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Would you settle for only 6.98%? That’s the annualized return of PRPFX over 15 years according to M*. If I were going to own just one fund, that would be my choice. Over that 15 year period the fund’s worst year was 2008 when it lost -8.36%. Its best year was 2003 when it gained +20.45%. (These numbers came from Yahoo Finance.)
You're being active in choosing the original make-up of the portfolio. Do you anticipate continuing to be active in modifying the portfolio? If not, do you want the managers to be active in adjusting their allocations? IOW, how rigid do you want this portfolio to be, and how much do you intend to interact with it? There are probably a lot of answers to your query, depending on how you answer the questions.
Given that you're not asking for the moon, I suspect you don't want to be active, and don't care if your manager(s) have an inflexible mandate. Isn't this why traditional, balanced allocation funds came into existence? Are you maybe trying to reinvent the wheel? Some combination of VWELX and VWINX? Maybe one of VWINX and FBALX?
Given that you're not asking for the moon, I suspect you don't want to be active, and don't care if your manager(s) have an inflexible mandate. Isn't this why traditional, balanced allocation funds came into existence? Are you maybe trying to reinvent the wheel?
Wanting to see if others are using non-traditional vehicles to dampen volatility...i.e. trying to get a smoother ride. Instead of the traditional VWINX, maybe use QMNNX, JDAEX, QDSNX, JHQAX, etc. VELIX was mentioned by @Baseball Fan, I believe they use options.
As you realize, PRPFX wasn’t a recommendation. But I was struck by how close that +6.98% was to your hypothetical 7% goal. Like you, I prefer to diversify well beyond a single fund - no matter how good it is. The biggest problem, I think, is that shorter term (5-10 years) anything can happen, and so trying to extrapolate future return armed only with a decade’s historical performance is tough and might not lead to your desired result.
As a very conservative investor, I use 3 funds only for trying to gage daily volatility and yearly return. They are not benchmarks. They are not goals. They are simply markers for what I think a conservative investor might reasonably expect to earn over time with very limited volatility. I do not own any of these.
AOK - Globally diversified. 30% equity / 70% fixed income. Relies on index funds. Low ER
TRRIX - A fund of funds from T. Rowe Price. 40% equity / 60% fixed income. Moderate ER
ABRZX - An “alternative” style investment from Invesco. Stocks, bonds, commodities (including precious metals). Attempts to hedge market risk using derivatives. ER exceeds 1%
Over the past 15 years the 3 have averaged +5.40% annually. TRRIX led the pack with a slightly better 6.07% return over that period. Sound bad? For some perspective I compared that number to T. Rowe’s short-term bond fund PRWBX. It has returned +1.86% annually over the same period.
*** I should have checked VWINX, arguably the gold standard, for conservative funds. True to form VWINX has topped all three of my afore mentioned tracking funds with a +7.06 15 year average return. However, not that much better thanPRPFX’s +6.98% return over the same period. Personally, I’d pick PRPFX over VWINX, being willing to sacrifice the 0.08% advantage enjoyed by VWINX for better inflation protection.
A lot of people are showing fascination with these "newfangled" trading funds. Not only newfangled but new - PHEFX is barely a year old. So how much one can understand about a relatively complex fund beyond the fact that it started hot out of the gate? (See the original thread on this fund.)
That said, I ran Portfolio Visualizer efficient frontier analyses. Because a couple of funds were extremely new, I had to make substitutions. In lieu of PHEFX I used IPSAX; also near the top of 1 year performance for options trading funds. And FWIW over such a short period, it correlates 99%. For HELO I substituted JHQEX.
I also threw in the four funds Vanguard uses for its model 60/40 portfolio: VTI, VXUS, BND, BNDX. Not surprisingly, at the high volatility end of the efficient frontier curve one finds pure VTI. (Throw in VFIAX and that will be the selected fund; it's been hard to beat S&P 500 if one doesn't care about volatility.)
At different levels of volatility, a portfolio with a single fund, PVCMX (lower volatility), JHEQX (medium volatility), or PRPFX (high volatility) comes pretty close to the efficient frontier. At 7% standard deviation, the highest return (over life of the funds analyzed) is 44% PVCMX, 46% JHEQX, 6% VTSMX, and 4% PRPFX.
I noticed nobody has proposed for consideration a portfolio solely made up of ETFs...kind of surprising as there are many model portfolio's like that floating out there..."The Lazy Portfolio", the three ETF portfolio, etc...
Also find it interesting that some are looking at past results as a comparison...last 15 years relatively low inflation until recently...also tremendous fiscal and monetary stimulus. Who knows that the future holds...some of you might remember a few years ago when I mentioned high grade rubies, you can fit a million dollar of them in your sock and no one would know..also interesting that no one has mentioned bitcoin...are we just a bunch of older dudes fighting the last war or are we going to open our minds and skate to where the puck is headed not where it is and has been?
Looking forward for this exercise, I am considering "continuity of fund managers", what are their ages and what is the bench strength and financial soundness of the fund company? Maybe need some international exposure as what if dollar weakens substantially?
What other inputs are folks pondering that maybe haven't been discussed yet?
That said, I ran Portfolio Visualizer efficient frontier analyses. Because a couple of funds were extremely new, I had to make substitutions. In lieu of PHEFX I used IPSAX; also near the top of 1 year performance for options trading funds. For HELO I substituted JHQEX.
I substitute ACIO for PHEFX when utilizing backtest calculations. I use ACIO specifically for taxable accounts, and it seems to track PHEFX decently so far.
LT Bonds have just gone through a funky stretch, but with rate cuts ahead, a VWINX conservative allocation fund could be nice to have in the mix. Trying to get my head wrapped around leaning back into medium/long term bonds.
I am a bit surprised how little the three managers of ACIO own in the fund. This is not a big fund family and so I was looking for Manager commitment. I shall let others unpack this fund.
I have done more than that and never lost more than 1% from any last top since retiring in 2018. The "secrets" are 1) Mostly owning 2-3 bond funds at a huge % 2) switching bond fund = good timing 3) avoiding market losses.
There's no easy way to do it with low volatility. It took me over 20 years to master my system. See how I did it at (link).
...also interesting that no one has mentioned bitcoin...are we just a bunch of older dudes fighting the last war or are we going to open our minds and skate to where the puck is headed not where it is and has been?
Looking forward for this exercise, I am considering "continuity of fund managers", what are their ages and what is the bench strength and financial soundness of the fund company?
What is this "bitcoin" you speak of?
As regards fund managers, I keep looking at AQR funds. They stunk it up a few years back, and then changed out a bunch of their managers. Since then, they have been performing very well. Can they be trusted?
HMEZX - a super steady merger-arb fund, but the Fund Manager (Dondero) has a checkered past. Is there hidden risk there?
A real world example of a very lazy portfolio using two index funds.
Criteria: --- 529 education account, open for 18 years --- inception, May 2006 --- self directed with self choice(s) of investment sectors --- 13 years of contributions (1st and 15th of each month) = $ cost averaging --- 5 years to date; no additional contributions --- the 50/50 equity/bond portfolio is reset to 50/50 each September, per the Utah 529 contract
The institutional funds (for 529 accounts) are VITPX (U.S. Total stock market) and VBMPX (U.S. Total IG bond market). All distributions reinvested in the fund(s).
The annualized returns data are from Vanguard, M* and the 529 account.
Catch. I like that a lot. At the end of the 18 years it probably beats chasing the fund of the hour every month. Less work, less stress , less second guessing yourself. My old man used to say, “you can second guess yourself to death Sonny boy !” Of course that plan would be highly regarded over at bogleheads and not be part of the MFO lifestyle. After all isn’t MFO all about finding “the best” funds and perpetually moving from one to the next as things inevitably change? Just sayin.
@catch22: the 50/50 equity/bond portfolio is reset to 50/50 each September, per the contract
Unclear what kind of "contract"? Did you use one of the 2 annual exchanges allowed to rebalance, or a 529 advisor did it for you?
Was 529 all used up? SECURE 2.0 allows some residual funds (in 15+ year old 529 for funds in account for 5+ years) to be transferred to beneficiary's Roth IRA.
Hi @yogibearbull I probably should have clarified a bit more.
--- The Utah 529 Educational Saving Plan LINK --- We didn't care for the vendor of the Michigan 529 plan at the time (2006). We missed the state tax deduction that would have been available; but we are very pleased with the Utah 529. A very well operated program with a lot of investment choices. One may choose established mixes by age; or as we did, and we built our own choices. --- The annual re-balance is a feature of the Utah 529 contract. I don't really care for this aspect; as we would prefer to let the gains remain for the equity and bond portions. We've not asked, but suspect the program wants to temper the portfolio from becoming lopsided. But, this has worked out okay over the long time frame. --- We did NOT need to use an advisor --- And yes about Secure Act 2.0. As everything stands at this time, monies will move to the beneficiary Roth IRA (per the $35k total and the annual maximum at this time). The Roth has been active for more than 5 years. Even with the possibility of a costly Master's program, the return on the investments currently is running ahead far enough for such an expense.
NOTE: the symbols shown previous have changed (per Vanguard) two times during our investment period in these holdings. But, the fund descriptions have NOT changed. VITPX and VBMPX are still valid symbols.
Hi @larryB One item that tempers folks from getting crazy with flipping monies in a 529 is the first set of 'rules' established by the gov't. regarding 529's. ONLY 1 change/exchange per calendar year to investment sectors. A few years ago, this was expanded to 2 portfolio changes/exchanges of holdings per calendar year. And of course, the investment style choices are the more standard choices. No exotic stuff. If you're curious, a LIST of investment styles/choices at the Utah 529. Mostly Vanguard, some DFA and some state choices. They're almost 'free' with some .02 ER's. There are also small, periodic administrative charges ($15), which is common with 529's.
Hey Catch. Maybe those rules, that seemed restrictive at first glance, are really for the investors benefit. We have all seen the numbers showing investors rarely get the numeric return that their fund delivered because of incessant tampering with their portfolio. Looking back on my investment life, which began in 1984, the biggest mistakes I made were just messing with the bits and pieces of my portfolio. We all can name certain participants of this group who bounce from one fund to another almost like changing shirts. It’s more like a sport than anything else. Fun perhaps. But probably costly.
I have done more than that and never lost more than 1% from any last top since retiring in 2018. The "secrets" are 1) Mostly owning 2-3 bond funds at a huge % 2) switching bond fund = good timing 3) avoiding market losses.
There's no easy way to do it with low volatility. It took me over 20 years to master my system. See how I did it at (link).
@larryB Agree. The 529 rules are to benefit the beneficiary into their education future. Tis not an investment playground for those who contribute and/or manage the monies. We had a few turns with the wee bit 'fiddle too much' syndrome is the way back days. We started with T-IRA's in the late 1970's. After a few 'you dumb arse'; everything may be smoothed. Keeping the 'twitchy aspect' is a difficult judgement decision that is full of temptations, if the investor 'doesn't know thy self' well enough. I'm reminded of the standard questionnaire, as explained by those I've know who have used an adviser...... What is your risk tolerance? I'm sure most didn't know until January of 2009, when compared to their equity portfolio of 6 months previous.
FWIW, in our IL 529 plan, I relied mostly on balanced option thinking that I couldn't tweak things myself (1-2 trade per year rule; but can redirect new contributions). Basically untouched for 20+ years, it does add up.
Comments
TSUMX 20%
PRCFX 25%
BIL 35%
Maybe?
35-40% bonds. (DODIX and WCPNX, 50/50)
PRCFX (GIROUX) 30-35%
VLAAX 25% or so.
Also, how much to rely on bonds. Longer dated bonds had a bad stretch, but with rates coming down.....do you go back to them now?
Lastly - Use of derivatives, hedged funds, long-shorts, market-neutral. AQR funds, for example. Different tools are available. Do you use them?
PRPFX alone can work for some, but it too has periods of under-performance. I am not sure that 1 fund alone can be efficient.
Given that you're not asking for the moon, I suspect you don't want to be active, and don't care if your manager(s) have an inflexible mandate. Isn't this why traditional, balanced allocation funds came into existence? Are you maybe trying to reinvent the wheel? Some combination of VWELX and VWINX? Maybe one of VWINX and FBALX?
So yes, reinventing the wheel.
As you realize, PRPFX wasn’t a recommendation. But I was struck by how close that +6.98% was to your hypothetical 7% goal. Like you, I prefer to diversify well beyond a single fund - no matter how good it is. The biggest problem, I think, is that shorter term (5-10 years) anything can happen, and so trying to extrapolate future return armed only with a decade’s historical performance is tough and might not lead to your desired result.
As a very conservative investor, I use 3 funds only for trying to gage daily volatility and yearly return. They are not benchmarks. They are not goals. They are simply markers for what I think a conservative investor might reasonably expect to earn over time with very limited volatility. I do not own any of these.
AOK - Globally diversified. 30% equity / 70% fixed income. Relies on index funds. Low ER
TRRIX - A fund of funds from T. Rowe Price. 40% equity / 60% fixed income. Moderate ER
ABRZX - An “alternative” style investment from Invesco. Stocks, bonds, commodities (including precious metals). Attempts to hedge market risk using derivatives. ER exceeds 1%
Over the past 15 years the 3 have averaged +5.40% annually. TRRIX led the pack with a slightly better 6.07% return over that period. Sound bad? For some perspective I compared that number to T. Rowe’s short-term bond fund PRWBX. It has returned +1.86% annually over the same period.
*** I should have checked VWINX, arguably the gold standard, for conservative funds. True to form VWINX has topped all three of my afore mentioned tracking funds with a +7.06 15 year average return. However, not that much better thanPRPFX’s +6.98% return over the same period. Personally, I’d pick PRPFX over VWINX, being willing to sacrifice the 0.08% advantage enjoyed by VWINX for better inflation protection.
(See the original thread on this fund.)
That said, I ran Portfolio Visualizer efficient frontier analyses. Because a couple of funds were extremely new, I had to make substitutions. In lieu of PHEFX I used IPSAX; also near the top of 1 year performance for options trading funds. And FWIW over such a short period, it correlates 99%. For HELO I substituted JHQEX.
I also threw in the four funds Vanguard uses for its model 60/40 portfolio: VTI, VXUS, BND, BNDX. Not surprisingly, at the high volatility end of the efficient frontier curve one finds pure VTI. (Throw in VFIAX and that will be the selected fund; it's been hard to beat S&P 500 if one doesn't care about volatility.)
PV efficient frontier analysis
At different levels of volatility, a portfolio with a single fund, PVCMX (lower volatility), JHEQX (medium volatility), or PRPFX (high volatility) comes pretty close to the efficient frontier. At 7% standard deviation, the highest return (over life of the funds analyzed) is 44% PVCMX, 46% JHEQX, 6% VTSMX, and 4% PRPFX.
Throw in the fund I mentioned in the original thread, HSFAX, and that replaces most of PVCMX.
Portfolio Visualizer second efficient frontier analysis
Also find it interesting that some are looking at past results as a comparison...last 15 years relatively low inflation until recently...also tremendous fiscal and monetary stimulus. Who knows that the future holds...some of you might remember a few years ago when I mentioned high grade rubies, you can fit a million dollar of them in your sock and no one would know..also interesting that no one has mentioned bitcoin...are we just a bunch of older dudes fighting the last war or are we going to open our minds and skate to where the puck is headed not where it is and has been?
Looking forward for this exercise, I am considering "continuity of fund managers", what are their ages and what is the bench strength and financial soundness of the fund company? Maybe need some international exposure as what if dollar weakens substantially?
What other inputs are folks pondering that maybe haven't been discussed yet?
I substitute ACIO for PHEFX when utilizing backtest calculations. I use ACIO specifically for taxable accounts, and it seems to track PHEFX decently so far.
LT Bonds have just gone through a funky stretch, but with rate cuts ahead, a VWINX conservative allocation fund could be nice to have in the mix. Trying to get my head wrapped around leaning back into medium/long term bonds.
Others, https://aptusetfs.com/acio/
I am a bit surprised how little the three managers of ACIO own in the fund. This is not a big fund family and so I was looking for Manager commitment. I shall let others unpack this fund.
The "secrets" are 1) Mostly owning 2-3 bond funds at a huge % 2) switching bond fund = good timing 3) avoiding market losses.
There's no easy way to do it with low volatility. It took me over 20 years to master my system.
See how I did it at (link).
What is this "bitcoin" you speak of?
As regards fund managers, I keep looking at AQR funds. They stunk it up a few years back, and then changed out a bunch of their managers. Since then, they have been performing very well. Can they be trusted?
HMEZX - a super steady merger-arb fund, but the Fund Manager (Dondero) has a checkered past. Is there hidden risk there?
@msf, thanks
Criteria:
--- 529 education account, open for 18 years
--- inception, May 2006
--- self directed with self choice(s) of investment sectors
--- 13 years of contributions (1st and 15th of each month) = $ cost averaging
--- 5 years to date; no additional contributions
--- the 50/50 equity/bond portfolio is reset to 50/50 each September, per the Utah 529 contract
The institutional funds (for 529 accounts) are VITPX (U.S. Total stock market) and VBMPX (U.S. Total IG bond market). All distributions reinvested in the fund(s).
The annualized returns data are from Vanguard, M* and the 529 account.
--- annualized 15 year combined return = 8.125%
--- YTD return = 10.47%
Remain curious,
Catch
Unclear what kind of "contract"? Did you use one of the 2 annual exchanges allowed to rebalance, or a 529 advisor did it for you?
Was 529 all used up? SECURE 2.0 allows some residual funds (in 15+ year old 529 for funds in account for 5+ years) to be transferred to beneficiary's Roth IRA.
I probably should have clarified a bit more.
--- The Utah 529 Educational Saving Plan LINK
--- We didn't care for the vendor of the Michigan 529 plan at the time (2006). We missed the state tax deduction that would have been available; but we are very pleased with the Utah 529. A very well operated program with a lot of investment choices. One may choose established mixes by age; or as we did, and we built our own choices.
--- The annual re-balance is a feature of the Utah 529 contract. I don't really care for this aspect; as we would prefer to let the gains remain for the equity and bond portions. We've not asked, but suspect the program wants to temper the portfolio from becoming lopsided. But, this has worked out okay over the long time frame.
--- We did NOT need to use an advisor
--- And yes about Secure Act 2.0. As everything stands at this time, monies will move to the beneficiary Roth IRA (per the $35k total and the annual maximum at this time). The Roth has been active for more than 5 years. Even with the possibility of a costly Master's program, the return on the investments currently is running ahead far enough for such an expense.
NOTE: the symbols shown previous have changed (per Vanguard) two times during our investment period in these holdings. But, the fund descriptions have NOT changed. VITPX and VBMPX are still valid symbols.
One item that tempers folks from getting crazy with flipping monies in a 529 is the first set of 'rules' established by the gov't. regarding 529's. ONLY 1 change/exchange per calendar year to investment sectors. A few years ago, this was expanded to 2 portfolio changes/exchanges of holdings per calendar year. And of course, the investment style choices are the more standard choices. No exotic stuff.
If you're curious, a LIST of investment styles/choices at the Utah 529. Mostly Vanguard, some DFA and some state choices.
They're almost 'free' with some .02 ER's. There are also small, periodic administrative charges ($15), which is common with 529's.
Agree. The 529 rules are to benefit the beneficiary into their education future. Tis not an investment playground for those who contribute and/or manage the monies.
We had a few turns with the wee bit 'fiddle too much' syndrome is the way back days. We started with T-IRA's in the late 1970's. After a few 'you dumb arse'; everything may be smoothed. Keeping the 'twitchy aspect' is a difficult judgement decision that is full of temptations, if the investor 'doesn't know thy self' well enough.
I'm reminded of the standard questionnaire, as explained by those I've know who have used an adviser...... What is your risk tolerance? I'm sure most didn't know until January of 2009, when compared to their equity portfolio of 6 months previous.
As my CDs mature, I am considering the following low volatility allocation for my retirement portfolio :
HELO 10%
ICMUX 25%
PRCFX 25%
QQMNX 15%
RCTIX 25%
Two of the funds are fairly new, HELO and PRCFX, but they are run by excellent and very experienced managers.
Available PV data over the past eight months is as follows:
Total Return = 9%
Std Deviation = 2.8%
Sharpe Ratio= 2.8
Sortino Ratio = 4.8
Can I do better, JD? I don't know, just sharing my ideas.
But, good luck.