JAGIX Janus Growth and Income next fund for WylieMoney Slowly portfolio

Once a month, I add one of 20 funds to the hypothetical non-retirement portfolio of mutual funds I am tracking called "WylieMoney Slowly."

I picked 20 funds, all available through one broker (Etrade) over several months and hypothetically invested $50,000 on May 1st. But I also wanted to see what the performance would be like if I invested slowly- one fund a month, over 20 months.

My approach is to invest in the fund on the first day of each month that the category I plan to add to is down for the day, "placing the order to buy at about 3:45" so I invest at the closing price for that day. Since August is almost upon us, it is time to get ready for my forth pick.

The next category I originally chose was Large Cap Growth and I originally picked JAGIX, Janus Growth and Income. But just because it was the best low cost fund Etrade had when I last looked, that does not mean this is still the case so I'm going to take another look.

When I screen out based on my criteria, low cost, low turnover, low investment minimums, etc. I get 7 options. JAGIX is listed 3rd when sorting by 3 year return. I like it over TEQUX given its lower fees. It has also done better than TEQUX over the last year and over 10 years. JAGIX struggled a bit recently (I actually own this one). It had nice returns, but not as nice as it should have, given the market trends, but despite that it remains a 5 star fund and has a nice record.

AMAGX is definitely worth a closer look. It has a higher expense ratio but has more than made up for it with much higher returns. It is riskier and is a straight growth play compared to JAGIX which also seeks income. JAGIX is actually top loaded with banks right now and is drifting toward the blend category, as a result. Citigroup is in its top 10 holdings and JP Morgan and US Bancorp are both in the top 25.

I'm going to stick with JAGIX, primarily because it WAS my original pick and is still the option with the lowest expenses. If I were actually investing money, I would think long and hard about AMAGX especially given the big picture of what a 20 fund portfolio like this would look like. I do not like the higher expenses, but the manager has a very long record of serious performance. I wish Etrade posted when they started offering this fund as a NTF (No transaction fee) offering.

Anyway, part of my strategy and inspiration for tracking these portfolios is to see if I can be only slightly less lazy than the lazy indexers, and beat them. So when given a couple of good options, I have tended to go with the less expensive choice and I have not spent a lot of time stressing over the details.


Etrade, what is wrong with you?

Not again!!!!!!

The great thing about No-Load No Transaction fee Mutual Funds is that you can invest in them over and over again without wasting money on fees. But this only works when you can invest the amounts advertised!!!!!

Here is the minimum in your web interface for your AIP:

Etrade, either you've got it wrong or Morningstar does.

And you fixed this just a month ago. So that's twice now that I've tried to invest and been unable to do so because of issues with your web site.

This is getting a little frustrating.

I called two weeks ago and left another message with the person who I talked to before, because I still have been unable to get someone to answer the phone directly at the Boston Branch. I have yet to hear back. I'll keep you posted.


Lazy Portfolios plummet in recent downturn!

Of course all portfolios plummeted in the recent downturn if you were invested long and broadly. But the Lazy portfolios of Vanguard Index funds I have been tracking fell by much more than the actively managed comparable funds I picked through a single discount broker. They fell so much more that my portfolio is now out-performing the 'lazy portfolio' since 'purchased' on May 1st and year-to-date.

I will not tell you what to do or challenge your intelligence, unlike Paul B. Farrell, who made the claim on 7/9/7, right before the recent downturn:

It's time you got serious about setting up some "Lazy Portfolios." Why now? Because they're the only intelligent way to invest for a passive investor: Simple well-diversified portfolios of three to 11 no-load index funds. "Lazy Portfolios" are the best and safest way to capture the bull on the way up and avoid the worst of the bear on the way down." (emphasis added)

I chose my 20 funds and then picked the 20 index funds to match the categories and then picked 3 index funds to cover the Domestic, International, and Bond allocations of my groups of 20. I did this to see, what would ACTUALLY happen with real side by side comparisons. Right now, Indexing would have cost me more than my hand picked low cost options, but 3 months is not enough of a record to really make a decision on.

Still, I wonder if Mr. Farrell likes his lunch.

I anticipated that when the market took a big dive, my actively managed mutual funds would lose more than the comparable portfolio of Vanguard Index funds, but the exact opposite took place. I probably anticipated this because I have read Farrell and others claiming this would be the case.

On Thursday, WylieMoney took the lead in % change since I invested on May 1st. I keep track of WylieMoney Slowly- the portfolio I am building one fund at a time, but since it only has 3 funds so far, and one of those is a bond fund, it is no surprise it is a bit out of sync. Once It gets up to 10, I'll consider it big enough to really be counted in the competition.

The Three Fund Index was still beating the WylieMoney 20 YTD. But then, along came Friday! Yes its true that Friday pushed all the portfolios into the red since my 'purchase.' Some might think this a sad day... Well, one thing to consider is that I only 'invested 'in May so I have to expect that short term, things might be a little rough. Another thing to consider as I did not actually invest any cash.

So here is the summary for 7/27 and below are the details for each portfolio. Click on the images for larger, more legible views.


WylieMoney Slowly


Really Lazy- 3 Fund Portfolio


SPY- S&P 500


Book Review: An American Hedge Fund

Timothy Sykes contacted me and asked if I would be interested in reviewing his soon to be published book, An American Hedge Fund.

I checked out his site, watched videos of some of his TV appearances, shook my head, laughed and said "sure."

After reading the book, my first reaction was: "This guy is nuts!"

Timothy took $12,000 and spent his college years day trading in his dorm room and made millions. That in itself is not nuts- its incredible. And the book explains how he did it in more detail than you might expect.

He started a hedge fund as the title indicates, but the book is less about his fund, and more about him, which is a good thing. He chronicles his journey from a tenacious youngster seeking to maximize profits (I'm glad he never strung my tennis racquet) to a college bound freshman with an obsession for finding market trends and playing them like a professional sportsman, to a young adult trotting the globe and riding high on his successes and also the parts of his personality which he very self consciously has learned can lead him to amazing new opportunities.

He makes the pitch that finance is THE American sport and for him, it certainly was. I say was because it is unclear to me if his market niche, much like some of our more intense physical sports, requires the 'muscles' or 'audacity' of youth. By the end of the book, Timothy seems to be hedging his investing profession with a stake in financial celebrity- a field almost as mysterious to me as Hedge Funds...

Ok- so why am I calling him nuts? I mean it in the most affectionate way possible- This book is highly entertaining as Timothy does a great job of telling his story with the same kind of speed, focus and energy that he must have taken to whatever computer terminal around the globe he found to sign on, and compete in his financial sport.

He shares in great detail, but in plain English, many examples of trends he saw and trades he made both scoring big and fouling out. As the book goes on, he shares more and more about his own ego and lack of discipline getting in the way of consistent crushing returns. His approach toward dealing with overcrowding in his dorm room, 'preparing' for interviews, and the frankness with which he lays bare some of his biggest failures and why he made them paints a picture of a driven, flawed, crazed, man on a mission.

Near the end of the book he sums it all up quite nicely: "Maybe I’m going overboard, but you get the point."

I was left wondering why on earth anyone would want to trust him with their money... but then you remember the $12,000 he started with and the millions he made.

Is investing the American Sport? And is it a game that requires the reckless abandon and singular focus that only a young mind can truly excel at? Will Timothy, like so many professional athletes after great success on the field, move into the media full time? Only time will tell.

But like the stories of some of our more 'lively' athletes, Timothy's tale is a highly entertaining look into the life of a driven competitor. The release date is Oct. 1st, 2007.


What is a Hedge Fund?

As media buzz continues to intensify around "Hedge Funds" I have grown more an more curious- just what is a Hedge Fund?

From all the noise, I got the confusing picture that a Hedge Fund has no clear definition, can invest in anything it wants, is only for the very wealthy and charges absurd fees. I also assumed there was a "Hedging" component- meaning that the fund employs counterbalancing strategies.

As far as I can tell, this is pretty much it, with the exception of the "Hedging" part. While some Hedge funds do in fact, 'hedge'... they aren't required to, by definition. Well, maybe they are required to by definition (for all you grammatical literalists), but they are not required to by regulation or as a consistent matter of practice.

Any manager seeking to run an unregulated investment operation can start up a fund and call it a Hedge Fund as long as s/he follows a few guidelines.

1) Allow fewer than 100 investors or only accept clients who earn $200,000 or have investment assets worth more than $5 million. (Different source list different numbers of millions required- more than a million seems to be the case).

2) Don't advertise to the general public.

I'm not making this up folks. Somebody over at wikipedia might be making this up, but I'm not.

So after putting together a group of their closest buddies and pooling their gazillions, what does a Hedge fund manager do? Pretty much whatever s/he wants!

How much does this cost the 'average' investor? Fees appear to generally range from 2% annual fees combined with 20% of profits to 3% plus 30% of profits. Some fees run much higher, some are likely lower but 2/20 to 3/30 appears to be what you will likely run into after you put together your 5 million and start searching for a Hedge Fund to invest in.

I was recently contacted by Timothy Sykes to review his forthcoming book "An American Hedge Fund." I'm reading it now and will review it soon- highly entertaining so far!

I also found Veryan Allen's site. As a big fan of diversification (20 mutual funds in one portfolio?) I like Veryan's stratagey of investing in... I'm not making this up either: 20 Hedge funds. At the very end of this post he says: "Twenty hedge funds managing strategies that have little correlation to each other is probably the MINIMUM number necessary."

Is 20 a magic number for fund picking? I digress.

So anyway- many Mutual Fund Investors might scoff- 2% annual fee and 20% of profits... "That's way too high!"

Of course many mutual funds charge 5% or more up front regardless of whether they earn a cent or lose value in addition to annual expenses which sometimes hit 2% or higherin annual expenses. And I would rather pay 20% of profits on some profits than pay 0% on no profits:

The real issues here are 1) you must have a ton of money to even have access to Hedge Funds thanks to our government protecting us poor folks from ourselves and 2) researching Hedge Funds is not so easy. Finding a single good one, much less finding the 20 required by Mr. Allen, would be quite a chore...


Simple portfolio continues to lead the way

Despite not updating for ten days, including some pretty significant swings in the US markets, the race for best portfolio has not changed too much. The portfolio of three Vanguard index funds continues to lead the pack with a 4.49% increase since May 1st. The Wylie portfolio comes in a close second at 4.29%.

The portfolio of all ETFs trails the pack significantly but still shows a gain of 2.85%. The ETFs have no longer outperformed year to date- that honor goes to the Wylie portfolio.


So long TIAA CREF!

My employer offers two different companies for retirement investing. I originally signed up for TIAA/CREF as they had a Real Estate option and the other company (Invesmart) did not.

I allocated a more than advisable percentage of my savings into the Real Estate offering for several years and did pretty well with that. I am switching out of TIAA CREF and into Invesmart which means no more Real Estate option. Even though Real Estate is not likely to do as well as it has over the last few years, I am still bummed I won't have the option. But overall, I think Invesmart is a better choice.

I think both the plans my employer offers are ok, but there are two reasons I am switching.
  1. The plan available to me through TIAA/CREF invests in annuities in a 403(b). These are not mutual funds so I cannot research the holdings on morningstar. I cannot compare them to other 'funds' in the same categories. I can go here and assess performance, but I cannot compare each holding, side by side with the competition.
  2. The main reason I am switching is that the options through Invesmart are, for the most part, better (once one goes through the tedium of trying to compare the two). Invesmart picks top mutual funds in each category and offers that fund. If a fund falls off the wagon they replace it with a better performing fund in the same category.


New "Really Lazy" Portfolio takes lead!

What a day!

I added the two new portfolios as promised, but I do not have data from the specific days I recorded in the past so, the chart will look a little funny until some more time passes...

Since I first, hypothetically invested on 5/01/07, the Three Index Fund portfolio has done the best, earning 4.83%.

During today's burst of energy, the SPY ETF tracking the S&P500 was the top performer. We shall see how the rest of the world reacts tomorrow. I bet the SPY 'portfolio' continues to lag YTD once the foreign holdings in all the other portfolios respond to today's domestic performance.

The ETF portfolio, strangely, is still the strongest performer YTD but is the second weakest performer of the bunch since I bought in May.

I added BTTRX to the WylieMoney Slowly account, like I promised.

And last but not least, the WylieMoney portfolio continues to do better than the matched Lazy portfolio of 20 index funds, but is not in the lead in any one category...

BTTRX American Century Target Maturity 2025/Inv

Today is the day I am adding BTTRX American Century Target Maturity 2025/Inv to the "Wylie Slowly" portfolio.


Additions to my hypothetical portfolios

Fed up with article after article saying buy this fund and that fund when no single brokerage actually lets you buy all funds, I chose a single brokerage (Etrade) and started researching funds in 20 different fund categories.

Curious whether this approach would lead to a portfolio of funds that could beat a similar portfolio of index funds, I identified the 20 Vanguard funds that most closely tracked the fund categories I had selected.

Also curious whether ETFs would be a better bet, I selected 20 ETFs, one for each category.

On May 1st, I invested $50,000 in each of the three portfolios by hypothetically 'purchasing' them, using the Morningstar.com portfolio tool as it allows me to reinvest dividends and capital gains distributions with minimal effort.

The funds I chose all allow minimum investments of $2500 or less. The Vanguard funds have higher initial investments, so you would not actually be able to buy the Vanguard portfolio unless you had more than $50,000 up front.

Also, the funds I choose all allow subsequent investments of $100 or less.

My goal here was to research a real world example of low cost options available through a
single brokerage that could serve as a model for someone with modest investment savings and a plan to invest over time.

Then by tracking the performance of such a portfolio against a couple of benchmarks, I hope to discover if this approach is worth the time and effort.

Finally, I also started tracking a portfolio of the 20 funds I selected, available through Etrade, buying one fund at a time to mimic how one could actually build this portfolio over time. I am adding the next fund, in the order I picked them, investing on the first day of each month that domestic markets are down significantly (leaving 'significantly' intentionally undefined).

Now I am going to add two new portfolios setting up additional $50,000 portfolios, invested on May 1st.

First, I am going to track the growth of SPY as a measure of the S&P 500.

Second, I am going to invest in total market indexes, in loose proportion to the 20 funds I have chosen: Vanguard Total Stock Mkt Idx VTSMX (55%), Vanguard Total Bond Market Index VBMFX (15%) and Vanguard Total Intl Stock Index VGTSX (30%).

If this 3 fund portfolio comes close to the 20 fund versions, then the answer is pretty clear as to what is the best (most efficient/worthwhile) way to invest in mutual funds, at least out of these options!


Is now the time to buy government long bonds?

In general, probably not. But for my hypothetical portfolio? YES!

Why? Because it is the third fund I picked. And yesterday would have been a good day to buy as it was down 1.39%. But I did not choose to buy yesterday before 4:oo pm so I will not add it at yesterdays price.

Today would have been fine as well as it was down .70%. I have not yet mastered getting a sense of when bond prices will close down as I do not have a handy graphic like the one morningstar provides for Stocks...


Actively Managed Mutual Funds Out Perform Index Funds!

For the first two months since I hypothetically invested in affordable mostly managed mutual funds (there are a few index funds where no competitive actively managed fund was available) the funds I picked have outperformed comparable Vanguard Index funds.

Though note that the Index portfolio did slightly better today. I think for a few days on my recent trip the index portfolio pulled ahead.

They are really close though. The big surprise to me has been how poorly the ETFs have performed. I would have thought they would have been more or less in line with the index mutual funds, but they have fallen almost 1% behind.

Etrade fixes minimum investing in mutual fund issue

So before I left town for a while, I was trying to resolve an issue with my Etrade account. My man Justin got back to me and the issue was resolved, but I took a break from posting about financial matters while I was on the road. I did update the message in the upper right corner of this site to indicate that the issue was fixed though, so it would not look like Etrade was not following up!

Basically, the minimum additional purchases for two mutual funds I own were not allowing any additional investments under $1000 each. Morningstar listed the minimum additional investments for an automatic investment plan purchase as $100. When Justin called me up and left a message it should be fixed, I went into the 'Automatic Investment Setup' screen and could see the new $100 minimum amounts showing.

Now that July has rolled around, I will wait for the first down day on the market and try and add $100 each to these funds and see if it lets me.