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A Rising Tide Lifts all….er… Index Boats

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Before you give your investment manager an ear full for trailing the S&P 500 last year, check out this article from Barron’s. Lots of useful insights that can help you stay the course and avoid the emotionally charged decisions that often sabotage long-term portfolio performance. It is no secret that index funds have gained in popularity in recent years. The proliferation of ETFs has been a big boon for the index fund community. According to the Investment Company Institute, in the first 11 months of 2014, investors pulled $96 billion from active U.S. equity funds and purchased over … [Read more...]

A Darn Good Track Record

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I always have money in the stock market and I always will. I don’t get worked up about big swings in stocks because I also have money in bonds. The bonds tend to go up when stocks fall and vice versa. This balanced approach is best illustrated with my favored Vanguard Wellesley fund. The fund has been down for the year only 6 times since 1971 and so far this year it’s up. But even if Wellesley were to be down this year I would never sell it. The fund has a knack for making money in the year following a down year. That’s a success rate that makes me comfortable in any market. … [Read more...]

The World’s Most Dangerous Mutual Fund?

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Fannie Mae and Freddie Mac investors are toast. That is the verdict the market delivered last week after a judge threw out a lawsuit to stop the government from seizing most of their profits. I don’t want to get into the details or merits of the case, but it is important for you to know that the common and preferred shares of Fannie and Freddie took a beating following the ruling. The Fannie Mae preferreds plunged almost 50% on the day of the announcement and they are down more than 60% since September 30th. The ruling on the mortgage giants' shares was notable, but what was most … [Read more...]

Bond Kings

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My favorite bond funds are not known for their king like managers. And I like it that way. One would think that the world renowned Bill Gross (whose compensation reached $200 million in years past) could make things work at PIMCO. But with interest rates so low, it was getting too hard for him to make a difference. In this interest rate environment, the only way a bond fund manager is going to make a difference is by taking on more risk than his competition. It’s not rocket science. But I have a feeling investors aren't going to be comfortable with these risks, as I explained here. … [Read more...]

Top 10 Funds in 2014

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What is working in the stock market this year? I ran a Morningstar screen of the top performing U.S. focused Large-cap blend (combination of growth and value) funds to find out which ones are beating the market YTD. Out of the 467 large-cap blend funds in the Morningstar database, about 94 have bested the S&P 500’s 9.74% YTD return. The top performing fund according to Morningstar is Upright Growth, up 20.1% YTD. How have Upright Growth and the other funds at the top of the heap beaten the market YTD? Among the Top 10 performing funds on the Morningstar list, the five largest … [Read more...]

Mutual Funds of the Future

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"Never pick a stock again," proclaims the headline of a recent article by Money. The California Public Employees Retirement System is considering making cuts to its allocation of active managers. Meanwhile, robo-advisors are hawking a “new” model of investment management centered around broad based index ETFs (I’ll have more on robo-advisors in a future post). The financial press and many more in the finance industry are hailing index based ETFs as the savior of the investing masses. Is this the real deal? Are we finally seeing a secular shift in the money management business or is … [Read more...]

Best Bond Funds to Buy Now

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What are the best bond funds to buy now? This is a simple question that is often unnecessarily complicated by investors. The best bond funds to buy now are the same bond funds you should have bought yesterday and the same bond funds you should buy tomorrow. But isn't past performance a poor predictor of future results? Indeed it is, but the best bond funds are not those that earned the highest return in any given year. The best bond funds are the cheapest bond funds. Cost is one of the most reliable predictors of mutual fund performance. Who offers the cheapest bond funds? For my … [Read more...]

Your Best One-Two Punch

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For my money the best balanced fund combination is a 50/50 mix of Vanguard Wellesley and Wellington. For clients I prefer a mix of Young Research's retirement compounder stocks and individual bonds and bond funds. The key difference from the Wellesley and Wellington mix is our stocks provide an eclectic group of international holdings and the bonds have a shorter maturity. But as you can see with my chart it's the balanced approach that gives you the confidence to stay in the fight. … [Read more...]

Vanguard GNMA Up 40.6%

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You’ve been rewarded for sticking with Vanguard GNMA. Over the last 52-weeks it has returned 5 percent and through the first half of this year it is up 4.5 percent. A lot of investors sold their GNMA last year when the Fed began its taper talk. And at the beginning of this year the so called experts said bonds were dead—making it even harder for you to hang in there. I’m glad you did. Aren’t you? Still all the chatter is about stocks. This week the Dow and S&P 500 both had record closings. Tech is way overbought and bonds are being left for dead, again. But the prudent investor would … [Read more...]