Well the vanguard funds dont have a duration. They'll pay that percentage of your principal out forever.
Of course, your principal might be four cents after some period of time if things dont go well. Or it might double in 20 years.
The fidelity funds actually plan to consume principal and run out of money by their end date. They may be more successful than expected and still have residual principal left at their expiry. Or they may fall short.
The reason why I threw some money in the pot early is simple. The fund managers have a LOT of options for investing the money and they want a smooth roll out. I dont expect these funds to draw in a ton of money right off the bat. People will take a wait and see approach. So the initial 6-12 months will be a long way from fund bloat, and they can cherry pick their very best prospects from the list of goodies available.
If they're successful and the 3% fund has a nice capital appreciation, the 5% outpaces inflation with the payout included, and the 7% fund holds its own...I'd expect a fair bit of money to flow in. Especially if they start cutting the ER, which I fully expect them to do as the assets flow in.
I could DIY it, but the fund costs over a regular vanguard fund arent that much, they are providing access to some stuff like commodities that vanguard doesnt sell (still waiting to see how they implement it) and its zero work for me. Nice piece of diversification and a nice shot at making some good money during the rollout.
Or maybe the market goes into full recessionary tilt and they get killed along with everyone else.
I imagine they've thought long and hard about that last piece, because the last thing they want is a major failure to launch on these funds.
That they're willing to go ahead with them now tells me they're pretty comfortable that things are going to turn up a bit, or that they can do some bargain shopping and contrarian moves to make up for it.
And again, its not like I threw half my money into it. Fer crying out loud I have more money in wellesley and in the high yield corp fund than I have in these.
But with cash yields declining, all I want to hold of that is in my penfed cd's so the money market money went into these. If they perform well, I'll slip some of that wellesley over to them.
I like the monthly payouts a lot. Really smooths out the income stream. The funds that pay quarterly require me to buffer the income to expenses in a money market. That was super when the MM's were paying north of 5%. Now that they're headed below 2%, I think I'll pass.
And I'll admit it: its fun to have a new toy!
