In theory the idea sounds good but if I wanted to go that route I would want a choice as to where the money was going. A simple approach would be a index fund for example.
AC had some hot funds in those days. I was in Ultra. Those funds attracted a ton of money afterwards as the investing magazines hyped them up. Growing pains put a lot of strain on the company as they were behind on hiring help from what I understand.
As for the Giftrust fiasco, I'm not a lawyer but opening up that fund to new investors who could move in and out while locking in those who invested in the original idea should have voided the contract between the investor and AC. Giftrust was a very focused fund in the small cap arena. It might have been prudent for them to close it but they didn't.
I have invested with AC now for 29 years. I've never had any issue with them but the Giftrust situation tells us all that buyer beware is always a good thing even with a brand you are loyal to.

We have had many discussions recently about retirement planning (thanks Dex) I sense most, if not all of us including me, tend to far overestimate their longevity. Obviously that optimism is warranted less we outlive our nest egg and the consequences thereof. But the other side of the coin also has drawbacks primarily dying too rich and not fully enjoying the fruits of our labor over a lifetime of investing. Longevity tables tell us that the first wave of baby boomers should expect to live to around 85/86. But I have my doubts about that statistic. I know a lot of widows and females in my neighborhood who are in their mid 80s+ but not one widower or male. I am just curious if any males who actively follow this board are over 85. I know Ron and MJG are around 81 but can't recall anyone much older. Maybe a stupid question so just humor me.
Edit: I don't mean to imply that there aren't any of us males around over 85. Just few and far between.

@Ted, M* says $10,000 become $35,280 in 10 years with VGHCX so you should probably send the bill for 2 dinners!

@PRESSMUP; Next time I go out to eat, I'm sending you the bill. A $10,000 investment in VGHCX 10 years ago in now worth $23,440--Nice work ! Note MFO Members what long-term comittment to a fund can bring.

Ted...I bought VGHCX over 10 years ago because HC was a defensive sector. Funny how being cautious worked out, eh?

Hi Guys,
Paul Merriman is predictable with his workmanlike analyses of the marketplace. The current article is no exception.
The red meat in the article is the reference he makes to his “fine-tuning table”. The table provides equity/bond mix returns data starting in 1970. The second part of his table shows several summary Bear market drawdown measures to help assess market risk.
Here is a direct Link to this useful data presentation:
http://paulmerriman.com/fine-tuning-asset-allocation-2015/
The Merriman tables are very comprehensive. They even degrade annual returns by subtracting an assumed 1% management fee. However, I find one major shortcoming in the presentations that is easily rectified.
The summary data shows annual returns and standard deviations, but does not include Compound (geometric) returns. Compound Annual Growth Rate (CAGR) measures actual integrated investment returns over the long haul.
Volatility (standard deviation) subtracts from average annual returns in terms of determining end wealth. Given equal average annual returns, the portfolio that accomplishes this with lower volatility rewards the portfolio holder with a higher end wealth.
If annual returns and standard deviations are accessible, it is an easy task to calculate CAGR. Here is the equation:
CAGR + 1 equals the square root of the entire two terms (1 + AR) squared minus SD squared.
The AR is the average annual return and the SD is the annual standard deviation. The Merriman data presentation permits the calculation to be made.
If you don’t like using the full 45 years of data incorporated into the Merriman summary stats, the tables are sufficiently complete that a user can select his favored timeframe, and do his own summary statistics.
I calculated the CAGR for the Merriman equity/bond mix tables. Not surprisingly, the portfolio CAGR end wealth rewards are not quite so bushytailed, but they still monotonically increase as the equity percentage increases. The Wall Street axiom that ties reward and risk together remains intact.
The simple equation that couples the more pertinent CAGR to annual returns and its standard deviation is a useful addition to your toolkit. I hope you are or become familiar with it. It will make you a better informed investor and/or better able to challenge your financial advisor.
Best Wishes.

@Old_Joe @Junkster - Aw, shucks.
@Dex - regarding the IRR (rate of return). From one perspective (especially on the insurer's side), the calculation is a lot more complicated, because the payout is not for a fixed term of years, but a life expectancy. This involves actuarial tables, probabilities, analysis of customer base (purchasers will self-select for longer lifetimes), etc.
From your perspective, perhaps the calculation is simpler - you know your health, and are much more able to treat the annuity as a fixed term of years, even if this is just an approximation.
In that case, the formula is relatively simple (but there's no closed form to compute the solution, i.e. IRR; a computer can calculate it by iterative approximation).
Let M be the number of years until payments start, and N the number of years of payments. Here, M is 15 (buy at age 70, start payments at age 85). Pick your own number for N.
By definition, the present value is the purchase price PP ($125K), and what you're interested in is the rate of return. You've got the right idea ... the value at year M (when payments start) is
PP * (1+r)^M = $125K * (1+r) ^ 15.
There's a standard formula for the value (price) of an annuity with N payments of $C ($55K). You can find it in a pretty nice paper here. It is:
PV (present value at start of payments) = C/r * [1 - 1/(1+r)^N] = $55K/r * [1 - 1/(1+r)^N
So we set these two expressions, representing the value of the annuity at the time payments start, equal to each other, and solve.
$125K * (1+r) ^15 = $55K/r * [1 - 1/(1+r)^N] or
$125K * (1+r) ^15 - $55K/r * [1 - 1/(1+r)^N] = 0
(In case it matters, you can see this is a polynomial equation by multiplying both sides by (1+r)^N and by r to clear the fractions.)
So now you're left with an algebra problem in the form: f(r) = 0.
You want to find the real root of this equation with r somewhere between 0% and 20%.
There are various mathematical packages that will do this for you, e.g. Matlab's fzero function. If one is into programming, there are simple iterative methods to find roots, e.g. bisection and Newton's method. See, e.g. http://www.math.niu.edu/~dattab/MATH435.2013/ROOT_FINDING.pdf
Or you could look for online solvers. A quick search for online bisection method calculator turned up http://keisan.casio.com/exec/system/1222999061
(Bisection is slower, but you don't need to provide the derivative of your function as you would for Newton's method.)
I tried this calculator for N=10 (payments to age 95) and came up with 7.61% rate.
With N = 5 (payments to age 90), the return is 4.49%.
(Use ^ for exponent and * for multiplication, as I did above. Also use a range between 0.01 and 0.2 - to avoid dividing by zero - see the $55K/r in the expression above. Finally, replace r in my expression with x for this calculator.)

A long time ago I owned a few Baron funds and I was pretty happy at the time. But I saw an article about his appearance on CNBC yesterday and the headline suggested he's a billionaire. Can that really be true? Fair enough, he started his own firm many years ago and I'm sure he's made a good amount of money. But I thought being a billionaire was reserved for a small handful of massively successful people. Is he really in that league?

Thanks Ted,
I'd argue that bonds are like the fuel in the tank and the oil in the engine. The liquidity that keeps the economic machine from seizing up and keeps the cylinders firing. Without bonds the economic system would come to a halt.
Interesting quotes from Article:
"I have spent years studying this table, which I update annually. For readers who like numbers, here are a few things I've learned:
Adding 10 percentage points of equities (and subtracting 10 points of bonds) adds about 0.55% to the long-term return.
Each additional 10 percentage points of equities increases a portfolio's volatility by 10% to 20%.
Each additional 10 percentage points of stock exposure increases losses by 4% to 6%.
Finally, a few notes about this particular 45-year period of market history.
This was a tough period for bonds, including sharp increases and prolonged, deep decreases in interest rates. In the early 1980s, interest rates were so high that banks were offering 16.5% on 2.5-year certificates of deposit. Many conservative investors thought they would never need to own stocks again. Wrong!
During this period, investors in the 100% diversified equity portfolio experienced 15 consecutive years (1975-1989) of positive returns and a 25-year period (1975-1999) with only one losing calendar year (1990)."

FYI: (This is a follow-up article)
This morning the Wall Street Journal ran a story which showed that 2013 was the first year in decades that there was a net outflow from 401(k) plans. The immediate reaction by many was that this is just the start of a mass exodus from the markets by retiring baby boomers, which could have huge implications on the markets in the coming years as we patiently wait for Millennials to pick up the slack with their savings in the 2020s.
Regards,
Ted
http://awealthofcommonsense.com/will-retiring-baby-boomers-ruin-future-market-returns/

Roy,
Man do I miss you and your old forum and the frequent visitors like Rono, which I was drawn to because you provided a method/analysis, for investors to dump poorly performing mutual funds. At the time, the internet was full of advice on what to buy, but not what to sell or when to sell a badly performing mutual fund. Investing was simple then, the 1990's and into early 2000's. Thanks so much for your 3-alarm advice, your website, and definitely your humorous columns on the junk stuff out there. After many years of investing and having felt some pain during the tech run, I am just a boring buy and hold indexer, and have not much to say about this board.
birdsgears, anders, anderson

Dex, you are spot-on and I have been doing similar calculations. But I am also trying to factor in that the $125,000 is RMD free. But regardless, if I live to 95 that is $550,000 (actually $425,000 after factoring in the $125,000) I have received from the annuity. It may just be better to grow the $125,000 at 70 instead of letting it do nothing until I am 85. Then again, the way I look at it, instead of worrying about the next 20 or 25 years or longer when I am 70, all I have to worry about is the next 15. Probably no right or wrong answer but a personal choice.

One thing to consider is as you age will you be able to handle your finances? I'm not talking about Alzheimer or similar but just mental decline. From that aspect the annuity could be helpful. I have some nephews I can turn my fiances over to.
As I mentioned before I think my small pension and SS does give me some peace of mind.

I have always been against annuities. The first link explains why you should never buy an annuity. But the second link about the new rule where you can purchase up to $125,000 of a deferred annuity with IRA money that won't go against your RMD sounds compelling to me. Playing around with an annuity calculator, I see that at age 70 a 15 year $125,000 deferred annuity pays out some $4600 monthly (over $55,000 annually) beginning when I am 85.

I really like to see the math of that and then look at alternative investments.
In 15 years 125,000 will double to 250K at 4.8%/year
rule of 72
72
15 years
4.8 %
So the question is - what is the % the 125 is growing at and how much of the 55 is return of principal so we can calculate the annual return.

Dex, you are spot-on and I have been doing similar calculations. But I am also trying to factor in that the $125,000 is RMD free. But regardless, if I live to 95 that is $550,000 (actually $425,000 after factoring in the $125,000) I have received from the annuity. It may just be better to grow the $125,000 at 70 instead of letting it do nothing until I am 85. Then again, the way I look at it, instead of worrying about the next 20 or 25 years or longer when I am 70, all I have to worry about is the next 15. Probably no right or wrong answer but a personal choice.

I have always been against annuities. The first link explains why you should never buy an annuity. But the second link about the new rule where you can purchase up to $125,000 of a deferred annuity with IRA money that won't go against your RMD sounds compelling to me. Playing around with an annuity calculator, I see that at age 70 a 15 year $125,000 deferred annuity pays out some $4600 monthly (over $55,000 annually) beginning when I am 85.

I really like to see the math of that and then look at alternative investments.
In 15 years 125,000 will double to 250K at 4.8%/year
rule of 72
72
15 years
4.8 %
So the question is - what is the % the 125 is growing at and how much of the 55 is return of principal so we can calculate the annual return.
When I looked at annuities they didn't compare favorably with junk bond funds.

I have always been against annuities. The first link explains why you should never buy an annuity. But the second link about the new rule where you can purchase up to $125,000 of a deferred annuity with IRA money that won't go against your RMD sounds compelling to me. Playing around with an annuity calculator, I see that at age 70 a 15 year $125,000 deferred annuity pays out some $4600 monthly (over $55,000 annually) beginning when I am 85. Yes, I know many/most of us males, including me, may never make it to 85 or much beyond, but it still sounds compelling. Instead of worrying about the next 25 to 30 years and outliving our nest egg, I would think this would narrow our focus to only the next 15 years (before the annuity kicks in) and doing the right things financially in our investments. What am I missing here? I will say, were I to ever purchase an annuity it would ONLY be through New York Life.
http://www.forbes.com/sites/davidmarotta/2012/08/27/the-false-promises-of-annuities-and-annuity-calculators/
http://taxvox.taxpolicycenter.org/2014/08/01/new-way-invest-old-age-many-will-buy/

Sometimes it take some encouragement to get seniors to spend. This list is a bit long, but I like getting a 10% raise at my age.
Dunkin Donuts gives free coffee to people over 55 . If you're paying for a cup every day, you might want to start getting it for FREE. YOU must ASK for your discount !
Other discounts for seniors as young as 50 years young:
List 1
List 2
List 3
List 4
NOW, go out there and claim your discounts - - and remember -- YOU must ASK for discount ---- no ask, no discount.

MJG, I enjoy your discussions. However, in the real world, the middle class "dollar costs averages" over a working lifetime with ups and downs on the level of contribution due to stuff that happens. For most people, most of the money is invested in later years.

Hi Guys,
Returns are intimately tied to when you leave the investment starting gate. Nobody can consistently predict returns for the next few years. Both GMO and John Hussman have launched signals warning that the Shiller cyclically adjusted price-to-earnings (CAPE) ratio is uncomfortably high. They imply the likelihood of a near-term downturn.
Indeed if that is the case, the question is how to prepare? I sure don’t have a definite answer. Any answer is likely to be closely coupled to an individual’s specific timeframe, his wealth, his risk profile, and his short-term/long-term need tradeoffs. But history can provide some guidelines to help scope the problem.
Here is a Link to a nice chart from the Wrapmanager site that displays the S&P 500 pricing history since 1900:
http://www.wrapmanager.com/wealth-management-blog/did-the-sp-500-reach-all-time-highs-is-there-a-cause-for-concern
Note that the chart also marks off P/E ratios at critical turning points in the S&P’s storied history.
As LewisBraham suggests with his post, when the investment battle is exactly joined directly influences annual returns. Some starting dates are especially disastrous. But over time, the historical record demonstrates that even poor starts have been integrated away by the rising tide. Over the very long haul, the precise starting date is not all that significant.
Here is a Link to a nifty calculator that yields S&P 500 returns with and without dividends reinvested for any input starting and end date. The calculator is from a “Don’t Quit Your Day Job” website:
http://dqydj.net/sp-500-return-calculator/
The calculations can be easily completed both with and without inflation adjustments.
For example, if an investor had the misfortune to invest immediately before the 1929 Crash, his annual return to this month would have been 9.69% with dividends reinvested. If he had been prescient enough to have delayed that initial entry date until April of 1932, his annual return would be at the 11.37% level.
For those of us old enough to have initiated our investment program immediately after WW II, our annual return would have been 11.01%, again with dividends reinvested. If we have been in the S&P 500 Index over the last 30 years, our reward would have been 10.99%. When you leave the starting gate matters a little, but the returns are impressive regardless of the precise timing.
I hope you visit the websites that I referenced, and that you find them helpful.
Best Wishes.

Sounds like you and I are in about the se place nearing retirement and thinking what to do investment wise going forward. I can tell you what I did.
I was downsized a couple years ago but was able to pick up with another company at the same pay. This allowed me to move my 401k to an IRA with Schwab. I picked Schwab because they have a local office here that gave me access to a financial advisor - for free. Also chose them because of all the products they have to offer.
To make a long story shorter, I split money 3 ways. A 3rd in their robo syst, Intelligent Portfolio, a 3rd in their managed Windhaven portfolio and the remaining 3rd, for the same fun reasons you gave, self manage.
Hech, we are all different, but this is what was most comfortable for me leading into retirement. I'm happy with my choice.

For what it’s worth and
from a purely - over simplified - Technical Analysis…
The “lows” brushed the 150-day Simple Moving Average.
This also happened earlier this year.
Each time, the price has bounced off this price area.
We have seen this several times over the past few years
so this has been a decent buying area.
The first sign of this pattern failure is likely to be if the
price falls thru this 150 area and fails to bounce back above it
with greater than average volume.
This would mean that the next (lower level) of price support
would be that 200-day moving average.
If and when the markets break down, it appears to me that
$INDU will be the first to go.
Off to play tennis.