Simple Is Good

[yakers]

Like a lot of folks here I have been saving & investing with mixed success over 25+ years. A first I tried to be a bit smart and worked with a (actually decent) financial planner and then went with DRIPs and mostly index funds in my (401k type) deferred comp account (TSP). I tried ibonds. I am a fan of Vanguard and have my Roth with them and my wife’s IRA in their Wellesley Fund. That being said, I am becoming more of a fan of my TSP Lifecycle Fund and other Lifestyle and Target Retirement type accounts. The folks on the Vanguard diehards site may want to slice & dice 10 different ways and there are some serious investors here (brewer & Ha come to mind) who really follow markets and are able to make considered investments. But I don’t have the time (& temperament?) to be a trader. I just want to get on with my life without getting screwed financially. So I, as 12 step folks might say, ‘come to believe’ in these simple, low fee, diversified, mostly index funds. Its amazing, over time, to see the funds simply keep growing. Even in ‘bad’ markets they don’t fall much. And they adjust for my age so I don’t have to keep playing with them.
I don’t know what the market would look like if just a large proportion of traders, brokers and mutual funds just disappeared but that would work for me and I suspect, for most people.

 

[Rich_by_the_Bay]

I've had the same sentiment, but then I say to myself, "Really ought to have a good piece in international funds," and "10% REITS wouldn't be a bad idea," or "when I rebalance or replete my SWR bucket I really want to sell the winning sectors, not some proportion of everything."

In the end I'm not sure it really matters that much as long as you are broadly diversified but I hear ya.

 

[Donzo]

I'm with you Yakers - other than a few pharm stocks(an industry I know) I am going index and target funds. I also have been pleased with their performance. I had my 401Ks invested in index stock funds(100%)while working - emerging/international and domestic and their performance is a big part of my ability to be "DONE". I am now more conservative with Target funds and blends - the growth may not be as large in a rally(like now!), but I can sleep at night with less potential downside.
Although I do find this process of learning the investing game fun and interesting, so....who knows - I may get more involved with a small portion in the future.

 

[unclemick]

hmmm

Some of us have yet to be fully cured:

85% Target Retirement
15% Drips/individual stocks

Sans a few more serious hobbies - the stock thing may never be fully irradicated.

heh heh heh

 

[jazz4cash]

I looked at the lifecycle funds, but they seem too conservative for me as I am too far away....maybe when we are closer. Another thing I just noticed at Fidelity the lifecycle funds are compilation of various other Fidelity funds (fund of funds) and that always makes me think expenses will be high. Some of the allocations are too tiny to make much difference also (.2%).

Yakers.........I am going to look up the TSP L Series for comparison and see if they seem more attractive.

 

[Rich_by_the_Bay]

Now, if someone offered balance fund like this:

Large cap 10%
Small cap 10%
Large value 10%
Small value 10%
International 20%
REITs 10%
Bonds (conservative) 30%
Expense ratio: .2%

... I'm in. Anyone know of a single blended fund like that one?

 

[MasterBlaster]

.. I'm in. Anyone know of a single blended fund like that one?

- Check out the Vanguard STAR fund. Not exactly like your post suggests but leans that way.

holdings are:

1 Vanguard Windsor II Fund 16.4%
2 Vanguard Long-Term Investment-Grade Fund 12.6%
3 Vanguard GNMA Fund 12.3%
4 Vanguard Short-Term Investment-Grade Fund 12.2%
5 Vanguard Windsor Fund 8.9%
6 Vanguard PRIMECAP Fund 7.0%
7 Vanguard U.S. Growth Fund 6.9%
8 Vanguard Morgan Growth Fund 6.9%
9 Vanguard International Value Fund 6.3%
10 Vanguard International Growth Fund 6.3%
11 Vanguard Explorer Fund 4.2%
Total — 100.0%

 

[HFWR]

I've boiled it down to:

SP500
Russ2000
Short-term Bond Fund
IGR
TIP
VGK
VPL
VWO

And, ok, some "miscellaneous"... :

 

[Dawg52]

I'm leaning to the Target funds as well. The way I see it, you can have the best of both worlds. Use the Target or Lifecycle funds as your core holding, then plug a few holes with 2-3 additional funds or etf's. I plan to keep a small amount(5%) for individual stocks. As Unclemick, got the old male hormones to pacify.

 

[Rich_by_the_Bay]

We had a brief thread on this a ways back...

One reason I hesitated about a balanced fund only is that I'd like to rebalance infrequently (q 1-2y) by selling the winners selectively (assuming there are some). So in a year which is weak overall, you can at least find a sector or two that did OK and sell them for that year's replenishment. Balanced funds force you to sell in proportion to the fund's strategy so you are selling a bit of everything if you sell anything.

Someone countered that this doesn't matter because all your rebalancing has already occurred whenever you sell, so the share price already reflects the winners being pruned, etc. Not sure I fully understood how that works or if it is even true, but I'm educable if anyone would care to explain.

 

[audreyh1]

Simple IS good! Really! You can be out living your life and not pay any attention to your portfolio except for once a year when you need to withdraw from it. There is really a lot of value in being able to forget about it most of the time.

To be honest, if I had to do it all over again, I'd just put it all in DODBX and have done with it. That fund is hard to beat. Now I don't want to sell all my fund holdings and incur the capital gains.

Audrey

 

[REWahoo]

To be honest, if I had to do it all over again, I'd just put it all in DODBX and have done with it. That fund is hard to beat.

DODBX was the backbone of my 401k plan the last 10 years before I retired, and it has been very good to me. A lot of people discovered how good it was after the dot com bomb and the fund grew rapidly until Dodge & Cox closed the fund to new investors in 2004. It grew from $4.9 billion in assets on 12/31/00 versus $23.6 billion on 12/31/05, and I'm not as confident as I once was that it can maintain the performance levels it once enjoyed. As a result last year I reduced it to 20% of my portfolio, down from 50%.

Or maybe it was because I kept hearing someone whispering...psssst...Wellesley...

 

[CCdaCE]

<snip>

Someone countered that this doesn't matter because all your rebalancing has already occurred whenever you sell, so the share price already reflects the winners being pruned, etc. Not sure I fully understood how that works or if it is even true, but I'm educable if anyone would care to explain.

<snip>

Perhaps they were saying Vanguard/Fidelity/etc. rebalanced funds when the "rebalance trigger" was pulled, not when you chose/choose to rebalance. You just have to accept their "trigger" (2.5% off? 5/25 rule?, etc.) If the different fund allocations were too "out of wack", the winners were sold as appropriate. In a case where it's a "weak year", if the funds asset allocation wasn't out of wack, then it doesn't matter. Doesn't matter because there wasn't a particular "winner". Yet.

So the only difference is whether you like their allocation, rebalancing rules, and feeling of "lack of control" or whatever you choose to call it as to when asset classes are "out of wack".

-CC

 

[Nords]

I've had the same sentiment, but then I say to myself, "Really ought to have a good piece in international funds," and "10% REITS wouldn't be a bad idea," or "when I rebalance or replete my SWR bucket I really want to sell the winning sectors, not some proportion of everything."
In the end I'm not sure it really matters that much as long as you are broadly diversified but I hear ya.

I'm pretty sure that in the next 20 years we'll have a buying opportunity that will make us all fondly recall 1974, 1987, and 2002... and gosh, we might not even have to wait that long!

 

[mathjak107]

only problem with lifestyle funds i see is they arent really good for buying in over time as it makes the mix tooooo conservative.

they are better when plunking all the money in at once or in a very short time period

 

[HFWR]

I'm pretty sure that in the next 20 years we'll have a buying opportunity that will make us all fondly recall 1974, 1987, and 2002... and gosh, we might not even have to wait that long!

That's why I'm 20% cash right now; it's my "market crash/Iran/North Korea/terrorist attack" bucket...