After spending the majority of my time over the last few years pouring over investments, asking LOTS of questions here - and always receiving great responses - I was happy with my resulting portfolios. But I finally had "information max out" and have been spending my time repotting and enjoying my 2000+ potted plants. (As you can tell, I'm not a "moderation" type girl).
But I really missed reading and communicating with the people here, so wanted to try a bit more conservative participation - sort of like a diet where I can have a few "splurges" every once in a while.
My very conservative portfolios were gaining nicely- like everyone else's here, I'm sure, during this last year with the market doing so well. But during this past month, when even my most conservative bond funds dropped substantially more during market falls - and my entire portfolio on occasion even went very slightly down during the up times - I feel there now seems to be no such thing as "diversification" in a portfolio anymore. When the market went down, gold, real estate, bonds and just about everything else all went down with it. Adding to that all the scares about the "end of the bonds' 30 year bull market", it's a little scary. If they are just talking about Treasuries, that's one thing. But almost all my bond funds now have significant amounts of those mortgage-backed investments, so I didn't worry too much.... until the real estate market started tanking after all those gains it has had. Will we have another 2008 real estate crash? Since the government seems to have done nothing to protect/regulate even the worst offenders, how will my specific bond funds hold up now during the next major downturn? .
So I really need to start watching what's happening more closely again... and hope that my FSO friends here will, once again, give the patient and helpful responses I so appreciated in the past.
Cathy
P.S. I love the new MFO fund ratings charts - can't wait for the full version. So much time and effort must have already been spent creating this. I made a new PayPal donation to help support this great site and do hope that David and the staff at least makes some income after expenses.
Comments
I think you can move the post but I've never done it. Someone will be by in a while who does, I'm sure.
I certainly understand your feeling that diversification isn't all its cracked up to be, but I retooled my portfolio this year into what I felt was a more diversified portfolio. I inherited additonal funds, and felt it needed tweeking. And yes, when I got back from my vacation on Friday I saw a dramatic drop from the time I left two weeks ago, but all in all satisfied that diversification helped contain some losses, and a few investments did no worse. In an ideal world, you would see a mix of red and green ( a bit like New Mexico chili) every day letting you know diversification is working, but sometimes they all go down together. Without diversification, Im sure you would see a bigger loss that you have.
I too, continue to learn every day from the members of MFO and thank David and his excellent volunteers and members for their help when asked and for their insights on a dialy basis. Good to be back in the USA
There have been many posts recently about people's worries and about what they are doing with their money now. Of course anything can happen, even another great recession, but my take is that we are probably in for a normal equities correction of 5-15%. For me, I'm at the low end of my equity percentage now, somewhere below 40%. So I'm comfortable waiting for the inevitable pull back. Your concern about bonds is shared by everyone here. And like I said, bonds have been a steady topic for the last month.
Glad to have you back.
Cheers, AJ
It is quite easy to move to a different category
just choose edit in the discussions you create and click on the category selection box and pick the new category one you want.
I agree the new fund ratings is pretty cool.
https://www.google.com/finance?q=INDEXCBOE:VIX&ed=us&ei=vvWrUZDFA8vcqAGdmQE
"Selling for the Safety of Cash" Copied from full article @ http://fabiancm.com/wealth-management/risk-management/
My grandfather used to say that “lost opportunity is a much better feeling than lost money”. In real world practice however, they can both feel like the great equalizer. This brings me to the second tenet we have written on the wall at Fabian Capital Management; selling for the safety of cash.
In today’s zero interest rate, ever inflationary world, cash is the most consistently underrated and chastised of all risk management tools. This mere fact makes cash a favorite of ours that we don’t foresee changing anytime soon.
Developing our strategy for cash includes a couple of different perspectives, or ways of looking at our client’s portfolio goals and objectives. For example, the simplest of all would be evaluating a price target for a position, and then simply reducing the holding for the safety of cash once the target was met. That way, we are selling on our own terms, not when the market decides to force our hand.
Another example could include expanding our cash positions when we meet a predetermined growth or income goal in a single year, or even single quarter, as to simply reduce the future risk of drawdown. The size, length of ownership, and plan for cash should all be taken into account when making this decision. In the past, we have even gone so far as to set stop losses for our client’s cash positions, where they would “stop in” to a given market after having to large, or too long a presence there.
P.S. Someone at MFO was kind enough to change the category for me.
I am so uncomfortable with the market now that any suggestions/information on diversification that actually works (other than MM/CDs) will be a big help to me. I will review previous posts in the hopes of finding more information.
I'm very conservative in equities (approx 20% including those in VWINX, BERIX, PGDIX and GLRBX) - and hopefully will be comfortable (though not happy) with the losses they may incur during next strong downturn.
My anxiety is with my 80% Bond MFs. I don't understand exactly what category of bonds so many people say will start taking much larger losses - are they just long term treasuries and/or high yield, or do they also mean the mortgage-backed (including GNMA, govt mortage and agency/non-agency MBS that so many bond funds have significant percentages of)? And do they also mean global and emerging market bond funds - and/or muni bond funds? It doesn't make sense to me that ALL bond MFs - no matter what type of bonds they are invested in - are likely to take large losses over an extended period of time (1 year or more). But when I hear that Gross says to walk away from bonds - and he is a king of bond funds - that's really scary. Why on earth would he say that knowing his own funds will suffer large withdrawals?
It was so nice to feel comfortable (and even happy) during these last 12 months. But knowing there is still so much corruption/manipulation/incompetency in our government, largest private sectors, etc., it's impossible for me to try and project when, and our large, the next crash will be. And, most importantly, how I can best protect us from the worst of it. At our retired age, we can't wait 20+ years for a recovery if the crash is really bad.
We do have a substantial amount of MM and tiered CDs to not panic - and we don't need to withdraw any funds to live on, so we are very lucky. But horribly incompetent CalPers will be tripling our long-term care insurance, and health costs are bound to become much larger percentage of our expenses. So it would really be nice to at least average 4%-5% after taxes on our portfolios - or at least not lose more than the approx 7% average our portfolio would have lost in 2008.
Cathy
I am envious of your woodland project... would love to have acres of trees, streams, etc. But know how disrupting major projects like those are to our lives, so hope it is finished and you are happy with it.
Most importantly for this site, I hope your investments are doing well and they are not causing you anxiety to counter-act your now peaceful environment.
Cathy
I also love the new B, I, U auto-code-adding ability here - AND the ability to include pictures, graphs, etc! I will have to test that out sometime soon. This site is really becoming professional - and with all the great contributors here makes it my first "Top Priority Read" for investment information.
My first thought was to invest in short 500/Dow(SH/DOG) - or even the Ultra shorts - not to make money off of them, but to reduce any temporary or extended losses enough to keep me from panicking and selling at the wrong times. However all their 5+ year losses were so high and the amount I was willing to add to my portfolio was too small to make much of a difference at all in my total % losses (based on 2008 losses).
Fortunately, we are able to maintain sizable amount of cash (MM, CDs) to get us through even extended long downturns. But that still won't keep me from the anxiety of watching all our nice gains in the last year disappear - especially since it is the first time in years of mostly gains. If we held stocks/etf's, etc., I would have strongly considered selling half last month. But 98% of our investments are in MFs... and they don't take kindly to buying again after a large sell-off.
So I'm hoping that having a significant amount of Conservative Allocation MFs (that can invest in stocks, bonds, foreign, etc. and increase their cash when they feel best) will leave at least that portion in the hands of managers who know far more than I do - whose only job is to monitor all this every day.
Cathy
For now, the only chart is in my cover essay as part of the lead story. In it, Charles highlights the lowest risk-category funds from among those with at least a 20 year record. We'll share more in July, we hope. The key is making the data manageable for and useful to the average user. Right now, Charles's spreadsheet runs to about 120 pages if you're not reasonably conversant with Excel, it won't be nearly as useful as it might be.
Hope that helps,
David
Im about 20% in mutual funds, about 12% in ETFS, 20% stocks, 8% cash and 40% bonds (all munis), so I do have stop losses on about half of my stocks and etfs, which has protected my downside this year. You may want to consider etfs to replace some of your funds, since you could set your own limits on when to sell in a downturn. The ETFs I own are not all sector funds, but here is a list of the ones I like and have: DTN, DVY, EEM, IYR, IYW, PKW, (my largest), RHS, VIG, XLP. Actually, most of my funds have held up well, I do have few sector funds, but the others I would consder conservative funds,all but my small cap fund and emerging market funds are either equity income or dividend growth. I believe in diversification, but as we all know, there are times everything tanks and hopefully you have the stamina to hold on. I don't know your timeframe for when you will need the money, but I know its a bit easier to hold on if you don't need the money right away. Keep reading the posts and keeping track of funds or etfs other may like too for ideas. I do
a real diversifier in the current environment is probably a small cap equity fund. not advice, just an observation of the last couple of weeks' price action.
at one time you wanted to have fund polls. Now you can create your own
http://www.mutualfundobserver.com/discuss/index.php?p=/discussion/6245/poll-creation-instructions-and-information-april-9-
"The fund poll" isn't what you would call a popular feature among the forum members. It is kind of a flop at the box office. But it is there if you want to use it.
why don't you convert formulas to php and put it in sql database. If it is something where that data is retrieved on a periodic basis, it might be the way to go. But then again, I'm looking at it from not knowing the internals.
I could probably help (but I couldn't promise a time frame). let me know.
then you could tie it in with fund popup and put an icon next to fund if it is mentioned in the discussion with a small owl that has "1 thru 5 hoots" or screeches for the losers
Some also have separate "agency MBS CMO" (as well as "Agency MBS pass-through"). I haven't a clue what the difference is, but such high MBS totals in some concern me.
P.S. PONDX has been my top favorite fund for a long time now. I know it won't be able to maintain the large gains for this type, but do hope it will be able to hold its own during the coming years. And I increased percentages in my two small caps (ARIVX and ICMAX) - though still very conservative totals.
Additionally, I've thought about the VIX at times myself but there has been issues with tracking (article: http://www.minyanville.com/businessmarkets/articles/warner-etf-VXX-VIX-tracking-derivatives/1/7/2010/id/26250) and some of these issues are either ETNs (credit risk - http://www.investopedia.com/articles/bonds/08/credit-risk-exchange-traded-note.asp) or I think one or two of these (VIXY) are structured as partnerships, which lead to a K-1 at tax time (another K-1 I do not need.)
I'd suggest something like Marketfield (MFLDX), although unfortunately, that fund's original shares before the fund was bought by Mainstay Funds are no longer available for investment. I own Pimco's Long-Short Fund (PMHDX), which has had a good year after a so-so start as a mutual fund in 2012 (it was previously a hedge fund.) The Riverpark Fund (RGHVX) has also done rather well this year.
I also don't need another K-1. I will check out your MFs and put them on my watch list...thanks!
Since I'm not trying to get even close to maximum gains, I feel much more secure with funds that don't make huge drops in downturns - even though they also don't make huge gains in upturns.
I want to hold off on any TIPs for now... can't imagine any large interest rates gains in this economy.