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Keeping it simple
Old 05-08-2007, 11:10 AM   #1
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Keeping it simple

If you need 4% after tax from your investments to be comfortable in retirement would the following simple portfolio work

Vanguard Prime MM 16% (4 year cash bucket)
Wellesley Income Fund 84 % (before and after tax funds)
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Re: Keeping it simple
Old 05-08-2007, 12:25 PM   #2
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Re: Keeping it simple

Maybe, but you are putting all your equity money in the hands of one Mutual Fund Management team.

I would not be comfortable with it!

If you want to keep it simple, why not go with a Target retirement Fund from Vanguard?
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Re: Keeping it simple
Old 05-08-2007, 12:39 PM   #3
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Re: Keeping it simple

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Originally Posted by Cut-Throat
Maybe, but you are putting all your equity money in the hands of one Mutual Fund Management team.

I would not be comfortable with it!

If you want to keep it simple, why not go with a Target retirement Fund from Vanguard?
That was another option something like Vanguard Retirement Income or maybe a 2015 Retirement fund
if I want more equity exposure
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Re: Keeping it simple
Old 05-08-2007, 01:09 PM   #4
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Re: Keeping it simple

Quote:
Originally Posted by none
If you need 4% after tax from your investments to be comfortable in retirement would the following simple portfolio work

Vanguard Prime MM 16% (4 year cash bucket)
Wellesley Income Fund 84 % (before and after tax funds)
For a long retirement, this portfolio might lag inflation.
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Re: Keeping it simple
Old 05-09-2007, 12:03 PM   #5
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Re: Keeping it simple

Quote:
Originally Posted by none
That was another option something like Vanguard Retirement Income or maybe a 2015 Retirement fund
if I want more equity exposure
Yup, And if you want less equity exposure go with a 2010 fund.........................
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Re: Keeping it simple
Old 05-09-2007, 01:19 PM   #6
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Re: Keeping it simple

Quote:
Originally Posted by Cut-Throat
Yup, And if you want less equity exposure go with a 2010 fund.........................
I know that its interesting to construct portfolios and look at historical returns, and there are
always special circumstances that require more complicated approaches, but would my approach
work for 90% of us?
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Re: Keeping it simple
Old 05-09-2007, 02:34 PM   #7
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Re: Keeping it simple

Quote:
Originally Posted by none
I know that its interesting to construct portfolios and look at historical returns, and there are
always special circumstances that require more complicated approaches, but would my approach
work for 90% of us?
The question is why would you want to assume more risk for less return? - A target retirement fund will probably give you more return with a lot less risk.

Wellseley is mostly large cap value stock class and bonds. - Just 1 asset class for stocks and is not an index fund.
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Re: Keeping it simple
Old 05-09-2007, 03:01 PM   #8
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Re: Keeping it simple

Hmm...sort of flies in the face of the investing materials i've seen.

What I had heard was that large value offered a greater return in the long haul than an indexed mix. Seems like less risk for a higher return, potentially, to go with wellesley and a little cash buffer than an index fund with just total stock and total bond market.

But then again, none of us has a crystal ball either.

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Re: Keeping it simple
Old 05-09-2007, 03:34 PM   #9
 
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Re: Keeping it simple

none,

According to M* x-ray your 84/16 portfolio breaks down this way:

Cash 18.42
U. S. Stocks 31.30%
Foreign Stocks 1.37
Bonds 48.80%
Other 0.10%

67 24 3
7 0 0
0 0 0

Bonds 100% Intermediate High Quality

ER .25%

Projected 5 year growth 8.86%
Yield 3.33%

Are you happy not owning foreign, small & medium stocks?
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Re: Keeping it simple
Old 05-09-2007, 04:31 PM   #10
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Re: Keeping it simple

none, I love Wellesley and have it at almost 20% in our portfolio. However, CT's point about depending on one management team is very valid. This would make me a little wary to hold 84%. By adding one more fund, you could balance indexed with managed and also add some good diversification.

Adding a Vanguard Lifestrategy or Target fund for part of the Wellesley allocation (determined by the overall equity allocation you feel comfortable with) is something I would consider. Both give more exposure to non-value US stock and international stock. Target funds also have a little TIPS exposure.

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Re: Keeping it simple
Old 05-09-2007, 05:06 PM   #11
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Re: Keeping it simple

Quote:
Originally Posted by WilliamG
none, I love Wellesley and have it at almost 20% in our portfolio. However, CT's point about depending on one management team is very valid. This would make me a little wary to hold 84%. By adding one more fund, you could balance indexed with managed and also add some good diversification.

Adding a Vanguard Lifestrategy or Target fund for part of the Wellesley allocation (determined by the overall equity allocation you feel comfortable with) is something I would consider. Both give more exposure to non-value US stock and international stock. Target funds also have a little TIPS exposure.

Yes that's why I liked the suggestion of going with a Target fund

so 16% Vanguard Prime MM, 84% Vanguard Target Retirement 2015
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Re: Keeping it simple
Old 05-09-2007, 05:09 PM   #12
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Re: Keeping it simple

Quote:
Originally Posted by none
Yes that's why I liked the suggestion of going with a Target fund

so 16% Vanguard Prime MM, 84% Vanguard Target Retirement 2015
I could sleep at night with that.
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Re: Keeping it simple
Old 05-09-2007, 10:16 PM   #13
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Re: Keeping it simple

Quote:
Originally Posted by none
Yes that's why I liked the suggestion of going with a Target fund

so 16% Vanguard Prime MM, 84% Vanguard Target Retirement 2015
My question would be if you plan on reinvesting the dividends from the Target Retirement/Wellesley, or if you will spend the cash.

If you're spending the dividends, then I don't see why you need to keep 16% in cash - 84% of your entire portfolio will be throwing off around 2-4% in dividends each year, so even if the market dives, I wouldn't expect the dividends to be impacted too much. That would require a lot less in cash reserves, and allow more of your nest egg to grow.
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Re: Keeping it simple
Old 05-10-2007, 07:59 AM   #14
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Re: Keeping it simple

none - good thought on less cash if taking dividends. I think taking or re-investing dividends is a personal preference. My personal preference is to take divdends in retirement rather than re-invest. That way I can keep a proportionally smaller cash stash and I like the dividend "paycheck".

Also, although I think your revised plan is fine, I wasn't necessarily saying you should drop Wellesley entirely. Keeping it gives you the diversification of some active management and also some large cap value stock. Since you say you have both before and after tax accounts, you could keep Target 2015 in one and Wellesley in the other (probably Wellesley in the smaller). If Wellesley is in a taxable account I would definitely go ahead and take the distributions rather than re-invest since you will be paying taxes on them any way.

Just some possible thoughts for fine tuning with not too much more complexity; think you'll do fine either way....
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Re: Keeping it simple
Old 05-11-2007, 10:30 PM   #15
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Re: Keeping it simple

Quote:
Originally Posted by MooreBonds
My question would be if you plan on reinvesting the dividends from the Target Retirement/Wellesley, or if you will spend the cash.

If you're spending the dividends, then I don't see why you need to keep 16% in cash - 84% of your entire portfolio will be throwing off around 2-4% in dividends each year, so even if the market dives, I wouldn't expect the dividends to be impacted too much. That would require a lot less in cash reserves, and allow more of your nest egg to grow.
Thanks for the comments. The 16% in cash is a hold over from the old buckets approach. I asked the question becuase I think I'm like many folks who after a few jobs have more accounts and funds than they know what to do with as they approcah retirement. I did some consolidation last year and moved as much as I could into a single firm and put it into a US stock index (40%), International index (40%), REIT (10%), Total Bond Index (20%). As I look towards ER I want to get a bit more conservative and throw off more dividends/income and just simplify things.
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Re: Keeping it simple
Old 05-11-2007, 10:40 PM   #16
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Re: Keeping it simple

Hey None, I want to have 110% also.
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Re: Keeping it simple
Old 05-12-2007, 10:08 AM   #17
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Re: Keeping it simple

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Originally Posted by 73ss454
Hey None, I want to have 110% also.
OOPs I've been listening to "Robert Kiyosaki’s investment advice" again. Make that 35% in the US and 35% in International index funds
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