Howdy, Stranger!
It looks like you're new here. If you want to get involved, click one of these buttons!
In this Discussion
-
bee
November 2012
-
Ted
November 2012
Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Comments
An important topic but, I have a couple of criticisms on such as study.
The article suggest using moderate allocation (balanced) funds instead of trendy retirement funds. The article doesn't suggest any balanced funds so it doesn't provide any data to compare between these two strategies. I wish they had selected a few balanced funds to compare the three retirement funds against.
I will use one of the oldest mutual funds in existence, VWELX. It is described as a 60/40 moderate allocation fund. Since this fund has been in existence for over 80 years a research study, such as this, could have created (60) rolling 20 year results. This would be great data to compare these retirement funds against. But, the success of a retirement fund should really be looked at over the entire retiree's investment time horizon...which would be closer to 40 years.
Let's assume I use a balance fund such as Wellington. If I invested in VWELX in 1929 I woud have experience a 62% loss over the first few years...sounds familiar to 2008? More importantly, it remained a negative investment for most of the first 13 years...again, sound familiar? Between 1932 - 1936 (just like 2009 - 2013) it made back what it had lost but, another big loss kept it negative until 1942...Is this where we are now?
By 1949 this fund would have turned the initial $10,000 investment into $22,000...so it roughly doubled over this 20 year period...I would not have wanted to time my retirement during this 20 year period.
If we live during these same depressionary times, neither retirement nor managed balance funds will be the answer.
Here's Wellington Fund out of the gate(1929) and graphed over the first 20 years of its struggling existence:
Regards,
Ted
https://personal.vanguard.com/us/funds/vanguard/all?reset=true&sort=name&sortorder=asc&assetclass=bal