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More on the Portfolio Sleeve Management System

Old_Skeet
edited August 2014 in Fund Discussions
I am providing more on the “Sleeve System” to investing. Seems others have found good value in a sleeve type management system besides myself.

bee who has been a long time poster on the board and made me feel welcome when I first arrived (as some were rude) many years ago (back in the Fund Alarm days) recently sent me some information, she found, from FMD Capital about their using a sleeve type management system for income investing. My system is geared towards income plus capital appreciation as my system contains an additional growth area. In this way, capital gains (if needed) can be taken in addition to income generation to help supplement the portfolio's monthly distribution. Currently, I draw form three to five percent annualy form the portfolio and have been able to grow principal over time at these distribution rates.

The FMD Capital system is definitely worth the read and it is linked below for your reading enjoyment. It is titled, "The Strategic Approach to Income Investing" and is written by Michael Fabian. http://fmdcapital.com/wp/wp-content/uploads/2013/09/FMD_Income-Investing.pdf

Thanks again bee ... It is most appreciated.

I have also posted below how I have my sleeve system organized by area and by sleeve with current holdings.

Sleeve System

Here is a brief description of my sleeve system which I organized to help better manage the investments that were held in five accounts. The accounts consist of a taxable account, a self directed ira account, a 401k account, a profit sharing account and a health savings account plus two bank accounts. With this I came up with four areas. They are a cash area which consist of two sleeves … an investment cash sleeve and a demand cash sleeve. The next area is an income area which consists of two sleeves. … a fixed income sleeve and a hybrid income sleeve. Then there is the growth & income area which consist of four sleeves … a global equity sleeve, a global hybrid sleeve, a domestic equity sleeve and a domestic hybrid sleeve. An finally there is the growth area which consist of four sleeves … a global sleeve, a large/mid cap sleeve, a small/mid cap sleeve and a specialty sleeve. Each sleeve consists of three to six funds (in most cases) with the size and the weight of each sleeve can easily be adjusted, from time-to-time, by adjusting the number of funds and the amounts held. By using the sleeve system one can get a better picture of their overall investment picture and weightings by sleeve and area. In addition, I have found it beneficial to xray each fund, sleeve, an area and the portfolio as a whole. Again, weightings can be adjusted form time-to-time as to how I might be reading the markets and wish to weight accordingly. In addition, all fund distributions are taken in cash and are diverted to the cash area of the portfolio.

Below is how I have it broken out with current holdings.

Cash Area
Demand Cash Sleeve… (Cash Awaiting Investment Deployment)
Investment Cash Sleeve … (Savings & Time Deposits)

Income Area
Fixed Income Sleeve: ITAAX, LALDX, THIFX, LBNDX, NEFZX & TSIAX
Hybrid Income Sleeve: AZNAX, CAPAX, FKINX, ISFAX, PASAX & PGBAX

Growth & Income Area
Global Equity Sleeve: CWGIX, DEQAX & EADIX
Global Hybrid Sleeve: CAIBX, IGPAX & TIBAX
Domestic Equity Sleeve: ANCFX, FDSAX, INUTX, NBHAX, SPQAX & SVAAX
Domestic Hybrid Sleeve: ABALX, AMECX, CFIAX, DDIAX, FRINX, HWIAX & LABFX

Growth Area
Global Sleeve: ANWPX, PGROX, THOAX, DEMAX, NEWFX & THDAX
Large/Mid Cap Sleeve: AGTHX, SPECX, IACLX, VADAX, HWAAX & BWLAX
Small/Mid Cap Sleeve: IIVAX, PCVAX & PMDAX
Specialty Sleeve: CCMAX, LPEFX & TOLLX

I wish all ... "Good Investing."

Old_Skeet

Comments

  • Old_JoeOld_Joe
    Hi Skeet- I hadn't really thought of my setup as "sleeves", but the general organization is of a similar type, with four self-defined "areas"-

    1) US Equity Funds: ANCFX, ACMVX, GABAX, GASFX, BUFBX, PRBLX, VVPSX, SCHD
    2) US Balanced and Allocation Funds:ABALX, TWSMX, RSIVX, MFLDX
    3) World and EM Equity Funds: SMCWX, CWGIX, ANEFX, MAPIX, ARTGX, SFGIX, WAFMX, GPROX
    4) US Bond Funds: ABNDX, AIBAX, AHITX, ABHIX, RPHYX, LSBRX

    As you say, it makes it easy to adjust balances within areas by adjusting various fund levels. The four areas are currently 20%, 20%, 31% and 29%, respectively. A series of graphs and charts in my spreadsheet give a good picture of the performance of each fund individually, as well as overviews of the total allocations as: US stocks, foreign stocks, US Bonds, foreign bonds, convertible, preferred, cash & "other".

    BTW, am thinking about adding TOLLX.

    Regards- OJ
  • Old_Skeet
    edited August 2014
    Hi Old_Joe

    Thanks for your comments.

    I count 26 funds within your portfolio. How many accounts feed your sleeves?

    And, TOLLX is a good fund by my thinking and research. And, it is one that I have on my list to buy additional shares during market pull backs. I have linked its M* report for those that might wish to take a closer look.

    http://quotes.morningstar.com/fund/f?t=TOLLX&region=USA

    Old_Skeet

  • Old_JoeOld_Joe
    Hey there Skeet- well, as you can see I don't break it down to the degree of granularity that you do- I just grouped the whole mess into those four general areas. I'm thinking that if I break it down even further I'll spend more time than it's worth worrying about the whole thing.

    As life turned out, with both of us retired for some ten years now our combined pension and SS income is more than enough to meet our needs. We have a very large cash "reserve" of about 50% of our NW, which is in addition to the portfolio given above. The portfolio constitutes about 25% of our NW, and is structured so as to provide enough income/appreciation to offset the inflation which is eating away at the non-invested cash. Also, the portfolio is designed to provide approximately half of the volatility of the S&P, limiting both it's potential upside and downside swings.

    The remaining 25% of our NW is the conservative resale value of our weekend home. The value of our home in SF is not included in any of these calculations. Both properties are mortgage free, and we have no debt of any kind. Very conservative, but we have no problem sleeping at night.

    OJ
  • LLJB
    TOLLX has a great record along with low risk, so very appealing on that basis. What I'm wondering is whether you would ever pay the big front-end load for a fund like this or any fund for that matter? I just checked my broker and somehow, to my great shock, I have access to the S class shares, which seem to have no load and an expense ratio that gets close to the institutional shares. How that happened I have no idea, but as they say, never look a gift horse in the mouth. In any event, I suspect you guys are just as opposed to front-end loads as I am, but interested whether there are situations when you would accept it.
  • beebee
    edited August 2014
    LLJB said:

    I have access to the S class shares, which seem to have no load and an expense ratio that gets close to the institutional shares.

    I also own TOLSX through my brokerage.
    image

    I find "D" shares at pimco and "N" shares at Janus and TCW and "Z" shares at Columbia are all investor share often NTF.

    Some funds have both NTF share class and a TF share class...I will sometimes consider TF shares class if I plan on holding the position for a longer time frame.

    Also TRP and Fidelity offer Advisor shares that are often NTF, but with a higher ER than the non-advisor shares (say for instance PRWCX vs PACLX).

    It always has to do with costs...either Loads, Expense Ratios, 12-1 fees, early redemption fees, etc.

    Some brokerage houses only offers the load or TF share class of a particular fund while some have FUNDX.lw (load waive) versions. These often are the institutional classes.

    Very confusing isn't it?

    I'm sure I missed something...lots to know when it comes to the slicing and dicing the mutual fund world.



  • Old_JoeOld_Joe
    edited August 2014
    TOLLX seems to be no-load/no fee at Schwab. ER is 1.42%
  • VintageFreakVintageFreak
    Not that I am against the concept. But why not the TRP global infrastructure fund?
  • Old_JoeOld_Joe
    Not about to further complicate my life with yet another account/brokerage.
  • LLJB
    Sometimes its unbelievable how many different pricing schemes there are. We've come so far in reducing the cost of investing and yet its become so much more complicated to actually take full advantage of that progress. Two steps forward, one step back, two steps forward, one step back.
  • tigerman3tigerman3
    TOLSX is also no load at Schwab with an ER of 1.25%
  • jafink63jafink63
    Hi Skeet and Old Joe - After reading your article, it made me curious of where I was putting my money. Here's my breakdown. My funds are either at Vanguard or TRP. I have never been outside of either those 2 companies. My wife and I are 51, I retired from military in 2008, she works part time and I work full time. I am sure loaded up on International funds, maybe even some of them in the same arena.

    1. US Equity Funds: PRWCX, PRSVX, VWELX, VWINX, VTSAX, VMRGX
    2. World and EM Funds: PRSNX, TRAOX, TRAMX, VFSVX, VTIAX, VWIGX, TREMX, PRLAX, VEUSX
    3. Health Care: PRHSX, VGHCX
    4. Real Estate: VGSIX
    5. Communication: PRMTX, PRGTX
    6. Natural Resources: PRNEX

    John
  • scott
    I don't think there's anything wrong with this style at all. Really, if something's working for you, great. I don't get why people get so upset about the idea that someone is investing in a different style then their own.
  • jafink63jafink63
    Cheers Scott
  • JohnChisum
    A question for all, is the bucket method of investing the same or a variant of sleeve investing?
  • scott
    JohnChisum said:

    A question for all, is the bucket method of investing the same or a variant of sleeve investing?

    Would seem the same to me.
  • JohnChisum

    "Would seem the same to me."


    I think the intent is the same but the way the intent is handled seems different. I see one traditional bucket system set up for time periods, ie 1-5 yrs, 6-10yrs, 11yrs and beyond for example. The sleeve is something new or in this case the management of the sleeves as Old Joe has done with sleeves for different investment strategies. ( cash, fixed income, etc. )

  • VintageFreakVintageFreak
    Personally I think ANY system is better than lc, mc, sc, intl / 40, 20, 20, 20 tripe. Another thing it does it make people understand it is not all about comparing your performance against some index and trashing other people's opinions looking at 3 year and 5 year numbers and perpetually chasing "stAr" funds.

    There is no price for ones sleep.
  • JohnChisum
    I totally agree VF. I believe that cap size is becoming a bit irrelevant these days. It has been some time since I bought a fund based on cap size. It is also true that one can go nuts when they have a 10% return and their friend has a 12% return. It means nothing. It is all dependent on your investment outlook and risk tolerance.

    I have found this sleeve thread very informative and it could be very useful as I head into retirement age.
  • maxlib421
    I think that the bucket system is quite different from the sleeve approach being used by Old_Skeet and Old-Joe. As JohnChisum states, there are usually at least three different time buckets and the investments in each bucket are selected based on what the contents of the bucket are going to be used for. Morningstar uses Bucket 1 to cover two years of retirement expenses and that consists of cash, CD's, & safe ST bond funds. Bucket 2 for years 3 - 10 consists of mostly stable bond funds, including some TIP's, and possibly a conservative allocation fund like Vanguard Wellesley. Bucket 3 for years 11 -25 consists of mostly equity investments along with riskier bond funds like Loomis Sayles Bond and possibly a commodity fund. Bucket 2 is used to replenish Bucket 1 when needed and Bucket 3 is used to replenish Bucket 2 when needed. The bucket system seems more geared to the fact that withdrawals are occurring during retirement although I guess it could also be used during the accumulation phase in a slightly modified form.
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