Mutual Fund Overlap

[Detroitgator]

Lol, so true re the stop. It's why they're relatively useless.

Hey, DG, you're yet another example why investing and, in particular, investment management, are not one-size-fits-all. We all have a different downside tolerance.

As an anecdote to the discussion, I had a client with two large rollover IRAs, one that was managed and one that garaged shares of LMT. She was an LMT retiree and felt it was a "safe" investment.

When LMT warned of an earnings miss last summer and the stock began falling, she freaked. We had a meeting on diversification. One by one I overlayed other defense stocks, then stocks from other sectors, some with lower beta ratings than LMT. Not a two-year graph, but five and 10 years. When LMT did poorly, others did well, and vice versa. Her managed account had done better over time.

Her eyes grew large as saucers. Now she could see why. She still owns LMT, just not as much.

Yeah, I should have mentioned that the trailing stop loss alerts are for positions where I am swing trading for income, not for the defense stocks that are "buy and hold forever"... I just let those ride. I also use the alerts when up targets are hit on the swing trades to assess if I want to pare off some of the position and let the rest ride to next target.

 

[78]

This is listed in the profile for my Blue Chip. The symbol is JIBCX.

Key Statistics (as of 12-31-18 unless noted§)¤
Number of Holdings: 126
Sharpe Ratio: 0.80 That's basically an efficiency rating. The higher the Sharpe, the better. It takes into account the actual return minus the riskless return divided by standard deviation. In other words, too complex. Keep it simple.
Beta: 1.12 (S&P 500 TR USD) A volatility measurement per the market. The higher the beta, the more the volatility. A beta of 1.00, assuming the investment is correlated to the market, suggests up and down movements relatively in sync with the market.
R²: 78.48 (S&P 500 TR USD) A tool to determine how much an underlying index can explain the movement of your investment. For example, you own a Growth & Income fund where the most appropriate comparative index is the S&P 500. The R2 is 98. That means your fund's up and down movements are closely tied to the S&P's movements. R2 of 100 would suggest it's completely in sync, like being in an 500 Index ETF. It's a correlation stat to aid with diversification.
Turnover (annualized)§: 25.00 How much does the fund portfolio turn over a given year? High turnover generally relates to higher expense ratios and increased capital gains exposure,. This particular fund is relatively passive at 25%.
Net Assets: $3.4 billion
Underlying fund expense ratios:
• Gross* 0.84%
• Net* 0.84%
Market Cap (millions): 122492.30

What do all those mean? I get # of assets and net asset value. Also interesting, the expense ratio listed for this fund is listed at 0.35%.... so what is the underlying fund expense ratio?

 

[78]

Yeah, I should have mentioned that the trailing stop loss alerts are for positions where I am swing trading for income, not for the defense stocks that are "buy and hold forever"... I just let those ride. I also use the alerts when up targets are hit on the swing trades to assess if I want to pare off some of the position and let the rest ride to next target.

Yep. It's always a good idea to take some of the profit off the table, even when you're maybe not so inclined. It's just good practical sense.

You know what they say about investors. There are three kinds -- bulls, bears and pigs. The latter fall too in love with their gains and get killed. I'd much rather pay long-term capital gains tax, or even short-term gains, than lose 20-30% because of holding a position too long.

 

[Concrete Helmet]

Yeah, you and I are a lot alike. I started typing up my thoughts for a thread I wanted to title "Personal Philosophy(ies)" so we could see where everyone is coming from, and because I don't put a single penny into ANY retirement account and wanted to explain why. But it is REALLY fookin long, so I didn't post it.

I'd like to read it. Actually this forum has opened my eyes to some good stuff as well as some scary stuff I had not thought about before.

 

[78]

BTW, Brad, a fund that passes on an expense ratio of 0.84% when it's basically holding assets isn't necessarily the best deal in town, even if this one has high decile rankings for its category.

Here's one, an ETF, at about 1/15th the cost that invests similarly. VUG. Little chance you have access to it because you're in a 401(k). Just an FYI.

 

[bradgator2]

BTW, Brad, a fund that passes on an expense ratio of 0.84% when it's basically holding assets isn't necessarily the best deal in town, even if this one has high decile rankings for its category.

Here's one, an ETF, at about 1/15th the cost that invests similarly. VUG. Little chance you have access to it because you're in a 401(k). Just an FYI.

There is not a single ETF, or index, or low cost fund to choose from in my 401k. This all comes back to my rant about fees.

So my only option to avoid that is:
not contribute to my 401k and save post tax dollars elsewhere. I will still get my company's 4% contribution. If I dont put that $19,000 pretax in there... I will not be able to save in a Roth. Although I have heard there are some back door Roth tricks to sneak that money in every year.

 

[bradgator2]

I take that back... there is exactly one.

VVIAX
Top Holdings (as of 12-31-18)¤
Microsoft Corp 6.6%
Berkshire Hathaway Inc B 3.3%
Johnson & Johnson 3.1%
JPMorgan Chase & Co 2.9%
Exxon Mobil Corp 2.6%
UnitedHealth Group Inc 2.1%
Pfizer Inc 2.1%
Bank of America Corporation 2.1%
Verizon Communications Inc 1.9%
Wells Fargo & Co 1.8%

Underlying fund expense ratios
• Gross* 0.05%
• Net* 0.05%

vs my current JIBCX
Top Holdings (as of 12-31-18)¤
Amazon.com Inc 9.8%
Microsoft Corp 5.4%
Alphabet Inc Class C 4.0%
Facebook Inc A 3.9%
Boeing Co 3.8%
Visa Inc Class A 3.4%
Booking Holdings Inc 3.4%
UnitedHealth Group Inc 3.1%
Mastercard Inc A 2.8%
Alibaba Group Holding Ltd ADR 2.7%

Underlying fund expense ratios
• Gross* 0.84%
• Net* 0.84%

The reason I did not choose it is because of performance

1YEAR 3YEAR 5YEAR 10YEAR
VVIAX:
-4.44% 8.98% 7.75% 11.88%

JIBCX
2.39% 12.42% 11.70% 17.46%

That is not even close, right?

 

[78]

There is not a single ETF, or index, or low cost fund to choose from in my 401k. This all comes back to my rant about fees.

So my only option to avoid that is:
not contribute to my 401k and save post tax dollars elsewhere. I will still get my company's 4% contribution. If I dont put that $19,000 pretax in there... I will not be able to save in a Roth. Although I have heard there are some back door Roth tricks to sneak that money in every year.

If your MAGI (AGI with the add back of certain items like student loan interest, self-employment tax, IRA contributions and qualified tuition expense) is south of 193k, you're good up to $5,500 assuming you're not yet age 50. $6,500 if you're above 50.

Heres an MAGI calculator.

What Is Modified Adjusted Gross Income? | IRS.com

 

[78]

I take that back... there is exactly one.

VVIAX
Top Holdings (as of 12-31-18)¤
Microsoft Corp 6.6%
Berkshire Hathaway Inc B 3.3%
Johnson & Johnson 3.1%
JPMorgan Chase & Co 2.9%
Exxon Mobil Corp 2.6%
UnitedHealth Group Inc 2.1%
Pfizer Inc 2.1%
Bank of America Corporation 2.1%
Verizon Communications Inc 1.9%
Wells Fargo & Co 1.8%

Underlying fund expense ratios
• Gross* 0.05%
• Net* 0.05%

vs my current JIBCX
Top Holdings (as of 12-31-18)¤
Amazon.com Inc 9.8%
Microsoft Corp 5.4%
Alphabet Inc Class C 4.0%
Facebook Inc A 3.9%
Boeing Co 3.8%
Visa Inc Class A 3.4%
Booking Holdings Inc 3.4%
UnitedHealth Group Inc 3.1%
Mastercard Inc A 2.8%
Alibaba Group Holding Ltd ADR 2.7%

Underlying fund expense ratios
• Gross* 0.84%
• Net* 0.84%

The reason I did not choose it is because of performance

1YEAR 3YEAR 5YEAR 10YEAR
VVIAX:
-4.44% 8.98% 7.75% 11.88%

JIBCX
2.39% 12.42% 11.70% 17.46%

That is not even close, right?

VVIAX is an index fund, not an ETF, but the expense ratio is dirt cheap. It's in the large cap value category.

JIBCX is different. It's in the large cap GROWTH category as evidenced by the higher Nasdaq concentration. Higher upside, higher downside.

It all equates to risk tolerance and time horizon.

 

[bradgator2]

VVIAX is an index fund, not an ETF, but the expense ratio is dirt cheap. It's in the large cap value category.

JIBCX is different. It's in the large cap GROWTH category as evidenced by the higher Nasdaq concentration. Higher upside, higher downside.

It all equates to risk tolerance and time horizon.

Time horizon = 20-25 years to retirement.
Risk Tolerance = let it ride baby

So... 0.05% cost, large value vs 0.84% cost, large growth?

These underlying expense fees are yearly, correct?

So for a $100,000 investment:
VVIAX is $50 per year
JIBCX is $840 per year?

 

[78]

Time horizon = 20-25 years to retirement.
Risk Tolerance = let it ride baby

So... 0.05% cost, large value vs 0.84% cost, large growth?

These underlying expense fees are yearly, correct?

So for a $100,000 investment:
VVIAX is $50 per year
JIBCX is $840 per year?

Correct.

 

[Detroitgator]

Your thinking isn't lost on me, DG. Defense stocks are just that, defensive. GD and RTN have been a disappointment of late, BA the bomb.

ITA is a good ETF for that play. More of them than you probably want to gather, but a good upside hedge nonetheless.

Sure is! ;)

I reference you again to why I said I don't hold BA with the other defense sector stocks. ;)

 

[78]

Sure is! ;)

I reference you again to why I said I don't hold BA with the other defense sector stocks. ;)

Market overreaction. FAA came out saying they're airworthy. The company is flush with cash. Buy the dip.

 

[Detroitgator]

Market overreaction. FAA came out saying they're airworthy. The company is flush with cash. Buy the dip.

Agreed, it was just funny given the word you used.

 

[78]

Agreed, it was just funny given the word you used.

I was awaiting your reprisal after our back and forth. It underscores BA's hypothetical risk relative to strictly defense stocks.