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Author: ranger54 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76397  
Subject: Un'Balancing' My IRA Date: 2/14/2002 7:01 PM
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Hello,
I am considering reallocating my IRA. I am in my mid 30s and currently have all of my IRA in a Balanced Fund. I have read about Index Funds here and am considering moving a portion of my IRA to one. The question is : What percent do people recommend? I know that for 5 responses I may get 6 different answers :-)

I was just hoping for a variety of suggestions from which to make a decision. Also, what about a portion in a Growth Fund?
I was considering 50% Index Fund, 25% Balanced and 25% Growth. Or would I be better off being out of a Balanced Fund?

Any suggestions would be appreciated.
Thanks,
C--
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Author: jbking Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33797 of 76397
Subject: Re: Un'Balancing' My IRA Date: 2/14/2002 7:10 PM
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Greetings ranger,

I am considering reallocating my IRA. I am in my mid 30s and currently have all of my IRA in a Balanced Fund. I have read about Index Funds here and am considering moving a portion of my IRA to one.

There is such a thing as a Balanced Index fund such as Vanguard's Balanced Index(VBINX) that I would note.

What percent do people recommend?

This isn't the key question from my view. The better question is what asset allocation do you have and which asset classes, eg large US stocks, small stocks, foreign stocks, bonds, do you want to index?

Also, what about a portion in a Growth Fund?

Well, most blend funds have a portion in growth stocks, eg all the stocks of Vanguard's Growth Index are in the 500 Index. Or do you have a different definition of Growth Fund?

Aren't Vanguard's Growth Index(VIGRX) and Small-cap Growth Index(VISGX) both growth funds AND index funds? If not, please explain to this Fool as I'm 99% sure they are both or you use different meanings than I do.

I was considering 50% Index Fund, 25% Balanced and 25% Growth. Or would I be better off being out of a Balanced Fund?

Vanguard has 20 index funds that break down like this: 11 US Stock funds, 5 Foreign funds, 4 bond, and 1 Balanced so indexing is merely a strategy that a fund can use to invest, IMO.

Just a few notes,
JB

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Author: ranger54 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33798 of 76397
Subject: Re: Un'Balancing' My IRA Date: 2/14/2002 7:25 PM
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JB,
I am a rookie in the field of Mutual Funds so I am probably not using all of the terms correctly. Thanks for the suggestion of the Index Growth Fund-I will look into that.
C--

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Author: jbking Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33800 of 76397
Subject: Re: Un'Balancing' My IRA Date: 2/14/2002 7:38 PM
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Greetings C,

I am a rookie in the field of Mutual Funds so I am probably not using all of the terms correctly.

So, here are a few links for getting some of the basics down:

http://www.fool.com/school/mutualfunds/basics/intro.htm
http://personal.vanguard.com/educ/inveduc.html
http://moneycentral.msn.com/articles/invest/invfund/contents.asp?p=2

As well as Morningstar's University section, www.mfea.com and others.

Some terms like Growth do have multiple meanings so that in one context it means capital appreciation so that it is a contrast to an income fund that may have an objective of more dividends and interest than investing in rising stocks. The other main definition of growth and the one I'm used to is that of growth in contrast to value when looking at valuations and how a fund invests: Will the fund manager buy stocks with higher multiples, eg what Janus did well, or is there an impression that this fund manager hunts among stocks that have low valuations, eg Oakmark, Dodge & Cox invest this way.

Balanced funds just invest in stocks and bonds and so there can be some aggressive funds like Janus Balanced(JABAX) or something more conservative like Dodge & Cox Balanced(DODBX) but there are also those more in the middle like that Balanced Index fund I mentioned before. Over the past couple of years value seems to have done very well and growth hasn't looked good.

Regards,
JB

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Author: Bluecat6 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34075 of 76397
Subject: Re: Un'Balancing' My IRA Date: 3/30/2002 9:38 PM
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I was considering 50% Index Fund, 25% Balanced and 25% Growth. Or would I be better off being out of a Balanced Fund?


Ranger,

Its time to avoid the index funds. Some predict sideways movement in the broad markets through the end of the year and maybe into 2003 depending on the actual recovery activity. Managed funds should do better in this market.

As for a mix, here is my recommendation

20% Bond fund
20% Small/Mid cap growth
20% Small/Mid cap value
20% Large cap growth
20% Large cap value

Small and mid-caps have done very well over the last year and when the recovery really takes hold Large caps should do better. Value has done better than growth over the last 2 years and it should still do well. Growth will pick back up after the recovery is well underway.

Bonds have been the winner the last 2 years. Its good to have them in the mix if they are doing better than money market.




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Author: jrr7 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: 34078 of 76397
Subject: Re: Un'Balancing' My IRA Date: 3/30/2002 11:44 PM
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Its time to avoid the index funds. Some predict sideways movement in the broad markets through the end of the year and maybe into 2003 depending on the actual recovery activity. Managed funds should do better in this market.

Which index funds -- just stock index funds, or do you include bond index funds and REIT index funds?

How likely is it that the "some" have a crystal ball to know exactly what the market is going to do in the future?

Who will be able to predict the end of the "secular bear market" in advance? When will it be time to switch back to index funds?

I'm not disagreeing with you (I'm a skeptic of the index fund gospel), but you have to admit you just made some controversial statements there.

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Author: Bluecat6 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34079 of 76397
Subject: Re: Un'Balancing' My IRA Date: 3/31/2002 11:58 AM
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Which index funds -- just stock index funds, or do you include bond index funds and REIT index funds?


I was refering to stock index funds.

I certainly don't have a crystal ball but this does not appear to be a time for index funds. Index funds are great when the whole economy and thus the markets are on a tear but it appears that the next year will be a time for picking and choosing.

BTW almost any large fund looks like a index fund over time. The larger the fund the more spread out it needs to be. I used to be in some of Fidelities larger 'managed' funds. Then I looked back at their performance vs. the S&P 500. The curves layed right on top of each other over a two year period.

Of course smaller funds will have less spread and be more concentrated. This can be good if the fund manager picks well. It can also underperform an index if the manager does not pick well. This risk/reward factor is higher with smaller managed funds vs. large managed funds or index funds.

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