Questions:
1. What about the 20-30% that do beat the S&P500 benchmark?
2. Is it legitimate response to choose certain active management funds because of the diversification they bring, or perhaps they hit non-standard asset classes?
Does anyone here use an active fund? What about VWINX or VWELX?
A1. As I recall the academic results, it ain't the same guys every year that are in the 20-30%.
A2. In my case, a small yes.
I have VWINX in my small Roth. It is doing much better than my previous choices.
Most of my assets are in Vanguard index funds and ETFs. I slice-and-dice, so they are focused on small cap, value and international.
I do have some managed funds--Vanguard healthcare and Matthews Asian Growth and Income.
No one fund of any kind is more than about 8% of my total.
I also have small positions in 10 energy stocks, each one about 1% of my total.
In the very beginning, I did not know about indexing. Neither did many others at the time. I used managed mutual funds.
When I learned about the value of indexing, I went 100% VFINX for a long time.
When I read about slice-and-dice, I went for a bias for small cap, value and international index funds. I also figured that two long-term trends were worth focusing on: health care and energy. I used Vanguard's managed VGHCX, which has done fine for me, and a Vanguard energy index fund.
I have recently been moving some of my domestic indexing out of bond funds and into dividend indexes.
In the past ten years, I figured that I knew enough about energy to back out of the energy index fund and buy a few individual energy stocks. The index, by definition, has to buy the dogs, too. I figured I could avoid a higher percentage of dogs than an index in this sector. So far, so good. Energy total is only 10% of my pot. I will buy XOM if it ever shows weakness; otherwise, I am standing pat and watching my ten eggs.
I used to rebalance annually, but have slacked off. Otar's suggestion to rebalance every four years at the end of an election years sounds about right to me. See you in December!
I am uncertain what instructions to give my wife in the event of the death of me or my brain. At the moment, it is: Sell everything and put it into VWINX. I am happy enough with the present asset allocation that I may suggest that she could leave it all as-is as long as she wants. The distributions into the MMF should exceed 3.5% indefinitely. After age 70.5 and MRDs are forced, she may want to simplify at that time. At the moment, I am thinking, put the MRDs into a savings account and CDs.
So, that is more information from me than target2019 was looking for.
Sometimes it helps me to articulate what I am doing and put it down on paper. My opinions change with time.
WAIT! Here comes one now! BUY GOLD!