How can we match or beat PRWCX?

[Norbert]

This much-discussed fund is closed to new investors.  It has achieved commendable returns with moderate volatility over a long period. 

The question here is: can we construct a portfolio that has done at least as well as PRWCX?  The goal is to achieve higher returns with lower volatility.  My best portfolio idea looks like this:

(click to enlarge)

So, 50% in growth stocks, 25% in dividend growth stocks, with the rest in gold and the long bond.  There's no trading involved.

Performance compared to PRWCX ("Portolio 1") and Fidelity's Capital Growth fund FDCAX ("Portfolio 3") since 2005 would have looked like this:

What do you think of this, looking forwards?  Do you have other, hopefully better ideas?

N.

[yogibearbull]

Going forward, I may combine the NEW ETF TCAF with a multi (PONAX, FADMX, etc) & evaluate the results a few years AFTER.

[bigseal]

Why not simply buy VOO and forget about volatility?  Always better and more profitable to think long term.  Just because the stock (ETF) price wiggles a lot doesn’t mean it is more risky.

[steelpony10]

Jun 18, 2023 17:10:34 GMT bigseal said:

Why not simply buy VOO and forget about volatility?  Always better and more profitable to think long term.  Just because the stock (ETF) price wiggles a lot doesn’t mean it is more risky.

        VOO, VTI beats on cost, 03 to 84 and has similar returns the last 6 years 1/1/2017 on.

         Starting tomorrow no one knows but factual costs should be much less into the future.

[Norbert]

Jun 18, 2023 17:10:34 GMT bigseal said:

Why not simply buy VOO and forget about volatility?  Always better and more profitable to think long term.  Just because the stock (ETF) price wiggles a lot doesn’t mean it is more risky.

That's an option, but it's not the subject of this thread. I asked the moderator to move your comment to a new thread.

[richardsok]

Over a three-year chart, there's little meaningful difference between SPY, VOO and QQQ.... surely not enough to warrant spending our golden years forever debating them. The past few days I have been poking around a newer fund, TUG. It's managed,yes, but seems to track quite well with less volatility.

I'm wondering if the bold and confident speculator might successfully reach for true alpha by trading FNGU / FNGD on on short term one-month technical signals.  Though leveraged, it doesn't seem as volatile as one might expect. I might attempt it with a small allocation, say, 1% of PV.   Like with options, I probably won't post those trades, though.  Whether successful or face-plant, there probably wouldn't be much to conclude.

[anitya]

Jun 18, 2023 18:34:35 GMT richardsok said:

Over a three-year chart, there's little meaningful difference between SPY, VOO and QQQ.... surely not enough to warrant spending our golden years forever debating them. The past few days I have been poking around a newer fund, TUG. It's managed,yes, but seems to track quite well with less volatility.

I'm wondering if the bold and confident speculator might successfully reach for true alpha by trading FNGU / FNGD on on short term one-month technical signals.  Though leveraged, it doesn't seem as volatile as one might expect. I might attempt it with a small allocation, say, 1% of PV.   Like with options, I probably won't post those trades, though.  Whether successful or face-plant, there probably wouldn't be much to conclude.

"The past few days I have been poking around a newer fund, TUG. It's managed,yes, but seems to track quite well with less volatility."

Say more.  e.g., Track what?  what do you plan to use it for? 

I just looked up TUG on M*.  Its name is, "STF Tactical Growth ETF."  Currently, 50% equity and 50% cash.  Guessing from chart that it is more volatile than SPY and PRWCX but matches in cumulative TR with those.  As expected, it is quite behind QQQ in TR over its life time but more correlated to QQQ.  

(Just a thought - Unless asking / mentioning about widely known tickers, it would be great if posters share more info than just the tickers so others can benefit too and may be save some time.  I am a poor writer and so it takes me a lot of time to write but I write what I know hoping 10 others can save time.) 

IMO, you write extremely well and it must come naturally to you.

[anitya]

In Norbert's chart, to my eye, even without looking at the metrics in the table at the top, the alternative portfolio seems to track PRWCX very well. 

Why was 2005 chosen as a starting point for the study?

David Giroux has been managing the fund since June 2006
    

[roi2020]

Jun 18, 2023 19:26:27 GMT anitya said:

In Norbert's chart, to my eye, my preference is for Portfolio 2 which seems to be more correlated to Portfolio 1 (PRWCX). What is Portfolio 2?

Click on the 1st image in the OP to view Portfolio 2 constituents.

[richardsok]

ani --

I was merely responding to N's post requesting alternative ideas for capital growth ETFs. I don't know anything that meaningfully beats SPY or QQQ unless you reach for leveraged gusto. But I thought TUG came very close with, to my eye, a little less volatility. If you're going to B&H, volatility is almost a non-issue, but for we traders, timers and other sad sacks, it becomes almost paramount.

[steadyeddy]

Jun 18, 2023 15:29:19 GMT yogibearbull said:

Going forward, I may combine the NEW ETF TCAF with a multi (PONAX, FADMX, etc) & evaluate the results a few years AFTER.

I like this idea of a close approximation to PRWCX. I am assuming that some of the stocks from PRWCX would make it into TCAF. Plus the most beloved PONAX would be a good active bond component.

[saratoga]

How about Portfolio (VOO 75%, PIMIX 25%)? According to Portfolio Visualizer, from 2011, Portfolio had CAGR 10.75%, Sharpe 0.88 while PRWCX had CAGR 10.75%, Sharpe 0.99.

[Fearchar]

M* Description says at least 50% total assets in stocks and remaining generally in corporate and gov't debt
including mortgage-, asset backed- and bank loans. It may also invest in up to 25% in foreign securities.

As of March 31, 2023 PRWCX was reportedly composed of the following:

US Equity 58%
Non-US Equity 5%
Fixed Income 30%
Other 2%
Cash 5%

Important point is that the allocation to each sector changes somewhat.
I'm sure they have a committee that meets and strives to reach a consensus.
So, distribution has likely shifted.

Anyhow, here's my 1st cut:

US Equity; JPMorgan Quality Factor: JQUAL @58%

For Non-US Equity: Vanguard FTSE Developed: VEA @5%

Right now, with such a tight monetary policy, I'd lump Fixed income and cash together into T-Bills <1 year duration.
Okay, maybe a sliver out at 2 years, but that'd be about it. So, 30+5=35% into T-Bills.
Ladder them up and and keep duration short as long as yield curve is inverted.

For other, I'd look to River Canyon Total Return Bond Fund: RCTIX @2%
Strictly speaking RCTIX is a junk bond fund, but it's rather unique and maybe it's an "other".
However, I can see myself arguing that it's a bond fund and would consider increasing allocation while reducing bond/cash hoard.

[Fearchar]

update:

Instead of VEA for Non-US Equity please consider the following

BNY Mellon International Equity; BKIE @2.5%
Columbia EM Core ex-China; XCEM @2.5%

[Norbert]

I observe that this simple allocation (Portfolio 2) would have matched PRWCX (Portfolio 1) since 2007:

50% IVW (LC Growth)

20% IVE (LC Value)

30% PIMIX

(Click to enlarge)

FWIW,

N.

[steadyeddy]

Jun 29, 2023 6:43:42 GMT Norbert said:

I observe that this simple allocation (Portfolio 2) would have matched PRWCX (Portfolio 1) since 2007:

50% IVW (LC Growth)

20% IVE (LC Value)

30% PIMIX

(Click to enlarge)

View Attachment

FWIW,

N.

Research well done, Norbert! The SD and CAGR are amazingly close over a span of 15+ years.... Maybe you found the answer you were looking for?

[racqueteer]

Definitely a great match for the past.  What are your feelings about the future?  This isn't news to you, but PIMIX had some tailwinds which might be lacking going forward, and IF things change, will Giroux's active management become a factor (for good or ill)?  I'm pretty sure that none of us have any definitive idea, but I'm interested in your thoughts.  Meanwhile, I'm personally yoking FBALX with MY PRWCX.

[johntaylor]

Would be interesting to run comparison back to June 1986 (Cap App inception) if there are handy historic proxy components

[steadyeddy]

Jun 29, 2023 13:47:15 GMT racqueteer said:

..... but PIMIX had some tailwinds which might be lacking going forward .... 

racqueteer, not to pollute this thread but might I ask you what tailwinds could be lacking going forward? Is it the distressed MBS they picked up after the GFC? 

I am heavily invested in PIMIX thus the question. 

[dcowboys]

steadyeddy , Have had Pimix for many years 81 years old. 45% of Holdings reinvest all of the Div lot better than a annuity

[anitya]

I used to have a bigger allocation to FBALX through my 401(k) until it was bumped out. Then I bought a smaller size FBALX in my IRA. (For lack of better ideas, I may just add to FBALX) FBALX I think runs a more conservative credit (and longer duration) fixed income sleeve than PRWCX. I only own 2 allocation funds: PRWCX and FBALX.  Both have big AUM.  FBALX has 11 portfolio managers and a bit of manager turnover, compared to single manager PRWCX.

[Deleted]

I looked at this sometime ago. I was frustrated that I could not buy PRWCX so I set out to find 2nd best. My 2nd best was JABAX. It had similar volatility characteristics. The upside was a bit short of PRWCX but the downside risk was better. What it needed was a DC shift upward while maintaining the downside attractive quality. I threw in some VGT and it looked pretty good. Take a look at 80% JABAX and 20% VGT. Still, of course, this is just backtesting.

[racqueteer]

Yes, the MBS timing was a lot of it. Basically, PIMIX has been focused on MBS for some time and hit that right. Rising rates have given people other places to buy productively. So, really two things have been flying which may not continue to do so.

[johntaylor]

Future is unknown, but some of what made Cap Apprec work in the past: value screens, converts, lev loans,  option overlay, etc

[roi2020]

Jun 29, 2023 18:59:46 GMT racqueteer said:

Yes, the MBS timing was a lot of it. Basically, PIMIX has been focused on MBS for some time and hit that right. Rising rates have given people other places to buy productively. So, really two things have been flying which may not continue to do so.

Daniel Ivascyn and Alfred Murata made some great (and large) bets on non-agency MBS after the GFC.

This may have been a once-in-a-generation opportunity.
Several years ago, my sources indicated non-agency MBS with similar terms and return potential were in short supply.
While PIMIX will probably do fine, I doubt future performance will resemble the fund's stellar past performance.