What are you buying?
Anything new seeing that nothing that did well last year in terms of funds is working? I have a few things working but wanted to see if the group had any thoughts, particularly for retired clients needing income.
It depends on what you're expecting for the next year or so. For example, I expect a further deterioration of the dollar's value, high "real" inflation of 10%+, more reckless government spending, etc. In essence, more of the same ole, same ole.
For retirees, I'm focusing on high quality foreign: bonds & dividend-paying stocks. It doesn't mean that I'm dumping all their dollars overseas, just increasing the allocation to these sectors. Same for precious metal funds, particularly those that pay a good dividend. For those clients averse to foreign stocks & bonds, U.S. corporations with significant overseas operations are good substitutes.
Bottomline, I'm sticking with plain vanilla investments, with little or no counterparty risk involved, i.e., no derivatives.
What precious metal investments pay a divy of any amount? I am curious as I never see they paying anything. Thanks! I am putting some in some energy trusts (mostly US, not Canadian yet) and some agency mortgage reits.
By precious metal funds, I mean funds that buy the "stock" of companies that own and/or mine the stuff. You might check into Franklin's Gold & Precious Metal Fund "FKRCX". Morningstar had given it 4 stars, last I checked. It had an income disribution of $1.97 and a closing NAV price of $39.02.
The link below will give you all the details:
As always and with any post, do your own due diligence. By doing so, you'll come to own the information you uncover; and hence, will be able to make a more convincing case to your clients and/or prospects.
I've owned that fund before and I don't recall income. I'll check it out but most of those miners seem to plow capital back into the business. I am not doubting it, I am just suprised.
I don't think anyone said anything about using Morningstar in presentations, did they? It's good for us brokers as one tool.
I don't really make bets on where the market is headed, etc, so I leave it to the professionals.
I typically use a JH Funds Lifestyle, a Vanguard LifeStrategy, and about 0-10% in the Ivy Asset Strategy Fund as my model (for both retirement savings and income). Basically, you got the managed asset allocation, passive (mostly) asset allocation, and tactical allocation from those three funds. If the clients have saved enough early on, than 60/40 usually produces enough appreciation (both growth and income) to cover their needs. If they didn't, its decision time for the client as to whether or not they want to change their retirement lifestyle or change their risk tolerance. Not the easiest conversation to have at first, but I always tell my clients that I'll always give it to them straight, whether its good or bad news. Most seem to appreciate that.
Of course, a lot depends on the client. Some clients I have two to three years worth of income needs in a money market (aka a separate bucket) as it helps them sleep at night. Others aren't as concerned and remain fully invested and just take income distributions monthly, quarterly, annually, etc.
I've found these models allow me to do what I do best, and thats be available to my clients and their needs.
Again, not saying its the only way, just the way I go about my business.
I am using IVY also up to 20%
10%Canadian & USA Income trusts
DFA 60/40 Global for te rest of the allocation
Can you describe the DFA fund(s)? I've heard very little about them.
It's not surprising that you may not have heard much about them unless you use passive, no-load strategies. I don't claim to be anything approaching an expert on them, but to get you in the right ballpark here is what I would say.
DFA, a.k.a. Dimensional Fund Advisors, is a well respected fund family run by a host of big name finance academics (Merton, Scholes, Fama, Ibbotson, French, et. al.). They've had relatively strong performance and have attracted a loyal (some would say almost cult-like) following among some. They are big believers in passive, low cost investing using what amounts to custom or enhanced indexes. Some would say their small outperfromance is primarily due to their lower expenses, a la a cheap index fund. They also will not allow an advisor to sell any of their funds unless they have been 'approved,' so smaller advisors who really want to sell them must go through an approved advisor and incur the added layer of fees that entails.
DFA has scores of advisors - especially in the independent RIA channel - who swear by them. Some use them exclusively. I've even heard them referred to as "the anti- Long Term Capital Management," which is the height of irony considering that at least two of the key board members from LTCM are ALSO board members of DFA (Robert Merton and Myron Scholes). I am NOT implying that the STRATEGIES used by DFA are anything close to those used by LTCM, but they share the same intellectual heritage and arrogance. If investment success really was driven by pure intellect, these guys would clearly have an alpha of about 5,000.
They are certainly worth learning more about, if only for your professional education. Even if you don't use them you will likely run into prospects who do use them, so it would be helpful to know a little of what they are about.
I thought that's who they were. There was an article in a recent broker mag about this indy rep who used them. Ivy seems to be mentioned a lot more lately. I've only been buying it for a couple years. Lots of good funds have reopened (First Eagle comes to mind) so I am not too concerned about lack of good managers out there.
When going up against DFA funds I've found them to be on value side of investors. Unless the individual has a rep who has explained the DFA strategy, that acct almost always been ACAT'd over due to bad performance in the past 12 months & a promise to stay more in touch.
I'm still cautious, but I'm edging clients back up to their personal benchmarks. In Dec. most clients were 15% underweighted in stocks(70/30's were 55/45's), now they're at a 10% underweight. As we're putting more in stocks we're emphasizing growth stocks. We have a 2x in Int'l bonds than we have in the past, but I don't know how long this will be a good trade. If other central banks decrease rates I may have unwind that.
USO, BRK, commodities
short financials, homebuilders, above-discount retailers
P/E will continue to contract.
Bondguy - good idea. Given the bond insurer issues do we buy high-yield muni's here given they've already been beat up and have a very good yield, or do you still prefer the higher quality stuff?
You've just described a hedge fund which I wouldn't do own my own. However, in my own accout I am doing similar type of stuff. Not the shorting but essentially betting that Fed Funds has to drop. I've been buying munis for over a year and getting killed but that story, like a broken watch, will be right at some time down the road. Ivy is an ok way to have a semi hedged emerging market/gold position.