Gyroscopic Investing

I realize most investors here are of the opposite mind, but 'package' type mutual funds (like PRPFX) and Vanguard's Wellesley give me the psychological perservance necessary to be an investor. I'm financially faint of heart, so seeing only small swings in share price suits me well.

Right now I'm in PRPFX+EDV (a la Medium Tex) and looking for a few other low ER funds that might be suitable for my VP allocation (~25% of my assets). I hear OAKBX, Wellington, Hussman and others mentioned often. I would appreciate any suggestions from fellow or former fund users.   

I would avoid actively managed funds. But if you just have to use them, then Vanguard's Wellington, Star or Windsor funds would be on the short list.

I like Fairholme. FAIRX.
I still own a little of it. Everything else got sold and went into the PP.

Thanks guys. I'm slowly transitioning to a 4x25 PP using VFINX, VUSTX, VFISX or more I Bonds, and probably enough GLD to rebalance with... also considered VGPMX.

Nonetheless, I really just want to stick a portion of my money with a good active fund like Wellington (0.26 ER with Admiral Shares) and forget about it for 30 years.

SmallPotatoes wrote: Thanks guys. I'm slowly transitioning to a 4x25 PP using VFINX, VUSTX, VFISX or more I Bonds, and probably enough GLD to rebalance with... also considered VGPMX.

Nonetheless, I really just want to stick a portion of my money with a good active fund like Wellington (0.26 ER with Admiral Shares) and forget about it for 30 years.

Be careful with VUSTX.  It's not well-suited to the overall PP strategy and it won't protect you the way TLT, EDV or individual bonds will.

Using VUSTX rather than longer dated bonds in a PP setting actually increases risk.

VGPMX is also not a substitute for gold in the portfolio. You want something that represents exposure to gold bullion, not mining stocks like VGPMX is.

Of the stock/bond active funds out there, Wellington has a good reputation.

Appreciate the feedback. I've got PRPFX and EDV now, so I'll just build around that. I can increase EDV and add some VFINX, then just buy I Bonds (or would VFISX or a MM be better?) and a few coins.

I'm really trying to avoid all the hassle of handling my portfolio assets, which is why I'm thankful for PRPFX. However, I do understand the costs involved and will try to mitigate that with a few indexes. Otherwise, Wellington seems like a good VP option.
 

SmallPotatoes wrote: Appreciate the feedback. I've got PRPFX and EDV now, so I'll just build around that. I can increase EDV and add some VFINX, then just buy I Bonds (or would VFISX or a MM be better?) and a few coins.

I'm really trying to avoid all the hassle of handling my portfolio assets, which is why I'm thankful for PRPFX. However, I do understand the costs involved and will try to mitigate that with a few indexes. Otherwise, Wellington seems like a good VP option.
 

If you have taken the leap on the PRPFX/EDV mix I have discussed and you are interested in the simplest possible approach, I would just stick with that.  That's pretty darn simple (and tax efficient).  Maybe rebalance annually or when the assets hit 85%/15% or 95%/5%.

MediumTex wrote:

SmallPotatoes wrote: Appreciate the feedback. I've got PRPFX and EDV now, so I'll just build around that. I can increase EDV and add some VFINX, then just buy I Bonds (or would VFISX or a MM be better?) and a few coins.

I'm really trying to avoid all the hassle of handling my portfolio assets, which is why I'm thankful for PRPFX. However, I do understand the costs involved and will try to mitigate that with a few indexes. Otherwise, Wellington seems like a good VP option.
 

If you have taken the leap on the PRPFX/EDV mix I have discussed and you are interested in the simplest possible approach, I would just stick with that.  That's pretty darn simple (and tax efficient).  Maybe rebalance annually or when the assets hit 85%/15% or 95%/5%.

I do like the PRPFX+EDV mix… a lot.  Ne'ertheless, I still hold a few coins, a few I & EE bonds, and VFWIX+VFINX. I feel like at present it's a combination that fits my tolerance while givng me a taste of managing my own PP.  I still wonder if Wellington might be a good VP choice, though I could just weight VFINX heavier.  Or is it best not to use PP classes in the VP? 

Hussman Strategic Total Return (HSTRX) has mostly treasury bonds but can buy up to 30% in gold mining stocks, utilities, reits or foreign bonds. It actually made money in 2008 where PRPFX had a rare losing year.

Dr. Hussman says he invests all his own money in the two funds he manages, so that suggests some confidence and integrity.

With HSTRX you get more protection from deflation and inflation than most other one-choice funds.

As a nervous older investor, I would consider this fund a reasonable part of a variable portfolio.

John

I do like the look of HSTRX, and might drop into that for added inflation/deflation protection.  I'm also thinking VWELX might be in my VP since it's been proven (not just back-tested) over 80 years, and would add more of the prosperity component with some protection from bonds.

At the core, of course, PRPFX.

For anyone like me who can't resist tinkering active funds remove the most risky component: me.

MediumTex wrote:

SmallPotatoes wrote: Thanks guys. I'm slowly transitioning to a 4x25 PP using VFINX, VUSTX, VFISX or more I Bonds, and probably enough GLD to rebalance with... also considered VGPMX.

Nonetheless, I really just want to stick a portion of my money with a good active fund like Wellington (0.26 ER with Admiral Shares) and forget about it for 30 years.

Be careful with VUSTX.  It's not well-suited to the overall PP strategy and it won't protect you the way TLT, EDV or individual bonds will.

Using VUSTX rather than longer dated bonds in a PP setting actually increases risk.

Could you elaborate on why it is not suitable? I remember asking craigr about a similar Fido fund - FLBIX - and he didn't dismiss it as an option altogether, although the fact that average duration is less than that of TLT definitely translates into bigger volatility. However long-term performance of VUSTX is not substantially different from TLT:

I believe VUSTX has an average shorter duration on it's bond holdings than EDV or TLT. Now how that changes the value I'm not so sure… bond funds can be confusing.

SmallPotatoes wrote: I believe VUSTX has an average shorter duration on it's bond holdings than EDV or TLT. Now how that changes the value I'm not so sure… bond funds can be confusing.

As the chart shows TLT surely jumps higher than lesser duration bond funds when everything drops and everybody runs to (at least perceived) security of Treasuries. On the other hand it doesn't drop that much in the opposite scenarios.

foglifter wrote:

SmallPotatoes wrote: I believe VUSTX has an average shorter duration on it's bond holdings than EDV or TLT. Now how that changes the value I'm not so sure… bond funds can be confusing.

As the chart shows TLT surely jumps higher than lesser duration bond funds when everything drops and everybody runs to (at least perceived) security of Treasuries. On the other hand it doesn't drop that much in the opposite scenarios.

TLT is probably the best ETF for the bond portion after looking at a few charts. I think EDV is in a close second, but VUSTX just doesn't have the volitity to take advantage of the a PP approach.

I'll go with EDV until I can get free trades of TLT. 

That LT bond fund chart would be more helpful if it were a log chart.

Do your own due diligence, of course, but VUSTX is not suitable for a PP.

VUSTX is probably administered by its managers with an eye toward reducing volatility while maximizing current yield.  This volatility mitigation makes perfect sense if you are running a fund, but for the PP we are SEEKING volatility, not trying to avoid it.

there probably isn't enough demand to make it happen, but it would be nice if vanguard (or someone else) had a LT fund that was made pp friendly and sought out the volatility the pp needs,

when i first looked at the pp i got stalled out on the same question how can i avoid something i dont understand (ETF's - rule9), when the time comes to invest in them i will have to study up and figure them out,  i imagine (and hope) they are not as complex as they seem to me right now

l82start wrote: there probably isn't enough demand to make it happen, but it would be nice if vanguard (or someone else) had a LT fund that was made pp friendly and sought out the volatility the pp needs.

EDV is a Vanguard fund and it's perfect for PP purposes.

excuse my beginner questions, but isn't EDV a ETF ? or can it be bought and sold like VUSTX?

SmallPotatoes wrote:
I don't know if anyone truley understands ETFs well enough to say 'That investment vehicle makes perfect sense to me.' Mutual funds make good sense and Indexes make even better sense, but ETFs are new and it's difficult to understand the many gears the make them run… or cost you money or security.

When John Bogle writes a book giving ETF a thumbs-up I'll read it and invest.  Until then I'm seeking the best ways to avoid ETFs and create the PP.  I still like PRPFX, but realize it's too costly to keep indefinitely.

i haven't ruled out buying individual LT bonds, but i haven't studied that option yet either, it may not be simple or hassle free but my hunch is they are easier to understand than ETF's.

l82start wrote: excuse my beginner questions, but isn't EDV a ETF ? or can it be bought and sold like VUSTX?

Well, EDV is an ETF, but Vanguard recently waived commissions on Vanguard ETFs, so it can be bought and sold just like VUSTX if you are referring to cost.

More generally, can you tell me why ETFs bother you but mutual funds don't?  I don't fully understand what it is about ETFs that you are uncomfortable with.  For example, VTI is an ETF and VTSMX is a mutual fund, but they hold the same assets and I would imagine that VTI would be a bit more tax efficient and probably slightly cheaper as well. 

mostly the added layer of complexity, opening trading accounts to buy and sell them, the buy orders/sell orders/stops etc, and all the details i need to learn about (or things/risks i need to learn to avoid  as a buy and hold investor), i am sure if i read a book, talk on the phone with a service person and study on line, i can gain the confidence i need to be comfortable with them, its just more complex than the "buy an index" investing that i have read books about studied on line and already feel comfortable with...

there is a urge to "keep it simple" that a pp friendly VUSTX type fund would fill.

since one doesn't exist, when the time comes for me to invest i will go with ETF's or buy LT, i won't let a little complexity or need to study stop me from building a pp or force me to use something that wouldn't work..

MediumTex wrote: Be careful with VUSTX.  It's not well-suited to the overall PP strategy and it won't protect you the way TLT, EDV or individual bonds will.

Using VUSTX rather than longer dated bonds in a PP setting actually increases risk.

I wonder if it's possible to substitute a mix of VUSTX and EDV for TLT. Do you think it would be a good replacement?

BTW, I just noticed that this is the VP thread, but your reply regarding VUSTX sounds to be PP-related. Do you think your suggestion is true for both portfolio types?

foglifter wrote:

MediumTex wrote: Be careful with VUSTX.  It's not well-suited to the overall PP strategy and it won't protect you the way TLT, EDV or individual bonds will.

Using VUSTX rather than longer dated bonds in a PP setting actually increases risk.

I wonder if it's possible to substitute a mix of VUSTX and EDV for TLT. Do you think it would be a good replacement?

BTW, I just noticed that this is the VP thread, but your reply regarding VUSTX sounds to be PP-related. Do you think your suggestion is true for both portfolio types?

50% VUSTX/50% EDV is, IMHO, a suitable approach to the LT bond potion of the PP, though it begins to look a lot like a solution that is more complicated than the problem.

With respect to the PP/VP question, I'm not sure what your VP goals are, so I'm not sure what type of bond exposure would be appropriate.

MediumTex wrote:

foglifter wrote: I wonder if it's possible to substitute a mix of VUSTX and EDV for TLT. Do you think it would be a good replacement?

50% VUSTX/50% EDV is, IMHO, a suitable approach to the LT bond potion of the PP, though it begins to look a lot like a solution that is more complicated than the problem.

As you might guess the root of the question is I'm trying to make the best of my lousy 401(k) investment options. In fact it's even worse - there is no Vanguard funds available, all I have is Fidelity Total Bond (FTBFX) and Fidelity ST Bond (FSHBX). The idea is to buy some EDV in my IRA so the overall bond allocation is as close as possible to TLT.

Is the 50/50 allocation just your rough guess or something calculated?

foglifter wrote: Is the 50/50 allocation just your rough guess or something calculated?

It's my rough guess, but I'll bet it's very close to what 100% TLT would give you.  If it's different, it's not by much.

In my view, EDV is a great way of taking an intermediate term bond fund (which is what most 401(k) plans offer) and using it to fill out the LT treasury part of the PP.

Obviously, this approach is less than ideal, but if you have significant assets in your 401(k) account and don't have access to a brokerage window, you have to do the best you can with what you've got.

On a somewhat related note, I thought it was comical earlier this year when everyone got all worked up about the government forcing everyone to invest their 401(k) accounts in long term government bonds.  For some reason, no one seemed to notice that virtually no 401(k) plan provides ANY type of treasury fund (short term or long term), and that for a balanced portfolio such an option would actually reduce risk.  It seems to me that the government could simply mandate that 401(k) plans offer a treasury fund OPTION if it wanted to use 401(k) plans as a way of selling more debt.  No confiscation needed.

The "taking over your 401(k) accounts" concern is sort of like the "government is going to take my gold" argument--there is simply no point in the government seizing an asset when it can just buy it by printing more fiat currency.