Wednesday, November 18, 2009

Pimco Convertible: A Viable Substitute for Vanguard Convertible



Chart courtesy of www.StockCharts.com

In mid-June 2009, Vanguard closed Vanguard Convertible Securities Fund (VCVSX) to new accounts and placed an investment limit on current retail accounts.

Vanguard investors seeking a viable alternative can find a suitable substitute in the Pimco Convertible Fund (PFCAX).

For active investors, I've found that selling the fund when it closes below its 50-day moving average (the blue line on the chart) at the end of the week (Friday close) and  buying it when it closes above its 50-day moving average at the end of any week has kept us out of harm's way and has provided above-average returns relative to buying-and-holding the S&P 500.

This way we only have to check on the status of the fund over the weekend and don't have to monitor it every day of the week.

This year PFCAX is up +39.49% versus a +36.1% return for VCVSX (thru 11/18/09).

Since PFCAX closed above it 50-day moving average on Friday May 15, Pimco Convertible is up +33.4% versus only +25.7% for the S&P 500 and +20.6% for Vanguard Convertible.

FULL DISCLOSURE: We currently hold this fund in many of our managed accounts.

And, of course, past performance is no guarantee of future results.

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