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Your Choice: One Mutual Fund to Hold For the Next 10-15 Years
There's some ambiguity in the question. Does owning a fund for 10-15 years mean only that one doesn't make changes, or does it also imply that one is investing with the intent to draw from the fund after 10-15 years?
jlev seems to take the former view - starting at age 31, the portfolio could still have many years to go past the 15 year target before getting tapped. In that case, a more aggressive, pure equity fund would be a reasonable choice. No disagreement on that broad perspective.
Ted is hooked on growth funds (we've had this exchange before). Value and growth tend to take turns leading, but the alternations can be glacial. Personally, I wouldn't bet the farm on growth over the next fifteen years considering the long run that growth has already had. So in that sense I'd disagree with GPMCX.
Note that even existing shareholders can't buy much of GPMCX. From the prospectus:
"Fund is closed to both new and existing investors seeking to purchase shares of the Fund either directly or through third party intermediaries, subject to certain exceptions for participants in certain qualified retirement plans with an existing position in the Fund and direct shareholders with existing accounts who may purchase up to the amount of the current IRA catch up limit per year in additional shares, regardless of account type."
@msf, you're right about the fund but the question is how much reality should we suspend for a decision that isn't very realistic to begin with. There are other funds people would have chosen that are closed to new investors and picking a single fund for the next 15 years isn't really a model for diversification, admitting that some of the choices would be far better than others just in terms of being reasonably diversified. I don't think GPMCX is a bad choice and while I'd agree with you on growth vs. value these guys are GRP guys and that makes me more comfortable. The thing I'd think long and hard about is how big can the fund get before it's a lot more difficult to pursue their stated purpose. The fund was started at roughly $25 million 2 years ago and it's now $41 million according to M*. If it doubles in 7 years plus the contributions existing investors are allowed to make, does $80 or $100 million make pursuing the tiniest of the tiny a lot more difficult. They currently have 187 holdings and the average market cap of their holdings is $326 million. That's $200K on average and suggests to me they could deal with more assets as long as the float isn't a small percentage of the market caps. Nothing suggests a big problem to me in the few minutes I worked on it but that's what I'd be focused on.
@LLJB We're actually in pretty strong agreement. I gave the information about the (semi) hard close of GPMCX largely in response to Ben's implication that an existing shareholder could buy more shares. That would be likely be necessary even for an existing shareholder if one were to shift all of one's assets into a single fund. So from a purely mechanical perspective, GPMCX would likely not be a feasible selection even for an existing shareholder.
As you point out, you want the fund not to run out of capacity. A fund family with a strong policy of closing funds gives reassurance here; the fact that the fund is already closed could be considered an additional plus.
I also agree with your sentiment that if one were to go with Grandeur Peak, their "mini-micro-cap" fund would not be my first choice. I'd prefer something with a bit more flexibility.
@LLJB and @msf I'm currently in a discussion with the misses regarding how to allocate current funds. It's true that GPMCX is a hard fund to get into, but we're debating how to allocate the little we can currently deposit on our current salaries. I'm intrigued at where you might go instead between I'm assuming GPRIX and GGSYX?
To a fair degree, I've got to beg off, since Grandeur Peak isn't a family I follow that much.
That said, a superficial look at GPRIX, GGSYX and GPGIX suggests a fair degree of overlaps among the Grandeur Peak funds.
Top 10 holdings in both GPRIX and GGSYX include Man Wah, First Republic, First Cash. Another top 10 holdings in GPRIX held by GGSYX is China Medical Systems. Other top 10 holdings in GGSYX held by GPRIX are Nihon M&A, Power Integrations.
There's a similar pattern of overlaps with GPGIX.
So at least at first blush, I'd be inclined to view these funds as covering slightly different segments of the market, but otherwise not fundamentally different. Others can speak more cogently about them. Consequently, I'd focus on whether I wanted more small cap (GPRIX) or midcap (GGSYX). Everyone manages their portfolio differently, e.g. "core and explore", multiple sleeves, covering style boxes, etc. You have to see what fits best in your portfolio.
Personally, my own style is more to look at foreign funds (combined with domestic funds) than at global funds. So I'd be less inclined to use Grandeur Peak global funds in a portfolio, possibly looking instead at GISYX. But for the purpose of this thread (a single desert island fund), I'd take a global equity or global allocation fund.
@msf, you're exactly right. Even though it doesn't work perfectly based on my past reviews, GPRIX is supposed to hold everything and then each of the other GP funds is just a different subset, probably with the exception of GPMCX although I've never asked or read that. I haven't asked them about any holdings I've found in one or another fund that wasn't in Global Reach but my assumption has always been that the theory rarely works perfectly in reality.
@jlev, I guess my answer to your question might depend a bit on the context. Assuming you and the misses have decided on something that you want to add to your GP holdings then my preference would be one of the Stalwarts funds. I don't own Global Reach and I assume you do because it's hard closed and even then I think there are very limited exceptions for adding. Anyway, I'm somewhat sensitive to the number of holdings a fund has and I'd much prefer the 100-130 in the Stalwarts funds to the 320 in Global Reach. I also feel like, although I'm sure this isn't totally true, that Global Reach is just a grab bag with a lot less thought put into portfolio composition than any of the other funds.
Whether you prefer the International Stalwarts or the Global Stalwarts I think depends on your feelings about US stocks and potentially dealing with adjustments in the future. My personal belief is that International is a better place to be right now because of valuations and because I think the Fed will slow down US stocks before the ECB or BOJ slow down international markets. In the long run, though, I'd rather have the global fund. The nice thing is that since the funds are still open you can make adjustments later as you please.
How long would people wait before deciding their level of comfort/ trust with VGWAX?
I've thought about this as well. My take is when a mutual fund is introduced it has the benefit or challenges of the market cycle. Funds that became available in say 2007 had a serious set of challenges to overcome. Most new funds (less than 10 years) have not been tested through a serious bear market...well, maybe the energy and commodity funds have.
Two things strike me as interesting to follow with regard to VGWIX (VGWAX): 1. What will management select as initial purchases... equity, bond, and other. 2. How will VGWIX perform out of the gate and over the short term in comparison to VWINX...a brother from the same mother. Sibling rivalry or will big brother VWINX have VGWIX back? Me thinks the latter.
Regarding VGWIX, VGWAX, etc., my global allocation fund of choice is SGENX, available load-waived at Schwab. If bonds are needed, may be supplement with PONDX. I have owned SGENX for a very long time. My other long-term holds (>10 years, some >15 years) are OAKBX, FPACX, MACSX.
I'll echo OldSkeet's mention of American Funds and their conservative approach to things as a core all-in-one fund. I hold several in my taxble account and don't think twice about them. CWGIX, CAIBX are solid alloction funds.
My TIAA 403b is 100% in AF Washington Mutual R-6 (largecap value, decent quarterly dividends, good companies) and I see no reason to ever touch it.
For long-term sector bets, sure, tech and health care should continue to provide juice for growth opportunities.
I'll echo OldSkeet's mention of American Funds and their conservative approach to things as a core all-in-one fund. I hold several in my taxble account and don't think twice about them. CWGIX, CAIBX are solid alloction funds.
My TIAA 403b is 100% in AF Washington Mutual R-6 (largecap value, decent quarterly dividends, good companies) and I see no reason to ever touch it.
For long-term sector bets, sure, tech and health care should continue to provide juice for growth opportunities.
How would you do that? You'd have the same problem I raised above regarding GPMCX - you cannot make it the one fund you'd take with you to a desert isle.
Nor does it seem that you want to be able to make it the one fund you'd own while watching the waves lapping on the shore: "I do appreciate the focus on generating good performance and keeping assets within reason."
Hard closes are good things generally, but bad if you're looking for the only fund to own.
Because I'm trying to maximize by return over that time period. And if I'm on an island, I'm making no additional income so wouldn't have any additional capital to add to the fund anyways... Therefore, the hard close doesn't impact me.
If you're going to get caught up in the technicalities of funds closing then my answer would be just stick everything in a passive global equity instrument.
The "technicalities" concern owning just one fund. By hypothesis, one would have to divest of other investments prior to going on that "three hour tour". So an investor would be stuck with lots of cash (as well as holding that fund) if the fund were presently (hard-) closed.
The possibility that the selected fund might close in the future while one is on that island is of no import, because even hard closed funds allow reinvestment of dividends. Thus a purported advantage of passive investments (that they don't close) isn't real.
With that in mind, would you reconsider your newly stated preference for passive investments? Also, what does "equity instrument" mean? Does it include ETNs, individual securities, perhaps even perps, or just mutual funds?
I agree with the "global equity" aspect, and stated so previously. I didn't suggest a fund because (with a cursory look) I didn't see one that particularly excited me. The usual suspects all seem to be showing signs of bloat, and few others stand out (to me).
FLPSX has been suggested - it's virtually a global fund anyway (50/40 US/foreign). But it is also huge (Tillinghast manages other funds as well in a similar style) and has management risk (Tillinghast is 59, and Fidelity started adding comanagers six years ago). I'd also prefer something with more EM exposure. DODWX is better with EM exposure, but is lacking in small (or even midcap) exposure.
I would not change my stance on passive. I'm almost entirely passive with the exception of some of the more niche areas of the market where I believe active management can add value over time. If I had to go one fund this way I'd just go VT.
This re FLPSX is dated obvs but had some info I did not know, including EM portion and a buying / timing strategy. The foreign proportion varies of course.
Comments
jlev seems to take the former view - starting at age 31, the portfolio could still have many years to go past the 15 year target before getting tapped. In that case, a more aggressive, pure equity fund would be a reasonable choice. No disagreement on that broad perspective.
Ted is hooked on growth funds (we've had this exchange before). Value and growth tend to take turns leading, but the alternations can be glacial. Personally, I wouldn't bet the farm on growth over the next fifteen years considering the long run that growth has already had. So in that sense I'd disagree with GPMCX.
Note that even existing shareholders can't buy much of GPMCX. From the prospectus:
"Fund is closed to both new and existing investors seeking to purchase shares of the Fund either directly or through third party intermediaries, subject to certain exceptions for participants in certain qualified retirement plans with an existing position in the Fund and direct shareholders with existing accounts who may purchase up to the amount of the current IRA catch up limit per year in additional shares, regardless of account type."
As you point out, you want the fund not to run out of capacity. A fund family with a strong policy of closing funds gives reassurance here; the fact that the fund is already closed could be considered an additional plus.
I also agree with your sentiment that if one were to go with Grandeur Peak, their "mini-micro-cap" fund would not be my first choice. I'd prefer something with a bit more flexibility.
That said, a superficial look at GPRIX, GGSYX and GPGIX suggests a fair degree of overlaps among the Grandeur Peak funds.
Top 10 holdings in both GPRIX and GGSYX include Man Wah, First Republic, First Cash.
Another top 10 holdings in GPRIX held by GGSYX is China Medical Systems.
Other top 10 holdings in GGSYX held by GPRIX are Nihon M&A, Power Integrations.
There's a similar pattern of overlaps with GPGIX.
So at least at first blush, I'd be inclined to view these funds as covering slightly different segments of the market, but otherwise not fundamentally different. Others can speak more cogently about them. Consequently, I'd focus on whether I wanted more small cap (GPRIX) or midcap (GGSYX). Everyone manages their portfolio differently, e.g. "core and explore", multiple sleeves, covering style boxes, etc. You have to see what fits best in your portfolio.
Personally, my own style is more to look at foreign funds (combined with domestic funds) than at global funds. So I'd be less inclined to use Grandeur Peak global funds in a portfolio, possibly looking instead at GISYX. But for the purpose of this thread (a single desert island fund), I'd take a global equity or global allocation fund.
@jlev, I guess my answer to your question might depend a bit on the context. Assuming you and the misses have decided on something that you want to add to your GP holdings then my preference would be one of the Stalwarts funds. I don't own Global Reach and I assume you do because it's hard closed and even then I think there are very limited exceptions for adding. Anyway, I'm somewhat sensitive to the number of holdings a fund has and I'd much prefer the 100-130 in the Stalwarts funds to the 320 in Global Reach. I also feel like, although I'm sure this isn't totally true, that Global Reach is just a grab bag with a lot less thought put into portfolio composition than any of the other funds.
Whether you prefer the International Stalwarts or the Global Stalwarts I think depends on your feelings about US stocks and potentially dealing with adjustments in the future. My personal belief is that International is a better place to be right now because of valuations and because I think the Fed will slow down US stocks before the ECB or BOJ slow down international markets. In the long run, though, I'd rather have the global fund. The nice thing is that since the funds are still open you can make adjustments later as you please.
Two things strike me as interesting to follow with regard to VGWIX (VGWAX):
1. What will management select as initial purchases... equity, bond, and other.
2. How will VGWIX perform out of the gate and over the short term in comparison to VWINX...a brother from the same mother. Sibling rivalry or will big brother VWINX have VGWIX back? Me thinks the latter.
I'll echo OldSkeet's mention of American Funds and their conservative approach to things as a core all-in-one fund. I hold several in my taxble account and don't think twice about them. CWGIX, CAIBX are solid alloction funds.
My TIAA 403b is 100% in AF Washington Mutual R-6 (largecap value, decent quarterly dividends, good companies) and I see no reason to ever touch it.
For long-term sector bets, sure, tech and health care should continue to provide juice for growth opportunities.
You already pointed out that little obstacle: "I can't add to my GPEOX position."
https://www.mutualfundobserver.com/discuss/discussion/comment/74847/#Comment_74847
Nor does it seem that you want to be able to make it the one fund you'd own while watching the waves lapping on the shore: "I do appreciate the focus on generating good performance and keeping assets within reason."
Hard closes are good things generally, but bad if you're looking for the only fund to own.
If you're going to get caught up in the technicalities of funds closing then my answer would be just stick everything in a passive global equity instrument.
The possibility that the selected fund might close in the future while one is on that island is of no import, because even hard closed funds allow reinvestment of dividends. Thus a purported advantage of passive investments (that they don't close) isn't real.
With that in mind, would you reconsider your newly stated preference for passive investments? Also, what does "equity instrument" mean? Does it include ETNs, individual securities, perhaps even perps, or just mutual funds?
I agree with the "global equity" aspect, and stated so previously. I didn't suggest a fund because (with a cursory look) I didn't see one that particularly excited me. The usual suspects all seem to be showing signs of bloat, and few others stand out (to me).
FLPSX has been suggested - it's virtually a global fund anyway (50/40 US/foreign). But it is also huge (Tillinghast manages other funds as well in a similar style) and has management risk (Tillinghast is 59, and Fidelity started adding comanagers six years ago). I'd also prefer something with more EM exposure. DODWX is better with EM exposure, but is lacking in small (or even midcap) exposure.
https://www.investopedia.com/articles/etfs-mutual-funds/043016/flpsx-fidelity-lowpriced-stock-fund-performance-case-study.asp