Which portfolio would you choose?

[Focus]

Can't wait to see how everyone votes in this poll.

Here's the situation:

You’re about to retire, and you want a relatively low-risk portfolio that will survive 40 years of modest withdrawals. You’ve only got these choices at Vanguard. What would you choose?

[Focus]

By the way, this isn't my own situation. I'm still years away from retirement, but it's always interesting to ponder what the "ideal" portfolio would be after pulling the trigger.

[Zathras]

You need to define 'relatively low risk' as well as 'modest withdrawals'.
Actually, never mind, even with that information the limited choices are far too... limiting.

[Nords]

You're trying to make ER asset allocation a five-lane one-way street.

And then you're trying to drive a herd of cats down it.

This question might get a better crowd reaction over at Bogleheads, but I don't know enough about the performance of any of those portfolios to make a choice. In the absence of any other ER income, like a pension or an annuity or other assets, then I'd study up and pick the one that seemed to offer the best success rate.

[yakers]

DW's IRA is 60% Wellesley & 40% Star so I chose the Wellesley/Wellington funds as similar. All of the fund selections are OK by me but the target retirement would be the easiest, you would have to stop posting financial questions if that were selected.

[DoubleDown]

None of the above. How about 100% PRPFX and you withdraw 5% of the account value per year?

[Focus]

Quote:

the limited choices are far too... limiting.

After reading too many books about investing for my own good, I've concluded that it's best to keep a portfolio simple rather than slice and dice to infinity, and this poll reflects that. I can see how this would frustrate some. Feel free to post your preferred alternative.

Quote:

the target retirement would be the easiest, you would have to stop posting financial questions if that were selected.

Should I take that as a gentle hint?

Quote:

How about 100% PRPFX and you withdraw 5% of the account value per year?

Hadn't heard about PRPFX. Here's a link to more info for those similarly in the dark about it.

[brewer12345]

Personally, I woul probably look to end up with about 50% equities (half US half Intl), 30% bonds (TIPS, nominal US bonds, foreign bonds) and 20% "other" (commodities, merger arb funds, perhaps some covered call funds, maybe some real estate). I think the referenced portfolios are not diversified enough.

[jIMOh]

Quote:

Originally Posted by Nords You're trying to make ER asset allocation a five-lane one-way street. And then you're trying to drive a herd of cats down it. This question might get a better crowd reaction over at Bogleheads, but I don't know enough about the performance of any of those portfolios to make a choice. In the absence of any other ER income, like a pension or an annuity or other assets, then I'd study up and pick the one that seemed to offer the best success rate.

LOL

ROFL

100% wellesley was not a choice (40-60 fund last I checked)
limited options, limited info
I did not even vote

[jIMOh]

Quote:

Originally Posted by DoubleDown None of the above. How about 100% PRPFX and you withdraw 5% of the account value per year?

Another option worth considering

I own PRPFX
buts its my backup fund... not my primary

I invest a normal allocation in X% stocks and y% bonds
then keep about 1 months expenses in PRPFX for now, hoping to have about 3 years expenses in PRPFX when I retire- as my backup plan for a buckets approach.

[FIREd]

DW's IRA is built around a core consisting of 50% Wellesley and 50% Wellington. But it is not diversified enough for my taste and I added a bit of international, REITs, commodities and TIPS to supplement it.

[Helen]

Would this be in a tax sheltered account?

I am looking for a really simple portfolio too, but I have a big chunk of change that is in a non tax sheltered account.

I like the simplicity of the target fund, but in a year when the stock market is down, I wouldn't want to have to sell stocks.

The Total World Stock Index has an ER of .5 and a purchase fee of .25%, but it is a nice one fund stock index. I'm just surprised the expense ratio is so high for an index fund.

I'm thinking of going with tax managed international index, total stock market index, and maybe a muni fund in my taxable account. My TSP will be all in the G fund. In addition, I will keep several years cash in laddered CDs. If we get a ten year period of down markets I'll tap the CDs until gone, then attack my TSP.

That being said, I would love the simplicity of going 100% Wellesley and living off the interest and dividends. For me that would be too risky due to the lack of diversification and it wouldn't be very tax efficient. But, I suppose there could be worse choices to make.

[wildcat]

Quote:

Originally Posted by Helen Would this be in a tax sheltered account? I am looking for a really simple portfolio too, but I have a big chunk of change that is in a non tax sheltered account. I like the simplicity of the target fund, but in a year when the stock market is down, I wouldn't want to have to sell stocks. The Total World Stock Index has an ER of .5 and a purchase fee of .25%, but it is a nice one fund stock index. I'm just surprised the expense ratio is so high for an index fund. I'm thinking of going with tax managed international index, total stock market index, and maybe a muni fund in my taxable account. My TSP will be all in the G fund. In addition, I will keep several years cash in laddered CDs. If we get a ten year period of down markets I'll tap the CDs until gone, then attack my TSP. That being said, I would love the simplicity of going 100% Wellesley and living off the interest and dividends. For me that would be too risky due to the lack of diversification and it wouldn't be very tax efficient. But, I suppose there could be worse choices to make.

VG's newer index funds often come w/ higher expense ratios/costs initially and drop over time

[jIMOh]

Quote:

Originally Posted by Helen Would this be in a tax sheltered account? The Total World Stock Index has an ER of .5 and a purchase fee of .25%, but it is a nice one fund stock index. I'm just surprised the expense ratio is so high for an index fund.

Comparing expense ratios of a domestic fund to a bond fund to an international fund is like comparing Obama's tax policies to the price of banana's in Mexico (its pointless).

An "all world" index will have higher trading costs-

foreign exchanges
plus domestic exchanges
plus large caps (easy to buy)
plus small caps (more expensive to buy)

are all included- that adds costs, not reduces them.

[Helen]

Quote:

Originally Posted by jIMOh Comparing expense ratios of a domestic fund to a bond fund to an international fund is like comparing Obama's tax policies to the price of banana's in Mexico (its pointless). An "all world" index will have higher trading costs- foreign exchanges plus domestic exchanges plus large caps (easy to buy) plus small caps (more expensive to buy) are all included- that adds costs, not reduces them.

Actually I was thinking more like:

Total World Stock Index ER = .5 + purchase fee of .25%
Total International stock ER = .34
FTSE All World ex-US ER = .4
Total Stock Market Index ER = .18

A combination of Total Stock Market and Total International Stock Market would be quite a bit cheaper than the Total World Stock Index. I would have to rebalance myself though.

[tulak]

Quote:

Originally Posted by Helen Actually I was thinking more like: Total World Stock Index ER = .5 + purchase fee of .25% Total International stock ER = .34 FTSE All World ex-US ER = .4 Total Stock Market Index ER = .18 A combination of Total Stock Market and Total International Stock Market would be quite a bit cheaper than the Total World Stock Index. I would have to rebalance myself though.

And if I remember correctly, you'll own twice as many companies with total stock market/total intl than total world stock index.

More companies = better diversification. At least IMO.