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GUNR, your thoughts and opinions please
Old 04-15-2018, 05:17 PM   #1
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GUNR, your thoughts and opinions please

I am an index funds investor guy with Schwab and Vanguard index funds. My financial advisor, independent assets under management, is recommending a fund I really don't understand. GUNR, is a FlexShares Morningstar Global Upstream Natural Resources index fund. FlexShares states this is a balanced exposure to three traditional(30% in agriculture,energy and metals and two non traditional(5% timber and water) natural resources.

Financial advisor is recommending GUNR to buy after selling MLPZX. MLPZX was 6% of total account assets. All index funds with Schwab and Vanguard have and are doing very well for several years. My thoughts are just buy more index funds, which I understand, or take a chance with GUNR. In researching GUNR, I noticed Vanguard has VAW which is an MSCI US investable market materials 25/50 index. Whatever that is?

Need thoughts and opinions about going forward with GUNR,thanks in advance

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Old 04-15-2018, 05:27 PM   #2
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For me, the short answer is-if you do not understand it, do not invest in it
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Old 04-15-2018, 05:53 PM   #3
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I would ask a financial adviser at Vanguard and Schwab for their allocation strategy for your age and situation. Then you can compare three strategies.
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Old 04-15-2018, 05:54 PM   #4
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Originally Posted by Souschef View Post
For me, the short answer is-if you do not understand it, do not invest in it
Yes.

Also, it helps to think about investments as if they were tangible things one had to work for (like buying a new car), rather than moving numbers around in a spreadsheet. Useful to ask oneself: Would you buy this if you had to work a certain number of months for it? Do you understand it well enough that you would be comfortable doing so? Or would you research it thoroughly, first - just the way you would research a new car model before buying it?

Finally, for commodity-oriented funds, which this one seems to be, this article is useful perspective.
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Old 04-15-2018, 07:50 PM   #5
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Fire your FA. Below compared GUNR with Vanguard Total Stock Market Index Fund... GUNR underperforms for 3, 5 and 10 year periods.

VTSAX Vanguard Total Stock Market Index Fund Admiral Shares Fund VTSAX chart
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Old 04-15-2018, 08:07 PM   #6
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It seems like an oddball recommendation for an index fund investor. You're looking at a .46% expense ratio versus .04 for VTSAX. Before I increased my expense ratios by 11.5X I'd want a really good explanation from the FA on how this would benefit me.
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Old 04-15-2018, 08:39 PM   #7
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I'm almost exclusively an indexer, but I like GUNR and own it in my Schwab account, alongside my stock and bond index funds. I use GUNR as a hedge against inflationary spikes, and it's commission-free at Schwab.
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Old 04-15-2018, 08:51 PM   #8
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Quote:
Originally Posted by ukwildcat View Post
...
Financial advisor is recommending GUNR to buy after selling MLPZX. MLPZX was 6% of total account assets. ...
Quote:
Originally Posted by Onward View Post
I'm almost exclusively an indexer, but I like GUNR and own it in my Schwab account, alongside my stock and bond index funds. I use GUNR as a hedge against inflationary spikes, and it's commission-free at Schwab.
Onward, How does the 6% sound to you as an allocation from your standpoint?
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Old 04-15-2018, 08:54 PM   #9
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Originally Posted by pb4uski View Post
Fire your FA. Below compared GUNR with Vanguard Total Stock Market Index Fund... GUNR underperforms for 3, 5 and 10 year periods.

VTSAX Vanguard Total Stock Market Index Fund Admiral Shares Fund VTSAX chart
Before I'd fire him, I would send him the above chart.
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Old 04-15-2018, 09:08 PM   #10
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I've owned VAW for quite a while and it has worked out well for me. GUNR or MLPZX.. no. I agree with the comments that if you don't understand it, then you shouldn't own it.

If you look at Roger Gibson's book on Asset Allocation (really dry book), he uses the example how adding a modest position in the Goldman Sax Commodity index can reduce volitility (STDEV) and improve returns. The interesting thing is the GSCI has a high STDEV. I know I'll get the wrath of may indexers who do not look beyond a few indexes. Many do well at investing only a few indexes.

If you are going to use this FA, then understand what he is suggestion you buy. Have him educate you. MLPs have been lagging since 2015. As oil is increasing in price, this will help the MLPs recover. But you are going to sell out now?

I don't own any MLPs, so don't take my comment as an investment recommendation.

Invest in what you know. Learn a little bit more. Don't buy what you don't understand.
Take with your Schwab on how to set up a diversified portfolio using low cost etfs. Use their online tools to learn more.
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Old 04-15-2018, 09:17 PM   #11
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Onward, How does the 6% sound to you as an allocation from your standpoint?
I try to keep GUNR at 8.3% of the portfolio because it fills the "Resources" slot in the 7Twelve portolfio strategy, which I use.

This is not my only account or portfolio, though, so GUNR makes up much less than 8.3% of my total holdings, which are very dispersed.

Overall I think 5-8% of total portfolio is a good allocation to natural-resource funds like GUNR.
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Old 04-15-2018, 10:24 PM   #12
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I try to keep GUNR at 8.3% of the portfolio because it fills the "Resources" slot in the 7Twelve portolfio strategy, which I use.

This is not my only account or portfolio, though, so GUNR makes up much less than 8.3% of my total holdings, which are very dispersed.

Overall I think 5-8% of total portfolio is a good allocation to natural-resource funds like GUNR.
Thanks for some practical and thoughtful information from someone with some skin in the game. I think the OP has some homework to do to determine if a narrow focus fund such as this belongs in the portfolio and if this is the right one. Onward has given some hints of where to start that research. I personally am too lazy to do that level of research and am quite content to just buy the larger market funds.
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Old 04-15-2018, 10:42 PM   #13
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I can only pass along a recent experience I had with one of my brokers. First she wanted me to switch some investemts to a fund with a 5% front end load, also wanted me to look at a QLAC annuity to delay some RMD's.
Needless to say, I opted for neither.
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Old 04-16-2018, 08:19 AM   #14
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Oops. The ETF I own, and have been referring to, is GNR, not GUNR.

I'm not familiar with GUNR. Sorry bout that.
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Old 04-16-2018, 11:35 AM   #15
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There is continuous confusion, seemingly everywhere, between what it means to be an "index investor" and what it means to be a "passive investor."

The gurus' position, as stated by Fama and French is " ... we have to hold the market portfolio." This means, basically, everything. Some might consider "everything" to be a total US market fund. Others, including me, consider "everything" to be the whole world. (Vanguard Total World Stock Index Fund/VTWSX)

Originally IMO the term "indexing" referred to using index funds to build a passive portfolio.

Now, though, being an "index investor" simply means holding mutual funds (ETFs are mutual funds) with the word "index" in their name. GUNR is an example. These IMO are basically wolves in sheep's clothing. Buying them is simply a way to place bets on sectors and is really not much different from stock picking, which is a known loser's game.

So, to the OP, in addition to the fact that GUNR is a lousy fund and you have a lousy advisor, I would say to avoid it simply because buying it is not passive investing; it is sector picking.

Also, if when you say "I am an index funds investor guy with Schwab and Vanguard index funds." you really mean you want to be a passive investor I would look at those holdings and see if you are instead placing bets on sectors.

And, yes, an S&P 500 fund is a sector fund: US Large Caps
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Old 04-16-2018, 12:06 PM   #16
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There is continuous confusion, seemingly everywhere, between what it means to be an "index investor" and what it means to be a "passive investor."

The gurus' position, as stated by Fama and French is " ... we have to hold the market portfolio." This means, basically, everything. Some might consider "everything" to be a total US market fund. Others, including me, consider "everything" to be the whole world. (Vanguard Total World Stock Index Fund/VTWSX)

Originally IMO the term "indexing" referred to using index funds to build a passive portfolio.

Now, though, being an "index investor" simply means holding mutual funds (ETFs are mutual funds) with the word "index" in their name. GUNR is an example. These IMO are basically wolves in sheep's clothing. Buying them is simply a way to place bets on sectors and is really not much different from stock picking, which is a known loser's game.

So, to the OP, in addition to the fact that GUNR is a lousy fund and you have a lousy advisor, I would say to avoid it simply because buying it is not passive investing; it is sector picking.

Also, if when you say "I am an index funds investor guy with Schwab and Vanguard index funds." you really mean you want to be a passive investor I would look at those holdings and see if you are instead placing bets on sectors.

And, yes, an S&P 500 fund is a sector fund: US Large Caps
By your definition, an S&P 500 index fund is not an index fund. Its a large cap sector fund. I'll stick to the definition of an index fund being composed of a representative sample of the assets included in the index.
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Old 04-16-2018, 12:35 PM   #17
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By your definition, an S&P 500 index fund is not an index fund. Its a large cap sector fund. ...
No. It is a sector fund by virtue of the fact its underlying index is an index of a sector. It is still accurate to also call it an "index fund." But an investor buying only that fund is not holding "the market portfolio."

There is nothing wrong with playing wiht sector funds if that's your cup of tea. But people who buy index funds based on sector-specific indices, then think their strategy is consistent with the academic wisdom are simply wrong.

The problem here, as usual, is hucksters who cook up specialized "indices" with corresponding "index" funds, expecting to hook some suckers who have heard that investing in index funds is a wise thing to do. Here are a few of the more egregious (IMO) examples:
  • Credit Suisse Merger Arbitrage Liquid Index
  • IQ Merger Arbitrage Index
  • Sabrient Multi-Cap Insider/Analyst Quant-Weighted Index
  • FTSE Asia Pacific Qual / Vol / Yield Factor 5% Capped Index
  • ISE Exclusively Homebuilders Total Return Index
  • MSCI China Small Cap Growth Index
Actually, not understanding that an S&P index fund is a sector fund does not produce terrible results, since the S&P is something like 40% of the world market cap. So these people do not have "the market portfolio" as Fama recommends but they have a pretty hefty piece of it. It is the GUNRs IMO, who are the ones misleading people who aren't paying attention.
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Old 04-16-2018, 01:04 PM   #18
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No. It is a sector fund by virtue of the fact its underlying index is an index of a sector. It is still accurate to also call it an "index fund." But an investor buying only that fund is not holding "the market portfolio."

There is nothing wrong with playing wiht sector funds if that's your cup of tea. But people who buy index funds based on sector-specific indices, then think their strategy is consistent with the academic wisdom are simply wrong.

The problem here, as usual, is hucksters who cook up specialized "indices" with corresponding "index" funds, expecting to hook some suckers who have heard that investing in index funds is a wise thing to do. Here are a few of the more egregious (IMO) examples:
  • Credit Suisse Merger Arbitrage Liquid Index
  • IQ Merger Arbitrage Index
  • Sabrient Multi-Cap Insider/Analyst Quant-Weighted Index
  • FTSE Asia Pacific Qual / Vol / Yield Factor 5% Capped Index
  • ISE Exclusively Homebuilders Total Return Index
  • MSCI China Small Cap Growth Index
Actually, not understanding that an S&P index fund is a sector fund does not produce terrible results, since the S&P is something like 40% of the world market. So these people do not have "the market portfolio" as Fama recommends but they have a pretty hefty piece of it. It is the GUNRs IMO, who are the ones misleading people who aren't paying attention.
I agree that you do need to understand an index fund. Schwab put me in a "Schwab small cap index fund" when I asked them to put me in a fund that followed the Russell 2000. It did not follow the Russell 2000. They just picked small stocks and called it an index. It went through many name changes which reset the performane numbers as it consistently underperformed everything. That was many years ago. I moved my money to Vanguard after that.
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Old 04-17-2018, 06:41 PM   #19
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In comparing the holdings, it looks like MLPZX has a lot of pipeline and other LP's, while GUNR is more towards traditional integrated oils.

I'm assuming here that this investment is a hedge for other more traditional passive index funds? And that you want to keep some money in things that would do well if oil prices rise? If so, OK, but GUNR has an expense ratio of 0.47%. If I were going to have a fund of integrated oils (XOM is the largest holding) and food/seed (e.g. Monsanto), why not just buy ETF's like mostly XLE and a little MOO? XLE has exp ratio of 0.13%, MOO (is higher at 0.53%). Or just buy some of the holdings with no expense ratio.
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Old 04-20-2018, 11:31 AM   #20
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Fire your FA. Below compared GUNR with Vanguard Total Stock Market Index Fund... GUNR underperforms for 3, 5 and 10 year periods.

VTSAX Vanguard Total Stock Market Index Fund Admiral Shares Fund VTSAX chart
http://quotes.morningstar.com/chart/...22%3A%5B%5D%7D
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