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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.

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Catastrophe Porfolio



  • Finishing the comment from above: I love reading the monthly discussions from Mr. Bolin. He is providing a very useful information month after month. There always so insightful and analytical Yet it can be difficult to construct a portfolio because each month brings some new funds and different analyses. It would be very useful if he would have some specific portfolios and up date recommended changes when he thinks it's necessary.
    This months catastrophe portfolio is compelling, and one I may invest in for the long term. As a retiree of many years its just what I want.
  • edited September 2021
    It seems like time tested VWINX deserves a spot in a Catastrophe Portfolio, particularly if the goal is to minimize tinkering with it after it has been set up.
  • Schwab will apparently charge $50 to $75 to buy VTMFX ( although I just put in a fake trade and there was no fee) FFFDX and FMSDX. VTMFX is not available at Fidelity. Vanguard apparently has the Fidelity funds but will charge $50

    It is difficult to construct a similar portfolio using different funds, as the allocations in FFFDX and FMSDX are different in other similarly named funds.

    Sometimes it seems I spend more time trying to see if a particular fund is available than I spend researching the competence of the manger, risk, and relative return etc.
  • I use multiple brokerages in order to gain access to many funds. My experience with Vanguard is satisfactory even though their website is dated relative to Fidelity or Schwab, for example. Once your asset level reach Flagship status at Vanguard, you get 20 free trades on transaction fee funds per year. ETFs and stock trades are free of charges. Between Vanguard and Fidelity, I can buy just about all the funds mentioned in @Lynn Bolin’s article. My challenge is to find the time to incorporate these funds/ETFs in our portfolios.
  • The fundamental problem is whether those predicting inflation are right or not. If they're right, bonds in funds like VWINX and many normally defensive funds are a problem when interest rates go up because of inflation. But I think it is by no means certain the pundits hawking significant inflation are right. They've done it before and been wrong. But it is the essential question because funds like VWINX will work well in other emergencies.
  • I too have Fido Vang and Schwab accounts, but to avoid lots of funds spread all over, I try to run each account with a specific philosophy. It is very difficult to track dozens of positions if you do not have a benchmark to compare the account to.

    VWINX generally is one of the funds I compare conservative positions and allocations to, but one of the reasons it has worked so long is the ballast from bonds that have had a wonderful 30 years. If rates risk and the market falls, I doubt VNIX will out preform
  • edited September 2021
    We are looking at building a portfolio that can not be changed for 5 years looking ahead from today (other than rebalancing). It might be helpful to include VWINX in the mix because it doesn't rely on a five year continuation from today of out-performance principally related to market behavior during the recent central bank supported stock market melt-up. VWINX has performed well since 1977 through many types of market conditions. And, looking at the 2008 to early 2009 stock market catastrophe suggests it may outperform again when the next catastrophe occurs -- if it doesn't outperform again before then.

    Here is a picture that looks at the performance of VWINX and the mixed asset funds in the Catastrophe Portfolio since 9/25/2002 which is the inception date for COTZX (FAYZX is omitted due to its short life).


  • edited September 2021

    One of the funds in the portfolio is the Fidelity Freedom 2020 portfolio, FFFDX. Why does it make sense to include in the portfolio a 'target date' fund that for many years in the 'backtest' had an evolving (with time) asset allocation that was different from the current allocation?

    Think - for example - that inclusion of a 'target date' fund might make more sense if the specific target date (i.e., 2020 for FFFDX) was adjusted to a future year, rather than a year in the past ... right?
  • Hi @Vegomatic,

    The funds were chosen based on their characteristics including valuations and allocation to foreign stocks and bonds. The backtest was only to show how the portfolio would have performed over the past several years. What I like about FFFDX is the glidepath which I covered in table #3 of the August article. I included it because it gets more conservative over time. I also like that the Target Date funds have a relatively high allocation to international equities. Their risk adjusted return is solid.

    Thanks for reading and commenting.

  • Hi @davfor VWINX is certainly a good fund and one of my larger holdings. I am concerned about the long bond holdings and how they will do in inflationary times. It has benefited from falling rates which may not be there in the future. VWINX has done well since the 1970's because rates have fallen.

    I often include VWINX in articles, and the September article shows that conservative funds do well on a risk adjusted basis. I tried to focus this article more on categories that do well during secular bear markets.

    Thanks for reading.
  • Hi @davfor VWINX is certainly a good fund and one of my larger holdings. I am concerned about the long bond holdings and how they will do in inflationary times. It has benefited from falling rates which may not be there in the future. VWINX has done well since the 1970's because rates have fallen.

    I often include VWINX in articles, and the September article shows that conservative funds do well on a risk adjusted basis. I tried to focus this article more on categories that do well during secular bear markets.

    Thanks for reading.
  • @LewisBraham Thanks for reading and commenting. Short-term inflation has been high, I believe due to supply chain interruptions. Longer term, I believe debt and demographics will be deflationary.

    Other factors may impact some types of inflation. Emerging markets are attempting to increase taxes on natural resources. That may be another factor in short term inflation. That is why I chose FMSDX as it owns assets that tend to do well during inflationary times. I own some commodity funds that I am watching carefully.
  • Thanks for reading, @golub. It is difficult to set up and track individual portfolios, because many investors have limited access to many funds, as pointed out in the thread above. Some investors can't buy Vanguard or Fidelity.

    I often show examples that over time, conservative portfolios perform as well as aggressive portfolios. I plan on retiring in the next year or so. Maybe then, I will have more time...
  • VWINX has done well since the 1970's because rates have fallen.

    I often include VWINX

    Rate climbed throughout they late 70’s…early 80’s…

    I would add PRPFX to the conversation.

  • Did a little more checking. VWINX inception date was actually 6/30/1970.

    Here is a look at the 10-year treasury trend from 1973 to 1982.


    And here is a look at VWINX performance from 1973 to 1982 compared to S&P500 and VWESX (Vanguard Long-Term Investment-Grade Inv). That was the only bond OEF that showed up in a quick google search. (better comparisons are welcome)


    Nothing definitive, but those two charts don't appear to rule out the process VWINX uses to deal with an extended period of rising interest rates.
  • I should have been more clear, @bee. When I said rates have been falling since the 1970's. the began falling in about 1982 when Mr Volker broke inflation by raising rates. VWINX has done well with it's low cost, value oriented philosophy, and was assisted by a long running bond bull market due to falling rates.
  • Nice comparison, @davor, Thank you.

  • VWINX current duration is 8 years. So if rates increase 2% the bonds will drop 16%, taking the fund down 11%.

    The problem with comparisons to the 1980s is the SP500 started at very low PEs, so a lot of the return in VWINX was from the 30% equity portion. From 12/79 to 3/80 before the equity blast off VWINX lost 13%

    I would think you need something to hedge the rate increases if they come, along with faltering economic growth. Maybe real assets as mentioned, but that implies economic growth, which would also support equites.

    "this time it is different" may in fact be true today , as they has never been a comparable time with sky high equities valuations and sky high bond prices

    I worry that standard 30/70 funds will do poorly when both bonds and stocks get hit badly

  • "I worry that standard 30/70 funds will do poorly when both bonds and stocks get hit badly."
    Most funds will do badly when both bonds & stock funds get hit in a double down market !!
    Agreed, Derf
  • The 1980's saw inflation without much growth. Another scenario is Japan with high debt and low inflation.

    I bought the Fidelity Real Return Fund (FSRRX) last year anticipating inflation. It's performance has not been great, but it has done well the past year. I bought it because it has had lower drawdowns than commodity funds.

    "The fund invests directly, in other funds, and through derivatives such as commodity futures and swaps. For its fixed income portion, it invests in inflation-protected debt securities and floating rate loans. For its equity portion, the fund invests in stocks of real estate investment trusts. For its commodity portion, it invests in commodity-linked notes. The fund also invests in Fidelity's central funds. It employs fundamental analysis along with a bottom up stock picking approach by focusing on factors such as security's structural features and current pricing, its issuer's potential for success, and the credit, currency, and economic risks of the security and its issuer, financial condition, earnings outlook, strategy, management, industry position, and economic and market conditions to create its portfolio. "
  • I thought when lynnbolin revealed the Catastrophe portfolio that the inclusion of this FSRRX WOULD BE A GOOD SOURCE OF DIVERSIFICATION FOR WHAT WAS INCLUDED. maybe he will comment.
  • Since the publication of the Portfolio, I've bought most of the funds in two IRA portfolios. It's easy to do at Fidelity with the only fund I bought elsewhere was the Vanguard Fund which is tax managed so it's just fine with my Regular account @ Vanguard.
  • I see he did comment on FSRRX I missed that and also got the symbol wrong.
  • edited September 2021
    sma3 said:

    ”I worry that standard 30/70 funds will do poorly when both bonds and stocks get hit badly”

    That’s a great point. Normally “the world turns over” every 24 hours. But when it comes to falling or very low interest rates, this has been going on now for 30-40 years - an obscenely long time.

    The temptation is to run to riskier assets and away from bonds. Yet, when markets really tank, stocks can stink up the joint a lot worse than bonds can. If nervous about interest sensitive bonds, consider short duration bonds or bond funds out to perhaps 3-5 years.

    I also worry about traditional “balanced” funds - be the ratio 60/40, 40/60, 30/70 or 60/30/10 (RPGAX). All are subject to the “double-whammy” of bonds & equities submerging together. That, I think, is why TRP brought out TMSRX which is capable of garnering a modest return even in a market marked by falling bond and equity prices. I have a couple others I think may offer similar benefits, but am not confident or versed enough in them to post or recommend.

  • TMSRX only concern is that expense ratio is 1.29%

  • edited September 2021
    golub1 said:

    TMSRX only concern is that expense ratio is 1.29.

    You’re being generous if that’s your only concern. Some of that “fee” isn’t really related to management of the fund, but simply reflects some of the expenses peculiar to short selling. For many years they weren’t included in the ER. I’ll guess on the date. But I think it was around 2000 that the SEC began requiring these costs be disclosed in the ER and, as a result, the stated fees on such funds jumped.

    This article explains those costs - which simply stated are (1) Dividend expenses on short sales and (2) Interest expense on short sales

    Price’s ER is in line with similar funds and I’d expect the 1.29 ER to be lower in a few more years as assets increase. The fund (perhaps deservedly) has been subject to some brickbats. However, when it rains out (and equities nose dive) it holds up very well - a haven of sorts from the storm.

    I’m not trying to sell it. My own commitment is in the area of only 14-15% of portfolio.

  • edited September 2021
    Perhaps it’s already been noted, but a clue to how well a find might hold up can be found in its 2008 performance as well as by looking at how it fared during the first quarter of 2020. Of course, not all funds under discussion date back that far. Yahoo Finance does a great job on performance records for the funds that were in existence.
  • Thanks hank that is good information to know. I held the fund earlier in the year, but sold it when I came to the conclusion that it was too expensive. I didn't realize that they were doing any short selling, which can be expensive. I knew they were in line with other other funds with a similar objective. I never did find one that covered such a broad spectrum. While I thought I cold assemble a set of ETF's that would cover that space - that proved to be challenging for me.
  • There are lots of ETFs that try to move counter to the market ( SH) , or provide a floor under losses ( take your pick 5 9 13 % or higher BUFF) or buy puts ( TAIL) These should all do well during a correction.

    Inverse funds unfortunately drop to a smaller and smaller portion of your portfolio as the market moves higher. lowering their impact. It is unclear to me what an ETF that is structured to buffer a 5 to 15% loss will do in a 20% correction.

    Puts might be your best bet, as you know ahead of time how much you stand to give up, although you have to constantly maintain a position to continue the "protection".

    Usual advice is don't put money into the market you can't afford to loose. I am afraid this may also apply to the Bond Market now

    While conservative equities with a "margin of safety" are likely to eventually reclaim any significant correction, the P/Es on a number of high flyers may take years. I assume it would take an equally long time for a 1.5% coupon bond to recover, if ever.

  • Well said @sma3

    Maybe iBonds to the limit, some are saying will be paying over 6% come November. Wow. Inflation is transitory.. the crash in the housing market is contained....sure...go ahead and believe it...

    Pimco inflation multi asset, pirmx

    Vlsax virtus kar long short


    Limit orders 20 to 30% to 40% lower from here for apple aapl, googl, dhr danaher

    Ammunition, batteries, and canned goods and rice..

    Did you see where Cooperman said when she goes down it'll happen so fast your head will spin... meaning the market

    Who knows, I sure don't

    Starting to think Lewis B is right. High inflation then deflation biggly?

    Really frightening how many nurses and physicians are adamant won't get vax. Why?!

    Stay safe, good luck and good health to you and yours

    Baseball Fan
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