Something I don't understand is why any investment (aside from cash equivalents) should be considered acceptable for short term needs:
"If you're selling out of an active MF within 6 months, then you have no business investing in it. Just buy a bunch of index ETFs or a target date fund"
Active bad, passive good?
"These are long term investment products unlike individual securities or ETFs."
It's okay to use any investment so long as it has low/no commissions?
We can dismiss the impact to the fund itself - that's taken care of by the fund's own redemption fee (which goes back into the fund to compensate it for trading costs/market movement). Here we're talking about brokerage fees, not fund redemption fees.
So the question is, from the investor (as opposed to fund) perspective, does it ever make sense to count on index ETFs or target date funds, or individual securities or any (active or index) ETFs, as a place to keep short term (under 6 month) money?
IMHO, the answer is no, with the possible exception of individual securities, if you're buying them because you (think you) see an obvious mispricing that you want to take advantage of and flip quickly.
Actively managed funds (whether open end or ETF) may be more unpredictable in the short term than indexes, but that doesn't mean one can count on an index fund not taking a dive in the next few months.
Target date funds, especially in the short run, are basically just hybrid funds (glide path significantly affects allocations only over years). With roughly zero correlation between stocks and bonds, sometimes the components will move in opposite directions, sometimes not. You don't know if this time, this month, they're both going to drop.
https://www.ft.com/content/7914a096-48a9-11e8-8ee8-cae73aab7ccb
"in case something comes up and you need to sell"
I read that as an unexpected, large expense (roof blew off, car suddenly died, etc.). If one's six month plus emergency fund isn't enough to handle the rare, unexpected expense, then sure, one will need to sell some longer term investment.
I wouldn't expect a need like that to occur more than once every several years. It's not worth picking a brokerage on the possibility of incurring a $50 fee every few years. It seems better to focus on routine costs/fees, service, accessibility, etc.

@Ted - just one example:
"The new preferred from ARES is non-cumulative and redeemable in 5 years which is typical for preferred issues. What is not typical is that these shares will generate a K-1 at tax time instead of the more typical 1099. This is because ARES is a limited partnership. We are aware that many investors shy away from issues that generate K-1’s and if you are one of those people this is not the issue for you."
From:
https://www.dividendinvestor.com/limited-partnership-ares-management-sells-a-preferred-issue/

https://www.thewealthadvisor.com/article/how-invest-mutual-fund-closed-new-investors
August 15, 2018
Two weeks ago I published a list of 17 mutual funds whose managers have been at the helm for 10 years, outperforming the S&P 500's 10 year return of 10.61% and their category benchmark by enough of a margin to make a difference to investors.

I'm looking at RYT for my long-long term portfolio, actually. For that conservative account I like the equal-weighted feature of that fund!

Very enlightening comparisons among these funds. While it does not have the long-term record of the cubes, RYT has been my choice in technology. For the last three years it has been a winner.

Very enlightening comparisons among these funds. While it does not have the long-term record of the cubes, RYT has been my choice in technology. For the last three years it has been a winner.

@rforno: Beg to differ with you on PRGTX being a great fund. It's perfromance over the last fifteen years doesn't match what I consider to be a great fund. You are right on QQQ's sector allocation only 56% technology, about 25% in Consumer Staples/Discretionary and 9% in Healthcare, that's what makes it a great fund.
Regards,
Ted :)
PRGTX:
15yrs. 1st Percentile
10yrs. 4th Percentile
5yrs. 7th Percentile
3yrs. 46th Percentile
1yr. 89th Percentile
YTD: 91st Percentile
QQQ:
15yrs. 2nd Percentile
10yrs. 1st Percentile
5yrs. 1st Percentile
3yrs. 2nd Percentile
1yr. 19th Percentile
YTD: 13th Percentile

@willmatt72: I'd give Spencer until the end of the year to see if there is an improvement in returns, if not move on. The Linkster has always been a big fan of the Q's that has had an superior annual return record over the last fifteen years.
Regards,
Ted
QQQ Annual Perfromance:
http://performance.morningstar.com/funds/etf/total-returns.action?t=QQQ&region=USA&culture=en_US

Now I've heard everything "modernize" a "rule".
Reminds me of a ... I met once who didn't understand when I told him I'd set up a "file server" in my house for the past 20 years. His blank stare turned to englightenment when I said I have a "private cloud".
On another note, isn't someone publishing an article on this topic every other week? I really don't understand why anyone has to be obsessing about 4% or 7%. You live in retirement based on how much money you have saved up and you withdraw based on how much you are required to because of RMD.

FYI: Christine Benz interviews Ed Slott. Eight years after their arrival, backdoor Roth IRAs are alive and well. Joining Christine to discuss the maneuver is IRA expert Ed Slott. He is author of the newly revised "Retirement Decisions Guide."
Regards,
Ted
https://www.morningstar.com/videos/878097/backdoor-roth-ira-conversions-alive-and-well.html

@MikeS , before you make any transfer, ask whether some of the funds you currently have will transfer to ML. Some may not and you will have to choose from funds they sell, as they d o not sell all funds. Many Vanguard Funds are not available on their platform for instance. It is why I left ML two years ago although I liked my advisor.

Well...when did you buy? If 3 years back I guess you can hold.
Then again...

Thanks very much Bee. I will explore whether an extra annuity is an option. I work for the federal government so I don't think they offer this but I will ask. We have 3 sources of income as feds. 1) An annuity that's based on years of service. 2) Social security. 3) The Thrift Savings plan which is like a 401K program with a limited set of investment options -- equity and bond indexes.

Not often mentioned, but another planning topic is your debt to income ratio. Prior to retirement I had very good credit (partly due to my low debt to a higher working income). This "debt to income ratio" will change instantly in the first months of retirement...probably due to a lower income... and as a result your credit score may suffer. More importantly you will qualify for less credit.
I applied for a 30 year mortgage (actually a 15/15 ARM @ a rate of 2.875 fixed for the first 15 years) and also took additional cash out on this loan. I planned to use the cash for home improvements that I knew I now had time to do myself (retirement offers time to do this) as well as serve as a on demand cash for opportunities. Another story for another time, but cash was king back in 2010.
This decision to refinance my home loan prior to retirement effectively locked in my principle/interest payments for 15 years into retirement and since I completed this process while I was still working I qualified for a much larger mortgage due to my higher "debt to income ratio".

Take a close look at the retirement benefits that are being offered through your government employer. Ten years may be a bit off in the future, but start paying attention to what's being offered now and what might be on the chopping block.
Employers usually have a retirement packet that they share with new retirees. Gather as much information about the retirement process with your employer. I did this and discovered there were many choices I needed to consider with this part of retirement planning. In my case, I selected to move some of my 403b investment to purchase an "extra annuity" through my employer (a somewhat unique option). I shared this option with a few financial planners and they confirmed that using some of these 403b dollars to buy this annuity was a very good option. I fine tuned the amount of the "extra annuity" based on my projected retirement income needs.
These financial planners typically will not be experts on all the options that your employer offers...it's your job to bring these choices/options for discussion.

I was hoping to request some advice. I am meeting with a new financial planner today to do some retirement plannig and review our investment portfolio. I'm about 10 years from retirement and will have a government pension. I'm interested in the planner providing recommendations on asset allocation and steps we should take to achieve our goals. I would value the board's suggestions on questions I should ask the planner or links to such questions. The planner works for Merrill so I'm sure he will be recommending their various products. Our situation is a little complicated in that we have a special needs son that we need to plan for. Thanks so much for your advice.

"Zeroes," of course, you buy at a discount to face value.

And the reason they’re priced below face value is that you have to hold them until maturity to get that face value out of them. Until than, they’re generally worth less (although interest rate fluctuations in the broader market could temporarily drive their market value higher or lower)
But “face value” (what they’re worth at maturity) never changes. The biggest risk with zeros (assuming you hold them until maturity) is that the rate at which they were priced may appear very low compared to rates by the time you redeem them. For example, a zero priced to yield 5% to maturity in 20 years might seem attractive today. But if in 10 years 10% yields become common, you’re going to be a bit unhappy holding that 5% zero with still another 10 years left to maturity.
Just a fly by the seat of the pants calculation - Today you might buy a zero yielding 5% annually and maturing in 2038 (20 years from now ) with a face value of $2650 for a price of $1000. Sounds like a discount. But is it really?

@davfor
I wandered a bit from your subject post, relating to the Mackinac Bridge in the article photo; which has a 5 mile span connecting the lower and upper peninsulas of Michigan.
As to the subject, I'm not sure why NYT chose this particular piece; but Mr. Lee is likely not wrong about possibilities. There is a very large boat load of money in the form of bond issuance globally.
If one were to envision the financial markets perched upon an eight leg stool of bonds and other cash substitutes; not all legs would have to break to cause a problem.
CDS (credit default swaps); being insurance against bond defaults and other forms of derivatives are still in place, not unlike the market melt 10 years ago. CDS instruments, to the best of my knowledge are still not monitored or under scrutiny by any official agency, U.S. or global. Although I am sure the Fed. and U.S. Treasury know the amounts.
Apologies for the thread drift via the "bridge".....I don't like or appreciate excessive thread drift either.
Regards,
Catch

“Turkey is the canary in the coal mine,” Mr. Lee said on Friday. “We are going have another crash that will be worse than 2008 in certain ways.”
Ha! Love the cliche. But my sense is we need more coal mines to house all the canaries. Bill Fleckenstein thinks it’s Tesla. I’m thinking Bob Mueller. Who knows?
I will say that perhaps half of the big U.S. market downdrafts I can remember over the past 20-30 years have had some root in the EM markets. Probably because they’re the most sensitive to credit / interest rate issues which than spread to the developed markets. The 1997 Asian Market Crisis is one. https://en.m.wikipedia.org/wiki/1997_Asian_financial_crisis

I rather wish that the Times had taken, well, the time to consider a simple question: "is there any reason to believe this guy?" Our only two bits of data are (1) European investment funds buy his newsletter and (2) he's been bearish for years. Neither of those, on face, either qualifies or disqualifies him so I'm left thinking "uh huh, they somehow find this one guy and he ..."

... I personally have decided to use the S&P 500 and stop further in depth allocations such as much discussed finer granular reits, mlp's, utilities etc. S&P500 contains all of the aforementioned within the index. ... The argument can be made for more granularity outperforming the S&P500, but i will live with the simple solution. I like the fact mutual funds can easily reinvest dividends/cap gains if needed while some ETF's cannot (easily). I also like the fact that by the nature of the SP500 index it gradually picks the winners for me and discards the losers. just my 2c.

Hi shipwreckedandalone,
Thanks for commenting. (Worth a lot more than 2c). All valid points. It’s not clear to me whether this represents a portion of your total invested assets or all of them. I suspect it’s the former. That said, I don’t think the argument for real estate or any other granular asset class rests only on maximizing return. There may be other considerations like diversifying assets (and hopefully mitigating risk), increasing income stream, hedging against the unexpected (rampant inflation, depression, war, tax law changes, etc.)
If I were age 25-40 and gainfully employed I’d be inclined to put 100% into growth (even possibly the S&P 500) and let her ride come Hell or high-water. A single fund (2 or 3 at most) would work fine. Even at age 40-50 that might make sense - but would require a stronger risk appetite. At 70 or older (with perhaps a 20-year life expectancy I believe an all-growth portfolio foolhearty, unless one is trying to build assets for posterity (estate planning). In that case, long as your own funding is assured for your lifetime, a 100% growth portfolio might still make sense.
To glean an appreciation of how much a 100% S&P 500 investment can fall in a relatively short time we need go back hardly more than a single decade (from Wikepedia): “The US bear market of 2007–2009 was a 17-month bear market that lasted from October 9th 2007 to March 9th 2009, during the financial crisis of 2007-2009. The S&P 500 lost approximately 50% of its value.”
Now - to sit still and endure the pain for 17 consecutive months while watching your total investment egg fall by 50% takes a great deal of intestinal fortitude. And, remember that on March 8, 2009 after 17 months of free-fall, there was no guarantee the market would reverse direction. History has taught that these downturns can persist for much longer. If an index can tumble 50% in 17 months ... it can just as easily fall 60 or 70% over a longer time. No law says it has to stop at 50%. (It’s likely real estate fared even worse during that period.)
In a nutshell, it depends a great deal on your life situation and ability to endure punishment. I think all of us could do a better job relating our age and years to / into retirement when discussing our allocations. One size does not fit all. Such understanding might benefit the younger newbies - if any.
PS: Just my humble mumble. I am not a qualified advisor. Other points of view welcomed.