Amana Portfolio Allocation

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Amana Portfolio Allocation

Postby Nomadix » Tue Jun 18, 2013 2:51 pm

Assume that I'm restricted to these 3 funds (just take it for granted, no use arguing why):

AMAGX
AMANX
AMDWX

What is the best allocation? (Currently 40/40/20).

Thanks.
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Re: Amana Portfolio Allocation

Postby mnvalue » Tue Jun 18, 2013 3:18 pm

Pick your desired portfolio AA, plug that allocation into Morningstar Instant X-Ray using Vanguard Total Stock / Total International / Total Bond. Then in another browser window of Instant X-Ray, adjust your allocation of those three funds until you get as close as you can. I'd focus on the domestic stocks / foreign stocks / bonds breakdown primarily. (I'm assuming that this is your entire portfolio. If you have other accounts, that changes the overall picture quite a bit.)
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Re: Amana Portfolio Allocation

Postby mhc » Tue Jun 18, 2013 3:22 pm

I would probably go 0/80/20. The growth fund would just offer a growth tilt to the portfolio. Most around here would prefer to tilt to the value side.

It appears that these are the only 3 funds offered by Amana. Do you have plans for bonds or is that just out of the picture?
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Re: Amana Portfolio Allocation

Postby dbr » Tue Jun 18, 2013 3:26 pm

It is noted that only these are all stock funds except the third which holds 20% in cash (for now).

It would be a good idea to think about the stock/fixed income distribution and what to do if almost 100% stock is too risky.
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Re: Amana Portfolio Allocation

Postby Nomadix » Tue Jun 18, 2013 3:38 pm

mhc wrote:I would probably go 0/80/20. The growth fund would just offer a growth tilt to the portfolio. Most around here would prefer to tilt to the value side.

It appears that these are the only 3 funds offered by Amana. Do you have plans for bonds or is that just out of the picture?



Thanks. Yes unfortunately bonds are out of the picture.
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Re: Amana Portfolio Allocation

Postby Nomadix » Tue Jun 18, 2013 3:39 pm

dbr wrote:It is noted that only these are all stock funds except the third which holds 20% in cash (for now).

It would be a good idea to think about the stock/fixed income distribution and what to do if almost 100% stock is too risky.


Thanks. As bonds are unavailable to me, I'm trying to figure out a fixed-income bond substitute. I've been looking to REIT's, MLP's, and real assets including farmland/ranch land.
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Re: Amana Portfolio Allocation

Postby Nomadix » Tue Jun 18, 2013 3:44 pm

Also, here are the expense ratios (horrendous I know):

AMAGX (Growth) 1.13%
AMANX (Income) 1.20%
AMDWX (Developing) 1.61%
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Re: Amana Portfolio Allocation

Postby dbr » Tue Jun 18, 2013 3:56 pm

Nomadix wrote:
dbr wrote:It is noted that only these are all stock funds except the third which holds 20% in cash (for now).

It would be a good idea to think about the stock/fixed income distribution and what to do if almost 100% stock is too risky.


Thanks. As bonds are unavailable to me, I'm trying to figure out a fixed-income bond substitute. I've been looking to REIT's, MLP's, and real assets including farmland/ranch land.


Those things are diversfiers or not, depending on exactly what is involved, but don't serve to significantly dilute volatilty of your assets. However, depending on your age, the amount of assets, how long you plan on being in this plan, etc., you could not need fixed income for awhile.

The standard question is whether or not you have an adequate emergency fund.

There is the option of investing in I bonds which are tax deferred and inflation indexed. The downside for a young investor is that the tax deferral ends at thirty years, which could be the worst possible time for tax to come due. Another alternative is either tax exempt bonds in a taxable account, or, if your tax rate is not too high, just holding fixed income in taxable. A lot depends on how much income is involved, whether or not you can save in excess of the plan in question (we assume this is some kind of tax deferred retirement plan), whether and how much employer match there is, and so on.
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Re: Amana Portfolio Allocation

Postby HurdyGurdy » Tue Jun 18, 2013 5:40 pm

What do the Amana folks suggest as a reasonable substitute for bonds? Don' t they offer such product? They must get that question all the time.
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Re: Amana Portfolio Allocation

Postby Nomadix » Tue Jun 18, 2013 5:40 pm

dbr wrote:
Nomadix wrote:
dbr wrote:It is noted that only these are all stock funds except the third which holds 20% in cash (for now).

It would be a good idea to think about the stock/fixed income distribution and what to do if almost 100% stock is too risky.


Thanks. As bonds are unavailable to me, I'm trying to figure out a fixed-income bond substitute. I've been looking to REIT's, MLP's, and real assets including farmland/ranch land.


Those things are diversfiers or not, depending on exactly what is involved, but don't serve to significantly dilute volatilty of your assets. However, depending on your age, the amount of assets, how long you plan on being in this plan, etc., you could not need fixed income for awhile.

The standard question is whether or not you have an adequate emergency fund.

There is the option of investing in I bonds which are tax deferred and inflation indexed. The downside for a young investor is that the tax deferral ends at thirty years, which could be the worst possible time for tax to come due. Another alternative is either tax exempt bonds in a taxable account, or, if your tax rate is not too high, just holding fixed income in taxable. A lot depends on how much income is involved, whether or not you can save in excess of the plan in question (we assume this is some kind of tax deferred retirement plan), whether and how much employer match there is, and so on.


It is a 401 (a). Emergency fund in place.

Whether in this deferred plan or outside of it, I cannot invest in bonds. I'm relatively young (<30 yo) so fixed income won't be paramount for a while, but I want to start getting a plan in place.

Since the Amana funds are currently the sole make-up of my stock portfolio, I want to make sure that I'm at least balancing those 3 correctly.
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Re: Amana Portfolio Allocation

Postby livesoft » Tue Jun 18, 2013 5:46 pm

It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Amana Portfolio Allocation

Postby Petunia » Tue Jun 18, 2013 6:21 pm

JuanZ wrote:What do the Amana folks suggest as a reasonable substitute for bonds? Don' t they offer such product? They must get that question all the time.


Not from their target market, they don't. :)

Amana funds invest according to Islamic principals. Charging interest is forbidden, so bonds are out.
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Re: Amana Portfolio Allocation

Postby retirementandpf » Tue Jun 18, 2013 6:27 pm

I am also on the same boat with the OP. I think WISEX could be considered as bond equivalent and ADJEX could provide more US stock exposure. AMDWX could also be used for international exposure.

Based on Morningstar x-ray, each fund's AA is below.


AMANX
Cash 3%
U.S. Stocks 78%
Foreign 19%

AMAGX
Cash 3%
U.S. Stocks 79%
Foreign 18%

ADJEX
Cash 2%
U.S. Stocks 93%
Foreign 3%


WISEX
Cash 36%
U.S. Stocks 13%
Foreign 3%
Bond Eq. 42%


AMDWX
Cash 20%
U.S. Stocks 11%
Foreign 70%
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Re: Amana Portfolio Allocation

Postby Nomadix » Tue Jun 18, 2013 6:34 pm

Petunia wrote:
JuanZ wrote:What do the Amana folks suggest as a reasonable substitute for bonds? Don' t they offer such product? They must get that question all the time.


Not from their target market, they don't. :)

Amana funds invest according to Islamic principals. Charging interest is forbidden, so bonds are out.


They are just a mutual fund manager, so don't that they advise anything with that regard necessarily, though it would be interesting to see if they have an opinion on the topic.

There has been attempts at a bond substitute, although it remains controversial (given their ultimate similarity to bonds):

See: http://en.wikipedia.org/wiki/Sukuk

I believe ultimately the substitution is a lower-risk income/dividend producing assest (the major principles are that there be risk involved and no money made on money), though what the optimal components of that are yet to be determined.
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Re: Amana Portfolio Allocation

Postby connya » Tue Jun 18, 2013 6:45 pm

I would like to point out that AMANX and AMAGX combined only hold about 130 securities. A heavy growth tilt may not be ideal but I would definitely hold equal weights of both funds just to get as much diversification as possible.

Emerging markets at 20% sounds a little high for a portfolio that is all-stock and already very risky, but again, diversification is important, so it makes sense. I think 40/40/20 is a good choice. Either that or go 45/45/10 to reduce volatility a little.

Recognize that no matter what you do, you are going to see a lot of volatility in this portfolio. REITs sound like a good idea. I wouldn't call them a fixed income substitute (too risky) but their low correlation to your current funds may smooth the ride somewhat which is very important in a portfolio like this.
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Re: Amana Portfolio Allocation

Postby Nomadix » Tue Jun 18, 2013 6:58 pm

connya wrote:I would like to point out that AMANX and AMAGX combined only hold about 130 securities. A heavy growth tilt may not be ideal but I would definitely hold equal weights of both funds just to get as much diversification as possible.

Emerging markets at 20% sounds a little high for a portfolio that is all-stock and already very risky, but again, diversification is important, so it makes sense. I think 40/40/20 is a good choice. Either that or go 45/45/10 to reduce volatility a little.

Recognize that no matter what you do, you are going to see a lot of volatility in this portfolio. REITs sound like a good idea. I wouldn't call them a fixed income substitute (too risky) but their low correlation to your current funds may smooth the ride somewhat which is very important in a portfolio like this.


Thanks Connya, this is more what I was looking for. Any reason you wouldn't tilt a little more towards AMANX, say 60/30/10
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Re: Amana Portfolio Allocation

Postby Nomadix » Tue Jun 18, 2013 6:59 pm

retirementandpf wrote:I am also on the same boat with the OP. I think WISEX could be considered as bond equivalent and ADJEX could provide more US stock exposure. AMDWX could also be used for international exposure.

Based on Morningstar x-ray, each fund's AA is below.


AMANX
Cash 3%
U.S. Stocks 78%
Foreign 19%

AMAGX
Cash 3%
U.S. Stocks 79%
Foreign 18%

ADJEX
Cash 2%
U.S. Stocks 93%
Foreign 3%


WISEX
Cash 36%
U.S. Stocks 13%
Foreign 3%
Bond Eq. 42%


AMDWX
Cash 20%
U.S. Stocks 11%
Foreign 70%



retirementandpf, seeing as we are in a similar situation, I'd be interested know your allocations...
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Re: Amana Portfolio Allocation

Postby connya » Tue Jun 18, 2013 7:37 pm

Nomadix wrote:Any reason you wouldn't tilt a little more towards AMANX, say 60/30/10


That's fine too, but I don't think you should be too concerned with the growth or value factors. First of all, the difference is less pronounced in larger stocks, and your funds are overweight in large stocks. Second, with so few securities you are less likely to see the trend of the overall market (and the intermittent trend of value outperformance and growth underperformance). I would rather maximize my free lunch of diversification. Also AMANX has a very slightly higher ER.

That being said, I can't imagine 45/45/10 will look much different in the end than 60/30/10, so just pick the one you are most comfortable with.
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Re: Amana Portfolio Allocation

Postby retirementandpf » Tue Jun 18, 2013 7:52 pm

Nomadix wrote:
retirementandpf wrote:I am also on the same boat with the OP. I think WISEX could be considered as bond equivalent and ADJEX could provide more US stock exposure. AMDWX could also be used for international exposure.

Based on Morningstar x-ray, each fund's AA is below.


AMANX
Cash 3%
U.S. Stocks 78%
Foreign 19%

AMAGX
Cash 3%
U.S. Stocks 79%
Foreign 18%

ADJEX
Cash 2%
U.S. Stocks 93%
Foreign 3%


WISEX
Cash 36%
U.S. Stocks 13%
Foreign 3%
Bond Eq. 42%


AMDWX
Cash 20%
U.S. Stocks 11%
Foreign 70%



retirementandpf, seeing as we are in a similar situation, I'd be interested know your allocations...


My wife and I are in our mid-30s, so my AA goal is 80/20. I am not there yet at the moment (88/12) but I intend to use new money to reach my desired AA. I also use my taxable brokerage account as my CD equivalent for shorter term needs and as emergency funds. The taxable fund is heavy with WISEX (70%) and has a touch of AMANX and AMAGX (30% combined).
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Re: Amana Portfolio Allocation

Postby Nomadix » Tue Jun 18, 2013 8:10 pm

retirementandpf wrote:
Nomadix wrote:
retirementandpf wrote:I am also on the same boat with the OP. I think WISEX could be considered as bond equivalent and ADJEX could provide more US stock exposure. AMDWX could also be used for international exposure.

Based on Morningstar x-ray, each fund's AA is below.


AMANX
Cash 3%
U.S. Stocks 78%
Foreign 19%

AMAGX
Cash 3%
U.S. Stocks 79%
Foreign 18%

ADJEX
Cash 2%
U.S. Stocks 93%
Foreign 3%


WISEX
Cash 36%
U.S. Stocks 13%
Foreign 3%
Bond Eq. 42%


AMDWX
Cash 20%
U.S. Stocks 11%
Foreign 70%



retirementandpf, seeing as we are in a similar situation, I'd be interested know your allocations...


My wife and I are in our mid-30s, so my AA goal is 80/20. I am not there yet at the moment (88/12) but I intend to use new money to reach my desired AA. I also use my taxable brokerage account as my CD equivalent for shorter term needs and as emergency funds. The taxable fund is heavy with WISEX (70%) and has a touch of AMANX and AMAGX (30% combined).


Thanks. With regards to the taxable brokerage account as CD equivalent, does that mean you are just keeping cash in the account or are you putting it into any product?
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Re: Amana Portfolio Allocation

Postby retirementandpf » Tue Jun 18, 2013 8:37 pm

Nomadix wrote:
retirementandpf wrote:
Nomadix wrote:
retirementandpf wrote:I am also on the same boat with the OP. I think WISEX could be considered as bond equivalent and ADJEX could provide more US stock exposure. AMDWX could also be used for international exposure.

Based on Morningstar x-ray, each fund's AA is below.


AMANX
Cash 3%
U.S. Stocks 78%
Foreign 19%

AMAGX
Cash 3%
U.S. Stocks 79%
Foreign 18%

ADJEX
Cash 2%
U.S. Stocks 93%
Foreign 3%


WISEX
Cash 36%
U.S. Stocks 13%
Foreign 3%
Bond Eq. 42%


AMDWX
Cash 20%
U.S. Stocks 11%
Foreign 70%



retirementandpf, seeing as we are in a similar situation, I'd be interested know your allocations...


My wife and I are in our mid-30s, so my AA goal is 80/20. I am not there yet at the moment (88/12) but I intend to use new money to reach my desired AA. I also use my taxable brokerage account as my CD equivalent for shorter term needs and as emergency funds. The taxable fund is heavy with WISEX (70%) and has a touch of AMANX and AMAGX (30% combined).


Thanks. With regards to the taxable brokerage account as CD equivalent, does that mean you are just keeping cash in the account or are you putting it into any product?


I don't hold any cash in the account since it would be subject to earning interest which is not permissible. Therefore, I currently hold 3 funds in my taxable account; WISEX (70%) , AMANX (~20%) and AMAGX (~10%). Our main retirement portfolio, which is a SEP IRA, is heavily in stocks with AMANX, AMAGX and a touch of WISEX.
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Re: Amana Portfolio Allocation

Postby Nomadix » Mon Jun 24, 2013 7:03 am

What is the ideal developing/emerging market equity allocation? Is it necessary? And why?
(trying to understand as oppose to just blindly allocating).
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Re: Amana Portfolio Allocation

Postby Nomadix » Wed Jun 26, 2013 9:34 pm

Anyone else in the same boat as me look into WisdomTree ex financial funds,
DOO
DTN

Same to exclude the main culprit (financial sector), but reasonably lower ER's than Amana.
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Re: Amana Portfolio Allocation

Postby retirementandpf » Thu Jun 27, 2013 11:07 pm

Nomadix wrote:Anyone else in the same boat as me look into WisdomTree ex financial funds,
DOO
DTN

Same to exclude the main culprit (financial sector), but reasonably lower ER's than Amana.


Thanks for sharing it. Do you currently own them?
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Re: Amana Portfolio Allocation

Postby Nomadix » Sat Jun 29, 2013 9:58 am

Not yet, but looking into it.
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Re: Amana Portfolio Allocation

Postby Nomadix » Sat Jun 29, 2013 10:03 am

Maybe one day Vanguard will get an ex-Financials fund. Email them it as a suggestion!
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Re: Amana Portfolio Allocation

Postby retirementandpf » Mon Jul 01, 2013 5:16 am

This is from another discussion about this topic here: posting.php?mode=quote&f=1&p=1738282
I thought it might help for this discussion as well.

JTravers wrote:I know this is quite a few months after the original post, but I hope the OP finds the following information useful.

The best way to invest in Shariah-compliant passive indexes is to open an account at a broker that offers trading on global exchanges at reasonable prices -- Interactive Brokers, Fidelity, Charles Schwab, etc. -- and buy the 3 iShares MSCI Islamic Index ETFs that trade on the London Stock Exchange (LSE).

They are:
1. iShares MSCI World Islamic ETF (ISWD)
2. iShares MSCI USA Islamic ETF (ISUS)
3. iShares MSCI Emerging Markets Islamic ETF (ISEM)

The World ETF contains US stocks, so you have to keep that in mind when setting up your portfolio.

Beyond that, you're stuck with mutual funds with high fees or trying to create portfolios of compliant stocks yourself. For bond-equivalents, the Wise Capital Fund (WISEX) looks interesting, but -- again -- the high fees will make things difficult. Also, only having one unproven fund with your entire fixed income allocation could be asking for trouble.
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Re: Amana Portfolio Allocation

Postby nihejazi » Fri May 30, 2014 7:59 pm

retirementandpf, do you know if there is any tax implications for a US-reisdent investor investing in UK-based ETFs such as the iShares ETF mentioned (ISWD - ISUS and ISEM)?
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Re: Amana Portfolio Allocation

Postby LadyGeek » Fri May 30, 2014 8:19 pm

FYI - new member nihejazi has started a thread asking for help here: UK taxes on iShares ETF offered by Fidelity

nihejazi - Welcome! Consider editing the post in your other thread with the Amana shares you mentioned here. Having all of the information in one location will help us answer your questions. (Use the Edit button in the top right corner of your post.)
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Re: Amana Portfolio Allocation

Postby bpp » Sat May 31, 2014 5:07 pm

Are individual stocks an option? The expense ratios on those Amana funds are outrageously high.
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