Have been reading this board for some time and would like to get some advice from the knowledgeable people here.
In 2008-09 I did not get out of the market in time and lost half my IRA, all equity funds. Did not want to sell with such big losses and decided to wait it out. Last year my portfolio had recovered and even added a little. So, last August I sold all but 2 of my equity funds and bought bond funds instead for a more age appropriate allocation; I am in the low seventies. Now my portfolio consists of 13% OAKBX, 18% PRWCX, 20% cash and 49% bond funds, with emphasis on Treasuries of various duration. Based on what I read on this board, heard on TV and read in yearly reports, this was a bad idea. Also yesterday my bond funds were hit hard. I am ready to sell them all but don’t know where to put the money. Preservation of capital is my highest priority.
Found the discussion about FPA New Income fund on this board the fund looks attractive to me. Although they will drop the front and deferred load the fund will have a 2% redemption fee. Besides that I don’t want to put half or more of my IRA into one fund. Are there funds of high dividend paying companies? Any better suggestions?
My IRA is with Scottrade.
Thank you in advance!
Comments
Um, your current portfolio sounds pretty good to me. Would you mind sharing what your bond funds are? Sounds like they are all long-term.
DEEIX, PGOVX, PREMX, PRTIX PTTDX, VBIIX.
MAPIX: 10%
SGOVX (or whatever share class): 10%
PRWCX: 10%
OAKBX: 10%
TIBIX (or PQIDX): 10%
TTRCX: 15%
DBLTX: 15%
PUBDX: 10%
(another bond fund here): 10%
Just throwing something together.
More equity-heavy:
Bond 30%
MAPIX: 10%
SGOVX (or whatever share class): 15%
PRWCX: 15%
OAKBX: 15%
TIBIX (or PQIDX): 15%
I continue to like FPACX and that would be an OAKBX alternative.
http://news.morningstar.com/fund-category-returns/conservative-allocation/$FOCA$CA.aspx To me ,and I don't own it but probably will at age 74,BERIX is a possibility.Just about everything you might buy at the moment is like today's Dow,at or near an all time high except commodities,and I wouldn't go there! Scott posted a good list and I know he is a fan of Steve Romick at FPACX, a fund I've owned and probably will continue to own, and add to, even at 90,which my father will turn this summer.Some good comments in the past week on this board about RPHYX and protection of capital,but as stated ,that fund was not in existence in 2008.
RiverPark Short Term High Yield Fund (RPHYX) – July 2011, updated October 2012
If you're gonna make a move with bonds, I might just lighten-up on Treasuries and acquire a fund that holds some corporates. What I've been reading lately is that those are not the big bargain they were in the past year or two, but not OVERPRICED, either. But bond yields on corporates have been diminishing. I stuck it out through the Crash and the Great Recession, too. Just don't be jerking yourself around, this way and that. It's a market, remember: there is no PERFECT portfolio. Cripes, I sure do know THAT to be true. My "portfolio construction" along the way has been filtered, limited and subject to too many vagaries to even try to mention. But I like where I'm at. I'm heavy in Asia, and heavy in bonds of different sorts. I suppose the flavor of bonds I do NOT own would be government bonds from the DEVELOPED world, out beyond the USA. My DLFNX is heavy into corporate bonds, but also US Treasuries... If you forsake equities altogether, there's no way you'll beat inflation. "Break a leg!"
MAPOX is a "balanced" fund, owning both (domestic) equities and bonds. I do believe right now, it's about 30% bonds. It has performed VERY well for me, given its "mission" as a "moderate" risk balanced fund. I bought-in last year.
In particular, get rid of DEEIX, PGOVX immediately. If interest rates rise even a minuscule amount these will be hurt the most.
With your OAKBX and PRWCX you are about 18% Domestic Equity and 2% International Equity making the current Equity allocation 20%.
I think you may be able to increase your international allocation a bit and maybe bump up total equity allocation around 30%.
Here is what I am thinking for you. According to M*, this portfolio has about 18% US Equity, 15% Intl. Equity, about 49% bonds (direct or indirect through balanced funds), 11% cash and about 5% other. The type of bonds should handle interest rate hikes better. If you want more conservative consider replacing OAKBX either with GLRBX or VWINX.
Thanks - the above was just something pulled together (if the original poster takes an idea or two from it, great), but I agree that I think it's difficult to make large-scale changes in asset allocation with the market where it is (which I've said with some of catch's discussions about bonds vs equity.) I wouldn't be buying anything overly aggressive at this point and would focus on more conservative/stable funds and/or funds that pay a dividend.
Thank you all very much for your many suggestions! I will check out each one of them after I sell all bond funds today with the exception of PREMX. Thank you also for reminding me that now is not a good time to buy. As you see from my first post I am not good in market timing. I will leave the money in a money market fund for now where it also shrinks, due to inflation, but hopefully not as much as in bond funds. Now I have ample time to consider my choices and buy after the next market dip.
I'd reconsider going all but entirely to cash, as it looks like you may do. None of the funds I mention below have actually lost money year-to-date, in this recent rate-rise; the managers have the latitude to change the asset mix, and the dividends have generally made up for any capital loss.
First, I'd get rid of most of the Treasury-heavy funds and move into more diversified bond funds run by some of the very best bond managers.
You apparently have access to Pimco, and that's the fund family I trust the most for bonds in this everything's-sky-high environment; I'd look at PIGIX, PIMIX, and PDIIX as possibilities, and consider switching your PTTDX over to the ETF BOND (same manager, more nimble with a much lower asset level he has to manage).
Next, I'd consider adding one of the mostly-mortgage funds DBLTX and TGLMX (from DoubleLine and TCW, respectively), for relatively safe, steady income.
Finally, you might look at OSTIX, which is a mostly-bond fund that is doing well during this current rise in T-rates, & though somewhat stock-correlated, would likely not lose very much in a down stock market (it lost only 5% in 2008).
Good luck out there ...
If there are dips and you want to buy, maybe start with the minimum investment and continue to dollar cost average if the pullback continues. Additionally, we can make suggestions, but I think it also comes down to your desired risk tolerance and your own situation. I think having equity exposure - but more conservative and/or income-oriented equity exposure - would be a positive. SGOVX, which I mentioned, is a more conservative foreign fund, while investor offered some good, more conservative US balanced options with GLRBX and VWINX. TIBIX would be more volatile, but offers a very nice yield.
Consumer staples have run up a lot - I think to some degree because people are looking for equity exposure they believe is "safer" (and the yield), but if there's a considerable pullback in the staples ETF, I think that's actually not a bad idea for those in/near retirement. Boring, familiar names (the P & G's, the J & J's, the Wal-Marts, the Costcos) that offer products everyone needs and decent yield of about 2.75% for Vanguard's consumer staples ETF (VDC) - there are a ton of various consumer staples ETFs,that's just one example.
Again, I think consumer staples have run up a lot and are probably currently overvalued, but if there's a pullback (and the pullback may come if people shift from these names to names that are less "defensive"), something to consider that would offer a degree of stability (while past performance is no guarantee of future results, likely an investment that you would not have to be overly concerned with/watch over), familiarity (lots of names everyone knows and products everyone's probably familiar with) and not a bad yield. It's not going to hit home runs, but it's also going to not likely tank on a bad year, either - best scenario, just consistent singles and doubles and a decent yield (and again, something that isn't going to be volatile, most likely.) Overall, a boring, consistent, fairly low-key idea that may particularly fit those nearer to retirement age.
I think there are some instances where things aren't overvalued - I think some of the oil names and other natural resource plays actually seem rather reasonable and both energy and natural resources have not fared terribly well the last couple of years in many cases. However, given the volatility,not something I'd really recommend.
I think what I have to really emphasize again is that, yeah, it's probably going to be best in the years ahead to have some more equity exposure, but that really keep in mind your own situation, risk tolerance, etc. What's best for you is what you feel comfortable with to the point where you can sleep well at night and not spend time being overly concerned about markets that may be volatile (they haven't been that volatile in the past few years with some exceptions here-and-there, at some point do people get too comfortable?)
As for bonds and interest rates and whatnot, I remain concerned about how fixed income will fare over the next several years, but who knows how long that will take to really play out.
Just my 2 cents.
Thank you both for your fund and ETF recommendations. Also your detailed explanations are especially appreciated. Sold the bond funds a little while ago. Altogether I got so many more suggestions then I had hoped for. Now I have to research them and pick and choose which will keep me busy for some time.
I suggest that you decided on the percent allocation and come up with dollar cost averaging scheme to get to the target allocation in a few installments.
Having said that the portfolio I've suggested for you is a low risk one. It does not have funds that does big upside/downside movements. And with 30% Equity exposure you are not really at big risk. But if you like you can reposition to the bond funds next week and enter to balanced funds with say 2 equal installments (say a week apart) and the pure equity funds (both international) in say 3 or 4 chunks. Make it according to a plan. You need equity funds to balance out the losses if equities move up and bonds lose. So, do put a portion of your equity along with bond funds. Once you reach full allocation all you have to do is rebalance periodically (once a year) Again, 20-30% equity portfolios are low risk so that frequent rebalancing is very unlikely.