Hi...Am new to the site and the forum! Quite a wealth of information out here! Thank you!
A couple of questions - is it generally a good idea to go by the "great owls" list, picking the ones with best return vs risk?
Also is it a good idea to split your investment in a sector amongst multiple funds - for e.g. if I were to invest 50K in large cap, should I pick one fund each from growth/value/blend or is it advisable to split it into say multiple growth/value/blend funds?
Comments
I got one word for ya: diversify. The "Great Owls" are dependable and with very good performance records. I think they are rated in terms of risk-adjusted returns, too. But you don't need to be married to them. I own just one from that list, if I'm not mistaken.
Go heavier on domestic funds, lighter on foreign. And among foreign funds, it makes a difference whether a fund is invested in developed economies on the one hand, or Emerging Markets, on the other. I don't own any mid-caps. I own either big stuff or small stuff. ("small-caps.")
Most would advise you to hold some bonds, but those are for ballast. Your bonds won't ever GROW your wealth. When you get older, you will--- if you've been wise and fortunate--- depend more and more on bond funds for current monthly income.
...But it sounds like you're young AND new. WELCOME.
As a "rule of thumb," it is generally recommended that you keep each holding no bigger than 20% of your total, in proportion to your other holdings.
I can't hope to cover all the bases in one reply. Surely some others will respond, too. There are a number of EXPERIENCED professional investment people here. We listen to them, and are grateful to them.
As for diversification: it is both a Science and an Art, in terms of the best way to do it, and there is no one best recipe. You can't hope to cover EVERY conceivable contingency. People make different selections, and that is precisely what makes this whole business a "Market."
So, you came to the right place. Stay tuned. You won't regret it.
Not sure what to say about that comment.
And welcome.
Here's my first rule of investing, for what that's worth: invest in what you understand. Rule two: don't invest until you understand.
In general, the problem of bad investors is worse than the problem of bad funds. "Bad investors" are folks who are looking for - and think they find - magic solutions. They think they find magic because they find funds that did great in the past and blindly conclude they'll do great in the fund. They won't. Some "great" funds are simply flukes and all great funds have bad stretches.
The key is to stack the odds slightly in your favor by looking for experienced managers whose strategy you understand and are willing to stick with, preferably in funds that do a bunch of "right things" - are small enough to execute their strategy, have announced their strategy capacity, minimize expenses, have high levels of insider ownership, show systematic independence from their benchmark index, trade lightly. If you achieve both those goals - a fund with a decent prospect in the long-term and an investor who's in it for the long-term - you'll do better than most.
But that requires legwork now - time spent reading Tobias or Ellis, time spent learning about your manager (if you spend more time studying your used car options than your investment options ...) and time spent thinking about how the pieces come together.
If you don't want to do that, then just pick a low-cost balanced fund of funds, invest regularly and celebrate all of the time you spend with family, friends and community. Vanguard STAR (VGSTX) would have a very fine option for folks pursuing that path.
Other folks will surely share experiences and fund names, but I thought I'd try the 30,000 foot view at the start.
As ever,
David
I'm 40 with a 10yr old and a baby on the way. Looking for long term investment with reasonable risk tolerance. I have a bunch of funds - 80% domestic (70% large cap + 10% mid%), 20% bond funds and have about 85K to invest.
FMIHX
FCNTX
YACKX
FDCAX
PRBLX
SWTSX
BGRFX
GTCSX
PONDX
MWTRX
LSBRX
Thanks
This is a great site for fund selection but not so much for portfolio construction. You run the risk of creating a kitchen sink portfolio with too many funds containing everybody's favorite funds not consistent with your risk profile. That will cause you grief in the long term.
Glad that you're helping keep everyone on the ball about investing (bonds).
Tis understandable that likely the majority of investors are equity-centered. The majority of business news and what the general public does and has seen over years is the "stock market" numbers; on their nightly news networks or wherever. Nothing wrong with this, of course; but the majority of individual investors I have known basically only know the word, "bonds" and seldom have a direct investment in them.
Some area in the investing world is always in season. Finding the trend here and there is likely the most common challenge. I don't advocate folks flipp'in around among equity and bonds, unless they have practiced this trading and know they are good with the choices.
May do some equity trimming today from VITPX, VIIIX, ITOT, VSCPX......likely keep monies in place with PRHSX. About 40/60 (equity/bonds) today.
Thank you again.
Catch
Welcome to MFO.
Are your existing funds (your list) tax sheltered monies (IRA, 401k, etc.) and will this be the case with some of the new money? I will presume most of the new money would be in taxable accounts, however; both you and your spouse may choose to place some of the money into Roth IRA's.
Also, do you plan to dollar cost average the new money over a period of time?
Take care,
Catch
Also, I often recommend owning an individual stock or two that you are heavily familiar with, a company or product you use heavily and really like. I do think that it's easy when times are difficult to hold on to investments if it's a product or service that you know and love.
What I'm saying is add some food for thought. Looking at a bunch of your other posts you seem to have a handle on the bond stable. We all won't be comfortable trading in and out en masse as you seem to do on occasion but we might benefit from learning about what to look for when choosing bond funds for a portfolio.
FMIHX Sell
FCNTX Keep
YACKX Keep
FDCAX Sell
PRBLX Keep
SWTSX Sell
BGRFX Sell
GTCSX Keep
PONDX Sell
MWTRX Keep
LSBRX Keep
Regards,
Ted
What/where does he invest the monies from your sell list?
Take care,
Catch
I'd look at some international replacements for the funds that are sold, including - as I mentioned lower - First Eagle Overseas, Oakmark International or a couple of the lower key Matthews funds (MACSX, MAPIX). Ivy Asset (WASCX) is another recommended option as, aside from a few bumpy periods, that continues to be a solid world allocation choice, with some ability to short/hedge. There are other international options, as well, which I'm sure others will offer - I just threw out some of the first that came to mind.
Thanks for your response. Yes, these funds are in tax sheltered accounts and the new money also going into tax sheltered account. Yes, planning to do dollar cost averaging over the next few months as well.
Regards,
Ted
I think it's going to come down to your own comfort zone and I truly don't think that there is a right or wrong answer, just differences in opinions. I don't do it myself anymore but I did at one time believing that I was providing diversification to my portfolio. Really all I was doing was collecting funds. Keep it simple and focus on your long term plan and goals.
Give the fella a break. He's only been here 2-3 months:-)
See, to me, it really becomes this combination of how much do you want to involve yourself in the day-to-day and what level of risk are you comfortable with?
You can either:
1. Be actively involved, try to time the market and lessen/increase risk as you see fit.
2. Have a set of managers that you are comfortable with and change over time if things change (like a change in manager) or a "better idea" option comes along and you want to take profit.
Or
3. Something in-between.
----
The Baron funds are going to do well in good times and they are not going to be pretty in bad times. Baron Partners has the ability to short, but it doesn't seem like it ever uses that flexibility. Ron Baron is certainly a successful investor, but they are growthy, high octane funds. If you do not want to try and time the market, have it as part of your portfolio, but I'd tailor the % to your comfort level.
Personally, I like to have income with long-term holdings (with few exceptions, not everything's going to offer a dividend.)
I do think that you should consider some % to EM, which has not done well, but if you have a long-term view on EM, now is the time to start to DCA into a good EM fund.
If you are prone to investing like collecting wine or toy trains and it is the hobby aspect of it that excites you, you have come to the right place. Soon you will be talking about your cellar selection and the difference between 2005 and 2010 bordeauxs. The fund pushers will keep you occupied.
If you don't want to fool yourself trying to take up another hobby disguised as investing for your future, you need a reset of your thinking first.
1. Investing has three components: Allocation strategy, fund selection, risk management. These accommodate any style of investing. You have to have a plan in all three dimensions. Start with allocation strategy.
2. Allocation strategy depends on your investing style, risk tolerance and personal financial circumstance as well as family context. At one extreme, you can be a passive investor that allocates for the next few decades and does minor tweaks once in a while. At the other end, you can be an active investor that allocates based on current trends and exploits every part of the market cycle. Both are valid approaches or anything in between.
3. For the situation you are in, you should spend less than 3-4 hours a year on investing most of it in the initial part setting up your portfolio for the next decade or two. The amount of money you have currently to invest doesn't justify spending more time than that. Do the math. Active meddling and spending a lot of time might increase your annual performance by 1% (usually it is much less or negative). In the best case scenario it will make you an additional $800. How much time do you want to spend on it? Your best return on investment at this stage is looking after your career and taking care of your family and being actively involved in your children's lives on a daily basis than spending time reading about funds. Financially, your goal at this point should be earning as much as possible and saving as much as possible and keeping your family healthy and happy.
4. The above suggests a primarily passive portfolio designed for the next few decades while you focus on accumulation. You can start worrying about spending time on investments when the annual returns on that investments start to be 4-5 times your annual saving in dollar amounts.
5. With that allocation strategy, you don't need much of a fund selection activity and the ETFs suggested by Wealth front might just be fine possibly tweaked based on availability of funds where you have your investments.
6. In that context, you don't need much risk management which is for more active investors. An annual tweaking or rebalancing is all you need.
If the above seems dull and uninspiring and it is selecting the red marble or the blue marble that gets you excited, join the club of fund pushers here. Safer than being adducted to internet porn, just don't mislead your wife or yourself that you are spending time looking after the future while you are indulging in your hobby/addiction.
Are you my long lost son or something? Love it!!
One thing about this discussion board which can be both good and maybe some bad, you will be made aware of many new and often intriguing funds that you may never had heard of elsewhere. It's very easy to become a fundaholic if that's the right term. If you are going to be a mostly buy-and-holder, which it sounds like you are, do all the upfront work to hire the fund managers you are comfortable with, x-ray your portfolio to see if you are within your ballpark allocations and go with it. My opinion, and it's only an opinion, is you don't need duplicate category funds to do this. But the important thing is, what does your gut say? Another suggestion; if you have a need to play or make momentum bets or want to try new things (which I'm guilty of), segment a small portion of your portfolio for that. I do this with ~10% of my portfolio.
I'll add my own preference for choosing funds; in general I like management that can and will adjust their portfolio's with capital preservation and total return in mind (FPACX and YAFFX for example). I like more focused funds (not a lot of holdings), a smaller asset base though that is hard to keep if the fund is doing well, and mostly a fund that has a good to great upside-downside ratio as seen in M*. The up/down ratio is similar to the statistics Charles uses to display his great owl funds.
Good luck to you.
I'd go with 1-3 good equity funds. Yikes - It's impossible to know which category will shine brightest over the next few years. "Value" funds are one good choice. "Growth" or "Growth & Income" are another. "Global" generally denotes a fund that invests in both U.S. and international holdings (as opposed to "International"). So a good global fund would be another fine choice.
Not all fund families are created equal. Some will gouge you with exorbitant fees or even front end loads. Others will shoot for the moon (pulling in lots of assets) and have great returns for a few years only to tank badly when the market turns. Some simply treat you better when you call. I like T. Rowe Price a whole lot. Check out their Spectrum Growth and Spectrum International funds. Even Spectrum Growth invests a significant portion in international equities. PRWCX is arguably their best fund, but too conservative IMHO for a youthful investor like yourself.
Honestly, I don't see myself spending a whole lot of time actively managing my portfolio. Ideally re-balancing/reallocating 2-3 times a year is what I am looking for. So my thought was to pick a diversified portfolio that I can set on cruise mode for the next 3-4 months and see. So I started building a hypothetical portfolio with some of my existing holdings and picking other ones based on reviews/numbers on this site coupled with other factors like low fees, manager tenure etc. But looks like a lot of few been suggesting going with balanced index funds and/or a diversified low cost index/ETFs. But most suggestions seem to be for Vanguard funds...understandably so. But my accounts are with Schwab (75%) & Fidelity (25%) - so I believe I'll get tacked with transaction fees especially if I were to do dca over a period of time...so does anyone have suggestions for a balanced fund at Schwab/Fidelity?
It's currently carrying one-third of assets in bonds. The Morningstar page says it is available via both Fido and Schwab. I gather that it is without a transaction fee, because I see "TF" (for "transaction fee?") attached to some OTHERS, but not those two.
PRWCX is a great one, too, which has stood the test of time. And MAPOX goes back to 1961. I was in first grade! (Mairs and Power, out of St. Paul, MN.) But is it tax efficient? It pays quarterly dividends. PRWCX pays only in December.