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Fund ideas for rational investing portfolio
Old 09-23-2007, 05:31 PM   #1
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Fund ideas for rational investing portfolio

I am trying to create a portfolio based on the rational investing portfolio model.

So far It looks like that:
28% US large caps with value tilt
9% US small caps
14% foreign large caps - developed markets
6% foreign large caps - emerging markets
6% REITs
5% money market fund
11% International bonds
21% US intermediate bonds (mix of treasuires, corporate, and high yield bonds)

I have a few asset classes missing in my portfolio right now: foreign small caps, and commodities.
But after much research I have not been able to find a foreign small cap fund I like. Many of them are closed to new investors (like VG Int'l explorer, which would be my favorite candidate), others require high initial investment. Do you have any suggestion?
Also, I would like to invest about 7% of my portfolio in commodities/energy. I like the Vanguard Energy fund, but because of the high initial investment required, it's out of my reach right now. I would like to find a well rounded commodity fund (no load, and with an initial investment of ~3-5K) which has a tilt toward oil/gas. I hear many people like PCRIX, but again, the initial investment is too high for me, though I was wondering if what looks like its sibling PCRDX could work for me (it's offered with NTF, so I could DCA into that one).
I am not looking at ETFs right now because I will DCA into those funds for many years to come.

Thanks for your help.
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Old 09-24-2007, 12:40 PM   #2
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I use Wisdom Tree International Small Cap Dividend (DLS).

IIR, it is ex-North America so get your Canadian exposure elsewhere.

Like you, I had trouble settling on what to buy in the Int. Small Cap arena. This seemed as good as anything out there. But I only recently acquired it.
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Old 09-24-2007, 12:50 PM   #3
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I think your only realistic choices for commodities are PCRDX or DJP. If you would be holding them in a taxable account, DJP would be worth paying the commissions.
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Old 09-24-2007, 03:25 PM   #4
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[quote=FIREdreamer;558985]
Also, I would like to invest about 7% of my portfolio in commodities/energy. I like the Vanguard Energy fund, but because of the high initial investment required, it's out of my reach right now. I would like to find a well rounded commodity fund (no load, and with an initial investment of ~3-5K) which has a tilt toward oil/gas. I hear many people like PCRIX, but again, the initial investment is too high for me, though I was wondering if what looks like its sibling PCRDX could work for me (it's offered with NTF, so I could DCA into that one).
I am not looking at ETFs right now because I will DCA into those funds for many years to come.
quote]

PCRDX & PCRIX are very similar, but PCRDX is twice the annual expense. I guess Pimco has to get paid to work with all those perky DCA investors. PCRIX uses TIPS as collateral against the futures contracts providing a nice lift against inflation as well. I'm not certain about PCRDX, but it probably does also. Your selection looks like a nice diversification of investments.
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Old 09-24-2007, 03:34 PM   #5
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Brewer, yes it would be for a taxable account. My tax-deferred accounts are already full of bonds, REITs and managed funds.
I like PCRDX. The expense ratio is a bit high for my taste, but I figure that in a few years, when the balance for this fund reaches 25K, I can always switch to PCRIX or better yet the Vanguard Energy fund. Two other things bother me as well: a large portion of the fund is invested in TIPs (which would provide some diversification but make the fund not so tax efficient), and less then 1/3 of the fund is invested in energy.
DJP seems like a good choice too, though I must say that I am a bit uncomfortable with their investment strategy based on exchange-traded notes and it seems that the tax treatments of those notes is not well defined either which could make it a headache at tax time.

Bosco, I can't find much information about DLS. (portfolio composition, geographical diversification, etc...). It seems to be a fairly new investment, it has a low trading volume, and I would have to pay transcation fees everytime I buy into it, so at first glance I can't say I'm in love with it. However, I'll keep looking into it and won't rule it out yet. Investments in that asset class are so hard to find, that I will have to keep an open mind about it.


Thanks for your ideas, and keep them coming!
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Old 09-24-2007, 03:38 PM   #6
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DJP is the same thing as PCRIX/PCRDX. Two differences: DJP collateralizes with t bills rather than TIPS, and DJP is far, far more tax efficient.
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Old 09-24-2007, 03:51 PM   #7
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Quote:
DJP is the same thing as PCRIX/PCRDX. Two differences: DJP collateralizes with t bills rather than TIPS, and DJP is far, far more tax efficient.
I didn't realize that DJP was the same thing as PCRIX/PCRDX. This new bit of information makes DJP very attractive (especially if it is far more tax efficient as PCRDX). However, should I be worried that this fund's returns being tied to Barclay's financial health? I know that Barclay is a big financial institution but with that subprime business still lurking on banks' balance sheets, should I be worried at all about it?
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Old 09-24-2007, 03:57 PM   #8
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Quote:
Originally Posted by FIREdreamer View Post
I didn't realize that DJP was the same thing as PCRIX/PCRDX. This new bit of information makes DJP very attractive (especially if it is far more tax efficient as PCRDX). However, should I be worried that this fund's returns being tied to Barclay's financial health? I know that Barclay is a big financial institution but with that subprime business still lurking on banks' balance sheets, should I be worried at all about it?
You would certainly have to be comfy with taking credit risk to Barclay's. Its not something that keeps me up at night.
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Old 09-24-2007, 04:03 PM   #9
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Thanks Brewer, I think I would be comfortable with taking a credit risk with a bank like Barclay's, though I am going to do a bit more research on that before taking the plunge.
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Old 09-24-2007, 06:11 PM   #10
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Originally Posted by FIREdreamer View Post
Thanks Brewer, I think I would be comfortable with taking a credit risk with a bank like Barclay's, though I am going to do a bit more research on that before taking the plunge.

Interesting article on the subject.

http://www.andrewtobias.com/newcolumns/070911.html

W
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Old 09-24-2007, 06:31 PM   #11
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fyi - in addition to DLS for int'l small cap, there is also GWX , see ETFs that give you Foreign small cap exposure. iShares is also coming out with (1) MSCI EAFE Small Cap Index Fund, (2) MSCI Emerging Markets Small Cap Fund, (3) MSCI Japan Small Cap Fund.

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Old 09-24-2007, 06:57 PM   #12
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ats5g,

GWX seems interesting. It is well diversified and it works like an index fund (passive management). The fees are very reasonable. I also like the fact it focuses on developed countries only. I'll have to take a second look, but it looks very promising.
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Old 09-24-2007, 07:02 PM   #13
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Wally,

good article and completely relevent to our conversation. It underscores what I have been poundering, i.e. with DJP you have to put your faith in Barclay's credit worthiness as much as you have to put your faith in higher commodity prices in the future. But with a AA rating, I feel pretty good about it.
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Old 09-25-2007, 09:43 AM   #14
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Personally, I might forgo REITs in favor of CCF's [PCRIX] in tax deferred if I was running out of room. IMO, CCF's are better diversifiers of stocks and bonds than REITs. Also, finding a low cost int bond fund is tough. The cheapest one I've found is PFUIX.

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Old 09-25-2007, 10:00 AM   #15
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PFUIX is certainly cheap, but BEGBX is reasonable and GIM is reasonable if you can snipe it at a discount.
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Old 09-25-2007, 10:29 AM   #16
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PRIDX for international small cap
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Old 09-25-2007, 10:46 AM   #17
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PFUIX is certainly cheap, but BEGBX is reasonable and GIM is reasonable if you can snipe it at a discount.
I guess that depends on what you think is reasonable. RPIBX looks to be as cheap as BEGBX.
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Old 09-25-2007, 11:55 AM   #18
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Personally, I might forgo REITs in favor of CCF's [PCRIX] in tax deferred if I was running out of room. IMO, CCF's are better diversifiers of stocks and bonds than REITs. Also, finding a low cost int bond fund is tough. The cheapest one I've found is PFUIX.
I still want to own REITs because they represent two important asset classes in my portfolio (residential and commercial RE). My approach to investment is not only to diversify from stocks, but it is to own a piece of each major asset class out there. RE is definitely one of them. However I understand that, as I add new funds, I may have to rearrange my portfolio a bit to keep it as tax efficient as possible and if that means moving the REITs to my taxable account, so be it. But it looks like with DJP I wouldn't have to.

I already have an Int'l bond fund I am happy with (LSGLX). Not the cheapest, but a strong contender in my opinion.

Quote:
PRIDX for international small cap
Looks like an interesting option, though I must say GWX is still my favorite at that point.
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Old 09-25-2007, 09:39 PM   #19
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Firedreamer,

Instead of investing directly in commodities consider a fund such as the T. Rowe Price New Era fund (PRNEX) that invests in the companies in the natural resource area. Last time I checked it was heavily weighted toward energy, around 65%.

For your international bond sector you should consider an unhedged fund so the US $ weakness can boost your return. Take a look at the American Century International Bond Fund (BEGBX).

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Old 09-26-2007, 09:00 AM   #20
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For your international bond sector you should consider an unhedged fund so the US $ weakness can boost your return. Take a look at the American Century International Bond Fund (BEGBX).
It was my understanding that LSGLX was unhedged, I am incorrect?
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