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Managed Payout Funds?
Old 11-12-2010, 11:22 AM   #1
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Managed Payout Funds?

(Perhaps I'm missing something new, but didn't find much in Search)

The Vanguard Managed Payout funds haven't received much discussion lately, but the October issue of Consumer Reports Money Advisor has an article that includes them, and a graph on p. 8 showing how they would have allegedly performed over the last 20 years.

The 20 year numbers look better than I thought, but in theory one could get the same results with proper AA, just takes more work.

Any comments, praises, or warnings?
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Old 11-12-2010, 11:29 AM   #2
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Well since the managed payout funds have only been around since 2008 or so, the 20 year performance is all theoretical. Keep in mind that Vanguard reserves the right to change the allocation depending on conditions in the world.

They suffer from introducing the funds just prior to the great recession and losing their clients money which probably has recovered since then.

One of my concerns with these funds is that the asset mix may contain too much equity exposure for an older client.

I do like the concept though and wish them well
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Old 11-12-2010, 11:47 AM   #3
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Quote:
Originally Posted by MasterBlaster View Post
Well since the managed payout funds have only been around since 2008 or so, the 20 year performance is all theoretical. Keep in mind that Vanguard reserves the right to change the allocation depending on conditions in the world.

They suffer from introducing the funds just prior to the great recession and losing their clients money which probably has recovered since then.

One of my concerns with these funds is that the asset mix may contain too much equity exposure for an older client.

I do like the concept though and wish them well
I agree. My diversification plan includes not putting all of my money with any one organization (like Vanguard), so a lot of of my fixed-income stuff is held at other places. That would reduce my equity %, but might not work for for someone else.
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Old 11-12-2010, 11:49 AM   #4
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I don't trust them yet; they haven't been "proven" over multiple market cycles to provide a steady income stream with little risk of depleting your capital. And i'm really skeptical of the ones paying out more than about 3-4% a year. (Some pay out 7% -- unless this is purchased by a 90-year-old who isn't worried about preserving their estate, that seems a bit ridiculous.)

Plus, you can mostly do the same thing with a proper asset allocation (or even a conservative "target" retirement fund) and take out (say) 3-4% a year with inflation adjustments.
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Old 11-12-2010, 02:04 PM   #5
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I like my DIY asset allocation strategy better. I have the flexibility to reduce my distributions when market returns are low and can shift to a more conservative asset allocation after a period of high returns. I've been able to move my fixed income money out of bond and money market funds into higher yielding and lower risk online savings accounts and CDs. Meanwhile, the managed payout fund just plods along with its one size fits all strategy which, while simple, may not really fit all that well.
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Old 11-12-2010, 11:09 PM   #6
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I started investing in the last January, but decided to leave them during the year. In a few weeks, I will have sold my position in them.

The main reason is because I felt it just added another layer of me calculating my asset allocation with them. Not only do that have holdings that aren't only equities, bonds, but also their percentages can change.

Would be nice to have some extra money come in each month, but not fun to try track the percent allocations when I tally that up.

So, I've decided to just stick to simplifying and just stay with index funds.
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Old 11-13-2010, 12:32 PM   #7
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I would say that for 90% of people who don't read this forum, they are probably a great idea.
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