By David Snowball
It’s November!
Had you noticed?
That means so many things, so many changes. It’s the onset of The Golden Quarter, aka Fourth Quarter Holiday Retail Season when an inexplicable sense of panic and social obligation separates consumers from their gold.
It’s the beginning of what traditionally has been the kindest season for stocks, with higher returns and lower volatility than in the warm months.
It’s the end, please dear Lord, of the presidential election season.
And it’s the beginning of festivity. The days shorten, our time outside contracts, the weather cools, and travel shifts toward family gatherings. For much of human history, it’s the beginning of a dark and uncertain chapter in the story of the year. In the face of this, historically we have chosen to gather and rejoice rather than to withdraw into ourselves. It’s a healthy impulse. Perhaps our healthiest. And so, Chip and I, in November plan trips to New Orleans and Minneapolis, and in December trips to see family. We will find cause to celebrate the simple delight of being together. And, of being with our families, crazy though they are. And, of good food.
We hope you do likewise.
In this issue of the Observer
Our colleague Devesh has moved to a new role: Writer Emeritus. More on that below.
Our colleague Lynn Bolin shares two essays this month (and a thousand thanks for them!). The first, “Living Paycheck to Paycheck,” draws on Lynn’s experience working with the non-profit Neighbor-to-Neighbor that seeks to help people navigate the financial consequences of loss of employment, unexpected health issue, divorce, loss of a loved one, rent inflation, or an accident. It offers suggestions on how to manage expenses and stress. The second, “Top Performing Multi-Cap Core Funds,” tries to help you answer the question, “How simply can we invest without getting too simple?” An excellent question! Lynn has chosen to focus much of his portfolio on three multi-cap core funds, just as I’ve invested in two flexible portfolios ones. Lynn helps folks understand the differences between such funds and how to assess the best.
I share the first take on two new funds. AlphaCentric Real Income Fund is, in theory, a name change for their three-year-old Strategic Income fund. It appears to be far more than that with a new management team (CrossingBridge), a new focus (on real estate and real property securities), and a new primary investment strategy. Given CrossingBridge’s record, it’s worth discussing.
Bridgeway Global Opportunities is a more complicated story. Bridgeway is a purely quant fund manager in Houston with an entirely admirable culture (50% of their profits go to charity, everyone at the company invests in their funds, their founder’s salary is tied to his lower-paid staff, they’re obsessive about minimizing the expenses borne by their investors) but a distinctly inconsistent performance record. A lot of that is driven by a combination of distinctive funds (Ultra Small Company invests in the smallest of the small companies and closed hard after drawing its first $27 million) and unwavering discipline (“value” means “deep value and no wavering when the market hates it”). They’re excited about Global Opportunities, which will be a global market-neutral fund that draws on decades of success that lead manager Jacob Pozharny had at QMA and TIAA.
And, as ever, The Shadow notes a raft of new ETFs and fund-to-ETF conversions from major industry players, a new wave of closures to new investment, some strategic repositioning of funds, and only a handful of liquidations. All that, and more, in Briefly Noted.
Devesh’s farewell
Our colleague Devesh Shah has been (nominally) retired for several years but has remained active – both intellectually and with the financial community – throughout that time. His keen intellect and good judgment have remained in demand and this past month he received an offer that he couldn’t refuse. He has agreed to join the Equity Risk Management team at Millennium Management, a $69 billion hedge fund manager that has one strict rule: “Don’t lose money.”
One understandable consequence of his decision to join them is that he must necessarily leave us. Devesh asked that we share these parting reflections with you.
The arrival of an appropriate professional opportunity in the financial sector motivated my intellectual interests and I have started work in New York. I will not be able to contribute further monthly columns.
Writing for MFO has been a rewarding endeavor for me. I’ve learnt a lot from the reader community, from the many contributors on the discussion board, and from those who chose to write me privately. Along with this healthy reader feedback, support from various fund managers, from David Snowball, and Charles Boccadoro was the oxygen needed to serve as your columnist. For this I am grateful.
On the auspicious day of Diwali, the Hindu festival of lights, I wish you all good luck, health, and prosperity.
We wish him, his new firm, and his investors the greatest of good fortune. Those curious about the firm might enjoy the Wall Street Journal’s September 2024 profile of it, “The Giant Hedge Fund That Hates Risk and Still Wins” (paywall).
Reaching beyond the printed word: MFO in pod and graphics?
One of Devesh’s final discoveries with us was the presence of an AI app that could turn essays into podcasts. Not “the app reads your text aloud” podcasts but “two lively young hosts who discuss arguments in your essay, banter about and occasionally add their own examples” podcasts. Devesh’s thought was that people often listen to podcasts at times when they can’t read: while at the gym or walking, for instance.
Chip, not to be outdone, introduced me to Napkin.ai, an app that converts articles to graphics.
Dear Lord.
Help us figure out whether the spoken word (in the format of an AI-generated podcast) is useful to you. If it is, we’ll extend the experiment in December.
I recently published an article on LinkedIn about the relationship between optimism and success. It’s titled “Rallying Hope Against Dark Words: America’s 2024 Optimism Test.” It draws on a bunch of scholarly research to establish four points:
- Historically, optimists win elections. Roughly 90% of the time in US presidential elections.
- Historically, presidents speak far more optimistically than the rest of us. Whether they personally feel optimistic, they’ve seen a call to “the better angels of our nature” critical to their ability to rally Americans to face, address, and overcome challenges.
- Historically, our preference for optimism is rooted in “American exceptionalism.” Simply put, “American exceptionalism” is the notion that we’re not “just another country, like the rest.” Optimistic exceptional rhetoric peaks in presidential election years, when candidates for national office speak about the aspirations of the nation.
- Optimism works, pessimism fails. Challenges are universal. In the face of them, pessimists find enemies, optimists find opportunities. The psychological research on the effects of optimism is stunning.
My LinkedIn article concludes by asking, given the historical and psychological patterns, why the 2024 election polls don’t reflect a landslide for the optimistic candidate. A short discussion of fearmongering as a profit center for news and social media follows.
Here’s what Napkin.AI thinks that looks like:
And here’s what Notebook LM thinks that sounds like as a podcast about optimism and success. I hope you find it engaging and useful, if slightly weird. Two notes: (1) you appear to need a Google/Gmail account to use the service and (2) you may hit the message “you’re not allowed in.” If so, simply open a private browser tab and you will be allowed in.
Let us know – by email or by a note on the discussion board – whether you find the podcast format interesting enough that we should share the podcast version of one story each month. If it helps you, we’ll make it happen!
Curb Your Enthusiasm
In “The Charts that Scare Wall Street,” Bloomberg’s Emily Graffeo and Vildana Hajric offer insiders’ concerns about “sky-high stock valuations, super-concentrated markets, and the US government’s enormous interest bill.” On the former, they quote Emily Roland, co-chief investment strategist for John Hancock as saying, “We are at the third-highest valuations on the S&P 500 in modern history only behind 1999/2000 and 2021. If this valuation upside continues, it leaves forward-looking returns less compelling.” With the S&P 500 up 35% in the past twelve months, regular investors seem not to be pulling back.
Corporate insiders, on the other hand, have been reluctant to snap up shares of their own companies. Of all US companies with a transaction by an officer or director in July, only 15.7% reported net buying of company shares … which was the lowest level in 10 years. (“Corporate Insiders Sit Out Stock Rally,” WSJ, 10/7/2024, p 1)
The number ticked up in August and down in September, remaining below its average. As a concern, it’s complemented by Mr. Buffett’s decision to build cash, and the decisions of Mr. Bezos and Mr. Zuckerberg to sell unusually large slices of their companies’ stock. The Journal quotes Nejat Seyhun of the University of Michigan as saying, “Insider trading is a very strong predictor of aggregate future stock returns.”
Which might or might not be auspicious for the launch of Tweedy, Browne’s first-ever ETF. Tweedy, Browne is a 104-year-old value-oriented investor with $8.6 billion under management. Of that amount, $1.6 billion are insider investments made by the managers, directors, employers and their families (as of June 30, 2024). Tweedy has filed to launch, likely in the next 30 days, an actively managed ETF: Tweedy, Browne Insider + Value ETF (COPY). The fund targets U.S. and non-U.S. companies that Tweedy, Browne believes are undervalued and where the company’s “insiders” have been actively purchasing the company’s equity securities and/or the company is conducting opportunistic share buybacks. The investment process is largely quantitative and decision-rule-based.
We’ll follow them for you.
In Memoriam, Jim Oelschlager (1942‐2024)
James D. Oelschlager, a titan of the investment world and a beacon of resilience, passed away peacefully at his home in Bath on September 29, 2024, at the age of 81.As the founder of Oak Associates and the mastermind behind the phenomenally successful White Oak Fund (1992-2024), Jim left an indelible mark on the financial industry during his 55-year career. Despite battling Multiple Sclerosis for over five decades, Jim’s unwavering optimism and indomitable spirit never faltered.
Mark Oelschlager, now manager of the very fine Towpath Focus Fund, shared two reflections about his dad’s life and times.
Jim grew up in Pittsburgh, attended Denison University in Ohio, earned a law degree from Northwestern, and worked in Chicago before landing a job as the portfolio manager of Firestone’s pension fund in Akron, despite having no experience. He proved to have an unbelievable knack for investing, and the fund flourished under his leadership. After 15 years there, and despite being diagnosed with MS, he left the security of Firestone and started Oak Associates, where he continued to generate strong returns for many years.
Jim was naturally optimistic and, unlike the doomsayers, always thought the world was getting better and would continue to get better, not worse. He saw the best in people, sometimes to a fault. His predisposition to positivity led to a willingness to take calculated risks, which was one of the factors in his success. If it isn’t optimism, Jim’s defining attribute may be his generosity. He was not born into wealth, but when he became financially successful later in life, he recognized his good fortune and used it to try to help as many people as possible. He gained attention for some of his large charitable gifts (he always declined to put his name on a building), but there were countless instances that nobody knew about of him privately helping those in need.
His professional acumen was matched only by his generosity and commitment to improving lives. Jim’s legacy extends far beyond the boardroom, encompassing educational scholarships, the establishment of the Oak Clinic, and substantial charitable contributions to Akron hospitals and Ohio universities through The Oelschlager Foundation. His life serves as a testament to the power of perseverance, innovation, and philanthropy. He is survived by his devoted wife, Vanita, his children, and grandchildren.
We celebrate Mr. Oelschlager’s rich life and wish his family peace.
Thanks, as ever
To David Moran, talented editor, a long-time contributor to the Discussion Board, and now … quote investigator. At the beginning of our October issue, I shared a quote with a half-apology. I’m fastidious about not using “quotes from the Internet,” a famously unreliable source in which mistakes and misattributions struggle for preeminence. My epigram and half-apology:
So, celebrate, while we can, “Autumn…the year’s last, loveliest smile.”
(The phrase is often attributed to the poet William Cullen Bryant (1794-1898) though I can’t for the life of me find it in the original.)
David could, and promptly did: “The ‘loveliest smile’ phrase appears in a poem by WC’s brother John H Bryant,” with a direct link to “The Indian Summer.”
The year’s last, loveliest smile,
Thou com’st to fill with hope the human heart,
And strengthen it to bear the storms awhile,
Till winter’s frowns depart.
Thanks, good sir! The past has been updated to reflect the present, which is to say Chip edited the intro to the October issue.
For those interested in the larger challenge of unreliable quotes on the internet, drop by The Quote Investigator for the story of “Buy land, they’re not making it anymore” and other tales.
To Melissa Hancock and her legal team at Schnell + Hancock, PC, for stopping an extortion attempt dead in its tracks. Shortly after we published October, we began getting threatening letters from a sort-of law firm representing an internet copyright troll. The business model is simple: the troll launched a reverse-image search bot to crawl the web 24/7, looking for images that might be used without a license. The law firm then sends threat letters, reportedly thousands a month, to site owners demanding money.
In MFO’s case, it was a thumbnail image at the end of a five-year-old guest essay which, as it turns out, wasn’t stolen and to which neither the troll nor the law firm had any demonstrable right. Nonetheless, in the absence of a cool and thoughtful team, a lot of folks simply give in and write a check to make the threat go away. In a “millions for defense, but not a cent for tribute” (Robert Goodloe Harper, if you care. I checked) sort of way, we asked Melissa to address the threats. She did and now they’re being very, very quiet. We’re grateful.
To our faithful “subscribers,” Wilson, S&F Investment Advisors, Gregory, William, William, Stephen, Brian, David, and Doug, thanks!
And to Craig from Knoxville and Rae of Ohio, thanks for the support and the kind notes. (Augie just lost to Illinois Wesleyan. (sigh)) Thanks also, to John from Pensacola!
To the 800,000 poll workers who toil long hours for negligible pay, and who are approaching the 2024 election with elevated anxiety. Thank you. In a literal sense, without you, the American democracy would not work. Thank you. You matter in the work that you do and the example that you set.
One last reminder, gentle reader: Vote. Our civic obligations do not end with voting, but they surely begin there. Vote, knowing that you matter. Vote, knowing that the children are watching. Vote, proudly.
With good thoughts for us all,
By Charles Lynn Bolin
How simply can we invest without getting too simple? Three of my largest holdings are multi-cap core funds held in accounts managed by Fidelity, Vanguard, or myself. I own Vanguard Total Stock Market Index ETF (VTI), Fidelity Strategic Advisers US Total Stock (FCTDX), and Vanguard Tax-Managed Capital Appreciation Admiral (VTCLX). What is under the hood of these funds and how well do they perform compared to the market?
According to the Refinitiv Lipper U.S. Mutual Fund Classifications, multi-cap core funds “by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-cap core funds typically have average characteristics compared to the S&P SuperComposite 1500 Index.”
We are going to see in this article that the performance of these multi-cap funds varies widely. This article is divided into the following sections:
- Section 1, Understanding Multi-Cap Core Funds
- Section 2, Universe of Multi-Cap Core Funds
- Section 3, Summary of Top Performing Multi-Cap Core Funds
- Section 4, Twelve Top Performing Multi-Cap Core Funds
- Section 5, Valuations Matter
- Section 6, Taxes Matter
- Section 7, Author’s Multi-Cap Core Funds
UNDERSTANDING MULTI-CAP FUNDS
Let’s start with the Vanguard Total Stock Market ETF (VTI) as an example. VTI outperformed 80% of the multi-cap core funds in this study. It holds 3,653 stocks with 30% of its assets in the top ten holdings. The stock style weight according to Morningstar is shown in Table #1.
Table #1: VTI Stock Style Weight
Source: Morningstar
Morningstar gives VTI three stars and a Gold Analyst Rating. According to Morningstar:
“Vanguard Total Stock Market funds offer highly-efficient, well-diversified and accurate exposure to the entire U.S. stock market, while charging rock-bottom fees—a recipe for success over the long run.
The funds track the CRSP US Total Market Index, which represents approximately 100% of the investable U.S. opportunity set. The index weights constituents by market cap after applying liquidity and investability screens to ensure the index is easier to track.”
I selected a large sample (138) of Multi-Cap funds excluding those that use a “fund of funds strategy”. The concentration in the top ten holdings is shown versus the number of holdings in Figure #1. There are only a couple dozen funds that follow a true total market approach.
Figure #1: Multi-Cap Core Fund Concentration Versus Number of Holdings
Source: Author Using MFO Premium fund screener and Lipper global dataset.
I used the Mutual Fund Observer Multi-Search Tool to summarize the “Benchmark Best Fit” in Table #2. The benchmark, number of holdings, and concentration will explain a lot of the performance variance. In addition, the median concentration in the US is 95%, while about 15% of the multi-cap core funds have more than 15% invested outside of the US.
Table #2: Multi-Cap Core Fund Best Fit Benchmark, Concentration, Holdings
Source: Author Using MFO Premium fund screener and Lipper global dataset.
UNIVERSE OF MULTI-CAP CORE FUNDS
There are 222 multi-cap mutual funds and exchange traded funds that are five years old or older. I selected 176 (79%) US Equity Multi-Cap No-load Mutual Funds and Exchange Traded Funds that are open to new investors, and have at least fifty million dollars in assets under management. Table #3 shows the funds by Ulcer Rating (a measure of depth and duration of drawdown) and MFO Rating (risk-adjusted return) based on quintiles. The red rectangle represents the 48 (27%) funds that have both average or higher risk-adjusted returns and average or lower risk (Ulcer Index).
Table #3: Multi-Cap Core Funds MFO Rating versus Ulcer Rating (Five Years)
Source: Author Using MFO Premium fund screener and Lipper global dataset.
These 176 funds are shown as Annualized Percent Return (APR) versus Maximum Drawdown in Figure #2. Clearly some multi-cap funds significantly outperform others. The mean Annualized Percent Return (APR) over the past five years is 13.5% with 125 (70.6%) lying between 11.2% and 15.8% (within one standard deviation). By comparison, the S&P 500 (SPY) had an APR of 15.9% and a maximum drawdown of 23.9%. The S&P 500 outperformed 87% of the US Equity multi-cap funds partly because large cap growth stocks performed so well over the past five years.
The red symbol in Figure #2 is the median APR and maximum drawdown. The red rectangle represents those funds with above-average APR and below-average drawdowns.
Figure #2: Multi-Cap Core Funds APR Versus Maximum Drawdown (Five Years)
Source: Author Using MFO Premium fund screener and Lipper global dataset.
SUMMARY OF TOP PERFORMING MULTI-CAP CORE FUNDS
I eliminate funds with Three Alarm Fund Ratings, above-average Ulcer Ratings, and below average APR, MFO Ratings, Lipper Preservation Ratings, and Fund Family Ratings, as well as those with very high minimum required initial investments. This produces fifty-four funds summarized in Table #4. The refined list has a slightly higher APR and Martin Ratio (risk-adjusted return) with a slightly lower maximum drawdown. We can conclude that most of the mutual funds are not index funds and use an active management approach. Most of the exchange traded funds are index funds that use an active management approach.
Table #4: Multi-Cap Core Funds Universe and Best Performing (Five Years)
Source: Author Using MFO Premium fund screener and Lipper global dataset.
I created a ranking system based on APR, Martin Ratio (risk-adjusted return), and APR Minimum 3-year Rolling average to capture a combination of return, risk-adjusted return, and recovery from downturns. This narrows the list down to thirty-six funds excluding funds that cannot be purchased at either Fidelity or Vanguard without a fee as shown in Table #5. In general, I expect the best funds to be mutual funds that are not indexed and are managed by the Top Fund Families. Passively managed funds tend to have higher returns while actively managed funds tend to have higher risk-adjusted returns.
Table #5: Multi-Cap Core Fund Performance and Approach (Five Years)
Source: Author Using MFO Premium fund screener and Lipper global dataset.
TWELVE TOP PERFORMING MULTI-CAP CORE FUNDS
I used my ranking system to select the top-rated funds for APR, Martin Ratio, and APR Minimum 3-year Rolling average shown in Table #6 and Figure #3. Note that some funds are less tax-efficient than others. FCTDX and VTCLX which I own both show up in my list of top-performing multi-cap funds while VTI does not.
Table #6: Twelve Top Performing Multi-Cap Core Funds (Five Years)
Source: Author Using MFO Premium fund screener and Lipper global dataset.
Figure #3: Twelve Top Performing Multi-Cap Core Funds (Five Years)
Source: Author Using MFO Premium fund screener and Lipper global dataset.
VALUATIONS MATTER
David Snowball pointed out last month in the Mutual Fund Observer October 2024 Newsletter that there can be secular bear markets that take more than ten years for a traditional 60% stock/40% bond portfolio to recover. Ed Easterling is the founder of Crestmont Research and author of Unexpected Returns: Understanding Secular Stock Market Cycles and Probable Outcomes: Secular Stock Market Insights which look at the relationship of valuations and inflation to these secular bear markets.
There are various methods to survive these periods such as covering living expenses with guaranteed income (pensions, annuities, Social Security), building bond ladders, investing for income, using a Bucket Approach to cover ten or more years of living expenses in short and intermediate buckets, variable withdrawal rates to withdraw more during periods with high returns and cutting back on discretionary spending during years with poor returns. The ultra-wealthy use a strategy of “buy, borrow, die” where they borrow from appreciated assets instead of selling them and benefit from lower taxes and the step-up in basis inheritance laws.
Price-to-earnings ratios seem straightforward, but they can be confusing. I produced Figure #4 from the S&P Global data for Operating and Reported Earnings per share. The dashed lines are the average excluding four quarters during the 2009 financial crisis that distorted the data. The price-to-earnings ratios are over 30% higher than the average of the past twenty years. The timing of the available data can also impact the results. In the following sections, I will compare the price to earnings using Morningstar for funds and the S&P 500.
Figure #4: S&P 500 Price To Earnings Ratio
Source: Author Using S&P Global
Ed Easterling’s financial physics describes how inflation and valuations drive secular bear markets. Mr. Easterling normalizes the price-to-earnings ratio for the business cycle and concludes:
Today’s normalized P/E is 40.5; the stock market remains positioned for below-average long-term returns.
The current valuation level of the stock market is above average, and relatively high valuations lead to below-average returns. Further, the valuation level of the stock market is especially high, given the uncertainties associated with the currently elevated inflation rate and interest rate environment…
In this environment, as described in Chapter 10 of Unexpected Returns, investors can take a more active “rowing” approach (i.e., diversified, actively managed investment portfolio) rather than the secular bull market “sailing” approach (i.e., passive, buy-and-hold investment portfolio over-weighted in stocks).
Fidelity invests according to the business cycle as described in How to invest using the business cycle. Vanguard uses a low-cost index strategy but has a time-varying asset allocation approach for its corporate clients. I favor a tilt towards bonds because interest rates and stock valuations are both high.
TAXES MATTER
High national debt has the potential to slow economic growth and raise borrowing costs. The Congressional Budget Office projects that the federal debt held by the public will rise to 122 percent of gross domestic product by 2034 and that economic growth will slow to 1.8 percent in 2026 and later years. To control the national debt, taxes will have to be increased, and/or spending such as Social Security Benefits will have to be reduced in the coming decades.
“Are you invested in the right kind of accounts?” by Fidelity Viewpoints describes the types of the types of accounts, and the importance of asset location to minimize taxes. With regard to multi-cap core funds, funds that hold equities for long-term growth, index ETFs, and tax-managed funds are ideal for buy-and-hold taxable accounts. Multi-cap funds with high turnover are better suited for Traditional IRAs and Roth IRAs.
Table #7: Fidelity Asset Location and Tax Characteristics
Source: Fidelity Investments
As part of financial planning, I have diversified across Roth IRAs, Traditional IRAs, and taxable accounts in order to have some flexibility with the uncertainty of future tax changes. Traditional IRAs have required minimum distributions which are taxed as ordinary income while Roth IRAs do not. Accounts that use tax loss harvesting can be used to help manage taxes. I favor Roth IRAs because taxes have already been paid, and earnings grow tax-free. High-growth funds and actively managed funds have the potential to generate more taxable income and tend to be less tax-efficient. Concentrating these funds and higher-risk funds in a Roth IRA is ideal. Tax-efficient multi-cap funds are well-suited for taxable accounts.
AUTHOR’S MULTI-CAP CORE FUNDS
In my professionally managed accounts, Fidelity invests in Fidelity Strategic Advisers US Total Stock (FCTDX) which is only available to clients of Fidelity Wealth Services, and Vanguard invests in Vanguard Total Stock Market Index ETF (VTI) while I invest in Vanguard Tax-Managed Capital Appreciation Admiral (VTCLX) in a self-managed taxable account. I don’t own American Century Avantis US Equity ETF (AVUS) but am interested in the Avantis funds. All four of these funds are top-performing funds.
FCTDX is a fund of funds with high returns but is not especially tax efficient. It is ideal for a Roth IRA. VTI also has high returns and is tax efficient and most suitable for a taxable account, but also fits well in a Traditional IRA or Roth IRA. VTCLX is ideal for a buy-and-hold taxable account.
Table #8: Author’s Multi-Cap Core Funds (Five Years)
Source: Author Using MFO Premium fund screener and Lipper global dataset.
Figure #5: Author’s Multi-Cap Core Funds (Five Years)
Source: Author Using MFO Premium fund screener and Lipper global dataset.
Strategic Advisers Fidelity U.S. Total Stock Fund (FTCDX)
Strategic Advisers Fidelity U.S. Total Stock Fund (FCTDX) is only available to clients enrolled in Fidelity Wealth Services. It outperformed 94% of the multi-cap core funds in this study. Understanding FCTDX is not particularly straightforward. From the Prospectus, I quote a portion of the “Principal Investment Strategy” that summarizes the FTCDX best for me:
The Adviser pursues a disciplined, benchmark-driven approach to portfolio construction, and monitors and adjusts allocations to underlying funds and sub-advisers as necessary to favor those underlying funds and sub-advisers that the Adviser believes will provide the most favorable outlook for achieving the fund’s investment objective.
When determining how to allocate the fund’s assets among sub-advisers and underlying funds, the Adviser uses proprietary fundamental and quantitative research, considering factors including, but not limited to, performance in different market environments, manager experience and investment style, management company infrastructure, costs, asset size, and portfolio turnover.
FTCDX is an actively managed fund of funds. Allocations will change according to market conditions. Current allocations are shown in Table #9.
Table #9: FTCDX Top Holdings
Source: Fidelity Investments
From Morningstar, FCTDX receives four stars and a Gold Analyst Rating. It has a price to earnings ratio of 20.9 compared to 22.3 for VTI, and 22.9 for the S&P 500 (VOO). Stock style weight is shown below:
Table #10: FCTDX Stock Style Weight
Source: Morningstar
Vanguard Tax-Managed Capital Appreciation Admiral (VTCLX)
Vanguard Tax-Managed Capital Appreciation Admiral (VTCLX) also receives a four-star rating with a Gold Analyst Rating from Morningstar, “The fund targets stocks that pay lower dividends to enhance its tax efficiency while also mimicking the contours of the flagship Russell 1000 Index, which captures the largest 1,000 US stocks.” Its stock style weights are shown in Table #11. It has a price to earnings ratio of 21.5. It outperformed 86% of the multi-cap core funds in this study.
Table #11: VTCLX Stock Style Weight
Source: Morningstar
CLOSING THOUGHTS
The famous economist, John Maynard Keynes reportedly said in the 1930’s, “The market can remain irrational longer than you can remain solvent.” Mr. Easterling’s books on secular bear markets convinced me early on to maintain a margin of safety in retirement planning. For me, this meant maximizing contributions to employer savings plans, saving more for additional goals, owning a home, living beneath my means, working beyond my normal retirement date, increasing financial literacy, and using a Financial Planner.
As a result of writing this article, I am satisfied that I have top-performing, diversified multi-cap funds that will track or beat the total domestic markets. I am comfortable that these funds are located in the optimum account locations. It also gives me some ideas to research for producing income in Traditional IRAs for when required minimum distributions begin.
By David Snowball
On November 1, 2024, the former AlphaCentric Strategic Income Fund was rebranded as AlphaCentric Real Income Fund with a new sub-advisor, broader strategy, and new expense ratio to accompany its new name.
CrossingBridge Advisors will manage the investment strategy by employing a team approach. Portfolio managers are T. Kirk Whitney, CFA, who joined the firm as an analyst in 2013, Spencer Rolfe, who first joined in 2017, and David Sherman, CIO. CrossingBridge, with over $3.2 billion in assets as of 8/31/24 was selected to apply a bottom-up, value approach to the strategy.
The fund’s focus on “real income” is new, but the firm’s is not. All CrossingBridge strategies start with the same philosophical statement: “Return of principal is more important than return on principal.” Their hallmark is seeking undervalued income-producing investments having “overlooked factors” that lead to price appreciation. The fund will own a mix of bonds and stocks to provide income and capital appreciation.
The revised investment mandate is to invest in companies directly or indirectly associated with real estate and real property. Real property includes hard-asset businesses, pipeline owners, shipping companies, and so on. The managers anticipate investing in some equity and preferred securities, as well as some debt.
Although this is a new dedicated strategy for CrossingBridge, they have positions – asset-backed securities, mortgage-backed securities, and some real estate companies – in their existing funds that would qualify for the Real Income portfolio. This will be the first mutual fund in which CrossingBridge invests a substantial allocation in equities, so investors should expect significantly greater volatility than CrossingBridge’s traditional offerings.
The other caution is that CrossingBridge is inheriting a portfolio constructed by other managers with other disciplines. It’s normal for funds to see a fair amount of portfolio turnover in their first month or months. Potential investors might want to wait a bit before jumping in.
Three reasons why the fund may be worth your consideration.
Hard assets are attractive assets.
These real property/hard asset investments are fundamentally different from pure financial asset investments. Forests, farmland, pipelines, and warehouses are all long-lasting physical objects that generate predictable income streams over predictable time frames. That means that they have a series of attractions:
- Diversification: These assets can reduce portfolio risk by providing a counterbalance to financial assets. Real estate, for example, has a weak positive relationship with the stock market and a weak negative relationship with bonds.
- Inflation protection: Hard assets tend to maintain or increase in value over time, even as inflation rises. Real asset returns tend to be correlated with inflation, which means that they rise as inflation does.
- Income generation: Many hard assets, such as real estate and commodities, can generate regular income streams.
- Long-term appreciation: Hard assets can appreciate over the long term, providing potential for capital gains. That’s most pronounced if you’re relying on a patient value investor to acquire them at prices below their intrinsic values.
Many advisers consider these to be “alternative investments” that might occupy 5-20% of a portfolio.
The CrossingBridge team are exceptional stewards of your money.
CrossingBridge advises, or sub-advises, six open-ended mutual funds, and one exchange-traded fund. The most recent addition was the Nordic High Income Bond. All are income-oriented, active, and capacity-constrained. In addition, all have top-tier risk-adjusted returns since inception.
MFO Premium allows us to track funds, including ETFs, on an unusual array of measures of risk-awareness, consistency, and risk-adjusted-performance. For the sake of those not willing to obsess over whether an Ulcer Index of 1.3 is good, we always present color-coded rankings. Blue, in various shades, is always the top tier, followed by green, yellow, orange, and red. Below are all the risk and risk-return rankings for all the funds advised or sub-advised by CrossingBridge since inception.
Total and risk-adjusted performance since inception, all CrossingBridge funds (through 9/30/2024)
Source: MFO Premium fund screener and Lipper global dataset. The category assignments are Lipper’s; their validity is, of course, open to discussion.
Here’s the short version: every fund, by virtually every measure, has been a top-tier performer since launch. That reflects, in our judgment, the virtues of both an intense dislike of losing investors’ money and a willingness to go where larger firms cannot.
Some members of MFO’s discussion community worry that some of the new funds are effectively clones of existing ones. To assess that concern, we ran the three-year correlations between all of the funds that CrossingBridge advises or subadvises.
RPHIX | RSIIX | CBLDX | CBRDX | CBUDX | SPC | |
RiverPark Short Term High Yield | 1.00 | |||||
RiverPark Strategic Income | 0.54 | 1.00 | ||||
CrossingBridge Low Duration High Yield | 0.70 | 0.81 | 1.00 | |||
CrossingBridge Responsible Credit | 0.60 | 0.67 | 0.75 | 1.00 | ||
CrossingBridge Ultra-Short Duration | 0.80 | 0.48 | 0.71 | 0.45 | 1.00 | |
CrossingBridge Pre-Merger SPAC ETF | 0.14 | 0.36 | 0.33 | 0.13 | 0.28 | 1.00 |
The correlations are consistently low; each new CrossingBridge fund brings something new to the table.
The fund they are inheriting is quite small, about $55 million in assets, and CrossingBridge already has substantial investments in real estate and real property in its other funds, so the adoption poses minimal additional stress on management.
A value-oriented hard asset portfolio offers reasonable income and reasonable growth.
Mr. Sherman was clear that this fund is likely to experience “more volatility than our Strategic Income Fund with higher upside compared to a high-yield bond index. We have a bias toward downside protection so we’re looking at fixed-income plus fixed-income-like equity. That might offer significantly lower volatility than a stock/bond hybrid fund but will also likely have less upside.” The yield of a portfolio like this is “probably 6-7%” and active management of the portfolio has the prospect of adding 150-250 bps when measured over reasonable time frames.
Website: CrossingBridge Advisors and AlphaCentric Real Income Fund. At the point of publication, AlphaCentric had only begun updating the fund’s pages to reflect these changes; for example, the old management team was still listed. Folks seeking to understand CrossingBridge’s approach might start with their website, check the Corporate Finance Institute’s overview of hard or real assets, and then check back with AlphaCentric.
By David Snowball
On October 15, 2024, Bridgeway Capital launched Bridgeway Global Opportunities Fund (BRGOX), a long/short equity fund that will pursue long-term positive absolute returns while limiting exposure to general stock market risk. Using advanced quantitative modeling, the fund will hold 250-300 long positions and 250-300 short positions. The portfolio is designed with a bias toward quality, value, and sentiment. It will otherwise be neutral as to country, size, sector, and beta. That is, it will shoot for a beta of zero, a net China exposure of zero, and so on.
The fund will be managed by a Bridgeway team led by Co-Chief Investment Officer Jacob Pozharny, PhD. He joined Bridgeway in 2018 and leads the firm’s international and alternative equity investing efforts. Jacob was formerly head of international equity research and portfolio management at QMA, a Prudential Global Investment Management (PGIM) company where he successfully managed $15 billion, and head of international quantitative equity at TIAA-CREF where he was responsible for about $10 billion. Reportedly his QMA team consistently outperformed global, EAFE, EM, EAFE small-cap, and EM small-cap benchmarks. The fact that he grew QMA assets from $2.5 billion to $15 billion in seven years implies some considerable satisfaction with his performance.
The key will be intangible capital intensity
The world, and the world economy, have changed dramatically in the past quarter century. Accounting standards and valuation metrics have not; they remain largely rooted in the 20th-century economic model. A half-century ago, a company’s most valuable assets – those that weighed most heavily on balance sheets and in stock valuation metrics – were physical objects: factories, machines, raw material reserves, and so on. In the 21st century, the dominant assets are mostly intangible: patents, research programs, intellectual property, network effects, etc. Based on old rules, intangible assets were not measurable goods while expenditures on creating intangibles were marked as negative. That is, a research and development program was seen as a drag on the balance sheet which contributed nothing.
Dr. Pozharny has published a lot of research on the nature and significance of intangible capital on a firm’s prospects and has identified the industries in which intangible capital is the most important driver of success. That led to the formulation of Bridgeway’s Intangible Capital Intensity metric. The notion is that by factoring in intangible capital, Bridgeway can better identify attractive growth opportunities and better assess the firm’s actual stock valuation.
Bridgeway is not the first investor to pursue intangible capital with focus and discipline. Guinness Atkinson Global Innovators has used it to create a high-performance (top 5% of global growth funds over the past 15 years), low turnover (8%) portfolio that has drawn less attention than its merits warrant.
Bridgeway, unlike Global Innovators, will actively short stocks. Founder John Montgomery’s assessment is that a well-devised short book might add even more value than the long book alone.
Why not run this as an ETF? Two reasons. Shorting in an ETF is hard. And ETFs cannot close to new investors. Bridgeway intends to close this fund to new investors at between $100-150 million. Once the fund closes the strategy will only be available through larger separately managed accounts and a Bridgeway hedge fund. Both will charge more than the 1.5% e.r. on the mutual fund.
Website: Bridgeway Global Opportunities Fund. The fund is available at Schwab for a $2500 minimum and at Fidelity.
By Charles Lynn Bolin
For most of us, saving money is the first step to investing, yet 25% to 35% of Americans are living paycheck to paycheck. This article looks at why people are living paycheck to paycheck and how lower- and middle-income Americans in particular may be able to increase emergency savings leading to saving more for retirement. The concepts are just as relevant to higher-income people as well.
In addition to volunteering at Habitat For Humanity, I also volunteer at a local non-profit organization, Neighbor To Neighbor, which offers programs in eviction avoidance, utility shut-off avoidance, affordable housing, housing search, foreclosure prevention, and counseling including financial coaching, debt consolidation, and reverse mortgages. Many of the people seeking assistance at Neighbor To Neighbor have experienced an unfortunate circumstance such as temporary or permanent loss of employment, unexpected health issue, divorce, loss of a loved one, rent inflation, or an accident. My role is to prescreen people to get the appropriate assistance within Neighbor To Neighbor and direct them to external sources of assistance.
As a housing opportunity resource for Northern Colorado, Neighbor to Neighbor (N2N) services are designed to meet each individual where they are now – from homeless and low-income individuals seeking a place to live; to families needing assistance to secure their existing homes; to prospective buyers ready to explore the homebuying process. Our trained housing professionals assist clients through obstacles and develop personalized solutions to help them achieve their housing goals.
I hope this article offers some useful ideas on how to cut spending and save more. It is divided into the following sections:
- Section 1, Steve Balmer Explains Today’s Economy to Non-Economists
- Section 2, Financial Literacy: Emergency Savings versus Retirement Savings
- Section 3, Americans’ Financial Stress
- Section 4, Assessing Spending Habits
- Section 5, Financial Counseling versus Financial Advisors
- Section 6, Improving Saving Habits
STEVE BALMER EXPLAINS TODAY’S ECONOMY TO NON-ECONOMISTS
Key Point: The economy has been stronger than expected while interest rates were rising. It is an opportune time to get your financial house in order and save for less fortunate times.
Steve Balmer spent 34 years growing Microsoft, 10 years owning the LA Clippers, and started the non-profit USA Facts which is rated by Media Bias/Fact Check as “Least Biased”, “Very High Factual Reporting”, and “High Credibility”. Mr. Balmer provides this fourteen-minute video, “Is The Economy Strong?” explaining the state of the (2023) economy in simple terms. He covers economic growth, inflation (gas, groceries, rent, housing), employment, income, taxes, government benefits, demographic shifts, and poverty thresholds.
Figure #1 shows the net income of the Bottom 20% income group which is Market Income (Wages, savings added to retirement accounts, employer benefits, and income from investments) minus taxes (Federal, State, and local) plus government benefits (Social Security, Medicare/Medicaid, food stamps, tax credits, unemployment benefits…). The net income in 2022 of the Bottom 20% was $31,325 which was mostly government benefits, and the net income for the Middle 20% was $68,575. That was a year of high government spending to lessen the impact of the COVID pandemic, and that spending is ending this year.
Figure #1: 2022 Average Net Income for Bottom 20% of Income Levels
Source: USA Facts
Mr. Balmer ended on a positive note, he continues “to be amazed at the innovation and dynamism of the U.S. economy and the work ethic of Americans. The American worker and American economy should never ever be underestimated.”
In my opinion, the rising national debt will most likely result in higher taxes and/or cuts to government spending if Congress fails to address the shortfalls. Social Security was originally created to meet the basic needs of older Americans for food and shelter during the Great Depression. High housing costs and inflation are impacting seniors relying on Social Security.
FINANCIAL LITERACY: EMERGENCY SAVINGS VERSUS RETIREMENT SAVINGS
Key Point: People should prioritize building emergency savings, reducing debt, and then begin to make small contributions to retirement savings.
Various articles estimate the number of people living paycheck to paycheck to be between 25% and 75%. From this section, I believe that 25% to 35% of people are living paycheck to paycheck and another 25% to 35% may not have enough in savings to cover three months of living expenses. Let’s start with a definition of living paycheck to paycheck from Investopedia:
“’Paycheck to paycheck’ is an expression that describes an individual who would be unable to meet their financial obligations if they were unemployed. Those living paycheck to paycheck devote their salaries predominantly to expenses. The phrase may also mean living with limited or no savings and refer to people who are at greater financial risk if they were suddenly unemployed or faced another financial emergency.”
Now let’s take a look at the definition of “emergency savings” and “retirement savings” from “15+ American Savings Statistics to Know in 2024” in FinMasters by David Moadel:
- Emergency savings are kept in reserve to meet immediate goals or cover unexpected expenses or job loss. They are typically kept in savings accounts or other accounts that allow easy access.
- Retirement savingsare intended for use after retirement and are usually invested in an IRA, 401(k), or brokerage account. These savings types are equally important, but data on them are collected separately.
Overall, 22% of households self-reported having no emergency savings, and over a third have some savings but cannot cover three months of living expenses. Approximately 40% are more secure.
USA Facts published “Nearly half of American households have no retirement savings” using the 2022 Survey of Consumer Finances by the Federal Reserve. They have interactive charts for Checking/Savings, Retirement Savings, Financial Assets, and Net Worth. In Figure #2, I show the percentage of people by age with at least $10,000 in their checking and savings accounts along with the percentage of people with at least $100,000 in their retirement accounts. About 30% to 50% of people fit into one of these categories.
Figure #2: Percent of People with Emergency Savings Over $10,000, Over $100,00o in Retirement Savings by Age
Source: USA Facts
Forbes Advisor’s latest online survey of one thousand Americans is summarized by Jamela Adam in “American Savings By Generation: How Balances And Goals Vary By Age.” Ms. Adam writes, “According to our survey, roughly 28% of Americans across all four generations currently have less than $1,000 in personal savings, including emergency funds, non-workplace retirement accounts, and investments.” Figure #3 contains the total savings from the survey. In the event of an emergency, respondents said they would dip into their savings (59%), and use debt such as credit cards or loans (30%) while others said they would sell belongings or cut expenses (29%).
Figure #3: Total Savings (including emergency funds, retirement accounts, and investments) by Age Group
It helps to set goals. JP Morgan’s “2024 Guide to Retirement” provides a useful table of checkpoints by age and income level based on an assumed contribution rate of 5% and asset allocation of 60% stocks/40% bonds prior to retirement. Most people can save more than the table below by increasing their savings rate as their income rises.
Table #1: Retirement Savings Checkpoints by Income and Age
Source: JP Morgan
AMERICANS’ FINANCIAL STRESS
Key Point: About 25% of Americans are financially stressed, but some in the lower-middle-income groups may have room to save more and reduce debt. Having savings provides more financial freedom to overcome emergencies.
One of the services that Neighbor To Neighbor offers is “housing search” to help people find an apartment that they can afford. Many homeless people have jobs, but cannot afford housing. Some are living paycheck to paycheck and face eviction because they cannot afford the increase in rent.
The US Census Bureau estimates that approximately 37 million people (11%) lived in poverty in 2023. Eighteen million (13.5%) were food insecure at some time during 2023, according to the U.S. Department of Agriculture. Over 21 million renter households spent more than 30% of their income on housing costs in 2023, representing nearly half of the renter households in the United States for whom rent burden is calculated according to the U.S. Census Bureau.
I created the chart below from another US Census Bureau Report, “Income in the United States: 2023”, showing the income distribution in 2023. The poverty threshold depends upon household size. The three lowest income ranges in Figure #4 represent 21% of households. Some people will progress from the lower income groups to the higher groups as they gain experience, education, and/or skills. Others may move up and down between the levels based on job stability, job opportunities, health, or life events and preferences.
Figure #4: Distributions of US Household Incomes (2023)
Source: Author Using US Census Bureau Report “Income in the United States: 2023”
Gili Malinsky at CNBC explains why people are living paycheck to paycheck in “More Americans say they are living paycheck to paycheck this year than in 2023—here’s why”. The reasons cited are:
- 69% cite inflation
- 59% cite a lack of savings
- 28% cite rising interest rates
- 33% cite credit card debt
- 28% cite medical or healthcare bills
- 21% cite layoffs or loss of income
- 15% cite student loans
Having credit card debt is both expensive and risky. Khristopher J. Brooks wrote “Americans continue to rack up credit card debt, hitting a record $1.14 trillion” for CBS News Money Watch. He described that U.S. consumers collectively owe a record $1.14 trillion in credit card debt. He adds, “About 7.18% of cardholders fell into delinquency in the second quarter, up from 5% in the previous quarter…” Many adults have more credit card debt than money saved in emergency savings. The average credit card interest rate is now over 24%.
ASSESSING SPENDING HABITS
Key Point: Having an awareness of commercial temptations and the desire for financial independence can help develop better savings habits.
Most people have a budget, but people often fail to stick to that budget. Andrew Marder at NerdWallet describes a survey that finds over 80% of Americans that have a monthly budget overspend in “Most Americans Have a Monthly Budget, but Many Still Overspend”. He adds that close to half of Americans say they want to prioritize emergency savings. Figure #5 shows the categories where respondents overspend. These categories represent opportunities for people to save money by adhering to their budget.
Figure #5: Overspending Categories
The McKinsey & Company article, “An update on US consumer sentiment: Consumer optimism rebounds—but for how long?” by Becca Coggins, Christina Adams, Kari Alldredge, and Warren Teichner finds that people are spending more on many of the above categories. Pessimism about the economy has declined over the past three years. Over a third of the “respondents say that stabilizing inflation has made them feel more optimistic about the economy”. The points that I took away are:
- Younger people tend to splurge more than older generations.
- Consumers indicated they planned to increase their spending on most essential, semi-discretionary, and discretionary items over the next three months.
- Seventy-six percent of consumers report trading down—that is, changing the type or quantity of purchases for better value and pricing…
- Consumers report trading down while at the same time signaling their intent to splurge. In the third quarter, more consumers across income and age groups indicated an intent to splurge compared with the previous quarter.
Figure #6: Share of Respondents Intending to Splurge in 2024, by Demographic, %
Figure #7: Categories Where Consumers Intend to Treat Themselves, % of All Respondents with Intent to Splurge
The above article describes spending increasing because of consumer optimism. Here is another article, “Gen Z and millennials are increasingly ‘doom spending.’ Here’s what it is and how to stop it” by Sawdah Bhaimiya at CNBC which describes younger people spending more because they are pessimistic about the economy and their future. When some people are depressed, they tend to spend more to pick themselves up. As an example, because of the high price of homes, some people may give up buying a home, and spend the money instead of saving for a down payment. One solution Ms. Bhaimiya offers is to increase the “pain of buying” such as driving to the store instead of the ease of online shopping. Ask yourself, “Do I really need this?”
Why are people spending more when many are living paycheck to paycheck or have little savings? “Inside the Psychology of Overspending and How to Stop” by Jessica Walrack in U.S. News and World Report describes why some people overspend. She lists five common reasons experts say Americans are overspending:
- Social Pressure: Buying what you see others buying as a way to signal that you can afford it, too.
- Lifestyle Creep: When your expenses unintentionally creep up as your income increases.
- Emotional Impulse Spending: A study reports that shopping enhances feelings of personal control, which suggests it’s likely to alleviate sadness.
- Not Accounting for Inflation: If you don’t adjust your budget to account for cost increases, you’ll likely find yourself overspending each month.
- Credit Misconceptions: The truth is that you have to pay back every dollar, plus interest and fees.
FINANCIAL COUNSELING VERSUS FINANCIAL ADVISORS
Key Point: Financial Counselors can assist in improving financial literacy and end living paycheck to paycheck if a person is willing to stick with it.
Financial advisors usually help to determine investments, asset location, and asset allocation, and produce a financial plan. Financial counselors provide a different service. People living paycheck to paycheck often have low savings so a financial counselor will probably be of more benefit than a financial advisor. John Egan describes the services and accreditation of a financial counselor as well as where to locate one in “What Is A Financial Counselor?” for Forbes Advisor.
Jean Folger provides a “Guide to Hiring a Financial Counselor“ in Investopedia. She lists typical support and guidance provided as:
- Build savings
- Create (and stick to) a budget
- Create a plan to pay down debt
- Deal with an immediate financial crisis
- Determine if you’re eligible for tax credits
- Improve your credit score
- Manage lines of credit
- Manage student loans
- Modify ineffective money habits
- Navigate available public benefits and community resources
- Set and realize financial goals
- Understand basic financial principles
- Improve your overall financial health
- Refer you to an investment advisor or financial planner when you’re ready
- Some financial counselors have extra training in other areas
Ms. Folger says that the price charged by a financial counselor is usually lower than when working with a financial advisor or certified financial planner. “Financial counselors who work in private practice may offer a free initial session and then charge a flat fee for any subsequent meetings. Others may charge an hourly rate or a monthly subscription,” she adds.
IMPROVING SAVING HABITS
Key Point: Create a budget. Cut out unnecessary subscriptions and services. Automate your savings. Pay off expensive debt or consolidate it with a lower interest rate. Just say “no” to those impulse purchases. Go for a walk in the park instead of walking through the mall. Consider a visit to a Financial Counselor.
Emily Batdorf wrote “Living Paycheck To Paycheck Statistics 2024” in Forbes Advisor, a “2023 survey conducted by Payroll.org.” When asked how people living paycheck to paycheck plan to save money, respondents cited three major strategies.
- Nearly 63% of respondents say making food at home and packing food when going out is their primary way of saving money.
- The second most common way to save was cutting back on nonessential expenses (57%).
- The third is shopping secondhand (50%).
Non-profit organizations like Habitat For Humanity, Goodwill, Salvation Army, and The Arc raise money through donations to their second-hand stores. There are many bargains. If you want to downsize or clean out your attic consider donating to a worthy organization.
To stop living paycheck to paycheck on your own, Julia Kagan suggests in “Living Paycheck to Paycheck: Definition, Statistics, How to Stop” at Investopedia that you can:
- Review your budget. Budgeting relies on tracking your expenses against your income… Look at every dollar you spend over a month to see if you can find out what may have increased your spending.
- Make sure you are saving. Living paycheck to paycheck often precludes saving. If you have little to no savings, start small—set aside 1% of each paycheck ($10 for every $1,000 you earn). And automate it so that you aren’t tempted to spend it.
- Pay off your debt. One downside of having no financial cushion is relying on credit cards with high APRs to cover emergencies of varying sizes. Depending on your situation, there are numerous ways to pay down credit card debt, including using a debt snowball strategy to pay off the smallest debt first, using a balance transfer on a credit card with 0% interest for a year or more, or getting a personal loan or a debt consolidation loan.
- Increase your income. Whether that means starting a side hustle, asking for a raise or a promotion, or finding a better-paying job, the extra cash can help you start setting aside more savings and/or paying off your debt faster.
Consider a non-profit financial counselor like the National Foundation for Credit Counseling (NFCC) which was founded in 1951 and works with consumers through one-on-one financial reviews. The press release, National Foundation for Credit Counseling Warns of Skyrocketing Consumer Financial Stress, describes a “critical level of financial strain where households are cutting back on food expenses and personal savings”.
Neighbor To Neighbor’s (where I volunteer) Financial Coaching includes 1) Personal Credit Score Analysis & Loan Options, 2) Personalized Budgeting Plan, and 3) Referrals for lenders, agents & other housing professionals. As part of the coaching, the manager helps clients analyze their spending habits to understand where they are spending their money.
Roughly two-thirds of employers offer 401(k) savings. Elizabeth Gravier says in an article at CNBC, “A 401(k) match is like free money — here’s how it works” that “98% of companies that offered a 401(k) in 2023 matched their employees’ contributions to some extent”. The typical match is 3 to 5%. This is an additional incentive to save at least the minimum amount to get the employer-matching contribution. If an employee contributes 5% and the employer contributes 3% then the savings rate is 8%.
For people with low and moderate incomes, the Retirement Savings Contributions Credit, also known as the Saver’s Credit, allows a person “to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan”. The maximum contribution amount is $2,000 ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly).
Closing
I believe in the “Pay yourself first” philosophy where you save money as a priority before you spend it. I also believe in maintaining emergency savings as a priority before investing. Life will have its challenges and emergency savings may be the difference between financial hardship and landing on your feet. If a person is living paycheck to paycheck then it may be worthwhile to visit a Financial Counselor/Coach.
By TheShadow
AKRE Focus ETF is in registration. The Fund invests primarily in securities of companies listed on U.S. stock exchanges. Investments consist primarily of common stocks of companies of any size market capitalization. John H. Neff will be the portfolio manager. Expenses have not been disclosed. Mr. Neff also comanages Akre Focus Fund, which was founded by the namesake Charles Akre. Mr. Akre was remarkable, engaging, and … well, old. He retired from day-to-day management about three years ago. Since then Akre Focus Fund has performed in the way it was designed: exceptional in down markets, reasonable in up markets. In the absence of Mr. Akre, that seems not to have convinced shareholders to stay:
In the fund’s three “laggard” years, including 2024, it’s made an average of 22% for its investors. That’s nothing to sneeze at.
FMI Global Fund is in registration. The Fund invests mainly in a limited number of large capitalization (namely, companies with more than $5 billion market capitalization at the time of initial purchase) value stocks of global companies (U.S. and non-U.S. companies). The institutional share class is the only share class offered at this time with an initial investment minimum of $100,000. The fund will be managed by a portfolio management committee composed of Patrick J. English, John S Brandser, Jonathan T. Bloom, and Robert M. Helf assisted by numerous analysts. Net operating expenses will be .90%. Global might incorporate the best of a five-star domestic fund and a four-star international one, with both sporting “Low” risk (per Morningstar) and “High” returns.
Parnassus Core Select and Parnassus Value Select ETFs are in registration. The total annual fund operating expenses for the Parnassus Core Select and Parnassus Value Select ETFs will be .58% and .59%, respectively. Billy J. Hwan, CPA, CFA, and Krishna S. Chintalapalli will be the portfolio co-managers of the Value Select ETF. Todd C. Ahlsten, Benjamin E. Allen, and Andrew S. Choi will be the portfolio co-managers of the Core Select ETF.
Tweedy, Browne Insider + Value ETF is in registration. It will buy equity securities of U.S. and non-U.S. companies that Tweedy, Browne believes are undervalued, and where either the company’s “insiders” have been actively purchasing the company’s equity securities and/or the company is conducting “opportunistic share buybacks”. For the purposes of the investing, the adviser considers a company’s “insiders” to be executives, corporate officers, and/or directors or controlling shareholders, and the Adviser principally intends to determine whether such insiders are “actively” purchasing a company’s equity securities at a price that is less than the Adviser’s view of such securities’ intrinsic value by reference to public reports filed under the Securities Exchange Act of 1934. Roger de Bree, Jay Hill, Thomas Shrager, John Spears, Robert Wyckoff, Andrew Ewert, and Frank Hawrylak are jointly and primarily responsible for the day-to-day management of the fund. Total annual fund operating expenses will be .80%.
Vanguard’s legacy mutual fund platform will be ceasing at the end of 2025. According to Vanguard, their Vanguard Brokerage Account platform is a modern investing experience with access to additional investment products (Vanguard and non-Vanguard mutual funds, ETFs, stock, bonds, and CDs) and services with access to additional investment products and services, including their ETFs, advice offers and their new Cash Plus Account, will be the only way Personal Investor clients can invest directly with Vanguard. Existing clients are being notified their accounts will be eligible for an automatic transition from August 2024 into 2025.
The WSJ notes that active ETF launches in 2024 outnumber passive ones by 3:1, despite the fact that active large cap ETFs trail both passive ETFs and active funds in performance. Active ETFs thrive only in small cap equity and bond investing, per the Journal and Morningstar Direct.
Small Wins for Investors
The Board of Trustees of the Villere Balanced Fund and Villere Equity Fund agreed to reduce the Balanced Fund’s operating expense limit from 0.99% to 0.89%, and the Equity Fund’s operating expense limit from 1.25% to 1.15%, both effective October 1, 2024.
Closings and Other Inconveniences
Effective as of October 16, 2024, Fidelity Small Cap Growth Fund closed to new investors and did so without advance notice. Once upon a time, popular funds would announce their closings weeks in advance in an attempt by the marketers to harvest a last rush of assets. We’re glad that Fidelity did not.
Effective as of the close of business on October 4, 2024, the Hood River Small-Cap Growth Fund is closed to most new investors.
Effective November 4, 2024, Manning & Napier High Yield Bond will be closed to new investors with all the usual soft close exceptions.
Old Wine, New Bottles
In a substantial and, from the discussion board’s perspective, worrisome move, on November 1, 2024, AlphaCentric Strategic Income Fund became AlphaCentric Real Income Fund. The worrisome part, from their perspective, is that CrossingBridge Advisers will become the fund’s new subadviser. Members of the MFO community expressed two sets of concerns: (1) that the AlphaCentric culture, which Morningstar rates as “low,” was not healthy, and (2) that CrossingBridge might be extending themselves too far, at the risk of both their brand and their ability to execute across their increasing array of strategies.
Blackrock International Dividend Fund will be converted into BlackRock International Dividend ETF on or about November 15.
Fidelity Municipal Core Plus Bond Fund will be reorganized into an exchange traded fund (ETF), titled Fidelity Municipal Bond Opportunities ETF. The ETF will have identical investment objectives, principal investment strategies, and fundamental investment policies. Cormac Cullen, Michael Maka, and Elizah McLaughlin will be co-portfolio managers of the ETF. All three individuals managed the predecessor fund. Expenses have not been stated at this time. The fund is expected to be converted in April 2025.
Fidelity Municipal Bond Index Fund will be reorganized into an ETF, titled Fidelity Systematic Municipal Bond Index ETF The ETF will have identical investment objectives, principal investment strategies, and fundamental investment policies. Brandon Bettencourt, Richard Munclinger, and Mark Lande will be the portfolio managers. All three individuals managed the predecessor fund. Expenses have not been stated at this time. The fund is expected to be converted in April 2025.
Effective October 10, 2024, Fidelity High Yield Factor ETF will be renamed Fidelity Enhanced High Yield ETF. Truth be told, no “enhancement” other than a new manager is in evidence.
On or around December 9, 2024, the GQG Funds will jettison to word “Dividend Income” from their names in favor of “Value.” They’re given no reason.
Old name | New name |
GQG Partners International Quality Dividend Income Fund | GQG Partners International Quality Value Fund |
GQG Partners Global Quality Dividend Income Fund | GQG Partners Global Quality Value Fund |
GQG Partners US Quality Dividend Income Fund | GQG Partners US Quality Value Fund |
In connection with the foregoing changes, the Funds also will make certain changes to their principal investment strategies and benchmark indices.
On December 6, 2024, The Beehive Fund (mid- to large-cap domestic equity with the usual promises about defensible business models and such) will become The Beehive ETF.
Dustbin of History
Altegris/Crabel Multi-Strategy Fund was, “in the best interest of its shareholders,” liquidated on October 28, 2024.
Baillie Gifford U.S. Discovery and Baillie Gifford Health Innovation Equities Funds will be liquidated on or about December 2 and January 6, 2025, respectively.
Clifford Capital Focused Small Cap Value Fund will be liquidated on or about November 20.
The nine-year-old Ensemble Fund was liquidated on October 24, 2024. The reason was unusual: the advisor is being acquired by a firm (unnamed) that does not wish to be in the mutual fund business.
FS Managed Futures Fund was liquidated, on rather short notice, on October 15, 2024.
Heitman US Real Estate Securities Fund will be liquidated on or around November 27, 2024.
Intrepid Small Cap Fund will be merged into the Intrepid Capital Fund on November 22, 2024. “The Intrepid Small Cap Fund will then terminate,” sayeth the filing. The fund was a vehicle for accessing the acumen of Eric Cinnamond, and then his colleague Jayme Wiggins, whose discipline was simple: only buy stocks that are poised for outstanding returns over the next several years.
Oberweis Emerging Markets Fund will be liquidated on or about November 18.
ProcureAM, LLC, the investment advisor to Procure Disaster Recovery Strategy ETF, determined that the Fund should be closed. It will be liquidated on or about October 24, 2024.
Rational Real Assets Fund (formerly,Rational Inflation Growth Fund) will be liquidated on or about November 6, 2024.