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Oct 10, 2005 1:33 pm
Oct 10, 2005 2:31 pm

95% in one asset class! Now that is scary!


A share or C shares! Wow did you ever recieve any training!


I will agree you need a lot of help !   

Oct 10, 2005 4:07 pm

good luck in arbitration....

Oct 10, 2005 10:27 pm

go with the A's

Oct 10, 2005 10:42 pm
Oct 11, 2005 10:59 am
radernation-1:

[/quote]

Oct 11, 2005 11:01 am
jamesbond:

good luck in arbitration....

Oct 11, 2005 6:46 pm

Did they teach you about Asset Allocation?

Oct 11, 2005 11:17 pm
Oct 11, 2005 11:18 pm
Oct 11, 2005 11:38 pm

I think when silver and gold go tank, you're screwed.  As for the bonds..... consider Individual Bonds or a good basket of ETFs.

Oct 12, 2005 4:44 pm

Muni bonds is one area where you don't need to use funds. Munis are a straight forward investment that don't need management. Better pricing is usually available for blocks above 100K. Best pricing for blocks above 1 million. However, buying 5 bonds can still be a better deal than some funds. That said, muni funds from Franklin, Eaton Vance, Van Kampen, and Oppenheimer won't leave you with splaining to do down the road. On the conservative side look at Franklin's state specific funds. For the more aggresive investor, the Opco Rochester Nat'l Muni and Van Kampen's Strategic muni are places to look.


A shares are usually the way to go with muni funds as it is unlikely that the client will ever have to sell. A shares also reduce the Management fees and max out the return to the client. Of course you need to review the best share class on a case by case basis.

Oct 12, 2005 5:11 pm
radernation-1:


Oct 12, 2005 6:41 pm

Muni bonds is one area where you don't need to use funds


What about the danger of owning individual bonds in a rising interest rate environment?  Unless the client has adequate assets to build a bond ladder (at the very least 100K) they are going to be holding sub par, and sub coupon rate bonds that they will not be able to sell without taking a bath and/or be forced to hold the bonds for a very long time.  Even if they don't need the initial investment back and can wait until call or maturity, clients still don't like to see a monthly statment with a big negative amount in their bonds.  Granted there is no guarantee of principal return or interest rate in a bond fund, but there is liquidity and the chance to have a rising interest rate as newer bonds are added to the mix.  Selling the interest rate on bonds and the the lower cost to buy the bonds is only a part of the dynamics of owning bonds


I am very leery right now of individual bonds for the average investor, unless they are very short term and are part of a much larger managed portfolio.   I have many clients who have bonds that we bought over 5 years ago and they are now reaching call dates. I'm sure that many will be called as the coupons are 8% or better.   I am going to suggest bond funds or a blended bond/stock fund if the income is still  a need.   Oppenheimer and Franklin are some that I like also there are some ETF bond funds.  But be careful of those as many are leveraged.

Oct 13, 2005 3:36 pm

 Bond funds are an excellent intrument for your clients if you are not a seasoned bond buyer.  Basically you are paying the managers of these funds to manage a portoflio for you.  No need to pay the ongoing fees if you have the knowledge necessary to build your own porfolio.  Build your own bond fund with a professional selection of individual securities.  I would recomend a short laddered portfolio with a low duration.  Your clients will escape the ongoing fees and you will look a little better in their eyes.  There are many firms out there that will do this for you.  Of course you will pay for the mark ups but thats a one time fee and will not reduce the overall yield like the funds will.  Good luck 

Oct 13, 2005 11:00 pm
babbling looney:

Muni bonds is one area where you don't need to use funds


What about the danger of owning individual bonds in a rising interest rate environment?  Unless the client has adequate assets to build a bond ladder (at the very least 100K) they are going to be holding sub par, and sub coupon rate bonds that they will not be able to sell without taking a bath and/or be forced to hold the bonds for a very long time.  Even if they don't need the initial investment back and can wait until call or maturity, clients still don't like to see a monthly statment with a big negative amount in their bonds.  Granted there is no guarantee of principal return or interest rate in a bond fund, but there is liquidity and the chance to have a rising interest rate as newer bonds are added to the mix.  Selling the interest rate on bonds and the the lower cost to buy the bonds is only a part of the dynamics of owning bonds


I am very leery right now of individual bonds for the average investor, unless they are very short term and are part of a much larger managed portfolio.   I have many clients who have bonds that we bought over 5 years ago and they are now reaching call dates. I'm sure that many will be called as the coupons are 8% or better.   I am going to suggest bond funds or a blended bond/stock fund if the income is still  a need.   Oppenheimer and Franklin are some that I like also there are some ETF bond funds.  But be careful of those as many are leveraged.



Looney-


Have you considered the Federated Muni and Stock Advantage Fund?  It is a balanced fund, but the bond portion of the fund is made of munis, both high quality and high yield.  None of the munis are subject to AMT, and all of the equities qualify for the lower dividend tax rate.  The fund yields around 4% at NAV, pays monthly, and the clients nets about 90% of that yield.  Performance has been outstanding since inception (less than 2 years).  I know there is not a lot of track record, but I like the idea.

Oct 14, 2005 11:18 am

Sooth...


Thanks. I will look into that fund.  

Oct 16, 2005 1:13 pm
Oct 19, 2005 11:38 am
babbling looney:

Muni bonds is one area where you don't need to use funds


What about the danger of owning individual bonds in a rising interest rate environment?  Unless the client has adequate assets to build a bond ladder (at the very least 100K) they are going to be holding sub par, and sub coupon rate bonds that they will not be able to sell without taking a bath and/or be forced to hold the bonds for a very long time.  Even if they don't need the initial investment back and can wait until call or maturity, clients still don't like to see a monthly statment with a big negative amount in their bonds.  Granted there is no guarantee of principal return or interest rate in a bond fund, but there is liquidity and the chance to have a rising interest rate as newer bonds are added to the mix.  Selling the interest rate on bonds and the the lower cost to buy the bonds is only a part of the dynamics of owning bonds


I am very leery right now of individual bonds for the average investor, unless they are very short term and are part of a much larger managed portfolio.   I have many clients who have bonds that we bought over 5 years ago and they are now reaching call dates. I'm sure that many will be called as the coupons are 8% or better.   I am going to suggest bond funds or a blended bond/stock fund if the income is still  a need.   Oppenheimer and Franklin are some that I like also there are some ETF bond funds.  But be careful of those as many are leveraged.



I don't think I said buy long term munis. I did write that funds MAY not be the best deal for the client. This is largely because the fees charged by the funds eat up such a large portion of the income. Same with taxable income funds. As advisors it's up to each of us to try to advise our clients as to how to handle interest rates. My own take is to buy the maximum coupon available matched to the client's risk tolerance. This means buying long term bonds all the time. I do this because buying muni bonds is about one thing, INCOME. When buying munis we are not trying to manage for total return or to balance a risk spectrum. Most advisors ladder because the direction of interest rates is unknowable and they don't want to lock a client into a low rate. I maximize income for exactly the same reason. Laddering trades a sure thing, today's coupon payment, for a what if. The client comes out ahead with laddering ONLY if rates increase. Which, explains why laddering has been the WRONG strategy for better than 20 years, costing clients billions of dollars in lost income. Clients who ladder put themselves in a position of NEEDING an interest rate increase to make up for lost income. The longer they go without one, the bigger the increase NEEDS to be to match the yearly and total income of the long term muni buyer. The numbers are unknowable. Of course the long term muni buyers bonds are worth less if rates do increase. Usually not an issue as clients spend income, not principal. We hold to maturity. Again, it's about maximizing income.


Muni funds have had a steadily decreasing income stream over the last 20 years. Most funds are managed for total return, not maximum income. Opco's Rochester National is an exception to this(this fund has some problems right now). Managing for total return assumes the manager will guess right, not always the case. Many. if not most of these funds have not recovered their principal loss from 94 and 98(Wrong guess).


If client is buying munis for income and not as part of an allocation strategy then go long term and lock in the highest possible income. If 4.5% tax free is the worst investment you ever buy for a client then you're in for a very successful relationship.


if rates go up GOOD NEWS! Buy more!

Oct 19, 2005 12:09 pm
SonnyClips:

TJC45,

I have heard that the Franklin State Specific Fund was good. Is there an advantage to muni funds other than the obvious like offseting risk of higher yielding higher risk bonds by purchasing them in the form of a fund or just a more conservative investment. Is there more reasons one might have that I'm just not seeing.

Best,
Sonny


You're not missing much. Funds are an excellent way to get high yield exposure. Monthly income is another reason for going the fund route. Some clients can't handle the six month income cycle, even if we buy bonds to cover all the months. As for adding value, that's part of the pitch not part of the reality. An example is the Eaton Vance National Muni fund. This is an excellent fund, yet a $100,000 investment made 20 years ago(more or less) is worth about $101500 today. That's better than a maturing 100k bond, but the income from the fund dropped from 8% to 6% in the first ten years. Not so sure that lost income added any value. Also,there were plenty of opportunities over the years for these guys to screw up and cost the client big time. They didn't, but why exspose the client to the risk? it's one thing to lose value when rates increase. it's another to never get it back. Something that needs to be reviewed before buying a fund. How do they do when the wheels fall off, like what happened in 94 or 98/99? Can they get the lost principal back? And if so at what cost to income? Non issues with a buy and hold long term muni bond income strategy.