FYI: The Five-Year Rally in Stocks Has Bolstered Workers' Nest Eggs. But Consider These Six Issues First.
Regards,
Ted
http://online.wsj.com/articles/can-you-afford-to-retire-early-1406912729#printMode
Are You Saving Enough For Retirement ? Copy & Paste 7/31/14: Walter Updegrave: WSJ
Fueled by surging stock prices, average 401(k) balances have come back from the beating they took in the financial crisis and now stand at or near record highs.
But hold the confetti.
The tailwind of stocks' nearly 18% of annualized gains of the past five years—almost double the stock market's long-term average—clearly isn't sustainable for the long term. Indeed, given today's low interest rates and high stock prices relative to earnings, average annual stock returns over the next decade or so could come in at well below half the pace of recent years.
Which means if you want to accumulate enough savings during your career to sustain you in retirement, you will have to do it the old-fashioned way: by saving diligently.
On that front, the news isn't quite so upbeat. A survey of 144 large 401(k) plans covering some 3.5 million employees released in July by benefits consulting firm Aon Hewitt found that the annual contribution for employees and employer matching funds combined averaged just under 11% of salary last year, down a tad from the year before.
And although the survey also showed that the average employee-plus-employer contribution rises with age—starting at 7.6% of salary for participants in their 20s and climbing to 10.1%, 11%, 12.7% and 13.4% for participants in their 30s, 40s, 50s and 60s, respectively—not a single age group averaged the 15% a year that retirement experts generally recommend if you want to maintain your preretirement lifestyle after calling it a career.
Fortunately, it doesn't take a heroic savings effort to appreciably boost the eventual size of your nest egg and enhance your retirement prospects.
Let's assume you are 25 years old, earn $50,000 a year and receive 2% annual raises, and that you make an "average" effort to fund a retirement account such as your 401(k). That is, throughout your career the total of your contributions plus employer matching funds mirrors the age-group averages in the Aon Hewitt survey.
If you invest your savings in a diversified portfolio of stocks and bonds that earns a reasonable rate of return—say, 6% a year after fees—your 401(k) balance would total roughly $1.1 million at age 65.
That is a tidy sum, to be sure. But it probably isn't enough to replace enough of your income over at least 30 years of retirement.
Generally, advisers say personal savings should generate 50% to 60% of your preretirement income, so that withdrawals from savings plus another 20% to 25% from Social Security and other sources (part-time work, a pension) replace at least 75% to 80% your preretirement income—a level experts generally consider the benchmark for maintaining your preretirement standard of living after you retire.
Increasing the amount you save by even a relatively small amount can significantly improve your chances of reaching that level.
For example, if instead of saving at that average level, reported by Aon Hewitt, you set aside just an extra 1% of salary each year, your 401(k) account's value would climb to just under $1.2 million at age 65. Assuming a 4% initial withdrawal of $48,000, your savings would now be able to replace nearly 45% of pre-retirement income from savings alone. Boost your savings rate another 1% each year, and your account's projected value rises to almost $1.3 million, which allows for a withdrawal of $52,000, bringing you just within reach of replacing 50% of your preretirement income from savings.
And if you manage to stash away the 15% a year that advisers recommend, you would have a nest egg at age 65 valued at almost $1.6 million, providing for an initial withdrawal of $64,000, or about 60% of preretirement income. Throw in an additional 20% to 25% from Social Security and other sources, and your retirement income now meets or exceeds that 75% to 80% benchmark.
Aside from the obvious benefit of a larger nest egg generating more income in retirement, saving at a higher rate during your career also makes your retirement strategy less vulnerable to setbacks from financial shocks.
For example, the hypothetical 25-year-old in the scenarios above saved like a machine each and every year over four decades. In the real world, job losses, health problems, unexpected expenses and all manner of other unanticipated events can prevent even the most diligent saver from sticking to a savings regimen uninterrupted over an entire career. By making the effort to save at a higher rate when things are going well, however, you effectively will build a cushion that will help you better absorb any financial setbacks and get your retirement planning back on track.
Such a cushion can come in especially handy late in your career. For example, if you are on the verge of retiring and the stock market takes a dive, having $1.6 million in savings instead of $1.1 million could mean the difference between scaling back your lifestyle a bit but still going ahead with your retirement plans versus having to postpone your employment exit and spend extra years on the job.
The single best way to maximize your savings effort is to sign up for your company's 401(k) or similar plan. Aside from the benefit that your contributions and investment earnings in a 401(k) account go untaxed until withdrawal, the fact that money is automatically deducted from your paycheck makes it more convenient to save, and more likely you actually will do so.
That said, some features in 401(k) plans that were designed to spur savings can sometimes have the opposite effect. For example, the lure of "free money" in the form of company matching contributions clearly creates an incentive to save. But the Aon Hewitt survey shows that nearly a third of 401(k) participants contribute just enough to get the full company match.
While doing that may seem smart, in that you get the largest company match while you shell out as little as possible, it also can leave you short of the savings rate required to assure a secure retirement.
Keep in mind, though, that while 15% is generally a reasonable goal, the actual amount you should be setting aside can vary considerably depending on your salary, how much you already have stashed away and the number of years until you retire.
There are many online retirement planning tools that can help you home in on the right annual savings target for you. Whether you use a basic calculator or a more comprehensive one that allows you to vary such assumptions as how you invest your savings and your planned retirement date, you will want to reassess every year or so to see whether your current savings rate is adequate.
As exciting as it may be to watch the value of your nest egg swell as stock prices soar, over the long run it is how much you save that will determine how well you can live in retirement.

". In the US world, only 14% of the actively managed funds outperformed an Index in both excess returns and in reduced risk. Another 21% also generated excess returns above Index returns, but at a higher risk level. So 65% of the active portfolios delivered less than their Indices."
To me this doesn't sound too bad. I've got a strong stomach and was able to add to my high beta funds during 2008 and 2011. I'm willing to take higher risk if I get long-term outperformance, and this quote seems to indicate that about 35% of funds do that. Then again I expect not to retire for at least another 20 years. If I were retired already or planning to retire in the next fews, it would be a different story.

Hulbert will quote anyone to spin out yet another "article". The three indicators are subjective anyway. I for one do not consider the overall market to be overvalued. Plenty of blue chip dividend stocks have p/es in the low teens. My mutual fund has a p/e of 15. And according to M* the Russell 2000 p/e is under 20. So where are these lofty valuations?
Also it should be mentioned that the US energy picture is the brightest that it has been for many years. Which is a boost for the economy and markets.

Raise a little cash?
I recently sold three funds (a small cap fund, a commodity fund and a long/short fund) with the sale proceeds increasing my cash allocation. I plan to average this money back in into a few existing positions and perhaps add a few new funds one of them perhaps being SHRAX which is one that Ted has touted. I am in no hurry to do this though as I "feel" a market down draft coming. Perhaps when my portfolio drops to about five percent off its 52 week high water mark I'll consider selling some more equity off. Currently, it is down about 2.9% from its 52 week high and lost 1.8% last week while the 500 Index is down about 3.2% from its high water mark and lost 2.7% last week.
I am in no rush either way ... Got plenty of cash to buy the pull back ... and, if it turns upward I still have plenty invested to enjoy the upward ride. At this point, I am definitely not running for an equity exit.
Know there are those that have to write articles that are geared towards investor emotions. My thoughts are to be prudent and do what you feel is best for you. Don't sell out just because of an article ... watch the price action of the market and then govern accordingly with a planned sell down strategy should prices continue to drop. And, they may as I feel some are already getting margin calls and this could cause some additional selling presure in the market. It no doubt is highly leveraged up from my thinking and is overbought.
For those that would like to check the short interest and the days to cover for the S&P 500 Index the link below will provide that information. Perhaps as the short interest along with the days to cover drop this might be an indicator that the Index is becoming more fairly valued. The past week Morningstar's Fair Market Valuation Graph indicated that the market started the week being about three percent overvalued and closed the week by only being about one percent overvalued. So perhaps, the pull back might not be as deep as some are broadcasting.
http://shortsqueeze.com/?symbol=spy&submit=Short+Quote
http://www.morningstar.com/market-valuation/market-fair-value-graph.aspx
I wish all ... "Good Investing."
Old_Skeet

FYI: (Follow-Up Article)
The easiest way to “invest like a billionaire” would be to start with a billion dollars.
Since you don’t have that, your latest way to invest like the super-rich involves a new exchange-traded fund with an appealing methodology.
The question is whether it’s a gimmick or if it actually works.
Regards,
Ted
http://www.marketwatch.com/story/this-fund-tries-to-try-to-be-like-buffett-and-soros-the-ibillionaire-index-etf-2014-08-01/print?guid=5E5E681A-198A-11E4-AA86-00212803FAD6
Open Day Activity: http://www.marketwatch.com/investing/fund/ibln
Direxion Website: http://www.direxioninvestments.com/products/direxion-ibillionaire-index-etf

Hi MikeM,
You make some good points. Although I compare the performance of my portfolio to a benchmark ... its true test comes in does it meet my needs. After all, if it does not meet my needs it does not matter what a benchmark might be doing. On the subject, I do have two index funds VADAX and IACLX which resprents 25 percent of their Large/Mid Cap Sleeve.
Old_Skeet

Thanks David for lots of great comments and highlights.
Thanks also to Charles who took one of my discussion board ramblings and turn it into something actionable. Wow! "Fund Recovery Time" has a nice ring to it. I was also thinking of sending my fund managers "get well soon" cards.
If Charles and Edward's work the balcony than David must work the orchestra...thanks for all the great monthly mutual fund performances...part variety show, part opera, and part standup comedy. The best part...all the seats are the "cheap seats". One way to thanks all their work is to remember to walk through the amazon portal (door) when you leave the theater for popcorn or a cold beverage at intermissions.
If you missed the discussion thread that Charles was referring to, here's the present iteration:
mutualfundobserver.com/discuss/discussion/14523/duration-as-an-added-component-to-mutual-fund-maxdd-draw-down#latest

from Blitzer: ...But, my problem is that the active funds that I choose almost invariably underperform their related indices.
And this, I think, is the crux of every debate for active/passive. I kind of have a different view. A fund like FPACX for example which has lots of asset options, or even YAFFX which often loads up on cash, should I care if they beat the S&P500? All I care about is that my chosen manager gives good consistent returns with downside protection. MACSX? Do I expect this fund to have leading returns year in and year out? Nope. I own it because it is a relatively conservative way to participate in the growing Asia market. How do I compare it to a benchmark since it is so unique.
I guess to me, I'm less interested in what fund will give me the best return all the time or if it beats an index. I'm more interested in having a collection of fund managers that keep the journey on track with my goals - as smooth as possible.
Given that, the benchmark that I do find very important is overall portfolio results - is my collection of funds doing as good or better than a portfolio benchmark, say a comparative target date fund.

Three distribution days last week, Thursday especially, where SPY dropped 2% on twice normal volume.
Below 10 and 50 day simple moving averages.
So, not a great July.
YTD, still a nice 5.2%.
For those of us long US equities, let's hope Berkshire Hathaway's latest earnings help reverse recent downward thread.

US aggregate bonds having decent year as well, despite low expectations. Seems to be treading water this summer, which I suspect is due to Fed's plans to unwind some QE measures.

I thought I’d comment on a few things. They follow.
Item 1) In reviewing IRNIX which was presented by the Vintage Freak although it is a fund of funds it does carry a four star M* rating and has a duration on 3.35 years. So with this it appears good performance can be had form a fund of funds just as good performance can be had form my sleeve system that holds a number of funds … usually three to six. I expect this fund to continue to perform well and if one or even a few of the funds that it holds falters then there are the others that can still propel the fund. Its turnover ratio is 43% so it appears some active trading and positioning occurs. In 2008 it lost about one half of what its category lost.
Item 2) Some say I have way too many funds … perhaps so, perhaps not! In comparing my portfolio’s performance to Morningstars Moderate Target Risk as a benchmark … well I have handily bettered the benchmark. The results follow listed by period with the portfolio being listed first within the results and then the benchmark for a market close of August 1, 2014 in its current configuration.
1 Week) Portfolio -1.8%, benchmark -1.8% … 1 Month) -2.1%, -2.0% … 3 Month) 1.5%, 1.4% … YTD) 5.0%, 3.7% … 1 Year) 11.9%, 9.6% … 3 Year) 10.7%, 9.4% … 5 Year) 12.5%, 10.9% … 10 Year) 8.4%, 6.6%.
Closing comment: With this, there seems to be some added value by using the sleeve system along with selecting only quality funds and when one of them does falter replacing it with another. Seems this is what IRNIX might be doing and it seems to be doing it just fine as it only lost about one half of what the average strategic income fund lost in 2008.
I think one needs to ask themselves this question ... Does your portfolio meet your needs? And, if it does, from my thoughts, then the rest really does not matter if you are happy.
Have a good day … and, most of all I wish all … “Good Investing.”
Old_Skeet

I thought I’d comment on a few things. They follow.
Item 1) In reviewing IRNIX which was presented by the Vintage Freak although it is a fund of funds it does carry a four star M* rating and has a duration on 3.35 years. So with this it appears good performance can be had form a fund of funds just as good performance can be had form my sleeve system that holds a number of funds … usually three to six. I expect this fund to continue to perform well and if one or even a few of the funds that it holds falters then there are the others that can still propel the fund. Its turnover ratio is 43% so it appears some active trading and positioning occurs. In 2008 it lost about one half of what other funds in its category lost.
Item 2) Some say I have way too many funds … perhaps so, perhaps not! In comparing my portfolio’s performance to Morningstars Moderate Target Risk as a benchmark … well I have handily bettered the benchmark. The results follow listed by period with the portfolio being listed first within the results and then the benchmark for a market close of August 1, 2014 in its current configuration.
1 Week) Portfolio -1.8%, benchmark -1.8% … 1 Month) -2.1%, -2.0% … 3 Month) 1.5%, 1.4% … YTD) 5.0%, 3.7% … 1 Year) 11.9%, 9.6% … 3 Year) 10.7%, 9.4% … 5 Year) 12.5%, 10.9% … 10 Year) 8.4%, 6.6%.
Closing comment: With this, there seems to be some added value by using the sleeve system along with selecting only quality funds and when one of them does falter replacing it with another. Seems this is what IRNIX might be doing and it seems to be doing it just fine. After all, it caught the Vintage Freaks attention and carries a four star rating by M* ... and, it only lost about half of what other strategic income funds lost in 2008.
Have a good day … and, most of all I wish all … “Good Investing.”
Old_Skeet

FYI: When these indicators flash together, it’s time to sell
Regards,
Ted
http://www.marketwatch.com/story/3-market-warning-signs-predict-20-stock-tumble-2014-08-01/print?guid=9751D8A6-199D-11E4-8E04-00212803FAD6

Strategic Income is $500 NTF at Ameritrade, the other fund not available.

Interesting article Ted. For one, there are a lot of maybes and what ifs. Is a target date fund that holds only index funds a good choice versus the investor buying those same funds themselves? To me that says the company and or the manager is not putting much effort into the product.
Nothing is sure but if you research a fund and wonder why they hold only index funds or have 150 managers that should be a clue to look elsewhere.
Just my thoughts. Thanks Ted.

FYI: Copy & Paste 8/2/14: Lewis Braham: Barron's
Regards,
Ted
Edited by Snowball to move the post back toward some approximation of the "fair use" envisaged by copyright law.
Please do not cut-and-paste wholesale from copyrighted materials. Excerpt, explain and link (if you can). Summarize, comment and aim folks toward the original when you can't.
"The case for index funds and ETFs has always rested soundly on costs. After expenses, most money managers can't beat their benchmarks, so a fund charging 1.5% will lag behind an ETF charging 0.05%. But what happens when the actively managed fund costs the same -- or less -- than the ETF? Welcome to the Vanguard paradox."
[two paragraphs deleted]
Moreover, Vanguard's actively managed funds are so well run that on average they beat their zero-fee benchmarks even over long periods of time. [remainder on the paragraph, which supplied the empirical data, deleted]
SO WHY BOTHER with ETFs?"
Mr. Braham cites two reasons, cost aside: (1) consisistency - you eliminate style drift, manager risk and so on and (2) mistimed purchases of sectors, styles and niches - which might be mitigated by holding a broad market index.
In general, though, Vanguard often has active products that are as good as or better than passive ones. Two flies remain in the anointment: (1) Vanguard as "dumbed down" (Dan Wiener's phrase) some funds by adding too many managers and (2) trading costs imposed when you buy Vanguard funds through non-Vanguard platforms can overwhelm your performance edge.

I agree the commentary is worth more than one pays for it, but the Gross and Double-Line sections could have been covered by a link to one of the many articles in the past month covering the issues, although I did check out the Disneyland employee link. I suppose I should have skimmed them, as suggested above, but I assumed if it was worth writing, it presumably was worth reading.
HOWEVER, a listing of the 17 5* funds for the past 1-10 years would have been appreciated, perhaps even worth a subscription. Did Ted link this when I wasn't looking? (Or did I miss the link in the commentary?)
I have found that the talks I spend more time preparing are shorter than the rush jobs, and the audience is more likely to stay awake. Suggesting tighter construction is not a personal attack.

@VintageFreak,
I have been doing the same thing. American Century made it easy for me by opening a new fund ASDVX. Short duration of less than 3 years. Investment grade and high yield instruments from anywhere including emerging markets. Preferred stocks. I had been looking at Schwab but since this was in a rollover account the paperwork was a consideration.
I was 80/20 stocks to fixed, now after a couple of moves including the above I am about 65/35.

Hi Mrdarcy,
No convincing is necessary.
On many past postings I documented that my current portfolio is divided about equally between passive and active funds. Recently, I decided to shift more towards a passive mix without abandoning active management completely. Active funds do have a place.
I plan a core Index dominated portfolio with a satellite active component. I expect a final mix of perhaps 80/20 or 70/30 passive to active components.
Many studies demonstrate that active funds outdistance passive products about 20% to 50% of the time, never predictable ahead of time, and never persistently.
The database includes stuff like the S&P. SPIVA scorecard and Persistency semi-annual studies and the Gus Sauter Vanguard work referenced earlier. Many others exist.
I don't mind a little leg pulling since it permits me to cite additional data sources. I have never submitted a post without quoting statistics that I culled from what I evaluated at least as semi~reliable from an honest source. This derives directly from my engineering background when preparing work proposals. Trust, but verify.
Thanks for the opportunity.
Best Wishes.

I think the poster in question has a system where he can monitor his holdings. Maybe a computer application? He seems to do well with it and I commend him for that.
Simplicity does have its place. I know I
could never monitor 50 + funds. I have 9 holdings and that's enough for me.
As far as the argument of which type of investment plan works best, it's a wash. There are too many variables. It is easy to pick out funds on each side to make one side look better than the other. It's the old passive versus active argument.
In this case I would say that both you and the other poster are right.

I’m immediately just a little leery when an author tosses out an extremely high, unrealistic percentage claim without justification. Additionally, he highlights that number in the title of the article. What about you guys? Does it strike a skeptical chord with you? It does with me.
I’m apprehensive that anyone ever claimed that Index portfolios outdistanced active fund managed equivalents 90% of the time for any fund category for any extended timeframe. I doubt it ever happened.

Um...
From January 9th:

The active route is more challenging with a likelihood of Index out-performance that is in the 10 % to 30 % range depending on time horizon and number of active funds within the portfolio.

On some level I'm just pulling your leg. But it is an honest question whether there is any evidence that would convince you of the utility of an active strategy.