Forbes Article - Best Vanguard funds for retirement

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Faisal
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Forbes Article - Best Vanguard funds for retirement

Post by Faisal » Tue Feb 14, 2017 9:20 am

http://www.forbes.com/sites/michaelfost ... 76d8034c75

Since I am looking to invest in Vanguard and following the bogleheads philosophy, would you agree with the article linked above?

livesoft
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Re: Forbes Article - Best Vanguard funds for retirement

Post by livesoft » Tue Feb 14, 2017 9:23 am

No, I would not want to own a single one of the funds mentioned in that article. Furthermore, even Vanguard doesn't use a single one of those funds in its Target Retirement series of funds nor in its LifeStrategy series of funds.
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Faisal
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Re: Forbes Article - Best Vanguard funds for retirement

Post by Faisal » Tue Feb 14, 2017 9:29 am

Interesting. Could it be that these are more for building up value for future retirement?

dbr
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Re: Forbes Article - Best Vanguard funds for retirement

Post by dbr » Tue Feb 14, 2017 9:31 am

The S&P 500 fund is a totally possible investment selection, but most people here would choose the total stock fund. The other funds listed might be chosen by some people but wouldn't be the fundamentally indicated choice, not what I invest in, and not, as mentioned above, what Vanguard uses in their blended funds.

The idea that these are the "best" funds for retirement is nonsense. In any case someone choosing those funds had better understand thoroughly how they work.

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Re: Forbes Article - Best Vanguard funds for retirement

Post by dbr » Tue Feb 14, 2017 9:31 am

Faisal wrote:Interesting. Could it be that these are more for building up value for future retirement?
No

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cinghiale
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Re: Forbes Article - Best Vanguard funds for retirement

Post by cinghiale » Tue Feb 14, 2017 9:38 am

Take a close look right under the writer's byline:
I write on high yield assets that deliver a reliable income stream
So that's the lens through which his makes his recommendations. The guy likes yield. Do you? Is achieving a high yield an important component of your investment and retirement planning?

Around 25% of my retirement assets are in Wellesley Income. If you type "Wellesley" into the top, right search box, you will find a number of recent threads about it. It is actively managed, and that is enough to disqualify it from consideration for some forum members. There's nothing wrong with the S&P 500 Index fund, though many (most?) of those who post here tend to favor the total stock index fund. And each of the other two recommended funds has its champions.

Here's the question: Why do your investment planning based on a brief article written by some twenty-something who is producing a catchy title and a recycled set of fund recommendations for a paycheck?
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jhfenton
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Re: Forbes Article - Best Vanguard funds for retirement

Post by jhfenton » Tue Feb 14, 2017 9:43 am

No. They are all decent funds, but they are hardly Vanguard's "best funds for retirement."

I own VFIAX in my HSA, but that's because it's the best of limited fund choices. All else being equal, I'd pick Vanguard Total Stock Market for my large-blend exposure.

I would never own either of the dividend funds. And if were ever to own a high-yield fund, it would be a fallen angel fund, not Vanguard's.

dbr
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Re: Forbes Article - Best Vanguard funds for retirement

Post by dbr » Tue Feb 14, 2017 9:51 am

The high yield bond fund had a NAV of 8.84 in 1980 and paid a monthly dividend of 0.09. In 2016 the NAV is 5.86 and the dividend is 0.028. With an inflation factor of 2.91 this is a loss of 77% of the principal and a loss of 90% of the income. That would not have been a good plan. The result is due to trying to withdraw more in yield than the investment produces in return, which over time destroys both the investment and the income and is (an admittedly extreme) example of why setting withdrawals by yield does not guarantee anything.

Note that if one did not withdraw the yield and had held high yield bonds as part of a portfolio one would have had an investment with a return of about 6% and a standard deviation of returns of about 15%. This is intermediate between conservative bonds and stocks and may or may not be a helpful component of a portfolio.

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2pedals
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Re: Forbes Article - Best Vanguard funds for retirement

Post by 2pedals » Tue Feb 14, 2017 10:01 am

Educate yourself

https://www.bogleheads.org/wiki/Boglehe ... art-up_kit

I don't understand why Forbes would recommend those investments for retirement first without talking about total market and total bond funds first. Sometimes 401K plans have limited investment options. If a LOW cost index S&P 500 is offered without a LOW cost total market fund that would be fine.

The 3 fund portfolio: "often recommended by Bogleheads attracted by "the majesty of simplicity" (John Bogle's phrase), and for those who want finer control and better tax-efficiency than they would get in a target date fund"

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

You should be concentrating your efforts as to what asset allocation (% stocks, %bond) you would be comfortable with.

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Re: Forbes Article - Best Vanguard funds for retirement

Post by wolf359 » Tue Feb 14, 2017 10:12 am

Interesting article. It reads like someone who believes in active management and traditional investment approaches. His criteria is high quality, high income, and low cost.

He picks the S&P 500 index because that's what he benchmarks everything against, and notes that it's very difficult to beat it.

The dividend strategy is a conservative active approach -- he is an equity analyst that regularly recommends individual dividend stocks. He recommends Vanguard's high dividend yield if you're following this strategy in a retirement account. He notes that it's not actually high dividend, but the stocks are high quality (remember, he's a stock picker.)

His other two recommendations are low-cost actively managed funds - junk bonds and Wellesley Income. He picks them because they perform well and are low cost (those two factors are probably related.)

He's not a Boglehead. His approach is not Boglehead. Forbes is not recommending this approach. Forbes notes that this is the opinion of the author.

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Re: Forbes Article - Best Vanguard funds for retirement

Post by ruralavalon » Tue Feb 14, 2017 10:22 am

Faisal wrote:http://www.forbes.com/sites/michaelfost ... 76d8034c75

Since I am looking to invest in Vanguard and following the bogleheads philosophy, would you agree with the article linked above?
No, I don't agree.

Vanguard 500 Index Fund and Wellesley Income Fund are plausible fund choices, but I would not even consider the high yield funds.
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dbr
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Re: Forbes Article - Best Vanguard funds for retirement

Post by dbr » Tue Feb 14, 2017 10:26 am

One could also argue that any article with "best" in the title is going to be worthless at best, and more likely actually harmful.

Now in defense of that, I recall Larry Swedroe once mentioning that his series of books got "best" in the titles not from his choice but because the published wanted to market them that way, and Larry's books are definitely not worthless.

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willthrill81
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Re: Forbes Article - Best Vanguard funds for retirement

Post by willthrill81 » Tue Feb 14, 2017 11:17 am

Faisal wrote:http://www.forbes.com/sites/michaelfost ... 76d8034c75

Since I am looking to invest in Vanguard and following the bogleheads philosophy, would you agree with the article linked above?
I think that Wellesley is an excellent choice for retirees due to its solid long-term returns and remarkably low volatility.

VFIAX would be fine as a portion of a retiree's portfolio, but I doubt that many would suggest that it comprise the majority of that portfolio.

My advice: browse this forum and forget Forbes for your investment advice.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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