Dear Mr. Berko: I have $156,000 left in my IRA after a disastrous two years with a broker who bamboozled me out of $110,000.
I wanted a diversified portfolio with little bits of lots of things like commodities, exchange-traded funds, bonds, growth stock, small-cap stocks, treasuries, currencies, precious metals, emerging markets, REITs, etc. Instead, he put me in 11 load mutual funds, and within two years, between 2008 and late 2009, I lost 32 percent. I fired him and have been in cash since January.
A friend of mine whom you helped told me to write you for suggestions on what to buy to meet my goals.
I’m very bullish on the market. So knowing what I want, could you recommend a half dozen funds for me to look at so I can get started? I’m willing to pay you a good fee for your recommendations. — G.E, Troy, Mich.
Dear G.E.: I can’t compose a portfolio for you without having a great deal of knowledge about your risk tolerances, long- and short-term goals, finances, business and personal obligations, age, health, marriage status, income, etc. But don’t send that information to me.
Rather, you need to employ a money manager who has been in the business at least 25 years, who can understand your goals, who has the knowledge and wisdom to select the right investments, with whom you can establish a comfortable personal/business relationship and who will monitor your investments 24/7.
A portfolio manager, if he’s as bullish as you, might recommend stuff like PIMCO All Asset A fund (PASAX, $12.48). The guy who runs this fund invests in a mix of PIMCO’s best funds with a goal of besting the inflation rate by 5 percent. The manager is heavy in emerging market bonds, TIPS, currency futures and commodities. The five-year performance is 5 percent, and the load is 3.75 percent.
Permanent Portfolio (PRPFX, $43.47), a no-load fund, is plus l0.2 percent so far this year. PRPFX uses a mixture of Swiss Francs, the Euro, U.S. treasuries and mining stocks. In the market crash of 2008, PRPFX was off 8 percent versus 37 percent for the Dow.
BlackRock Global Allocation A Fund (MCLOX, $18.47) takes teeny positions (usually less than 1 percent) in several hundred stocks, bonds, currencies and derivatives, convertible bonds and health care stocks. This $43 billion fund is plus 4.1 percent this year and has a 5.25 percent load cost.
Caldwell & Orkin Market Opportunity Fund (COAGX, $19.01) is no-load but has a $25,000 minimum initial investment, invests in large-cap issues, has a five-year average return of 4.7 percent and buffets its risks by shorting many positions. When the market crashed 37 percent in 2008, COAGX was off 5 percent.
PIMCO Unrestrained Bond Fund D (PUBDX, $11.23) is a $12 billion no-load fund with a year-to-date 6.53 percent return. The fund spread 80 percent of its bets among 800 bond offerings around the world with varying maturities using derivatives, options futures contracts and swap agreements. Nearly 35 percent of its portfolio is junk, and a large portion of this portfolio is tied to emerging market stocks and bonds.
IPath, DJ-UBS Commodity Index Tr Etn (DJP, $43.43) is a note that trades like a stock, giving investors a low-cost way to get commodity exposure via the price of 19 commodities it tracks. Its three-year performance is 7.7 percent, and its future profitability is predicated on an expected high demand for commodities in developing economies.
Finally, SPDR Dow Jones REIT ETF (RWR, $58.91) has positions in 80 or so high-quality REITs that own apartment buildings, office space, health care and retail properties. During the past five years, its performance has been better than the S&P 500, and it currently yields 3.1 percent.
These issues cover the landscape. Now find a professional (he may not care for any of these) to design a portfolio for you.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at firstname.lastname@example.org.