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Author: Jubii Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Easy Portfolio - opinions? Date: 2/24/2007 3:25 PM
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I'd like some Foolish opinions on this:

http://marketplacemoney.publicradio.org/display/web/2007/01/05/an_easy_way_to_invest_your_portfolio_part_2/

It advocates an all-index-fund strategy----as far as I can make out, like this:

12.5% U.S. Large Value
12.5% U.S. Large Growth
12.5% U.S. Small Value
12.5% U.S. Small Growth
12.5% International Large Value
12.5% International Large Growth
12.5% International Small Value
12.5% International Small Growth

Every once in a while you rebalance, adding dollars to the worst-performing funds on the theory that then you're buying them when they're cheap & they're bound to go up eventually.

I'm tempted but have concerns about going to a 100% stocks portfolio when most of the advocated portfolios I've seen include at least 20% bonds & some cash.

I want some kind of unifying retirement strategy---we opened 2 Roths for 2006, adding to the rollover IRA, the 401(k), the pension plan that will replace DH's teaching salary, and the defined-contribution plan from DH's 2nd job, so it's starting to be a lot of accounts to keep track of.

We're 25+ years away from retirement, and just tipped over $100K in 401(k)+Reg IRA+Roth+DCP savings.

Does this kind of approach make sense for a wanna-be-hands-off, risk-tolerant household with our investing timeframe?


Thank you, dear Fools,
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Author: MarinBMWZ4 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55971 of 74759
Subject: Re: Easy Portfolio - opinions? Date: 2/24/2007 3:54 PM
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At 25+ years before retirement I would be 100% in stocks.

MZ4

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55972 of 74759
Subject: Re: Easy Portfolio - opinions? Date: 2/24/2007 4:04 PM
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To the extent possible, I would roll over his old plans into Vanguard or Fidelity, which would simply things. As for the allocations, you likely would have the same end result by combining your domestic funds money into Vanguard's Total Market fund, and same the foreign funds into Vanguards extended foreign index. The total returns from the funds you listed would be almost the same as what you would get by combining them. Given that you're 5 years from retirement, I wouldn't put 20% in fixed assets (bonds). Over the years I was working, I kept about 98% of my portfolio in equities in order to max growth. I left my firm almost 8 years ago, and I'm still 90% in equities, although I plan to move another 15% into fixed assets over the next couple of years. Do what allows you to sleep well at night, but these are my thoughts.

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Author: ravvt Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55973 of 74759
Subject: Re: Easy Portfolio - opinions? Date: 2/24/2007 4:29 PM
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At 25+ years before retirement I would be 100% in stocks.

MZ4


... I agree with that sentiment.

In addition, as you approach your retirement date, you might want to consider keeping a very high allocation (i.e. 90+%) in equities since any pension that you get as well as SS could be considered a "bond like" annuity. If you were to convert your total annuity income into the lump sum of cash that would be needed to provide that annuity income using a Tbill rate of return; you could convince yourself that the "portfolio cash value" of these annuities would more than make up any "bond / cash" portion that might be required by asset allocation theory....

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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: 55975 of 74759
Subject: Re: Easy Portfolio - opinions? Date: 2/24/2007 5:36 PM
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Here is a link to a asset allocation paper that I like. I've modified it a little as to % allocations in each class and I've substituted a money market fund for bonds.

http://trendfollowing.com/whitepaper/CMT-Simple.pdf

As others have pointed out, total market indexes would pretty much give the same performance as all those indexes combined.

One thing about risk. Everyone thinks they have a high tolerance for risk/volatility until they personally experience it. Just ask people how their investment strategies changed after 2000.

JLC

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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55976 of 74759
Subject: Re: Easy Portfolio - opinions? Date: 2/24/2007 5:57 PM
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I do not believe in a hands off approach to investing. You need to read, study, and learn about the market. At the very least, watch Cramer on CNBC to get some idea of how things work. To properly select and evaluate mutual funds, you need a good tool like Fasttrack (www.fasttrack.net)

The index fund approach can certainly be improved on. It is not difficult to find a number of funds with excellent records that beat the indices. Consider AMAGX, ARTVX, BPTRX, FAIRX, HDPMX, IZZYX, JATTX, KSCOX, PAGRX, PYEQX, RYVFX, and WWNPX. These are all funds that have significantly beaten both large and small cap indices as measured by SPY and IWM with distributions reinvested over the last 2 years. There is no future guarantee, but their performance has been consistently good.

You need some foreign and emerging market exposure also. Some excellent funds are ARTIX, ARTKX, JAOSX, DODFX, EUROX, LZOEX, MINDX, OBCHX, PRLAX, TREMX, and UMEMX. Some of these are single country or region funds, and hence should be weighted less heavily than the more general funds.







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Author: MarinBMWZ4 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55977 of 74759
Subject: Re: Easy Portfolio - opinions? Date: 2/24/2007 7:57 PM
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At 25+ years before retirement I would be 100% in stocks.

MZ4

... I agree with that sentiment.

In addition, as you approach your retirement date, you might want to consider keeping a very high allocation (i.e. 90+%) in equities since any pension that you get as well as SS could be considered a "bond like" annuity. If you were to convert your total annuity income into the lump sum of cash that would be needed to provide that annuity income using a Tbill rate of return; you could convince yourself that the "portfolio cash value" of these annuities would more than make up any "bond / cash" portion that might be required by asset allocation theory....
-----------------
Plus, many mutual funds have a percentage of assets in bonds, for redemptions and such, or, they are "value" or such type that they tend to have more bonds in the portfolio normally. In other words, just 'cuz it's a mutual fund doesn't mean you don't have bond exposure.

MZ4 (read the prospectus, see the allocations, see the holdings)

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Author: MarinBMWZ4 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55978 of 74759
Subject: Re: Easy Portfolio - opinions? Date: 2/24/2007 7:59 PM
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At the very least, watch Cramer on CNBC to get some idea of how things work.
----------------
If he says sell, buy, if he says, buy, sell. He's a great contrarian indicator. Go to the BMW board and talk about him....

MZ4

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55979 of 74759
Subject: Re: Easy Portfolio - opinions? Date: 2/24/2007 8:42 PM
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If he says sell, buy, if he says, buy, sell. He's a great contrarian indicator.

I've always thought of Cramer as the comic relief. (Much like several posters at TMF.) I had no idea he was useful as a contrarian indicator.

--Peter

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Author: Jubii Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55983 of 74759
Subject: Re: Easy Portfolio - opinions? Date: 2/25/2007 12:39 AM
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Thanks, guys. Knew I'd get some good feedback.



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Author: Hohum77 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 55991 of 74759
Subject: Re: Easy Portfolio - opinions? Date: 2/25/2007 5:19 PM
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I've always thought of Cramer as the comic relief. (Much like several posters at TMF.) I had no idea he was useful as a contrarian indicator.

--Peter



I don't follow Cramer much, but I do know a couple of years ago, he was my Sandisk (SNDK) contrarian indicator- Cramer said Sell, I held, and walked away with a nice gain a few months later :)

Here's another example (this one, at least, Cramer pundits walked away with some money). This was Intuitive Surgical (ISRG),
http://www.fool.com/investing/high-growth/2006/01/09/cramer-vs-cramer.aspx




Hohum

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