I don't think you need an EIA. At your age, and with your knowledge of
how things work (I'm making some assumptions here) I don't know what
the benefit would be. Unless you need the downside protection because
you might want your money back within 10 years or so.....

You'll be paying expenses and capping your returns when you probably
don't need to.

Sounds like you want to be aggressive. Maybe reduce bonds to 10% and
make sure you're getting enough foreign exposure.

Good for you for taking action early. Remember to keep it simple.
You've got a head start and are doing well. I don't know how much
you've saved or how much you want to pay yourself in retirement but I'm
thinking you've got a good start.

Thanks for your insight. While I did some screening based on past
performace, it was long term stable past performance (over 5 years) and
not short term. Not sure if this matters much.
Most if not all of these funds have exceeded their respective indexes
for the long term.
Any thoughts on Equity Indexed Annuities? I may be pretty young for an
investment vehicle like this but for a portion of my investments it may
preserve capital in case of a market downturn.

Thanks!

beliavsky[at]aol.com wrote:
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Eric wrote:
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Since your prospective portfolio contains 80% stocks and 20% bonds and
some of the stocks are small-caps, the S&P 500 is not an appropriate
benchmark. A better benchmark would probably be a

(1) large cap U.S. index fund (tracking say the S&P 500)
(2) small cap U.S. index fund (S&P 1000 = S&P 400 (MidCap) + S&P 600
(SmallCap)
(3) international stock index fund (tracking the EAFE, perhaps)
(4) U.S. bond index fund (tracking the Lehman Aggregate, perhaps)

weighted in the same manner as your prospective portfolio. I don't know
of an index fund for foreign bonds.

A possible problem with your approach is that you may have screened for
the best-performing actively managed funds in various categories and
then created an optimal portfolio from them. This assumes that past
performances will be repeated. Studies have found that there is some
mean reversion in mutual fund performance. A fund that has achieved a
return of x% relative to its benchmark can be expected to achieve a
relative return of c*x% in the future, where 'c' is a persistence
coefficient that needs to be estimated empirically from a large sample
of mutual fund return data. Staunch index fund advocates will say that
c is close to zero, meaning that past performance is no guide to the
future and that you should invest in index funds to minimize expenses
and thus maximize returns. I think c is positive, based on some
research on style-adjusted mutual fund returns I have read, but I would
guess that it is less than 0.5 . So I suggest that you deflate the past
excess (over the benchmark) returns of the funds you are considering by
at least one half and then compare the portfolio return to a more
appropriate benchmark.

Hope this does not sound discouraging. It's good that you are serious
about investing so young, and I think you are on the right track.

I am in my late 20's and am in the process of reviewing my financial
plan. I'd like some thoughts on my process. I currently have most of my
retirement assets in my company 401k, with some money left on old
401k's. I also have a Roth IRA. For my taxable investments I have a
somewhat allocated selection of funds, stocks and one bond.
I am considering creating a new portfolio consisting of the following:

Funds:
25% - Oakmark Equity Income (Core)
15% - Ariel Fund (Mid/Small Blend)
15% - Artsian Small Cap Value
10% - Fidelity Investment Grade Bond
10% - Fidelity New Markets Income
15% - Oakmark Global
10% - US Global Investor


According to my morningstar calc, this would provide a better return
than the SP500 with less volatility. My only concern is the lack of a
good growth fund, any thoughts on this?
I have more investments in taxable investments right now, should I move
these into tax deferred as soon as possible since I have such a long
time spam until retirement?
Another option I am cosidering for my taxable investments is a
5/7/10-year Equity Indexed Annuity. Can anyone make a recommedation if
this is a good idea and if so which ones to take a look at?

Thanks!