Fidelity Simplicity RMD Funds - Allocation Strategy with RMD Age (70.5) in Mind If you want to manage your own glide path, and you want to keep it simple and cheap(er), why use hybrid funds of funds rather than the underlying funds?
Cheaper, because you won't be paying Barclay's second layer of management fees. (Since the thread is about managing RMDs, IRAs are assumed; realizing gains as one adjusts allocations to follow glide path is not a concern.)
Simpler, because you can just buy whatever percent of each underlying fund that you want. Also, because with just four funds and seven underlying funds (plus cash), it may be theoretically impossible to get the mix that you want (unless you happen to luck out, e.g. if you want exactly AOK's mix, then you can get it by buying just that fund).
Let's say you don't care about the mix of domestic stocks, the mix of foreign stock, the mix of domestic bonds, and the mix of foreign bonds. You're keeping it simple. You just care about these four percentages. Here's how you could do that with four funds:
For an allocation of 40/20/35/5 (domestic/foreign/domestic bonds/foreign bonds):
ITOT (Core Total Market) 40% (0.03% ER)
IXUS (Core Total Int'l) 20% (0.11% ER)
IUSB (Core Total US Bond) 35% (0.06% ER)
IAGG (Core Int'l Bond) 5% (0.09% ER)
Blended ER = 0.06%, vs. 0.25% for a mix of AO* funds.
While you'd like to get the same ratios using the AO* funds (which would involve solving four simultaneous linear equations), you discover that no matter which fund(s) you use, you're going to have just as much foreign stock as domestic, even if all you want is 1/3 foreign. These don't let you manage your current asset allocation (let alone a glide path) beyond a basic stock:bond ratio.
AOA is approximately 41% US stock, 40% foreign stock, 16% US bond,3% foreign bond,
AOR is approximately 31% US stock, 30% foreign stock, 33% US bond, 6% foreign bond,
AOM is approximately 21% US stock, 20% foreign stock, 50% US bond, 9% foreign bond,
AOK is approximately 16% US stock, 15% foreign stock, 58% US bond, 11% foreign bond
Run Your Personal Portfolio Like a Pension Fund - Fund Allocation Review @Bee: Interesting concept. My spouse is a retired teacher in MI, but her pension payout has nothing to do with the state pension fund's performance. I suspect that in CT, the same is true. I realize you are not comparing income from your pension to income (or returns) from your personal portfolio, but I thought it useful to state. In fact, pensions are threatened because elected officials can and do modify the payouts, sometimes claiming under performance of the fund. OTOH, my TIAA RMDs do depend on the performance of my retirement portfolios because my yearly distributions are based on an age-determined percentage applied on December 3
1.
Run Your Personal Portfolio Like a Pension Fund - Fund Allocation Review I began reading a white paper from Schwab this weekend and this quote caught my eye:
In 1986, Gary Brinson, Randolph Hood and Gilbert Beebower studied the allocations of 91 pension funds and concluded that asset allocation decisions, on average, explained more than 90% of pension fund risk, as measured by the volatility of returns over time
Source:
Schwab Intelligent Portfolios™ Asset Allocation White Paperhttps://intelligent.schwab.com/public/intelligent/insights/whitepapers/asset-allocation.htmlAlso, I believe
@MikeM invests a portion of his portfolio with SIP™ (mentioned in this thread):
https://mutualfundobserver.com/discuss/discussion/comment/97608/#Comment_97608Obviously a dated quote (
1986), but probably still true today.
Question: Where does one turn to for Pension fund information?I review my pension fund's performance periodically. It is state run and has a easy to access website (linked below).
My plan going forward is to benchmark my personal non- professional portfolio against my pension fund's results. There is usually a delay of a month or two for their results to post on the state's website, but for my purposes (quarterly/yearly reviews) this delay shouldn't be a big problem.
As of Feb 28, 20
18:
My YTD Performance (through 4/27/20
18):
Further, I like to also compare the pension fund's allocation to mine (I use M* Portfolio Manager). The pension fund's allocations are as follows:
Notice that they have a Policy Wt and and upper and lower Range for that policy weighting.
Via M* Portfolio manager (free service through T Rowe Price) my top
10 Holdings (70% of assets):
Going forward, as I become more risk averse (moving into retirement), I plan to lean on this professionally run pension information as a benchmark to my personal investing. I am no where near as diversified as the pension fund, so I will continue researching good investment choices for my portfolio.
Pension fund is linked here:
ott.ct.gov/pensionfunds_overview.htmlFund Performance Page:
ott.ct.gov/pensiondocs/fundperf/FundPerformance02282018.pdf
Consuelo Mack's WealthTrack: Guests: John Hathaway & Randy Swan: (TGLDX) - (SDRAX) Obviously counter intuitive, but down markets are buying opportunities. For long term investors, down markets are the most important "buy & hold" time frames for investing success.
In periods of market stress (I'd mentally try and change this wording to market opportunity), non-correlated assets, that have a higher relative value than equities, can help re-balance portfolios and provide downside risk when equities sell off severely.
Cash or "near cash"(ST Treasuries):1. You can spend cash to get you through the stressful period instead of selling equities low... Cash is what you spend so you can "hold" equities long term.
2. You can "buy" opportunistically with cash when equities are relatively low... The term "Cash is King" fits well here.
Gold (as part of a basket of commodities):
It may take a substantial allocation to commodities to enhance the risk-adjusted returns of a balanced portfolio. Our third graph shows the performance of four hypothetical balanced portfolios over the last 30 years and how they might have been affected by the introduction of a 10% stake in commodities. Only one portfolio—the 90% stock/10% bond portfolio, adjusted to become 81% stocks/9% bonds/10% commodities—would have recorded improved risk-adjusted returns, and the improvement would have been marginal. An allocation to commodities would have increased the volatility of a bond-heavy portfolio and would have reduced returns across the board.
Source:
researchcommentary/article/InvComVIPSCommodityInvestments
Articles related to Non-Correlated Assets & Portfolio Risk:Long Term Bonds (VUSTX):The Best Diversifier Has Been the Simplest
Bonds Get It Done
As you can see, the (U.S. OE) long-government category is the only category with a strong negative correlation with both the U.S. large-blend and foreign large-blend equity categories, as well as the moderate-allocation category. That's not just a phenomenon of the bull market, either. While the correlation between long-government bonds and stocks isn't quite as strongly negative during the trailing 10-year period as it has been in the past three years, it's still the most negative relationship depicted on the 10-year chart.
Article:
morningstar.com/articles/697751/the-best-diversifier-has-been-the-simplest.htmlAsset Allocation White paper from Schwab:
This paper outlines the appropriate asset mix, based on that evaluation, for different types of investors and explains the process of constructing a diversified portfolio.
https://intelligent.schwab.com/public/intelligent/insights/whitepapers/asset-allocation.htmlFinally, will their be a place for a fund like Permanent Portfolio (PRPFX) as we move forward?
is-the-permanent-portfolio-permanently-broken
Bespoke’s Sector Snapshot — 4/26/18 Bespoke is one of my favorite data/trend analysis groups, and in case anyone's interested, I'll point out that they're posting a lot of great info via Seeking Alpha these days, in concise, right to the point, digestible bites. SA is routinely panned because there's no vetting of the writing, but here and there, you can find top-notch analysis if you look, and Bespoke is near the top of the list for me. You don't have to be a Bespoke premium member to read or receive these posts thru SA.
Here's their article index. For example, I received links to the top two pieces this morning:
A piece on the post-earnings report buying/selling pattern by sector: selling tech & industrials, buying health, utes, & reits - a pattern they don't consider "very bullish."
A short analysis of the GDP report: Q
1 weaker than Q4 '
17, but not by as much as expected. First quarters are "always the least accurate," though, so expect a revision later.
Best, AJ
Buy-Sell-Ponder, anticipating April, 2018 Hello,
This week was much the same as the week before with Old_Skeet's market barometer closing the week with a reading of 154 (boarderline between fair value and undervalued). The 2/10 treasury yield spread narrowed a bit from 0.51 to 0.47 indicating that the yield curve flattened a bit more. The short interest for the 500 Index remains at 1.6 days to cover. Starting in May an interest rate feed will be added to the barometer as a secondary feed now that interest rates seem to be having an influence on the markets. The primary feeds remain the same and consist of an earnings feed, a breath feed and a technical score feed.
For the past week the things that worked best, for me, were my value funds found in the growth & income area of my portfolio along with my infrastructure fund found in the growth area.
Have a good week ... and, I wish all "Good Investing."
Old_Skeet
Fidelity Simplicity RMD Funds - Allocation Strategy with RMD Age (70.5) in Mind The Simplicity funds and the Target Date funds have the virtue of keeping life simple. Some how that got lost in these discussions.
What I like about these funds is that if the allocation is too conservative or too aggressive an investor could simply choose a different date without worry of recreating an entirely new allocation.
They also have a re-balancing and a (glide path) that most investors don't dedicate enough attention to.
Finally, they're affordable. For a young investor target date funds are a great one stop solution. For an aging investor the Simplicity Funds are certainly worth considering.
Thanks for getting us back on topic.
Now back to my assigned reading from Professor
@msf...thanks for the link.
Fidelity Simplicity RMD Funds - Allocation Strategy with RMD Age (70.5) in Mind I haven't played with ORP, so I can't comment on it.
Still looking at the "Simple" Formulas page (for complex withdrawal strategies). "Simple" is definitely in the eye of the beholder. In the sense of easily expressible and computable, the formulas are easy; in the sense of comprehensible, not so much.
It turns out that the Withdrawal Efficiency Ratio incorporates risk tolerance by assuming a particular constant relative risk aversion. (Didn't mean anything to me.)
In learning about that, I found what to me is a great textbook chapter (about
19 pages if printed) on risk aversion. I'd put it at a college sophomore level - about the same as what you'd need for intro Economics - a basic understanding of derivatives (differential calculus) and a bit of common sense.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/risk/riskaversion.htmConstant relative risk aversion means that the
percentage of money you're willing to risk is the same (constant) regardless of how much money you have. A millionaire might risk $
100K (
10%), but if he becomes a decamillionaire, he'll be just as comfortable risking $
1M (
10%).
As I wrote above, I'd frame the question of investing for retirement in terms of constraints - specifically that I
must not run out of money before I die.
In any case, if one is really patient and really interested in risk aversion, that NYU Stern Business School page is worth skimming. Even if one skips the math, it's interesting to read about why and when the models break down. For example:
Nonlinear preferences: If an individual prefers A to B, B to C, and then C to A, he or she is violating one of the key axioms of standard preference theory (transitivity). In the real world, there is evidence that this type of behavior is not uncommon.
This sort of thinking makes optimizing retirement plans virtually impossible. Welcome to the real world.
Commodities Now: All Roads Lead To Gold? @Old _Joe: You need to learn how to read ! From the article, "Commodities Now: All Roads Lead To Gold?" Quote: "On Thursday, the dollar’s strength weighed on gold prices. Gold spot futures declined 0.3% to about $
1,3
18 per troy ounce. The PowerShares DB US Dollar Index Bullish Fund (UUP) has gained 0.4%, while the SPDR Gold Trust (GLD) is down about 0.4%. Meanwhile U.S. government debt yields fell as fresh buying pushed rates to under 3% Thursday morning."
:( :( :( :( :( :(
M*: This Global Stock Fund Holds Promise: (MGGIX) Mr. Heugh's favorite stocks are Asian tech companies. If Chinese internet firms go south, it's likely that his MS funds will also. Heugh has also been given another fund, an Asia ex-Japan growth vehicle. As with the other two funds he manages, MS has created an alphabet soup of different share classes. If you click on "Management" on the M* site, then on "Other Assets Managed" under the manager's name, you get all the share classes. One symbol for the Asia Opportunities (about 39M in assets) is MSAUX. From what I can tell, you have to pay the load unless you've got a million to plunk down. Is there anyone on the board who knows what appears to be Finnish to me? Here's a fund Heugh managed: 06/2016 — 01/2017 Säästöpankki Aasia B.
Commodities Now: All Roads Lead To Gold? Vanguard Article:
History suggests that commodity-related investments may at least partially hedge the risk of inflation. It also suggests that exposure to metals, agricultural products, oil and gas, and other hard assets can help to diversify portfolios of stocks and bonds. So why do commodities account, on average, for just 2%–4% of pension funds and nonprofit investment portfolios?1 And why does Vanguard include them in some multi-asset funds but not others?
Findings:
It may take a substantial allocation to commodities to enhance the risk-adjusted returns of a balanced portfolio. Our third graph shows the performance of four hypothetical balanced portfolios over the last 30 years and how they might have been affected by the introduction of a 10% stake in commodities. Only one portfolio—the 90% stock/10% bond portfolio, adjusted to become 81% stocks/9% bonds/10% commodities—would have recorded improved risk-adjusted returns, and the improvement would have been marginal. An allocation to commodities would have increased the volatility of a bond-heavy portfolio and would have reduced returns across the board.
What Vanguard Funds hold commodities?
Only two Vanguard funds, both specialty offerings, tend to invest in commodity futures. As of December 31, 2017, our Alternative Strategies Fund had a target commodities allocation of 20% of net assets, and our Managed Payout Fund had less than 5% of assets invested in commodity futures
Source:
researchcommentary/article/InvComVIPSCommodityInvestments
SSI: Message to the Public
People Think Amazon Has The Most Positive Iimpact On Society Out Of Any Major Tech Company Not sure why
@Ted decided to post this - but I personally enjoy these
Off Topic posts. Watching my money resting comfortably / growing in a handfull of funds day in and day out wouldn’t make very interesting conversation. Doing a little traveling - so this contribution isn’t well researched and can’t follow up. Seems to be a lot of confusion re Amazon and the reported pay to workers. Just a few observations.
The first linked article comments on the reported yearly medium compensation of Amazon workers and also contains some refutation by Bezos. He contends those numbers include many overseas workers where compensation levels are much less than in the U.S. (Yep - having tried to work out issues with employees who sounded like they were in India and could barely speak English, I’d say many are overseas.). Bezos also contends that the low numbers cited actually included part time workers. Further, he contends many receive health care and other additional benefits. Additionally, he puts the average hourly wage of Amazon’s U.S. warehouse workers at $
15 per hour - higher than earlier reports suggest. I dunno. Just trying to paint with a broader brush.
http://chicago.cbslocal.com/2018/04/23/amazon-employees-median-pay/As other (media) observers have noted in recent days, those very low reported pay figures don’t seem consistent with Amazon’s large cloud computing business. Unlike warehouse workers, whom I envision packing and labeling boxes, cloud computing would seem more dependent on highly skilled technical workers. This article alludes to the size of that growing business. So, likely, the numbers that are flying around pertain only to the fulfillment center employees.
http://www.businessinsider.com/amazon-cloud-bigger-than-microsoft-google-ibm-combined-2016-10The third article notes that even the CIA uses Amazon’s cloud computing capabilities. And $28,000 per year hardly seems appealing to those handling our nations top secrets. Just doesn’t sound right. (It’s actually about half of what one reported government high security phone booth cost.) :)
https://www.nextgov.com/it-modernization/2017/11/amazon-web-services-announces-secret-cloud-region-cia/142662/All this makes me think that that $28,000 medium figure pertains only to warehouse (read “low skilled”) workers. Perhaps somebody has the time or research savvy to sort all this out.
SSI: Message to the Public Simple and easy: REMOVE the CAP, currently at about $127,000.00. Those that make more money than that do not presently pay-in to Soc. Sec. on the amount above that cap. But, no. Of course not. Who among the oligarchy wants to pay their FAIR share of taxes? And they're the ones in control.
SSI: Message to the Public
Wells Fargo’s 401(k) Practices Probed By Labor Department:
Wells Fargo’s 401(k) Practices Probed By Labor Department:
SSI: Message to the Public The Beatles - 1968, Revolution
A theme song to and for the people's representatives.....I hear the whole song in my head as I wander outside to continue the chores.
A few lyric section excerpts:
You say you got a real solution
Well, you know
We'd all love to see the plan
You ask me for a contribution
Well, you know
We're doing what we can
You say you'll change the constitution
Well, you know
We all want to change your head
You tell me it's the institution
Well, you know
You better free you mind instead
