I live about 3/4 of the way up a mountain on a windy dirt road in the woods.This picture is the Holden Efigy concept car. I believe Holden is an Australian car company, I know we saw a lot of them when we went to New Zealand. I stumbled across this car in at NY Times article about the Detroit Auto Show.
As neat as I think this car is, it has no utility for where I live. Are there things in your portfolio that have no utility?
I have written countless times about keeping your portfolio as simple as possible relative to the time you want to put in, assumes your are managing your own portfolio. Most of the accounts I manage have 40-45 holdings. For the time I spend (this is my job and hobby all rolled into one, remember) this is simple for me.
The right number for you probably depends on the time you want to put in and your experience with managing your own portfolio and even then still, it depends.
There are many schools of thought on this but my idea of simple is more than just staying current with your holdings but also staying current with the various themes that each holding ties into, this goes for ETFs and OEFs. The notion of themes should not come as a surprise to long time readers as I believe in top down management. This is not rocket science but it does take work.
A reader left a question that I think is relevant to this. He noted that since I don't think all-ETF portfolios are ideal; what do I think about all mutual fund portfolios. I have touched on this in the past.
From the top down, once you know the themes you want in your portfolio you then need to seek out what you think is the best way for you to capture each theme. For some things that could be an ETF, others an individual stock and so on. The idea that ETFs are the best tool for every theme you want to own, even if there are just six you have in mind, doesn't really make sense to me.
I tend to believe that most people that manage their own portfolios have the wherewithal to follow at least four or five stocks as a part of their mix along with following the fundamentals of one or two other countries besides the US.
A lot of MSM tends to portray owning individual stocks as complete black box voodoo. It is not. I'll concede that 40 stocks might be a bit much for folks that don't spend a lot of time but a portfolio with 20 diversified holdings, four of which are individual stocks weighted at 2-4% is far from reckless and self destructive.
18 comments:
I don't need a suntan in the middle of winter.
I don't need two cappuccinos in one day.
I don't need new suits every month.
But... I think I might need a car like that. That's got some cool attitude.
i may have to take the other side of the cappuccino comment. That car is pretty cool.
Lest you get too excited by the Holden...it is owned by GM, and the models available in Australia are essentially identical versions of either GM or Opel (aka, GM Europe) cars.
I never understood the utility in concept cars. They never go into production.
I've been toying with the idea of buying DIAMX Long-Short fund and wouldn't mind hearing opinions from the peanut gallery. There's a front end load of 5% and the annual expense ratio is 1.55%. Those are the big negatives imo. The track record is impressive and returs look pretty consistent. I compared to the S&P 500, Wilshire, and Russell 2000.
Btw, those of you who buy individual stocks might have fun playing with Diamond Hill's stock valuator. Enjoy.
http://dhim.diamond-hill.com/DhCalculator/Pages/Valuator.aspx
DIAMX has an enviable track record and that 1.55% is fairly cheap for a long-short fund (what would have called a hedge fund in the 'old days' before the style explosion); the 5% load sure puts a dent into that though as does the additional 25 basis pts from the 12b1 fee. Did a quick check and it also looks pretty volatile, with quite a dive recently: touching lower Bollinger Band, not breaking through but RSI is under 10 and not turning yet so might want to wait a bit to see what happens before entering; JMO.
Since you have dual strategies already in place, one of which is fairly tactical, wouldn't it make more sense to use one of the double-short ETFs; e.g., MZZ, QID, etc. Less money needed to adjust beta since they're leveraged and you know how much you are actually short, something you don't necessarily know with DIAMX.
the utility of concept cars? easy, there isn't any;-)
TomK I would ask if you have explored whether you can recreate the effect on your own?
I agree completely with the notion of including individual stocks within the investor's portfolio. Funds serve a useful purpose. Individual stocks, selected with reason, add the spice to lift a portfolio beyond being average.The same strategy should be followed with fixed income securities.
The Holden? Pass.
The car looks like a Zephyr from the 1930's. Retro looks like this will be vogoe in 5 years. For example Chrysler 300 is from a concept car of about 5 years prior. I saw it in a picture that was in the annual report about 5 years before they brought it out.
Diamond Hill Focus Long-Short (DIAMX) is available no load for Schwab and TDA Ameritrade accounts. At Schwab it's avalible NTF (no transaction fee) as well!
Roger, their prospectus says DIAMX managers use a "bottom-up" process. I'm a top-down guy and don't really have the time or inclination to research individual companies.
Also, this fund claims to be a long-short fund but by looking at the charts I doubt they do a lot of shorting. It seems most of their performance comes from the long side.
Anon 9:40, thanks for the info on Schwab and TD Ameritrade.
tomk, if you are looking for shorts to be apart of your diversification, perhaps it's matter of time until there will be selection of sector short etfs. then you can use a momentum model of your own with this group.
tomk, if you are looking for shorts to be apart of your diversification, perhaps it's matter of time until there will be selection of sector short etfs. then you can use a momentum model of your own with this group.
Just a reminder to everyone, when looking at a chart of a mutual fund, closed or open ended, Bollinger Bands and other charting techniques are nearly meaningless. Almost all charts on the web do not, and can not include distributions from these funds. This makes a big difference to the look and lay of the chart.
Have any of you ever seen any of Chip Foose's cars? He is the best custom car designer around today.
http://www.chipfoose.com/gallery.aspx?LinkID=tn7
These show cars can be had for about 1 mil.
http://www.caranddriver.com/features/9866/almost-perfect.html
One more note about Diamond Hill Focus Long-Short (DIAMX), the fund has a three year standard deviation of 7.7, beta of .41 and a five year standard deviation of 12, beta of .67. Not a money market fund, but still a low volatility fund. Check out the specially designed mutual fund charts at Fasttrack, "http://www.fasttrack.net/charting.asp". These are the only charts on the web that adjust for fund distributions. DIAMX looks a bit different, flatter and with a sharper upward tilt. I've never taken this service, it costs too much, but you can pop one fund in at a time for free.
Yet another note on DIAMX fund, check out the name, Diamond Hill Focus Long-Short, yes it's a focused fund. Long/short positions are approximately 1.5 to 1 in favor of the longs. And it's truly focused. There is no diversification of sectors or market caps. They go wherever their valuation analysis takes them. As for the annual expense ratio, it’s 1.55% inclusive of the 12b1 fee, not 1.55 plus the fee. Those 12b1 fees typically go to pay the brokerage NTF (no transaction fee) service, so buy thru a brokerage to recoup part of your 12b1 fee back. Also, be careful on exiting a NTF service, brokers and the funds themselves charge a early withdrawal fee (both separately), typically for a holding of 6 months or less. Schwab charges a fee for 3 months or less, I don’t know what the Diamond Hill Fund holding period is.
Here is a photo gallery of the concept cars at the Detroit Auto Show:
http://autobytel.espn.go.com/content/shared/articles/templates/index.cfm/article_page_order_int/1/article_id_int/2497
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