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Some of those funds look great over 10 years, but did they hold up during the crash? Pimco Total Return PTTDX was rock solid in 2008. And Yacktman did pretty good for a stock fund as well.
But I agree with you, I don't really go for "gold funds" or "small cap funds", I like the monolithic, flexible ones better.
I think the minimum holding period should be 5 years. Anything less than that, & you shouldn't be investing in a mostly stock portfolio. All had a positive return for the 5 year period and beat the S&P 500's negative return for the 5 year period ending 9/9/10.
That said, they all lost money in 2008, but less than the S&P 500, which lost 37%. The worst performer was Dodge & Cox Balanced, with a loss of over 33%, ranking in the 89th percentile for the category that year. The next worst was Fidelity Balanced, which lost 31.31% (76th percentile) The other moderate funds held up better, but still lost between 20% and 27% in 2008. The Vanguard Balanced Index held up surprisingly well, losing just over 22%, putting it in the 13th percentile. The best performer on the list was FPA Crescent, losing 20.55%. One of the best moderate funds in 2008 was one I haven't listed. Oakmark Equity & Income, losing 16.18% in 2008, putting it in the 4th percentile. It hasn't been around 15 years yet, but held up very well in both 2002 and 2008, with a 10 year track record of 8.17%.
The conservative funds, as expected, all did much better in 2008 than their moderate counterparts, losing between 8% & 10%. However, they all ranked in the 11th percentile or higher for their category that year. The problem with that is, it doesn't guarantee they won't blow up relative to their peers in the next major market downdraft. People used to think Dodge & Cox Balanced & T. Rowe Price Captial Appreciation were immune to downdrafts until 2008 hit both pretty hard. T. Rowe held up better than the category average, but still lost over 27%, coming in 41st percentle. That was still a shock for a fund that had never lost more than 1.25% since its inception in 1986.
5 year trailing returns as of 9/9/10 from Morningstar.com web site:
S&P 500 Index Instl+ shares: (.18%)
Moderate Allocation:
Dodge & Cox Balanced: .17%
Invesco/Van Kampen Equity & Income: 1.91%
American Balanced: 2.16%
Fidelity Balanced: 2.60%
Income Fund of America: 2.65%
Vanguard Balanced Index: 2.78%
Vanguard STAR: 2.97%
Mairs & Power Balanced: 3.47%
T. Rowe Price Capital Appreciation: 3.88%
Vanguard Wellington: 4.17%
FPA Crescent: 4.96%
for planning our returement we use 15 year time frames. why? because there is a 95% chance that thats how long it takes to insure you will never have to liquidate stocks at a loss. we have had quite a few time frames where equities were down 10 years or less.
5 years is a very short holding period ,you can almost flip a coin as to whether any 5 year period will be up. if your planning on needing that dough in 5 years its a big gamble whether you will be up or not
we will keep 7 years of withdrawls in cash instruments, 7 years in bonds and the rest in equities... that way we can feel at ease as things go to hell in a hand basket as we know we have 15 years to even think abot liquidating equities at a loss.odds are that wont ever happen.... heck 15 years ago we were in the 4,000's on the dow
Last edited by mathjak107; 09-10-2010 at 03:46 AM..
I think the minimum holding period should be 5 years. Anything less than that, & you shouldn't be investing in a mostly stock portfolio. All had a positive return for the 5 year period and beat the S&P 500's negative return for the 5 year period ending 9/9/10.
That said, they all lost money in 2008, but less than the S&P 500, which lost 37%. The worst performer was Dodge & Cox Balanced, with a loss of over 33%, ranking in the 89th percentile for the category that year. The next worst was Fidelity Balanced, which lost 31.31% (76th percentile) The other moderate funds held up better, but still lost between 20% and 27% in 2008. The Vanguard Balanced Index held up surprisingly well, losing just over 22%, putting it in the 13th percentile. The best performer on the list was FPA Crescent, losing 20.55%. One of the best moderate funds in 2008 was one I haven't listed. Oakmark Equity & Income, losing 16.18% in 2008, putting it in the 4th percentile. It hasn't been around 15 years yet, but held up very well in both 2002 and 2008, with a 10 year track record of 8.17%.
The conservative funds, as expected, all did much better in 2008 than their moderate counterparts, losing between 8% & 10%. However, they all ranked in the 11th percentile or higher for their category that year. The problem with that is, it doesn't guarantee they won't blow up relative to their peers in the next major market downdraft. People used to think Dodge & Cox Balanced & T. Rowe Price Captial Appreciation were immune to downdrafts until 2008 hit both pretty hard. T. Rowe held up better than the category average, but still lost over 27%, coming in 41st percentle. That was still a shock for a fund that had never lost more than 1.25% since its inception in 1986.
5 year trailing returns as of 9/9/10 from Morningstar.com web site:
S&P 500 Index Instl+ shares: (.18%)
Moderate Allocation:
Dodge & Cox Balanced: .17%
Invesco/Van Kampen Equity & Income: 1.91%
American Balanced: 2.16%
Fidelity Balanced: 2.60%
Income Fund of America: 2.65%
Vanguard Balanced Index: 2.78%
Vanguard STAR: 2.97%
Mairs & Power Balanced: 3.47%
T. Rowe Price Capital Appreciation: 3.88%
Vanguard Wellington: 4.17%
FPA Crescent: 4.96%
about the only true well balanced fund on your list is the permanent portfolio. even they got away from their origional pure concept and now weight the portfolio more towards higher inflation outcomes...
as 2008 results showed us, the fund was down slightly while the pure permanent portfolio concept done on your own was actually up in 2008.
the fund added foreign currancies,energy stocks and a host of other stuff getting away from the equally balanced gold,long term treasuries,cash and stocks.
for decades we all got spoiled as we settled into the idea that markets were up 2/3 of the time and down only 1/3 but that hasnt been the case for over a decade..
traditional balanced funds were geared around the concept that prosperity will dominate but as we learned the past can change on a dime.
other asset classes are needed that do well in other economic outcomes other then prosperity.
the days of throwing it all in equities and in 10 years your light years ahead may be over for the future.. other asset classes may run with the ball for a while and funds that want to call themselves one stop shopping have to change with the times as well.
all the target date funds took horrible losses as whatever they held got smashed...they thought they were diversified but all the catagories that they held all moved together downward.
they too were geared for prosperity with all the asset classes they chose.
Mutual Fund fees eat up return,aside from maybe a Vanguard Index Fund,outside of forced contribution through employment,I would buy ETF's with low fees.
fees certainly count but depending on my goals and strategy i would never not buy a fund that met my goals just because it had a low fee ...
my portfolio has very low fees but its actively managed funds and has beaten most indexes for over 20 years following a newsletter.
not that the funds are above average but the weightings are such that they fit into the bigger picture going on at that time better then just index funds.
as an example: when the dollar was weakening one of the funds we utilized was heavy into american large companies with exposure overseas....
as things slowed with the drop we moved into funds more sensitive to the recovery.....
as that faultered we moved over to a fund more defensive so even though each fund wasnt a great performer the fact that the weightings at different times let you capture the best of the gains eventually having your total portfolio beat the index and with less risk...
like nudging a big ship in different directions very gently the different funds in the portfolio ended up being greater then any of the individual funds on their own....
one day i may go all index funds and etf's but for now why screw with decades of success.
Mutual Fund fees eat up return,aside from maybe a Vanguard Index Fund,outside of forced contribution through employment,I would buy ETF's with low fees.
I see your point on fees. But I think fees are worth paying a small premium for.
That would leave funds such as:
Vanguard Wellington .34%
Vanguard Star .37%
Vanguard Wellesley Income .31%
Vanguard Balanced Index (good but the others have performed better) .25%
Of course, once you get to 100K, you can get the Admiral shares, which are cheaper by about 10 basis points.
I think the premium you pay for these funds is so small it's worth it.
Also, if you can get the R5 or R6 share classes of these 2 American funds in your retirement plan:
American Funds Balanced R5 .37% R6 .33%
American Funds Income Fund of America R5 .38% R6 .33%
I think a fund with a good track record with an expense ratio of .40% or less is worth risking. But I concede, it's hard to argue too hard against indexing.
about the only true well balanced fund on your list is the permanent portfolio. even they got away from their origional pure concept and now weight the portfolio more towards higher inflation outcomes...
as 2008 results showed us, the fund was down slightly while the pure permanent portfolio concept done on your own was actually up in 2008.
the fund added foreign currancies,energy stocks and a host of other stuff getting away from the equally balanced gold,long term treasuries,cash and stocks.
for decades we all got spoiled as we settled into the idea that markets were up 2/3 of the time and down only 1/3 but that hasnt been the case for over a decade..
traditional balanced funds were geared around the concept that prosperity will dominate but as we learned the past can change on a dime.
other asset classes are needed that do well in other economic outcomes other then prosperity.
the days of throwing it all in equities and in 10 years your light years ahead may be over for the future.. other asset classes may run with the ball for a while and funds that want to call themselves one stop shopping have to change with the times as well.
all the target date funds took horrible losses as whatever they held got smashed...they thought they were diversified but all the catagories that they held all moved together downward.
they too were geared for prosperity with all the asset classes they chose.
I kind of thought you'd like the Permanent Portfolio. Personally, I don't like the highish expense ratio for that fund. But I wouldn't argue against it. It is more truly diversified than the others. I just think that a mix of stocks and bonds is diversified enough. It seems to me gold is very volatile and currencies can change rapidly, too.
I'd like the Permanent Portfolio more if it had a lower expense ratio.
His flagship mutual fund has been blessed, gaining 20 percent this year and 59 percent in 2009. That was some 32 percent better than the S&P 500, according to Morningstar, a fund rating service.
"Yacktman has been an excellent manager who has had lots of success wherever he has been," says John Coumarianos, an analyst with Morningstar.
His Yacktman Fund has easily outpaced the S&P 500 over one, five, 10 and 15 years. For example, his recent 15-year number was 11.10 percent a year, some 3.35 percent better a year than the S&P 500.
Yacktman Focused Fund 11.35%: 1-year return 12.01%: 10-year return
By the way, when I say I'm a fan of balanced funds, I mean a balanced strategy, not necessarily balanced between stocks and bonds. Like I said before, I think investing in gold, large caps, technology, municipal, treasuries, or the flavor of the day is short sighted, when you could just invest in a fund that has done well through thick and thin. So on the bond side, I'm a fan of Pimco Total Return, as they steered clear of risky debt in 2008 and piled into mortgage bonds as the government stepped in.
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