All,
Simply thought I would post my thoughts on an allocation that I'm close to adopting and would greatly appreciate your thoughts and criticism?
These investments are primarily to fund our retirement which is 20+ years away. There are no immediate income needs from the portfolio nor will we need to take any withdrawals out until retirement. I am a very conservative investor so capital preservation is a priority with an objective of generating returns of inflation plus 3-4% while generating decent upside and downside capture. Targeting a beta of 0.3-0.4.
There are four main categories of the portfolio allocation.
The first consists of Global Asset Allocators. My goal here is to invest in 5 risk conscious managers with varying views and that have great investment flexibility. 40% will be allocated amongst the following:
Wells Fargo Absolute Return (GMO)- WABIX
FPA Crescent-FPACX
PIMCO All Asset All Authority- PAUIX
Ivy Asset- IVAEX
First Eagle- SGIIX
The second category consists of what I term tactical allocation and long-short. A 20% weighting will be allocated to:
Good Harbor US Tactical Core- GHUIX
AQR Managed Futures- AQMIX
Marketfield- MFLDX
The third category consists of flexible bond funds. A 40% weighting to the following:
Scout Unconstrained- SUBFX
Doubleline Total Return- DBLTX
Osterweis Strategic Income- OSTIX
Templeton Global Total Return- TTRZX
Sierra Core Retirement- SIRRX
RiverPark Strategic Income- interested in this fund after it launches
The fourth category is invested outside of my portfolio outlined above. This consists of two direct lending vehicles, Lending Club and a private placement fund that specializes in short term small business loans.
I also plan to reduce the global asset Allocators over time and invest in the following after a 15-20% market decline:
Seafarer Growth & Income- actually might consider now
Yacktman Focused
FMI International or FPA International Value
Thanks
Heather
Comments
But since you asked, in my opinion, if this is a retirement account with a 20+ year target, you may be way to conservative "and complicated". Most of the funds you chose seem to be top-notch, at least right now. Time will tell if those alternative funds like PAUIX and AQMIX pan out. Maybe they could have a sleep well affect - if you are 5 years from retirement. I would be concerned having so many bond funds myself. 40% in bonds along with the "flexible" and "alternative" funds you think you need are also heavy in bonds themselves! Not sure why OSTIX and TTRZX wouldn't be a suitable combination on their own.
Another thing that jumps out is I don't see any small cap fund exposure. Or much straight stock funds at all for that matter. Why not use index funds for some or most of your equity exposure and maybe a couple managed funds for possible alpha - or conserving principle as you hope. I guess I'll stop there. You asked so I spoke. This might be an okay allocation for a 55 year old, but again, way to complicated and conservative for 20+ years out IM<HO. Over 20 years, the portfolio allocation will be what drives 90% of your returns, not the funds you choose. And over 20 years the short term volatility of equity won't mean much either.
But, as always, if this feels right for you, go with it. Obviously know one knows you better then yourself. And obviously you put a lot of work into this. I do notice you took PRPFX out of the equation.
1. give mediocre to poor performance over an entire market cycle.
2. have ridiculously high expense ratios which, when compounded over several decades ---
which is what you are talking about prior to your intended retirement date ---- become
quite substantial.
3. underperform several of the best balanced (MAPOX, OAKBX, etc.) and go-anywhere/do
anything" funds (FPACX) without substantially changing the volatility of one's portfolio.
And I agree with MikeM: you are making things unduly complicated and micromanaging
your portfolio without a clear-cut reason or realistic anticipated result.
The only thing that I remain skeptical about is the managed futures fund - despite being apparently one of about two or three people on this board who do not appear to loathe alternative funds, I have yet to really find a managed futures mutual fund of interest. The AQR fund is one of the best examples of the managed futures category, but I still think managed futures is more suited to hedge funds that can be more nimble than mutual funds.
I do agree that there's not that much straight-up stock exposure. I'd say maybe adding a small portion to start with (10%?) in Seafarer, FMI and/or Yacktman rather than putting 40% in bonds.
EXAMPLE:
1. Domestic CORE, maybe a good balanced fund like MAPOX, mentioned above.
2. Domestic small-cap (MSCFX? From the same shop: Mairs and Power)....Or TRP PRSVX.
3. Domestic BONDS--- nothing longer than intermediate-term. DODIX, DBLTX. DLFNX.
(keep your bond stake small for several more years. You have 20+ years to retirement. You want this animal to GROW. Make sure, when the mutual funds offer you the choice to take pay-outs or to RE-INVEST them, that you do the LATTER!)
4. INTERNATIONAL, global: MAPIX, SFGIX (mentioned above, in your own note) and TBGVX.
5. World bonds: MAINX.
6. A small stake in EM bonds. No more than 3% or so of your total. Right now would be a perfect moment to buy-in because they are so depressed: PREMX, FNMIX.
You can't hope to cover EVERY base. Later on you can get more complicated with various "sleeves." Make it more complicated than it needs to be and you end up chasing your own tail. -----"Max."
Clyde S. McGregor. He is also the manager of Oakmark Equity & Income fund which I owned for several years and does a fine job with the equity side.
When the stock market starts heading south again (as it did in October, 2007), will any of these tactical, long/short, global asset allocation funds or the latest fad funds invented by mutual funds' marketing departments help? It's anyone's guess, but I'm in for only 10% of my investment dollars.
Over the past 10 years, I own or have owned many of the funds you have mentioned. Picking good funds and getting in and out at the correct times is a very difficult task. I enjoy participating in investment forums such as this one and keeping current in the financial world, but I try to "beat the house" only with a small percentage of my investments.
Regards,
Ted
Sample Capital Appreciation Portfolio: http://assetbuilder.com/our_portfolios/model_portfolios/model_portfolio_14
Lazy Portfolio:
http://www.marketwatch.com/lazyportfolio
Or simply put everything into FPACX and leave that alone. I'm simply giving choices from your batch; I myself would do different even with your criteria. You're trying too hard to have everything, imo.
With all of this advice, I hope the OP doesn't leave more confused than when she started
Since you do seem to believe that past performance is a good predictor I would go with
10% FPACX
5% MFLDX
25% DBLTX
5% total stock index(a fund or etf)
5% Total international index(a fund or etf )
15% moderate to conservative allocation fund like VWINX or PRWCX or OAKBX(own 1, 2 or all 3)
35% total of a short term bond fund, a TIPS fund and whatever else you want that makes you comfortable as to risk noting that my suggested portfolio is much less than 40% in stocks unless you add a stock fund as part of the 35%.
You should not have less than 5% in a fund as it otherwise will have almost no impact on your performance. You have obviously spent a good deal of time on research but remember you can do quite well with a three- fund portfolio total stock market, total international, intermediate bond and just rebalance when the desired asset allocation is out of line by 5+% or once a year on your birthday if you don't want to spend much time.