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Balanced Funds Only?
Old 05-22-2006, 08:09 AM   #1
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Balanced Funds Only?

Hello all....Just a quick question to inquire if anyone actually uses a single (or maybe a combo of) Balanced Fund(s) for their entire retirement income Portfolio? Such as Vanguard Wellington or Wellesley for example. Is this being overly simplistic? I would only need to generate an annual income of 20-25K to go along with SS and the wifes COLA'd teachers Retirement to keep us just under the 15% IRS cap.
I am speaking of approx $800K at present of all tax sheltered IRA money. We intend to start drawing in just over 2 years.
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Re: Balanced Funds Only?
Old 05-22-2006, 08:20 AM   #2
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Re: Balanced Funds Only?

Nothing wrong with a single balanced fund approach. One with an established track record and low expense ratio is important. It's a great way to go - minimal fuss. Not having to fuss with your retirement investments is a major good thing.

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Re: Balanced Funds Only?
Old 05-22-2006, 08:24 AM   #3
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Re: Balanced Funds Only?

Maineiac,

Most of my portfolio is in two balanced funds: D&C Balanced (20%) and Vanguard Wellesley (50%). The remaining 30% is split between D&C International and cash. Don't know if it is overly simplistic, but it lets me sleep at night.

FYI, I am 59, retired and have no pension.

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Re: Balanced Funds Only?
Old 05-22-2006, 08:41 AM   #4
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Re: Balanced Funds Only?

I think balanced funds are great. I use prwcx but it has very little international exposure so I added an international fund and a small cap fund. Also put a little in a reit and a commodity fund for added diversification. But thats just me, the additional funds made me feel a little more secure from an allocation stand point.

Good luck with your retirement.
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Re: Balanced Funds Only?
Old 05-22-2006, 09:49 AM   #5
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Re: Balanced Funds Only?

Some people use two balanced funds to achieve a median goal.

When a single ER, I split between wellesley and wellington to get closer to a 50/50 balance. 35/65 seemed too conservative and 65/35 seemed too aggressive.

Some people use two similar goal funds that work differently to get more 'peanut butter' effect without disrupting style.

Combining Wellesley with target retirement income or wellington with target retirement 2025 or 2035 for example. Income funds and moderate growth funds that use active vs index, different types of equities and bonds, but over the medium to long term should provide similar performance.

A lot of people pick one core fund for a lot of their dough, then over time add additional smaller positions in other asset classes when they have funds available (rebalancing, dividends, additional income) to broaden their asset allocation.
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Re: Balanced Funds Only?
Old 05-22-2006, 10:05 AM   #6
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Re: Balanced Funds Only?

Before deciding to use a balanced fund, I would determine what fixed-income allocation I want in my portfolio as a whole. Then find a balanced fund that is close to that level.

Many balanced funds have more in bonds that I would want in my portfolio.

The State of Alaska defaults all employees into a balanced fund for their 401A plan. For my 19-year-old son who started working there I think it is too conservative. Retirement is the farthest thing from his mind at the moment but I am trying to use this as an opportunity to get him thinking about something else besides the typical 19-year-old concerns.
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Re: Balanced Funds Only?
Old 05-22-2006, 10:08 AM   #7
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Re: Balanced Funds Only?

although, rereading your post, in your case being within 2 years of using the funds I doubt a balanced fund would be too heavy in bonds. However, I would still determine what allocation I want in fixed-income first in case there aren't enough to suit your tastses.
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Re: Balanced Funds Only?
Old 05-22-2006, 10:31 AM   #8
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Re: Balanced Funds Only?

As per other posters, a balanced fund can work as your mainstay vehicle. However, I am assuming some would supplement this with a separate fixed income bucket (ST bonds, cash, etc.) to a) allow you to "sit out" the market for a stretch when things are bearish, and b) manage your month-to-month cash flow.

Personally, I like the idea of keeping around 5 years of anticipated expenses out of the main fund, and that total amount will fluctuate as the market wiggles. That's alot of money for most, perhaps 20% of your total assets. So a balanced fund with 30% bonds would place you at a total of 20%+30%=50% bonds.

If you like to fine tune it down the road, you might add a REIT fund, kick up the international exposure, etc.

But even if you do nothing but put it all in a sound balanced fund, you will be leagues ahead of many retirees who meddle and meddle until they are in trouble.

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Re: Balanced Funds Only?
Old 05-22-2006, 10:37 AM   #9
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Re: Balanced Funds Only?

Like those mentioned a couple of times above, I use a balanced fund and fine tune it with REIT, International and mid/small cap. Due to differing fund choices in 401(k) and IRA my situation is a little more complex in reality, but my core strategy is one balanced fund with small portions of other asset classes to diversify and tweak. I'm in the accumulation phase many years from retirement, but my current plan is to maintain my current mix indefinitely.
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Re: Balanced Funds Only?
Old 05-22-2006, 11:49 AM   #10
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Re: Balanced Funds Only?

Quote:
Originally Posted by Rich_in_Tampa
As per other posters, a balanced fund can work as your mainstay vehicle. However, I am assuming some would supplement this with a separate fixed income bucket (ST bonds, cash, etc.) to a) allow you to "sit out" the market for a stretch when things are bearish, and b) manage your month-to-month cash flow.
Rich,
I would like to explore this a little bit more. Are you saying that in a bearish environment the dividends earned from a balanced fund would be reinvested instead of used for living expenses? Assuming that the investor is no longer in the accumulation stage.

Others?

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Re: Balanced Funds Only?
Old 05-22-2006, 12:10 PM   #11
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Re: Balanced Funds Only?

Thanks all for the input. * *I am now S&Ding with an all Vanguard Portfolio that currently X-Rays at Morningstar as
25-27-16
12-6-4
5-3-1

with US Stocks 32.21% *
Foreign Stocks 17.48%
Bonds of 48.54%
Cash of 1.76%

24.5% *VBIIX *Int Term Bond Index
24.5% *VIPSX *Tips
20% * * VTSMX Total Stock Marked
18% * * Total International Index
5% * * * REITS
4% * * * VISVX Large Value
4% * * * VISVX Small Value *



Pretty close to the 50/50 AA I started with. *I have been overly concerned that this may be inappropriate portfolio for a retiree or soon to be retiree and is "too many funds". *Maybe too much reading. *I need a break as I do not want to spend so much time questioning my Portfolio based on the latest book I've read! * *I let too much slip away with so called "advisors" ,that I am now free of , to mess things up with my own tinkering.
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Re: Balanced Funds Only?
Old 05-22-2006, 12:20 PM   #12
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Re: Balanced Funds Only?

Mainiac,
I wouldn't worry -- your portfolio looks good for being in ER, too.

If you ever feel compelled to tweak, you might consider swithing a few perecent of the bond allocation into other non-stock asset classes. Paradoxically, they may make the portfolio even safer and less volatile due to their low correlation with stocks and bonds. Otherwise, I don't think you need to get any more conservative. just because you are switching from Accumulation years to ER.
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Re: Balanced Funds Only?
Old 05-22-2006, 03:12 PM   #13
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Re: Balanced Funds Only?

I don't see anything wrong with that portfolio. It's not too many funds; in fact it's quite efficient given the varying asset classes and subclasses you have. If you would feel compelled to fine tune a balanced fund I don't think you would get a simpler portfolio than what you have now.

If you're happy with your allocation choices I'd vote to leave it at is.

Here's an example of how a simple balanced fund can get more complicated: A couple of years ago I decided I'd go for LifeStrategy Moderate Growth as my balanced fund. (Previously I had a mix of funds similar to LS Mod's allocation.) Oh, but I didn't have it in my 401(k), so I used Wellington as a substitute in my 401(k). I want to overweight medium/small cap a bit, so I add some extended market index. Oh, now my international is under my target allocation, so I add some total int'l fund. Hmmm, now I'd like to add 10% REIT index. Oops, now my bond allocation is way low, so I add some total bond market. Now my portfolio is about as complex as yours and still requires manual rebalancing.

(edited for spelling)
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Re: Balanced Funds Only?
Old 05-22-2006, 06:15 PM   #14
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Re: Balanced Funds Only?

Not balanced only, but like some others I have recently gone to part balanced by converting large cap to 15% Asset Allocation Fund and 15% Wellesley. I count the Asset Allocation as 100% equity since it is usually 100% S&P 500 when equities are in favor, and the Wellesley as 5% equity. I like having the automatic re-balancing and also the small amount of tactical asset allocation that these funds provide. Rather have the experts do it than try the timing myself. Complement these with Vanguard's small cap, reit and international indices for a 50/50 stock/non-stock allocation.
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Re: Balanced Funds Only?
Old 05-22-2006, 07:06 PM   #15
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Re: Balanced Funds Only?

if i had to pick one fund i like fidelity balanced fund
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Re: Balanced Funds Only?
Old 05-22-2006, 09:14 PM   #16
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Re: Balanced Funds Only?

Yes

13th year of ER. Vanguard Target Retirement 2015 - as follows:

75% Target at 5% draw to get 58% of retirement income - small non cola pension plus early SS the rest.

For old age - 7% Roth Lifestrategy mod in case I live past 84.6 and for "da er ah" male hormones heh heh heh - 15% individual stocks and 3% Prime MM.

This is a new strategy* this year - we'll see. Trying to lighten up and unfrugal some of my more bizarre methods of previous 12 yrs of ER. Shooting to leave my "cheap bastard past behind.

Lead sled dog the last ten years was Lifestrategy moderate and DRIP dividend stocks.

Of course at at 62 almost 63 - I could just - pssst! Wellesley, take out 4% and go fishing.

However - 'one more time - male hormones and putzing are incurable.

So even though I know it only takes one fund

heh heh heh heh heh - hmmm are kayaks addictive?
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