Readers Serve Up Their Favorite Investment Side Dishes
Healthcare, precious metals, and real estate are popular accompaniments to more-traditional fare.
Though the Thanksgiving leftovers are probably finished up by now, luckily we have plenty more holiday feasts and treats to look forward to in the next few weeks. In the spirit of all that delicious feasting, we asked Morningstar readers to tell us about their favorite investment "side dish." Not the main-course core holding that anchors a portfolio, but the satellite or supporting player that adds that little bit of spice and diversity.
Among the most frequently mentioned accompaniments to a more-balanced portfolio were healthcare and real estate investments. Some respondents said they had a sliver of precious metals on the side--a few of these readers noted that they hope those holdings will soon look more appetizing. Others mentioned liking bolder bond funds, some global-stock funds, and a few alternative funds, too.
Below is a summary of the responses. To read the full thread and weigh in yourself, please click here.
'As long as us boomers are getting older, healthcare will boom.'
Some readers, such as FLstategrunt, said they had an appetite for healthcare. For some, it's a more diversified exposure via a mutual fund or ETF, while for others it's individual stocks.
" Vanguard Health Care (VGHCX) has been a core holding since 1992," said FLstategrunt. Other fans of Vanguard Health Care include CardsFan, chabroken1, and hdw4567.
"In March 2013, I put $23,000 into two smallish pharmas, ISIS Pharmaceuticals (ISIS) and ANI Pharmaceuticals (ANIP)," said chip1909. "Today the package is valued at $43,000 (up 87%). Needless to say, I've been very happy--and lucky!--with this side dish."
"I keep $5,000 of iShares Nasdaq Biotechnology (IBB)," said macpiano. "Its volatility keeps me from mucking with my portfolio. When I see it go down 3%-4% in a day ... I would not want my whole portfolio to do that."
'Might be time to add to my small GLD position'
Other respondents (such as FABERD, quoted above referring to SPDR Gold Shares (GLD)) said that they have a small helping of precious metals on the side. Although the asset class has been pretty hard to swallow lately (the Morningstar equity precious-metals fund category is down 6.6% and 5.3% during the trailing three- and five-year periods), many readers said they still have conviction.
Farhorizons likes Vanguard Precious Metals and Mining (VGPMX). "I can't resist bottom-fishing," said this reader. "I've got a couple percent of my portfolio invested here based on some articles I've read about it on Morningstar this year. I like its very low correlation with the rest of my portfolio. It's one of the few nonindex investments I own."
VGMontana is also a fan of the Vanguard Precious Metals and Mining Fund. "Have had this for some time--every time it bottoms, I double down. I'm planning someday to be proud of that."
"We hold two funds which might qualify as side dishes--Fidelity Select Biotech (FBIOX), which has done well in the last few years, and Fidelity Select Gold (FSAGX), which as a fund of mining stocks, has not," said retiredgary.
'I am glad that I have ignored the naysayers who say there is no need for real estate funds in a diversified portfolio.'
Many readers (such as dawgie, quoted above) consider real estate an appealing side dish. For some, this exposure is attained through a mutual fund, while others said they prefer physical properties.
"I have held a real estate fund, Fidelity Real Estate Investment (FRESX), for more than 15 years, and Fidelity Real Estate Income (FRIFX), for about five years. Both funds have served me well, providing great returns and diversification to my portfolio. Fidelity Real Estate Investment has had returns comparable to stock funds, but often zigs when stock markets zag. Likewise, Fidelity Real Estate Income has had returns comparable to high-yield or multisector-bond funds, but often behaves differently," said dawgie.
"Rental residential real estate property [in] South Florida. Beats bonds in return; rents rising; adds to diversification," said retired at 48.
"I have a variety of side dishes, such as real estate funds ( Vanguard REIT Index (VGSIX), T. Rowe Price Real Estate (TRREX), Fidelity Real Estate Income fund, and Third Avenue Real Estate Value (TVRVX)), Fidelity Capital & Income (FAGIX), Vanguard Health Care fund, T. Rowe Price Mid-Cap Growth (RPMGX), Franklin Utilities (FKUTX), and Hennessy Gas Utility (GASFX)," hdw4567 said.
"Waterfront rentals in Miami/Miami Beach from real estate crash," cmlewis said. "Crowd-sourced real estate both 5-10 year equity and bridge loans."
Reader cpwhitworth likes mortgage REITs and business-development companies. "I expect them to outperform in the rate-rising environment, especially off of recent lows."
Other respondents' tastes were eclectic; they mentioned side-dish investments in varying flavors, such as global-stock funds, more-daring bond funds, and a few alternatives picks. We've arranged some here in a buffet:
"Templeton Dragon Fund (TDF) is my flier," said FLstategrunt. "Bought in 1997 for $9.00, dropped to $5.00, peaked in 2007 at $36.50, and has returned more than 15% over 15 years including a 3%-4% distribution most years."
"Vanguard Emerging Markets Government Bond ETF (VWOB). This fund has really held up this past year--very nice performance," said VGMontana.
Rathgar likes "DoubleLine Income Solutions (DSL), a closed-end fund run by Jeffrey Gundlach; 5% allocation to IRA, and reinvest monthly income while out of favor."
"I have two supporting funds: Vanguard Global Minimum Volatility (VMVFX) to hedge against volatility, and Vanguard High-Yield Corporate (VWEHX) to balance out Vanguard bond funds that don't take much credit risk," said w004dal.
SpecialNeedsDad has around 10% in "AQR long-short funds that have decent expected returns and are very uncorrelated with stocks and bonds." These funds are AQR Equity Market Neutral (QMNNX), AQR Style Premia Alternative (QSPNX), and AQR Managed Futures Strategy (AQMNX).
"I use a group of small- and mid-cap funds to help my big boys move along," said BoomerGuy. " Vanguard Tax-Managed Small Cap (VTMSX), Baron Growth (BGRFX), Brown Capital Management Small Company (BCSIX), Meridian Growth Legacy (MERDX), and Primecap Odyssey Aggressive Growth (POAGX). Vanguard FTSE All-World ex-US ETF (VEU) and Matthews Asian Growth & Income (MACSX) add a bit of oomph to my international side."
"I've had T. Rowe Price Media & Telecommunications (PRMTX) for a few years now--about 3%-4% of my holdings, so it isn't a big play," said phil56. "I think of it as investing in something I see around me everyday, namely people glued to their devices and soaking up media."
"Over the years, I've added utilities, convertibles, real assets, a few volatile sector funds, some international flavors, and a couple of gadget funds. I never had the patience for any of them, and they ended up going down the garbage disposal with the creamed onions and curried yams. Lessons learned," said lionsgate. "From then on, it's been traditional fare. Meat and potatoes with a slice of REITs, TIPS, and a multisector-bond fund. Stable value is the gravy on top. Excuse me while I loosen my belt."
Karen Wallace has a position in the following securities mentioned above: POAGX. Find out about Morningstar’s editorial policies.