2018-02-26

How to Choose a Mutual Fund

How to Choose a Mutual Fund

I have defined, in previous posts, various measures of mutual fund strategy and performance - yield, turnover, etc. This post is to get you to think about how to use these measures to choose a fund.

Turnover - I want low turnover. This indicates investing in a company rather than trading stocks. In addition, high turnover increases hidden trading costs. I try for less than 25%, i.e. on average each asset is held for four years.

Expense ratio - higher expense ratio does not buy you anything. If Vanguard can run a great fund like Wellington for .25%, it looks to me like anything above this is just profit for the mutual fund company. If you limit yourself to .25%, that will be Vanguard funds and index funds. If you want more choice, Dodge and Cox funds are close to .5%. Funds under 1% are common. Certainly do not accept anything above 1%, or maybe 1.5% for international funds.

Yield - this tells you how much dividend income the held stocks and bonds produce. I prefer companies that distribute dividends because that indicates to me that they are a money making enterprise. A lot of companies make no money and their stock price is based on speculation of future earnings - you can make or lose a lot of money on these.

Total assets - if a fund is too big, it is can be difficult to manage. This depends on the strategy. If a fund trades constantly, big is a disadvantage. If the pool of stocks in the fund's strategy is limited, big is a disadvantage. Large cap, balanced, worldwide, size is not generally a problem.

Past performance - I look at past performance, especially performance in down markets. This shows how well the chosen stocks and the fund strategy handles these situations. I do not care much about short term out-performance - this is likely luck. When looking at past performance, some web pages include reinvested distributions and some do not. Morningstar does. Yahoo does not, they only report share price. Beware.

And beyond measures - I prefer funds that are run by stable companies, with a management replacement strategy. Small mutual fund companies may have very good funds. But they may be bought by other companies looking to feed on their reputation or past performance. And their management replacement system may be sub par.

I like allocation (balanced) funds. They make life easier by keeping the stock/bond ratio constant (or as the management sees fit). And they have less volatility than pure stock funds. And I like global funds. There is a big economy outside the US and exposure to other currencies sounds good.

Yahoo does a good summary with expense ratio, turnover, yield, total assets. Morningstar has this buried in a sea of information that I don't care much about. Mutual Fund Observer ( www.mutualfundobserver.com ) has a good forum.

Some bond and balanced funds to look at (I no longer follow pure stock funds) -
  • US bond - dodix, lsbrx, vcorx
  • US balanced - dodbx, mapox, prwcx, vwelx, vwinx
  • global bond - lsglx
  • global balanced - rpgax, vgwix, vgwlx

Some stable, well run mutual fund companies -
  • Vanguard
  • Dodge and Cox
  • T. Rowe Price

On a related topic - don't take security lightly with your investments.

I once saw a financial knowledge test question - is it better to have all of your money in one brokerage or have it split in two at different brokerages? The answer was - makes no difference, but the second brokerage is a waste of effort, your assets are insured. I think that this is WRONG. If someone uses identity fraud to steal your money, having it at two different places with two different access methods can thwart half of the theft. You might recover the stolen money. But it might take months. If I see my money disappear from one brokerage, I will be on the phone to the other saying "LOCK MY ACCOUNT. NOW".

2018-02-15

Android 8

Android 8

I upgraded my Google Nexus 5X to Android 8 a while ago. It now includes several updates and is at 8.1. What a mess.

Alarms go off late sometimes (I think mostly when the phone is in sleep mode).

SSHelper, a very useful app that runs a secure server, doesn't work. Apparently Android 8 aggressively shuts down background tasks to save battery power. Why doesn't it let me exempt programs?

And battery usage doesn't appear any different than with Android 7.

Sometimes, when I turn on my phone, it comes up in Google Play. Why?

Insets are a useless gimmick. It was so annoying with Maps that I had to disable it. (I do appreciate the disable option.)

I haven't found a good use for split screen, so that's a waste.

Dolphin browser, often leaves the keyboard on top of web pages, about 50% transparent. You can't get rid of it. I don't know if this is related to Android 8, but that's when it started doing this. I was using Dolphin because was dramatically faster than a previous version of Firefox. Chrome incorrectly renders some tables, making it useless for some web pages. Now it's back to Firefox.

I finally gave up waiting for Android Chrome to be fixed. The problem is multiple lines separated by line breaks in a table cell - these caused the font size to go crazy. I replaced the multiple lines with a single column table. Problem fixed. What a pain. I was set to start using Chrome. It has a new feature - a news feed on the home page. And an annoying tab menu. So I'm using Firefox, but my contra dance links work with Chrome now!

Of course they still haven't fixed the problem that when you use an app to turn off the screen, the fingerprint reader won't turn the phone back on. That started with Android 7.

There is no reasonable way to go back to 7.

I suggest another "law" related to computers (including phones, probably tablets but I have found no use for tablets), along the line of Moore's law about computer processing power. Every year, consumer operating systems add features and bugs/incompatibilities at about the same rate. This makes them less and less useful. Eventually they will all degrade to the point of being unable to handle basic features - screen, phone, internet. Then it's back to dedicated devices - flip phone, calculator, music player, ...