bondy diversification

davidrmoran

Being a little dismayed at the slumping of PONAX and PCI this year (as well as the ongoing strength of FRIFX). I am thinking of adding a fourth nonequity fund (any type, obvs) to my retirement nut.

I am looking at and liking PDVAX, and am wondering what others' suggestions might be. (Would have to be ntf / no-load at Fido and Merrill, but I don't expect you to know or check that.)

I see that AGG and BND and such do not generally do it, nor FADMX, I think. Other etfs? TRP offerings? What else?

msf

I can appreciate your interest in buying a fund at Merrill or Fidelity (those being the two brokerages at which you have accounts). Still, giving up 40 basis points for convenience (PDIIX has an ER that's 1/3 lower than PDVAX's, 0.79% vs. 1.19%) seems like a lot.

http://financials.morningstar.com/fund/purchase-info.html?t=PDIIX&region=usa&culture=en-US

Not quite sure what "it" is that AGG and FADMX do not do. Nor what "ongoing strength" you see in FSIFX, which has underperformed its multisector peers in every calendar year of its existence, starting in 2014.

Disregarding the particular types of bonds PONAX holds, given its sub ½ year duration it faces a relative headwind when interest rates are dropping. And this year rates have fallen like a stone.

So a question is: do you expect rates to continue to plummet? If so, then sure, swap horses. If you don't expect a severe decline to continue, then it's more a matter of how the portfolio is invested (i.e. the yield it gets on its holdings after accounting for defaults). And if you expect a rate reversal (rates rising again), that would seem to lend it a tailwind.

If what you're looking for is an NTF multisector fund (inferred from your mentions of FSIFX, PDVAX, and FADMX) that has outperformed PDVAX, there's LBNDX. Same duration, better performance YTD, 3 year, 5 year (roughly the period since a major management overhaul for LBNDX). And same ER as PDIIX (with an insignificantly higher SEC yield). And it does it without leverage (Diversifed Income's bond exposure is 162% of AUM).

Of course this is all based on each fund's aggregate figures and doesn't consider what's inside the funds.

davidrmoran

oops, typo, FRIFX

PDIIX is unavailable to me at either brokerage. I may overpay, yes. for the ability to get in and out as I plan our cashflow needs.

LBNDX is the opposite, available nl / ntf; tyvm; will research further.
have not read about that here before (skeet), my bad.

(it is load at merrill but waived)

I expect interest rates to wiggle a bit, as they have been.

davidrmoran

just did a prelim check, LBNDX tracks PDVAX very closely over the years, slightly above, slightly below, depending on period; marginally superior as you note except oddly inferior @ 1y

Lipper gives them each a 2 for preservation, otherwise identically rated except LA much cheaper ... so one might be able to infer that Pimco leverage accounts for the higher ER, while adding little or no value ?

msf

DIY investors including myself have a tendency to ignore load families. While I've paid attention to a few (e.g. Franklin Templeton, American Funds), Lord Abbett is one I know virtually nothing about. The fund just showed up with good numbers in what seemed to be your search space and NTF.

Based on M*'s family profile (legacy page here) Lord Abbett seems to be concentrated in bond funds, and pretty good at that. As before, that's just from looking at a couple of aggregate figures. I've no particular insight to offer.

davidrmoran

MFOP is interesting: the Pimco again has somewhat lower returns, as you noted, but with lower max drawdown, slightly lower UI, lower MFO risk of course, plus honor roll ....

LBNDX has been in operation as long as, actually somewhat longer than, I have been investing.

davidrmoran

yeah, I too know little about it, was seduced like so many by Pimco in my dotage

Old_Skeet

Hi @davidrmoran. A bond fund that I recently opened a position in to expand my income sleeve is JGIAX, J P Morgan Income A. You might wish to take a look at it. A bond fund that I have under review and study is JMUAX. The reason I went with JGIAX is that it offers a higher yield plus it seems to be able to navagiate the bond market currents pretty well. I'm also holding space within my income sleeve to add a tax free muni fund sometime in the future.

davidrmoran

tnx; that janus sure is a steady performer

MikeW

Hi @davidrmoran . Take a look at ACGYX. Its a nice steady eddy with a great long term track record.

davidrmoran

tyvm, looks v steady indeed; young management, but in any case unavailable either ML or Fido

MikeW

That's too bad. Please let us know which funds you decide to go with. There are a number that folks have mentioned that I'm also looking at, IOFIX included.

wxman123

I like PTIAX, often mentioned here.

msf

Since you're okay paying more for PDVAX (vs. PDIIX) to gain access to that fund in Fidelity, it seems that paying more for AKGAX (vs. ACGYX) would also be okay. A tad less expensive as well: AKGAX 1.08% (net), PDVAX 1.19%.

http://financials.morningstar.com/fund/purchase-info.html?t=AKGAX&region=usa&culture=en-US
https://fundresearch.fidelity.com/mutual-funds/summary/01881M467

davidrmoran

tnx; I looked for that M* info but could not find it; have bookmarked M* legacy cagr graphing page (having trouble getting accurate graph of PCI growth on the new site), and wonder how long it the legacy pages will last