I agree. If you can't understand what risk is, you can't do investment.

Charlie Chee
chee[at]queensbury.com

"FranksPlace2" <franksplace2[at]email.com> wrote in message
news:d6bbed5b.0312030734.23c82057[at]posting.google.com...
- quote -

I don't believe in a fixed percentage approach or an age based
approach. Rememeber you may be retired for 30 years so you must
continue to grow your assets. My rules are:

1) Choose a portfolio such that you are comfortable with the risk.

2) Keep 3 to 5 years living expenses in "cash or near cash". Put the
rest, subject to Rule 1, in growth equities.

Frank



Tad Borek <borekfm[at]pacbell.net> wrote in message news:<126yb.61792$Nw5.56066[at]newssvr25.news.prodigy.com> ...
- quote -

I don't like any rule based entirely on age. You may live 30 years
after you retire.

My rule 1 is you should be comfortable with what ever risk level you
choose for your portfolio.

My rule 2 is to have 3 - 5 years of needed funds in cash and near
cash. Everything else, subject to rule 1, should be in equities.

Frank



Tad Borek <borekfm[at]pacbell.net> wrote in message news:<126yb.61792$Nw5.56066[at]newssvr25.news.prodigy.com> ...
- quote -

Thanks for pointer. By the way, I also looked at similar Vanguard
funds since they are big on index funds. Here's what I found at:
http://flagship5.vanguard.com/VGApp/hnw/FundsByName

Looking at the Target 20XX funds, they simply invest in a weighted
distribution of several index funds:
Vanguard Total Stock Market Index Fund
Vanguard Individual European Stock Index Fund
Vanguard Total Bond Market Index Fund
Vanguard Individual Pacific Stock Index Fund
Vanguard Inflation-Protected Securities Fund
(Different percentage levels depending on the target year)

So all-in-all, I think I have found what I was looking
for. It seems like it's possible to build a diversified
retirement portfolio just using index funds.

Now I only need to find out a method to calculate the percentages
for a given expected rate of return

Anoop


daft[at]hotmail.com (jt) wrote in message news:<be594162.0311291135.1ed96506[at]posting.google.com> ...
- quote -

"BMS" <mcfared[at]comcast.net> wrote in message news:<S04yb.249494$mZ5.1856437[at]attbi_s54> ...
- quote -

I am interested mainly in index funds because they are easy to
understand. For a non-index fund, I have to constantly worry
about what the fund manager is up to. Of course, there is the
added benefit of low expense. Given that the average actively
managed fund does worse than an index fund, I don't see the
need to subject myself to that much more work and worry just
to try and beat the index. I would rather focus on the asset
mix and invest only in index funds.

If I wanted to play the market, I would pick individual stocks.

Anoop

- quote -

Big fund companies have self-adjusting funds for this which you
buy based calibrated to a year of retirement. See Vanguard or
http://personalmko.fidelity.com/prod...domfunds.shtml

Some years ago many of these seemed to lag markets (adjusted for
bonds) quite a bit, I think for the above reasons of being too
generic and not diversifying stocks and tuning bond durations to
current conditions. But maybe more sophisticated now - check them.

Anoop Ghanwani wrote:
- quote -

It really depends on what you're investing for. If the plan is to get
ready for withdrawing assets beginning at retirement age, and depleting
them over your retirement years, then most people will want to gradually
reduce the volatility of their investments as they age (ie shift to
bonds, esp. shorter-term bonds). Doing so makes it more likely that your
money will last, even if the stock market tanks early in your
retirement. I think that's why generic asset allocation models show the
gradual shift, they assume you retire and start taking money out, and
increase the money you take year by year.

In practice there's a lot of variation and it seems people who plan
their savings well in advance don't follow that kind of withdrawal
program. So your age brackets for different allocations might be a lot
different. By age 70 you could have say 30% invested in bonds and cash,
and with social security factored in, still have more than enough income
to live off of, and enough accessible dollars for any conceivable need,
even factoring in stock volatility. Or maybe you have a fixed annuity
providing regular cash so it adjusts the investment allocation. Point
being it really depends on what that number at the end of the pipe looks
like, and what sort of spending you have in mind for the assets. The
more %-wise you'll spend, the more you'll want to shift to
short/intermediate bonds and cash. This isn't just for retirement, it
applies really to any savings goal.

If you think of your retirement funds as a personal pension fund: a lot
of pension funds seem to hover around a 60/40 equities/bonds allocation.
Typically they're funding a lot of longer-term needs, as well as current
liabilities, so it's a bit different, but not all that different from
what a lot of people end up doing with their retirement savings (spend
some, pass the rest on).

- quote -

You could do a lot worse than some kind of rote combination of asset
classes, using strictly index funds. Gibson's "Asset Allocation" gives
some direction on how to do this. You might read it and end up doing an
elaborate analysis to pick the mix, but it might also give you
confidence in something relatively simple.

-Tad

"Anoop Ghanwani" <anoop[at]alumni.duke.edu> wrote in message
news:50bde0e6.0311281623.105a4b19[at]posting.google.com...
- quote -

I did an internat search of asset allocation models and got 177,000 hits

Is it possible to build a balanced retirement
- quote -

Yes, you could. Are you using index funds strictly because of low expenses
or because you understand them? Look for return based on net of expenses.
- quote -

Look to rebalance more frequently, quarterly or annaully, and look at the
entire portfolio. 5 years is too long.
- quote -

The reason I referred to it as the rule of 100, that it is a term used in a
variety of intro texts.

The important idea from your post to the original post is that you found a
strategy and stuck with it, you seem to understand the risks you are
accepting for your returns.

Good luck in the future.

"Dave Dodson" <dave_and_darla[at]Juno.com> wrote in message
news:80526350.0311290400.726cd2c3[at]posting.google.com...
- quote -

There is nothing "magic" about the number 100 in the "rule of 100."
You could just as well use the number 125.

I personally was 100% invested in equities until age 50. That is, I
was following the "Rule of 150." At age 50, I started reducing my
exposure to equities and increasing the bond portion of my portfolio.
At age 61, I have 55% domestic equities, 10% foreign equities, 30%
bonds, and 5% cash. I expect to maintain that asset allocation for
many years to come, as I feel quite comfortable with it. Thus, my
current rule could be called the "rule of 126."

The key to successful investing for the long term is to know yourself
well. Many people would not feel comfortable with my asset allocation.
They would have felt great discomfort in 2000, 2001, and 2002,
possibly making irrational decisions regarding their investments. For
them, the "Rule of 100" or even the "Rule of 80" might be more
appropriate.

Dave

"BMS" <mcfared[at]comcast.net> wrote in message news:<8WGxb.337301$Fm2.340595[at]attbi_s04> ...
- quote -

Thanks for the response. Where can I get more information on asset
allocation models? Is it possible to build a balanced retirement
plan using only index funds?

A question about rebalancing: Let's say I decide to rebalance
every 5 years. Does that mean I only change where new contributions
go, or does it also require that I sell some of the old funds and
try to maintain the new mix for the entire portfolio.

Anoop

"BMS" <mcfared[at]comcast.net> wrote in message news:<8WGxb.337301$Fm2.340595[at]attbi_s04> ...
- quote -

There is the rule of 100. Take 100 subtract your age, the difference is the
percentage that should be in equities and the rest in fixed income.

However what you are proposing is not close to a balanced retirement plan.
Having all your retirement in 2 types of funds, a large cap index and a bond
fund. Go look at some asset allocation models and compare them to your risk
tolerance profile. Up to 95% of your return can be linked to proper asset
allocation.

"Anoop Ghanwani" <anoop[at]alumni.duke.edu> wrote in message
news:50bde0e6.0311270908.3d2d5556[at]posting.google.com...
- quote -

Are there rules of thumb for building a balanced retirement
portfolio with index funds such as the S&P 500 and the total
bond market index fund? For example, would it make sense
to allocate funds as follows:

Age S&P 500 Total Bond Market
<30 100% 0%
30-40 80% 20%
40-50 60% 40%
50-60 40% 60%

Is this too simplistic a plan? I'm basically looking
for a long-term investment strategy that is known to work
reasonably well in all market conditions so that one
doesn't have to keep watching what the fund manager is
up to.

Anoop