Hi
@LLJB You noted: "I have a question for you related to your points here and in another post about not investing less than 5% in "whatever" because it takes that to make any difference in your portfolio. I agree with you but I also realize it can depend on how you define your "whatevers". For instance, my position in PRHSX is 1% of my portfolio but I could count it as healthcare or I could count it as large cap growth or both. Either way it doesn't make or break the 5% rule in this case, but when you think about your 5% threshold, do you double count? And if not, how do you decide which "whatever" things get allocated to?"
>>>What I posted in another thread: Our house remains U.S. centric in the equity area, gathering whatever international exposure from the fund holdings. The only direct exception being, GPROX; at this time.
A serious consideration going forward is to maintain VTI / ITOT or similar holding for 40% U.S. equity exposure and PIMIX (our largest bond holding) for bond exposure, also at 40%.
The remaining 20% would be allocated to "other", as determined by market observations. Currently, this would be the healthcare sector. Any of these holdings would be subject to change, not unlike June of 2008, as previously noted. None of the 20% floater money would hold less than 5% in any one area; as too little forward appreciation could likely be the result. This could mean, however; that more than one fund could result in a given market sector.....i.e.; energy; to provide the 5%.
Regarding the 5% consideration for the "whatever" money.
The 5% minimum I personally use is for investments I consider favorable for my risk/reward tolerance; and that present what appears to have a decent
capital appreciation potential.
This is relative to what I noted above; with maintaining 40% in each for VTI and PIMIX. Healthcare holdings are about 14% of VTI. This would meet my needs, if I wanted at least 5% in healthcare (14% of 40% of the total portfolio).
Obviously, 40% each to VTI and PIMIX indicates a major part of a preference for an overall portfolio, and is U.S. centered with the exception of non-U.S. companies within VTI, or more so, the earnings of U.S. companies generated outside of the country. So, one could weakly argue some foreign exposure.
Now, what to do with the other 20%? Cash at this house has been some form of bond holding. If we want to buy something else, we always have to sell some of a bond fund for the transaction (at least as of today :) ).
This is the part that generally has the consideration for the 5% to make any difference; for the investment to be worthwhile to the overall portfolio. Usually the 5% is purchased at one time. Although, I think it is fine to average into a holding, too. But, I if averaged into a particular holding; it would likely be within a one month time frame.
Today, with 80% of a portfolio in the above two holdings; this would be the mix for the remaining 20% if split 4 ways: GPROX (although now closed), FRIFX (conservative, decent performing real estate), GASFX (utiliy/energy) and FSPHX. Or the whole 20% into FRIFX , GASFX or FSPHX.
This is obviously a lot of fiddling around with a portfolio. With enough choices, one may also consider 20% into 5 balanced/conservative allocation/moderate allocation funds or etfs to spread manager risk. I note this as one balanced fund with a very nice return record for several years is in the tank this year....... VILLX is running a negative return YTD. Lots of folks with this fund who are not happy. We do not hold this fund, thankfully.
>>>You also noted: "For instance, my position in PRHSX is 1% of my portfolio but I could count it as healthcare or I could count it as large cap growth or both. Either way it doesn't make or break the 5% rule in this case, but when you think about your 5% threshold, do you double count?"
PRHSX is a sector fund and that is the only way I view such a holding. It is a special consideration; separate from a LC, MC, SC, growth or value equity. Such a fund could be a combination with tight restrictions from managers; such as a small cap healthcare fund, but it is still a dedicated sector.
>>>Also noted: " but when you think about your 5% threshold, do you double count?"
I will presume you mean overlap within holdings to form the 5% threshold. Yes.
I write singular here; but the portfolio is a household portfolio. At one time we both had several 401k/403b from investment vendor changes over the years. Early in 2009 we wanted a high percentage exposure to the HY bond area. We had about 45% of our portfolio invested in this area at one time, split among several investment houses within the retirement accounts. The same would apply to 1% from here and another 2% from somewhere else to meet the 5%.
I have not checked, but I suspect many broadbased equity funds have fairly high percentages of healthcare holdings. Depending upon your funds, you may have a fairly high overall percentage of healthcare.
In theory for some, is that diversification helps ease the pain when the markets are "mad". One could suppose finding 20 investment areas and givng 5% to each. I'm not convinced this method is of value.
I probably missed something with this long write; which was not intended to be this chatty.
Like me know about clarity; as it is too late at night for me, today.
Regards,
Catch
