My sister who knows nothing about investing wants a conservative asset allocation fund in early retirement for an inheritance she doesnt need to live on.
I would usually go to VWINX, but I worry its large standard bond allocation will not be much of a buffer with interest rates so low. I doubt its benchmark AGG will be much help if stocks crash because of rising interest rates.
I wanted to give her max DD and recovery rates for several funds from major families but they all differ in % equity allocations.
Can anyone suggest a source for data on major fund families allocations for the income phase of target date funds so I can run an MFO comparison for her?
Comments
I own some PRWCX. Great fund. But would you believe that over the past year DODBX has performed better? (+26.75% vs +22.57%). At the 5-year mark they’re close, with PRWCX slightly ahead (+13.61% vs +12.38%).
One has David Giroux. But the other has lower fees (DODBX .53% .ER vs PRWCX .70% ER).
There’s a great many good funds that would fill the needs of @sma3’s sister. Depends on a lot of factors I’m not qualified to judge. Just wanted to try and knock a bit of the luminescent cellophane off PRWCX.
* My numbers came from Lipper.
In the 30%-50% category, other than VWIAX, I would suggest FMSDX and CFIAX. I own both of the latter and both are great LT holds that are each doing very well in the current market environment. VWIAX is historically a leader in this category but is limping through the current conditions. Former LT holder of it but have sold if off for the time being. Any of these though are LT keepers.
In the 15%-30% category, RBBAX appears to be one of the best.
I’d begin by asking her how big a drawdown she’d be comfortable with over a 1-3-year period. If inclined to pull the money out after a 10% downdraft, than funds like PRWCX wouldn’t be a good choice. I think Giroux is a bit optimistic in his recent annual report when he states his fund’s second goal: “Preserve shareholder capital over the intermediate term (i.e., three years)” - But hats-off to a manager willing to be that specific. Not many are.
In looking forward to the day when I may no longer want to monitor, or even think about, my investments, I have my eyes set on PRSIX. Recently opened a small position in the fund. Yes - bond holdings in any fund are concerning. The good managers, however, diversify those into varying durations, varying credit risk and EM markets. Some employ hedging tactics as well. So don’t judge the book by its cover.
I noted the following a few days ago regarding a 529 account that was started in 2006 but could be applied to a taxable account, too:
>>>We set our own allocation, being 50/50 with VITPX and VBMPX. The expense ratio for the funds are .02 and .03%. VITPX holds 3,400 equities and VBMPX holds 18,000 bonds. YOW !!!
The 50/50 ratio is required to auto balance once per year. So, the ratio has never traveled to far outside of 50/50.
The 10 year total return for this blend of 2 funds is 8.705%.
I've used FBALX as a benchmark for our own investments to discover how much of a smart arse or dumb arse we may be at any given time. FBALX is high on the list of balanced funds in it's category.
FBALX has a 10 year annualized return of 10.83%. <<<
An equivalent to the above could be a simple 50/50 of SPY and AGG (or BAGIX, a plain vanilla active managed AA bond fund); OR whatever percentage mix an individual wants to choose for these two. The rough math indicates a 50/50 mix of the above to provide about a +8.45% blended total return for the past 10 years and +6.95% over the past 15 years.
My personal choice using AGG or BAGIX examples for bonds, would be the equity side into FSPHX or FSMEX for the 50/50 mix.
We individual investors find ourselves at an unfamiliar place recently, relative to the AAA bond sector. Although we have BAGIX as part of our portfolio, I/we don't know how much support/ballast will arrive during a greater than -20% equity dive, although I still feel central banks and large investment organizations would still run to AAA bonds during an equity melt.
NOTE: 50/50 of SPY (or an index) and AGG = -.4% YTD, VWINX = -.25% YTD and FBALX = +2.3% YTD.
I think your sister could have a decent risk and reward blend of no more than 3 holdings among bonds and equity to satisfy a meaningful performance portfolio.
Lastly, retirement finds too many variables for individuals/couples. If monetary needs are satisfied for the normal expenses, one's investments should still include equities, IMHO. Forty years of favorable bond returns are at a new place right now; and I surely don't know the forward road in this sector for a fully buy and hold portfolio.
Take care,
Catch
If you do and are investing in a taxable account, you may want to consider VTMFX.
At least 50% of the fund's assets are allocated to munis so that investors can benefit from their tax-advantaged distributions.
Or, have you found any other resource that would give that sort of quick-and-dirty breakdown?
I have been going through dividend funds wondering how to screen out those that invest in REITS.
Later that morning . . .
Another DOH! moment. Obviously I thought I was responding to the original poster. Well. Because Sven looks so much like sma3.
What I have been doing is phasing strongly into PMEFX, Penn Mutual AM 1847 Income Fund, run in part by a couple of fund managers who used to run BERIX (Berwyn Income Fund)
Do like their past results, do like they are starting from a small asset base, have sat out for a year, likely due to non compete, like that as they likely have been doing their homework and formulating their strategy. Do like their stock portion, value, strong ROIC, balance sheets, div payers. Cipollini is articulate, seems like he has moxy, have seen him on some vid clips. Conservative to somewhat moderate approach? Younger guy too, likely going to be running that fund for some time hopefully, not dependent on one fund manager, looks like there are four managers.
Me thinks, FWIW, some of those other funds listed on above posts are going to get hammered biggly when market goes down, might not happen right away but looking out in the future sure looks like we are biggly over valued right now.
I've taken the monies out of TMSRX (too much black box, swaps, got small burn in IQDAX, could have been a lot worse if that happened several months ago) and into this fund.
Avail at Schwab.
Good Luck and Good Health to All,
Baseball Fan
Stay Safe, Derf
@Derf - Odds-makers strongly favoring Dodgers over KC tonight (exhibition game).
House Bill 4916 legalized sports betting, both retail and online, in the state.
From article - “These new online platforms are certain to boost Michigan’s gambling economy ...”
Slowly recast these funds out on the Target Date spectrum towards a higher equity weighting. This allows part of your portfolio to slowly move into a higher weighting in equities as you age and help avoid sequence of return risk early in retirement.
Should Equity Exposure Decrease In Retirement, Or Is A Rising Equity Glide path Actually Better? should-equity-exposure-decrease-in-retirement-or-is-a-rising-equity-glidepath-actually-better
https://www.morningstar.com/funds/screener-rank
We kicked this concept around here roughly a decade ago. I thought than it was totally WACKO.
In hindsight, it would appear to me anyway that if a retiree is able to protect & grow his / her nest-egg during the crucial first decade following retirement, than (depending on circumstances) that person might be in a somewhat better position to assume greater market risk later on. Perhaps mentioned already - but if home equity has grown substantially over those years, it’s also an argument for taking on a bit more market risk.
Why is the first decade so important? Because a large % loss than might prove more devastating than were it to occur later on after (1) net worth had increased appreciably and (2) life expectancy had decreased. All depends ...
I never liked glide-paths and have assiduously avoided funds that incorporate them. Fine for people who pay little attention to markets and investing. But I’d rather have the ability to add or pull back on market exposure than to venture down the one-way street glide-paths seem to lock one onto. The experience in 2007-9 and to some extent in early 2020 demonstrate the advantage of being nimble rather than locked in.
Remember: The "C" in "Rap" is silent. And the rest of it just sounds like techno-percussion with words that are ALMOST enunciated fully enough to be understood. Like listening to Van Morrison on Quaaludes.
(Sorry, I just HAD to chime in.)