The Financial Times reports that Vanguard’s assets under management have surged past $6 trillion for the first time. In the investment business, the biggest rarely means the best. Big funds and big investment managers have fewer opportunities to choose from, and bigger funds are harder to maneuver. Do You Think Your Business Really Matters to Vanguard? Even if you have a $1 million portfolio with Vanguard, your business means almost nothing to the firm. They have $6 trillion under management. There are 5,999,999 other $1 millions in $6 trillion. Think about that the … [Read more...]
Ginnie Mae (GNMA) Bond Yields
What do Ginnie Mae (GNMA) bonds yield? The table below lists the yields on two of the major Ginnie Mae (GNMA) indices as well as the latest SEC yield on some of the top Ginnie Mae (GNMA) dedicated funds. A note of caution when you are looking at yields on Ginnie Mae funds. Like all SEC yields, these yields are based on the last 30-days of income generated by the fund. They are not directly comparable to the yields on the Merrill Lynch and Barclay’s Ginnie Mae (GNMA) indices. Description Symbol Yield as of 11/30/2019 Yield as of 12/31/2019 Merrill Lynch Ginnie Mae … [Read more...]
Think Your ETF Portfolio is Diversified?
If you are buying ETFs because you hope to build a more diversified portfolio than you believe you can get by purchasing individual stocks, this chart is for you. The chart below from Bespoke dispels the myth that ETFs always provide adequate diversification. The chart shows the weighting of the top two holdings in each S&P 500 sector. Like many ETFs, the S&P 500 sector ETFs are market-capitalization-weighted. As you can see, the top two stocks are driving the ship in most sectors. In the Communications Services, Energy, and Technology sectors, the top two stocks account for about … [Read more...]
Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
The Vanguard Wellesley (VWINX) and Wellington (VWELX) funds are both balanced mutual funds managed by the Wellington Management company. Wellington and Wellesley both invest in dividend-paying stocks as well as bonds, but there are some crucial differences. We will explain the similarities and differences between Vanguard Wellesley and Wellington to help you decide which fund, if either, works best for you. Richard C. Young an Authority on Vanguard Wellesley & Wellington Young Research has followed both Wellesley and Wellington for over four decades. We aren’t aware of any … [Read more...]
Warning: Avoid Mutual Fund Year End Distributions
UPDATE: The end of the year is a great time to review your mutual fund year-end distributions. You should try to avoid them if possible. If you haven't done so already, read through Fidelity's primer on Mutual Funds and Taxes below. You don’t need to worry about year-end distributions with individual stocks. But with mutual funds, you absolutely need to worry. It’s why at Young Research we favor individual stocks in both our Retirement Compounders and Maximizers investment strategies. Here’s a primer on year-end distributions courtesy of Fidelity. Pay particular attention to tax strategies … [Read more...]
Vanguard GNMA Outlook 2020
What is the Outlook for the Vanguard GNMA Fund in 2020? GNMA bond prices like all bond prices are influenced by the level of interest rates and the outlook for interest rates. GNMA bonds are bonds that are backed by mortgages, so their prices tend to be influenced more by the level of long-term interest rates than by short-term interest rates, but both matter. The Federal Reserve has absolute control over short-term interest rates, but their policies heavily influence the level of long-term interest rates. What Does Interest Rate Policy Mean for Vanguard … [Read more...]
Potential Index Fund Component Loses 98%
If you want to get an inside look at how the sausage is made with certain index funds, take a look at this story by Jacky Wong in The Wall Street Journal: The giants of passive investment need to get more active. Marble mining company ArtGo’s 3313 117.86% Hong Kong-listed shares fell 98% Thursday after index compiler MSCI, MSCI +1.24% in a rare U-turn, dropped its plan to add the company to its indexes. MSCI said the decision followed further analysis and feedback from market participants about the stock, which had soared 3,800% this year. A Heard on the Street column Wednesday may have … [Read more...]
The Final Nail in the Coffin for Mutual Funds
The mutual fund industry has been facing headwinds for years. First, the industry became too big. So dominant were the biggest funds, they couldn’t invest without moving the market themselves. The next problem for mutual funds was the advent of the ETF. ETFs hollowed out the high-fee actively managed equity fund industry. I wrote about these problems here in November of 2006: I write often that the majority of mutual funds offer no compelling reason for investment. Here’s a double shocker for you. Of the top-ten largest equity mutual funds, seven come from one family. How could one … [Read more...]
Vanguard Wellington (VWELX): The Original Balanced Fund
The Vanguard Wellington Fund (VWELX) is the original balanced mutual fund. It was the first mutual fund to include bonds in its portfolio and the 7th open-end mutual fund ever launched in the United States. It also happens to be one of the most successful mutual funds of all-time. From its inception in 1929, the Vanguard Wellington Fund has turned a $10,000 investment into over $11,000,000 (through year-end 2018). Wellington’s approach of investing in stocks, as well as bonds, is the driving force behind the fund’s 90+ year record of investment success. Were it not for the decision of … [Read more...]
Caution: Returns in the Rearview May Be Closer than They Appear
Many investor presentations and fund brochures focus on three year returns. But without a bear market since 2009, how can investors see how a fund handles volatile markets using three year returns? Past returns can never predict the future, but an investor can learn something about the resilience of a fund manger's strategy by examining how the fund performed in past times of turbulence. John Coumarianos suggests using 15 year returns for fund analysis today, so investors can see an entire cycle included. The future ain’t what it used to be, Yogi Berra said. But now, when it comes to … [Read more...]
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