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I think the problem with selling is often the violation of a basic tenant: Never turn a trade into an investment. You go into a trade (hopefully) with an expectation of a specific outcome. You should also have a specific profit goal. When you reach the goal, or if your expectation turns out to have been in error, you ought to be selling for profit or cutting your losses. I think that far too many either decide to hold the trade indefinitely (invest), or hold, waiting for a turnaround. If you were wrong, your reason for buying/owning no longer exists. Just admit it and move on.
Excellent. I think your thought / theory should also be applied to all investments of active funds.
E.g., you invest in an active fund that has performed well in a particular macro environment or when the manager was at a good place in his life and you were not aware of either of those but you thought the fund's performance was entirely due to manager skill. You still have to make a choice to sell if the active fund underperforms because it can suck for a decade or more. When to sell?
I guess, at the outset, one has to set specific parameters / expectations for the investment and sell when those parameters are violated and not assume at the outset that it is a forever investment. The vague assumptions / ideas at the outset screws one up.
Did I capture your thinking properly?
Edit: I now see Larry’s later post. (I was not trying to address his questions.)
That's pretty much the thrust of it. Imo, buying into an active fund, requires one to believe in the manager(s), and trust them to make decisions for you. You should basically be off-loading oversight to the manager(s). At that point, your only interaction should be in evaluating whether you continue to trust him/her/them. Part of that process would involve determining if the fund was making astute adjustments (or any). That is, after all, what you are paying for.
For the past two months, I have been following two "Market Neutral" funds, QQMNX and VMNFX, which held up very well and provided some protection during recent market downturns. New managers have been at the helm of both funds since 2021.
As MikeM said: "I have to admit, QQMNX is a tempting alternative in this alternative field for a less bumpy ride and, so far, excellent returns."
As a retired investor who doesn't need a lot more money, preserving capital is more important to me than seeking sizeable returns on capital. While both funds have excellent risk/reward profiles, I have decided to add QQMNX to my portfolio at this time of fairly high equity valuations.
A couple other market neutral funds you can consider: BDMAX and JMNAX. BDMAX has outperformed QQMNX over the last 1 and 2 year trailing periods, and has a higher Sharpe ratio and lower standard deviation over the last 3 years according to Morningstar data. JMNAX has had lower returns, but has a smooth ride. I use a combination of BDMAX and JMNAX, but I might consider adding QQMNX. Thanks for bringing it up.
Observations: 1) fred495 is a good trader. Every investment board have different traders. The ones who buy and hold years, the ones who switch every 2-3 years, and others who change when they see better funds than what they have. So, when someone posts about a fund I own now and says, Well, in 2022, it lost more than another fund or in the last 10 years, this fund was better than another, I don't care, what matters is what the fund is doing now. 2) We discussed PVCMX several months ago and I said why own it now. YTD is made only 4.2%. Does anyone own this fund and feel great? 3) ICMUX made YTD 8.5%(there are better bond options). Retirees who have enough and want low SD performance should be very happy to make it in bonds. I know fred is in this camp. Where can I sign for 3-5% annually over inflation and I keep the money? 4) What about QQMNX? I have tested so many ALT funds, especially AQR funds, and was never impressed about their LT. It is also very difficult to hold them when the market is running away. ALT funds can do a better job in more volatile markets, but remember, if the managers make 1 mistake every year, it can be costly. In 2022 QQMNX did well, but in 2023 it made 5% while SPY made 26%. Would you hold that long? 5) Retirees who have enough can avoid the big losses easier than accumulators who must stay invested all the time. 6) Someone who can't time markets and wants to own 10%, maybe 20% in ALT funds and hold LT? why not.
BTW, I don't love or hate any fund/manager, I dislike laggers, especially the ones that lag for 1-2 and more years while many hang on.
It's my perception that people who move in and out of funds are "fund" investers, maybe even collectors, not over-all "portfolio" investors. My hope is having a portfolio that trends upward with the least amount pf volatility I can obtain. The portfolio is, hopefully, made up of managers and a mix of fund type with a winning long-term history. Not the best fund that month or year. If ICMUX has a so-so year, I don't jump out to get into the hot fund at the time. ICMUX, and I'm just using this fund as an example, has history of good management and returns and a risk level that fits the portfolio.... Is there better funds at this precise time? Probably. Just another 2-cents.
It's my perception that people who move in and out of funds are "fund" investers, maybe even collectors, not over-all "portfolio" investors. My hope is having a portfolio that trends upward with the least amount pf volatility I can obtain. The portfolio is, hopefully, made up of managers and a mix of fund type with a winning long-term history. Not the best fund that month or year. If ICMUX has a so-so year, I don't jump out to get into the hot fund at the time. ICMUX, and I'm just using this fund as an example, has history of good management and returns and a risk level that fits the portfolio.... Is there better funds at this precise time? Probably. Just another 2-cents.
Good management is not guaranteed to be good every year or even several years and in every situation and/or market. I never believed in diversification either because it led to lower performance for years. BTW, in very high risk markets, you learn pretty quickly that most funds sink together. You even learn that bonds don't always save you, think 2022.
The SP500+QQQ has been great since 2010. From 2000 to 2010, the SP500 lost about 10% and QQQ lost almost half. FAIRX was a great fund during 2000-10 but has been far behind since 2010. ICMUX made more than PIMIX for 3 years (chart) But PIMIX made more from 2015 to 2020 (chart) and PIMIX management is pretty good. Based on my history of following many funds, I hardly ever found a fund that stays at the top every 2-3 years. Maybe PRWCX is the exception.
In bondland the exceptions are so much better and can last for months, sometimes years. An extra of 3% in bondland annually for many retirees is so good that you can own a small % in stocks (or none) with a much lower volatility portfolio.
The investors who believed in B&H; in the last 10 years, the most recommended bond fund, BND (US Total index) made just 1.7% average annually, far behind inflation.
In the last year, I owned 2 bond funds for most months and hardly traded. Not every trader changes funds every week/month. I always admitted I'm a trader but I see many who trade so much more than me and claim they don't.
The SP500+QQQ has been great since 2010. From 2000 to 2010, the SP500 lost about 10% and QQQ lost almost half. FAIRX was a great fund during 2000-10 but has been far behind since 2010. ICMUX made more than PIMIX for 3 years (chart) But PIMIX made more from 2015 to 2020 (chart) and PIMIX management is pretty good. Based on my history of following many funds, I hardly ever found a fund that stays at the top every 2-3 years. Maybe PRWCX is the exception.
@FD1000, you totally didn't understand or ignored what I said. My opinion is that, for most investors (not traders), it's the portfolio construction that matters more so than individual funds. Of course no fund stays in the top tier of category year in and year out. But there are plenty of funds that stay consistently good over time and fill that portfolio segment, like ICMUX.
Your comparative selection of funds above is all in hindsight and therefore irrelevant to portfolio construction IMHO.
Portfolio construction matters if you are basically passive; or, at most, B&H. Someone who trades need have little concern about such details. So yes, Mike, while FD can do portfolio construction, it isn't really his way of doing things generally. The problem with online posting is that there are so many different approaches to things which others employ, that we often get crossed signals.
We have indexers, passive and active investors, B&H, traders, income investors, and then fund hoppers within some of these other categories. Each has their own way of looking at, and doing, things; sometimes their own terminology. It's no wonder there are disagreements online!
@MikeM, I did understand you pretty well. Racqueteer's answer was excellent, explaining it further. There are so many styles between traders to B&H for ever. You could have constructed a very nice portfolio in 2010 just to find out that your decent VALUE or EM funds have lagged SPY/VOO by a big margin. On the other hand, the same funds above lost money for 10 years. I also posted how PIMIX did great and then ICMUX did much better + why high-rated funds were terrible in the last 10 years. The above examples are not monthly or even yearly trades, these are at least 3 years in the same fund. It shows it would be difficult to construct a portfolio that works well in all markets. So, when someone says she is not a trader on these boards, it's hard for me to believe it. Did you trade 2-3 times per year? You are a trader. Did you trade only 30% of your portfolio? You are still a trader.
There are not many posters who bought 10 funds 5 years ago and created their "perfect" portfolio and haven't done 3-5 and more changes.
Most of the ones who owns their funds for years are indexers and or Bogleheads.
“I also posted … why high-rated funds were terrible in the last 10 years “
@FD / Wouldn’t it help people more if you posted what different investments will do in the next 1, 5, 10 years rather than what they did in the past?
You seem to be inventing your own definition of “trader” vs “investor.” I’m not sure if there exists a rigid definition of “trader.” You are entitled to your own like anyone else. For day trading the SEC does have a definition. But it’s several times weekly, not yearly.
Thank you @hank for clarifying a bit more. It's just BS to say this fund did well in this time frame but didn't do well in another, so you should have magically known to sell this one to get into that one at this precise time. The question is, does this fund have a manager with a good track record, a manager I'm comfortable holding my money and does it fit my portfolio in that the portfolio, as a whole, trends up "X" % a year on average to meet my goals in a steady fashion. One that consistently has a higher upside than downside capture ratio. To keep responding with fund suggestions after the fact and thinking you are some guru is irritating.
So yes, Mike, while FD can do portfolio construction,
I see a lot of chatter in this page and it seems a lot of it is surrounding FD. Without me having to digest all of it,
1) what does FD say about the prospects going forward for QQMNX or the L/S category (the, QQMNX category)?
2) Does he say it is a good category to be in, irrespective of specific fund's prowess?
3) If yes, does he think QQMNX is a good fund to be in that category?
4) If yes to 2 or 3, are his hoped for prospects for a trade or for B&H investing over 1, 3, or 5 yrs?
I only need 1 or 2 word answers for the above. Pl note that I am only interested in prospects (future). I do not need any reasoning, because I trust anyone posting here is intellectually honest to the best of their abilities. I am perfectly OK if someone's crystal ball gives them a wrong answer.
The future possibility of any manager beating a relevant benchmark is near impossible to predict. If that can be done at scale with a high hit rate, the poster would not be on this forum! Buffett and Giroux are the exceptions and not the norm. There's a few managers of hedge funds and non-public funds who have long term beaten the SP500 but these too are exceptions.
1) hank "@FD / Wouldn’t it help people more if you posted what different investments will do in the next 1, 5, 10 years rather than what they did in the past?"
FD: your claim is pretty old. I don't predict what would be good, I invest based on what markets do currently and what I have posted for about 15 years on different sites. You can read real time trades (here). What I think about bonds (here) and market calls (here).
2) hank: day/frequent trader FD: I never said I'm one. I said I'm a trader and I'm not ashamed of it, while many who trade as much as me or more can't admit they are one.
3) BB: what does FD say about the prospects going forward for QQMNX or the L/S category FD: I have said many times that most should avoid ALT funds and explained why. You must hold for years to see the benefit just to find out it was wrong.
4) MikeM: It's just BS to say this fund did well in this time frame but didn't do well in another, FD: it's not BS, history proved that 1-2 categories can be at the top for years. Constructing a portfolio with the best funds now and never trading will not guarantee best results in the next 10 years. Markets change. Managers that did great with one style will lag markets that do better with another style. One of the best writers in this site is Charles Lynn Bolin because of his ability to change based on current markets.
5) MikeM: To keep responding with fund suggestions after the fact and thinking you are some guru is irritating.
FD: of course, we had to get to this claim Just read the above 3 links in item 1).
6) MikeM: I don't believe that FD can construct a portfolio for a second.
Trading is data-driven. As such, stale data (what has happened in the 'distant' past), and non-existing data (what will happen in the future) are of little assistance or predictive value. All that matters is what is at that moment in time. The recent past may provide some clues, but there are no guarantees on choosing correctly.
I'm pretty sure that FD will agree with all the above. Unfortunately, I'm also fairly sure he'll say it in a way as to annoy multiple people. FD largely invests now in 'bonds', and is not a B&H investor; so I think it would be safe to say that he doesn't have a lot of affection for LS-type funds. I think the whole idea of such funds is that you trust the fund to do things for you, to do so in a manner you are not going to understand, and FD doesn't completely trust anyone to make decisions for him.
One may or may not care for his online personality, but he's someone whose advice I respect and consider in my own decision_making. As I do many others here. You just have to understand where they're coming from.
As to what constitutes "that moment in time", I can only speak for myself. I tend to look for things which are showing a pattern of doing well over the last couple of weeks as a validation of performance over the last month or two. Something that did well three months ago or before, but is currently stumbling, might indicate an inflection or an accident in composition. The same is true of something which has done nothing for six months, but is currently doing well. Might mean something; might not. It does me little good to be involved with something which did well a year ago, but hasn't in the last month or more. That's a trader's perspective, certainly, and not for everyone.
This is also the perspective of someone who has enough, and who doesn't want to lose what has been gained; I don't, after all, have 30 years to smooth out losses. Purely binary outcomes with roughly equal odds are not appealing. While willing to run risks, I prefer to control the extent of the risk and want to be paid to take that risk. Right now, I chose not to risk a lot, because I don't think you can expect to be paid adequately for taking that risk. So far this year, I've gotten about 70% of the market, while usually holding less than 50% equity and haven't felt at risk. Everyone's situation is different, but I consider that to be a good outcome.
So, when someone posts about a fund I own now and says, Well, in 2022, it lost more than another fund or in the last 10 years, this fund was better than another, I don't care, what matters is what the fund is doing now..
The problem is defining "now." A fund that does well for a few months or even a year would be bad reason FOR ME to jump in, perhaps you are different. If you have a fund that outperforms for years then that would be a reason for me to move...but just as often I find the fund reverts to the mean rather than continue to outperform, a point you acknowledge in another post. I totally get the idea of riding the wave of a winner, but find that strategy hard to implement in real life. Truth is it's very hard to beat buy and hold with solid funds over a long period of time, or even an index fund. I suspect many of us know that deep down, but just because I'm a bad golfer doesn't mean I dislike golf.
My problem with qqmnx, which I own, is that it really isn’t “market neutral.” It has a .61 correlation with the S&P 500, according to PV. The Vanguard and AQR market neutral funds have negative correlation to the S&P 500. Qqmnx is also the only of the three with a positive beta to the overall market. If the goal is non-correlated returns to the stock market this may not be the best vehicle. That being said, if it is a piece of an overall strategy to achieve non correlated returns, it may be perfect.
So, when someone posts about a fund I own now and says, Well, in 2022, it lost more than another fund or in the last 10 years, this fund was better than another, I don't care, what matters is what the fund is doing now..
The problem is defining "now." A fund that does well for a few months or even a year would be bad reason FOR ME to jump in, perhaps you are different. If you have a fund that outperforms for years then that would be a reason for me to move...but just as often I find the fund reverts to the mean rather than continue to outperform, a point you acknowledge in another post. I totally get the idea of riding the wave of a winner, but find that strategy hard to implement in real life. Truth is it's very hard to beat buy and hold with solid funds over a long period of time, or even an index fund. I suspect many of us know that deep down, but just because I'm a bad golfer doesn't mean I dislike golf.
Actually, most funds trail the SP500 with which has a very small expense ratio if you hold for decades. There is a good reason why Bogle and Buffett recommended the SP500 for decades....and it's the easiest way to invest. So, why are we discussing funds and trade?
I came to a conclusion that I want to participate in the markets by using best risk/reward funds. The idea is to find good performance wide range funds with lower volatility, and that will result in a better sharp ratio. My basic system from 2000 to 2013 was to use a fund screener every 4-6 months and find the best 5 risk/reward funds for 1-3 months + 1-3 years and invest 20% in each. After I have done it several years, I learned a lot more about the managers, their history, and their weaknesses and strengths. 2008 was a waking call, I lost 25% in that year, and since then I have been searching for a way to control meltdowns. It took me another 10 years to master that concept, but this time by using special bond funds. As you can see, it took me years of practice and tweaking. You just can't wake up one morning and be successful doing it. Of course, bad calls are built into it, the idea is to lose very minimal (which in bondland is 0.1-0.2%) and make a lot more when I'm right. I'm not your typical trader, if my trade is right, I can stay in it for months until I find a better fund. Now, at retirement, my portfolio is big enough that I only need to make inflation + 2-3%(of course, I want more) and why I don't need to take a lot of risk.
What is "now"? Years ago, using my original system, 'now' used to be 1-3 months but I also looked at 1-3 years just to be sure the fund did well for the short+longer term. Since 2017, "now" is the last 2-3 weeks and where better trading is needed
"now" also means investing in the best wide range funds, why you don't want to diversify, and exactly what I have done.
"What is "now"? Years ago, using my original system, 'now' used to be 1-3 months but I also looked at 1-3 years just to be sure the fund did well for the short+longer term. Since 2017, "now" is the last 2-3 weeks and where better trading is needed
"now" also means investing in the best wide range funds, why you don't want to diversify, and exactly what I have done."
How often do you run the fund screener even if your current holdings are performing to your satisfaction?
What vehicles are available if you do not want to trade but want to make 2-3% + inflation?
Are yearly Buffer ETFs a worthy consideration? These just roll year after year if you do not sell. If I recall their construction / offering, seems like my principal is always preserved + a potential for limited upside.
If your principal is preserved year after year, why do you care about daily volatility?
Just do not put all your money into them because the manager may not be able execute as contemplated - not a substitute for US Treasury bonds!
There may be more than one thread on Buffer ETFs but here is one -
I am bringing up this topic again because of the new consideration of total return of 2-3% + inflation and no loss of principal. It is tradable and so you can get out whenever you want - not like private equity or private credit.
MAXJ currently has $170M AUM and there may be others with larger AUM for better B/A spreads and liquidity.
Just to be clear, the 100% downside protection is only if invested at inception. For after inception, pl check fund site for remaining cap and fund NAV (minus inception NAV / floor). E.g., if one buys MAXJ now, one could still lose 4%.
BB: "How often do you run the fund screener even if your current holdings are performing to your satisfaction?
FD: My simpler original system says run it every 4-6 months regardless of anything and select the best risk/reward funds. My newer trading system since 2017 with emphasis on making 3% over inflation and never losing more than 3% from any last top has more moving parts. I have 3-4 lists (Multi, HY Muni, Bank loans, others) of my best ideas already. I looked at these lists once a week. I run a generic screener at least once a month, maybe a miss fund. If my funds are doing fine, like this year, I get lazy for weeks.
BB: What vehicles are available if you do not want to trade but want to make 2-3% + inflation? FD: the only ones I'm willing to use are special bond funds and that's why I spatialized in these categories. I'm not willing to lose more than 3%. Others may be comfortable with losing 10-20%. I'm looking for bond funds with low SD. Over a year ago, we discussed CBLDX,RSIIX/RSIVX and I posted they are a longer hold, maybe years. It's never going to be an easy task. Sure, you can buy VOO and go to sleep...or...PRWCX.
Lastly, that is an exercise I use. Suppose all my money is in cash, what would be my best 2-3 funds to buy now? The answer is exactly what I do. That releases me from any commitment or being sorry.
The last few messages on this thread have been very educational, tks to all who contributed. I have a similar system as @FD1000 but have high confidence that I'm much less proficient. That said, I do decent on my goal of beating VWELX (either in absolute returns or better risk adjusted returns).
The below comment from FD1000 hit home because this is exactly what I do every 4 weeks relying heavily on the MFO Premium Screener. "Lastly, that is an exercise I use. Suppose all my money is in cash, what would be my best 2-3 funds to buy now? The answer is exactly what I do. That releases me from any commitment or being sorry."
My 2c on the topic of "trader" vs. "investor" -- SEC definitions are a moot point. If one is buying anything other than a passive index, one is a trader regardless of whether your average hold period is 3 months or 3 years or 30 years. You are inherently betting that your pick will perform better than an index from an absolute return OR SWAN perspective.
"If one is buying anything other than a passive index, one is a trader regardless of whether your average hold period is 3 months or 3 years or 30 years. You are inherently betting that your pick will perform better than an index from an absolute return OR SWAN perspective."
I respectfully disagree. Active fund vs. passive index fund perfomance does not signify whether or not someone is a trader. If an investor continuously holds the same active funds for 10 years as an example, I would not consider him/her to be a trader.
Anytime you make a trade, once a month or once a year, you are a trader, and it doesn't matter if it's 10% or 30%. After years of trading every 4-6 months, I found out that trading based on current market conditions gives me the best risk/reward. It's the only way to avoid the big losses. Intuition and experience play a huge part of it.
I do not know about passive vs active, but what about those that rebalance their portfolios based on equity % or time? But why does it matter whether one is a trader or not? Why glorify one over the other, rather than let people do what they want to and let them share what they do? If they are doing it wrong (I.e., not meeting their objectives), they will learn to adapt / improve. If they do not improve, we do not need to be their parents.
Comments
1) fred495 is a good trader. Every investment board have different traders. The ones who buy and hold years, the ones who switch every 2-3 years, and others who change when they see better funds than what they have.
So, when someone posts about a fund I own now and says, Well, in 2022, it lost more than another fund or in the last 10 years, this fund was better than another, I don't care, what matters is what the fund is doing now.
2) We discussed PVCMX several months ago and I said why own it now. YTD is made only 4.2%. Does anyone own this fund and feel great?
3) ICMUX made YTD 8.5%(there are better bond options). Retirees who have enough and want low SD performance should be very happy to make it in bonds. I know fred is in this camp.
Where can I sign for 3-5% annually over inflation and I keep the money?
4) What about QQMNX? I have tested so many ALT funds, especially AQR funds, and was never impressed about their LT. It is also very difficult to hold them when the market is running away. ALT funds can do a better job in more volatile markets, but remember, if the managers make 1 mistake every year, it can be costly.
In 2022 QQMNX did well, but in 2023 it made 5% while SPY made 26%. Would you hold that long?
5) Retirees who have enough can avoid the big losses easier than accumulators who must stay invested all the time.
6) Someone who can't time markets and wants to own 10%, maybe 20% in ALT funds and hold LT? why not.
BTW, I don't love or hate any fund/manager, I dislike laggers, especially the ones that lag for 1-2 and more years while many hang on.
Well said, Mike.
I never believed in diversification either because it led to lower performance for years.
BTW, in very high risk markets, you learn pretty quickly that most funds sink together. You even learn that bonds don't always save you, think 2022.
The SP500+QQQ has been great since 2010. From 2000 to 2010, the SP500 lost about 10% and QQQ lost almost half.
FAIRX was a great fund during 2000-10 but has been far behind since 2010.
ICMUX made more than PIMIX for 3 years (chart)
But PIMIX made more from 2015 to 2020 (chart) and PIMIX management is pretty good.
Based on my history of following many funds, I hardly ever found a fund that stays at the top every 2-3 years. Maybe PRWCX is the exception.
In bondland the exceptions are so much better and can last for months, sometimes years.
An extra of 3% in bondland annually for many retirees is so good that you can own a small % in stocks (or none) with a much lower volatility portfolio.
The investors who believed in B&H; in the last 10 years, the most recommended bond fund, BND (US Total index) made just 1.7% average annually, far behind inflation.
In the last year, I owned 2 bond funds for most months and hardly traded. Not every trader changes funds every week/month. I always admitted I'm a trader but I see many who trade so much more than me and claim they don't.
Your comparative selection of funds above is all in hindsight and therefore irrelevant to portfolio construction IMHO.
We have indexers, passive and active investors, B&H, traders, income investors, and then fund hoppers within some of these other categories. Each has their own way of looking at, and doing, things; sometimes their own terminology. It's no wonder there are disagreements online!
You could have constructed a very nice portfolio in 2010 just to find out that your decent VALUE or EM funds have lagged SPY/VOO by a big margin.
On the other hand, the same funds above lost money for 10 years.
I also posted how PIMIX did great and then ICMUX did much better + why high-rated funds were terrible in the last 10 years.
The above examples are not monthly or even yearly trades, these are at least 3 years in the same fund. It shows it would be difficult to construct a portfolio that works well in all markets.
So, when someone says she is not a trader on these boards, it's hard for me to believe it.
Did you trade 2-3 times per year? You are a trader.
Did you trade only 30% of your portfolio? You are still a trader.
There are not many posters who bought 10 funds 5 years ago and created their "perfect" portfolio and haven't done 3-5 and more changes.
Most of the ones who owns their funds for years are indexers and or Bogleheads.
@FD / Wouldn’t it help people more if you posted what different investments will do in the next 1, 5, 10 years rather than what they did in the past?
You seem to be inventing your own definition of “trader” vs “investor.” I’m not sure if there exists a rigid definition of “trader.” You are entitled to your own like anyone else. For day trading the SEC does have a definition. But it’s several times weekly, not yearly.
Here’s a legal definition of frequent trading
Here’s some SEC definitions of day trading
Of course, various mutual fund providers also have definitions for frequent trader. These can vary from one provider to the next.
1) what does FD say about the prospects going forward for QQMNX or the L/S category (the, QQMNX category)?
2) Does he say it is a good category to be in, irrespective of specific fund's prowess?
3) If yes, does he think QQMNX is a good fund to be in that category?
4) If yes to 2 or 3, are his hoped for prospects for a trade or for B&H investing over 1, 3, or 5 yrs?
I only need 1 or 2 word answers for the above. Pl note that I am only interested in prospects (future). I do not need any reasoning, because I trust anyone posting here is intellectually honest to the best of their abilities. I am perfectly OK if someone's crystal ball gives them a wrong answer.
FD: your claim is pretty old. I don't predict what would be good, I invest based on what markets do currently and what I have posted for about 15 years on different sites.
You can read real time trades (here). What I think about bonds (here) and market calls (here).
2) hank: day/frequent trader
FD: I never said I'm one. I said I'm a trader and I'm not ashamed of it, while many who trade as much as me or more can't admit they are one.
3) BB: what does FD say about the prospects going forward for QQMNX or the L/S category
FD: I have said many times that most should avoid ALT funds and explained why. You must hold for years to see the benefit just to find out it was wrong.
4) MikeM: It's just BS to say this fund did well in this time frame but didn't do well in another,
FD: it's not BS, history proved that 1-2 categories can be at the top for years. Constructing a portfolio with the best funds now and never trading will not guarantee best results in the next 10 years. Markets change. Managers that did great with one style will lag markets that do better with another style.
One of the best writers in this site is Charles Lynn Bolin because of his ability to change based on current markets.
5) MikeM: To keep responding with fund suggestions after the fact and thinking you are some guru is irritating.
FD: of course, we had to get to this claim
6) MikeM: I don't believe that FD can construct a portfolio for a second.
FD: pretty funny Mike.
I'm pretty sure that FD will agree with all the above. Unfortunately, I'm also fairly sure he'll say it in a way as to annoy multiple people. FD largely invests now in 'bonds', and is not a B&H investor; so I think it would be safe to say that he doesn't have a lot of affection for LS-type funds. I think the whole idea of such funds is that you trust the fund to do things for you, to do so in a manner you are not going to understand, and FD doesn't completely trust anyone to make decisions for him.
One may or may not care for his online personality, but he's someone whose advice I respect and consider in my own decision_making. As I do many others here. You just have to understand where they're coming from.
Please elaborate: "All that matters is what is at that moment in time."
What is a moment in time in your opinion. One day, a week, a month?
If you are thinking like a Zen master, then obviously, time is not real and there is no such thing as moment in time.
This is also the perspective of someone who has enough, and who doesn't want to lose what has been gained; I don't, after all, have 30 years to smooth out losses. Purely binary outcomes with roughly equal odds are not appealing. While willing to run risks, I prefer to control the extent of the risk and want to be paid to take that risk. Right now, I chose not to risk a lot, because I don't think you can expect to be paid adequately for taking that risk. So far this year, I've gotten about 70% of the market, while usually holding less than 50% equity and haven't felt at risk. Everyone's situation is different, but I consider that to be a good outcome.
I came to a conclusion that I want to participate in the markets by using best risk/reward funds. The idea is to find good performance wide range funds with lower volatility, and that will result in a better sharp ratio. My basic system from 2000 to 2013 was to use a fund screener every 4-6 months and find the best 5 risk/reward funds for 1-3 months + 1-3 years and invest 20% in each. After I have done it several years, I learned a lot more about the managers, their history, and their weaknesses and strengths.
2008 was a waking call, I lost 25% in that year, and since then I have been searching for a way to control meltdowns. It took me another 10 years to master that concept, but this time by using special bond funds.
As you can see, it took me years of practice and tweaking. You just can't wake up one morning and be successful doing it.
Of course, bad calls are built into it, the idea is to lose very minimal (which in bondland is 0.1-0.2%) and make a lot more when I'm right. I'm not your typical trader, if my trade is right, I can stay in it for months until I find a better fund.
Now, at retirement, my portfolio is big enough that I only need to make inflation + 2-3%(of course, I want more) and why I don't need to take a lot of risk.
What is "now"?
Years ago, using my original system, 'now' used to be 1-3 months but I also looked at 1-3 years just to be sure the fund did well for the short+longer term.
Since 2017, "now" is the last 2-3 weeks and where better trading is needed
"now" also means investing in the best wide range funds, why you don't want to diversify, and exactly what I have done.
Thanks for the following info:
"What is "now"?
Years ago, using my original system, 'now' used to be 1-3 months but I also looked at 1-3 years just to be sure the fund did well for the short+longer term.
Since 2017, "now" is the last 2-3 weeks and where better trading is needed
"now" also means investing in the best wide range funds, why you don't want to diversify, and exactly what I have done."
How often do you run the fund screener even if your current holdings are performing to your satisfaction?
Are yearly Buffer ETFs a worthy consideration? These just roll year after year if you do not sell. If I recall their construction / offering, seems like my principal is always preserved + a potential for limited upside.
If your principal is preserved year after year, why do you care about daily volatility?
Just do not put all your money into them because the manager may not be able execute as contemplated - not a substitute for US Treasury bonds!
There may be more than one thread on Buffer ETFs but here is one -
https://www.mutualfundobserver.com/discuss/discussion/62213/new-stock-etfs-offering-100-downside-protection-are-coming/p1
I am bringing up this topic again because of the new consideration of total return of 2-3% + inflation and no loss of principal. It is tradable and so you can get out whenever you want - not like private equity or private credit.
MAXJ currently has $170M AUM and there may be others with larger AUM for better B/A spreads and liquidity.
Just to be clear, the 100% downside protection is only if invested at inception. For after inception, pl check fund site for remaining cap and fund NAV (minus inception NAV / floor). E.g., if one buys MAXJ now, one could still lose 4%.
FD: My simpler original system says run it every 4-6 months regardless of anything and select the best risk/reward funds.
My newer trading system since 2017 with emphasis on making 3% over inflation and never losing more than 3% from any last top has more moving parts. I have 3-4 lists (Multi, HY Muni, Bank loans, others) of my best ideas already. I looked at these lists once a week. I run a generic screener at least once a month, maybe a miss fund.
If my funds are doing fine, like this year, I get lazy for weeks.
BB: What vehicles are available if you do not want to trade but want to make 2-3% + inflation?
FD: the only ones I'm willing to use are special bond funds and that's why I spatialized in these categories. I'm not willing to lose more than 3%. Others may be comfortable with losing 10-20%. I'm looking for bond funds with low SD. Over a year ago, we discussed CBLDX,RSIIX/RSIVX and I posted they are a longer hold, maybe years.
It's never going to be an easy task.
Sure, you can buy VOO and go to sleep...or...PRWCX.
Lastly, that is an exercise I use. Suppose all my money is in cash, what would be my best 2-3 funds to buy now? The answer is exactly what I do. That releases me from any commitment or being sorry.
The below comment from FD1000 hit home because this is exactly what I do every 4 weeks relying heavily on the MFO Premium Screener.
"Lastly, that is an exercise I use. Suppose all my money is in cash, what would be my best 2-3 funds to buy now? The answer is exactly what I do. That releases me from any commitment or being sorry."
My 2c on the topic of "trader" vs. "investor" -- SEC definitions are a moot point. If one is buying anything other than a passive index, one is a trader regardless of whether your average hold period is 3 months or 3 years or 30 years. You are inherently betting that your pick will perform better than an index from an absolute return OR SWAN perspective.
I respectfully disagree. Active fund vs. passive index fund perfomance does not signify whether or not
someone is a trader. If an investor continuously holds the same active funds for 10 years as an example,
I would not consider him/her to be a trader.
Anytime you make a trade, once a month or once a year, you are a trader, and it doesn't matter if it's 10% or 30%.
After years of trading every 4-6 months, I found out that trading based on current market conditions gives me the best risk/reward. It's the only way to avoid the big losses. Intuition and experience play a huge part of it.