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Buckets of Money
Old 12-15-2009, 06:31 PM   #1
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Buckets of Money

Is anyone familiar with Ray Lucia's Buckets of Money and his company RJL Wealth Management?

I'm considering investing with his firm, but I can't find any performance information on their products. Hoping someone here has had some experience with them.

Thanks
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Old 12-15-2009, 06:59 PM   #2
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Check the FAQ section of the Forum, Nords has put together "best of" thread on Lucia and buckets. It's here.

We have some Lucia devotees here (Rich in Tampa has written about him). I don't remember anyone believing the "brand name" RLJ investment products were worth the price, I think the bucket devotees are rolling their own using Lucia's ideas but cheaper investment choices (e.g. Vanguard, Fideltiy, etc)

Good luck.
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Old 12-15-2009, 07:10 PM   #3
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Thanks! I guess I need to do a "search" before I ask a question here, you guys have just about covered everything.

I've been a long time Vanguard investor (and a big fan of their low fees), but I thought maybe I could get better returns by going with an actively managed fund.
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Old 12-15-2009, 07:20 PM   #4
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You may get better returns with actively managed funds but then again you may not.

Looking for past performance will not help you with future performance.

Just take a look on TV and watch the opinions of the talking heads, none of them can agree on anything.
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Old 12-15-2009, 07:25 PM   #5
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Quote:
Originally Posted by JJtheNav View Post
Thanks! I guess I need to do a "search" before I ask a question here, you guys have just about covered everything.

I've been a long time Vanguard investor (and a big fan of their low fees), but I thought maybe I could get better returns by going with an actively managed fund.
Statistics seem to show that it is better to get lower fees then to trust that an actively managed fund can get better returns.

IF you are going to attempt this, why not split the portfolio 1/2 aned 1/2.
I think they call that diversification ... in this case I guess it would be management diversification.

good luck
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Old 12-15-2009, 07:44 PM   #6
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Thanks! I guess I need to do a "search" before I ask a question here, you guys have just about covered everything.
The "powered by Google" search box above seems to work better than the forum search software, at least for me. Be sure to click the Early-Retirement.org option.
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Old 12-15-2009, 08:03 PM   #7
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Old 12-15-2009, 08:40 PM   #8
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Lucia's Buckets approach has a lot of appeal, but it also has some troubling aspects. Ray is charismatic but very self-promoting, so beware.

Highs: easy to relate to the metaphor and inherently sensible. Makes it easy to conceptualize your portfolio. Keeps you long-term focused.

Lows: very conservative in terms of stocks to bonds, but strictlly speaking you would be very deep into a stock-oriented portfolio starting 15 years or so of his plan. He counters by saying you should "value average" or rebalance stocks to bonds during good years but that recommendation is vague and unsuppported. Back-testing is iffy, and not very robust, IMHO.Finally, he is a big supporter of nontraded REITS. I am no expert but many have doubts about the front end costs, etc.

Do your homework but there is much merit to his approach. I have moved away a bit but still use his philosophy. Otard is good, too.
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Old 12-15-2009, 09:13 PM   #9
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Thanks! After reading your previous forum I've decided to steer away from Buckets.

I did come accross an actively managed fund, CGM Focus (CGMFX) which has a great track record (although yes I know, "past performance is no guarantee...).

Anyone have any experience with CGM Focus?
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Old 12-15-2009, 09:30 PM   #10
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Several folks here (including me) use the technique of having 1 to 3 years of cash available for annual withdrawals, and then the rest in an asset allocation that gets rebalanced occasionally. This is just so you don't worry so much about short term market fluctuations. It really helps psychologically those of us living mostly off investments. It's kind of like a bucket - but not exactly..... I had this set up way before I ever heard of Ray Lucia, so I don't give him any credit .

Some other folks simply makes sure the cash portion of their AA covers 1-3 years of needs and ignore the rest of their portfolio in the short run.

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.

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Old 12-15-2009, 09:32 PM   #11
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Anyone have any experience with CGM Focus?
With a 1.33% expense ratio it isn't likely you'll find a large number of folks on this forum who will have any experience with this fund.
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Old 12-15-2009, 09:36 PM   #12
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Anyone have any experience with CGM Focus?
How does this fund fit into your overall asset allocation (what role would it fill for you)?

It takes extreme bets on sectors. When it wins, it wins big. In 2008 it lost 48% in value. It has an expense ratio of almost 1%. I don't have a need for such a fund, but maybe some folks do. It beats the dog track, I guess.

You mentioned you have low cost Vanguard index funds and money in the TSP. Those investments reflect a very different investmentment philosphy than does the choice of CGM Focus. I'm a fan of what you were doing before.

If you haven't read William Bernstein's Four Pillars of Investing I think you might find it useful.
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Old 12-15-2009, 09:37 PM   #13
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Thanks! After reading your previous forum I've decided to steer away from Buckets.

I did come accross an actively managed fund, CGM Focus (CGMFX) which has a great track record (although yes I know, "past performance is no guarantee...).

Anyone have any experience with CGM Focus?
CGM Focus is a very concentrated portfolio that is extremely volatile and tends to have elements of momentum trading in its strategy. IMO, it is pretty speculative.

I think I know the reason Ray Lucia likes non-traded REITs: they pay huge commissions to the advisors that sell them.
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Old 12-15-2009, 10:00 PM   #14
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I wouldn't go "all in" to this fund, but maybe 5 - 10% of my porfolio. As for the expense ratio, if you look at its 18% return over 10 years compared to the < 1% return of the VTSMX (Total Stock Mkt) fund... doesn't it make sense to pay the larger fee for a better return?
(Keep in mind, I'm 39 so this would be a long-term investment.)
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Old 12-15-2009, 10:12 PM   #15
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JJ, don't rush. Take your time and start with a few books like the Boglehead book, Solin's "Best retirement book you ever read" (or something like that). Don't make decisions until they are part of an overall plan. Read this forum including the relevant archives.

It took me 2 years to become confident enough to do this on my own. Meantime park your money in a balanced fund or whatever to buy time. This is very complicated stuff with wide opinions. It will come but be patient. At age 39 you have time and eventually you will get very comfortable with your decisions.
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Old 12-15-2009, 10:14 PM   #16
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JJ, that "larger fee for a better return" viewpoint is one that has a lot of merit - until it doesn't. You might make a killing investing in that fund over the next several decades - or not. But if you don't the fact that you are 39 will give you lots of time to recover - or not.

Heck, what do I know. I'm 63, spending down my portfolio and wouldn't touch that fund with a 20 foot boom.
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Old 12-15-2009, 10:18 PM   #17
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doesn't it make sense to pay the larger fee for a better return?
Yes, it would be a great bargain, if only we could know which funds would outperform in the future. But we can't.

When I first started investing I would pick up Money Magazine and select mutual funds based on their track records. Later, I got more sophisticated and used Morningstar to do the same thing. I lost a lot of money and a lot of ground that way, but I'm glad I got it out of my system early. The academic research makes clear that the search for talented active stock pickers or use of market timing techniques is not likely to be successful.
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Old 12-16-2009, 03:48 AM   #18
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i like using rays approach... it gives us great comfort but not necessarily the biggest gains.

since you rebalance by years of money and not by gains per se' it can do some wierd things.

if you wait until the 15 year time period has elapsed to refill your buckets you can get the biggest gains but also end up with a portfolio thats about 90% stock and your 80 years old.


on the other hand rebalancing thru the years whenever things are higher will give you less bang for the buck but maintain a more reasonable asset allocation.


i agree with rich, he really dosnt go into the mechanics of using the buckets well at all. he kind of leaves that open ended.
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Old 12-16-2009, 07:06 AM   #19
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JJ, I am by no means an exact yardstick for you, but we are of similar age (I am 36), probably have similar time horizons for permanent retirement (10 to 15 years) and similar income stability (I also work for a non-private market employer). I have a large appetite for risk (1/3 of my portfolio is in a single, volatile sector) and I am a pretty sophisticated investor (pro). Yet I would not touch CGM Focus.

As REW says, stick with the default option (balanced fund), do your reading and then make educated decisions.
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Old 12-16-2009, 07:39 AM   #20
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As REW says, stick with the default option (balanced fund), do your reading and then make educated decisions.
Actually it was Rich who gave that advice, but I'm in total agreement.
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