Howdy good people,
My brother in law is retiring and has a simple IRA that he wants to move from American funds to Price and reallocate. Currently, they've got him 90% in equities!!!! [I don't even recall being 90% long myself during the dot.com run].
Also, please note that I've been investing with Price for about 20 odd years, and so am familiar with a lot of their stuff. That said, I could still use your good offices in how to set him up and what are your particular Price fund favorites. Nothing fancy, just Price mutual funds.
He's 63 and just filed for social security; no debt, very conservative (worse than his sister and she's bad), other monies, wife has DB pension, benefits, successful kids, etc. His goals for this account, are basic capital preservation with some safe growth. Size, small 6 figs.
Thanks muchly,
peace,
rono
Comments
What do you/he think about Price's target-date funds? It's clear that Morningstar thinks of them as "best of breed."
I suppose one objection would be to their target asset allocation. For the 2015 fund, it's about 66% stocks - way more conservative than American, it seems. If you check the bottom on the portfolio page for any of the target-date funds, you'll see the asset allocation glide path: http://portfolios.morningstar.com/fund/summary?t=TRRGX®ion=USA&culture=en-US.
If, given his circumstances, that seems too aggressive, you could use one of their diversified income funds as a core and then supplement it to tweak the allocation. Personal Strategy Income is 45% equities, Retirement Income is about 40% equities, Spectrum Income is about 12% (both are funds of funds), Strategic Income has almost none but targets high-yield and e.m. bonds.
Just a thought,
David
Free M* Analyst Reports on all TRP funds until March 31: http://analysis.morningstar.com/Centers/trowe-fund-list?PlacementGUID=97C7719F-0073-4E4C-A008-B5C6A98ECB29&adcode=7277&CreativeGUID=8d26a6db-d03a-4b5f-be6f-ad83d1d2ad8e
"My brother in law is retiring and has a simple IRA that he wants to move from American funds to Price and reallocate. Currently, they've got him 90% in equities! ...
He's 63 and ...very conservative... His goals for this account, are basic capital preservation with some safe growth...."
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I'm troubled by the inconsistency between the (current) 90% equity allocation and your statement that he's "very conservative."
Are there other assets elsewhere (possibly sizable) which ARE conservatively invested, so that the "90% equity allocation" makes sense and IS consistent with your statement regarding his investment approach?
Or, he could roll his own, say with some combination of Prwcx, Pridx, Prhsx, and Prcix, Premx or even Rpsix on the bond side. Overall, though, I'm not a fan of Price's foreign offerings, and I'd like Rpsix much better if it were wholly a bond fund; just not real keen on the Equity Income fund.
Fwiw, in general, not knowing "the rest of the story," AJ
1) When it comes to allocation, there is no "they" at American Funds- you have to set up an account with them through a broker/adviser. If his broker/adviser doesn't have him set up the way he wants, why hasn't he been talking to them?
2) He has been getting quarterly statements from American Funds ever since he opened his account. Does he ever read them?
3) Once your account is set up at AF, you can easily deal with them directly on-line, without going through the broker. This is how I do it... my broker gave up years ago- says that "he can't keep track of what I'm doing, but it seems to be working OK". (Broker is friend... we see him at least once a year to go over things, but the only time he bothers me is if he sees that I'm doing something that may possibly be unsmart. He's cool.
It's hard to see how anyone but B-I-L is responsible for the present account configuration. On the other hand, almost all of the American Funds are sort of unexciting middle-of-the-road stuff, no sector stuff at all. Actually, Long-term buy and hold has worked pretty well with AF, as long as you can stay there long enough to recover from the inevitable occasional stock market disasters. And their balanced funds, while unexciting, actually hold up pretty well.
Their ERs are on the low side, but they do charge a front load starting at about 5.75%, which of course is why his broker used AF, same as mine. After all, he has kids to put through college. (B-I-L pays broker who pays David who buys groceries and puts his kids through college....) But once you have a sufficient account total (and they add all of the accounts, retirement and non-retirement together for this) the load goes down in steps all the way to "no-load".
B-I-L maybe should have talked to you a long time ago.
Hang in there...
40% spectrum income, 20% cap ap, 30% retirement income and 10% in tips. I think that works out to about 40% stocks many of which are conservative. To keep it real simple 90% retirement income and 10% tips also works well but has no investment in prwcx which seems like the best reason to move to TRP.
Howdy,
His previous advisor had him invested at 90% and he trusted him and just recently found out about this from his new advisor with the same custodian who thinks it's 'too aggressive' and that an annuity would be just the thing. Note that this would be exchanging from and to American funds which I would assume are A shares and have a load of 5.75%. When I shared this wee tidbit with my BIL, I thought he was going to have a cardiac. I also shared with him the 100-age rule of thumb. He then approached me for help. I agreed to teach him how to do it and help him get set up. His first assignment was to go to the sites of vg, price and fido and see which most appealed to him. He chose price. His next assignment was to request their New Investors and IRA kits. Whilst he's doing his homework, I'm seeking the good advise of you folks,
peace,
rono
peace,
rono
Hi Dan,
Hope you're doing well. American is the class of the loaded families but as you mention, they are thru an advisor (that guy getting the 5.75% off the top).
Gee, if you'd been around FundAlarm some 15 years back, perhaps I could have saved you the handicap.
His advisors just changed and his new one told him that the 90% equity allocation (in AFs) was too aggressive and he should tone it down a bit and should consider an annuity!!!! This is about where he called me. Yeah, he's my BIL but I never push advice on people. I told him I'd teach him how to do this and help him get set up. He picked TRP over Vg and Fido after I sent him to their websites for recon.
peace,
rono
The TRP account does give him the option of course to add outside funds. What if you used the TRP funds as the meat of the portfolio and added a wee bit of Asian gravy, say MACSX or MAINX?