Thank you kerryvan for your reply.  This is my first post to any forum.  I don't have a problem with a -3% loss -- But, it's only the beginning of several years in a bear market where global growth will slow and inflation will be rising.  After losing 17% in 2000, I stayed out of the market in 2001 and 2002.  I was glad I did.  Tx

kerry - I think you're responding more to one of those "Last year I dropped 100k into Hot Mutual Fund and now it's down 10%!!!! Please tell me that this is normal so that I don't buy high and sell low!!!!" posts than to the actual concerns of the OP.  She's not talking about any of your extreme options that are really straw men which avoid the question asked.  Do you really think that whatever AA the OP began with is optimal for all time, and the only option is "Don't look at it"?  What kind of investing advice is that?

FLVCX, although M* likes the fund, typifies the trend of mutual fund companies creating funds to satisfy niche demands, chase performance, and appear clever.  The fund has some positives - low expenses, good sector bets by the manager, good fund family - but I see them as outweighed by the absurd mandate of the fund.  Historical returns are fantastic, but if you believe that the manager has real skill, why would you want him to be limited to investing in leveraged companies regardless of market conditions?  Why not find an equally-skilled manager who is free to reduce the risks of leveraged investing when he or she thinks prudent?  Although the manager dodged the financial company disasters to which I was worried such a fund might be vulnerable (e.g. BSC, LEH), this is the kind of fund that could run into such a disaster at any time.  Also it's big for a specialized fund that likes mid-cap stocks.  Unless you really want risk and potential high performance, I would agree with the call to get out if you can do it with minimal costs (what's the time frame on the redemption fee?)

FAIRX is more defensible because it invests in a wider spectrum (including some decent foreign exposure and a cash holding - though you have to trust that Berkowitz will know when to put the cash to work).  I'm not crazy about paying 1.00% fee for a big Berkshire Hathaway stake - have you considered getting some BRK.B shares instead?  If you like Buffett's approach they're a lower cost option, and if he dies or retires you'd have an easier time getting out of your small holding than Berkowitz would have getting out of a $1 billion+ position.  Otherwise I think the concept of the fund is pretty reasonable and sound.

In terms of alternate holdings to prosper in times of stagflation, I would say look for growth that isn't dependent on major trends - small companies with great ideas/execution, funds that invest in economies that are very different from the US/Europe, etc.  Or you could just hope to be wrong and see a surprising return to overall growth.  Try to stay out of any low-yielding income traps (e.g. long term U.S. bonds).       

Thank you for your thoughtful reply.  I appreciate your evaluation of FLVCX AND FAIRX  and for offering some suggestions.   

 Re:  FLVCX redemption fee -- 1.5% within 90 days.  I have four contributions (4/29/08, 5/7/08, 5/15/08, and 5/19/08).  The redemption penalty I would incur is around $521(based on the last share price.)  The fund lost around 7% in its last 2 sessions -- According to M*, changed its portfolio (6/30/08).  The portfolio published on M* is dated 4/30/08.

Re:  FAIRX and Berkshire holdings -- Because my employer is a large, international law firm, I'm confined to investing in mutual funds.  I like this fund because of its low expenses -- I know Berkshire's financial holdings have taken a real hit -- but AIG is everywhere, including gaining entry into some EMs.

In 2000-2001, I lost about 17%, and from 2002-2003, I stayed in the fixed-income investment in the 401K for 2002-2003.  The SMA option was not available to the 401K plan participants at that time. 

Regards, and tx 

 

cgaros:

She's not talking about any of your extreme options that are really straw men which avoid the question asked.  Do you really think that whatever AA the OP began with is optimal for all time, and the only option is "Don't look at it"?  What kind of investing advice is that?

I disagree with your mis-stated comment.  For now I'd sit until all the holding time has elapsed.  Jumping now is a sure loss, it may be back to purchase price at the end of the holding time.  Is it really worth a few grand for a couple months?  Is it really going to drop again 3% over the next few months?

If you jump now,  where are you going to put the $$?  You may miss a rise which is a greater loss than sitting on the sidelines.

I pick solid funds the hold on until they quit performing.  Funds are not intended to be short term trading instruments.  While she waits for the holding time to expire,  plan the AA,  and next investments.  So my advise stands,  Just don't look until the holding time is up...