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.
I started this thread to emulate some very successful threads on M*
On M*, bond threads did not have to compete with a large number of threads on other topics and subjects.
On MFO, lurkers and readers need to determine if a thread is worth investing in to keep it alive and active--after a month
@dtconroe, I've read your comments and all I can say to you is, this is not Morningstar.
How many additions can one thread topic have without repeating itself and the funds suggested? Please, if a post goes dormant it is not because it wasn't interesting, but typically it has just run it's course, for a while anyway. There are many interesting and entertaining threads here that get tons of views but then fall down the list of posts. Usually those interesting threads, example the buy-sell-ponder post or old skeets value metrics updates or most any post junkster made, would fall down the post list but were brought back by that poster again to start new life, typically monthly updates. At least that's how it has been done here at MFO.
In any case, I enjoyed the post you started, very much in fact, but thinking it will be a daily thread... well I don't see it.
@dtconroe, I've read your comments and all I can say to you is, this is not Morningstar.
How many additions can one thread topic have without repeating itself and the funds suggested? Please, if a post goes dormant it is not because it wasn't interesting, but typically it has just run it's course, for a while anyway. There are many interesting and entertaining threads here that get tons of views but then fall down the list of posts. Usually those interesting threads, example the buy-sell-ponder post or old skeets value metrics updates or most any post junkster made, would fall down the post list but were brought back by that poster again to start new life, typically monthly updates. At least that's how it has been done here at MFO.
In any case, I enjoyed the post you started, very much in fact, but thinking it will be a daily thread... well I don't see it.
Mike, thanks for your thoughts. I started this thread, as it resembled very popular and similar threads at M*. A sizeable number of posters found many new and varying subjects that fit into the thread topic, and they periodically used the thread to get feedback and information about those subjects because of the strong thread support by the many varied posters. But you are right that this is not M* and maybe this is not the type of thread that MFO posters prefer. If that turns out to be case, then no hard feelings--I will just move on to other opportunities.
@dtconroe. I have thoroughly, again thoroughly, enjoyed your post and was able to evaluate some of your named funds to add to those I currently keep in my portfolio. Each post I believe has value to someone and some repetition is no problem at all, as in the end,the next post usually has some newly added value or information. Do not be offended by any ones opinion about your methodology, as it is only an opinion. The only true arbiter of this forum is Dr. Snowball and his minions. If it has to do with investing keep it coming!! Dr. Snowball only rarely gets involved and typically only with character assault issues.
I am retired also, and keep a 30% equity, 50% bond 20% cash portfolio and use a barbel type philosophy with the portfolio, with aggressive funds balanced by conservative ones both OEF's and etf's. One of my favorite HY Muni funds is VWALX. On my Wells Fargo platform this Admiral fund has a minimum purchase of $0. Yup. $0 instead of the 50K at Vanguard.This could be available similarly at certain other brokerages. If not VWAHX is available with a $3000 minimum and an ER of .17% This is a HY classified Muni fund but in actuality is mostly investment grade with an average BBB bond portfolio and with great metrics for what it is. Highly rated by M*.
I liked what I saw with DHEIX and at Vanguard it is available with only a $2500 minimum. Even with the $20 purchase fee, with a reasonably sized purchase it is far cheaper to keep for a year than DHEAX which is ntf. I made the purchase in my Vanguard account.
I do not post but rarely ,so keep up the good work and welcome to the board.
+1. ... And in our case, my wife always just trusts my choices. Like a great many people, she's happy deliberately NOT learning about the various ins-and-outs-and-angles of investing. It's intimidating, maybe overwhelming to her/them. I always found the sterile, raw algebra in school to be worthless and a waste of time. With investing, I began reading printed magazines like Kiplinger's, and watching Lew Rukheiser and his round-table on Friday nights on PBS. I soon picked up on the professional lingo. It was a real discovery and revelation when it dawned upon me that anything having to do with Ethics has been stripped out of the nomenclature.
"fundly">@dtconroe. I have thoroughly, again thoroughly, enjoyed your post and was able to evaluate some of your named funds to add to those I currently keep in my portfolio. Each post I believe has value to someone and some repetition is no problem at all, as in the end,the next post usually has some newly added value or information. Do not be offended by any ones opinion about your methodology, as it is only an opinion. The only true arbiter of this forum is Dr. Snowball and his minions. If it has to do with investing keep it coming!! Dr. Snowball only rarely gets involved and typically only with character assault issues.
I am retired also, and keep a 30% equity, 50% bond 20% cash portfolio and use a barbel type philosophy with the portfolio, with aggressive funds balanced by conservative ones both OEF's and etf's. One of my favorite HY Muni funds is VWALX. On my Wells Fargo platform this Admiral fund has a minimum purchase of $0. Yup. $0 instead of the 50K at Vanguard.This could be available similarly at certain other brokerages. If not VWAHX is available with a $3000 minimum and an ER of .17% This is a HY classified Muni fund but in actuality is mostly investment grade with an average BBB bond portfolio and with great metrics for what it is. Highly rated by M*.
I liked what I saw with DHEIX and at Vanguard it is available with only a $2500 minimum. Even with the $20 purchase fee, with a reasonably sized purchase it is far cheaper to keep for a year than DHEAX which is ntf. I made the purchase in my Vanguard account.
I do not post but rarely ,so keep up the good work and welcome to the board.
fundly
fundly, very encouraging post. Thanks for letting us know what you are doing and the reasons. Sounds like you have a good handle on what you are doing and could be very helpful in sharing your knowledge and experience with other posters. I look forward to other posts from you in the future. One of the things I personally get from posts like yours, is what is available through other brokerages that I am not familiar with. I envy you being able to get DHEIX so inexpensively at Vanguard.
I stopped to look at VWALX. It's "High Yield," and $50,000 just to get in. But the monthly dividends are about the same as the ones I get from my PRSNX which is a global multi-asset bond fund, without trying to be "high yield." (a bit more than 3 cents per share.) Also, the Performance Trust Muni-fund PTIMX offers lots better monthlies. Is Vanguard just pretending when it labeled that fund "high yield?" (The alternative share-class is PTRMX, but carries a load, so I wouldn't even think about that particular flavor.)
The HY title for this fund is actually a misnomer. It has a few below investment grade bonds but it really is an investment grade fund with an average bond rating of BBB. I do not know why Vanguard calls it HY. That said you could call it a very conservative HY fund. M* does a great review of it by analysts. This analysis is available with their premium product. I get it for free from our local library. Yes 50k minimum generally, but as I noted this is available to me for $0 minimum. VWALX and VWAHX which is available for 3k have incredibly small ER's. You would have to compare all the metrics of funds side by side to know what best for you and what risk you can tolerate.
VWALX/VWAHX is very different from PRSNX. VWALX is a domestic municipal bond fund whose dividends are federal tax exempt while PRSNX is a hedged global bond fund whose dividends are federally taxable. Depending on one's tax situation this can make a significant difference in realized results, particularly if held in a taxable account vs tax deferred account.
You can see the hedging in the M* portfolio for PRSNX as the fund has both short and long positions. The hedging is small and makes sense for a global fund holding bonds issued by many countries such as Mexico, Brazil, Cyprus, Malaysia, Italy, etc.
Some observations from the 3 year look back. VWALX shows greater overall return, greater dividend distributions (see graphs in link), lower volatility / standard deviation, lower drawdown and better Sharpe and Sortino ratios (other risk measures).
For full disclosure, I've held VWALX for a long time and been pleased with it's risk / reward ratio for my situation. There are several high quality muni bond funds available, some of which have been mentioned by other posters in this thread. Everyone's situation is different and you know what works best for your needs and situation.
From my own perspective I've hugely enjoyed reading and digesting this thread. I've learned a great deal and have researched almost every fund mentioned. Thanks to every contributor and dtconroe in particular for starting the discussion and for his exceptionally well informed comments.
My personal circumstances are such that when it comes to bond funds (both mutual and ETFs) all I am looking for is a greater overall return than an online savings account. Let's say anything above 1.8% APY. Preservation of principal is absolutely paramount because I may need to withdraw money on very short notice for my wife's medical expenses due to a back injury. (We both have high deductible plans.) Therefore, I have money in ultrashort duration/ultrashort maturity funds like TRBUX, SEMRX, DLSNX, MINT, and just this week I have opened a position in JPST. All of these I consider cash alternatives with little to no risk to principal. These are in taxable accounts separate from our retirement plans.
The wife and I work for the same employer and we are both around 80% stocks/20% bonds in each of our 401K plans - with 20 and 12 years to go until full retirement respectively. That allocation will of course change as retirement nears. The single bond fund we use (out of a grand choice of only two) is WAPSX. Both of our Roth IRAs are 100% in equity mutual funds because we are very bullish for the coming decade and are prepared to weather the inevitable volatility.
As so many have rightly said - everyone's circumstances are different.
Library's in N Carolina belong to NCLIVE which is a state sponsored electronic information site that carry's many fee based internet sites and is available free to any library member in NC. Morningstar premium is one of many available, by logging in with my membership number and can be accessed by any device, anywhere. It is a great benefit. Your local library may have a similar benefit so it is something you could research.
@csinvesting Just log in to M* at the library is all you need to do to tap into the Premium Product. Libraries typically have premium products most of us don't get unless we pay for them, such as Ancestry.com etc. You need to have a library card.
So appreciate all the helpful comments being offered on this thread. Personal experiences and opinions, by a wide array of posters, can be so very valuable for those looking to satisfy their personal circumstances!
I can understand why this thread has such good interest with members as there are a good number of us on the board that are retired or near retirement seeking income. I have good interest in fixed income and have a decidated income sleeve that makes up about 30% of the income area of my portfolio. The other sleeve is a hybrid income sleeve which accounts for about 70% of the area. I thinking of reconfiguring this mix in my income area by raising the income sleeve to 40% and reducing the hybrid income sleeve to 60% thus having a 40/60 mix. To achomplish this I plan to expand the number of positions in my income sleeve from nine to twelve along with increasing my tax free muni income holdings from one fund (FLAAX) to three (by adding AMHIX and OPAMX) along with adding another multi sector bond fund, possibly FSTAX.
As so many have rightly said - everyone's circumstances are different.
Is it really true that everyone's circumstances are different? can it be that 2 investors with similar situations invest completely differently and both be correct?
Examples: 1) I played tennis with a guy that sold his company for 15 million 25 years ago and put all his money in Munis.
2) I helped several ex co-worker all their twenties around 2009-10 with their 401K, one was scared and invested it at 30/70, the other selected 90/10.
3) Two ninty years old guys each with savings to cover the next 20 years. One invests at 20/80. The other invests at 80/20 because he knows he will have enough and his money will go to the kids.
4) In the last 5 years I read hundreds of posts where investors use MM,CD and funds like MINT and made less than 2% while many bond funds made a lot more and several of them with extremely low volatility.
This should help provide an understanding of how I govern my portfolio along with how the pieces fit into a master portfolio. The hybrid income sleeve is a big part of my portfolio and is detailed below.
Consolidated Master Portfolio & Sleeve Management System ... Last Revised on 12/31/2019
Now being in retirement here is a brief description of my sleeve management system which I organized to better manage the investments held within mine and my wife's portfolios. The consolidated master portfolio is comprised of two taxable investment accounts, two self directed retirement accounts, a health savings account plus two bank savings accounts. With this, I came up with four investment areas. They are a Cash Area which consist of two sleeves ... an investment cash sleeve and a demand cash sleeve. The next area is the Income Area which consist of two sleeves ... an income sleeve and a hybrid income sleeve. Then there is the Growth & Income Area which has more risk associated with it than the Income Area and it consist of four sleeves ... a global equity sleeve, a global hybrid sleeve, a domestic equity sleeve and a domestic hybrid sleeve. Then there is the Growth Area where the most risk in the portfolio is found and it consist of five sleeves ... a global growth sleeve, a large/mid cap sleeve, a small/mid cap sleeve, an other investment sleeve plus a special investment (spiff) sleeve. The size of each sleeve can easily be adjusted, from time-to-time, by adjusting the number of funds held and their amounts. By using the sleeve management system I can get a better picture of my overall investment landscape. I have found it beneficial to Xray each fund, each sleeve, each investment area, and the portfolio as a whole quarterly for analysis. All my funds with the exception of those in my health savings account pay their distributions to the Cash Area of the portfolio. This automatically builds cash in the Cash Area to meet the portfolio's disbursement needs (when necessary) with the residual being left for new investment opportunity. Generally, in any one year, I take no more than a sum equal to one half of my portfolio's five year average return. In this way principal builds over time. In addition, most buy/sell transactions settle from, or to, the Cash Area with some net asset exchanges between funds taking place. My rebalance threshold is + (or -) 2% of my neutral allocation for my Income Area, Growth & Income Area and Growth Area while I generally let the Cash Area float. However, at times, I can tactically position by setting a target allocation that is different from the neutral weighting to overweight (or underweight) an area without having to do a forced rebalance. I do an Instant Xray analysis of the portfolio quarterly and make asset weighting adjustments as I feel warranted based upon my assessment of the market(s), my goals, my risk tolerance, my cash needs, etc. I have the portfolio set up in Morningstar's portfolio manager by sleeve, by each area and the portfolio as a whole for easy monitoring plus I use brokerage account statements, Morningstar fund reports, fund fact sheets along with their annual reports to follow my investments. In addition, I use my market barometer and equity weighting matrix system as a guide to assist me in throttling my equity allocation through the use of equity ballast, or a spiff position, when desired. I also maintain a list of positions to add (A) to, to buy (B), to reduce (R), or to sell (S). Generally, funds are assigned to a sleeve based upon a best fit basis. Currently, my investment focus is to position new money into income generating assets. The last major rebalanced process was started during the 4th Quarter of 2018 and was completed in the 1st Quarter of 2019 along some sleeves being reconfigured along with the movement to a new asset allocation.
Portfolio Asset Allocation: Balanced Towards Income ... 20% Cash, 40% Income, 30% Gr & Inc and 10% Growth
CASH AREA: (Weighting Range 15% to 25%, Neutral 20%, Target 15%, Actual 14%) Demand Cash Sleeve ... Cash Distribution Accrual & Future Investment Accrual Investment Cash Sleeve ... MMK Funds: AMAXX, TTOXX, PCOXX, CD Ladder & Savings
INCOME AREA: (Weighting Range 35% to 45%, Neutral 40%, Target 40%, Actual 39%) Income Sleeve: BLADX(A), FLAAX(B), GIFAX, JGIAX(A), LBNDX, NEFZX, PGBAX, PONAX & TSIAX Hybrid Income Sleeve: APIUX(A), AZNAX(A), BAICX, CTFAX, DIFAX, FBLAX, FISCX, FKINX, FRINX(A), ISFAX, JNBAX & PMAIX
GROWTH & INCOME AREA: (Weighting Range 25% to 35%, Neutral 30%, Target 30%, Actual 32%) Domestic Equity Sleeve: ANCFX, FDSAX, INUTX(A) & SVAAX Domestic Hybrid Sleeve: ABALX, AMECX, HWIAX & LABFX Global Equity Sleeve: CWGIX, DEQAX, DWGAX(A) & EADIX Global Hybrid Sleeve: CAIBX, TEQIX & TIBAX
GROWTH & OTHER ASSET AREA: (Weighting Range 5% to 15%, Neutral 10%, Target 15%, Actual 15%) Large/Mid Cap Sleeve: AGTHX, AMCPX & SPECX Small/Mid Cap Sleeve: AOFAX, NDVAX & PMDAX Global Growth Sleeve: ANWPX, NEWFX & SMCWX Other Investment Sleeve: KAUAX(A), LPEFX & PGUAX Equity Ballast & Spiff Sleeve: No position held at this time.
In addition, my all weather asset allocation might be of some interest to you as well. Below is my blurb arbout it.
Old_Skeet's All Weather Asset Allocation.
My all weather asset allocation of 20% cash, 40% income and 40% equity affords me everything necessary to meet my needs now being in the distribution phase of investing. The benefit of this asset allocation is that it provides sufficient income, maximizes diversification, minimizes volatility, and provides long-term returns.
The 20% held in cash area provides me ample cash should I need a cash draw over and above what my portfolio generates plus it can provide the capital necessary to fund a special investment position (spiff) should I choose to open one during a stock market pullback. In addition, cash helps stabilize a portfolio during stock market volatility. Example of investments held in this area are cash, money market mutual funds and CD's.
The 40% held in the income area provides me ample income generation to meet my income needs in retirement. It is a well diversified area that incorporates a good number of income generating type funds. Some examples of investments held in this area are ISFAX, PONAX & PGBAX.
The 40% held in the equity area provides me some dividend income along with some growth, that equities generally provide, that offsets the effects of inflation over time. Some examples of investments held in this area are NEWFX, SVAAX, SPECX
Generally, for my income distributions, I take no more than a sum equal to what one half of my five year average total return has been. In this way principal grows over time.
@Gary1952 ... Thanks again for your question. I'm thinking the above information will provide the answer(s) you seek (or might seek) about me (going forward) as to how I govern.
"Simon">From my own perspective I've hugely enjoyed reading and digesting this thread. I've learned a great deal and have researched almost every fund mentioned. Thanks to every contributor and dtconroe in particular for starting the discussion and for his exceptionally well informed comments.
My personal circumstances are such that when it comes to bond funds (both mutual and ETFs) all I am looking for is a greater overall return than an online savings account. Let's say anything above 1.8% APY. Preservation of principal is absolutely paramount because I may need to withdraw money on very short notice for my wife's medical expenses due to a back injury. (We both have high deductible plans.) Therefore, I have money in ultrashort duration/ultrashort maturity funds like TRBUX, SEMRX, DLSNX, MINT, and just this week I have opened a position in JPST. All of these I consider cash alternatives with little to no risk to principal. These are in taxable accounts separate from our retirement plans.
The wife and I work for the same employer and we are both around 80% stocks/20% bonds in each of our 401K plans - with 20 and 12 years to go until full retirement respectively. That allocation will of course change as retirement nears. The single bond fund we use (out of a grand choice of only two) is WAPSX. Both of our Roth IRAs are 100% in equity mutual funds because we are very bullish for the coming decade and are prepared to weather the inevitable volatility.
As so many have rightly said - everyone's circumstances are different.
Simon, I appreciate your describing your unique circumstances, and your investing approach to address those circumstances. There are many of us who can identify with your description, and many of us who choose to adjust our investing decisions to accommodate our spouses and their wishes/needs. My wife does not have health issues, but in our joint taxable account, about half of it came from my wife's inheritance of her deceased parents estate. She is very conservative and has made it very clear to me what her risk tolerance is--very very conservative, with very low volatility as a key component of what is chosen for her inheritance and her personal IRA monies. That leads me to trying to find funds that she is comfortable with, not funds I try to force on her.
The HY title for this fund is actually a misnomer. It has a few below investment grade bonds but it really is an investment grade fund with an average bond rating of BBB. I do not know why Vanguard calls it HY. That said you could call it a very conservative HY fund. M* does a great review of it by analysts. This analysis is available with their premium product. I get it for free from our local library. Yes 50k minimum generally, but as I noted this is available to me for $0 minimum. VWALX and VWAHX which is available for 3k have incredibly small ER's. You would have to compare all the metrics of funds side by side to know what best for you and what risk you can tolerate.
This post is about Bank Loan/Floating Rate bond oefs. This category of bond oefs is being mentioned more often for a 2020 investment, after a good 2019 performance. Typically these funds perform very well in rising interest rate and flat rate markets, and so the 2019 market was supportive, and 2020 is projected to be a flat interest rate period. They generally get punished in a falling interest rate environment. This is a sector of HY Bond funds, with the average fund in this category will have a credit rating of B and about 7.5% of its total portfolio in investment grade categories. The average standard deviation in this category is about 2.77, and the risk level in this category is highly correlated with how much yield the fund earns, with the assumption that junkier bonds pay higher yield. With that background, one might wonder if there is any bond oefs in this category, that might appeal to a more conservative investor. I did some searching in this category and I found 3 funds that a conservative investor might be interested in. The following 3 funds are offered for consideration for the conservative investor:
1. RCRIX/RCRFX: This fund has a standard deviation of 1.0, almost 1/3 of the category average, has a portfolio with a credit rating of BB compared to the typical B rating, has 21.4% of its portfolio in investment grade assets compared to the typical 7.5%, and in the strong downmarket of 2018 this fund was in the top 2% percentile of performance.
2. MWFLX/MWFRX: This fund has a standard deviation of 2.18, has a portfolio with a credit rating of BB, has 24.2% of its portfolio in investment grade assets, and in the 2018 downmarket it was in the top 15% percentile of performance.
3. FRSAX/FFRSX: This fund has a standard deviation of 2.34, has a portfolio with credit rating of B, has 24.7% of its portfolio in investment grade assets, and in the 2018 downmarket it was in the top 22% percentile of performance.
I use to invest in this category quite a bit in the past, but exited this category early in 2018. I have thoughts about re-entering this category in the future, when rising interest rates look more likely, but have considered a small investment in 2020 because of a projected flat market. RCRIX and MWFLX are 2 funds I would consider due to their strong performance history in downmarkets,their portfolios having a higher credit rating of BB, and because they have over 20% of their portfolios in investment grade assets.
RCRIX has a small AUM. I wouldn’t be comfortable knowing the top 10 securities make up 49% of the portfolio in floating rate space (75% in junk) but that’s just me...
"BigTom">RCRIX has a small AUM. I wouldn’t be comfortable knowing the top 10 securities make up 49% of the portfolio in floating rate space (75% in junk) but that’s just me..
BigTom, very understandable. The category of Bank Loan/Floating Rate is basically a subsector, of the broader HY Junk Bond category. For an investor, especially a conservative bond oef investor, to be willing to invest in junk bonds, is an important question that each investor should answer. The Bank Loan/Floating rate bond oef, that I would most likely invest in, is MWFRX/MWFLX. It is from a stable of bond oefs, offered by Met West, and it has an established history of being managed very conservatively, at least "conservative" for a sector HY bond category.
RCRIX/RCRFX is from a smaller investment company, but a company that has offered some very good bond oefs, with a very conservative approach to investing. But on a confidence/comfort level, many investors will choose to only invest in a larger fund, from a more well known company.
I offered this topic to just offer a topic of discussion for a category of bond oefs, that has been around for many years. In general Bank Loan/Floating Rate funds, are considered a bit more conservative way of investing in junk bonds, at least from my experience. Of course some Bank Loan/Floating Rate bond oefs can vary greatly in risk, with many having much higher volatility, much worse performance in downmarkets, and focusing on much riskier types of bank loan assets.
This month Jan. 2020, I've added a number of bond institutional class OEFs in my main brokerage account. Besides high yield munis, they fall in the multisector or flexible categories. Sold two BL OEFs Fall 2018. As of Friday, the NAV of one of them is 20% lower than my selling price. I am not a bargain hunter and skeptical of interest rate predictions, so I will avoid that niche for the time being.
JpM, I am curious as to the specifics of the funds you sold--how risky/conservative they were with regard to Standard Deviation, Credit rating of the assets they held, etc. I have found that BL OEFs with SDs in the 3+ range, with B credit ratings, and providing Dividends in the 6%+ ranges, will perform very poorly in strong downmarkets like 2018
The two BL funds were SPFLX and CFRIX. Did not have access to EIFAX, or might have bought that one. Don't have the stats on these funds. But I don't pay attention to SD's, only performance and management skill.
JpM, according to M* CFRIX and EIFAX are rated as having the highest risk in their categories, with some of the highest SDs. SPFLX is rated by M* as having below average risk and below average return, but the assets that SPFLX holds, pays well over 6% yield, which frequently suggests some of the junkier holdings you can own to get that level of yield. SPFLX had a relatively poor 2019 performance--not sure why but I would guess it is because of some poor choices in very junky holdings. I did not mention any of those BL funds for a "conservative" investor, but they may be very good choices for more of a trader, or an investor who is willing to tolerate very high volatility. EIFAX is a very popular BL choice with great returns, so for more risk oriented investors or good traders, who can tolerate higher volatility, it may be a great choice.
This post is about Non-traditional Bond oefs, that resemble and perform in a manner, similar to multisector bond oefs. "Morningstar Category: Nontraditional Bond The Nontraditional Bond category contains funds that pursue strategies divergent in one or more ways from conventional practice in the broader bond-fund universe. Many funds in this group describe themselves as "absolute return" portfolios, which seek to avoid losses and produce returns uncorrelated with the overall bond market; they employ a variety of methods to achieve those aims. Another large subset are self-described "unconstrained" portfolios that have more flexibility to invest tactically across a wide swath of individual sectors, including high-yield and foreign debt, and typically with very large allocations. Funds in the latter group typically have broad freedom to manage interest-rate sensitivity, but attempt to tactically manage those exposures in order to minimize volatility. The category is also home to a subset of portfolios that attempt to minimize volatility by maintaining short or ultra-short duration portfolios, but explicitly court significant credit and foreign bond market risk in order to generate high returns. Funds within this category often will use credit default swaps and other fixed income derivatives to a significant level within their portfolios."
Attached are 4 Non-traditional bond oefs, that I believe are potential funds you might consider, as a Conservative Bond Oef investor, as lower risk alternatives to Multisector Bond oefs:
1. COSIX: One of the more risky Non-traditional Bond oefs with a SD of 2.45. Its assets are spread across 4 asset groups--Gov't (18.26%), Corp (28.55%), Securitized (28.39%), Cash (23.79%). Its Assets fall into the following investment grades--AAA (12.22%), AA(7.54%), A(8.89%), BBB(24.4%), BB(13.82%), Below B/NR(19.83%) 2. IISIX: One of the better total return options with a SD of 1.52. Its assets are--Govt(12.68%), Corp(20.58%), Securitized(53.14%), cash(13.62%). Its assets between investment grades are--AAA(21%), AA(5.16%), A(5.16%), BBB(21.5%), BB(16.85%), B(19.95%), Below B/NR(4.96%) 3. DFLEX is managed by the well known Gundlach with a SD of 1.51. Its assets are--Govt(14.71%), Corp(26.8%), Securitized(51.6%), cash(6.89%). Its assets between investment grades are--AAA(17.43), AA(3.6%), A(5.87%), BBB(21.01%), Below B/NR(26.5%) 4. PFIUX is from PIMCO with all of its stable of analysts with a SD of 1.56. Its assets are---Govt(24.89%), Corp(11%), Securitized(30.5%), cash(22.8%), other(10.28%). Its assets between investment grades are---AAA(79%), AA(6%), A(9%), BB(3%), Below B(3%)
Thanks DT. I had a couple of questions I was hoping your could answer. What are your key criteria for evaluating the overall risk of these funds? 3 of them are very close in terms of SD... how do you differentiate their risk levels from lower risk to higher risk and how would you compare these funds to the risk levels of funds like SEMMX and ZEOIX? thanks very much.
Comments
@dtconroe, I've read your comments and all I can say to you is, this is not Morningstar.
How many additions can one thread topic have without repeating itself and the funds suggested? Please, if a post goes dormant it is not because it wasn't interesting, but typically it has just run it's course, for a while anyway. There are many interesting and entertaining threads here that get tons of views but then fall down the list of posts. Usually those interesting threads, example the buy-sell-ponder post or old skeets value metrics updates or most any post junkster made, would fall down the post list but were brought back by that poster again to start new life, typically monthly updates. At least that's how it has been done here at MFO.
In any case, I enjoyed the post you started, very much in fact, but thinking it will be a daily thread... well I don't see it.
How many additions can one thread topic have without repeating itself and the funds suggested? Please, if a post goes dormant it is not because it wasn't interesting, but typically it has just run it's course, for a while anyway. There are many interesting and entertaining threads here that get tons of views but then fall down the list of posts. Usually those interesting threads, example the buy-sell-ponder post or old skeets value metrics updates or most any post junkster made, would fall down the post list but were brought back by that poster again to start new life, typically monthly updates. At least that's how it has been done here at MFO.
In any case, I enjoyed the post you started, very much in fact, but thinking it will be a daily thread... well I don't see it.
Mike, thanks for your thoughts. I started this thread, as it resembled very popular and similar threads at M*. A sizeable number of posters found many new and varying subjects that fit into the thread topic, and they periodically used the thread to get feedback and information about those subjects because of the strong thread support by the many varied posters. But you are right that this is not M* and maybe this is not the type of thread that MFO posters prefer. If that turns out to be case, then no hard feelings--I will just move on to other opportunities.
I have thoroughly, again thoroughly, enjoyed your post and was able to evaluate some of your named funds to add to those I currently keep in my portfolio. Each post I believe has value to someone and some repetition is no problem at all, as in the end,the next post usually has some newly added value or information. Do not be offended by any ones opinion about your methodology, as it is only an opinion. The only true arbiter of this forum is Dr. Snowball and his minions. If it has to do with investing keep it coming!! Dr. Snowball only rarely gets involved and typically only with character assault issues.
I am retired also, and keep a 30% equity, 50% bond 20% cash portfolio and use a barbel type philosophy with the portfolio, with aggressive funds balanced by conservative ones both OEF's and etf's. One of my favorite HY Muni funds is VWALX. On my Wells Fargo platform this Admiral fund has a minimum purchase of $0. Yup. $0 instead of the 50K at Vanguard.This could be available similarly at certain other brokerages. If not VWAHX is available with a $3000 minimum and an ER of .17% This is a HY classified Muni fund but in actuality is mostly investment grade with an average BBB bond portfolio and with great metrics for what it is. Highly rated by M*.
I liked what I saw with DHEIX and at Vanguard it is available with only a $2500 minimum. Even with the $20 purchase fee, with a reasonably sized purchase it is far cheaper to keep for a year than DHEAX which is ntf. I made the purchase in my Vanguard account.
I do not post but rarely ,so keep up the good work and welcome to the board.
fundly
I have thoroughly, again thoroughly, enjoyed your post and was able to evaluate some of your named funds to add to those I currently keep in my portfolio. Each post I believe has value to someone and some repetition is no problem at all, as in the end,the next post usually has some newly added value or information. Do not be offended by any ones opinion about your methodology, as it is only an opinion. The only true arbiter of this forum is Dr. Snowball and his minions. If it has to do with investing keep it coming!! Dr. Snowball only rarely gets involved and typically only with character assault issues.
I am retired also, and keep a 30% equity, 50% bond 20% cash portfolio and use a barbel type philosophy with the portfolio, with aggressive funds balanced by conservative ones both OEF's and etf's. One of my favorite HY Muni funds is VWALX. On my Wells Fargo platform this Admiral fund has a minimum purchase of $0. Yup. $0 instead of the 50K at Vanguard.This could be available similarly at certain other brokerages. If not VWAHX is available with a $3000 minimum and an ER of .17% This is a HY classified Muni fund but in actuality is mostly investment grade with an average BBB bond portfolio and with great metrics for what it is. Highly rated by M*.
I liked what I saw with DHEIX and at Vanguard it is available with only a $2500 minimum. Even with the $20 purchase fee, with a reasonably sized purchase it is far cheaper to keep for a year than DHEAX which is ntf. I made the purchase in my Vanguard account.
I do not post but rarely ,so keep up the good work and welcome to the board.
fundly
fundly, very encouraging post. Thanks for letting us know what you are doing and the reasons. Sounds like you have a good handle on what you are doing and could be very helpful in sharing your knowledge and experience with other posters. I look forward to other posts from you in the future. One of the things I personally get from posts like yours, is what is available through other brokerages that I am not familiar with. I envy you being able to get DHEIX so inexpensively at Vanguard.
The HY title for this fund is actually a misnomer. It has a few below investment grade bonds but it really is an investment grade fund with an average bond rating of BBB. I do not know why Vanguard calls it HY. That said you could call it a very conservative HY fund. M* does a great review of it by analysts. This analysis is available with their premium product. I get it for free from our local library. Yes 50k minimum generally, but as I noted this is available to me for $0 minimum. VWALX and VWAHX which is available for 3k have incredibly small ER's. You would have to compare all the metrics of funds side by side to know what best for you and what risk you can tolerate.
VWALX/VWAHX is very different from PRSNX. VWALX is a domestic municipal bond fund whose dividends are federal tax exempt while PRSNX is a hedged global bond fund whose dividends are federally taxable. Depending on one's tax situation this can make a significant difference in realized results, particularly if held in a taxable account vs tax deferred account.
You can see the hedging in the M* portfolio for PRSNX as the fund has both short and long positions. The hedging is small and makes sense for a global fund holding bonds issued by many countries such as Mexico, Brazil, Cyprus, Malaysia, Italy, etc.
https://www.morningstar.com/funds/xnas/prsnx/portfolio
PTIMX is a more comparable fund to VWALX as it is an intermediate term muni bond fund.
See a comparison at Portfolio Visualizer: https://bit.ly/2QGX0di
Some observations from the 3 year look back. VWALX shows greater overall return, greater dividend distributions (see graphs in link), lower volatility / standard deviation, lower drawdown and better Sharpe and Sortino ratios (other risk measures).
For full disclosure, I've held VWALX for a long time and been pleased with it's risk / reward ratio for my situation. There are several high quality muni bond funds available, some of which have been mentioned by other posters in this thread. Everyone's situation is different and you know what works best for your needs and situation.
My personal circumstances are such that when it comes to bond funds (both mutual and ETFs) all I am looking for is a greater overall return than an online savings account. Let's say anything above 1.8% APY. Preservation of principal is absolutely paramount because I may need to withdraw money on very short notice for my wife's medical expenses due to a back injury. (We both have high deductible plans.) Therefore, I have money in ultrashort duration/ultrashort maturity funds like TRBUX, SEMRX, DLSNX, MINT, and just this week I have opened a position in JPST. All of these I consider cash alternatives with little to no risk to principal. These are in taxable accounts separate from our retirement plans.
The wife and I work for the same employer and we are both around 80% stocks/20% bonds in each of our 401K plans - with 20 and 12 years to go until full retirement respectively. That allocation will of course change as retirement nears. The single bond fund we use (out of a grand choice of only two) is WAPSX. Both of our Roth IRAs are 100% in equity mutual funds because we are very bullish for the coming decade and are prepared to weather the inevitable volatility.
As so many have rightly said - everyone's circumstances are different.
"This analysis is available with their premium product. I get it for free from our local library"
Exactly how do you do that?
Just log in to M* at the library is all you need to do to tap into the Premium Product. Libraries typically have premium products most of us don't get unless we pay for them, such as Ancestry.com etc. You need to have a library card.
I can understand why this thread has such good interest with members as there are a good number of us on the board that are retired or near retirement seeking income. I have good interest in fixed income and have a decidated income sleeve that makes up about 30% of the income area of my portfolio. The other sleeve is a hybrid income sleeve which accounts for about 70% of the area. I thinking of reconfiguring this mix in my income area by raising the income sleeve to 40% and reducing the hybrid income sleeve to 60% thus having a 40/60 mix. To achomplish this I plan to expand the number of positions in my income sleeve from nine to twelve along with increasing my tax free muni income holdings from one fund (FLAAX) to three (by adding AMHIX and OPAMX) along with adding another multi sector bond fund, possibly FSTAX.
Wishing all ... "Good Investing."
Old_Skeet
Please explain what your "hybrid income sleeve" is. Sounds interesting.
Examples:
1) I played tennis with a guy that sold his company for 15 million 25 years ago and put all his money in Munis.
2) I helped several ex co-worker all their twenties around 2009-10 with their 401K, one was scared and invested it at 30/70, the other selected 90/10.
3) Two ninty years old guys each with savings to cover the next 20 years. One invests at 20/80. The other invests at 80/20 because he knows he will have enough and his money will go to the kids.
4) In the last 5 years I read hundreds of posts where investors use MM,CD and funds like MINT and made less than 2% while many bond funds made a lot more and several of them with extremely low volatility.
Welocme to MFO.
Thank you for your question.
This should help provide an understanding of how I govern my portfolio along with how the pieces fit into a master portfolio. The hybrid income sleeve is a big part of my portfolio and is detailed below.
Consolidated Master Portfolio & Sleeve Management System ... Last Revised on 12/31/2019
Now being in retirement here is a brief description of my sleeve management system which I organized to better manage the investments held within mine and my wife's portfolios. The consolidated master portfolio is comprised of two taxable investment accounts, two self directed retirement accounts, a health savings account plus two bank savings accounts. With this, I came up with four investment areas. They are a Cash Area which consist of two sleeves ... an investment cash sleeve and a demand cash sleeve. The next area is the Income Area which consist of two sleeves ... an income sleeve and a hybrid income sleeve. Then there is the Growth & Income Area which has more risk associated with it than the Income Area and it consist of four sleeves ... a global equity sleeve, a global hybrid sleeve, a domestic equity sleeve and a domestic hybrid sleeve. Then there is the Growth Area where the most risk in the portfolio is found and it consist of five sleeves ... a global growth sleeve, a large/mid cap sleeve, a small/mid cap sleeve, an other investment sleeve plus a special investment (spiff) sleeve. The size of each sleeve can easily be adjusted, from time-to-time, by adjusting the number of funds held and their amounts. By using the sleeve management system I can get a better picture of my overall investment landscape. I have found it beneficial to Xray each fund, each sleeve, each investment area, and the portfolio as a whole quarterly for analysis. All my funds with the exception of those in my health savings account pay their distributions to the Cash Area of the portfolio. This automatically builds cash in the Cash Area to meet the portfolio's disbursement needs (when necessary) with the residual being left for new investment opportunity. Generally, in any one year, I take no more than a sum equal to one half of my portfolio's five year average return. In this way principal builds over time. In addition, most buy/sell transactions settle from, or to, the Cash Area with some net asset exchanges between funds taking place. My rebalance threshold is + (or -) 2% of my neutral allocation for my Income Area, Growth & Income Area and Growth Area while I generally let the Cash Area float. However, at times, I can tactically position by setting a target allocation that is different from the neutral weighting to overweight (or underweight) an area without having to do a forced rebalance. I do an Instant Xray analysis of the portfolio quarterly and make asset weighting adjustments as I feel warranted based upon my assessment of the market(s), my goals, my risk tolerance, my cash needs, etc. I have the portfolio set up in Morningstar's portfolio manager by sleeve, by each area and the portfolio as a whole for easy monitoring plus I use brokerage account statements, Morningstar fund reports, fund fact sheets along with their annual reports to follow my investments. In addition, I use my market barometer and equity weighting matrix system as a guide to assist me in throttling my equity allocation through the use of equity ballast, or a spiff position, when desired. I also maintain a list of positions to add (A) to, to buy (B), to reduce (R), or to sell (S). Generally, funds are assigned to a sleeve based upon a best fit basis. Currently, my investment focus is to position new money into income generating assets. The last major rebalanced process was started during the 4th Quarter of 2018 and was completed in the 1st Quarter of 2019 along some sleeves being reconfigured along with the movement to a new asset allocation.
Portfolio Asset Allocation: Balanced Towards Income ... 20% Cash, 40% Income, 30% Gr & Inc and 10% Growth
CASH AREA: (Weighting Range 15% to 25%, Neutral 20%, Target 15%, Actual 14%)
Demand Cash Sleeve ... Cash Distribution Accrual & Future Investment Accrual
Investment Cash Sleeve ... MMK Funds: AMAXX, TTOXX, PCOXX, CD Ladder & Savings
INCOME AREA: (Weighting Range 35% to 45%, Neutral 40%, Target 40%, Actual 39%)
Income Sleeve: BLADX(A), FLAAX(B), GIFAX, JGIAX(A), LBNDX, NEFZX, PGBAX, PONAX & TSIAX
Hybrid Income Sleeve: APIUX(A), AZNAX(A), BAICX, CTFAX, DIFAX, FBLAX, FISCX, FKINX, FRINX(A), ISFAX, JNBAX & PMAIX
GROWTH & INCOME AREA: (Weighting Range 25% to 35%, Neutral 30%, Target 30%, Actual 32%)
Domestic Equity Sleeve: ANCFX, FDSAX, INUTX(A) & SVAAX
Domestic Hybrid Sleeve: ABALX, AMECX, HWIAX & LABFX
Global Equity Sleeve: CWGIX, DEQAX, DWGAX(A) & EADIX
Global Hybrid Sleeve: CAIBX, TEQIX & TIBAX
GROWTH & OTHER ASSET AREA: (Weighting Range 5% to 15%, Neutral 10%, Target 15%, Actual 15%)
Large/Mid Cap Sleeve: AGTHX, AMCPX & SPECX
Small/Mid Cap Sleeve: AOFAX, NDVAX & PMDAX
Global Growth Sleeve: ANWPX, NEWFX & SMCWX
Other Investment Sleeve: KAUAX(A), LPEFX & PGUAX
Equity Ballast & Spiff Sleeve: No position held at this time.
In addition, my all weather asset allocation might be of some interest to you as well. Below is my blurb arbout it.
Old_Skeet's All Weather Asset Allocation.
My all weather asset allocation of 20% cash, 40% income and 40% equity affords me everything necessary to meet my needs now being in the distribution phase of investing. The benefit of this asset allocation is that it provides sufficient income, maximizes diversification, minimizes volatility, and provides long-term returns.
The 20% held in cash area provides me ample cash should I need a cash draw over and above what my portfolio generates plus it can provide the capital necessary to fund a special investment position (spiff) should I choose to open one during a stock market pullback. In addition, cash helps stabilize a portfolio during stock market volatility. Example of investments held in this area are cash, money market mutual funds and CD's.
The 40% held in the income area provides me ample income generation to meet my income needs in retirement. It is a well diversified area that incorporates a good number of income generating type funds. Some examples of investments held in this area are ISFAX, PONAX & PGBAX.
The 40% held in the equity area provides me some dividend income along with some growth, that equities generally provide, that offsets the effects of inflation over time. Some examples of investments held in this area are NEWFX, SVAAX, SPECX
Generally, for my income distributions, I take no more than a sum equal to what one half of my five year average total return has been. In this way principal grows over time.
@Gary1952 ... Thanks again for your question. I'm thinking the above information will provide the answer(s) you seek (or might seek) about me (going forward) as to how I govern.
Old_Skeet
My personal circumstances are such that when it comes to bond funds (both mutual and ETFs) all I am looking for is a greater overall return than an online savings account. Let's say anything above 1.8% APY. Preservation of principal is absolutely paramount because I may need to withdraw money on very short notice for my wife's medical expenses due to a back injury. (We both have high deductible plans.) Therefore, I have money in ultrashort duration/ultrashort maturity funds like TRBUX, SEMRX, DLSNX, MINT, and just this week I have opened a position in JPST. All of these I consider cash alternatives with little to no risk to principal. These are in taxable accounts separate from our retirement plans.
The wife and I work for the same employer and we are both around 80% stocks/20% bonds in each of our 401K plans - with 20 and 12 years to go until full retirement respectively. That allocation will of course change as retirement nears. The single bond fund we use (out of a grand choice of only two) is WAPSX. Both of our Roth IRAs are 100% in equity mutual funds because we are very bullish for the coming decade and are prepared to weather the inevitable volatility.
As so many have rightly said - everyone's circumstances are different.
Simon, I appreciate your describing your unique circumstances, and your investing approach to address those circumstances. There are many of us who can identify with your description, and many of us who choose to adjust our investing decisions to accommodate our spouses and their wishes/needs. My wife does not have health issues, but in our joint taxable account, about half of it came from my wife's inheritance of her deceased parents estate. She is very conservative and has made it very clear to me what her risk tolerance is--very very conservative, with very low volatility as a key component of what is chosen for her inheritance and her personal IRA monies. That leads me to trying to find funds that she is comfortable with, not funds I try to force on her.
Best wishes on your investment choices.
1. RCRIX/RCRFX: This fund has a standard deviation of 1.0, almost 1/3 of the category average, has a portfolio with a credit rating of BB compared to the typical B rating, has 21.4% of its portfolio in investment grade assets compared to the typical 7.5%, and in the strong downmarket of 2018 this fund was in the top 2% percentile of performance.
2. MWFLX/MWFRX: This fund has a standard deviation of 2.18, has a portfolio with a credit rating of BB, has 24.2% of its portfolio in investment grade assets, and in the 2018 downmarket it was in the top 15% percentile of performance.
3. FRSAX/FFRSX: This fund has a standard deviation of 2.34, has a portfolio with credit rating of B, has 24.7% of its portfolio in investment grade assets, and in the 2018 downmarket it was in the top 22% percentile of performance.
I use to invest in this category quite a bit in the past, but exited this category early in 2018. I have thoughts about re-entering this category in the future, when rising interest rates look more likely, but have considered a small investment in 2020 because of a projected flat market. RCRIX and MWFLX are 2 funds I would consider due to their strong performance history in downmarkets,their portfolios having a higher credit rating of BB, and because they have over 20% of their portfolios in investment grade assets.
I wouldn’t be comfortable knowing the top 10 securities make up 49% of the portfolio in floating rate space (75% in junk) but that’s just me...
BigTom, very understandable. The category of Bank Loan/Floating Rate is basically a subsector, of the broader HY Junk Bond category. For an investor, especially a conservative bond oef investor, to be willing to invest in junk bonds, is an important question that each investor should answer. The Bank Loan/Floating rate bond oef, that I would most likely invest in, is MWFRX/MWFLX. It is from a stable of bond oefs, offered by Met West, and it has an established history of being managed very conservatively, at least "conservative" for a sector HY bond category.
RCRIX/RCRFX is from a smaller investment company, but a company that has offered some very good bond oefs, with a very conservative approach to investing. But on a confidence/comfort level, many investors will choose to only invest in a larger fund, from a more well known company.
I offered this topic to just offer a topic of discussion for a category of bond oefs, that has been around for many years. In general Bank Loan/Floating Rate funds, are considered a bit more conservative way of investing in junk bonds, at least from my experience. Of course some Bank Loan/Floating Rate bond oefs can vary greatly in risk, with many having much higher volatility, much worse performance in downmarkets, and focusing on much riskier types of bank loan assets.
"Morningstar Category: Nontraditional Bond
The Nontraditional Bond category contains funds that pursue strategies divergent in one or more ways from conventional practice in the broader bond-fund universe. Many funds in this group describe themselves as "absolute return" portfolios, which seek to avoid losses and produce returns uncorrelated with the overall bond market; they employ a variety of methods to achieve those aims. Another large subset are self-described "unconstrained" portfolios that have more flexibility to invest tactically across a wide swath of individual sectors, including high-yield and foreign debt, and typically with very large allocations. Funds in the latter group typically have broad freedom to manage interest-rate sensitivity, but attempt to tactically manage those exposures in order to minimize volatility. The category is also home to a subset of portfolios that attempt to minimize volatility by maintaining short or ultra-short duration portfolios, but explicitly court significant credit and foreign bond market risk in order to generate high returns. Funds within this category often will use credit default swaps and other fixed income derivatives to a significant level within their portfolios."
Attached are 4 Non-traditional bond oefs, that I believe are potential funds you might consider, as a Conservative Bond Oef investor, as lower risk alternatives to Multisector Bond oefs:
1. COSIX: One of the more risky Non-traditional Bond oefs with a SD of 2.45. Its assets are spread across 4 asset groups--Gov't (18.26%), Corp (28.55%), Securitized (28.39%), Cash (23.79%). Its Assets fall into the following investment grades--AAA (12.22%), AA(7.54%), A(8.89%), BBB(24.4%), BB(13.82%), Below B/NR(19.83%)
2. IISIX: One of the better total return options with a SD of 1.52. Its assets are--Govt(12.68%), Corp(20.58%), Securitized(53.14%), cash(13.62%). Its assets between investment grades are--AAA(21%), AA(5.16%), A(5.16%), BBB(21.5%), BB(16.85%), B(19.95%), Below B/NR(4.96%)
3. DFLEX is managed by the well known Gundlach with a SD of 1.51. Its assets are--Govt(14.71%), Corp(26.8%), Securitized(51.6%), cash(6.89%). Its assets between investment grades are--AAA(17.43), AA(3.6%), A(5.87%), BBB(21.01%), Below B/NR(26.5%)
4. PFIUX is from PIMCO with all of its stable of analysts with a SD of 1.56. Its assets are---Govt(24.89%), Corp(11%), Securitized(30.5%), cash(22.8%), other(10.28%). Its assets between investment grades are---AAA(79%), AA(6%), A(9%), BB(3%), Below B(3%)