VGENX Investment Timing?

[Craig]

[Excuse the verboten "timing" reference ... ]

This is very idle chatter at the moment, but we're thinking about eventually investing in Vanguard's energy fund.  Prices are coming down slowly, and of course this sector has had quite a run.  For long term, I do think it makes sense to have a dedicated investment here (on top of a large base of broad equity index funds, etc.).  We think the "Peak Oil" debate and concern makes sense during this century ...

The minimum investment is $25K, and I believe they recently re-opened the fund.  I'm guessing it might make sense to go in during 2006 or maybe 2007.  None of us know the future, but anyone else on the board thinking about this down the road?  How will you make your entry decision?

 

[retire@40]

[Excuse the verboten "timing" reference ... ]

This is very idle chatter at the moment, but we're thinking about eventually investing in Vanguard's energy fund.  Prices are coming down slowly, and of course this sector has had quite a run.  For long term, I do think it makes sense to have a dedicated investment here (on top of a large base of broad equity index funds, etc.).  We think the "Peak Oil" debate and concern makes sense during this century ...

The minimum investment is $25K, and I believe they recently re-opened the fund.  I'm guessing it might make sense to go in during 2006 or maybe 2007.  None of us know the future, but anyone else on the board thinking about this down the road?  How will you make your entry decision?

You are probably right in that some (maybe 5% to 10%) of your portfolio could be dedicated to energy. But if an energy fund is of interest to you now because it's the current rage, then you may be getting in at the wrong time. If you must get in now, DCA into it over 2 or 3 years.

 

[REWahoo]

[Excuse the verboten "timing" reference ... ]

This is very idle chatter at the moment, but we're thinking about eventually investing in Vanguard's energy fund.... For long term, I do think it makes sense to have a dedicated investment here (on top of a large base of broad equity index funds, etc.). We think the "Peak Oil" debate and concern makes sense during this century ...

You are probably already aware of this, but if you are in "broad equity index funds" you already have a 5-10% position in the energy sector:


Vanguard Fund Energy Sector Holdings
(as of July 31, 2005)
500 Index 9.0%
Balanced Index 8.7%
Capital Opportunity 9.3%
Dividend Growth 7.0%
Equity Income 9.2%
Extended Market Index 6.7%
Growth and Income 10.3%
Large-Cap Index 9.2%
PRIMECAP 9.5%
Total Stock Market Index 8.7%
Wellesley® Income 13.8%
Windsor 8.4%
Windsor™ II 12.9%

 

[Gone4Good]

The right time to get back in to energy is after oil goes back to $15 / brl and nobody else on earth is talking about energy stocks.

 

[brewer12345]

Not so ure about that, yrs. All of the energy companies appear to be priced as if we ae headed back to ~$30 a barrel soon and staying there for an extended time. You really see that happening, barring a global recession? I don't. There is less and less crude readily accessible and more and more demand from a growing world economy and fast growing 3rd world countries.

 

[lazyday]

Not sure I understand the rationale for including energy equities in asset allocation.

For someone who likes to pick their holdings based on what they think is cheap and/or is trying to beat the market, it could make sense to me. For someone doing more of a strategic asset allocation, I don't understand.
Does energy equity have a low correlation to equity overall? If we hit peak oil, will the sector do very well?

For my first question, IIRC, I've read that historically it hasn't. For the second one, I have no idea. But I have read that most of the oil is not in the hands of oil companies you can buy stock in. Don't know what % of vgenx is non-oil energy, which could do very well after peak oil. Maybe oil services could do well too.

 

[JPatrick]

Please look at Fidelity's energy funds also.
FSENX and FSESX.
Last I checked they were running ahead of Vanguard.  They require only $2500 to enter, $250 thereafter.  They price every hour and you can leave penalty free after 30 days.  Now I like Vanguard ( and have a fair  number of their funds) but I can't see why anyone would  use their energy funds over Fidelity.
As for timing, if you have 25K, I'd invest $2500 now and DCA the rest, but I would not dump the full 25K into anyones energy fund right now.

 

[wabmester]

Now I like Vanguard ( and have a fair  number of their funds) but I can't see why anyone would  use their energy funds over Fidelity.

I dunno. Maybe because fees matter.

 

[Gone4Good]

Not so ure about that, yrs.  All of the energy companies appear to be priced as if we ae headed back to ~$30 a barrel soon and staying there for an extended time.  You really see that happening, barring a global recession?  I don't.  There is less and less crude readily accessible and more and more demand from a growing world economy and fast growing 3rd world countries.

I think we've had this discussion - maybe a few times.



Oil can go to $200 an oz for all I know. I, however, have a strong aversion to buying asset classes after they've had a 35% one year run and a five year CAGR of over 20%. It seems like I'm a little late to the party.

Besides, if I were smart enough to know the direction of oil prices then I'd have been loading the boat with energy stocks back in 1998. I don't remember any of the experts telling me to do it then - so I'm not really going to listen to them now.

 

[Craig]

Thanks for the ideas ... I agree this isn't the time ... and I know our various funds definitely have energy exposure. But sometime down the road, we'll add some concentration, when it is out of favor. Appreciate the Fidelity tips.

Take care.

 

[JPatrick]

Thanks for the ideas ... I agree this isn't the time ... and I know our various funds definitely have energy exposure.  But sometime down the road, we'll add some concentration, when it is out of favor.  Appreciate the Fidelity tips.

Take care.

As an add-on to this discussion, I sold all of my pure energy funds yesterday (17th) in anticipation of lower oil the rest of the year.  I did keep most of the stocks/funds that relate to service and a few of those in natural gas.
Between now and year end that cash is headed for index funds primarily  to avoid any large distributions next month.  I'm certain though, that oil will become a major holding of mine sometime in the new year..

 

[VoyT]

Since this thread came up in the $4 gas thread, thought I'd bump it back up ....

Anyone regret not buying in November?

Have to admit, I kicked myself a bit this week ...

 

[Craig]

Well, since this is back on the screen ...

I'll admit I took a flyer, and finally did buy into VGENX on 2/3/06 (aided by a bonus).  Lost about $1K shortly thereafter, and just told my DW that was part of coming very late to the party ... it would probably get worse.  I still thought it was wise long term, but figured we'd probably have to DCA in more just to maintain our position for awhile.

Then things turned around, and now we're up a simple 10.2% so far.  Obviously that could turn upside down and more in short order.  We've bought in very high on the hockey stick.

I'm glad we did it so far, and we'll add more over time.  While commodities continue to be wild, I think the megatrends of expanding, formerly oppressed economies elsewhere in the world are creating new demand / supply imbalances, and will continue to do so.  If we get hammered, I'll offset that damage, psychologically, with salve from other investments where we entered much lower on the curve.

I could also be completely wrong about all this, watch this thing tank big time, and be glad (once again), that most of our investments are safer ... very much aided in that quest by the great advice on this forum.