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Author: quinnt01 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76420  
Subject: Do Target Retirement Funds have too many bonds? Date: 1/29/2011 5:43 PM
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I'm 60 with plans to retire in about 6 years. My understanding is that a typical allocation for someone like me would be about 50/50 in bonds and stocks. The target retirement funds certainly reflect this allocation ratio, and given my inclination toward simplicity these kinds of funds have a lot of appeal.

My question is this: With all the talk about a bond bubble and how there is no where to go but down for bonds over the foreseeable future, does this kind of allocation still make sense? Wouldn't a bond-heavy allocation be relatively risky at this time?

If so, then where would one put the bond money? Some into more stocks and some into cash? commodities?

Thank you,
Tom
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Author: ltangel Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68341 of 76420
Subject: Re: Do Target Retirement Funds have too many bon Date: 1/29/2011 6:16 PM
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I will be 59 and have given this MUCH thought -and in this point in my thinking - 30% stocks (diversified -growth/income),30%Money market Treasury funds,10% bond funds (short and intermediate)20-% CD's laddered,and 10% gold/silver - now I am not there yet but that is my thinking at this point - I am no seasoned investor and have asked many a question ,albeit, simple ones ,since I found this forum ,but I think your allocation decisions should strive to consider your needs,wants, tolerance for risk, retirement situation, and amount of time you have to focus on "keeping watch" of your decisions. Hope this helps - it feels good to be able to "give back" for advice I have received in the past- Godd luck!

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Author: drippinfool Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68343 of 76420
Subject: Re: Do Target Retirement Funds have too many bon Date: 1/29/2011 7:38 PM
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"With all the talk about a bond bubble and how there is no where to go but down for bonds over the foreseeable future, does this kind of allocation still make sense?"

What is the purpose of your allocation? Is it to follow the whims of the various markets? Or is it to give you some balance to weather whatever storms come along? If the former, then by all means get out of bonds if you think they are about to tank. If the latter, then sit back and enjoy a cool one as you watch the Super Bowl in eight days.

-drip

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68344 of 76420
Subject: Re: Do Target Retirement Funds have too many bon Date: 1/29/2011 7:50 PM
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Three ideas:

One, buy individual bonds. That way it don't matter what happens to the overall bond market. You'll get your return. Down side is potential individual bond risk and do you have enough money to be diversified.

Two, buy CDs instead of bonds. Less risk and get close to the same yield.

Three, buy dividend paying stocks. Especially those that increase their dividends each year. Google Dividend Champions and Dividend Achievers for ideas.

JLC

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68345 of 76420
Subject: Re: Do Target Retirement Funds have too many bon Date: 1/30/2011 12:04 AM
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...Wouldn't a bond-heavy allocation be relatively risky at this time?...

I'm not an expert but I have much the same feeling.

One thing that I am looking at as an alternative is buying individual TIPS that I can hold until maturity because they have a yield above the inflation rate which might help if interest rates, and presumably inflation, rise together. For a while these had a very low yield but the yield on these has been rising so I am watching these while I learn more.

A few years ago for a while they had a yield, above inflation, of well over 3% and I wasn't looking at them so I missed it. If they should get that high again I will be real tempted to put a significant part of my portfolio into these.


Greg

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68346 of 76420
Subject: Re: Do Target Retirement Funds have too many bon Date: 1/30/2011 12:07 AM
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P.S. There is nothing that says that just that because you are 60 that you have to put your money into a 2015 targeted retirement fund. If the asset allocation of a 2030 fund is what you want, then you can put it into that fund.


Greg

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