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You'd better develop your own sensibilities and sense of discipline - because one day your newsletter writer will strike out 100 times in a row - or retire.
And many funds are changing the way they do things these days. In terms of investment objectives - holdings - trading limits - etc.
I traded Fidelity sector funds for 20 years - until they changed the trading rules - overnight. So I couldn't trade like I had traded for 20 years.
And did you ever ask yourself - if your newsletter writer thinks he made a mistake - and you should sell something you bought a week earlier - how does he get around the Fidelity trading rules? Or perhaps he's so cozy with Fidelity that he'd never tell you to do something that violated Fidelity trading rules? Still have Select Gold and have started toying with energy at a very low level of skin in the game. More just to have my foot in the energy door.
And just curious - what is your annual percentage return with this newsletter for the last 10 years - from 1/1/2001 to 1/1/2011. Robyn
Yeah the minimum hold times with Fidelity has been a bummer. I have held Select Energy and Brokerage in the last half dozen or more years. Each tanked bad and I was fully out at about 90% peak on the down side after having been in for awhile. Pity someone who got in at the top on a 90 day hold without penalty. The rules about out and in suck also. Not sure if that's what you are referring to or not.
I had a feeling this economy would arrive sooner or later. I bought all US Treasuries with 30 year maturities in 1996 through 1998, so maturity is 2016 or later. The pool yield is 7.125%. Yes, as bonds yields rise I loose some of the gain, but the capital gains are still near 40% and have steady income.
Lately I have purchased some high yield corporate floating rate notes all AAA or better and they are tied to libor. They yield varies but between 5% and 6%, with 5 years or less to maturity.
You just need to pick companies that will survive irregardless where the economy goes.
I have begun investing in bonds after being in stocks mostly the past 15 years. But, I stay away from U.S. Treasuries and corporate debt at the present and have been researching sovereign debt, i.e., the bonds from other countries.
Currently, I hold a position in the Templeton Global Income closed-end fund (GIM). I am now researching another Templeton closed-end fund (TEI) and a Wisdom Tree ETF (ELD). These are interesting to me because they have a distribution yield in the 4-6% range, and yet hold the bonds of countries probably on the safer side, such as Malaysia (where I live), Korea, Brazil, Turkey, and Indonesia.
What do you see as the major differences between closed-end bond funds and bond ETFs? I understand closed-end funds a bit better than ETFs.
First off - I will say in all honesty that I don't know anything about the markets in Malaysia. Since you live there - I assume you know a lot more than I do . You bring up an interesting point. Investing in one's own country as opposed to investing elsewhere. If a person lives in a decent country with decent markets - and a decent legal system and financial regulation - I suspect that person is best off investing at home. Unless the markets are so thin there that it makes sense to diversify parts of one's holdings elsewhere. Especially because currency fluctuations can make a big difference in terms of investment returns.
I don't recall - if I ever knew - whether the Malaysian Ringgit is pegged to the US dollar - or any other currency. But - if it isn't - then currency changes may matter more than market changes. The Nikkei is down this year. But the JY is up so much against the dollar that a US investor in the Nikkei is up this year - mostly based on the currency - not the stock prices.
FWIW - I understand how this stuff works - but I don't have the knowledge or time to invest in it. Perhaps if I worked at it 60 hours a week - maybe.... But that's not my cup of tea. [to be continued]
I have begun investing in bonds after being in stocks mostly the past 15 years. But, I stay away from U.S. Treasuries and corporate debt at the present and have been researching sovereign debt, i.e., the bonds from other countries.
Currently, I hold a position in the Templeton Global Income closed-end fund (GIM). I am now researching another Templeton closed-end fund (TEI) and a Wisdom Tree ETF (ELD). These are interesting to me because they have a distribution yield in the 4-6% range, and yet hold the bonds of countries probably on the safer side, such as Malaysia (where I live), Korea, Brazil, Turkey, and Indonesia.
What do you see as the major differences between closed-end bond funds and bond ETFs? I understand closed-end funds a bit better than ETFs.
OK - let's get to open end funds - closed end funds - and ETFs. They're different animals - but - especially with bonds - starting to share similarities - especially when it comes to all but the most liquid bonds (like treasuries).
Open end funds have an unlimited number of shares - generally price once a day. Closed end funds have a finite number of shares - trade all day (generally on low volume). ETFs trade all day - but create more shares when people want to buy more. Conventional wisdom had it that open end funds would always have a "real" NAV end of day - ETFs always traded at NAV - and closed-ends could trade at premiums or discounts. But - when it comes to bonds - you're not talking about the liquidity you'll find - for example - in the SPY.
So - what I've seen in recent years. Open end funds. Particularly US ones those that hold things outside the US. Fidelity doesn't price at NAV at the end of the day if we had a big day and it expects Tokyo to open big. It puts what it calls a "fair value" on the expected market value on the Asia opening on the fund when it prices the NAV at the New York close.
Closed end funds. These have stayed pretty much as people expected. Trading at premiums/discounts as demand increases/increases. Kind of a cr** shoot. Thomas Herzfeld is kind of the expert on these. I used to trade FAX - like those Asian currencies from time to time - now I use the FXA.
ETFs - with bonds - especially anything except treasuries - trade like closed ends when the market is even a little under stress. Above or below NAV during the day. The US treasury market is the second largest market in the world - after currencies - but most other bond markets are very thin by comparison.
And don't forget that if you're dealing with many closed end funds - they're leveraged (can work in your favor - or against it). Robyn
yes thats what i use. since the beginning back in 1987.
robbyn nothing is a short term trade. its more like nudging a big ship. just tweaking different parts of the portfolio a bit so it sticks to the course better. sometimes it drifts a little but nothing major. . there are very few changes a year. almost 30% on the decade with the growth portfolio vs about even for the s&p 500. i toned it down to their income and capital preservation model a few years ago which only runs 20-35% equities so i dont have a 10 year return on that for myself. was in the growth model until about 4 years ago.
The next month will be interesting for mutual fund investors especially us senior variety. We will be getting our statements or have already seen them on line (Fidelity has available). We will have a return for the year with some coming from fixed income investments etc etc etc. It will be inevitable that many of us will look and say what if we had invested differently. What if we had taken more risk and put more money in the funds that performed above our return. It was a good year for equity funds. Will we change our strategy and take on more risk because of the what if. Perhaps we will seek to lock in gains and go more conservative and more capital preservation. Will be interesting how many of us change strategies.
the what ifs for seniors are as dangerous words as :WATCH THIS" was when i was a teenager lol.
marilyn and i were just saying boy if we only didnt tone it down when we did we would have had sooooo much more in gains but we know thats monday morning quarterbacking.
the what ifs for seniors are as dangerous words as :WATCH THIS" was when i was a teenager lol.
marilyn and i were just saying boy if we only didnt tone it down when we did we would have had sooooo much more in gains but we know thats monday morning quarterbacking.
Yes and that game is over and a new starts. So now moving forward it is no longer Monday morning quarterbacking but financial planning. If a person was 80% fixed income might they be tempted? If they were 80% equities might they be tempted to lock down a lot?
A funny thing goes on with corporate bonds and ratings. People think a lower rated bond is necessarily higher risk than a higher rated bond. The missing link is that risk is a function of price. So a distressed bond from a weak issuer may actually be quite safe.
Example #1: CIT Group bonds were trading for 40 cents on the dollar in the summer of 2009. The company was obviously going broke, losing money every day, and had no way to meet its obligations. But the balance sheet seemed to indicate that even if loan losses exceeded the worst-case scenarios by a wide margin, there would still be 80 cents on the dollar in a bankruptcy liquidation. What could be safer than buying 80 cents of assets for 40 cents?
Example #2: GMAC bonds traded for as little as 20 cents on the dollar in the crisis, and spent years in the 60 cent range. Yet car loan delinquencies never got above 4%. The mortgage subsidiary was bleeding badly, but GMAC had the right to shutter it and let the sub default on its bonds to stop the damage. (The government ended up throwing three rounds of TARP money in to squelch the default plan). Again, recovery values appeared to be 80-90% of face amount even in a liquidation.
CIT did file bankruptcy, and the bond buyer at 40 more than doubled his money in a year on the new bonds and stock received in the reorganization. GMAC survived, and the buyer at 60 cents earns double digit interest by holding a bond that has already appreciated 50%.
In both cases, it was possible to buy deeply discounted bonds from people who originally bought investment grade bonds, went through downgrades to junk, and then sold out. Seems to me that it is better to buy junk, go through upgrades, and sell investment grade (or hold for the incredible income).
The AAA bond has only one direction to go--down. At today's low interest rates, where is the upside? Aren't we too entranced by ratings?
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. You bring up an interesting point. Investing in one's own country as opposed to investing elsewhere. If a person lives in a decent country with decent markets - and a decent legal system and financial regulation - I suspect that person is best off investing at home. Unless the markets are so thin there that it makes sense to diversify parts of one's holdings elsewhere. Especially because currency fluctuations can make a big difference in terms of investment returns.
- whether the Malaysian Ringgit is pegged to the US dollar - or any other currency. But - if it isn't - then currency changes may matter more than market changes. The Nikkei is down this year. But the JY is up so much against the dollar that a US investor in the Nikkei is up this year - mostly based on the currency - not the stock prices.
