Beyond Ridiculous: A Portfolio for all Seasons

Ulli Uncategorized 9 Comments

Every so often you find a reporter’s story analyzing a fund manager’s portfolio or coming up with his own (in theory, of course) group of mutual fund/ETF holdings allegedly suited for all seasons.

You can recognize this by psychologically appealing names such as “The Lazy Man’s Way,” “Gone Fishing,” or other esoteric ones indicating that this certain portfolio combination is all you need — and you won’t ever have to worry about it.

This happened again a few days ago when a reporter interviewed and analyzed a well known money manager’s portfolio (over $20 billion under management). Apparently, his approach is to hold a variety of 11 inexpensive Vanguard Index funds allocated in certain percentages. Nothing wrong with that.

Investment returns were given for 2006 (about equal to the S + P 500) and over 3 and 5 years, where he outperformed the S + P 500 handily.

Since all ticker symbols and percentage allocations were listed, it would now be easy for the casual reader to imitate this portfolio with the assumption that, the way it was presented, this is a portfolio to duplicate and forget.

That’s the problem I have with this scenario. Fund managers and mutual fund companies are chomping at the bit that 5-year return figures are now showing some positive numbers (without the bear market), with a 5-year reporting period now covering 2002-2006.

Let me make it crystal clear. As great of a performance as this above portfolio has shown over 3 and 5 years, it was a big loser in the last bear market!

How do I know? I plugged in the numbers. Here’s how I did it. As you know, my trend tracking methodology had us on the sidelines in cash from 10/13/2000 until 4/29/2003.

To see a comparison, I applied the closing prices for the funds using the dates above in combination with the Vanguard portfolio. What a surprise! It turned out that this portfolio lost exactly 30% during the dates specified while the S + P 500 lost 33%.

The best portfolio component gained 17%, while the worst one lost 46%.

In Wall Street’s perverse thinking, a loss of “only” 30% is great, because the S + P 500 lost 33%. That’s one way to outperform the S + P and earn recognition among peers.

My point is, be careful when you read these stories. Don’t ever assume that there is a portfolio for all seasons. As much as we all would like one, it doesn’t exist.

How to get Investment Tax Advice — FREE!

Ulli Uncategorized 4 Comments

I am sure that during your investing endeavors, you will come across a situation where some qualified input from a tax professional might be of tremendous help. Or, maybe you just like a second opinion?

One of my newsletter readers, a former corporate CPA, has offered to answer any questions you may have in that area. His blog contains a wealth of information and, if you are in need of assistance, feel free to post a question in the comment section of his blog:

I hope you find this useful.

The most commonly asked Mutual Fund/ETF Investment Questions

Ulli Uncategorized Contact

Over the years, I have received hundreds of investment related questions from my newsletter readers.

These questions, and my answers, represent a wealth of knowledge, which has been archived and is readily available to you. The archive dates back to May 2003 and contains over 200 Reader Q & A’s.

You can view it at:;

Whether you are new to investing, or a seasoned veteran, there is bound to be some information contained in this archive which can help you become a better investor.

Mutual Fund/ETF Investing: How to Track your Stop Loss Points

Ulli Uncategorized 3 Comments

If you follow a methodical way to investing in no load mutual funds/ETFs, as I do, you most certainly will have learned the use of trailing sell stops to either lock in profits or limit any potential losses.

Putting money into the market without them is gambling and not investing. Despite the fact that you can’t place a stop loss with a mutual fund company, you nevertheless need to track it and place the order whenever it gets triggered.

In my practice, I track all sell stops via my custom data base and spreadsheet. It‘s easy for me do, because I spend a lot of time in front of my computer. If you are traveling a lot, this might be more difficult and pose a problem for you.

There is a solution. Some of my newsletter readers have used a couple of services which, for a subscription fee, will track trailing sell stop points for you and send an e-mail to you or your cell phone if any of them have been triggered. While I have not used these companies myself, you might find it worthwhile to check them out.

Here are their web sites with more information:

Feel free to send me an e-mail and share your experiences.

Mutual Fund Companies: Talking out of Both Sides of their Mouths

Ulli Uncategorized 5 Comments

When you have been dealing with No Load Mutual funds as long as I have, there is bound to be a run-in with a fund manager regarding investment philosophy.

This happened a couple of times over the past 2 years with the end result that my advisory firm was banned from placing trades with that particular fund family — forever, I suppose. Not that I was all broken up over it, but the reasoning left a bad taste in my mouth.

Here’s about how the phone conversation with the fund company (FC) went:

FC: “We noticed that you bought one of our mutual funds and sold it again within 60 days.”

Me: “That’s correct.”

FC: “We don’t allow that. We want advisors to invest with us for the long term. Don’t you do asset allocation?”

Me: “Yes I do. I generally invest for the long term, but the markets pulled back sharply and, to protect my clients’ portfolios from further damage, I moved to cash.”

FC: “We don’t allow that, you’re not supposed to time the market.”

Me: “Let me ask you, what is this fund’s Annual Holdings Turnover?”

FC: “Let’s see, this fund has an annual turnover of 140%.”

Me: “So, that means you pick your stocks and, if they don’t perform, or economic circumstances change, you sell them and buy others. By the end of the year, you have a turnover of some 140%. Is that correct?”

FC: “Yes, that’s right.”

Me: “Then, why don’t you pick the appropriate stocks in the first place? I am sure, that type of frequent in-and-out trading increases costs for your shareholders?”

FC: “Ah…well…you know, that’s not how it works. Things may change, or a stock heads south, and we need to adjust to increase our performance.”

Me: “That makes sense. Then why am I not allowed to do the same thing? If the markets change, I should have the right to liquidate positions, just like you do, to protect my clients’ assets or increase performance. I noticed that, during the last bear market, this fund went down some 40%. If we head in this direction again, shouldn’t my clients’ interests be priority?”

FC: “Hmm, no…yes, but our policy doesn’t allow that. We need to ban you from further trading with our firm.”

Me: “That’s your loss and not mine. Go ahead — ban away.”

That’s the prevailing attitude among most fund families. Their interests rule and yours don’t really matter.

If this type of thinking continues, more and more investors will eventually realize this and move their accounts. Guess where the assets will go?

Into ETFs, of course!