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Ah, thanks Tim. I'm trying to get a (first) feel for these. :)
If I may ask, how many are you in (tracking)?
I guess, generally speaking, I wanted to be sure that you don't trade these like you may trade stocks, and is it usually an advantage to hold them over a year.
I'm invested in the Gov't.'s Thrift Savings Plan (TSP), which I just leave in there till retirement.
I watch it regularly to see if I need to redistribute my funds. There are five of them. I mainly focus on three, the C, S, & I funds, which are crrently yielding 11, 25, & 24 percents, respectively.
So, if these are similar here, do you leave money in one (or more) and redistribute as one yields higher, or do you generally stick with one (or more) long term?
Again, remember from the RE board, this is new for me (as I may be getting old enough to consider them). :)
Fred, FWIW, I plan to review every 6 months and determine weather they are tracking the expected glidepath.
Started in Jan this year
Depends what you want to do. It also depends on how long you don't need the money, what your age is, you know, stuff like that.
Make Mine a Muni
by Scott Berry, CFA | 10-19-05 | 06:00 AM
It's hard to make a strong case for the bond market at the moment. PIMCO's Bill Gross argued in his October "Investment Outlook" that the Federal Reserve could be ready to lower interest rates by mid-2006, but Smith Barney's Joe Deane, also a former Morningstar Fixed-Income Manager of the Year, and others argue that with the economy in good shape and inflation picking up, interest rates are poised to go higher.
That argument would be fun to debate, but we don't think investors should base their investment decisions on the ups and downs of interest rates. With professional money managers having a hard time making such calls, individual investors aren't likely to have much success with that approach either.
The level of market rates, on the other hand, is something that investors should consider when picking one fund over another. In some cases, investors may want to consider how much added yield is being offered by long-term bonds (or funds) in exchange for their added interest-rate risk. In others, investors will want to consider the yield differences between municipal bonds and taxable bonds, as that difference can have a direct impact on an investor's bottom line.
The bond market would make the decision easy if municipal-bond yields moved in sync with taxable-bond yields, but that's not always the case, as supply and demand forces can push the yields closer together or farther apart. Recently, for example, demand for long-term Treasury issues has kept intermediate- and long-term yields relatively low. In fact, the five-year Treasury currently yields 4.36%, while a five-year insured municipal bond yields 3.44%. For investors in the 28% tax bracket, the advantage goes to the muni, as once taxes are factored into the equation the municipal's taxable equivalent yield jumps to 4.78%. For investors in higher tax brackets, the advantage is even larger. The advantage also grows if investors are willing to take on more interest-rate risk. A 10-year municipal bond offers a taxable equivalent yield of 5.50% versus the 10-year Treasury yield of 4.50%.
The same holds true for many municipal-bond funds. Direct comparisons are difficult to make because comparing bond funds isn't always an apples-to-apples comparison. However, a look at Vanguard's bond lineup shows that its muni funds currently look a bit more attractive than its taxable offerings. Vanguard Intermediate-Term Tax-Exempt VWITX , for example, yields 3.49% (4.85% tax equivalent for the 28% bracket) while Vanguard Intermediate-Term U.S. Treasury VFITX yields just 4.13%. Meanwhile, Vanguard Intermediate-Term Bond Index VBIIX yields 4.67%, and that fund takes on more credit risk and interest-rate risk than its municipal sibling. And Vanguard's funds aren't alone, as Fidelity's intermediate muni fund also boasts a yield advantage over its taxable counterparts.
Bonds may not look like a screaming buy at the moment, but those investors in need of income or those looking to cushion the potential volatility of a stock-heavy portfolio should at least consider the municipal-bond market. Our Analyst Picks from various municipal-bond categories are a good place to start. And be sure to check out our Bond Calculator to determine if municipal bonds make sense for you. When the taxman comes calling, you'll be glad you did.
Scott Berry, CFA, is a senior fund analyst with Morningstar.com.
First newbie question: Do you generally hold these for over a year?
REMEMBER BOARD: Interest rates have a SIGNIFICANT effect on mutual fund performance, no matter what sector or type of investment it is.
To become an intellegent investor, you don't have to follow each and every thought of the Fed chairman concerning interest rates, but you should have a general idea as to where Mr. Bernanke wants interest rates.
For example, commodity prices and inflation go hand in hand. When you hear that the fed is concerned about interest rates in the forseable future, it's a pretty good guess that they are not going to stop raising interest rates in the future. This is exactly what is happening in the United States now.
There's always something to buy. eom
not enough blood in the street yet.
not good to try and play the exact bottom / top ------->
risky business !!!!!!!!!!!!!!
BUT.....GLTY !!!!
8-)
wish i knew if this was a bottom. according to bradley it is but just don't know. if it were, i would be buying more mf's today.
Nope. I think I was gonna buy one or two a couple weeks or months ago, but I couldn't convince myself to do it. lol Basically, I looked at some other stuff and the charts looked better so I bought those.
ouie,
do you own any small cap stock funds?
Of course. What I am talking about are mutual funds. No doubt there are many great individual small cap stocks. However, on the whole, most of them don't have the equity to continue healthy earnings growth.
Raising capital through company stock is not the best way for a company to make money.
Not all of the smallcaps are debt ridden. If you take the time to look for them, you you find some that are not dependent on financial debt instruments. Of course, they use there stock as equity to fund projects.
A couple that I own:
AATK, JOB, GIGA
thanks, good tool.
article said year to date meaning this year. i would have to do some looking as i should have posted the link when i copied it. sorry.
on the left side under "tools" hit Mutual Fund Map......
another window will open....at the top hit "Map of the Market"
( note this take a while to load ).......
once the map is up, you can use the pull down arrows near top
to change timeframe, configuration ie. fund family, etc.
GOOD TOOL !!!! Move the cursor over different pieces of
each style to see the specific fund dynamics ie. largest GREEN
square in Intl. near top right quadrant is American Funds Euro-Pacific, etc.
Have fun !!
http://mutualfunds.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=mutualfunds&zu=http%3A%2F%2F...
What year is that from? That definitely matters because of interest rates. Post a link with your article, please.
Another Up Year for Equity Funds
Fund Investment Style 2005 Return
Small-Cap Value 6.17%
Small-Cap Growth 6.35%
Small-Cap Blend 6.06%
Midcap Value 9.07%
Midcap Growth 9.60%
Midcap Blend 9.65%
Large-Cap Growth 5.96%
Large-Cap Blend 5.34%
Large-Cap Value 5.74%
Domestic Equity Funds (excluding sector and balanced funds) 7.32%
S&P 500 Index (with dividends reinvested) 4.92%
Large caps have done well. Small caps have done better, I admit.
Over the long haul, large cap funds are the preferred choice of most financial advisors.
Wait until the Fed raises rates four times more than what people expect. It could have a devastating effect on small cap funds. Debt isn't cheap anymore. Debt is what fuels small businesses.
I copied this from Reuters.--Just to prove my point that small caps have certainly outperformed large caps. more than double.
Year-to-date, the Russell 2000 <.RUT>, the market's broadest benchmark for stocks with a market capitalization between $100 million and $2 billion, is up 10.2 percent, more than double the Standard & Poor's 500 index's <.SPX> 4.6 percent advance.
I like a more balanced portfolio with stronger funds in sectors that in vogue.
I like health care, energy, and water stocks right now.
Stock funds add $2.3 billion in week
Print | | Disable live quotes By Jonathan Burton
Last Update: 4:01 PM ET Apr 6, 2006
SAN FRANCISCO (MarketWatch) -- Investors added an estimated $2.3 billion to U.S. and international stock mutual funds in the week through Wednesday, vs. inflows of $2.5 billion in the previous week, according to data released Thursday by TrimTabs Investment Research. U.S. stock funds took in about $1.3 billion compared with inflows of $1.4 billion a week earlier. International funds collected $930 million for the week against $1.1 billion in new money a week earlier. Meanwhile, $436 million went to bond funds, building on last week's $363 million inflow, and hybrid funds -- which hold stocks and bonds -- added $565 million compared to $467 million in new money a week earlier.
Large Caps have been rallying since the beginning of the year.
This has been a small one at best. Not nearly as good as small cap. Small caps have performed large caps for quite some time.
I agree. I think small growth over value is best. what do you think.
Silver has many applications in manufactured products, gold less so, although you make a good point. I think most speculators in gold are looking at Central Bank(s) policy and gold as a hedge against inflation.
Many investors and advisors believe that mutual funds
with buy-and-hold strategies outperform those that trade
their stocks frequently. The latter are known as "high-
turnover" funds.
A fund with a 100 percent turnover rate holds each
investment for an average of one year before selling it.
The higher the ratio, the more a fund churns its
portfolio. On average, U.S. stock funds have a turnover
rate around 93 percent
High-turnover funds may underperform because they have
higher trading costs, from multiple transactions. Also,
they may incur taxable gains (including highly-taxed
short-term gains), which are passed through to investors.
However, a new academic study concludes that small funds
with higher turnover tend to outperform lower-turnover
small funds. Especially if a fund has had a few sub-par
years, low turnover may indicate it's sticking to its
losers–and might signal that it's time to switch to a
fund with more energetic management.
Mutual Persuasion
When you sell shares of a mutual fund, include any
reinvested dividends and capital gains in your "cost
basis." This will reduce your taxable gain or increase
a taxable loss.
If you're selling some shares from one fund, bought at
different times, specify that higher-cost shares to be
sold. This tactic also will generate a smaller gain or
a larger loss.
For example, you might write to your broker, "Please
sell the 500 shares of XYZ Growth Fund that I bought
on August 31, 2002." If you're not using a broker,
write to the fund company.
Either way, make sure you give these directions before
the sale takes place. Keep a copy of the confirmation
letter you receive.
Generally, you should sell shares held more than a year
because any profits will be taxed no higher than 15
percent However, you should specify short-term holdings
instead if those shares have lost value or if you have
only token gains on them.
Unfortunately, most people see gold and silver as a currency only. But, they have important value in industrial manufacturing also. I think as those currency folks hoard their gold/silver, it will put a hurt on the manufacturing end, thus rising the price even further
I've been playing the market for about 7 years, and have heard that over and over about smallcaps. But, if you have selected the right ones, you will continue to do well, imo.
An investor smarter than me said gold is no more and no less than another currency. I agree that as gold attains new heights it becomes ripe for speculators. If the price of gold continues to climb in small increments and the $ weakens against the euro and the yen I suggest it's a vote of no confidence in the $ and a signal of pending inflation. Should the "nutty" speculators grab it and drive the price up dramatically it's time to question. I expect that as it has done in the past, soon the gold fever investors will begin to pile on.
good article thanks....
Large Caps have been rallying since the beginning of the year.
As far as energy is concerned, for domestic energy, I like Jennison Dryden's Natural Resources Fund PRUAX, Munder Power Plus MPFAX, as well as Franklin Natural Resources (don't know the symbol off hand).
I personally like the jennison fund better, but you'll have to make the decision for yourself.
Personally, I think the place to be will continue to be international energy, domestic energy, latin america, russia, pacific rim, and select large caps.
Well, I have funds in latin America (mcltx), russia (letrx), pacific rim (mapcx), . I am looking for a good domestic energy fund, havent found one I really like yet. Everyone has been saying large cap it going to rally. I havent seen it yet,. small funds have been much better.
The Case Against Small Caps
By Paul Elliott (TMF Rael)
March 29, 2006
It took me nearly 20 years to grasp the implications of what you're about to read in the next few minutes.
Now, the case against small caps
Sure, we know all about those lucky devils who retire at 35 after stumbling upon Intel (Nasdaq: INTC) in the mid-'80s or even Wal-Mart a quarter-century ago -- before it hit the big time.
But that sword cuts both ways, right? What about the less-fortunate chumps who get wiped when their small-cap wonders suddenly go belly-up, leaving them holding the bag?
Isn't that the "problem" with small-cap stocks, after all? That they're a crapshoot?
Well, you're smart to think that way
Go to Harvard Business School, and they'll teach you the same thing -- though be sure to pack a few hundred thousand in small bills. Or save yourself a few bucks and consider something else instead. What if the problem isn't with small-cap stocks, but with small-cap investors?
What if it's because they have so much potential that small-cap stocks attract gamblers and daredevils? Maybe it's these reckless spirits, all vying for a shot at the next home run, that creates the illusion of a wacky and treacherous market.
Maybe nothing. That's precisely what happens. And don't take my word for it. Reams of data support that very contention; I'll even show you some in a bit. But more important than any piece of data is how you can use this "illusion" to make money.
Why small-cap investors get creamed
Slip the dean that first 50 grand, and his minions will tell you why small caps are risky. Markets for small stocks are illiquid. Earnings are less dependable and uneven ... capital is more costly and hard to secure, especially when times get tough.
But none of that is the real reason why small-cap investors get pummeled. It's more insidious than that. It's because they don't invest -- they speculate on stock tips and super high-risk story stocks with low-quality (or worse, no) real earnings. It's that simple.
Small-cap investors ignore fundamentals. At least, too many do. If you don't believe me, ask yourself this: When was the last time you heard some guy hocking a small-company stock at a party or on TV, and the fellow wasn't focused entirely on the story? Hardly ever, right?
Then again, who wants a cigar butt?
Now, compare that with the stodgy old-timers who focus on mature large-cap, cigar butt, and smokestack companies trading at bargain prices. Could these guys possibly be more boring? They never talk story. They're all balance sheets, assets, cash flows, and, worst of all, valuation.
Sure, they're smart. But they don't earn their maximum potential, either. Why? Because they're too busy picking over Wall Street's scrap heap. You can beat the market if fallen angels like Pfizer (NYSE: PFE) and General Motors (NYSE: GM) come back and you've been reinvesting dividends, but let's face it: Their triples and quadruples are behind them.
The trick, obviously, is to apply old-school valuation techniques -- "secrets" passed down by value hounds like Ben Graham and Warren Buffett -- to up-and-coming small companies. Again, I know it sounds simple, but you'd be amazed how few investors even give it a shot.
Forget the "next home run stock"
If you're a regular here, you know about my run-ins with Motley Fool co-founder Tom Gardner. Along with a handful of folks like Chuck Royce and David Nierenberg, Tom and his crew at Motley Fool Hidden Gems are among the few I know who are cashing in on this little "trick."
The little trick, of course, is shunning "the next big thing" in favor of small businesses with strong fundamentals at reasonable prices -- in other words, small-cap value. Put another way, these guys consistently make money in small caps (more on that in a bit) by balancing "story" and "potential" with fundamentals and valuation.
As Tom will tell you, this is what led investors to Wal-Mart in the '70s and turned a $5,000 investment into $2.5 million. But what did Wal-Mart have 30 years ago that today's little wonders don't? Let's take a look at how 1975 Wal-Mart compares with some of today's most heavily traded small caps:
Company
Revenue
Income
Five-Year Sales CAGR
Five-Year Earnings CAGR
Wal-Mart (1975)
$236
$6.4
52%
33%
Avanex (Nasdaq: AVNX)
$160
($97)
7.3% N/A
Encysive Pharma (Nasdaq: ENCY)
$14
($76)
(2.2%) N/A
Lexar Media (Nasdaq: LEXR)
$853
($36)
57.5% N/A
Finisar (Nasdaq: FNSR)
$280
($114)
16.5% N/A
While Wal-Mart boasted rapidly expanding profits and revenues back in 1975, that's not the case at the four companies I just showed you, which have no profits to speak of. Moreover, three of the four are struggling to grow revenue.
Companies like that are all story. And while speculating on them could work out in the end, it's a long shot. The safer bet is to find small caps like Wal-Mart (or even anything close) that can make you a lot of money methodically over the years.
After all, this "trick" turned $1,000 into $30 million. Granted, it took 70 years to do it, but still. And that's according to Ibbotson Associates, a firm that's been collecting market data for nearly a century. According to Ibbotson, if you'd invested $1,000 in small-cap value stocks back in 1927, you'd have more than $33 million by now.
That's three times as much as you'd have if you'd invested in a broad basket of small caps. And more than 15 times better than if you'd bought large caps (the stocks everybody loves) instead. Will those numbers hold up? Well, Tom Gardner has been mining small-cap value at Hidden Gems for just a couple of years now, but take a look and judge for yourself.
Over the past few years, Tom has alerted his subscribers to more than 50 small-cap value stocks. More than half a dozen of those picks have doubled or more, and the portfolio is up on average 36.6%. That's compared to 12.9% if you'd bought the S&P 500 instead.
Here's my opinion.
Large Caps will continue a rally. Small Caps will flatten off a bit due to interest rates and the fed.
Gold, In my opinion, is the only commodity I'm scared of. Silver will have an exchange traded fund soon. I'll look at that closely.
Personally, I think the place to be will continue to be international energy, domestic energy, latin america, russia, pacific rim, and select large caps.
These are only my thoughts and should not be taken as financial advice.
well I just bought it, but I buy some now and then for my IRA. all in all, it goes back about 6 mos
yes...unless ones research skills allow them to divine different cultures and economies.....my skills don't so I'll stick to good funds with proven mangers for international exposure.
It won't be straight up, but I think when the returns are in over that period the Small Caps will have outperformed the market in general.
exposure to internationals. agreed, via mf.
i left out the word worried, sorry.
agreed, i was just a little as the russell 2000 is so overbot.
I believe Small Caps will outperform the market over the next 12 to 24 months and that a greater than normal exposure in international (via mutual funds) stocks, particularly the pacific basin, China and India is warranted.
I still like small caps over large and mid caps.
so do I., do you think they will retreat over the next few months as they have had such a run? opinion please. thanks. lt
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