Selling Tweedy, Browne for Powershares Int'l Div ETF

[lswswein]

Hi Nords, Ben, brewer etc
I have a question about Intl Mid / Small caps. I am looking for any suggestions for funds as replacement for TBGVX - Tweedy Browne Global Value. I hate the ER of 1.39% of this fund but like the low turnover, Value focus and the fact that they have a whole bunch of mid and small caps in the portfolio. I also like the fact that they hedge the currency - this lets me overweight Intl compared to other portfolios.
The main issue is this: I am still in my accumulation phase and right now am DCAing into TBGVX - so PID and other ETF's are not a good idea in my case. I am mostly looking for mutual funds. Also this would be in a Taxable account. I don't have a problem meeting general fund minimums.
Right now my allocation is as below: (Ben would recognize this):

11% each of a) Vang. Tot. Stk Mkt b) Vang. Sm Val c) Tweedy d) Vang EM Idx e) Vang TM Intl = Total 55% Stocks

10% each of Vang Infl Proc, Vang ST Bond Idx = Total 20% Bonds

10% Vang REIT, 5% PCRIX, 5% Merger Fund(MERFX), 5% BRKB = Total 25% others

As you can see I am mostly in Index funds and I am trying to make sure my ER is around 0.5% I am close to the target but would like to reduce it. Right now I cannot think of any replacement funds - I would keep TBGVX and try to add the new money to any fund I would pick. The only think I can come up with right now is:
Split the new money into Vang TM Intl & a Bridgeway Micro Fund - essentailly getting get a small and Intl alloc.

All suggestions welcome & thanks a lot guys
-h

[Nords]

Quote:

Originally Posted by lswswein The main issue is this: I am still in my accumulation phase and right now am DCAing into TBGVX - so PID and other ETF's are not a good idea in my case.

I'll leave the slice & dice allocations to experts like Ben & Brewer, but here's my take on DCA'ing into ETFs.

When you pile up $10,000 in TBGVX then every year it costs you $139/year for them to put it to work. Right now they're 20% cash and selling whatever holding hits its target price. I think that their cash will climb higher before it gets lower, and that turnover this year could approach 15%. Admittedly TBGVX's turnover is peanuts compared to the typical fund's turnover, but that's about twice TBGVX's "usual" turnover... so there's going to be a bit more cap gains distributed this year. The fund is closed to new investments, which is typically a sign of management struggling with fund bloat.

I fearlessly predict that the dollar will go down this year, but Tweedy's hedging will keep your fund price from rising as the dollar declines.

If you had the same $10K in PID it'd cost you $50/year. Every dollar of your shares will be fully invested in dividend-paying stocks. Turnover is tied to the index and it's going to be a single-digit number because they're not juggling the index very much. (Out of 60 stocks I believe that only two have been changed since the fund started last fall, but the actual turnover rate remains to be seen.) The fund is still fairly small but bloat only depends on the float of the stocks that make up the creation units, which the managers will create as quickly as demand merits. In addition to its dividends, which Fidelity will re-invest for free, the fund will rise when the dollar drops.

All this plus saving $89/year in expenses. You could DCA into Tweedy until you have ~$10K shares, wait for the 60-day early-redemption rule to expire, and then sell those shares to buy PID. Depending on your commission to buy the shares, you could do it in $5000 or even $2500 increments every year and probably still come out ahead.

[Nords]

Ruh-roh... Business Week just jumped on the bandwagon.

Might have to pick up the buying pace a bit on Monday.

[lswswein]

Hi Nords
Thanks for the reply. I will think about it some more

-h

[preben]

Iswswein; what a sweet portfolio!
Since ETFs are not an option for you right now I think you have already found the best solution. Small cap foreign exposure is hard to get these days. Cheers!

[brewer12345]

Looks reasonable to me.* I guess the only two that stand out are Berkshire and MERFX.* I suppose both are better than a sharp stick in the eye if you want something to play with on the margins.* I have my reservations about Berkshire, but reasonable people seem to differ on the subject, so I will let it go.* On MERFX, I get the distinct impression that so much money has been chasing merger arb in the past few years that returns have laregly been squeezed out.* MERFX's returns over the past several years dovetail with this idea.* Any reason to stay there and pay those fees?

[preben]

I remember checking out MERFX before and reached the conclusion that it did not really fill the role as a diversifier I wanted it to fill. HSGFX or maybe some mining(the sale is on currently!) BGEIX or VGPMX (when open) might be better. Personally I hold VGPMX. www.raddr-pages.com commodities study mention that holding both PCRIX and metals/metals fund is worthwhile.

Cheers!

[lswswein]

Quote:

Originally Posted by brewer12345 MERFX's returns over the past several years dovetail with this idea.* Any reason to stay there and pay those fees?

I hate the fees for MERFX but thought I would give it atleast a 5yr try. The correlation numbers were low when compared to the rest of the asset classes. I will hold it for couple more years to see how things work out and then decide about what to do with the fund. The option is to move from MERFX into PCRIX or BRKB.

Quote:

Originally Posted by ben BGEIX or VGPMX (when open) might be better. Personally I hold VGPMX. www.raddr-pages.com commodities study mention that holding both PCRIX and metals/metals fund is worthwhile.

Ben, I sold BGEIX around Jan'06 before Raddr's sell signal - it was my fun account and bought BRKB. Decided not to have a fun account and did not want to do any timing - did not like the inconsistency there. Also wasn't impressed with precious metals as inflation hedge and decided PCRIX would cover commodities including metals.

Btw we discussed this portfolio on raddr's - I am bigboy8888 at raddr-pages. I cleaned up my Bond allocation and went with a simple combo of Vang. Infl Sec & Short Bond Idx

thanks for the responses
-h

[preben]

Bigboy! Oh yes of course. Good to see you here! Your portfolio is still very pretty!

Well, MERFX (and ARBFX) might certainly get back into the game again in the future so nothing wrong in testing it out - just seems to me that the older (bigger?) it gets, the more it turns into just another long fund - guess it is the cycle we are in. Time will show. Reason why it was on my watch list was also its low correlation with other asset classes.

I looked up that old watch list and found also the Vanguard Convertable bond fund VCVSX which still seems to do good at capturing most of the equity returns but with only about half the downside risk.
For someone wanting to protect the nest egg, while capturing some of the equity returns (and stay more ahead of inflation than normal bonds) this fund still looks interesting to me. Some will argue that a balanced fund will do the same job cheaper I guess.

Cheers!