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Balanced Fund(s) Core of Portfolio
Old 12-11-2008, 08:14 AM   #1
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Balanced Fund(s) Core of Portfolio

We have slowly evolved our retirement portfolio to a major dependence on balanced funds. Retired in 2000 and have been withdrawing from IRA where most of our money is since 2005.

Balanced funds provide on-going income stream while doing the heavy lifting on stock/bond re-balancing. As we get older the active re-balancing becomes a lot less attractive to us.

We are currently thinking of eventually having 3 asset allocation "buckets" (not to be confused with the Lucia discussions):
Stock - to directly hold REIT and International
Reserve - to directly hold very safe non-stock (IBonds, CDs, etc) and
Balanced
Thinking balanced would be an equal allocation between Wellesley and Wellington or allocated like Wellington (i.e., Wellesley mirror image) balanced fund(s). This would make the balanced bucket 50/50 stock bond and allow the Stock/Reserve allocations to "true up" to desired overall stock/ bond allocation.

Anyone doing something similar to this or comments on the approach?

thanks! bill
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Old 12-11-2008, 08:30 AM   #2
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I see nothing wrong with an allocation similar to balanced funds in most cases, but I do prefer to "roll my own." As for the Wellington/Wellesley combination, I use that in my mom's Vanguard IRA to approximate a 50/50 stock/bond mix.

I'd also want to consider adding TIPS into my bond allocation just as you're looking at adding REITs and international stocks into your stock allocation.
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Old 12-11-2008, 08:31 AM   #3
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Bill,

I share your thinking - with the exception of REITs, you are describing our current AA.

We have more in Wellesley than in Wellington and that, combined with the big hit to my international equity fund (DODFX), has our overall mix currently at 40/60. I've not had the stomach to do much rebalancing and will rely on the funds to do it for me. The two balanced funds account for ~60% of our total portfolio.
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Old 12-11-2008, 10:16 AM   #4
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Over the last 10 years I've come to rely more and more on the Wellesley/Wellington combination and I have found that not only has performance improved/volatility decreased but my stress level has significantly declined (W/W now at 40% of portfolio). My one question on this approach is that being that both are actively managed how safe is this concentration on W/W as the % goes up? (I don't think the comparison is valid but nonetheless look at Bill Miller's Mason fund cratering after such steerling performance)
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Old 12-11-2008, 10:28 AM   #5
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Even though I psssst Wellesley all over the place - actually trying to be 'mod squad' (aka MPT wise):

85% Target Retirement 2015

15% individual dividend stocks - aka the Norwegian widow. For example Con ED, National Fuel Gas, Aqua america, Exxon, Verizon, JM Smucker, Lilly, Washington Reit, VFC(Wrangler jeans), JP Morgan - Utilities, big oil, telephone, food, drug, reit, mfg, bank.

Age 65, retired 15 yrs - switched early on to Lifestrategy moderate and then 2006 to Target.

heh heh heh - .
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Old 12-11-2008, 12:36 PM   #6
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Quote:
Originally Posted by unclemick View Post
Even though I psssst Wellesley all over the place - actually trying to be 'mod squad' (aka MPT wise):

85% Target Retirement 2015

15% individual dividend stocks - aka the Norwegian widow. For example Con ED, National Fuel Gas, Aqua america, Exxon, Verizon, JM Smucker, Lilly, Washington Reit, VFC(Wrangler jeans), JP Morgan - Utilities, big oil, telephone, food, drug, reit, mfg, bank.

Age 65, retired 15 yrs - switched early on to Lifestrategy moderate and then 2006 to Target.

heh heh heh - .
What about CPB (Campbell's) and MCD (McDonald's). Then you have it all covered, from peanut butter and jelly to soup to oil........
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Old 12-11-2008, 01:35 PM   #7
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What about CPB (Campbell's) and MCD (McDonald's). Then you have it all covered, from peanut butter and jelly to soup to oil........
Yep - good additions should extra cash become available to deploy.

heh heh heh - Whaa whaaa wise - EGLE and STON are the only ones I have under water for tax loss/get some cash.
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