Of particular interest from this article was speculation that Fidelity would create ETF versions of its sector funds. Back in the early 1990s, before the Sector SPDRs, I recall two companies dominating the sector fund niche; Fidelity and Invesco. I don't know if the Invesco funds are still around but the Fidelity funds definitely are still around.
The article gave the impression that the Fido sector funds do well when compared to passive sector funds. I would add that in some instances there are also sub-sector funds. The article mentioned a biotech fund and there is also the Fidelity Select Defense & Aerospace Fund (FSDAX) to name a couple.
I am a huge believer in narrow based funds. I think the best way to go with a portfolio is using mostly individual stocks but that is not going to be realistic for a lot of do-it-yourselfers often as a function of time available to spend on the task. Narrow based funds can serve as proxies for individual stock exposure or at least allow investors inclined to spend time learning about sectors and industries to get closer to an all stock (or mostly stock) portfolio.
There will of course be industries where a viable ETF (or mutual fund) will be a long shot. I am still a huge believer in Norwegian fisheries and Chinese toll roads but the fishery ETF failed and although there is a toll road ETF in registration it seems like a low probability for listing (despite a recent article elsewhere to the contrary).
Someone with the requisite time and interest could easily construct a portfolio with one or two sector funds for each sector and here there are domestic, foreign developed, emerging, niche and there are some country funds that can serve as sector proxies. From there they could pick an MLP (I am not a fan of the MLP ETPs), a specialty tech stock they know very well and an airport from somewhere as an example. This sort of portfolio is very accessible for someone with the time and inclination (repeated for emphasis) and a suite of actively managed sector and industry funds would simply give more choices to the person willing to put in this sort of effort into their portfolio.
The picture is of Marcos Patronelli who is currently leading the quad-class of the Dakar rally. Not sure if it is easily visible in the above picture but he rides with a backpack on and for whatever reason I find that interesting.
7 comments:
Any thoughts using options as part of the investment process? I like to write covered calls and sell secured puts in my Roth to enhance my returns.
Also, a bit early, but, Super Bowl and NCAA bb picks?
I think i saw that Nate Silver is predicting Pats v Seahawks. NCAA hoops, well for now how about not Kentucky?
Roger,
Looks like Robby Gordon had another good run Saturday.
An article you linked today, "No-Brainer for Retirees Seeking Income" suggests turning savings into income by investing in managed payout funds. I looked up the funds mentioned at Vanguard. All three appear very aggressive for a retiree, with stock allocations ranging from 70 to 85%. Any thoughts about these managed payout products?
Looks like Gordon has had a run coming in third for a couple of days so he is moving up the standings but obviously not gaining on the lead.
Not sure what article you mean, if it was one of the Wikiinvest links then I wouldn't necessarily know the article (except for a coincidence). My general impression of teh payout funds is close to that of target date funds. I think the target date funds are a terrible idea but merely think the payout fund are a bad idea.
Roger. I turn 65 in a month and have been considering the Vanguard payout funds (there are 3 funds with slightly differing payout/capital preservation goals), and therefore find your comment that they are a bad idea somewhat troubling. Could you elaborate, please. Thank you.
If I am thinking of the right thing, I am not a fan of funds that wear two completely different hats. target date funds manage different asset classes and also then make changes to the asset mix. The payout funds (again, if I am thinking of the right thing) manage asset classes and also manage the depletion of the fund and this just seems far more complicated than a simple mix of stock, bonds and cash.
Apologies if I have the wrong product in mind but there is one that depletes and I think it is a bad idea for the potential complexity and complexity that I would add is unnecessary.
Here's a link to the article on managed payout funds: http://tinyurl.com/bweshtg
The annual distribution goal is roughly 3%, 5% or 7% for the three Vanguard funds.
I agree Roger about the complexity, that and the high equity ratio makes me wary. Target funds by comparison transition to about 50% bonds by retirement age. The main benefit I see in these, assuming they work, is the regular payouts for someone who doesn't want to manage a simple asset mix themselves.
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