Category Archives: Mutual Funds

MPG Core Tactical 60/40: August 2014 Performance Update

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MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

As always it’s important for both our new readers and in some cases…our existing ones to revisit what we are doing here with this series of articles:

Click here to revisit the first edition of the MPG Core Tactical 60/40 Portfolio.

Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (September 2, 2014).

Click here to compare our portfolio against the benchmark.

The expression of “the writing is on the wall” could not be more appropriate as we inch closer to wrapping up 2014. We work and interact with countless people in the financial services industry ranging from those who manage billions in the most sophisticated manners available, all the way to a retired blue collar worker who wants straight forward investor education and service on how to invest.

What each of these two parties have in common is that they don’t trust tomorrow and all of the warnings about a frothy and dangerous investing environment are as documented as they’ve perhaps ever been. Continue reading →

Alibaba – The next hot stock?

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Alibaba with chineseDear Mr. Market:

Every investor is looking for the next opportunity that looks like a ‘sure thing’. Throughout 2014 we’ve seen a plethora of IPO’s hit the market with the majority of them being well received. Currently there is a giant lurking out there and the markets have been licking their chops waiting to get a piece of it.   The stock is a behemoth based in China…Alibaba (anticipated to be listed as BABA).

Wall Street is expecting the IPO to hit the market sometime after the Labor Day holiday and this could certainly be an early Christmas present for the markets if it lives up to the anticipation. We have not seen hype like this surrounding a potential IPO since the dot-com era of the late 1990’s. Before you rush out in an attempt to participate in the IPO or buy through the open market, lets take a look at Alibaba to see if it warrants a position in your portfolio….

Summary:

It is challenging for the average U.S. investor to understand how large and diversified Alibaba is. Essentially Alibaba is: Amazon, eBay, PayPal, Cloud Services and much more wrapped up in one company. It has the fastest growing online commerce market in the world, last year it had transactions that totaled just under $250 billion! That is more than eBay (EBAY) and Amazon (AMZN) combined. To truly put the size of Alibaba in perspective let’s break down its largest components: Continue reading →

Independent Review of the Fidelity Contrafund (FCNTX)

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fidelity logoDear Mr. Market:

You need to hear about another mutual fund like you need a new hole in your head. That being said, however, how about we talk about one that’s been around for a long time? They must be doing something well….right?

We’ve certainly not held back with our opinion in the past when it comes to mutual funds. While they certainly can warrant a spot in many portfolios, they need to be reviewed and compared carefully to their peers and other investment options. Today we are going to take an in-depth look at a fund we see in many portfolios but very few individuals actually understand what it is. The Fidelity Contrafund (FCNTX) is one of the largest actively managed equity mutual funds there is with assets just under $110 billion! Continue reading →

MPG Core Tactical 60/40: April 2014 Performance Update

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MW-BB798_sm6040_20130422180557_MDDear Mr. Market:

Unless you’ve never picked up a financial magazine or read the business section of any newspaper, you have undoubtedly heard of the old investment adage “Sell in May and go away”. Many financial “experts” and journalists do their best to paint the summer months as those that are primed to underperform. Does history always repeat itself in exactly the same way? Nope. It’s not hard to find investors who sold last spring (or even the one prior) in anticipation of a nasty summer and they are still in cash or underweight equities. If you’re in that boat and don’t trust the stock market, you may sleep better at night for now but in the interim you’ve lost opportunity cost and missed another bull market.

The flip side to this is that bearish investors will eventually be right! The S&P 500 has not had a correction of -10% or more since October 3, 2011. Like many investors out there we firmly believe a correction of -10% to -20% is coming this year but we don’t think it will be the start of a bear market. The challenge behind all of this, however, is that the longer we go without a healthy correction the deeper and more severe the inevitable sell-off will be. Continue reading →

Top Tax Tips for 2014

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Dear Mr. Market:

Your whole world is about investing and the stock market. Stick to what you’re good at, and leave things like repairing your car, fixing that leaky faucet, or doing your taxes to someone else-

(1) Don’t take investment advice from a CPA and vice versa.

Notice how we practice what we preach. Our first “tax tip” will be to let you know that for specific tax advice you should NOT go to your investment advisor. We’re not CPA’s and even though we understand a great deal about taxation (specifically with regard to investments) our job is to manage investments, not tax codes.

Why is it then that we see so many accountants, tax preparers, CPA’s, and even “enrolled agents” dole out investment advice around this time of year? Investors naturally gravitate to the professional that sees the majority of their financial house and by default it’s typically a CPA. We’re not bashing CPA’s but allow us to be crystal clear on this point: A CPA has no formal training nor better understanding of investments or the portfolio strategy you or your financial advisor has put together.

Look to Tip #2 on what your CPA should know about your investment situation:

(2) If the introduction hasn’t been made yet…Make it happen!

In the case of investments and taxes one old adage couldn’t be more true: ”The right hand should always know what the left hand is doing.”

If your investment advisor has not met or interacted with your CPA an introduction needs to be made. They don’t have to become best friends but your overall financial situation will be enhanced when key professionals that help you know each other.

(3) What type of tax professional do you need?

Do you simply need Continue reading →

Update: March Madness: Final Four Investing Bracket 2014

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March MadnessThe 2014 NCAA Basketball Tournament certainly had an eventful weekend!  52 games have been played across the country with 5 of them going into overtime. The $1 Billion that Warren Buffett offered to anyone that had a perfect bracket is now a distant memory. Every year there are plenty of surprises and this year has been no different:

  • 3 of the 4 teams that were seeded as #12 in their brackets posted wins over teams seeded #5! The one team that lost was beaten by only 3 points in overtime!
  • #1 seed and ‘media darling’ Wichita State lost to #8 Kentucky in the 2nd round.
  • The 2 longest winning streaks in the country have both come to an abrupt end – Wichita State with 35 and S.F. Austin with 29.

 Here are some other mind boggling numbers to take into consideration with the NCAA Tournament:

  • The odds of winning Buffet’s $1 Billion prize was 1 in 4,294,967,296!
  • It is estimated that Vegas takes in over $100 Million from bets on the NCAA Tournament – experts think this represents only 4% of all the money wagered on games!
  • The NCAA tournament costs businesses $1.7 Billion in lost productivity during the month of March.

Continue reading →

The New “MyRA” … A Direct Route To Retirement Or A Bad Detour?

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Dear Mr. Market:

MyRA#7

If you ask the average hard working American what their top financial concern is, it’s that that they won’t be able to retire.  We could certainly go on and on about different solutions and how people can get on track to make their dreams a reality but today we will focus on a new program offered from the government.  On January 29th President Obama delivered his State of the Union address.  One of the takeaways from this speech was a new retirement account called MyRA (short for My Retirement Account).

Currently over half of the U.S. workforce is not covered by a retirement plan through their employer.  MyRA is targeted at low to middle-income workers, encouraging them to save for their own retirement.  Contributions will be funded through automatic payroll deductions where individuals can start with as little as $25 and contribute amounts as small as $5.  Individuals would be guaranteed that their account would never go down and they will not pay any fees on the accounts.  Sounds like a great product doesn’t it?!  Well let’s take a step back and dig a bit deeper to really explore what the MyRA is all about….

The MyRA can essentially be viewed as a way to introduce individuals that have not saved or funded a retirement account to the many long-term benefits of doing so. At this point companies are not required to be involved in the program, if President Obama wants to force employers to participate a vote from Congress would be required.  The accounts would be funded with after tax dollars much like a Roth IRA.  While it will be funded with payroll deductions individuals will be able to keep their accounts when they change jobs.  MyRA is subject to Roth IRA income and contributions limits.  Individuals can invest up to $5.500 per year (or $6,500 for investors 50 or older); once the owner reaches the age of 59 ½ they can make withdrawals tax-free.  There are also no required minimum distributions (R.M.D.’s). Continue reading →

Force your Portfolio to be Disciplined in 2014

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Rebalance Cartoon

Congratulations Mr. Market…you’ve delivered a tremendous year of returns to equity investors!  With the broad equity markets delivering returns over 25% (S&P =29%, DJIA = 25% and the NASDAQ = 37% as of 12/27/2013) investors are now faced with the question of what to do now?  For those investors that were invested in stocks, especially domestic stocks, year-end statements are going to look very impressive but remember that is only on paper. As we step into 2014 what should investors do with their portfolios?

Often investors choose to go with an adage commonly heard in casinos – “Let it ride!” Although the market defied odds and dodged several ominous obstacles, there is no guarantee that it will continue to do so going forward.  Sitting back and doing nothing could very well allow those returns to dwindle away and become nothing but a memory.  It wasn’t that long ago that ‘The Tech Bubble’ hit investors with a strong left uppercut that they never saw coming.  Mr. Market delivered three years of impressive returns (1997 = 33%, 1998 = 28% & 1999 = 21%) only to see it disappear with three consecutive years of negative returns (2000 = -9%, 2001 = -11%, 2002 = -22%) and let’s not forget 2008 (-37%).   How can investors avoid repeating history while also managing the risk and unrealized gains in their portfolio?  Continue reading →

Mutual Funds’ dirty little secret….Capital Gains Tax

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cap gains tax cartoonDear Mr. Market:

With one of the strongest stock market years on record many mutual fund investors will end the holiday season by unwrapping a lump of coal. In January most mutual fund companies and the IRS (Internal Revenue Service) will mail out Form 1099-DIV. 2013 will bring mutual fund investors capital gains distributions ranging from 6% to 60%. It’s no secret that we’re not fans of most mutual funds and capital gains distributions are just one more reason.  Today we will take a moment to address an issue that every investor (especially mutual fund investors) needs to be aware of – Capital Gains Distributions.

Capital Gains Distribution – The payment of proceeds prompted by a fund manager’s liquidation of underlying stocks and securities in a mutual fund. Capital gains distribution occurs when a mutual fund manager liquidates underlying positions that have made gains since they were added to the fund. Capital gains distributions will be taxed as capital gains to the person receiving the distribution. (Source – Investopedia.com)

 When a mutual fund sells any position at a profit it creates a capital gain, these can be either short-term or long-term.  By law mutual fund companies are required to distribute these gains to all of their shareholders.  If the position was held for less than a year it will be considered short-term. These are distributed to shareholder as income dividends and taxed at their ordinary income rates.  Long-term capital gain distributions (over one year) are taxed as follows: 0% for taxpayers in the 10% and 15% tax brackets, 20% for individuals in the 39.6% bracket and 15% for all others.  The key thing to remember when looking at mutual funds is that the investor has absolutely no say as to when positions are purchased or sold within the fund and the taxable consequences that are incurred. Continue reading →

Exclusive Interview with Long Short Opportunity Fund (LSOFX)

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Dear Mr. Market:

You are made up of so many pieces and not all move in the same direction on each day. Some stocks can rise in bear markets and some get clobbered in bull markets. That being said, we have a special treat for you today: The following interview was granted to My Portfolio Guide, LLC from management of the Long Short Opportunity Fund (LSOFX).

My Portfolio Guide, LLC (MPG): First off…thank you for the opportunity to meet and learn more about your investing strategies. Our first question is perhaps best intended to simply set the table for our clients and readers of our newsletter:

Briefly explain why investors in typical advisory relationships should even consider using a hedge fund or alternative strategy as part of their portfolio allocation?

Long Short Advisors (LS): The simple answer is to provide downside protection in an increasingly volatile world where equity markets are near all-time highs and bond yields remain near all-time lows. A typical investor has their money allocated to a traditional blend of 60% long-only equities and 40% long-only short bonds, and has generated a fantastic high single digit return from this allocation over the past thirty years. Unfortunately for these investors, the current state of the bond market dictates that these returns are not repeatable over the next decade.

We believe the bond allocation of a traditional 60/40 blend could tread water at best given the current trajectory of bond yields.

Long-term equity volatility is unlikely to change, making a larger allocation to stocks similarly imprudent, especially at today’s record highs.

Thus, investors need to diversify into alternative strategies that have the ability to benefit not only from continued overall market strength, but also potential market weakness.

MPG: Of all the hedging and alternative investment strategies out there and now available to mainstream investors, what are some of the primary reasons to consider a “long/short” type approach? Continue reading →