Morningstar Advisor - December 2013/January 2014 - (Page 63)
portfolio heavily-laden with one of these
families of funds.
PIMCO
Stock funds are the obvious complement
to a PIMCO-laden portfolio, but if most
of a client's money is in fixed income, consider
some non-PIMCO bond funds, too.
Municipal bonds are a small sliver of PIMCO's
business, so let's start there. A fund that
doesn't make top-down calls but instead
focuses on issue selection would make a nice
diversifier, so consider a fund like Fidelity
Tax-Free Bond FTABX. You can also lower costs
with the help of a Vanguard fund such
as Vanguard Intermediate-Term Tax-Exempt
VWITX. Even taxable bonds might be an
area to diversify. On the lower-risk side,
consider Dodge & Cox Income DODIX, which
also focuses more on issue selection and less
on macro bets.
Funds for Rounding Out a Family-Centric Portfolio
If your client is heavy with funds from...
Then diversify that family with...
PIMCO
Fidelity Tax-Free Bond FTABX
Tax-Free
Vanguard Intermediate-Term Tax-Exempt VWITX
Dodge & Cox Income DODIX
American Funds
Franklin Federal Intermediate-Term Tax-Free Income FKITX
Intermediate-Term
Templeton
Templeton Global Bond TPINX
PIMCO Real Return PRTNX
Harbor Real Return HARRX
Fidelity Intermediate Municipal Income FLTMX
T.
T. Rowe Price New Income PRCIX
Fidelity
FPA
FPA Crescent FPACX
Tweedy,
Tweedy, Browne Global Value TBGVX
Longleaf Partners LLPFX
Oakmark Select OAKLX
FMI Focus FMIOX
T. Rowe Price
Vanguard Total Stock Market Index VTSAX
Vanguard Tax-Managed International VTMGX
American Funds
Causeway International Value CIVVX
Value
Although American Funds has fallen in
investors' minds, you can still build a pretty
good portfolio with its funds. It runs
outstanding foreign- and domestic-equity funds
that are dependable and cheap.
Artisan Global Value ARTGX
Value
However
However, the American Funds multimanager
run-a-ton-of-money-in-one-fund model
hasn't worked too well for small-cap stocks or
bonds. The multimanager system doesn't
work well in bonds where one manager's views
can undo another one's bets or double
them. In addition, they haven't kept pace with
the competition when it comes to bond
analytics. In fact, we rate seven bond funds
from American, and they all earn Morningstar
Analyst Ratings of Neutral. For small caps,
American has just one very diffuse world-stock
fund that doesn't really have that much appeal.
On the bond side, there are lots of options to
diversify an American Funds portfolio,
but here are three worth a look for no-load
and load.
Dodge & Cox Global Stock DODWX
PIMCO All Asset PASDX
Vanguard
Sequoia SEQUX
Akre Focus AKREX
PIMCO Investment Grade Corporate Bond PIGIX
PIMCO Unconstrained Bond PUBDX
On the load side, there's Franklin Federal
Intermediate-Term Tax-Free Income
FKITX. Franklin is one of the better municipalbond managers on the load side. It
has modest costs and robust resources for
doing research.
On the taxable side, let's stay with the Franklin
Templeton family and buy the bold bordercrossing Templeton Global Bond TPINX run by
Michael Hasenstab. The strategy is to combine
currency and yield plays in order to deliver
strong long-term returns. It's got a fair amount
of risk, though, so this will work only as a
long-term holding. Now, let's dial down the risk
by purchasing PIMCO Real Return PRTNX for
some well-run TIPS exposure.
On the no-load side, we can switch to Harbor
Real Return HARRX for the same PIMCO
strategy and manager. For munis you can use
the same ones I mentioned for PIMCO,
but consider Fidelity Intermediate Municipal
Income FLTMX if you want a little less
interest-rate risk. Finally, we'll round things out
with T. Rowe Price New Income PRCIX. This
MorningstarAdvisor.com 63
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Table of Contents for the Digital Edition of Morningstar Advisor - December 2013/January 2014
Morningstar Advisor - December 2013/January 2014
Contents
Contributors
Letter From the Editor
What’s Your Purpose?
Working for Gen Y
How to Allocate College Savings
Mobius Looks to a New Frontier
Investments á la Carte
Investment Briefs
How to Manage Bonds for Today and Tomorrow
Cloud Is the New Engine of Growth
Knowing Where to Look
Economic Vulnerability Varies by Country
Factor Investing in Emerging Markets
Following the Rules
Exploring Indexing’s Next Frontiers
Frequent Fliers
Family Blind Spots
Optimal Portfolios for the Long Run
Finding Value in a Pricey Sector
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
The Emerging-Markets Roller Coaster
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