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Old 12-16-2009, 07:56 AM   #21
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My main point is - that you can use some of the general concept of staging of your investments for short and intermediate/long needs without necessarily using the Ray Lucia approach.
True. In reality, the Lucia "buckets" approach is just another way to look at asset allocation -- only instead of representing your allocations in terms of percentages, you look at the allocation of the "safer" stuff in terms of number of years of income.

The place where I get a little tripped up is that it's not entirely a mechanical strategy in that unlike rebalancing in a traditional AA, there's no specific, well-defined trigger mechanism for moving money from riskier buckets to safer buckets. For sure, you wouldn't have moved some out of the stock bucket in 2008, since much of the "buckets" idea is to have enough secure income to avoid the need to sell stocks low -- but if stocks are flat, up 5%, up 10%, up 20%, do you rebalance by replenishing the safer bucket, and if so, how much? As Rich mentioned, this is a fairly vague concept and a lot of us prefer more rigid, mechanical approaches such as "on this day every year, I will rebalance back to 60/40" or some such. But I do think the underlying idea is sound -- keep enough in the safer investments to make it very likely that your stock bucket can recover from a bear market before needing to "raid" it.
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Old 12-16-2009, 10:07 AM   #22
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In a way Vanguard Retirement Income is like buckets of money with about 1/3 in stocks the rest in bonds. The only difference is when you sell you do end up selling some of your stocks. But I think I would rather Vanguard Retiremnet Income because it would keep my AA stable.
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Old 12-16-2009, 07:11 PM   #23
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Ok, since so many of you said you wouldn't touch CGM Focus and you recommend I go with a balanced fund... Let me ask you the next obvious question(s):

What balanced fund do you recommend? (I'm 39)

Should I put it in my IRA or regular (taxable) account?

If I wanted to add some risk (like brewer did), what do you suggest? How much of my portfolio? Where should I put it?

And lastly, (since I have your attention) should I continue to invest in the TSP? Since I'm not getting a match, I only do it for the tax benefit (less total income). Currently I have 80% G fund and 20% Life Cycle 2040, with 10% of my pay now going to the Life Cycle fund.

Thanks!!! Keep in mind, I want to retire early!
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Old 12-16-2009, 07:31 PM   #24
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Ok, since so many of you said you wouldn't touch CGM Focus and you recommend I go with a balanced fund...
Doesn't matter much, this is just a pause for you. Maybe something like vanguard's wellington or similar. Check their site which is searchable.

Once you get your bearings you'll probably want to separate the different asset allocations.
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Old 12-16-2009, 07:32 PM   #25
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JJ, rather than getting random advice from anonymous folks on the internet, you'd be well advised to do some reading and develop your own investment philosophy and an asset allocation you are comfortable with. Then post it on the forum and let the group here critique it for you.

To answer one of your questions, one highly regarded balanced fund is Vanguard Wellington (VWENX) - but do your own due diligence.
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Old 12-16-2009, 07:36 PM   #26
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Originally Posted by ziggy29 View Post
True. In reality, the Lucia "buckets" approach is just another way to look at asset allocation -- only instead of representing your allocations in terms of percentages, you look at the allocation of the "safer" stuff in terms of number of years of income.

The place where I get a little tripped up is that it's not entirely a mechanical strategy in that unlike rebalancing in a traditional AA, there's no specific, well-defined trigger mechanism for moving money from riskier buckets to safer buckets. For sure, you wouldn't have moved some out of the stock bucket in 2008, since much of the "buckets" idea is to have enough secure income to avoid the need to sell stocks low -- but if stocks are flat, up 5%, up 10%, up 20%, do you rebalance by replenishing the safer bucket, and if so, how much? As Rich mentioned, this is a fairly vague concept and a lot of us prefer more rigid, mechanical approaches such as "on this day every year, I will rebalance back to 60/40" or some such. But I do think the underlying idea is sound -- keep enough in the safer investments to make it very likely that your stock bucket can recover from a bear market before needing to "raid" it.

our plan is replenish whenever markets are higher to capacity....overall gains are less then waiting until out of money in buckets 1 and 2 but much safer and comforting
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Old 12-16-2009, 07:38 PM   #27
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The TSP has the lowest costs of any investment option you are likely to get in your lifetime. It has good options. The "G" fund has a particular advantage offered by no other bond fund in the world (the advantage of the higher interest rate of longer-term govt securities but the lower volatility of shorter-term govt securities). Whatever you do now, do not ever make the mistake of closing out your TSP account entirely--after you retire you can never open a new TSP account, but if you already have one you can roll over $$ from a 401K, etc. So, keep your options open by never closing that TSP.

I recommend you just put this money in a good temporary holding spot while you do some reading and decide on an overall asset allocation. That might take a few months. If you want to have it "in play" in a balanced fund while you do this foundational work, then you could do worse than Vanguard Wellington (VWELX, 65% stock, 33% bonds). My personal recommendation for your situation, if you want to have stock and bond exposure, would be a Vanguard Target Retirement fund that has whatever mix of stocks and bonds you are looking for. Don't worry about the date in the name of the fund, just pick a mix. You'll get US stocks, foreign stocks, bonds, etc.

Really, you can't "CLEP out" of this course. The reading that folks are recommending is the only way for you to have an understanding of the "why" behind the decisions you are asking about.
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Old 12-16-2009, 07:47 PM   #28
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You guys keep telling me to go read, the problem is:
1. I can't read (ok, not true)
2. I don't have time! (ok, I guess not true either)
3. Reading makes me fall asleep (true)
4. Anything in a book is old news, I'd rather get good up-to-the-minute advice from you guys who have done all the reading for me! (also true!)

I get the point: don't rush, go learn, come back and then let you guys tell me if I learned anything... right?

Seriously, thanks for the advice - I'm going to go look into VWELX (and maybe pick up a book or two.... zzzzzz, goodnight.)
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Old 12-16-2009, 08:36 PM   #29
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As others have suggested, you could do worse than wellington or wellesley. Vanguard balanced index would be OK as well. But do your homework, since you will have to make decisions for youself and they should be informed ones. As for dull reading, keep in mind that there is (at least) six figures at stake here. You could waste if you made poor choices due to a lack of reading. Besides, at least you get to read the consumer-oriented stuff. Be happy you are not spending the next 5 years reading finance and accounting textbooks.
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Old 12-16-2009, 09:30 PM   #30
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Ok, I've decided to go with the Vanguard Target Retirement 2030 Fund for my IRA and the Life Cycle 2030 Fund for my TSP. (I'll max both out this year.) That way I'm diversified, automatically balanced each year and most importantly I'll be able to sleep well at night! As for my regular account, I think I'll keep it in cash until I can finish reading some books. Thanks for the great advice everyone!
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Old 12-16-2009, 09:53 PM   #31
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That's what I did, I plunked my first contributions into a retirement date index fund, then went and learned what sort of allocation I wanted, how to choose the funds which best fit that allocation, and finally how to buy low/sell high (didn't even have a remote idea of how this worked until after a LOT of reading).
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