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Old 02-26-2012, 02:00 PM   #21
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Originally Posted by frequenttraveler View Post
Not sure this is a general question or specific to this poster, so I will take a quick shot at it.

First, man have you taken a whack on these funds. a 32% loss is just staggering in this short of a time. At the least I would CAN this broker and do it yourself.
1. Keep CAIBX. I HATE load funds, yet this one has been decent; its standard deviation is respectably low (too high volatility can scare folks out of funds they should stay in...a smoother ride can keep an investor on the bus). In addition, it has had a pretty good history of growth in its income stream...again, a positive aspect.
2. Dump the other two. Take the losses and put half the proceeds in...I am ready to get flamed...bond funds. There are tons of them available that are so-called "multi-sector" bond funds that have very strong yields and keep their "duration" low. Look for a duration of LESS than the % yield.
3. Put the other half in a US fund like a Vanguard Wellington, which has again a somewhat balanced portfolio. I really wanted to say Vanguard Wellesley, but Wellesley is conservative and not sure whether it's too tame for you.

You will have capital losses for YEARS unless you get some cap gains down the road.
And again, dump that so-called advisor. Sticking you in three fairly similar world funds is bad bad bad!

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Where did you see a 32% loss? He said he sold some.

Let me clarify the 32% loss. I am probably even (give or take a percent or two) with the 3 funds I still have since I bought them back in mid 2006. Of course that is with dividends and gains rolling back in. I did take a fairly big hit when I cashed out about $30K - fundamental investors fund totally and about half of another fund (I canít remember the name or symbol of that one) . The remaining half of the second one I just moved across the three I kept. The cash outs were at different points in time during the 2009 and 2010 period so that is why I picked up a fair amount of Capital Loss. So maybe it would be simpler to say I started with $70K and am still at about $70K.
I did shift some shares to CAIBX from the other two (not a lot, about $5K total last summer (2011). Anyway I appreciate the input from everybody. I was just very disappointed that these funds didnít do much in 2011 although they have done better the first 2 months of this year.
BTW Ė never went to see that broker/advisor again (you get what you pay for and I paid nothing and he made money, and I lost money).
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Old 02-26-2012, 03:53 PM   #22
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Originally Posted by LOL! View Post
I would roll the money into my asset allocation of about 30% US stocks, 30% foreign stocks, 30% bonds, and 10% commercial real state. Specific funds:

VTI, VBR, VXUS, VSS, BND, VCSH. Very simple. Be sure to be tax-efficient in the fund locations. Also these ETFs are just share classes of Vanguard funds, so one can use mutual funds if they do not like ETFs.

See also my market timing newsletter on this forum.
You don't get to use your asset allocation. The OP said this is only 8% of his portfolio, so you need to match the allocation of what you are taking out otherwise you might unbalance his AA.

All three of these are either international or foreign. So the question becomes: What index funds would you have used for this part of the OP's AA?
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Old 02-26-2012, 04:27 PM   #23
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Let me clarify the 32% loss. I am probably even (give or take a percent or two) with the 3 funds I still have since I bought them back in mid 2006. Of course that is with dividends and gains rolling back in. I did take a fairly big hit when I cashed out about $30K - fundamental investors fund totally and about half of another fund (I can’t remember the name or symbol of that one) . The remaining half of the second one I just moved across the three I kept. The cash outs were at different points in time during the 2009 and 2010 period so that is why I picked up a fair amount of Capital Loss. So maybe it would be simpler to say I started with $70K and am still at about $70K.
I did shift some shares to CAIBX from the other two (not a lot, about $5K total last summer (2011). Anyway I appreciate the input from everybody. I was just very disappointed that these funds didn’t do much in 2011 although they have done better the first 2 months of this year.
BTW – never went to see that broker/advisor again (you get what you pay for and I paid nothing and he made money, and I lost money).
Thanks for the clarification, prototype.

I am not trying to be ugly here, but you bought at a high (or nearly at a high), then sold a portion of the holding after a severe market dip things started going down in 2007 then crashed in '08 and '09. Those sells locked in a loss. If you had not sold, you could have ridden it back up, and you would be a little ahead now. It is what it is; not trying to be judgemental, just the facts. And we don't know why you sold, but we don't need to know.

2011 was not a very good year for international or foreign, and you noticed, and are looking at what to do. I believe in another post you have noticed that things may be looking better YTD.

While I would not pay a load, and you could have done better (easy to say on Monday morning after the game), these funds are certainly not dogs. It could have been worse.

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Thanks for all the responses, I think I will do nothing for now and revisit/rethink this one in about 3 or 4 months.
This is a very reasonable, cool headed thing to do if you want this exposure to international.

You got caught in the 08/09 crash. I don't know how much difference a fraction of a percentage point difference in expense ratio would have made. Everything got severely beat down.
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Old 02-26-2012, 04:34 PM   #24
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One more thing: I really do not understand how anybody can seriously compare expense ratios of index funds to expense ratios of actively managed funds. The ER to ER comparison is certainly valid if you are comparing one index fund to another index fund that attempts to follow the same index, but outside that, an ER to ER comparison is really apples to oranges.
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Old 02-26-2012, 07:08 PM   #25
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The ER to ER comparison is certainly valid if you are comparing one index fund to another index fund that attempts to follow the same index, but outside that, an ER to ER comparison is really apples to oranges.
Well, when an index fund does badly at a certain ER, you shrug your shoulders and say "Darn, the market had a bad year."

When an actively-managed fund does badly at 2x ER, you let loose a few pithy curses and fire the manager. Or at the very least, you start a thread on a discussion board to try do decide what to do about it.
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Old 02-26-2012, 07:44 PM   #26
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You don't get to use your asset allocation. The OP said this is only 8% of his portfolio, so you need to match the allocation of what you are taking out otherwise you might unbalance his AA.

All three of these are either international or foreign. So the question becomes: What index funds would you have used for this part of the OP's AA?
I would have the OP change to my asset allocation for their entire portfolio.

One can easily see which of the ETFs I recommended are foreign equities, so one can use those to substitute for foreign actively-managed funds. The other ETFs I recommended fit nicely into other desirable asset classes, so there should be no problem figuring any of this out.
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Old 02-26-2012, 08:19 PM   #27
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I think this is a standard trick of advisors who push American funds: Make sure to divide up the assets into different funds so that the customer pays more in front-end loads and avoids the breakpoints that give lower upfront loads when one has enough in a single fund.
Is this true? IIRC, DW bought AMFunds years ago - spread across several funds - and the load was based on the total break point (not based on a break point for each fund). Maybe that has changed. I believe I did the same thing when I was with Oppenheimer. It was the total invested (within some time frame) IIRC. Also, IIRC, the regulators got after some of the funds for not allowing breaks based on total investment within (maybe) a year. Again, I could be wrong. No longer use load funds.
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Old 02-27-2012, 07:56 AM   #28
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Is this true? IIRC, DW bought AMFunds years ago - spread across several funds - and the load was based on the total break point (not based on a break point for each fund). Maybe that has changed. I believe I did the same thing when I was with Oppenheimer. It was the total invested (within some time frame) IIRC. Also, IIRC, the regulators got after some of the funds for not allowing breaks based on total investment within (maybe) a year. Again, I could be wrong. No longer use load funds.
You are correct. The load for American Funds is based on the amount you have collectively invested across the fund family in all of the accounts for your immediate family. You can move money from one fund in the family to another without load - you can even cash out shares from a fund and reinvest within 90 days without load on the new shares.
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Old 02-27-2012, 12:06 PM   #29
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You are correct. The load for American Funds is based on the amount you have collectively invested across the fund family in all of the accounts for your immediate family. You can move money from one fund in the family to another without load - you can even cash out shares from a fund and reinvest within 90 days without load on the new shares.
+1

I have done this back when I used front-loaded funds, although not American Funds. I was made aware of it by one of those "evil" advisors. It is generically called aggregation.
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Old 02-27-2012, 12:11 PM   #30
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I would have the OP change to my asset allocation for their entire portfolio.

One can easily see which of the ETFs I recommended are foreign equities, so one can use those to substitute for foreign actively-managed funds. The other ETFs I recommended fit nicely into other desirable asset classes, so there should be no problem figuring any of this out.
He was asking for help with only the 8% international.

Are you now saying his whole allocation is wrong?
Do you even know his current allocation or objectives?

How did your international allocation perform in 2011 compared to the OP's?
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Old 02-27-2012, 12:19 PM   #31
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Well, when an index fund does badly at a certain ER, you shrug your shoulders and say "Darn, the market had a bad year."

When an actively-managed fund does badly at 2x ER, you let loose a few pithy curses and fire the manager. Or at the very least, you start a thread on a discussion board to try do decide what to do about it.
So, given the timing of events (getting in in 2006, going through the crash of 08/09, selling about 30% of it in 2009 and 2010, and enduring 2011's international downturn), which international index funds would have served the OP better for this particular 8% of the portfolio?

How much better?

I guess I am looking for specifics, not the old "index funds are just better because they are just better" line.
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Old 02-27-2012, 11:10 PM   #32
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So, given the timing of events (getting in in 2006, going through the crash of 08/09, selling about 30% of it in 2009 and 2010, and enduring 2011's international downturn), which international index funds would have served the OP better for this particular 8% of the portfolio?
How much better?
I guess I am looking for specifics, not the old "index funds are just better because they are just better" line.
Well, specifically, I meant that passive index funds are better than actively managed funds. Maybe not every year, but over 5-10 years.

Then there's the whole issue of manager switches and fund bloat. Even Bill Miller and Peter Lynch got nailed by fund bloat. Heck, even Warren Buffett is getting killed by it. That never happens to index funds or index ETFs.

As long as you're looking for specifics, here's another one: "8%"? Why bother? Why not 6% or 9.342%? None of those numbers will really move the needle on either total return nor on volatility. Step it up to at least 20%.

I'd say to split the stock allocation three ways: a large-cap blue-chip dividend paying ETF, a small-cap value one, and an international one. Something like... oh, for example, DVY, IJS, and EFV.

Yeah, they sucked during 2008-09. But the other perspective is that it was an awesome time to be dollar-cost-averaging down and rebalancing as you go.
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Old 02-28-2012, 07:05 AM   #33
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He was asking for help with only the 8% international.

Are you now saying his whole allocation is wrong?
Do you even know his current allocation or objectives?

How did your international allocation perform in 2011 compared to the OP's?
If one plugs in the 3 ticker symbols and amounts given in the OP into a Morningstar instant X-ray analysis, they have the following features:
22% US stocks (yep, not all foreign)
60% Foreign stocks
7.5% Cash
10.5% bonds and other

The equities are all large cap with hardly any mid-cap and no small-cap.

So to match this allocation using the ETFs I suggested earlier would be about 60% VXUS, 22% VTI, 10.5% BND, and 7.5% VCSH.
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Old 02-28-2012, 01:50 PM   #34
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The ER to ER comparison is certainly valid if you are comparing one index fund to another index fund that attempts to follow the same index, but outside that, an ER to ER comparison is really apples to oranges.
Well, you have to understand that most of the folks on this board have 3-5 years of living expenses safely tucked away so market fluctuaion is of little concern.

I think a balance of index funds or ETFs and also some actively managed funds works. At least, it has for my portfolio.........
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Old 02-28-2012, 02:37 PM   #35
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Well, specifically, I meant that passive index funds are better than actively managed funds. Maybe not every year, but over 5-10 years.
OK, it's starting to make sense. Index funds are always better than actively managed funds . . . except when they aren't. They are better because, well, they are better.

Take a look at five and ten year performance of the three subject funds (CAIBX, CWGIX, AEPGX) relative to their indices.

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As long as you're looking for specifics, here's another one: "8%"? Why bother? Why not 6% or 9.342%? None of those numbers will really move the needle on either total return nor on volatility. Step it up to at least 20%.
If you go back and read the original post you will see that the OP has concerns with performance of three funds in particular, and these funds are about 8% of his portfolio.

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I'd say to split the stock allocation three ways: a large-cap blue-chip dividend paying ETF, a small-cap value one, and an international one. Something like... oh, for example, DVY, IJS, and EFV.
Easy to say. What if he wanted to retain the international exposure? We don't know what the rest of his portfolio looks like. One could also say he might have done as well in cash.

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Yeah, they sucked during 2008-09. But the other perspective is that it was an awesome time to be dollar-cost-averaging down and rebalancing as you go.
... and water is wet.


Note: I am not anti-index. I own a couple of index funds. But I object to the notion that every index fund is better than every managed fund.

Still waiting to hear what international index fund(s) would have performed better than the three he was in, investing in in 2006, selling about 30% of it in 2009 and 2010.
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Old 02-28-2012, 02:39 PM   #36
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If one plugs in the 3 ticker symbols and amounts given in the OP into a Morningstar instant X-ray analysis, they have the following features:
22% US stocks (yep, not all foreign)
60% Foreign stocks
7.5% Cash
10.5% bonds and other

The equities are all large cap with hardly any mid-cap and no small-cap.

So to match this allocation using the ETFs I suggested earlier would be about 60% VXUS, 22% VTI, 10.5% BND, and 7.5% VCSH.
The OP is concerned with a 1.5% return, so you are going to duplicate it for him. That'll help. If you can trim off 0.5% in expenses you'll get the return all the way up to 2%.
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Old 02-28-2012, 04:31 PM   #37
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MSN Money gives the peer comparison as follows:

CAIBX 1.69% World Allocation 2.22%
CWGIX 1.00% World Stock -1.07%
AEPGX 0.74% Foreign Large Blend -3.64%

While these 3 funds did not give stellar performance, they appear to have performed better than their peers. The last 5 years have not been a happy time for most investors; especially those who bought at or near the peak. The question is - how will these funds perform in the future? If they still fit in your asset allocation plan, I see no problem with them.
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Old 02-28-2012, 04:40 PM   #38
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The OP is concerned with a 1.5% return, so you are going to duplicate it for him. That'll help. If you can trim off 0.5% in expenses you'll get the return all the way up to 2%.
It doesn't matter to me because it ain't my money. However, check out YTD returns of the two portfolios. If it holds, then it's gonna be more than 0.5% difference. And then there are the taxes. Plus the potential tax-loss harvesting and the rebalancing that can make things better.

If you like, keep track of these two portfolios and see what happens.
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Old 02-29-2012, 09:20 AM   #39
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But I object to the notion that every index fund is better than every managed fund.
I have owned FLPSX for a lot of years. There might be a few index funds that ourperformed it but I can't think of any right now........
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Old 02-29-2012, 11:04 AM   #40
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Instead of starting a new thread, let me take this one a bit off topic (I know Iím a newbie here but I figure itís OK since I was the OP). Can anyone suggest a good pay as you go independent financial advisor in the Northern Virginia (FFX or Loudon County) area that has reasonable hourly rates (whatever that is for this area $200 to $250/hour?). I am just not a good DIY type investor. I can monitor things, know when things need to be changed, but never seem to know what changes to make when needed (at best, Iíve batted 50% over the years on investment decisions). I am sure everything I need to know is posted on this site, but it would take me weeks to read it all and educate myself. I think my AA my current allocation is reasonable (Large cap, small cap, international (American funds and some of my 401K), different bond funds, emerging markets, some old $10K I bonds earning a decent return, cash, PMsÖ.) but it needs a lot of tweaks, especially with the specific funds Iím in. So the 8% in the American Funds is kind of the tip of the iceberg. (Current AA summary is about 50% different types of bonds, 35% different types of stocks, 8% cash/MM, 7% PMs).
After reading all the good posts here and on some other threads, I really need to get a sanity check and probably need to have a independent professional assessment done on where I have all my money and what may be some better strategies/funds (not that I really have a strategy of any significance other than need to develop one). I have low to moderate risk tolerance, donít want to be on the internet all day reading financial articles and posts here, checking out funds, and trading. I also do not want someone actively managing my money for me and paying the fees (I guess it is a control issue I have).
Thanks
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