Let me preface by stating, I am retired, collecting a pension and SS and all monies are in either in a regular or Roth Ira.
Prior to retirement I redid my portfolio. Went from 100% equity to 35 % equity (as a hedge for inflation) and 65% income (split among 3 bond funds)
Since I do not need the added income, all bond and equity fund distributions are reinvested.
When the time comes that I need added income, I will take the monthly distribution from only the bond funds. I have no intentions of ever redeeming principal.
Therefore, if I am not redeeming shares I should not be concerned with NAV fluctuation and go for the largest dividends.
Any thoughts about my strategy?
Matt

Yep. These anticipated pull-backs are an opportunity to re-align the portfolio, which we do occasionally (now in retirement) to increase income stream, dump losers, trim over-achievers, etc.
We're about 20% cash with a wish-list comprising more divy stocks, MLP's, preferreds, utes, global bonds (maybe) and whatever else will shovel more cash our way.
Turning the boat 120 degrees or so from the 'accumulation' phase of life has come grudgingly. Generally speaking, it has meant accepting age. Crimeny!!
best, hawk

with TDF glide paths, one need to be careful if their offering is designed as the "to" retirement, or "through" retirement. different houses make different promises.

I would only consider purchasing the institutional class of this fund, PAUIX (0.98% ER), due to the excessively high expense ratio of PAUDX (1.38%) for a $10.4B AUM fund. This fund is best used as a hedge-fund equivalent position in one's portfolio, in my opinion. Shortly after the merger of Wellstrade with Wells Fargo, I purchased online an initial position in PAUIX for a $100 minimum in my WT retirement account. This fund is also available for $25K minimum in Vanguard accounts, and there is no minimum for this fund at TDA.
Kevin

Hi Guys,
Are fund management fee incentives tightly aligned with optimum investment results for their clients?
No, not often enough. Since risk and reward are always positively correlated for most investment organizations, fund management fees are formulated and charged in a manner that encourages managers to seek risk levels that exceed those of their more conservative customers. Given their fee structures, this observation is valid for both mutual fund managers and for hedge fund managers, but especially so for hedge fund managers.
My assertion is not rooted in the obvious organizational goal to increase the size of the fund’s footprint and profits. Although that goal is paramount to the success of all funds, this posting focuses attention on the specific levels of the fee structure itself. That structure promotes extra risk taking to enhance the management’s rewards, mostly at the expense of degrading the client’s comfort level. It is especially egregious when considering Hedge Fund operations.
Let’s examine two representative fund fee schedules: first the nominal 1.5 % management fee charge for an average actively managed equity mutual fund, and secondly, the so-called 2-20 fees for a typical hedge fund. The 2-20 schedule refers to a 2 % overall management charge plus a 20 % tax on annual profits. Of course the hedge fund assumes no liability for failure, but also yields to zero bonus payoff if its performance is downhill for usually an annual measurement period.
For the purposes of this example I postulated a $100,000 investment, perhaps a slice from a much larger portfolio. This tactic acknowledges the old adage to diversify and not put all eggs into a single basket no matter how attractive or secure that basket might appear.
To make the rewards/penalties more concrete and the analysis more tractable, I’ll assume that the fund management is considering a single, very aggressive investment opportunity that has a 50 % probability of a 50 % gain, but also has a 50 % likelihood of a substantial 50 % loss for the next year. These aggressive projections are made to emphasize potential portfolio impacts. Given today’s hostile environment, a 0 % return on idle cash is postulated; that’s not a bad assumption.
Most private investors would pass on this risky proposition. Many would require projected expected returns to be at least double possible losses given our historic risk aversion. This representative risk aversion profile has been verified by numerous academic Behavioral studies.
But what about assessing the investment prospects from the fund manager’s purview? His reward incentives for gambling on a 50/50 target proposition might prompt him to make a decision that his client would summarily dismiss if left to his own assessments.
I’ll do the numbers for a private investor, for an active mutual fund company, and for a hedge fund operation to identify profit incentives. For illustrative purposes, I will only propose two option scenarios: either a decision not to invest at all, or commit a $100,000 investment to the stipulated risky venture (really an adventure).
I propose to make the decision to invest or not to invest on a Total Expected Return (TER) basis. For all possible outcomes Total Expected Return is equal to the product of Anticipated Return (AR) times the Probability of that Event (PE) occurring summed over all outcomes. In equation format: TER = summation of all (AR X PE) possibilities. The TER is the criterion that will be used as a measure to control the final investment decision.
Maximizing TER does not guarantee a favorable outcome, but it does optimize prospective profits in an uncertain world. It is a rational econometric approach given an imperfect and incomplete information environment. Note that in almost every trade, uncertainty and information asymmetry exists that gives one participant of the trade an edge over the other side.
There is a disjuncture here between customer and fund providers on the evaluations of their respective TERs. For the private investor or fund client, the TER is based on anticipated holdings performance; for the fund providers, the TER is based on various accrued fees since these firms have limited or no skin directly in the game. TER is very much perspective dependent.
Observe that the TERs for the investor or client are calculated separately from the TER for the fund operators. And that difference produces a disparate incentive between the engaged parties when making an investment decision. This is a distinction with a difference; it not only matters, it matters greatly.
I have completed these calculations to demonstrate the disconnect between the TER for a private investor and the TER for a fund agent. The analysis illustrates the asymmetric nature of the reward incentives. I elected not to incorporate these sample calculations in this submittal because they are somewhat mind-numbing.
The conclusion from these analyses is that a substantial disparity exists between fund management incentives (their TERs) and an individual investor incentives (our TERs). That disjuncture encourages fund management to accept risks that a private investor would discard out-of-hand. Economists will always tell you that incentives are a primary motivation for any action; incentives definitely matter.
The bottom-line is that fund fee schedules, especially those of the Hedge fund industry, are not properly aligned with those of their clientele. In many instances, fund managers are persuaded to seek risks that their customers would immediately reject. Improperly constructed incentives often do damage.
This is yet another argument to be as independent an investor as your resources, your agenda, your time, and your skill set permits.
I guess hindsight is always easier than foresight. In retrospect it is apparent that when risks are not mutually shared, the actors in any endeavor will align themselves across a wide spectrum of actions; those confronted with a heavy risk burden will be more conservative while those not so challenged will favor more risky approaches. If individuals perceive themselves as underwater, more risk is an acceptable avenue to full recovery.
Never is the risk exposure asymmetry more evident then in the Hedge Fund/client investment relationship. The Hedge Fund operations assume almost zero risk, yet have the potential for enormous profits. That’s an unhealthy arrangement.
Allow me to close with a quote from Nikita Khrushchev: “Call it what you will, incentives are what get people to work harder.” Even the Communists understood incentive priorities. As wise investors, we should recognize and honor incentive differences when making all our financial decisions
Understanding the importance of incentives and costs for all financial matters are mandatory considerations when constructing and nurturing a retirement portfolio.
Keep it balanced folks. And stay away from Hedge Funds.
Best Regards,
MJG

Finding this here a bit hard to follow. Appears to say 2010 target funds are 5% above where the S&P was in Oct. '07, which would be comparing apples and oranges. But, the gist is that 2010 target retirement funds have now recovered the losses suffered in the bear market from late '07 until early '09. That's a bit surprising as would wager that most who post here recovered much earlier. These funds promise a set-it and forget-it style of investing and have become the default vehicle in many company plans. Not a bad option as some young people could care less about investing and may be more concerned about their career, buying a home, raising kids, caring for the parents or grandparents. For them these funds may still be preferable to sticking the money in cash or worse yet not investing at all. Over a 30 or 40 year time horizon they should do fine. Even with a 2010 retirement date, they'll likely continue to invest for another 20 or so years However, if they had the time and inclination when young to read this board and pursue just about any of the many approaches discussed, got a feeling they would do much better than what target date funds can provide.

Howdy,
Again, a thank you to all who post the links and also start and participate in the many fine commentaries woven into the message threads.
For those who don't know; I ramble away about this and that, at least once each week.
NOTE: For those who visit MFO, this portfolio is designed for retirement, capital preservation and to stay ahead of inflation creep; if and when it returns. This is not a buy and hold portfolio, and is subject to change on any given day; based upon perceptions of market directions. All assets in this portfolio are in tax-sheltered accounts; and any fund distributions are reinvested in the fund. Gains or losses are computed from actual account values.
While looking around.....TIC-TOC, neither may this house beat the clock. We all have just those 24 hours, eh? Spring is trying to arrive in MI and that means fix up and/or clean up inside and outside from the perils of winter. We may have 2-3 months of decent weather time, when substracting the ill weather days between now and September. I am already behind on me chores; and have more than enough family and friend functions on the schedule for this summer; of which, we are pleased to have. SO, the Funds Boat report will scale back to a quarterly report; at least at this point of time allowance. We'll just have to see how things, and time move along, at this house. The next scheduled report will be at the end of June, 2011.
Such are the numerous battles with investments attempting to capture a decent return and minimize the risk.
We live and invest in interesting times, eh?
Hey, I probably forgot something; and hopefully the words make some sense.
Comments and questions always welcomed.
Good fortune to you, yours and the investments.
Take care,
Catch
SELLs THIS PAST WEEK:
NONE
BUYs THIS PAST WEEK:
NONE
Portfolio Thoughts:
Our holdings had a +.69% move this past week. And yes, we are satisfied with our risk adjusted returns YTD. If the portfolio can pull a +10 to12% for the year; you will not hear any whining from this house. GEE WHIZ....no buys or sells. In the way back days of "don't fight the FED"; I personally felt more comfortable with this statement. TODAY, the statement has the added ? of don't fight the "high freq trading machines". So, while the FED is still stimulating the money machine, this house really should be buying everything in sight that "should" continue to move up in value in equities or where ever the hot may travel. It all makes sense, eh??? Low real interest rates; I mean, what else would a fella ask for. 'Course there is the unemployment rate and a housing market that will likely be stuck in place for a few more years, at the very least. Some states are raising taxes and fees to overcome and to correct a mandatory budget balance. Assured our state folks via email, that every dollar they choose to take from this house will be one that will not be spent in the local economy...pretty much a "who cares". I guess we may just have to go with the flow and hang our monetary butts out onto the "investment clothes line" as far as we dare; and hope a big wind "market correction" does not come along and blow all of the new investment clothes onto the dirty ground. Former President G.W. Bush was the "decider" and Mr. Ben at the FED has created the world of the "riskers". Scott and others at FA mentioned/discussed a year or so ago about the possibility of the DOW going to 30,000, and other indexes moving to similar high turf. I guess all of this is possilbe; as more than ever, we really live in a world of "funny money". Our mish-mash portfolio is really getting its YTD pants beat off by the equity sectors; 'course we also do not stand to get the big face slap either, if and when the "machines" decide to go to the equity sell mode.
Good investment fortune to all in the coming months.
The old Funds Boat may make 5% or 25% this year. I expect some rough waters, changing winds and opposing currents; causing the most serious attention being given to a firm hand upon the rudder control.
How our boat's cargo is doing:
Week: = +.69%
YTD = +4.45%
And the cargo is:
CASH = 15%
Mixed bond funds = 78.4%
Equity funds = 6.6%
-Investment grade bond funds 12.2%
-Diversified bond funds 18.5%
-HY/HI bond funds 28.8%
-Total bond funds 14.6%
-Foreign EM/debt bond funds 4.3%
-U.S./Int'l equity/speciality funds 6.6%
This is our current list: (NOTE: I have added a speciality grouping below for a few of fund types)
---High Yield/High Income Bond funds
FAGIX Fid Capital & Income
SPHIX Fid High Income
FHIIX Fed High Income
DIHYX TransAmerica HY
DHOAX Delaware HY
---Total Bond funds
FTBFX Fid Total
PTTRX Pimco Total
---Investment Grade Bonds
DGCIX Delaware Corp. Bd
FBNDX Fid Invest grade
OPBYX Oppenheimer Core Bond
---Global/Diversified Bonds
FSICX Fid Strategic Income
FNMIX Fid New Markets
DPFFX Delaware Diversified
TEGBX Templeton Global
LSBDX Loomis Sayles
---Speciality Funds (sectors or mixed allocation)
FCVSX Fidelity Convertible Securities (bond/equity mix)
FRIRX Fidelity Real Estate Income (bond/equity mix)
FSAVX Fidelity Select Auto
FFGCX Fidelity Global Commodity
FDLSX Fidelity Select Leisure
FSAGX Fidelity Select Precious Metals
---Equity-Domestic/Foreign
CAMAX Cambiar Aggressive Value
FDVLX Fidelity Value
FSLVX Fidelity Lg. Cap Value
FLPSX Fidelity Low Price Stock

IMO, David Iben is the real deal as I have discussed in numerous posts over at M*. He has consistently delivered at NWGRX, NVORX, NPTIX, NAWIX, and JGV. We have a 12% position in NWGRX, which continues to be available for reasonable minimums in Thinkorswim retirement accounts. I would really try and gain access to the institutional classes of the funds that he manages to keep costs at the lowest possible.
Kevin

RRTIX, Retirement Income R Series, is identical to TRRIX except that the "R" series snatches an extra half percent off the top in expense ratio, presumably to compensate your plans intermediary. TRRIX carries a .59% ER currently while RRTIX is at 1.09%. Bottom line: your annual return will be reduced in proportion to this added expense. This fund is the only retirement fund in Price's lineup that maintains a fairly static allocation to stocks and bonds, about 40% stocks and 60% bonds. Unlike the other retirement funds, its mix does not tilt more toward bonds over time. One option, then, would be to include this fund in your lineup and do the math to arrive at the % in bonds you want to have.
PTTAX carries a 3.75% front end load and a .90% ER. While the ER is a bit lower than RRTIX, keep in mind that with the Price fund you are also paying for the management of the stock portion.
A third option is to keep your cash and bond money in non-retirement accounts and include them with the retirement monies for allocation purposes. With the very low rates of interest available, your not gaining a whole bunch in the way of tax savings using a tax sheltered account for stable assets. Course that will change some day. Bonds vary alot, but in a stable short term bond fund or CD at current rates, it would take a number of years to earn the equivalent of the 3.75 Pimco load you'd pay up front. Not sure what the Pimco fund returned in recent years, but with rates as low as they are now, a repeat of recent performance seems unlikely. However, there is a tax break at the time you contribute to a 401K and so it may not be desirable from that standpoint to invest outside the plan. If you could do so through a separate Roth IRA (translate: lower fees and more control) it might make more sense to you. Hope this helps.

I am trying to save as much as I can in my 401k and really don't know what choices are the best. I have mostly equity funds with 30% T.Rowe Price 2030- RRTCX, 20% MSF Value- MVRRX, 20% Alger Cap Appr-ALARX, 15% Allianz NFJ Sm Cap-PCVAX, and 15% Janus Overseas-JIGRX.
The only exposure to bonds is in the 2030, so I am going100% to the PTTAX for a few months to build it up to 15%.
My company 401K is through ADP and ADP pretty much sucks in terms of service but I don't really know if the funds are quality or not. The complete list is:
I welcome all comments and observations.
Invesco Stable Asset Fund
RRTIX- T. Rowe Price Retirement Income R, + 2010-2050
PTTAX- PIMCO Total Return A
MVRRX-MFS Value R2
SVSPX- SSgA S&P 500 Index Instl
SRVEX- Victory Diversified Stock A
ALARX- Alger Capital Appreciation Instl I
FMIVX- Virtus Mid-Cap Value A
ATHAX- American Century Heritage A
PCVAX- Allianz NFJ Small Cap Value A
FSCTX- Fidelity Advisor Small Cap T
SSCRX- SSgA Small Cap R
PAIGX- T. Rowe Price Intl Gr & Inc Adv
JIGRX- Janus Overseas S

Of the funds you have listed only thee PIMCO Total Return fund is bond fund. Other funds you listed (Target Retirement funds) have some bonds but they are not pure bond funds.
If you need more bonds, get PTTAX (assuming it is load waived in 401k). Alternatively, if you have been investing all your retirement monies in a target fund, you can step down the date to pick up more bonds.
BTW, If you are investing in a mix of funds yourself, then there is no point in also getting target fund.

My 401K bond options are limited. I have Pimco Total Return A PTTAX and six T. Rowe Price Retirement Funds, Income-RRTIX, 2010-RRTAX, 2020-RRTBX, 2030-RRTCX, 2040-RRTDX, 2050-RRTFX.
I plan to increase the bond percentage of my 401K from less than 5% to about 15%. I currently only have bond exposure through RRTCX.
Which would you consider the better choice to increase the the percentage of bonds, Pimco, the 2010 or 2020.
Thanks in advance.
DPN

I love NTF's for building a position or even a portfolio, but you have to ask yourself "Why are some MF's NTF and others aren't". To get on an NTF list with a brokerage the mutual fund company must pay the brokerage a fee (typically 40 basis points of the AUM through the brokerage). This fee is then passed onto the individuals through the mutual fund expense ratio. So, there is no free lunch.
I didn't mean to highjack this thread. Here are a few suggestions for Fidelity NTF core positions:
EXDAX - Manning & Napier Pro-Blend Cnsrv Term S
EXWAX - Manning & Napier World Opportunities
HIINX - Harbor International Inv CL
ARTGX - Artisan Global Value Inv CL
Fidelity screens for funds with NTF, lower ER, and good returns and touts them as their fund picks: http://www.fidelity.com/products/funds/fundpicks/overview.shtml
They also list some funds lists from others (see top left section on this page): http://personal.fidelity.com/research/funds/?bar=p
(looks like you have some nice positions in your non-retirement account)

Again, another vote for PRWCX, which is my core holding. Also, their retirement funds are an excellent choice as well.

Favorites at TRP: several of the bond funds (Prwbx, Prcix, Prsnx, Rpsix, Premx) and Pridx, International Discovery, foreign small-mid growth stock. I like the composition of, but have never owned, two of their blend funds -- Prsix, Personal Strat Income, and Trrix, Retirement Income.
This is an answer to the headline question, "what's your favorite fund," which is different from the apparent question in the post, concerning a (single?) fund for an IRA. Hard to reply about the latter, not knowing what your sister's other investments are, and all that usual stuff.

Even during retirement you still need some equity exposure to keep up with inflation. Also I notice you don't have much foreign bonds, particularly emerging market bonds. Personally I prefer emerging market local currencies funds to hedge against declining US dollars.
Few to consider:
Pimco Emerging Local Currency Bond, Institute share, PELBX
TCW Emerging Market Local Currency bond, institute share, TGWIX

I am designing an income-producing in-retirement portfolio for an elderly loved one. My overall plan is to allocate money into several different strategies to mitigate management risk. I am considering an AssetBuilder capital preservation portfolio for one of these strategies.
I wondered if anyone had had any experience with AssetBuilder as a money management house. I am not particularly seeking comments about Scott Burns, DFA, or the theories behind DFA's indexing strategies. I am more looking for information on what it is like to invest money with them. Is the customer service good? Do they return emails and phone calls in a timely way? Are the tools for monitoring investments online sufficient for an individual investor's needs?
Any experienced-based comments will be welcome.
Thanks.
gfb

Hello,
I am new to investing, having only really begun researching over the past six months, and prior to that making contributions to 401K.
I recently opened a Scottrade account where I purchase stocks and have a Fidelity account where I hold my mutual funds. I have no allegiance to either but I had the fidelity account due to a rollover 401k and was convinced by a friend that Scottrade is less risky about how they hold their/my cash. I have individual accounts at both brokerages.
One thing I do like about Scottrade compared to Fidelity, is that they allow smaller contributions to funds after the min is met.
Anyway, I intend to hold the majority of my investments in mutual funds and for now they will be held in the fidelity account. The goals of these investments are both retirement and growth. I will dedicate a portion of all assets to retirement at some point.
What are some recommendations for core position ideas, starting with Fidelity funds and then others. If other, what are the reasons to look outside fidelity in terms of a core position?
Current non-retirement fund investments approx = %50 Cash, 20% TGLDX, 13% DEFIX, 17% ARIVX
I am reading "Common Scenes on Mutual Funds" as a primer on the topic.
Thanks in advance
DPN

Yes, if splitting retirement investments between the two Spectrum funds, it is advisable to rebalance annually back to the original 50/50 mix. I'd also note that some of us "control freaks" lean towards the Spectrum funds as a purer play; while the Retirement funds Mike mentioned gradually shift allocations towards fixed income over the years. If using Spectrum funds then, it is incumbent on the individual to make allocation changes over time. Assuming a long time horizon, I'd remain fully in the Spectrum funds for a good many years. Aside from this important distinction there's probably not much difference. PRSGX carries an ER of .85 and PSILX is at 1.01, making the combined about .92% . Retirement 2030 (TRRCX) carries a lower ER of .72%, likely due in part to greater use of index funds.