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Old 01-28-2009, 10:10 AM   #21
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I think we have arrived at "I shouldn't invest in things I don't understand". If PTTRX' status as a solid pick depends on the fund manager (per FD's earlier comment), that is not consistent with what I have understood of index funds, and an index fund is what I am looking for. I know very little about derivatives of any kind and do not understand what "futures", or "long" and "short" mean at all. Sounds like time for some more reading.
Not JUST a "fund manager", but Bill Gross. Here's a little info on Mr. Gross: http://en.wikipedia.org/wiki/Bill_Gross_(PIMCO)

PTTRX is the institutional share class of fund. I am not sure whether a small investor can directly buy it. If you can buy that class, there's no front load, and an ER of .43
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Old 01-28-2009, 11:02 AM   #22
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Thanks for the helpful insights. In doing my due diligence on the retail version of the fund, PTTAX, I learned it has a pretty high ER of .90%, which I might swallow given the successful trackrecord of the fund, but, the dealbreaker for me is they charge a load, around 3.5%, which I can't swallow. All in all, I think I'm leaning toward Vanguard Total Bond Maket Index fund as an alternative.
You don't have PTTDX available as an option? That seems to be a retail version of the fund, too -- with no load, and its ER is .75% instead of .90%.
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Old 01-28-2009, 02:48 PM   #23
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Not JUST a "fund manager", but Bill Gross. Here's a little info on Mr. Gross: http://en.wikipedia.org/wiki/Bill_Gross_(PIMCO)

PTTRX is the institutional share class of fund. I am not sure whether a small investor can directly buy it. If you can buy that class, there's no front load, and an ER of .43
It's listed as one of the pre-selected funds available in my 457 plan at work. Maybe it's the institutional version because it is within an employee retirement savings plan?

I mean nothing negative about Mr Gross. He could be the best bond fund manager in the world and I'd still be worried, because this appears to be an actively managed fund, so I can't assume that its return, standard deviation and correlation with other asset classes are similar to those of an index fund. I am looking for an index fund because the standard deviation/return/correlation of the index is what I used in estimating the risk & return of my portfolio as a whole and choosing an asset allocation. I started with apples and am concerned that if I switch to oranges in the middle of the process, the results will not be as expected.

I need to play with my spreadsheets tonight and see how much (if any) change in the ultimate results is produced by variations in the correlation between bonds and the other assets. Maybe in this specific instance it really doesn't matter a hill of beans whether I use an index fund or an actively managed one, whether the correlation with equities stays pretty stable or varies all over the map.
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Old 01-28-2009, 02:52 PM   #24
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I mean nothing negative about Mr Gross. He could be the best bond fund manager in the world and I'd still be worried, because this appears to be an actively managed fund, so I can't assume that its return, standard deviation and correlation with other asset classes are similar to those of an index fund. I am looking for an index fund because the standard deviation/return/correlation of the index is what I used in estimating the risk & return of my portfolio as a whole and choosing an asset allocation.
I guess the thought that comes to my mind here is, "don't let pursuit of the perfect become the enemy of the good enough."
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Old 01-28-2009, 04:56 PM   #25
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I mean nothing negative about Mr Gross. He could be the best bond fund manager in the world and I'd still be worried, because this appears to be an actively managed fund, so I can't assume that its return, standard deviation and correlation with other asset classes are similar to those of an index fund. I am looking for an index fund because the standard deviation/return/correlation of the index is what I used in estimating the risk & return of my portfolio as a whole and choosing an asset allocation. I started with apples and am concerned that if I switch to oranges in the middle of the process, the results will not be as expected.
You are way overthinking this. We are not talking about some hotshot Wharton grad that had a good year or two, we are talking about the "Warren Buffet: of bonds, whose a permabear and eked out a 5% return in 2008. There's probably not many index bond funds that can say that...........
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Old 01-28-2009, 05:40 PM   #26
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You are way overthinking this. We are not talking about some hotshot Wharton grad that had a good year or two, we are talking about the "Warren Buffet: of bonds, whose a permabear and eked out a 5% return in 2008. There's probably not many index bond funds that can say that...........
That's quite likely. I have tendencies in that direction. I just don't know yet if it would make any difference. If you are making muffins, it doesn't really much matter whether you use whole eggs or egg whites only. The recipe will work OK either way. But if you are making merengue, you cannot be so cavalier. You must use egg whites only, because even a tiny speck of yolk can cause the failure of the whole excercise. I just don't know yet whether a financial portfolio is more like muffins or merengue, and since I have to get it right the first time, I am inclined to stick to the recipe.

Just because there's nothing to worry about doesn't mean I don't get worried.
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Old 01-28-2009, 08:32 PM   #27
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You are way overthinking this. We are not talking about some hotshot Wharton grad that had a good year or two, we are talking about the "Warren Buffet: of bonds, whose a permabear and eked out a 5% return in 2008. There's probably not many index bond funds that can say that...........
Vanguard Total Bond Market Index: 5.1% for 2008

VBMFX - Fund returns - MSN Money
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Old 01-28-2009, 11:06 PM   #28
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Vanguard Total Bond Market Index: 5.1% for 2008

VBMFX - Fund returns - MSN Money
I said NOT many, I DIDN'T say NOT ANY........

I never looked, how did Vanguard Total Market fund do?
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Old 01-28-2009, 11:42 PM   #29
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I said NOT many, I DIDN'T say NOT ANY........

I never looked, how did Vanguard Total Market fund do?
Ya mean VTSMX?
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Old 01-29-2009, 08:47 AM   #30
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Correct. These guys are very good. Fearing a housing bubble they sent their team across the country to see what it's like locally - guess what they found? So they invested for a housing bubble.

Then they invested for a systemic crash. Unfortunately they kept out of Treasuries, and bought Fan/Fred, which ended up being OK instead of outstanding (had they stayed in Treasuries). You have to roll the dice ... but they still made good money.

I'm not aware of any year where they had a negative return, maybe they did one or two years. Usually it's 5%-10%.

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You are way overthinking this. We are not talking about some hotshot Wharton grad that had a good year or two, we are talking about the "Warren Buffet: of bonds, whose a permabear and eked out a 5% return in 2008. There's probably not many index bond funds that can say that...........
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Old 01-29-2009, 09:12 AM   #31
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Correct. These guys are very good. Fearing a housing bubble they sent their team across the country to see what it's like locally - guess what they found? So they invested for a housing bubble.

Then they invested for a systemic crash. Unfortunately they kept out of Treasuries, and bought Fan/Fred, which ended up being OK instead of outstanding (had they stayed in Treasuries). You have to roll the dice ... but they still made good money.

I'm not aware of any year where they had a negative return, maybe they did one or two years. Usually it's 5%-10%.
I looked at the 10 year returns for PTTRX and VBMFX and PTTRX returned about 1-2% more than VBMFX. In all years, PTTRX had higher returns than VBMFX, except for 2008 (an indication of things to come?).

I used to own PTTRX, but decided I didn't want a managed fund, so I went with VBMFX instead. Personal choice which I don't regret, but I can understand others preference with the managed fund. Looking at past performance, I can see the appeal, but then again, you never know what the future holds.

Charts:
PTTRX - Fund returns - MSN Money
VBMFX - Fund returns - MSN Money

Oh, and the last negative year for PTTRX was 1999: -0.3%.
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Old 01-29-2009, 09:15 AM   #32
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Correct. These guys are very good. Fearing a housing bubble they sent their team across the country to see what it's like locally - guess what they found? So they invested for a housing bubble.

Then they invested for a systemic crash. Unfortunately they kept out of Treasuries, and bought Fan/Fred, which ended up being OK instead of outstanding (had they stayed in Treasuries). You have to roll the dice ... but they still made good money.

I'm not aware of any year where they had a negative return, maybe they did one or two years. Usually it's 5%-10%.
I met him once at a conference. Truly a fascinating guy. Maybe buying equal amounts of Berkshire Hathaway and Harbor Fund would be the "balanced fund of the gods"...........
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Old 01-29-2009, 09:24 AM   #33
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I looked at the 10 year returns for PTTRX and VBMFX and PTTRX returned about 1-2% more than VBMFX. In all years, PTTRX had higher returns than VBMFX, except for 2008 (an indication of things to come?).
I don't know that it's an indication of things to come, unless you think the Treasury bubble will continue to inflate. I suspect that's the reason why VBMFX "won" in 2008, albeit barely.
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