Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
...Like PRWCX (closed to new investors) and DODBX. (too volatile, even in a tame-ish category.) I'm "shopping" for other good prospects in this category. Any of you all have good experiences with others in this peer group? Want to suggest? OEF only...Thank you.
I currently own ABALX in the 50/70 allocation fund classification. I have also looked at JDBAX ... MAGWX ... and CVTRX; and, I have found them to be pretty good and interesting as well. All of the tickers are for A shares so you might wish to look for other share classes that are avaliable, if interested.
Hi @Crash. I know you like TRP (so do I) so what about RPBAX?
I would also consider looking at retirement funds that are more diversified than the typical 60/40 domestic balanced fund. Should give a smoother ride (maybe) and you won't have to worry about which equities are in favor at any given time, International, domestic, large, small, ect.... I am considering that option myself versus my existing Schwab robo for a large part of my money.
I recall the money you're dealing with in this question is all traditional IRA, correct?
I'm confused about your portfolio.
You noted recently, that: "PRWCX = 32.35% of my stuff. I'm now bond-heavy, in retirement. It's my favorite, too, and my only balanced fund. I'm 61% bonds, 25% US equities, and 7% foreign equities. The rest is cash and cash equivalents and "other," according to Morningstar.
You also noted in this thread that PRWCX is closed to new investors. This is correct, I can not purchase. But, if you already hold PRWCX at TRPrice; are you not able to add to this fund?
GDMZX (7.5%) and RPGAX (10%) are the two funds that use up most of the $'s in my "Mixed 2 Pot". There is also a smaller amount of BTBFX (2.5%) there. Between those three, the fit looks to be within the 50 to 70% limits. I am comfortable with all three....
...Oops. Ought to have mentioned that this new 50-70 fund would be for a young relative, just graduating high school. Already, I/we will be starting him into BIAWX simply because of its very low minimum to get in. I'm glad for ALL the responses. I'll be checking those funds out, one by one. He's not "married" to TRP the way I am. I never put any money into RPBAX because I never liked their top 5 holdings. ...But now, I see that's CHANGED a bit.
Is the relative's account going to be a Roth IRA/Roth IRA for minor? If he has income, he may open a Roth IRA and the account may be funded by whomever, so she/he may keep his hard earned money for other uses. And to which firm will his money travel? Fidelity, or ???
Ought to have mentioned that this new 50-70 fund would be for a young relative, just graduating high school.
Then a 50-70 balanced fund might be the last category I would choose for a young kid. A Total Stock Market fund is what I would put a young person into. No bonds, no cash, straight global equity (assuming this is for long term investing).
Hi sir @_crash if you 100 bucks is it better to buy 50 to 70 bucks in VTI and rest in BND.. Fees so much lower, maybe less worries long term.. You can sell anytime
I recall the money you're dealing with in this question is all traditional IRA, correct?
I'm confused about your portfolio.
You noted recently, that: "PRWCX = 32.35% of my stuff. I'm now bond-heavy, in retirement. It's my favorite, too, and my only balanced fund. I'm 61% bonds, 25% US equities, and 7% foreign equities. The rest is cash and cash equivalents and "other," according to Morningstar.
You also noted in this thread that PRWCX is closed to new investors. This is correct, I can not purchase. But, if you already hold PRWCX at TRPrice; are you not able to add to this fund?
That was my first thought. And, of course @Crash may add to PRWCX since he currently owns it, unless it’s a different type plan. In my own case, I own it in my traditional but not my Roth - both directly at TRP. The thought has occurred to me that I might do a Roth conversion on a small portion and hence also have capability to move money into the fund inside my Roth there. I haven’t checked with Price, but have every confidence that would work.
Personally, I sleep better spreading management risk around, even with a fund as fine as PRWCX. So I have roughly equal amounts in PRWCX and DODBX. As Crash mentioned, DODBX is probably a bit more volatile and subject to larger drawdowns in some markets. Another I hold is RPGAX. Don’t know if that would fit what Crash is looking for, but I happen to like it a lot.
Added: I understand how one can get google-eyed staring at the impressive returns of PRWCX. But be careful what you wish for. The fund’s had 3 or 4 managerial changes since inception. There will be more. Also, different funds perform better in different investing climates. No guarantee the fund will continue to perform so well in the future. Giroux is doing a lot of fancy footwork using puts, calls, options and other derivatives that, frankly, I don’t fully understand. Some of this success, such as his plays on utilities, has been a result of the extraordinary low rate environment we’ve been in. That will change someday. While I’m sure he knows what he’s doing, in investing certain styles come in and go out of favor.
Okay, so let us look at this. The power of compounding and not paying taxes via a Roth IRA. Look at the total return number at the top of the data entry section, relative to the data placed.
At the linked page, also scroll down to read the "rate of return" info section.
Agree about using an etf. Example: I-shares, ITOT cost today is $65/share. At Fidelity, if one makes a purchase of a traditional mutual fund, you will also receive fractional shares for the full dollar amount of the purchase. VTI cost is about $146/share, so this obviously wouldn't be available with $100 initial investment. However, there are other etf's that are growth oriented that may have a lower price entry point. And the expense ratio is far below the .88 of the mentioned Brown fund......ITOT e.r. is .03%. I also agree that there is no need for bonds at this young age. Ride the cycles, and stay calm.
You guys all "got my back." I appreciate it. I've thought this through. BIAWX is just a start. I've mentioned the reason, above: very low minimum to get in. Of course, I'd not be thinking in terms of BIAWX if it were not a good performer. But since the market is nearly at an all-time high, we will be slowly dollar-cost-averaging into it. I will be a joint account holder along with him and his mother, so there's no question about the fund(s) accepting my checks. Ridiculous rules, these days. Criminals do bad stuff, so now we have the tail wagging the dog. But he will get the tax statements. That's my own rule--- given the fact that I'll be contributing. He won't be making much money for some years to come. (Community College, then probably further.) If he's still a dependent on his mother's tax return, so be it. I have an allocation fund in mind for "down the line"--- whether it's global or domestic. ...Tweedy Brown TBGVX just came to mind. I'm gonna add that one the list list you've all provided. And I'm going to feed a joint BANK or CU account out there as the piggy-bank from which I will take the money to be able to get him into the additional fund, later on. Could or should it be an IRA? Yes. ... All of this will be initiated next week: wifey and I are Hawaii-bound for a week, for his H.S. graduation.
I agree in theory that someone just out of high school would be best served by investing long term in pure equity. But I also remember starting out and being spooked by the idea of investing, period. You mean I could lose money?
While pure equity is better, a hybrid fund might be a reasonable compromise, especially for someone watching his first investment going up and down.
I like the idea of going global. So no "total" stock market where "total" means US. Rather something like VTWAX/VT. In the 50-70% allocation arena, davfor and hank mentioned RPGAX which seems like a good choice. Vanguard Star VGSTX would seem to be a good candidate as well, especially given the interest in a low minimum balance. It would take $1K to start, but then one can add $1/investment.
If this would be a joint account, it couldn't be an IRA. Still, taxes would likely not be a consideration for some time. Further, it might make sense to sell before earning "real" money, to recognize the gains with no taxes and reset the basis. Contributions to an IRA would be limited to compensation. Though the money could come from someone else as a gift.
(Financial institutions are funny in the ways they accept money. I recently lent a friend cash for a couple of days which she repaid by depositing a check to my Fidelity account. No problems. On the other hand, to bootstrap a BofA checking account I deposited $100 cash which I took directly from their ATM to their teller. I was required to show two forms of ID. Perhaps they thought the bills they were handing out were counterfeit?)
@catch22 I've never seen Fidelity (or most brokerages) offer to sell fractional shares of ETFs or stocks. (There are a few brokerages that offer "curated" baskets of securities where you can own fractional shares.) At Fidelity, when I go to buy a security like ITOT, there's a "calculate quantity" button. When I use that and input $100, it calculates 1 share; it doesn't offer me the option of buying 1.3 shares, give or take. Are you talking about buying fractional shares or reinvesting divs?
I would never advise an adolescent to go into a balanced fund, but JABAX is the one I always come back to when I do a deep dive into that world. No foreign to speak of, though (which is fine for someone who thinks foreign investing adds almost no value).
@msf You are correct, I did not intend to use an etf example for one obtaining factional shares from a purchase. I corrected my write to define the purchase of an OEF type fund. Thank you for the gentle head slap.
@msf You noted: "If this would be a joint account, it couldn't be an IRA."
My inclusion information for the Roth IRA or a custodial account for a minor is that this would be my preferred path for someone just graduating from high school. If they are not 18, then the "minor" account, which would then have to be transitioned to their stand alone Roth at age 18 (most states).
I was able to arrange things as I'd planned: though not a resident of Hawaii, I was able to open a 3-way account (joint) with the young man and his mother, at a local CU, in person. I will use it to feed the mutual fund from time to time. And if the worst should happen to me, there is nothing to worry about, legally. The account will simply carry on, in their names. The fund we're starting with will be BIAWX. If we are fortunate enough to NEED to branch-out, we will choose from the many suggested allocation funds offered here. We have just sent the mutual fund's application forms, too. If there are any glitches, surely they will let us know. I have urged the young man to begin an IRA. At his age, a Roth is the way to go. But at 18, it's a difficult thing to get him to FOCUS and think it through. I'm just an "honorary" uncle, anyhow. His mother is very smart, a good mother. Except re: finance. Like the vast majority, it seems. So... I live 5,000 miles away, at least for the present.
Added: I understand how one can get google-eyed staring at the impressive returns of PRWCX. But be careful what you wish for. The fund’s had 3 or 4 managerial changes since inception. There will be more. Also, different funds perform better in different investing climates. No guarantee the fund will continue to perform so well in the future. Giroux is doing a lot of fancy footwork using puts, calls, options and other derivatives that, frankly, I don’t fully understand. Some of this success, such as his plays on utilities, has been a result of the extraordinary low rate environment we’ve been in. That will change someday. While I’m sure he knows what he’s doing, in investing certain styles come in and go out of favor.
Where do you see the puts, calls, and etc in PRWCX? I will double check the lastest annual report and report back. M*, however, did not showed the above. As far as his over-weighning in utility sector, this is a matter of active management and his timing was fortunately ON instead of off. If his bet was on the energy sector and that would be a poor call today. On the other hands, Pimco funds, closed- and open-end bond funds use all wide arrays of investment strategy as you stated above.
With respect to risk one needs to decide for themselves on (active) management versus market risk as in broad-based index funds. David Giroux's stocks tend to be among the growth stocks such Amazon and biotech companies, but he balances them with the dull and predictable values stocks such as utilities. His latest WealthTrack interview is well worthwhile to view again.
"During the year ended December 31, 2018, the volume of the fund’s activity in options, based on underlying notional amounts, was generally between 8% and 15% of net assets." Annual Report, Dec 31,2018.
IMHO it's not the use of derivatives (including options) per say that can be a concern, but rather how they are used. As you noted, PIMCO uses them extensively - for boosting returns, for creating virtual leverage, etc. In contrast, FPINX makes extensive use of derivatives for defensive purposes, e.g. to reduce interest rate risk. I don't know what use PRWCX makes of derivatives.
I’ll try to locate my earlier source / reference on the derivative strategy sometimes used by PRWCX. It may take a day or so to dig that up. But it was primarily a strategy to generate income using stocks in some type of mutually beneficial contract with another party. The buyer of the option received a chance for upside potential should the stock increase in value. In return, PRWCX sacrificed some (or all?) of the stock’s upside potential in return for downside protection plus income. It was first mentioned 5-7 years ago by Giroux in a fund report. I haven’t read his reports recently. But just glanced at one tonight. While I can’t answer your question directly at the moment, how’s this excerpt (from Giroux) for honesty? It’s from the December 31, 2018 Annual Report for PRWCX. (It sounds like he’s being taken to “the woodshed” - and yet has nothing IMHO to apologize for.)
“We were disappointed in our investments in industrials, such as Middleby, a manufacturer of commercial food service equipment and high-end residential kitchen equipment. We bought it because the valuation and stock price had come down, management had a very good long-term track record on M&A, and, given higher labor costs at restaurants in a tight labor market, we felt that Middleby’s sales would benefit from a movement to substitute equipment for labor. From a process perspective, we made multiple errors that we do not intend to make again. First, we bought the stock without having met management. Assessing the quality of a management team is a very important part of our investment process. Second, earnings quality had deteriorated, with free cash flow conversion to net income dropping below 100%. Third, while capital allocation had been positive over the long run, recent acquisitions in the high-end residential kitchen equipment space had performed poorly.
“With GE, we started buying the stock right after the announcement that Larry Culp would become CEO. We bought too much too quickly given the risk profile of the company, and this hurt returns in 2018. We believe in GE and its new CEO and consider their aviation and health care businesses to be fundamentally solid. However, the initial position size should have been smaller, and we should have built the position more slowly. Again, we hope to avoid these mistakes in the future.”
@Sven - Just a follow-up to my above comments. I’m unable to locate the fund reports for PRWCX prior to 2018. The options strategy is not mentioned in the two most recent reports. If someone can help me find all the reports for PRWCX going ten years back I’d be glad to read all of them and highlight where the options strategy was discussed by Giroux. What I have provided below, and which might help, is an excerpt from the current PRWCX Prospectus which highlights writing call options as one of the risks the fund may undertake. I do recall mention of the options strategy bring beneficial to the fund’s performance sometime during the past 3-4 years - as well as in earlier years.
Re: “fancy footwork” - probably overstated on my part. But in reading his reports (even the one from Dec. 2018), an “opportunistic” and ever-evolving approach seems clear.
(Excerpt from Prospectus - PRWCX): “Options risks - To the extent the fund uses options, it is exposed to additional volatility and potential losses. Writing call options exposes the fund to the risk that the underlying security may not move in the direction anticipated by the portfolio manager, requiring the fund to buy or sell the security at a price that is disadvantageous to the fund. Certain call options carry a potentially unlimited risk of loss.”https://www4.troweprice.com/pcs/pcs-literature/mvc/USMFConsultantProspectuses/CAF/active/us/en/retrieveSingleDocument
Click on a "Document" link for the dated report, then on the first link in the page that brings you to.
I haven't looked for manager discussions, but in the annual reports, Note 3 (Derivative Instruments) includes the following, which sounds a little like what you're describing:
Options The fund is subject to equity price risk in the normal course of pursuing its investment objectives and uses options to help manage such risk. The fund may use options to manage exposure to security prices, interest rates, foreign currencies, and credit quality; as an efficient means of adjusting exposure to all or a part of a target market; to enhance income; as a cash management tool; or to adjust credit exposure
Comments
I currently own ABALX in the 50/70 allocation fund classification. I have also looked at JDBAX ... MAGWX ... and CVTRX; and, I have found them to be pretty good and interesting as well. All of the tickers are for A shares so you might wish to look for other share classes that are avaliable, if interested.
I would also consider looking at retirement funds that are more diversified than the typical 60/40 domestic balanced fund. Should give a smoother ride (maybe) and you won't have to worry about which equities are in favor at any given time, International, domestic, large, small, ect.... I am considering that option myself versus my existing Schwab robo for a large part of my money.
Good luck!
I'm confused about your portfolio.
You noted recently, that: "PRWCX = 32.35% of my stuff. I'm now bond-heavy, in retirement. It's my favorite, too, and my only balanced fund. I'm 61% bonds, 25% US equities, and 7% foreign equities. The rest is cash and cash equivalents and "other," according to Morningstar.
You also noted in this thread that PRWCX is closed to new investors. This is correct, I can not purchase. But, if you already hold PRWCX at TRPrice; are you not able to add to this fund?
And to which firm will his money travel? Fidelity, or ???
That was my first thought. And, of course @Crash may add to PRWCX since he currently owns it, unless it’s a different type plan. In my own case, I own it in my traditional but not my Roth - both directly at TRP. The thought has occurred to me that I might do a Roth conversion on a small portion and hence also have capability to move money into the fund inside my Roth there. I haven’t checked with Price, but have every confidence that would work.
Personally, I sleep better spreading management risk around, even with a fund as fine as PRWCX. So I have roughly equal amounts in PRWCX and DODBX. As Crash mentioned, DODBX is probably a bit more volatile and subject to larger drawdowns in some markets. Another I hold is RPGAX. Don’t know if that would fit what Crash is looking for, but I happen to like it a lot.
Added: I understand how one can get google-eyed staring at the impressive returns of PRWCX. But be careful what you wish for. The fund’s had 3 or 4 managerial changes since inception. There will be more. Also, different funds perform better in different investing climates. No guarantee the fund will continue to perform so well in the future. Giroux is doing a lot of fancy footwork using puts, calls, options and other derivatives that, frankly, I don’t fully understand. Some of this success, such as his plays on utilities, has been a result of the extraordinary low rate environment we’ve been in. That will change someday. While I’m sure he knows what he’s doing, in investing certain styles come in and go out of favor.
The power of compounding and not paying taxes via a Roth IRA. Look at the total return number at the top of the data entry section, relative to the data placed.
At the linked page, also scroll down to read the "rate of return" info section.
Agree about using an etf. Example: I-shares, ITOT cost today is $65/share. At Fidelity, if one makes a purchase of a traditional mutual fund, you will also receive fractional shares for the full dollar amount of the purchase. VTI cost is about $146/share, so this obviously wouldn't be available with $100 initial investment. However, there are other etf's that are growth oriented that may have a lower price entry point. And the expense ratio is far below the .88 of the mentioned Brown fund......ITOT e.r. is .03%.
I also agree that there is no need for bonds at this young age. Ride the cycles, and stay calm.
A Roth IRA??????
No taxation............
I set the recurring investment at $1,000/year; thus the $83/month entry.
Please look at the calculator link I provided above.
If she/he has worked or will be working this year, there is not a rush to set the account before your trip?
While pure equity is better, a hybrid fund might be a reasonable compromise, especially for someone watching his first investment going up and down.
I like the idea of going global. So no "total" stock market where "total" means US. Rather something like VTWAX/VT. In the 50-70% allocation arena, davfor and hank mentioned RPGAX which seems like a good choice. Vanguard Star VGSTX would seem to be a good candidate as well, especially given the interest in a low minimum balance. It would take $1K to start, but then one can add $1/investment.
If this would be a joint account, it couldn't be an IRA. Still, taxes would likely not be a consideration for some time. Further, it might make sense to sell before earning "real" money, to recognize the gains with no taxes and reset the basis. Contributions to an IRA would be limited to compensation. Though the money could come from someone else as a gift.
(Financial institutions are funny in the ways they accept money. I recently lent a friend cash for a couple of days which she repaid by depositing a check to my Fidelity account. No problems. On the other hand, to bootstrap a BofA checking account I deposited $100 cash which I took directly from their ATM to their teller. I was required to show two forms of ID. Perhaps they thought the bills they were handing out were counterfeit?)
@catch22 I've never seen Fidelity (or most brokerages) offer to sell fractional shares of ETFs or stocks. (There are a few brokerages that offer "curated" baskets of securities where you can own fractional shares.) At Fidelity, when I go to buy a security like ITOT, there's a "calculate quantity" button. When I use that and input $100, it calculates 1 share; it doesn't offer me the option of buying 1.3 shares, give or take. Are you talking about buying fractional shares or reinvesting divs?
You are correct, I did not intend to use an etf example for one obtaining factional shares from a purchase. I corrected my write to define the purchase of an OEF type fund.
Thank you for the gentle head slap.
You noted: "If this would be a joint account, it couldn't be an IRA."
My inclusion information for the Roth IRA or a custodial account for a minor is that this would be my preferred path for someone just graduating from high school. If they are not 18, then the "minor" account, which would then have to be transitioned to their stand alone Roth at age 18 (most states).
Fidelity's Roth for kids write
This is the large discussion here in April, 2017 revolving around Roth IRA's for minors.
If he is 18 he may have the Roth in his name and the account monitored by whomever.
Many details have been provided in this thread for this topic.
I have nothing remaining to offer.
Some I hold in taxable, most in my retirement accounts.
PRWCX (MIL's money)
BTBFX, ICMBX, OAKBX, WHGIX, FPACX, JPVDX, VWELX, IFAFX, GRSPX
For those surprised I got an American Fund, I managed to get it with no load.
I need to see if VTMFX might be better for me than VWELX...
With respect to risk one needs to decide for themselves on (active) management versus market risk as in broad-based index funds. David Giroux's stocks tend to be among the growth stocks such Amazon and biotech companies, but he balances them with the dull and predictable values stocks such as utilities. His latest WealthTrack interview is well worthwhile to view again.
Annual Report, Dec 31,2018.
IMHO it's not the use of derivatives (including options) per say that can be a concern, but rather how they are used. As you noted, PIMCO uses them extensively - for boosting returns, for creating virtual leverage, etc. In contrast, FPINX makes extensive use of derivatives for defensive purposes, e.g. to reduce interest rate risk. I don't know what use PRWCX makes of derivatives.
I’ll try to locate my earlier source / reference on the derivative strategy sometimes used by PRWCX. It may take a day or so to dig that up. But it was primarily a strategy to generate income using stocks in some type of mutually beneficial contract with another party. The buyer of the option received a chance for upside potential should the stock increase in value. In return, PRWCX sacrificed some (or all?) of the stock’s upside potential in return for downside protection plus income. It was first mentioned 5-7 years ago by Giroux in a fund report. I haven’t read his reports recently. But just glanced at one tonight. While I can’t answer your question directly at the moment, how’s this excerpt (from Giroux) for honesty? It’s from the December 31, 2018 Annual Report for PRWCX. (It sounds like he’s being taken to “the woodshed” - and yet has nothing IMHO to apologize for.)
“We were disappointed in our investments in industrials, such as Middleby, a manufacturer of commercial food service equipment and high-end residential kitchen equipment. We bought it because the valuation and stock price had come down, management had a very good long-term track record on M&A, and, given higher labor costs at restaurants in a tight labor market, we felt that Middleby’s sales would benefit from a movement to substitute equipment for labor. From a process perspective, we made multiple errors that we do not intend to make again. First, we bought the stock without having met management. Assessing the quality of a management team is a very important part of our investment process. Second, earnings quality had deteriorated, with free cash flow conversion to net income dropping below 100%. Third, while capital allocation had been positive over the long run, recent acquisitions in the high-end residential kitchen equipment space had performed poorly.
“With GE, we started buying the stock right after the announcement that Larry Culp would become CEO. We bought too much too quickly given the risk profile of the company, and this hurt returns in 2018. We believe in GE and its new CEO and consider their aviation and health care businesses to be fundamentally solid. However, the initial position size should have been smaller, and we should have built the position more slowly. Again, we hope to avoid these mistakes in the future.”
https://prospectus-express.broadridge.com/m_document.asp?clientid=trowepll&fundid=77954M105&docid=2205655&doctype=ann&docdate=20181231&back=1
Re: “fancy footwork” - probably overstated on my part. But in reading his reports (even the one from Dec. 2018), an “opportunistic” and ever-evolving approach seems clear.
(Excerpt from Prospectus - PRWCX): “Options risks - To the extent the fund uses options, it is exposed to additional volatility and potential losses. Writing call options exposes the fund to the risk that the underlying security may not move in the direction anticipated by the portfolio manager, requiring the fund to buy or sell the security at a price that is disadvantageous to the fund. Certain call options carry a potentially unlimited risk of loss.” https://www4.troweprice.com/pcs/pcs-literature/mvc/USMFConsultantProspectuses/CAF/active/us/en/retrieveSingleDocument
N-CSR are the annual reports
N-CSRS are the semi-annual reports
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000793347&type=N-CSR&dateb=&count=40&scd=filings
Click on a "Document" link for the dated report, then on the first link in the page that brings you to.
I haven't looked for manager discussions, but in the annual reports, Note 3 (Derivative Instruments) includes the following, which sounds a little like what you're describing: Underlining added.