OAKBX

[Guest swf83]

I have owned OAKBX for about a year or so, and I truly believe in the manager's ability to preserve capital and to moderately perform, and certainly outperform, its peer group in bull markets. I am 26 years old and will admit that the past few years has turned me into a more conservative investor, with 75% in cash and 25% in OAKBX. I bought OAKBX at a very favorable price point, and am currently up 23% on the position, which is a significant gain in a balanced fund. Taking profits are tempting, but I keep reminding myself that this is a fund I want to hold for 20+ years, and considering that I got in when I did means that in 20+ years the total return could be stellar.

 

I know 75% cash may sound way too conservative, but for me it is what I have to do so that I sleep well at night.

 

What would your advice be for someone in my situation? Sell the fund, or hold for the long-term?

 

Thanks to all-

Scott

[ericd1]

Hi Scott,

 

You've posed an interesting question and I find it interesting that the past few years have impacted your investment strategy. It's good you are aware of the risk involved in the markets. Learning that at at early age is invaluable and should help you throughout your life.

 

There's also nothing wrong with being a conservative investor. Those that swing for the fences usually have the most strikeouts. You should invest in your comfort zone, so you can sleep well at night.

 

However, at 26 you have a long time to invest and being too conservative might not be in your best interest. If your investments don't keep up with inflation, you would be losing future spending power.

 

I would strongly suggest you learn all you can about investing by reading some of the books mentioned on this board. Books about Warren Buffett, Ben Graham, John Templeton, etc can help you learn more about investing, the markets and the traits of successful investors. By applying their principals to your investment strategy, you will have every opportunity to be a successful investor.

 

After you've read a couple of good investing books and absorbed the concepts you'll be able to develop a long-term investment plan that meets your risk/return criteria and it will help you answer your own question about OAKBX.

 

All that said, if you don't need the money for anything, I'd hold the balanced fund until you develop a long-term investment plan and see how it fits into your plan.

 

 

 

 

 

 

 

 

 

 

 

 

[oec2000]

Hi Scott,

 

Assuming the 75% cash is not money you need for expenses, you already have too high a proportion of assets in cash.

 

You say 75% cash allows you to sleep at night so I am not sure you have considered the downsides of cash. If you have seen very long term charts (30 years and more) that compare the returns of asset classes such as equities, bonds and cash, you will appreciate the unattractiveness of cash as an investment asset. The results are even worse when you factor in after tax returns because of the preferential tax treatment of dividends and capital gains. If you are in a high tax bracket, cash probably gives you a negative return after tax and inflation.

 

For someone with a long term investment horizon, cash is without doubt the worst asset class to hold. In the current environment where governments around the world are all aggressively trying to reflate their economies, the danger that cash will be eroded by inflation is extremely high even if this may not happen immediately.

 

For a true long term investor, cash should only be considered as a default investment that you hold only when you cannot find better alternatives. With cash yielding nothing right now, you should be looking for opportunities to deploy the cash rather than increasing it.

 

You might find it useful to go through an exercise comparing cash to ORH.PR.A or WFC.PR.L (both of which pay >8% in tax advantaged dividends) under various economic scenarios. It will give you a better perspective on whether cash makes sense.

 

Hope this helps.