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Explorer ○○○

Portfolio Design

This is a good time for me to redesign my portfolio. It kind of grew over last 10 years by buying  what I mostly saw in these forums. 

I m 52, I have 13 years to retirement assuming I keep finding work. It is getting harder.

Some current investments will likely continue as is: BRKB - 7%,  AAPL - 5% and VWELX (Wellington) - 10%

I sold all bonds funds and emerging market funds in this downturn. So far I have not panicked or lost sleep in this downturn ie. I am able to take 30% down comfortably. 

I am thinking to stay AWAY from Airlines, Autos, Energy and Materials/commodities as those sectors seem rather hard for folks like me. 

I am on fidelity brokerage and also have access to many vanguard and primecap funds in one of my 401k. 

How do I design my portfolio for my retirement accounts assuming I will not need the money till age of 65 (hopefully)?

Added: 1) Decline more than 30% is causing some anxiety now. So I guess 30% decline is my limit for now.

2) I do not have any pension. But my wife and I should get social security.

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22 Replies
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Explorer ○○○

Re: Portfolio Design

bump

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Valued Contributor

Re: Portfolio Design

I've been really busy with posting, advising, cooking!/hunkering down and managing my own portfolio .  If I get a break this weekend, will try to reply.  Bump if not by Sunday night.

R48

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Explorer ○○○

Re: Portfolio Design

bump.

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Valued Contributor

Re: Portfolio Design

 

Hi waffle.

 

Waffle, I have enjoyed your forum presence.   I withdrew from heavy duty posting over a year ago.  However,  M* then went to a new forum layout; I stayed on to help ensure a forum I created, Portfolio Design/Management Forum, stayed intact, with some reasonable activity (M* cancelled several forums).  It survived.  Then, we now have had this swift bear market in stocks, and what I considered a highly historically overvalued bond market.  I stayed to give whatever help and insight I could.  A post that read: "R48, thank you, thank you, thank you, thank you!" made my weekend, and I know I have helped some readers.  However, we are now in a full bear market, and my guidance for many investors is, if you did not take mitigating action to date, you should hunker down...and DO NOT SELL.  And from my 2008/9 posting experience, when posters lose a lot of money, they can get quite upset and snarky.  Lastly, M* lost a lot of good posters, and the volume of posts/readers very low.  Well-thought-out posts quickly go into cyberspace to die.  So I consider my time has passed.  I will try to do two more portfolio reviews, one being yours.

I have a couple of key comments and questions.

First, you say design a portfolio for retirement, yet you state you are 13 years away from retirement.  Typically one should make this transition about five years out from retirement.  Why not just stay on a "total return" approach, until closer to retirement.

Second, you made really timely sells, and saved a lot.  Are you prepared to both inject that back in sometime, and would you consider using previous bond fund money, to buy "on-sale" stock funds?

Third, it seems to me your effort should be spent on a strategy of WHEN to buy back in, and types of funds that provide total return, not a retirement portfolio theme strategy.

I await your reply.

R48

 

 

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Explorer ○○○

Re: Portfolio Design

Thanks R48,

Yes, I want to put the cash in my tax deferred accounts back to work in stocks but in a  planned, thoughtful way. And I want to design this portfolio for maximum success ie growth. So need guidance on it. 

What I meant by retirement account is that money is in tax deferred account like IRA and 401k. 

My approach so far has been very random. Ie. I see some fund or stock being recommended by posters, I check to see that it is well regarded, not leveraged, doing well and have blue chip holdings and I buy it. So a lot of 2% holdings. I sold out all of that I have no clue why I bought in first place in this downturn ie. did spring cleaning. So we can assume I can start with clean slate except -BRKB - 7%,  AAPL - 5% and VWELX (Wellington) - 10%

Taxable savings money - most of it will go towards college tuition of kids and if anything remains then it will go to residential real estate (rental property.)

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Valued Contributor

Re: Portfolio Design

 

OK waffle

1) WHEN TO BUY

(I am now in 27th year of retirement)...posted this on another forum.

Briefly: When I start re-buying will be awhile.  I do not catch falling knives; no guessing on a bottom; NO AVERAGING DOWN.  I want to be buying in UPTRENDS.  Usually means when stock fund prices are ABOVE their moving averages.  I use my Pyramid Up technique (which means folks should not have been buying any stock funds in last month).  I change from 200 day Moving Average to 100 dayMA, to assist in identifying uptrends quicker.  However, FIRST BUYS may be when a COMPELLING VALUE is reached to buy anything...and pyramid up from each fund first buy.  I apply this to each fund, not the overall market.

So, I am spending time on what specific stock funds to buy or keep accumulating, what is the "compelling value price" for each to consider getting started, and what market dynamics will tell me about when to start.  The market will tell me when.

WHAT TO BUY

Here's some considerations: Conservative, looking for yield: Utilities VPU

                                               yield and growth...Vanguard Dividend Growth Fund, VDIGX (VIG etf)

                                                Great momentum/growth...IHI Medical Devices

                                                 A real flyer:  MJ...a little pot never hurt anybody! (now down 75%)

The first three have very strong momentum.  Consider start with compelling value.  For MJ, insist on fund crossing 100 day moving average on the upside.  Also consider adding to your best funds you own.  Scared of the market?...wait to 100 day MA cross on upside, for each fund.

I agree with you to avoid airlines, autos and materials.  Further, how about :

--An S&P 500 index Fund

--A Healthcare Fund (Either Presidential candidate will not change current system)

--Financials...become a banker...but wait until full uptrend verifiable.

--Energy (VGENX)...only when uptrend is underway.  Unlike other industries, Energy does not go bankrupt; companies do.  But the oil and gas remain.  So if the USA has a billion of barrels of oil owned by companies, it will have a billion barrels after COVID and corporate bankruptcies.  they will be owned by someone.  Supply/demand will adjust such that Oil/gas prices get back to profitable situation.  You also get an inflation hedge for rising prices.  With upcoming high yields (even after any dividend cuts) Energy may again be attractive, especially in a portfolio heading and into retirement.

Best wishes, waffle.

R48

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Explorer ○○○

Re: Portfolio Design

Thanks R48,

1. You wrote - "So, I am spending time on what specific stock funds to buy or keep accumulating, what is the "compelling value price" for each to consider getting started, "

Is there a process you follow to for it?

2. Do you do asset allocation? Something like 20% bonds, 30% intl , 20% US small cap etc.

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Valued Contributor

Re: Portfolio Design


@waffle wrote:

Thanks R48,

1. You wrote - "So, I am spending time on what specific stock funds to buy or keep accumulating, what is the "compelling value price" for each to consider getting started, "

Is there a process you follow to for it?

R48 reply: So, by not having to assess individual stocks, it frees up a lot of time to ponder and assess what is best going forward.  I spend every day with antenna out and thinking about what will be best.

Like, I am one year ahead of the baby boomers; I try to invest with this mass of people mind, such as what are they doing now?  Well, boomers are now entering age 74.  They are entering a decade of massive demand for  medical devices such as knees/pacemakers etc.  Get the drift .  Medtronics Co. CEO gave great outlook on Cramer, before COVID.   The etf of med devices, IHI,was doing great before covid.  Now sold down like all.  It's on my candidate list.

HOWEVER, here's my most important thing.  One of the 4 pillars of my investing is to "use momentum to ones advantage."  Momentum is one of three free lunches in the market.  So, after this market bottoms, and it rebounds, so that a precise bottom date is set, I will run compare charts on a variety of spaces and funds.  THOSE MOVING UP THE BEST OFF OF THE BOTTOM, WILL BE MY TOP CHOICES.  Then do due diligence (like no 2X or 3X funds), and make selections.  Pyramid up buying means I buy in five buckets, each buy has to be ABOVE the previous buy price, to prevent losses.

This bear is the only one where I exited a lot of bond funds (way overvalued and not worth it) and I will be re-deploying a lot of that money into the stock market to take advantage of this opportunity to buy stock funds very, very cheaply.

One caution.  If you consider a "compelling value" exists to buy something because it has a high dividend yield, I expect many companies my cut dividends for next quarter or two; thus yield % may fall, ie, not so compelling!

2. Do you do asset allocation? Something like 20% bonds, 30% intl , 20% US small cap etc.

Yes, but not rigidly.  I was about 70/30% bonds, before the stock decline.  I have been selling some stock funds, and my allocation is surely dropping quickly.  I also use a hedge, PSTIX that moves opposite (inverse) the market, that neutralizes some more of my stock holdings.  This is not for everyone.  You could consider a hedge via a fund called HEDG which does similarly.  But caution of this, if you don't follow markets daily.

I have no idea what my AA is currently!  

I go international, or sectors, or small cap, where ever I consider best returns lie going forward.  That's where I will use MOMENTUM to the max, after a bottom is set.  If Emerging Markets is leading USA markets, I will be adding there.  If small caps keep lagging large caps, I will be  in large caps.  I thus don't need a crystal ball; the market tells me what to invest in.

Good luck, waffle.

R48

 


 

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Follower ○○○

Re: Portfolio Design

R48,

Thank you for your input and share your valuable experience. 

How did you track your fund price? from Morningstar? Fidelity? How do you get reliable source of market information.  

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Valued Contributor

Re: Portfolio Design


@yeanling2020 wrote:

R48,

Thank you for your input and share your valuable experience. 

You're welcome.

How did you track your fund price? from Morningstar? Fidelity? How do you get reliable source of market information. 

--Morningstar primarily..go to home page, plug in symbols.  There, I get M*reports on selected funds , and note an "interactive chart" sublink exists with lots of data, incl performance over time periods/ and moving averages.

--The forums...lot's ofinfo gained from others...funds they like or are buying.  I get most bond fund info from FD1000 and dt conroe among others!!

--Experience/knowledge of existing funds

--yahoo finance

--the fund companies themselves...after I get serious about owning something.

--niche forums, such as the CEF Forums...still a lot of top talent there.

--Mutual fund websites

and so on.

I track my fund price primarily on-line from Vanguard and Fidelity, where I have my portfolios...and on M* homepage quotes...and stockcharts.com info--really good.

Good luck yeanling

R48

 


 

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Valued Contributor

Re: Portfolio Design

Everybody's questions answered?

R48

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Re: Portfolio Design

R48,

I believe I saw here or on another thread you are working to prepare to reallocate in the future.

I know you have a trigger with the 100 day moving average, and am aware of your Py Up system. Just wondering if you could share some of the "work" you do to help plan the next moves. What types of research, what tools, websites, etc.

As a buy and hold investor for many years, I'm at a point where I want to be more flexible to make changes. I need to increase my knowledge to have a better handle on this.

 

Thanks,

Ed

 

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Re: Portfolio Design

R48,

After the market crash, and moving average line move down. It is probably will be a while (2-3 years ) until they reach the uptrend? when will the next entry date? Pyramid up, how far apart will you make your second buy ? what you use for your hedge fund?

Again thanks for your input.  stay healthy! I sure like you to  help us  sail through retirement.  

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Valued Contributor

Re: Portfolio Design


@yeanling2020 wrote:

R48,

After the market crash, and moving average line move down. It is probably will be a while (2-3 years ) until they reach the uptrend?

R48 in bold: No, no.  The 100 dayMA will not take years to merge.  More like a month with markets looking like this.  You will see 100 MA taking a steep downslope soon.

when will the next entry date?

The market chart with MA will show when.  I also think the most likely market  direction is another strong down-move, testing near the previous low.  If it breaks downward...wait.  If then rebounds upward, perhaps make any compelling value bucket buys, or wait for 100 day MA pass through.  May want to view 50 day MA also, because of the swiftness of the current market moves, and the delay in MAs to catch up.

Pyramid up, how far apart will you make your second buy ?

I recommend 3-4% each buy in normal markets; but in this swift market, funds moving 5-10% daily, I  use judgment, and impose a two day limit on myself.  That is, no follow bucket buy until full two days have lapsed.  Since bear market, I have not bought any stock mutual fund, so have not yet put it to use.  Disclosure:  I recently  bought a preferred Dividend CEF, called HPS, posted as this:

Recently started accumulating HPS...John Hancock Preferred Stock Series III Fund.  Note at this time, preferred share dividends are not restricted from being paid, per new fed support bill.  Preferred's also up the chain in priority paying.  Great yields available.  HPS zooming up...holding on for the ride.

 

what you use for your hedge fund?

PSTIX...$1,000,000 minimum initial buy, but if you can't swing that, it is available for $25,000 in an IRA at Vanguard.:-)

Again thanks for your input.  stay healthy! I sure like you to  help us  sail through retirement.  


Glad to help.

R48

 

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Valued Contributor

Re: Portfolio Design


@Cobea wrote:

R48,

I believe I saw here or on another thread you are working to prepare to reallocate in the future.

I know you have a trigger with the 100 day moving average, and am aware of your Py Up system. Just wondering if you could share some of the "work" you do to help plan the next moves. What types of research, what tools, websites, etc.

As a buy and hold investor for many years, I'm at a point where I want to be more flexible to make changes. I need to increase my knowledge to have a better handle on this.

 

Thanks,

Ed

 


Ed, thanks for your support.

Yes, I would love to help; but in another thread here:

https://community.morningstar.com/t5/Portfolio-Design-Management/Portfolio-Design/td-p/685359/page/2

  I indicated I am cutting way back in posting on M*.  I will be doing some case-basis posting on Fidelity's Investment Forum, but I think one needs to have an account at Fido, and unless one makes a large # of trades, it is by invite-only.  On Fido, there seems to be many more readers/participants, so posts get more traction.  Boglehead.org forum almost overwhelmed by too many members/posters!

So, I don't have an easy way to provide continuous guidance to readers here going forward.  Sorry.

Regarding your question:... just wondering if you could share some of the "work" you do to help plan the next moves. What types of research, what tools, websites, etc.

In a below post is a list of sources I use for mutual fund/ETF/CEF info.

I am paying close attention to the market last month, as I am making a large move out of bond funds (way overpriced and not worth it), as well as mitigating the stock bear market.  I watch cnbc from opening, on and off, through market close, for making portfolio changes. This is not always.

But how I prepare for overall strategies, etc is perhaps answered best by this:

--Look, I made a lifelong hobby of investing since age 23.  Like I have probably read 200 books/articles/studies on using Moving Averages alone.  Surely only few can be that involved.

--Second, retiring at age 48 caused me to stay focused on investing, cause I'm told cat-food is not that tasty :-)

--Next, I have developed a knowledge of investing type gurus that I put a lot of faith in, that they provide good info/insight.  Like bonds: Jeff Gundlach; PIMCO"s Paul Mccauley.  Stocks:  s. Minerd; and various.  For instance , reading the tea leaves of Paul Tudor Jones (Hedge fund manager) in Davos in Jan re coronavirus impact caused me to sell some stock funds in January...just in time.  I view J Cramer's opening on TV almost daily.

--I follow forums..and participate, and follow sublinks posted, for info.

--I don't own any individual stocks, so it frees up time to just assess...think.

--I'm age 75, so wealth of experience.  I will be an even better investor the day before  I die...but none of this is easy.

--Lastly, I view bear markets as a good time to assess what things to own going forward, and the poorest 10% of portfolio that should be switched.  Fund selection is not key; rather strategy and being in the right spaces, and allocation, means the most.

--I assess forum people's behavior, fear and greed...like a poker player uses "tells".  I try to be "contrarian."  It has served me well.

wow, that's a tough question you asked, Ed!

Best wishes.

R48

 

 

 

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Re: Portfolio Design

R48,

1. Morningstar chart make me crazy, I can not make it stick to moving average line. therefore I used Yahoo finance. my questions for moving average line, which period are you reviewing? ytd, 1 year, or even one month, that is big difference

2. I have RFETX, American fund 2030, I am age 62 , my husband will probably retire soon, I mean this year. Should I change to Target fund 2025 ? 

3. I have 400K stock fund that did not move out of stock market soon enough, now market is rebound, should I sell it , take 10% hit compare to 2019 price.  But it is still over my cost, capital gains will be 5-10%.  

4. Emotion part is really hard to control. This time around, I move $ to CD, plan to buy annuity,  what is your thoughts?

5. I have PSTIX bought it last week. should I sell it if it is loss, and enter it when market is down? 

Thank you.  I hope you join me happy hours today. (virtually)

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Valued Contributor

Re: Portfolio Design


@yeanling2020 wrote:

R48,

1. Morningstar chart make me crazy, I can not make it stick to moving average line. therefore I used Yahoo finance. my questions for moving average line, which period are you reviewing? ytd, 1 year, or even one month, that is big difference

R48 in bold:  I use 6 month and one year MA looks.  both short time and long time data not reliable/misleading.

2. I have RFETX, American fund 2030, I am age 62 , my husband will probably retire soon, I mean this year. Should I change to Target fund 2025 ? 

Sorry, but I cannot get into individual funds, because I am overwhelmed with requests, and simply cannot take the time to review such.  But if one is changing the target dates on their retirement funds, I suggest going out farther (than retirement date) in which retirement date to use, to both lower your bond side (lousy investments now) and increase your stock allocation side, to take advantage of this bear market.  

3. I have 400K stock fund that did not move out of stock market soon enough, now market is rebound, should I sell it , take 10% hit compare to 2019 price.  But it is still over my cost, capital gains will be 5-10%.  

Click on my moniker name and profile to get my recent posts.  Review some.  

For most people, including me...when markets get into bear market territory (down 20% or more), I have three rules for my stock funds:

--Do Not Sell

--DO NOT SELL

--DO NOT SELL!

(Any selling I do is done in the down 8% to down 20% range).  Then I generally hunker down and weather the storm.

Disclosure...In bear markets, I do hedge some with buying a fund called PSTIX that performs the inverse of the stock market, thus neutralizing some of my equity allocation.  (Not for everyone).  And same-day stock fund switching, permitted.  

4. Emotion part is really hard to control. This time around, I move $ to CD, plan to buy annuity,  what is your thoughts?

I don't like annuities.  Don't pay enough, and companies cannot earn enough interest to pay, with historical low bond yields.

5. I have PSTIX bought it last week. should I sell it if it is loss, and enter it when market is down? 

Wow!  First, PSTIX is not a long term holding; when market settles out (maybe couple months), then get out.  But do not look at PSTIX as a gain or loss.  You are NEUTRALIZING an equal dollar amount of your stock side of the allocation.  So, if stocks double in price from here, PSTIX goes down.  But I would be very happy if that happened.  If stocks go down another 20%, PSTIX goes up similar amount.  I would be thankful for the hedge.  Do you see this?

Thank you.  I hope you join me happy hours today. (virtually)

Yes, I will join you.  Are you the primary investor for the household?  If your husband does not invest, then he cannot join us at happy hour :-)

BTW all posters are and must be, fully  responsible for their own investing and outcomes.

R48

PS.  To those readers who have sent me a private message (PM):  Sorry, but I did not see the number of PMs in the box on my forum page.  (I am used to receiving these by e-mail on other forums).   I will try to respond to all, this weekend.  So sorry.

 


 

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Re: Portfolio Design

R48

Thank you for the info...and good luck!

Ed

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Valued Contributor

Re: Portfolio Design


@Cobea wrote:

R48

Thank you for the info...and good luck!

Ed


You're welcome, Ed.

R48

 

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