Greg, your analysis here reminds us why most can't do our own income tax without help of professional anymore. And, if Congress can't pass a budget one year out, than how in tarnation can we anticipate what tax code will be in 10-20 years? My suspicion is they won't mess much with Roth - just because big money loves these and the opposition would be loud and strong. Axing Roth doesn't seem to have the same populist appeal as (for example) increasing the cap gains tax. However, that's just a suspicion and much depends on how the battle over budget & entitlements plays out and, of course, which party's in power.
I like the Roth for young folk. In addition to the obvious tax advantage compounded over a longer time, if they're anything like I was when younger, those extra taxes at the time are likely $$ that would have been blown on non-essentials. However, since dollar cost averaging in, they don't have to worry about big downdrafts in markets the way you would after a big one-time conversion. The linked article mentions one way to mitigate that risk by converting into multiple Roths and than "recharacterizing" the ones that don't do well per tax code. Others on the board have used this strategy successfully.
We were fortunate to convert a portion back in early '09. Paid taxes out of pocket - not pulling from IRA. The upside to us, in addition to catching the market updraft, was we won't have to take mandatory withdrawals on that portion at age 70.5 as with traditional IRAs. The disadvantage was we aren't allowed to withdraw from the Roth for at least 5 years after conversion (unless paying 10% early withdrawal penalty). We've also dabbled in your third strategy, putting some in a non-IRA tax efficient fund just for variety. It's unclear to me how this would benefit you with a large sum, since you'd pay the (estimated) 35% on the $$ before you invest and than the current cap gains tax as well on withdrawal. Just a few random thoughts. FWIW
http://www.financial-planning.com/fp_issues/2012_2/betting-on-a-roth-conversion-2677059-1.html?zkPrintable=1&nopagination=1

Everyone has been raving about the benefits of Roth IRA's-- but just how good are they for high income tax payers?
Hypothesis: which is better??
1. tax payer who earns $400K wants to setup a legacy for his grandkids. So his plan is to convert $100K from his traditional IRA into a Roth IRA, so that it will pass on to his grandkids tax-free. But since he is in the 35% tax bracket, he must pay $35,000 in income tax to do this conversion.
or,
2. would it be better to just invest $100,000 in a taxable investment account using a passive index fund that pays minimal dividend distributions and zero capital gain distributions. Then in 20 years the grandkids would get the assets in this brokerage account at the "stepped up" basis when he dies. Or if you cannot get the stepped up basis, at least it would be taxed as long term capital gains and not ordinary income like in a traditional IRA.
I am confused about which is better:
1. paying the income tax now at 35%, but zero when you take the money out of the Roth IRA.
2. making a pre-tax contribuion now, but taking the money out later at regular income tax rates of 35% using a traditional IRA ( I am assuming his tax bracket will be the same now as it will be then.)
3. using a taxable investment account and pay 35% tax on the initial investment, but only 15% capital gain tax on the accured profits when you take the money out.
It seems like the solution might change completely if Congress ever eliminates the capital gain tax, or reinstates the estate tax, or impliments a VAT tax like most of the rest of the developed world has.
It is really hard to plan for the future, when today's rules might not apply in the future.
Any thoughts???

Yes, exactly my observation also re diversification. Unfortunately, the same investment requirements which reduce or remove the loads also require maintenance of such a high account level that it becomes an all or nothing situation... if we were to take a significant amount out of American the remainder would then be subject to load, if we were to move it around within American.
As we are primarily interested in a relatively non-volatile retirement environment at this juncture, as opposed to trying to grow our retirement funds, American Funds is minimally satisfactory for our needs. SmallCap World for example is, as you mention, very conservative but just fine for us. New Economy, ANEFX, seems similar. Capital World Growth & Income has been hopeless during the last ten years or so.
I also agree that American is living in the past... at some point they are going to have to deal with this. As msf mentions below, one saving grace is the relatively low ongoing ER; and as David Snowball somewhat famously observed, dull is sometimes good. However, I would not recommend American Funds for anyone younger due to the loading and lack of diversity involved.

American Funds family is struggling. Some of their funds are hemmoraging assets in the billions. While they may shrug this off publicly, you can bet they are very concerned. The fact is they built their shop around multiple-advisor run funds, which has some merit. But when they have a half dozen or so large cap domestic funds with many of the same folks running them, there is obviously going to be a good deal of overlap of holdings.
The company was for years the darling of the commission-driven advisor industry. But after some significant underperformance periods during the last decade, even these folks have pulled big dollars (and, of course, moved to other loaded products, but that is another discussion). American Mutual is perhaps their strongest fund, and it has a decent risk/reward profile. SmallCap World is a very conservative EM fund. Capital World Growth & Income looked pretty good, until Thornburg Income Builder and a host of mimics arrived on the scene. It's dividend yield is downright puny, and the fund has had very little of the growth that it's name would suggest, especially when compared to its peers.
Forcing all of its managers to essentially work in the same mold has produced funds that have a lot of the same holdings, and behave similarly in good and bad times. Not much diversification here, which I think is the biggest problem for them.

Check out SATMX-Satuit Capital U.S. Emerging Companies (formerly MicroCap). High expenses but fine return for such a wild ride. David Snowball noted this fund in his November 2011 Commentary. For something a substantially more tame because of large cash holdings check out: PVFIX-Pinnacle Value. David Snowball profiled PVIFX also in November 2011. Peace out, Rick

Thanks Ted,
I own USATX and though there has been a slight pull back in fund price, the yield has been solid. Much of the gains of this fund and other Munis over the last year was price appreciation due to the "Meredith Scare".

Dear Skeeter: As Peter Lynch would say, "Duke was a ten banger" for you. In addition to good paying dividend stocks, I invest in preferred stocks and bonds for a steady stream of income in my capital preservation portfolio.
Regards,
Ted

My thoughts on these things are always sell first and ask questions later. Of course it is easy for me because I do aggressive accounting and make sure and gains/losses can I offset against each other, and in your case, you are talking tax deferred accounts. Just look at what's happening at Nuveen. Better take matters into your own hands instead of taking a chance. At the very minimum, such things are distractions for the fund managers. Chances are high nothing good will come out of it.
The other reason I still say sell is because I don't think there is necessarily anything unique about Artio. You can easily find satisfactory replacements elsewhere. Nothing is sure in this world and you never know how the funds would perform down the road with or without management shakeup, and same for the funds you would move into otherwise.
Best.

Hi Hank,
Well anything worth while is not easy. Although I had my late father to help me along the path of investing ... he is now gone. But, some of his strategies and reasoning still resonate with me today; and, I have found his simple strategies to still be in fashion. Sometimes, as grown ups, we tend to make things complicated and more complex than need to be ... when in fact ... keeping simplicity in place might be the best avenue.
Let me continue. Fact, I can not compete with the electronic and high frequency trading systems that seem to be in place and limit and perhaps destroy capital formation form my thoughts. So I took a path that somewhat involves them. I let them beat stocks down ... then I increase my allocation to stocks ... and, when they recover, I sell some of them off reducing my allocation and risk to stocks. I have found when stocks are towards their 52 week lows they are most likely under valued and oversold by investors and, with this, I increase my allocation to equities. And, when they strat to approach and reach new 52 weeks highs then they have perhaps become somewhat overvalued and overbought by investors and, with this, I sell some of them off reducing my allocation and my risk to equities. Indeed, a simple strategy. Seems to work though.
So yes ... "It's tough out there Lou" ...
Skeeter

I don't own most of these, but here are a few that eeked out positive gains:
IRNIX
LCMAX
ARBFX
MFLDX
HSGFX
CFIMX
SLASX
FAIRX
WAEMX
The top group is probably due to long short or arbitrage strategies.

Howdy,
Again, a thank you to all who post the links and also start and participate in the many fine commentaries woven into the message threads.
For those who don't know; I ramble away about this and that, at least once each week.
NOTE: For those who visit MFO, this portfolio is designed for retirement, capital preservation and to stay ahead of inflation creep. This is not a buy and hold portfolio, and is subject to change on any given day; based upon perceptions of market directions. All assets in this portfolio are in tax-sheltered accounts; and any fund distributions are reinvested in the funds. Gains or losses are computed from actual account values.
While looking around..... Speaking of looking around ! I can with clarity. I note this as I have had a 2nd eye lens implant within a month's time. Don't know about the sometimes discussed "all seeing" third eye. That one seems to be without problems most of the time...:):):) Back to the lens implant to discard the cataract burdened eyes. Will these procedures help with investments decisions? I can not say at this time; but the previous frustration with the ability to properly see all that we should read regarding investments surely must become a positive. I had chosen to write this week regarding this surgery and technology; but this will have to find another day. A small side effect of the numerous eye drops I must use for several weeks, four times a day; is drowsiness. This should only be a concern for this next week. None the less, further notes about investments with this write are at the near limit. I have added a few blips related to our portfolio and market observations at the below SELLs/BUYs and Portfolio Thoughts.
I have retained the following links for those who may choose to do their own holdings comparison against the fund types noted.
This 1st link to Bloomberg is for their list of balanced funds; although I don't always agree with the placement of fund styles in their categories.
http://www.bloomberg.com/apps/data?Sector=888&pid=invest_mutualfunds&ListBy=YTD&Term=1
These next two links are for conservative and moderate fund leaders YTD, per MSN.
http://moneycentral.msn.com/investor/partsub/funds/topfundresults.asp?Symbol=$HF&Category=CA
http://moneycentral.msn.com/investor/partsub/funds/topfundresults.asp?Category=MA&Type=&symbol=$HF
Such are the numerous battles with investments attempting to capture a decent return and minimize the risk.
We live and invest in interesting times, eh?
Hey, I probably forgot something; and hopefully the words make some sense.
Comments and questions always welcomed.
Good fortune to you, yours and the investments.
Take care,
Catch
SELLs/BUYs THIS PAST WEEK:

---All of FCVSX, FFGCX and a portion of FSAGX were sold and the proceeds moved to FTBFX. May in March? Okay, you're asking why these? Fair question, indeed. FCVSX and FFGCX have had decent runs, and nice YTD's. FSAGX is a bit more on the rocky path right now. Our house is not assured that there are not more investment sparks nearby; which may continue upward pressure on the $ which would likely surpress commodities and the metals. The same applies to the convertible securities sector; although our other equity holdings would also be exposed to down moves. We don't move monies around very often; and we may be off the track with these changes, but this is where we are for now.
A reflection upon the links above; we attempt to establish a "benchmark" for our portfolio to help us "see" how our funds are performing. Aside from viewing many funds within the balanced/flexible funds rankings (the above links), a quick and dirty group of 4 funds we watch for benchmarking are the following:
***Note: these YTD's per M*
VWINX ....YTD = + 3.1% - .21 week
PRPFX ....YTD = + 6.1% - .43 week
SIRRX .....YTD = + 1.8% + .0 week
HSTRX ....YTD = + .49% - .32 week
None of these 4 are twins to our holdings, but we do watch these as a type of rough guage.
Portfolio Thoughts:
Our holdings had a - .18 % move this past week. Greece may be given the old credit card rework; but all of the holders of debt are still in place; just wearing bond clothing made of a different fabric. Some CDS (Credit Default Swaps) will be trigged by losses on Greek bonds. Soon enough we will discover whether these psuedo insurance contracts written among bond holders and those stating they will cover losses are worth the electronic pages the words are noted upon. Between our Federal Reserve system and the European bank system; a form of what I will name as "halograhic" money has been formed. I suspect if one tries to touch the monies; that one's hands would merely pass through the image of what appears to be real money. These monies appear to mostly trapped within a tight circle of circulation; rotating among the central banks, the state banks and whomever may be the holders of government, state or soverign bonds. How much of this hot, halographic money is actually moving out into the consumer public is probably anyone's good guess on any given day. Where and when will all of this protective money find its landing place? So, many global and the state banks within countries are in place to note that their balance sheets are better. I don't know better than what? Also in the mix is the continued large amounts of bonds being issued by and for, everyone and his brother. One can not argue that bonds do indeed have a place in the public company sector allowing a business to raise monies for operations and/or expansion. Based upon some writings over the last six months; it appears that much of the bond issuance by emerging market governments or companies has been the result of European banks not willing or able to provide traditional loans; as their exposure to non-performing bonds is already too high; and I would suspect these banks really don't have the kind of balance sheets that one would hope for from a well capitalized bank. It appears that many of the European banks still have too much junk on the books; and they ran, did not walk for big pieces of cheap money when the ECB and friends opened up the LTRO halographic money doors, a second time at a 1% borrow rate over a 3 year period. "Such a deal I have for you"; as the old saying goes.
All of the new, cheap money would not be unlike our house having a large outstanding mortgage, the current house value being well under the remaining cost of the mortgage and being offered 2 new lines of credit against the value of the house. I take the money gladly at 1% interest and continue to pay down the mortgage. At least that is what all parties involved are hoping will happen. 'Course, in the fine print of the new credit line; one also discovers that some payment is also expected to be made against other underwater mortgages in the neighborhood. Credit, credit everywhere. Will it, the money; find its way into the public sector for spending? I sure don't know, but will presume those on the issue end sure hope so. Whether the global public continues to deleverage or spend a bit more into the economies is a most critical consideration going forward.
Bond prices at least relative to the U.S. Treasury 30 and 10 year areas have had a bit of upward yield creep over the past few weeks. The 30 year area is seeing continued downward price moves. This is not killing any broadbased bond fund holdings in my opinion; but is none the less, a movement I continue to monitor more today than six months ago. Some yet unknown days, weeks or months into the future; may find such a saturation of bonds of all flavors, that there will not be enough buyers; from either public (governments) or the private citizen. I do not know that this point would also indicate the buying of equities to replace bonds. Perhaps nothing more than a sideways and stalled equity market(s) finding the big traders swapping the ups and downs against the best laid plans of their computers algorithms. A bit like recent markets.
Enough blabber from this person...................
The old Funds Boat is at anchor, riding in the small waves and watching the weather. To the high praise of MFO and the members, it is very difficult to find a topic to note here that has not been placed into the discussion boards. Excellence, as usual.
---Below is what M* x-ray has attempted to sort for our portfolio, as of March 9, 2012---
U.S.Stocks 10.5%
Foreign Stocks 6.8%
Bonds 78.5% ***
Other 4.2%
Not Classified 0.00%
***about 35% of the bond total are high yield category (equity related cousins)
---This % listing is kinda generic, by fund "name"
-Investment grade bond funds 26.8%
-Diversified bond funds 19.8%
-HY/HI bond funds 23.2%
-Total bond funds 17.8%
-Foreign EM/debt bond funds 4.3%
-U.S./Int'l equity/speciality funds 8.1%
This is our current list: (NOTE: I have added a speciality grouping below for a few of fund types)
---High Yield/High Income Bond funds
FAGIX Fid Capital & Income
SPHIX Fid High Income
FHIIX Fed High Income
DIHYX TransAmerica HY
---Total Bond funds
FTBFX Fid Total
PTTRX Pimco Total
---Investment Grade Bonds
APOIX Amer. Cent. TIPS Bond
DGCIX Delaware Corp. Bd
FBNDX Fid Invest Grade
FINPX Fidelity TIPS Bond
OPBYX Oppenheimer Core Bond
---Global/Diversified Bonds
FSICX Fid Strategic Income
FNMIX Fid New Markets
DPFFX Delaware Diversified
TEGBX Templeton Global (load waived)
LSBDX Loomis Sayles
---Speciality Funds (sectors or mixed allocation)
FRIFX Fidelity Real Estate Income (bond/equity mix)
FDLSX Fidelity Select Leisure
FSAGX Fidelity Select Precious Metals
RNCOX RiverNorth Core Opportunity (bond/equity)
---Equity-Domestic/Foreign
FDVLX Fidelity Value
FSLVX Fidelity Lg. Cap Value
FLPSX Fidelity Low Price Stock
MACSX Matthews Asia Growth-Income

Is Jayme Wiggins really only turning 32 years old this year?
Mr. Wiggins returned to Intrepid Capital Management in 2010 after earning his MBA from Columbia Business School, graduating with highest honors. Mr. Wiggins was with Intrepid Capital Management for 6 years, originally joining the firm in 2002. Before leaving for business school, Mr. Wiggins managed Intrepid’s high‐yield bond portfolios from 2005 to 2008 and the Intrepid Income Fund (ICMYX) from inception. Prior to this, Mr. Wiggins served as a small cap analyst from 2002 to 2005. Mr. Wiggins graduated summa cum laude from Stetson University where he earned a BBA in Finance in 2002.
http://intrepidcapitalfunds.com/media/PR_081010.pdf

Howdy Ted,
What is Off-Topic? What is an area that is not directly related to funds; but may be Off-Topic, yet may be of great value in protecting one's assets?
Do you consider events related to the Euro problems or actions of the Fed. or Treasury to not have an impact upon our investments?
What about discussions regarding the possible changes coming to tax policies upon capital gains and dividends? Would this not affect your portfolio; or at least your portfolio positioning? Do you think if this noted area of taxation does change for the worse; that this may impact equity market selling at the end of 2012?
Has there been any subject matter in Off-Topic from which you have benefited from the information?
The "ignore" the Off-Topic" is always a choice, eh?
I would like to know the answers.
Regards,
Catch

Howdy,
Again, a thank you to all who post the links and also start and participate in the many fine commentaries woven into the message threads.
For those who don't know; I ramble away about this and that, at least once each week.
NOTE: For those who visit MFO, this portfolio is designed for retirement, capital preservation and to stay ahead of inflation creep. This is not a buy and hold portfolio, and is subject to change on any given day; based upon perceptions of market directions. All assets in this portfolio are in tax-sheltered accounts; and any fund distributions are reinvested in the funds. Gains or losses are computed from actual account values.
While looking around..... I know you know, those little steel balls in the handheld games where one tilts and moves the flat base around to drop the balls into holes, or pass through a maze or some other quest. You may have one of these stashed away in a drawer at home. Well, I envison such a game from time to time and presume my game board and the holes represent investment choices. There are 20 holes in the base board representing the investment sector choices; but there are only 10 steel balls. Hey, I can do this with enough time, practice and experience. Cool, I got the balls into the holes of choice. Whoops, who bumped my board? Ah, that's it. While I slept, someone else was messing around with my game board. As you may assume by now; after placing the steel balls into the investment sector holes of my choice; I find during one practice event with the board, the sensation of other hands also attempting to move the board. Now this hole alignment thing is hard enough; let alone another set of hands trying to override my moves. I'm sure your understand my connective note about this board game and the others who are also playing with our game; even while we sleep. Keep your thinking caps in place, be patient and continue to assess your own risk and reward behaviors. There always will be others who are messing around with your game.
#72 There also exists rules 69 and 70. These, of course; are the simple, quick and dirt methods using head math to rough guage investment return rates; although these may be used for other caluclations, too. I know some here question why I would bother with such a note about the rule of 72. I will note that there have been more than enough adults whom I have encountered over the years who have never heard of the rule; so I will assume this may apply here, too; and that I/we have no way of knowing how many first time and young investors may be reading through the posts here at MFO. The number 72 has many of the easy factor numbers from multiplication that most folks learn in the 4th grade. So, one conjures that their portfolio is able to return about 6%/year with proper management. How long before one may be close to doubling their monies, from a set value? Divide 72 by 6 (annual % return); and one finds about 12 years are required to double the worth of the original investment dollars. Now, if one is really good with money; and gathers returns of 35%/year; the money will double in worth in just about 2 years. Okay, enough for this.
Sideways, with a twist. This is what our current portfolio could be named. A little bit of this and a little bit of that, with a yield average of about 4.7%; awaiting to find if there is more than sideways markets in our near future, and where and what may be the sectors.
Well, just some out loud thinking and writing.
I have noted a few things below, in the Buy/Sell/Portfolio section.
I have retained the following links for those who may choose to do their own holdings comparison against the fund types noted.
This 1st link to Bloomberg is for their list of balanced funds; although I don't always agree with the placement of fund styles in their categories.
http://www.bloomberg.com/apps/data?Sector=888&pid=invest_mutualfunds&ListBy=YTD&Term=1
These next two links are for conservative and moderate fund leaders YTD, per MSN.
http://moneycentral.msn.com/investor/partsub/funds/topfundresults.asp?Symbol=$HF&Category=CA
http://moneycentral.msn.com/investor/partsub/funds/topfundresults.asp?Category=MA&Type=&symbol=$HF
Such are the numerous battles with investments attempting to capture a decent return and minimize the risk.
We live and invest in interesting times, eh?
Hey, I probably forgot something; and hopefully the words make some sense.
Comments and questions always welcomed.
Good fortune to you, yours and the investments.
Take care,
Catch
SELLs/BUYs THIS PAST WEEK:
NONE
A reflection upon the links above; we attempt to establish a "benchmark" for our portfolio to help us "see" how our funds are performing. Aside from viewing many funds within the balanced/flexible funds rankings (the above links), a quick and dirty group of 4 funds we watch for benchmarking are the following:
***Note: these YTD's per M*
VWINX ....YTD = + 3.3% + .4 week
PRPFX ....YTD = + 6.6% - 1.3 week
SIRRX .....YTD = + 1.5% + .3 week
HSTRX ....YTD = + .81% + .2 week
None of these 4 are twins to our holdings, but we do watch these as a type of rough guage.
Portfolio Thoughts:
Our holdings had a + .34 % move this past week. A M* returns list I really like. Click the link just below.
http://news.morningstar.com/index/indexReturn.html?msection=IdxReturns
Many equity markets were just kinda hanging around this week; with the exception of the U.S. small/mid cap area, which received a slight haircut. Treasury yields still indicate a bit of an edge for some investors; or at the very least a parking spot for some extra cash. Yields in most Treasury durations ended the week in the down range, with prices reflected upward. The old Funds Boat is at anchor, riding in the small waves; watching the weather and keeping the existing cargo. To the high praise of MFO and the members, it is very difficult to find a topic to note here that has not been placed into the discussion boards. Excellence, as usual.
---Below is what M* x-ray has attempted to sort for our portfolio---
U.S.Stocks 11%
Foreign Stocks 11.14%
Bonds 70.83% ***
Other 7.03%
Not Classified 0.00%
***about 35% of the bond total are high yield category (equity related cousins)
---This % listing is kinda generic, by fund "name"
-Investment grade bond funds 26.8%
-Diversified bond funds 19.8%
-HY/HI bond funds 23.2%
-Total bond funds 17.8%
-Foreign EM/debt bond funds 4.3%
-U.S./Int'l equity/speciality funds 8.1%
This is our current list: (NOTE: I have added a speciality grouping below for a few of fund types)
---High Yield/High Income Bond funds
FAGIX Fid Capital & Income
SPHIX Fid High Income
FHIIX Fed High Income
DIHYX TransAmerica HY
---Total Bond funds
FTBFX Fid Total
PTTRX Pimco Total
---Investment Grade Bonds
APOIX Amer. Cent. TIPS Bond
DGCIX Delaware Corp. Bd
FBNDX Fid Invest Grade
FINPX Fidelity TIPS Bond
OPBYX Oppenheimer Core Bond
---Global/Diversified Bonds
FSICX Fid Strategic Income
FNMIX Fid New Markets
DPFFX Delaware Diversified
TEGBX Templeton Global (load waived)
LSBDX Loomis Sayles
---Speciality Funds (sectors or mixed allocation)
FCVSX Fidelity Convertible Securities (bond/equity mix)
FRIFX Fidelity Real Estate Income (bond/equity mix)
FFGCX Fidelity Global Commodity
FDLSX Fidelity Select Leisure
FSAGX Fidelity Select Precious Metals
RNCOX RiverNorth Core Opportunity (bond/equity)
---Equity-Domestic/Foreign
FDVLX Fidelity Value
FSLVX Fidelity Lg. Cap Value
FLPSX Fidelity Low Price Stock
MACSX Matthews Asia Growth-Income

Hi msf,
I should have had that extra cup of coffee. You are correct. I reversed my fee numbers between the old and new VA accts offered at Fidelity.
And has been mentioned, and too which I agree; there may be a place for using the Fido VA's when other avenues are not available.
The current list of funds (54) does provide a fairly decent choice of investments.
I have not looked at all of the funds for ER; but a quick glance and guess would indicate about a 1% average ER.
Our current retirement accts holdings ER average is .70%; and we know there are numerous folks who are paying much higher than 1%, especially if also paying adviser fees.
Anyhoo, if I was using the Fido VA; I suppose I would prefer to take my chances of compounding the non-taxed earnings each year; versus the monies being taxed at current rates for cap gains and dividends. Maybe a coin toss for the winning totals at the end, eh?
Thank you for your input, msf.
Regards,
Catch

Agree with others that VA should not be used before some other forms of tax-sheltered investments (notably IRAs and defined contribution plans).
Catch - I think that what you were looking at was the older VA that Fidelity used to offer - Retirement Reserves. This had an 80 basis pt wrapper (it was originally 100 basis pts when it firts launched), plus underlying fund fees, and insured return of premium. The current plan, Personal Retirement Annuity, costs 25 basis points plus underlying fund fees. It is still technically insurance, and guarantees return of accumulated value (i.e. what you've currently got in the underlying funds). Now to you and to me, that doesn't sound like any insurance at all, yet it's treated as insurance, and thus regulated on the state level and not by the SEC.
A VA is like a cross between a non-deductible IRA and a 401k plan, taking the worst attributes of both. Like the non-deductible IRA you get no immediate tax benefit, and capital gains are transmuted into ordinary income. Like the 401K, you investment options are limited to what's in the plan. The calculations on whether it pays (after exhausting other options) are very similar to deciding whether a non-deductible IRA makes sense. And the answer is: sometimes, but generally only if you'll have money in it for decades. (Otherwise, the transmutation of cap gains into ordinary income costs more than the tax sheltering saves.)
Finally, note that there's nothing about "variable annuity" that says "deferred". There are immediate VAs, and given the low interest rate environment we're in, might even make more sense than the traditional (fixed) immediate annuity.

I was also concerned that this article didn't provide the big picture. If I were a professional writer; I surely would have provided as much detail as possible with a full list of the pro's and con's. My write will also not provide the big picture; but there are circumstances and some VA's that may provide another avenue for some investors.
---The tax status is not an invalid consideration, considering an ordinary income tax burden on withdrawals from a VA. A presumption would have to exist indicating that an investor would be able to operate a very tax efficient portfolio outside of the VA shelter to have a lower tax burden.
---Along this same line, the tax burden mentioned regarding lower dividend and captial gains tax rates on non-VA sheltered monies. This may true today, but these tax rates may be gone at the end of this year. True, this is an unknown; but is in place to change.
---As msf noted regarding fees; well, fees may be every which way depending upon what one may desire from a VA. Fidelity offers 54 fund choices within their VA accounts. There may have been some small chances since I reviewed this area last year; but this is a snippet from what I recall from a year ago: One would pay the the expense of whichever fund and an additional .25%. A fund with an ER of .75% added with the VA fee would =1% total fees. Today, with a quick look; I find indicated for the Fidelity funds within the VA to indicate what appears to be a flat fee of .80%. I don't know if this is a change from last year or not; and currently do not have the time for further investigation. Also, with a Fido VA; one is restricted to 4 round trip fund exchanges per year.
NOTE: the Fidelity VA account is not an insurance policy type of investment, so does not include an insurance guarantee or related as may be found with traditional VA products issued through a full blown insurance vendor. Also, there is not the traditional penalty period for withdrawals as is common with most VA accounts. So, if one pulls their monies within 1 year, there is not the common 7% penalty fee in place.
---I am not a fan of, or would recommend a traditional VA to many folks; I also am not a tax attorney, so there may be items related to taxes that would have to be sorted out by a professional dealing in taxes.
Just my inflation adjusted 2 cents worth.
Regards,
Catch

Reply to @Anonymous: I'm usually not in cash but have been increasingly moving in that direction. While many have predicted a continued rise due to election year, etc, that's not always the case. Additionally, geopolitical issues (Iran, China, Russia) could become a serious issue. I primarily sold a number of smaller-mid sized satellite positions, such as the SOIL and BRAQ etfs.
Looking long term/over the horizon, I do believe there will be considerable inflation and I do want to be in stocks (especially some specific sectors.) That said, I just think the market feels way too complacent. Retail money may move out of fixed income into stocks, but I don't know - I think a lot of people in fixed income are in fixed income.
There was a line in David's commentary about how the long bond would do if interest rates normalize - I'd be curious if 100 average investors (people who don't do a lot of research and essentially "check boxes" on their 401k, not that I'm saying anything against it, but just saying people who don't research their investments in detail) were polled as to whether they were aware if that would be the result if interest rates normalize or not.
Essentially, if people were told this: " Tim Krochuk of GRT Capital Partners volunteers the same observation in a conversation this week. “If rates return to normal – 4 or 5% – holders of long bonds are going to lose 40 – 50%. If you thought that a 40% stock market fall led to blood in the streets, wait until you see what happens after a hit that big in retirees’ ‘safe’ portfolios.” Folks from Roger Ibbotson to Teresa Kong have, this week, shared similar concerns."
How many would go, "But I thought bonds were safe?"
So, I do want to be in equities (funds, stocks, etfs, whatever), but I do think there will be better opportunities.

Howdy David,
I peeked at Fund Reveal several days ago; and am curious as to the forthcoming MFO write regarding this site. Obviously, over the years and with the expansion of the internet; one may find 1,000's of investment wisdom sites that express "their" system is the best to maximize one's investment gains.
I remain open to finding a site with positive trackable results; knowing many sites use their own modeling criteria and perhaps a touch of the human element thrown into the mix.
Regards,
Catch

Howdy,
Again, a thank you to all who post the links and also start and participate in the many fine commentaries woven into the message threads.
For those who don't know; I ramble away about this and that, at least once each week.
NOTE: For those who visit MFO, this portfolio is designed for retirement, capital preservation and to stay ahead of inflation creep. This is not a buy and hold portfolio, and is subject to change on any given day; based upon perceptions of market directions. All assets in this portfolio are in tax-sheltered accounts; and any fund distributions are reinvested in the funds. Gains or losses are computed from actual account values.
While looking around..... Tinker: the archaic meaning generally reflects to a person who traveled the road and repaired household utensils....metal pots and pans and related. The older reference also indicates a person of the poor working class and uneducated. However, one must consider that this work required a broad-based knowledge of many areas; as one may consider that such a person was also employed to perform many other types of repairs while in the community or at a household. The tinkerer was only uneducated in some areas; not unlike the broad citizenery now. Today, many consider the word to also have the meaning: "To exert one's self for a purpose; to put forth effort for the attainment of an object; to labor; to be engaged in the performance of a task, a duty, or the like." While one's skill set may not be in a particular area of effort; we may still "tinker" around with something; be it planting flowers in the springtime of the year around the house, simple painting of the interior or exterior of the home or simple repairs around the household; be it replacing this or that or a repair of the lawnmower. While these areas may not be our primary knowledge area; we are bright enough to read and consider whether the task is within grasp of the efforts to attain a "decent" outcome; or whether to leave the circumstance to those skilled in the task; to hire someone.
This reflection upon tinker, reminds me of myself and others; we individual investors.
Although I do not know the composition of other's portfolios; I do assume there is "tinkering" in place; now and then.
This brings me to a recurring thought about portfolio tinkering at this house. Some days, tinkering is a lot of fun and one is always learning something. Our house doesn't tinker very much, with only a few funds changing in a year's time. This brings me to the active managed/traditional vs the eft fund. I will note a few quick and dirty numbers; although these eft's would not be my primary choices. Starting with year 2006 and including 2011 returns for these two eft's; VTI and BND , and one having 50% in each, the average return over this period = +3.35%. Our portfolio over the same time period average = +6.4%. To be fair about this compare; VTI is U.S. equity based and had a - 37% in 2008. We sold 84% of our equity portfolio in mid-June of 2008. Obviously, these two holdings views are not twins in construction; and the VTI and BND are indicated with a buy and hold position maintained.
As 1/3 of our account holdings are currently with Fidelity; we have access to 30 etf's that provide nominal exposure to numerous market sectors; and the price is right, too. Beyond this, the brokerage function of the accounts offer whatever etf we may choose, although at a higher cost (trading fees).
The next question this house must answer is whether we may provide similar results as in the past, using etf's for this function. Are we able to find and/or manage etf's that would replace managed mutual funds; several of which, have management skills with which we are most satisfied. Could we be more skilled than the management of FNMIX ? Or FLPSX ? Might it be just as easy and with acceptable results to hold TIP versus FINPX ? I am not assured of this. Even for monies invested in gov't tips bonds, active managers may move among the durations as they feel indicated. We could try to provide a similar exposure using STPZ LTPZ and TIP . Yow......too much work there, eh?
Another question. Would this house become more "twitchy" about moving monies around more frequently? We have not been a house which flips funds often, and we suspect this temperment would be maintained. Although one must consider the low cost of flipping among some etf's.
The question that becomes presented is whether to gather a basket of 12-15 etfs to attempt to match our holdings at any given time. At the very least, we could gather .30-.40% of reduced fund expense fees. M* indicates our current average expense ratio of .70%.
A fling it "here and there" could include lg cap, mid cap, sm cap of a blended and domestic/international flavor. Bond styles could be mix and/or matched to one's choices. Special sectors may be thrown in to suit one's market thoughts or trends. And no, I don't think this house would be or become a "lazy portfolio" of buy and hold. Although some statistics indicate a reversion to the mean for a given market area over time; I know we would still practice our own form of "reversion to our own mean"; attempting to minimize the downside and preserve capital. Time is not in this house's favor. Now if we were 30 years old again..............
A result into the future may be a mix of active managed funds and eft's, or perhaps an index here and there, too.
Well, just some out loud thinking and writing.
I have noted a few things below, in the Buy/Sell/Portfolio section.
I have retained the following links for those who may choose to do their own holdings comparison against the fund types noted.
This 1st link to Bloomberg is for their list of balanced funds; although I don't always agree with the placement of fund styles in their categories.
http://www.bloomberg.com/apps/data?Sector=888&pid=invest_mutualfunds&ListBy=YTD&Term=1
These next two links are for conservative and moderate fund leaders YTD, per MSN.
http://moneycentral.msn.com/investor/partsub/funds/topfundresults.asp?Symbol=$HF&Category=CA
http://moneycentral.msn.com/investor/partsub/funds/topfundresults.asp?Category=MA&Type=&symbol=$HF
Such are the numerous battles with investments attempting to capture a decent return and minimize the risk.
We live and invest in interesting times, eh?
Hey, I probably forgot something; and hopefully the words make some sense.
Comments and questions always welcomed.
Good fortune to you, yours and the investments.
Take care,
Catch
SELLs/BUYs THIS PAST WEEK:
NONE
A reflection upon the links above; we attempt to establish a "benchmark" for our portfolio to help us "see" how our funds are performing. Aside from viewing many funds within the balanced/flexible funds rankings (the above links), a quick and dirty group of 4 funds we watch for benchmarking are the following:
***Note: these YTD's per M*
VWINX ....YTD = + 2.9%
PRPFX ....YTD = + 7.9%
SIRRX .....YTD = + 1.5%
HSTRX ....YTD = + .60%
None of these 4 are twins to our holdings, but we do watch these as a type of rough guage.
Portfolio Thoughts:
Our holdings had a + .62 % move this past week. The old Funds Boat is at anchor, riding in the small waves; watching the weather and keeping the existing cargo. To the high praise of MFO and the members, it is very difficult to find a topic to note here that has not been placed into the discussion boards. Excellence, as usual.
---Below is what M* x-ray has attempted to sort for our portfolio---
U.S.Stocks 11%
Foreign Stocks 11.14%
Bonds 70.83% ***
Other 7.03%
Not Classified 0.00%
***about 35% of the bond total are high yield category (equity related cousins)
---This % listing is kinda generic, by fund "name"
-Investment grade bond funds 26.8%
-Diversified bond funds 19.8%
-HY/HI bond funds 23.2%
-Total bond funds 17.8%
-Foreign EM/debt bond funds 4.3%
-U.S./Int'l equity/speciality funds 8.1%
This is our current list: (NOTE: I have added a speciality grouping below for a few of fund types)
---High Yield/High Income Bond funds
FAGIX Fid Capital & Income
SPHIX Fid High Income
FHIIX Fed High Income
DIHYX TransAmerica HY
---Total Bond funds
FTBFX Fid Total
PTTRX Pimco Total
---Investment Grade Bonds
APOIX Amer. Cent. TIPS Bond
DGCIX Delaware Corp. Bd
FBNDX Fid Invest Grade
FINPX Fidelity TIPS Bond
OPBYX Oppenheimer Core Bond
---Global/Diversified Bonds
FSICX Fid Strategic Income
FNMIX Fid New Markets
DPFFX Delaware Diversified
TEGBX Templeton Global (load waived)
LSBDX Loomis Sayles
---Speciality Funds (sectors or mixed allocation)
FCVSX Fidelity Convertible Securities (bond/equity mix)
FRIFX Fidelity Real Estate Income (bond/equity mix)
FFGCX Fidelity Global Commodity
FDLSX Fidelity Select Leisure
FSAGX Fidelity Select Precious Metals
RNCOX RiverNorth Core Opportunity (bond/equity)
---Equity-Domestic/Foreign
FDVLX Fidelity Value
FSLVX Fidelity Lg. Cap Value
FLPSX Fidelity Low Price Stock
MACSX Matthews Asia Growth-Income