Conservative mutual fund for a 70-year-old relative's IRA?

[pb4uski]

If the plan is to leave it to his son, it should be invested at an AA appropriate for his son. That assumes that the current 70 YO won't need it, but if he is relying totally on SS, that might not be the case. Any unexpected expense above SS could have him needing to dip into it.

It seems foolish to assume that a 70 yo won't need it. The subject has SS and $38k as i understand it. I would not assume that the subject won't need it at some point so I would invest it conservatively. If it never gets used the whatever happens to be left goes to the son.

If the subject had more than he would ever likely use then I agree that an AA appropriate for the son might enter into the thinking, but not in this instance.

 

[engineernerd]

...snip... It looks like their ETFs all require a $50K minimum investment. ...snip...

Just noticed this. There is no minimum investment for Vanguard ETFs. The equivalent mutual funds typically have $3k minimums but not the ETFs.

 

[Bruno]

Here are a few of my funds and ETF from Vanguard. VFIAX has been my biggest winner but i really like VWNEX-Windsor also. you can look them over here. Good Luck!! VYM,VFIAX,VWENX,VWNEX Stock Chart (Dividends Reinvested, Inflation Adjusted) | Total Real Returns

 

[mrfeh]

Wellesley is managed similarly to Wellington but more conservatively. It's certainly not as conservative as CDs but may be a reasonable choice. Reviewing the annual performance for each of the last 15 years may give you (and him) a feel for whether or not he's comfortable with that level of risk.

Wellesley was my first thought also.

But without defining "conservative" it's hard to say if that's appropriate or not.

ETA - if he may need to "dip into it", I suggest separating the equity and fixed income components and buy 2 different funds. Just decide on the AA, then get a total market equities fund and either CDs or extremely short treasuries fund.

This way he can sell whichever component has done better.

 

[VanWinkle]

VSCGX is still 40% equities. The fund lost 11% in 2022. If your relative has dipped into his IRA in the past, how will he feel if his $38000 turned into $35000 later this year.

It seems to me IF this is the only account he has beyond his checking account, equities should be a smaller allocation than 40%

For my own parent, I have most of her equity exposure in VTI. I agree JAAA might be a solid offerring for the balance if you were willing to have 2 funds

If he is not familiar with trading, will someone be available to assist removing funds invested in markets?

I'm guessing most of the 2022 loss was on the bond side of this fund. Many have described 2022 as a once in a lifetime bond loss. Should we fear these conservative balanced funds due to once in a lifetime event? There are many here that have quit investing in bond funds altogether because of once in a lifetime event. I'm not one of them. I also like Wellesley Income fund for a conservative investor.

 

[VanWinkle]

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EGRIX / EGRAX

A chart that dreams are made of.

Egrax is a front loaded expensive fund. In 10 years the cost of owning the fund with a 5% average return would be in excess of 10,000 dollars. You get what you don't spend when investing, low cost is a great predictor of returns.

 

[GBcycling]

I'm guessing most of the 2022 loss was on the bond side of this fund. Many have described 2022 as a once in a lifetime bond loss. Should we fear these conservative balanced funds due to once in a lifetime event? There are many here that have quit investing in bond funds altogether because of once in a lifetime event. I'm not one of them. I also like Wellesley Income fund for a conservative investor.

My inferred point, (clearly not stated) is a retired individual of modest means may not realize the risk of market exposure and any reduction in their balance materially reduces their ability to make ends meet. My DMIL had less than 100k in net worth after her husband passed and knowing that was all she had, I was hesitant to have her exposed to any significant volitility in her NW. But everyone's risk profile is different.

 

[Semi-Retyrd]

I agree with the others suggestion of EGRIX.

It's strengths - It's a bond fund with very low standard deviation (4.19%) - similar to that of a low duration bond fund. It is widely diversified in something like 140 different countries. It's CAGR over the most recent three years is equity like (13.8%).

It's weaknesses - it will underperform if the US dollar suddenly get stronger. It will underperform in a similar fashion to all bond funds if interest rates suddenly increase in large steps.

With the current outlook over the next 2-3 years of a weaker or flat dollar and flat to lower interest rates, IMO the current tailwinds should persist over this term.

My entire IRA and ROTH are in EGRIX and I am 76. So high conviction for me.

 

[COcheesehead]

Egrax is a front loaded expensive fund. In 10 years the cost of owning the fund with a 5% average return would be in excess of 10,000 dollars. You get what you don't spend when investing, low cost is a great predictor of returns.

There is no load.

 

[COcheesehead]

I agree with the others suggestion of EGRIX.

It's strengths - It's a bond fund with very low standard deviation (4.19%) - similar to that of a low duration bond fund. It is widely diversified in something like 140 different countries. It's CAGR over the most recent three years is equity like (13.8%).

It's weaknesses - it will underperform if the US dollar suddenly get stronger. It will underperform in a similar fashion to all bond funds if interest rates suddenly increase in large steps.

With the current outlook over the next 2-3 years of a weaker or flat dollar and flat to lower interest rates, IMO the current tailwinds should persist over this term.

My entire IRA and ROTH are in EGRIX and I am 76. So high conviction for me.

I also have my entire Roth in EGRAX/EGRIX. I am up almost 12% in 4 months.

 

[Phroig]

EGRAX has been a great investment, and its recent outperformance may well persist for some time. However, a fund whose top three holdings are bonds from Mexico, Uganda, and Egypt is not a “forever” investment. Most folks here who invest in it are nimble traders. Who’s going to get the message across to OP’s relative when it’s time to move on to something else?

 

[COcheesehead]

EGRAX has been a great investment, and its recent outperformance may well persist for some time. However, a fund whose top three holdings are bonds from Mexico, Uganda, and Egypt is not a “forever” investment. Most folks here who invest in it are nimble traders. Who’s going to get the message across to OP’s relative when it’s time to move on to something else?

Have them become a member here and watch this thread.