I have 2 allocation funds, IVWIX and FPACX. Both long term holds over 5 years Both funds are 30%+ cash/bonds. On down days they sometimes have worse performance than some of my all stock funds. I am not seeing the advantage of having an allocation fund, at least my 2 choices. 7 of my 11 funds had better performance today. FPACX is in the middle of the pack YTD and IVWIX is my worst performer YTD. 3 year returns are not much different. Buy/sell/hold these funds? What are your thoughts? I am thinking separate stock and bond funds.
Comments
Not that my 2 cents of thought is really worth 2 cents; but we departed away from all non-U.S. equity in May of 2016, with the exception of whatever may be held by a fund for some foreign exposure. To the best of my recall, we used the best turd in the global turd pile approach for this decision.
Not that the funds you noted are sub-par, but that their investment areas may not be as favorable right now. No easy choices or decisions in the current markets conditions. Too many things going on all around the globe.
I/we still hold this view; although there will always be exceptions in some foreign areas.
I used FBALX for a moderate allocation (U.S. centric) compare in the below chart. This is not a fair comparison as to fund types, but represents the returns only for a view.The fund generally may have 5% or less of foreign equity exposure. Fund inception, Nov. 1986; with lifetime annualized total return of 9.18%.
Chart of these funds, since 2008 IVWIX , FPACX , FBALX
Are these holdings tax sheltered so that taxes would not be a problem with a sale? What would be the percent impact to the total holdings if you sold both?
Take care,
Catch
Looking at IVWIX year by year, it's done acceptable or better most years. 2012 was a year like this one, 84th percentile then, 86th percentile YTD. M* writes that this fund lags in up markets such as 2012 and that would seem to apply to this year as well.
Consistent with that, the fund currently holds over 30% in cash alone (almost no bonds), and 2/3 of its equity is abroad. That seems quite defensive, positioned for interest rate hikes and the US market peaking. In six months that may look very prescient or it may look somewhat foolish. Regardless, this seems to fit the fund's overall profile. This is not your typical world allocation fund and it doesn't seem to have changed its style recently.
If you're looking for a pure stock fund, would you consider IVIQX? If not, then perhaps it's the managers' style that you don't like and not necessarily world allocation funds in general.
With respect to domestic allocation funds, I usually start with VWELX as my benchmark. Is that a fund you would be happy with? If so, then again it may be the fund (FPACX) and not the category that troubles you.
If in using separate stock and bond funds you'd have the same stock/bond mix as before, then you'd expect to do about the same as with allocation funds generally. Personally I prefer separate stock and bond funds, but I do keep eyeing Wellington. It's more a question of how one wants to manage one's portfolio than a question of performance.
It is a fork. You may be being swayed by recency, but recent conditions are telling and presumably lasting, sure.
It took me a long time to get my mind around leaving JABAX and the original Fido Asst Mgr (and several others, including FPACX and FPURX and AOR and others) and move to separates.
Over time, a long time.
Eventually, however, I did go to separates, as I have posted before. So now I am happily splayed among only DSEEX, PONAX, with some FRIFX and PCI at the edges. (Plus some loser spec stocks.) I see I have done rather better than sticking with JABAX or equivalent, even at its approximate ratios.
Fwiw.
I benchmark against a decent 40/60 allocation fund (TRRIX). Mainly I’m interested in having similar or lower volatility than that fund exhibits most days and keeping slightly ahead of it in total return longer term. I’ve owned it before, but don’t currently own it.
At 70+ I own no all-stock funds, unless you count minor exposure to some specialty funds (gold, infrastructure, etc.)
My several balanced funds now have a portfolio weighting that 30 years ago would have been invested in stock funds. Among them is PRWCX, which is probably the most aggressive one and probably better classified as a “stock” fund.
I can’t think of any classic allocation funds I currently own. But I’m not opposed to owning them either. Actually, it may be easier for some to tolerate the swings in an allocation or balanced fund over time than to tolerate the gyrations a stock fund might experience. If you’re comfortable running both stock and bond funds side by side, nothing wrong with that.
No advice @Art except to settle on some kind of benchmark suitable to age, circumstance and temperament. Comparing your returns against a reasonable benchmark is a lot less trying than comparing them to any particular hot fund or market at any given time. The benchmark you use might be a favorite fund, an index, or a collection of 2 or 3 of those averaged together.
So most of my funds have allocations to cash, but the question here is should you pick one that is committed to other asset classes, and is Romick the best person to use.
The first question is personal preference. Are you more comfortable is someone else make your asset allocation decisions?
The second question has a little more data behind it. I have used FPACX for years but "past performance is no guarantee.." certainly holds here. Romick's outsized gains are almost all due to the years before 2009.
He never went off the deep end like some of the heroes in years past but I am not sure that I would buy FPACX now just for his expertise
This raises the questions (1) whether its good performance has been due in part simply to this bias, and (2) whether this is where the manager is comfortable investing or whether he would shift to value (and under what conditions)?
It's hard to answer #2. To address #1, I ran a quick analysis using Portfolio Visualizer.
I ran back tests from May 2005 to the present, comparing JABAX with VWELX and with 60/40 mixes of VOOG & VBTLX (to check JABAX value add vs. index funds) and VOOV & VBTLX (for VWELX value add vs. index funds). Rebalanced quarterly.
From best to worst annualized returns:
VOOG/VBTLX: 10.43% (growth mix)
VWELX: 9.74%
JABAX: 9.32%
VOOV/VBTLX: 8.36% (value mix)
Yes, Janus (the company, too, TBailey's penchant, then JCraig) has usually, albeit sometimes intermittently, leaned toward growth, as long as I have been involved with them, going back to Janus Fund. Not like VWELX and Romick and Oakmark. Indeed, you would think that FPURX (similar growth taste as JABAX) would be even better than it is, would you not?
I don't know what it would take for Pinto and Fido (speaking v generally) to ever shift to value.
I held FPACX in my portfolio from 2010 - or earlier - until the end of 2018.
My reasons for dumping it were:
1) fund should have been closed long ago. I got in when AUM was approx $8B. How in good conscience can a fund be kept open when the average cash stake was 20% or better most of the time? That much cash means there aren't many good deals out there, so why accept more cash?
2) For an $8B fund with 20-30% of AUM in cash, what justifies an ER >= 1.00%.?Today AUM are 50% greater, so why has the ER increased instead of decreased?
If you look at M* data, you'll see that over 15 years, FPACX is a middle-of-the-road fund. It maybe is in the second quartile on the 4-bar graph, and comes in around 50% in terms of fund rankings.
If I remember correctly, prior to 2010, this fund was hot, and it wasn't large cap performance that made it hot. I thought it might have had good defensive characteristics, which is why I bought in. Sometime around that time, money started to pour in, AUM went way up, and people didn't care that the ER was where it was because the fund was still doing well.
There are plenty of other funds out there - big and small - where I would put my money. I have both VWENX and VWIAX. If I didn't, I'd consider DODBX, ABALX - even if I had to pay the load -, and possibly MAPOX and FOBAX. I sold out my FOBAX two years ago, and have been regretting it ever since. I have not regretting selling FPACX and doubt that I ever will. YMMV.
The general point remains - MPinto may not have added value. The good performance can be explained by the Janus growth style.
(Based on the two sets of figures, what PV output for a decade and what you report from M* over roughly 15 years, we can say that Wellington has done better over the past decade; Janus Balanced was better in the five years preceding that.)
BTW, $10K in Wellington grew by $21,269, not to $21,269. See M* graph here.
Regarding Puritan, like Wellington it outperformed JABAX over the past decade. Which suggests not so much that it should have done better given its growth leanings, but rather that JABAX was the anomaly, as it outperformed by a wide margin in 2007-2008. Which in turn suggests taking a closer look at the other 40% of the portfolio, i.e. the bonds. (For example, treasuries did well around 2008, other types of bonds more poorly.)
If (and I haven't looked into this) bonds are indeed the reason for the outperformance of JABAX between 2005 and 2010, then that advantage was lost in 2016 when Smith left. That's something you might want to take a closer look at.
Let us say mom or daughter, not just you or I, graphs M* $10k growth of VWELX, JABAX, and FPURX for 3 and 5 years.
(She did so because she read an article advising always to do that, not shorter terms.)
What does she see? Well, someone sure is adding value somewhere. Clearly. 3y starts in the fall of 2016. Hmm. Notable outperformance by JABAX from then.
She adds FPACX, OAKBX, and DODBX, because of another article she read. Well, forget them.
She goes ahead and, just for kicks, checks 1y and ytd. A hair of underperformance by JABAX wrt to Vanguard. Bond advantage lost? Not seeing it.
Same for 3mos.
You may have it in for Pinto because it was I who posted about JABAX, or something like that. But superior things have always taken place for as long as he has been involved w/ JABAX, to my view. Am I missing something?
Growth, but growth a la Pinto, look to be the key. If growth alone, the question remains for me, Why is FPURX not better?
So I score all this as showing at least some added value for this guy. Maybe Snowball can do an interview with him about outperformance longevity.
"Growth, but growth a la Pinto, look to be the key." Are you sure that it's growth a la Pinto that's the key? Prior to the last three years, the fund was still good, but somewhat less so. Smith left three years ago. Coincidence? Pinto took over the responsibility for asset allocation and others took over the bond sleeve.
Before 2017 the fund had some fine years, but not in the top decile. Since Smith left, it's been nothing but. While that data suggests that someone is adding value now, it also suggests that Pinto's stock sleeve management skills are not the key. They haven't changed, have they?
Take the five year period ending when Smith left (3/31/11 - 3/31/16). Your mom and daughter's $10K would have grown to $14,177 with JABAX, and to $14,692 with FPURX.
See M* chart.
Or the three year period 3/31/13 - 3/31/16. There JABAX ended with $12,112 vs. FPURX's $12,722. (One can edit the start date in the M* chart to get these figures.)
(VWELX has done gangbusters over the last month, that's true.)
If you are interested in delving further, you might wish to MFOP-compare the two of them, both GO/HR and w/ similar UIs, over 15/12/10 ...-year periods and subperiods. Except for Vanguard having way deeper drawdowns long in the past, it is really remarkable how a fund 6x the size of Janus and moreover with a value tilt has done very close to as well, and sometimes better. It's as though the long-discussed value penalty does not exist for VWELX. It would be interesting to understand that too.
"I generally suggest caution when evaluating a fund with recent poor performance. That recent performance distorts the longer term figures."
The same applies to funds with recent good performance. One gets a different perspective by disregarding a recent, disproportionately bad (or good) period and looking at longer periods that came before. Now three years (2017-19) is not just a very recent 6 month or one year span that can be lightly disregarded. But there was a significant management change in 2016 that justifies looking at the pre- and post-Smith periods separately.
Your mother and daughter are in fact doing half of that. They're looking at the post-Smith period exclusively (3 years) or the mostly post-Smith period (5 years). You're doing that also, with your 5/4/3/2/1/ytd figures that virtually ignore the Smith period.
Again repeating myself, all of this may suggest that Pinto is a great manager (better alone than with Smith). But it also cuts against your statement that the key to the fund's performance is the way he manages the stock sleeve. If the stock sleeve were the key, one would expect similar relative performance across consecutive multi-year periods, those with and without Smith.
Cherry picking says that the selection of time periods is made by seeking especially good (or bad) periods. That's not what I did. I selected time periods based on management. Which makes sense to do on general principle, let alone to test the hypothesis that "growth a la Pinto" was the key.
This is per M*; see below.
Chart of above funds
But the results are quite different! (Unless I am making a mistake.)
Stockchart shows performance since 4/25/2005 to date for JABAX of +208% (rounded up) and VWELX of +210% (rounded down). Hmm. Whereas M* shows nothing of the sort: $10k grows over the same period to 32,842 Janus vs 31,297 for Vanguard, a difference of $1500.
wtf??
Again, unless I have done something wrong.
Charles and msf may have thoughts on this discrepancy.
To use the M* legacy graphing for ready (meaning easier than with the new site, to my mind) specifying of dates and periods and more:
https://quotes.morningstar.com/chart/fund/chart.action?t=jabax
Yes, it is not easy to get an exact start date, but I was able to review the chart with a starting date of 4-21-2005; which is close enough over such a long time frame.
I find JABAX and VWELX even at +211%.
The other four for this time period range from +171 to +160%.
ALSO, that as one moves the left side slider to the right to shorten the time frame, more interesting changes may be seen.
Obviously, being active managed funds; their paths vary based upon management choices during the period(s).
FPACX running with high cash positions recently will show in their returns vs the others. Although I don't know what "cash" means in this case.
I can not offer more to this discussion, IMHO.
Take care,
Catch
Don't recall whether M* numbers or percentages includes all distributions for a given time period.
Do you know the answer?
Catch
Growth of 10,000
The Growth of $10,000 graph shows a fund's performance based on how $10,000 invested in the fund would have grown over time with dividends reinvested. The returns used in the graph are not load-adjusted. The growth of $10,000 begins at the fund's inception, or the first year listed on the graph, whichever is appropriate. Located alongside the fund's graph line is a line that represents the growth of $10,000 in either the S&P 500 Index (for stock funds and hybrid funds) or the LB Aggregate Index (for bond funds). Both lines are plotted on a logarithmic scale, so that identical percentage changes in the value of an investment have the same vertical distance on the graph. This provides a more accurate representation of performance than would a simple arithmetic graph. The graphs are scaled so that the full length of the vertical axis represents a tenfold increase in investment value. For securities with returns that have exhibited greater than a tenfold increase over the period shown in the graph, the vertical axis has been compressed accordingly.
VTSMX $10k appreciation since last Dec 07, not so long ago:
M*: $11,110
SC: $11,368
When StockCharts shows a heading of Dec 7, 2018 - Sept 24, 2019, it means the performance on those days, inclusive. So if there were no dividends, one would just take the closing price on Sept. 24 and divide it by the closing price on Dec 6 (and multiply by $10K) to get the final value of a $10K investment.
StockChart graph for VTSMX.
Since the fund had divs, you can use the adjusted prices from Yahoo to verify that this is in fact what StockCharts is showing (correctly). FWIW, I cross checked Yahoo's daily prices with Vanguard's data, incorporated the divs from Vanguard, and came up with $11,370. Clearly some rounding errors by someone, but close enough to validate the StockCharts price.
M*'s handling of the boundary dates is a bit problematic. The chart linked to here will illustrate. It graphs VTSMX from Dec 7, 2018 to Dec 10, 2018. (Weekend days were Dec 8 and Dec 9.)
Notice that there are three prices in the graph, i.e. two changes. Since this spans a weekend, that must mean that it is including the performances of Dec 7 (Friday), and Dec 10 (Mon). But it shows the starting value on Dec 7 as $10K, and a drop (to $9770.83) on Dec 8th, a Saturday. After one day with no price change (for the weekend) it shows a price change on the 10th. But a weekend must have two days with no price changes.
Regardless, it would appear that M*, like StockCharts, plots performance inclusive of the start date. It is just struggling with how to represent the change on the first date. (In fairness, StockCharts doesn't do any better; here's its chart going from Sept 23 to Sept 24, and it shows only one price change.) Or perhaps not ...
Rather than waste time reverse engineering how these tools handle their start points over different time spans, I'll just suggest you look at this M* graph of VTSMX from Dec 8 to Sept 24. Dec 8 was a Saturday, so in theory this should make no difference (but it does). This graph shows a final value of $11,371, within a dollar of my calculation and a couple of bucks or so of StockCharts.
Obviously I did not register the results correctly. This is reassuring; tnx.
I use StockCharts to provide data that I may find useful, or to settle a dispute from whomever (not at this forum) about such and such a fund, vs another.
I find the visual of charting to satisfy how I absorb information, in additional to actual numbers.
For the VTSMX you mentioned for the 200 day period beginning Dec. 7 to date, I saw the return for the period to be shown as 13.86%. Using only simple math and starting with $10K brought me to a total value for the period of $11,386.
As the old saying goes, "close enough for government work."
Take care,
Catch
Apology. We really drifted your original question.
Catch