I am 72

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woodedareas
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I am 72

Post by woodedareas » Tue Aug 21, 2012 6:17 pm

I am new to Bogleheads and find it instructive. I am 72 and have invested without a specific asset allocation other than a very conservative approach. That is to not lose my principal. I would appreciate some suggestions on a combination of funds with about 65 to 70% in non equities. I hesitate to say 30% in bonds as I know there are other possibilities that would fall into the non equity category. I am investing for both a deferred account(IRA) as well as a taxable account.
Thanks

Johm221122
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Re: I am 72

Post by Johm221122 » Tue Aug 21, 2012 8:17 pm

Try a 3 fund portfolio

'THREE-FUND INDEX PORTFOLIO Diversification. Over 10,000 world-wide securities. Contains every style and cap-size. Very tax-efficient. No manager risk. No style drift. No overlap. Low turnover. Avoids "front running." Easy to rebalance. Never under-performs the market (less worry). Mathematically certain to out-perform most investors. Simplicity "


http://www.bogleheads.org/wiki/Three-fund_portfolio

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Watty
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Re: I am 72

Post by Watty » Tue Aug 21, 2012 8:30 pm

Welcome to the board. :beer

There really isn't enough information to give you a good response since the details of your situation could make a huge difference.

A pretty generic answer is a targer retirment income fund like this;

https://personal.vanguard.com/us/funds/ ... IntExt=INT

If you add together the domestic and international stock funds it comes to just about 30%.

If you would like more specifid informaion there is a suggested outline of what you should include in your post here;

http://www.bogleheads.org/forum/viewtop ... f=1&t=6212

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abuss368
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Re: I am 72

Post by abuss368 » Tue Aug 21, 2012 8:38 pm

Johm221122 wrote:Try a 3 fund portfolio

'THREE-FUND INDEX PORTFOLIO Diversification. Over 10,000 world-wide securities. Contains every style and cap-size. Very tax-efficient. No manager risk. No style drift. No overlap. Low turnover. Avoids "front running." Easy to rebalance. Never under-performs the market (less worry). Mathematically certain to out-perform most investors. Simplicity "


http://www.bogleheads.org/wiki/Three-fund_portfolio
Excellent advice.

I have never come across an investor who tried the Three Fund Portfolio and did not like it.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

Fallible
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Re: I am 72

Post by Fallible » Tue Aug 21, 2012 8:50 pm

woodedareas wrote:I am new to Bogleheads and find it instructive. I am 72 and have invested without a specific asset allocation other than a very conservative approach. That is to not lose my principal. ...
Welcome to the Forum! I have boldfaced part of your comment referring to not losing your principal because, while you may be new to the forum, your pursuit of safety of principal says you're a bonafide Boglehead. I tend to agree with the Three-Fund Portfolio approach already suggested here, along with the link to that subject in the wiki. It also is a topic on the forum that you may want to read, and here is the link: The Three Fund Portfolio

Good luck. :)
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

woodedareas
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Re: I am 72

Post by woodedareas » Wed Aug 22, 2012 9:19 am

The 3 fund portfolio is very interesting. I own a small company and for decades managed the company retirement program. I invested very simply with the concept of a almost guaranteed return and no loss of principal. Some of the younger employees complained about my lack of attention to equities for higher returns and they were correct especially during a good economy. I stayed with my simple philosophy for decades and it did work and I did not lose any $.I also use a process that I call nit-picking. I use 3 brokers and I visit them once every 3 months for any interesting ideas. A few times a year I will buy a corporate bond or TIPS if it is at least AA and returns a minimum of 4% even though it may have a long duration.I also will purchase aTIPS as an ETF as many religious and charitable organizations safely park money in this instrument. The returns are lower but it is better than cash.

Now that I am about to retire I realize that risk is something that I can not afford as I can not replace my money by working any longer. So I am reaching out to find a process to give me a reasonable return with the least amount of risk. I have survived 4 stock brokers and recently interviewed 2 fee only advisors who were less informed than me. They both wanted to manage all of my money, so my meetings with them did not last very long. My return on my investments last year was about 5.5% and I ignored ALL of my brokers advice. I am looking this year for a range of 4-5% as I believe our economy is devastated and regardless of the presidential election it will not be turning around any time soon.

In terms of how my $ are currently allocated I will have to evaluate them more carefully as this has never been my methodology even though it is recommended by everyone. I am guided by common sense and my experience in the business world.These low interest rates are ruining many seniors who have worked hard their entire lives, but you never hear a politician address the subject.

Johm221122
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Re: I am 72

Post by Johm221122 » Wed Aug 22, 2012 9:26 am

Bogleheadhead philosophy,
" How much bonds? That's the basic question of asset allocation. Before you decide, you first need to balance your ability, willingness, and need to take risk. The more risk you can handle, the less bonds you need. If you do not have need for a high return (perhaps you already saved enough to retire), you should hold more in bonds. The benefit is a reduction in the volatility of portfolio returns. A good guideline is to hold "your age in bonds." When you are young, your prime earning years lie ahead, and it will be decades before you need to access the money. So, big drops in stock prices will not hurt as long as you do not flee the market. As you age, you can afford to take less and less risk."

"Bogleheads typically divide bond allocations between just two categories: nominal bonds such as the Vanguard Total Bond Market fund, and U.S. Treasury Inflation Protected Securities (TIPS) such as the Vanguard Inflation Protected Securities"

http://www.bogleheads.org/wiki/Boglehea ... Philosophy
You can't change interest rates,you have to use what's in your best interest (maybe 20/25% stocks and 20/25 % tips)

Johm221122
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Re: I am 72

Post by Johm221122 » Wed Aug 22, 2012 9:33 am

You may also consider SPIA
'It is important to understand that the payment streams from an income annuity consist of both income and principal, so the payout percentages are not comparable to the yields of fixed income securities or dividend yields from stocks. The payout is comparable to the percentage withdrawal rates of a systemic withdrawal. You can determine the actual yield of the annuity payout by using the google spreadsheet included in the external links below. The yield of the income annuity investment will increase as the term of payout increases."

http://www.bogleheads.org/wiki/Immediat ... ity_-_SPIA

YDNAL
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Re: I am 72

Post by YDNAL » Wed Aug 22, 2012 9:44 am

woodedareas wrote:I am new to Bogleheads and find it instructive. I am 72 and have invested without a specific asset allocation other than a very conservative approach. That is to not lose my principal. I would appreciate some suggestions on a combination of funds with about 65 to 70% in non equities. I hesitate to say 30% in bonds as I know there are other possibilities that would fall into the non equity category. I am investing for both a deferred account(IRA) as well as a taxable account.
Thanks
Welcome, woodedareas!

You addressed the MOST important decision.... Equity/Non-Equity split.
  • 1. Then, the next important decision is proper "placement" of investments since you have an IRA and a Taxable account.
    2. Placement is obviously dependent on YOUR tax circumstances. You don't provide enough information to proceed, in my opinion.
    http://www.bogleheads.org/forum/viewtop ... f=1&t=6212
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

woodedareas
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Re: I am 72

Post by woodedareas » Wed Aug 22, 2012 5:32 pm

In terms of my taxable accounts I am in a high bracket so I am very sensitive to investments that will aid in reducing my taxes and thus my income. It may sound extreme but over the years I have invested for a safe and reliable return without regard to taxes. In this respect I am more concerned about conservative safety and return than tax rates. I realize that is not desireable for most prudernt investors.The preservation of my principal is most important and for that reason I am going very slow until after the presidential elections. Since I am still working cash is very comfortable even though it is basically stagnant.I will slowly average into funds with a about 70% into fixed income type investments. I do not like REITS at this time nor municipal bonds, as many municipalities are in serious trouble and conditions will not be improving anytime soon.

Johm221122
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Re: I am 72

Post by Johm221122 » Wed Aug 22, 2012 6:41 pm

It sounds like you want to time market, everything you mentioned is already known by the whole market.

" This is perhaps the most challenging part of Boglehead investing, but is essential to its success. Bogleheads adopt a reasonable investment plan and then stay the course"from Boglehead philosophy
http://www.bogleheads.org/wiki/Boglehea ... Philosophy

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Toons
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Re: I am 72

Post by Toons » Wed Aug 22, 2012 6:44 pm

Johm221122 wrote:Try a 3 fund portfolio

'THREE-FUND INDEX PORTFOLIO Diversification. Over 10,000 world-wide securities. Contains every style and cap-size. Very tax-efficient. No manager risk. No style drift. No overlap. Low turnover. Avoids "front running." Easy to rebalance. Never under-performs the market (less worry). Mathematically certain to out-perform most investors. Simplicity "


http://www.bogleheads.org/wiki/Three-fund_portfolio
+1 Exactly :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

freebeer
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Re: I am 72

Post by freebeer » Wed Aug 22, 2012 7:04 pm

woodedareas wrote:I am new to Bogleheads and find it instructive. I am 72 and have invested without a specific asset allocation other than a very conservative approach. That is to not lose my principal. I would appreciate some suggestions on a combination of funds with about 65 to 70% in non equities. I hesitate to say 30% in bonds as I know there are other possibilities that would fall into the non equity category. I am investing for both a deferred account(IRA) as well as a taxable account.
Thanks
Congratulations! To me the key question comes from your statement "not to lose my principal". Because, presumably you are entering a "decumulation" stage where the critical need is to fund spending through the remainder of your life (12 more years on average, and less than 5% chance of being 20 years more). Depending on the spending level and your portfolio size the best means of so doing could well be to explicitly plan to "lose" your principal (whether by spending it down or annuitizing). OTOH if you have a major bequest motive or simply a very large amount of funds relative to your spending needs then you may prefer to be more aggressive and invest like an endowment. The right portfolio for anyone will hugely depend on this question and until that question is answered for you it seems like it's very premature to give feedback about details like 3-fund portfolio.

Johm221122
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Re: I am 72

Post by Johm221122 » Wed Aug 22, 2012 7:11 pm

freebeer wrote:
woodedareas wrote:I am new to Bogleheads and find it instructive. I am 72 and have invested without a specific asset allocation other than a very conservative approach. That is to not lose my principal. I would appreciate some suggestions on a combination of funds with about 65 to 70% in non equities. I hesitate to say 30% in bonds as I know there are other possibilities that would fall into the non equity category. I am investing for both a deferred account(IRA) as well as a taxable account.
Thanks
Congratulations! To me the key question comes from your statement "not to lose my principal". Because, presumably you are entering a "decumulation" stage where the critical need is to fund spending through the remainder of your life (12 more years on average, and less than 5% chance of being 20 years more). Depending on the spending level and your portfolio size the best means of so doing could well be to explicitly plan to "lose" your principal (whether by spending it down or annuitizing). OTOH if you have a major bequest motive or simply a very large amount of funds relative to your spending needs then you may prefer to be more aggressive and invest like an endowment. The right portfolio for anyone will hugely depend on this question and until that question is answered for you it seems like it's very premature to give feedback about details like 3-fund portfolio.
You do know that the three fund portfolio could be 80% total bond market (but bonds could loose money) and keeping principal safe may make you loose your pants to inflation
Using this link will get OP better answer http://www.bogleheads.org/forum/viewtop ... f=1&t=6212

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joe8d
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Re: I am 72

Post by joe8d » Wed Aug 22, 2012 7:28 pm

Woodedareas,I'm 70 and share your pain with your statement:
These low interest rates are ruining many seniors who have worked hard their entire lives, but you never hear a politician address the subject.
I was just was researching CD rates in Australia and all the major banks there are paying 4.5 - 5 % for a 12 mo Term Account. Unfortunately,we just have to live with the 1% instruments available to us.
All the Best, | Joe

woodedareas
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Re: I am 72

Post by woodedareas » Thu Aug 23, 2012 7:55 am

JOHNM
You are correct about bond funds losing $ and inflation. It is for this reason I never purchased a bond fund but always purchased individual corporate bonds that were properly rated and paid a reasonable return. The bond index as recommended in these post seems as an alternative but must be amended with TIPS. This thread started with a recommendation for 3 funds as one could buffer the other, still not conservative enough for me. Please give me a 5% CD.

Johm221122
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Re: I am 72

Post by Johm221122 » Thu Aug 23, 2012 8:10 am

woodedareas wrote:JOHNM
You are correct about bond funds losing $ and inflation. It is for this reason I never purchased a bond fund but always purchased individual corporate bonds that were properly rated and paid a reasonable return. The bond index as recommended in these post seems as an alternative but must be amended with TIPS. This thread started with a recommendation for 3 funds as one could buffer the other, still not conservative enough for me. Please give me a 5% CD.
Risk/reward 5% is only available with risk at this time(unless SPIA and then you have nothing to leave)

Valuethinker
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Re: I am 72

Post by Valuethinker » Thu Aug 23, 2012 9:59 am

woodedareas wrote:In terms of my taxable accounts I am in a high bracket so I am very sensitive to investments that will aid in reducing my taxes and thus my income. It may sound extreme but over the years I have invested for a safe and reliable return without regard to taxes. In this respect I am more concerned about conservative safety and return than tax rates. I realize that is not desireable for most prudernt investors.The preservation of my principal is most important and for that reason I am going very slow until after the presidential elections. Since I am still working cash is very comfortable even though it is basically stagnant.I will slowly average into funds with a about 70% into fixed income type investments. I do not like REITS at this time nor municipal bonds, as many municipalities are in serious trouble and conditions will not be improving anytime soon.
The right muni fund is nevertheless attractive to high tax paying investors.

Remember you can preserve the $100 of capital, but if inflation is 4% then you had $96 at the end of it. Granted at the moment inflation is not a high risk-- about 2% (and if you google ' MIT Billion Prices Project' you will see that data collected on prices from the internet is tracking US CPI, there's no strong evidence of bias either up or down).

Given your age safe preservation of capital is a good idea. Some ideas:

- SPIA - single premium annuities. You can create a substantial income return, much higher than with bonds, using this mechanism. Choose insurers with high credit ratings, and most states have a scheme insuring the first $100k of premium ($100k should give you, fixed annuity (not inflation protected) about $7k pa of income-- higher at your age)

- CDs within FDIC limits of course

- ST US government bond funds

- Ibonds

Note it has been shown that a portfolio with 80% bonds and 20% equities has a higher return but a *lower* risk than a 100% bond portfolio-- this is true as far as I know on almost all historical data. So I would suggest that 20% of your funds in the Vanguard Total Stock Market fund (which would itself pay a yield of around 2.5% I believe?) could be a good investment.

woodedareas
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Re: I am 72

Post by woodedareas » Fri Aug 24, 2012 8:30 am

I was asked about my portfolio and asset allocation . I have about 80% in bonds. But they are all corporate bonds, rated about AA and provide a stepped return. They are mostly subject to call after one year. lately very few of these investments are available. I have never used a bond fund as it seemed mor indefinite in terms of return. By purchasing individual bonds I was able to control my time frame, return and quality of the bond.I am trying to get my mind around to the 3 portfolio investment concept but am struggling because the bond component is not a structured as I will lose control in contrast to my individual purchase of each bond. To date I have not had any company or bank go bad and they have performed as I anticipated when I invested in them.Given my age I was thinking about using the 3 fund approach with 70% in bonds just as I have been doing with my existing portfolio . Is there something I am missing as I am uncomfortable about buying an index fund and losing control of my "anticipated" return that I get from individual bonds?
I do not invest in individual stocks with the exception of about 7 companies that are large cap with excellent dividends, and for this reason I would use a fund for a small portion of my portfolio but probably not an index fund. All of the investment I am discussing are in my IRA.

Johm221122
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Re: I am 72

Post by Johm221122 » Sat Aug 25, 2012 8:29 am

woodedareas wrote:I was asked about my portfolio and asset allocation . I have about 80% in bonds. But they are all corporate bonds, rated about AA and provide a stepped return. They are mostly subject to call after one year. lately very few of these investments are available. I have never used a bond fund as it seemed mor indefinite in terms of return. By purchasing individual bonds I was able to control my time frame, return and quality of the bond.I am trying to get my mind around to the 3 portfolio investment concept but am struggling because the bond component is not a structured as I will lose control in contrast to my individual purchase of each bond. To date I have not had any company or bank go bad and they have performed as I anticipated when I invested in them.Given my age I was thinking about using the 3 fund approach with 70% in bonds just as I have been doing with my existing portfolio . Is there something I am missing as I am uncomfortable about buying an index fund and losing control of my "anticipated" return that I get from individual bonds?
I do not invest in individual stocks with the exception of about 7 companies that are large cap with excellent dividends, and for this reason I would use a fund for a small portion of my portfolio but probably not an index fund. All of the investment I am discussing are in my IRA.
Use cds ,I bonds,individual bonds or a short term bond fund instead of total bond market(you have to accept yield, it is terrible)

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