One Fund? Really?

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Pax
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One Fund? Really?

Post by Pax » Tue Apr 25, 2017 9:10 am

One Fund? Really?
Do Bogleheads have for example $1,000,000 in a single fund like the FXIFX Fidelity Freedom® Index 2030 Fund - Investor Class ER=0.15 ?
I am now 57 years old. I have been selling all my high ER positions and I need to rebalance my portfolio (50-70 stocks/ 50-30 bonds -- I have not decided on the percentage, I am getting 70/30 in the VG and Fifo calculators -- which seems risky).

I diverted, sorry. Would it be OK to have 90% of the retirement money in one single fund at age 57 and beyong through the retirement years?

Your advice is appreciated.

Initially, was thinking of a Three Fund Portfolio using ETF but the simplification factor and the no need to manually re-balance is significant. I read somewhere here in the forum that the 3 or 4 fund portfolio would have a lower Expense Ration (ER).

However, I have Fidelity as my main account and I was putting together this 3 fund portfolio and the ER add up to 0.18, for example.

Three-Fund Portfolio
35% Fidelity Total Market Index Fund (FSTVX) ER=0.45 or iShares Core S&P Total U.S. Stock Market ETF (ITOT) ER=0.03
35% Fidelity Total International Index Fund (FTIPX)ER=0.11 or iShares Core MSCI Total International Stock (IXUS) ER=0.11
30% Fidelity U.S. Bond Index Fund (FSITX) or iShares Core U.S. Aggregate Bond ETF (AGG) ER=0.05

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bottlecap
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Re: One Fund? Really?

Post by bottlecap » Tue Apr 25, 2017 9:13 am

Yes, one fund is okay. It's really not one fund, but a fund or funds.

JT

donaldfair71
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Re: One Fund? Really?

Post by donaldfair71 » Tue Apr 25, 2017 9:15 am

Pax wrote:One Fund? Really?
Do Bogleheads have for example $1,000,000 in a single fund like the FXIFX Fidelity Freedom® Index 2030 Fund - Investor Class ER=0.15 ?
I am now 57 years old. I have been selling all my high ER positions and I need to rebalance my portfolio (50-70 stocks/ 50-30 bonds -- I have not decided on the percentage, I am getting 70/30 in the VG and Fifo calculators -- which seems risky).

I diverted, sorry. Would it be OK to have 90% of the retirement money in one single fund at age 57 and beyong through the retirement years?

Your advice is appreciated.

Initially, was thinking of a Three Fund Portfolio using ETF but the simplification factor and the no need to manually re-balance is significant. I read somewhere here in the forum that the 3 or 4 fund portfolio would have a lower Expense Ration (ER).

However, I have Fidelity as my main account and I was putting together this 3 fund portfolio and the ER add up to 0.18, for example.

Three-Fund Portfolio
35% Fidelity Total Market Index Fund (FSTVX) ER=0.45 or iShares Core S&P Total U.S. Stock Market ETF (ITOT) ER=0.03
35% Fidelity Total International Index Fund (FTIPX)ER=0.11 or iShares Core MSCI Total International Stock (IXUS) ER=0.11
30% Fidelity U.S. Bond Index Fund (FSITX) or iShares Core U.S. Aggregate Bond ETF (AGG) ER=0.05
1.

It is okay to have 100% of your portfolio tied up into one fund.

2. You have to take the weighted averages of your 3 fund, not the total. In your case, the weighted average is .06%... So you would save .09 by going separate vs the all in one.

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Re: One Fund? Really?

Post by The Wizard » Tue Apr 25, 2017 9:16 am

In a tax deferred account, a single balanced fund like this might be OK.
But not in your personal taxable account, since it makes it difficult to harvest tax losses, plus you may want tax-exempt bonds rather than nominal bonds...
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Re: One Fund? Really?

Post by 123 » Tue Apr 25, 2017 9:23 am

If you can find a fund that meets your asset allocation and needs a single fund really works great in retirement accounts. With regard to Vanguard funds many could pick a Target Retirement fund if they find one that is suitable for them and they want an ongoing glide path. For others a LifeStrategy fund might work if they want a stable asset allocation.
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BL
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Re: One Fund? Really?

Post by BL » Tue Apr 25, 2017 9:30 am

You need to consider taxes when you are investing in taxable. If you will have other income, the bond portion should maybe be in muni bonds to save on taxes. Or, you could have more bonds in 401k or IRA. You would get increasing bond % in time. If you are in the 15% tax bracket, it would probably be fine to have a single fund. What is your tax bracket?

I know Vanguard has one tax-managed balanced fund, about 50/50 stock/bond that might work fine. Also I hear they have good muni bonds. Can you get any for your state, to save on state tax as well?

If you have 3 different ERs, the final weighted average ER will never be higher that the highest one, nor lower than the lowest ER.

The 3-fund shouldn't be too hard to keep somewhat balanced. If your bond fund is 5-10% above or below the desired amount, then some rebalancing might be done. Do you have IRAs where you could do rebalancing since that would have no tax consequences? There are even some folks who never rebalance!

Age minus 20 is pretty aggressive. I would not have less than 30% bonds at your age, and 50% might be suitable for retirement.
Last edited by BL on Tue Apr 25, 2017 9:41 am, edited 1 time in total.

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knpstr
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Re: One Fund? Really?

Post by knpstr » Tue Apr 25, 2017 9:31 am

yes, 1 fund can track thousands of securities.
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retiredjg
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Re: One Fund? Really?

Post by retiredjg » Tue Apr 25, 2017 9:34 am

One widely diversified fund is fine if....
  • -your portfolio is all in tax-advantaged accounts; one fund is OK, but may be less than optimal, if it is in a taxable account and you are not in a very low tax bracket

    -your brokerage offers the one you want without paying fees to trade; since you are at Fidelity a Vanguard fund is not your best choice
The only one I know about at Fido would be one of the Fidelity Freedom INDEX Funds (not the regular Fidelity Freedom Fund). That would be a good choice if you realize it will migrate toward a higher bond allocation over the years. If you don't want that, every 5 or so years, you'd have to exchange into the next younger fund to maintain the stock to bond ratio desired.

https://www.fidelity.com//fund-screener ... pA=0%2C0.5

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Re: One Fund? Really?

Post by Jack FFR1846 » Tue Apr 25, 2017 9:35 am

Pax wrote: 35% Fidelity Total Market Index Fund (FSTVX) ER=0.45 0.045% or iShares Core S&P Total U.S. Stock Market ETF (ITOT) ER=0.03
35% Fidelity Total International Index Fund premium (FTIPX)ER=0.11 FSIVX 0.08% or iShares Core MSCI Total International Stock (IXUS) ER=0.11
30% Fidelity U.S. Bond Index Fund (FSITX) 0.05% or iShares Core U.S. Aggregate Bond ETF (AGG) ER=0.05
I made some corrections to the Fidelity mutual funds above. I think these are absolutely fine and I hold them.

Don't sweat so much over rebalancing. I do understand that a lot of people get all whigged out thinking they have to rebalance to the penny at the perfect time. You don't. If you do it once on your birthday (what I do), that's great. If you miss doing it for 5 years.....who cares.

If you buy and hold, I see no difference between the mutual fund and the ETF. I have both. At Schwab, I bought SCHB and SCHX (similar to total stock and 500) because at the time, they were cheaper than equal Schwab. At TDAmeritrade, I hold VTI because I get a Vanguard ETF at the same ER that I'd pay at Vanguard but get 24/7 support by phone, email or online chat (which is my preferred method).
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Re: One Fund? Really?

Post by Texanbybirth » Tue Apr 25, 2017 9:57 am

All mid-five figures of my 401k is in one fund, Vanguard TD2050 fund. It's the only mutual fund I plan to own because I trust Vanguard (right now) to know more about this stuff than I do. And, if I croak it's easier for my wife to understand what's going on.


(None of this means I won't monitor the fund going forward to keep Vanguard accountable.)

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Re: One Fund? Really?

Post by High Income Parent » Tue Apr 25, 2017 10:08 am

While one fund seems risky at first glance the diversity is much greater than a lot of people advocate in a fund like you mentioned.
I guess the only risk is the one company managing the fund but pick a reputable one with a strong track record of financial responsibility and you can't do much better than that.
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Re: One Fund? Really?

Post by pkcrafter » Tue Apr 25, 2017 10:18 am

Pax wrote:One Fund? Really?
Do Bogleheads have for example $1,000,000 in a single fund like the FXIFX Fidelity Freedom® Index 2030 Fund - Investor Class ER=0.15 ?
I am now 57 years old. I have been selling all my high ER positions and I need to rebalance my portfolio (50-70 stocks/ 50-30 bonds -- I have not decided on the percentage, I am getting 70/30 in the VG and Fifo calculators -- which seems risky).
I agree, 70/30 is too high. Lower AA when heading into retirement in order to reduce risk/volatility because you may run into "bad sequence of returns risk," which means a market crash at the wrong time. Posters have mentioned the tax issue, but one way around that is to use Vanguard tax-managed balanced (50/50) in taxable and a freedom fund in all tax-advantaged accounts.

Paul
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Re: One Fund? Really?

Post by Athenaios » Tue Apr 25, 2017 10:22 am

In terms of asset allocation, I have no trouble with one fund.

In terms of actual practice -- account security, human error, computer error, failure to match indices, dubious accounting practices -- I would not entrust an overwhelming percentage of my capital to a single brokerage house, let alone a single fund.

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Re: One Fund? Really?

Post by oldcomputerguy » Tue Apr 25, 2017 10:33 am

Jack FFR1846 wrote:
Pax wrote: 35% Fidelity Total Market Index Fund (FSTVX) ER=0.45 0.045% or iShares Core S&P Total U.S. Stock Market ETF (ITOT) ER=0.03
35% Fidelity Total International Index Fund premium (FTIPX)ER=0.11 FSIVX 0.08% or iShares Core MSCI Total International Stock (IXUS) ER=0.11
30% Fidelity U.S. Bond Index Fund (FSITX) 0.05% or iShares Core U.S. Aggregate Bond ETF (AGG) ER=0.05
I made some corrections to the Fidelity mutual funds above. I think these are absolutely fine and I hold them.
Just a nitpick, both FTIPX and FSIVX are Premium class. These two funds track different indices; FTIPX tracks MSCI ACWI ex-US Investable Market, which contains 21% emerging markets and 7% Canadian markets, plus some mid- and small-cap. FSIVX tracks MSCI EAFE, which contains no emerging markets nor Canadian holdings and is mostly large-cap (with less than 10% mid-cap and no small-cap). Both are good funds, it just matters depending on what one actually wishes to hold in their international allocation.
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Pax
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Re: One Fund? Really?

Post by Pax » Tue Apr 25, 2017 11:22 am

I am a happily overwhelmed and thankful for your quick replies and ideas! As I am at work, I will re-think and post tonight.

In the meantime, here are answers to some of the questions posted:

(1) Wow!
One fund...still wrapping my head around this.. :)

(2) Some more info (sorry for the columns misalignment)
Emergency funds : 9 months of expenses
Debt : Mortgage
Tax Filing Status : Single
Tax Rate : 13.46% Federal (effective rate from 1040) (Tax Bracket 25%)
State of Residence : Maryland (MD) 4.75% (from MD Website)
Current Age : 57
Wish to Retire at Age : 68
Size of portfolio : $1.2M (Tax-advantaged)

(3) Weighted average ER
I totally missed using the final weighted average ER for the 3 funds. Weighed is 0.06%. So this is a good argument for the 3 fund portfolio.

(4) Tax-Advantaged accounts
I am working wiht my Tax-Advantaged accounts at this point, i.e. Traditional IRA, ROTH IRA, company 401K and HSA. When I leave work I could roll- over the 401K and $34K cash balance to the Traditional IRA and use the one fund ; and for now use the 3 fund portfolio accross the 401K, ROTH and HSA.

(5) AA of 70/30
I need to work on this. Maybe 60 stocks/ 30 bonds or 50/50?

Thanks again.

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David Jay
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Re: One Fund? Really?

Post by David Jay » Tue Apr 25, 2017 11:35 am

Pax wrote: (5) AA of 70/30
I need to work on this. Maybe 60 stocks/ 30 bonds or 50/50?
If you choose 60/30, can I have the extra 10%? :D
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jalbert
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Re: One Fund? Really?

Post by jalbert » Tue Apr 25, 2017 11:54 am

If you look at the holdings of these 1-fund solutions, they are a fund of funds, generally holding more than 3 funds.

Thus, the way to think about them is that they are a managed portfolio of funds. They hold a collection of funds, and the fund provider takes care of establishing and maintaining the asset allocation.

Compared to a low cost index fund portfolio, you might only pay an extra .07 or .08 percentage points for this management if you select an index-fund-based fund of funds. If most of your assets are in one of the accounts, such as the 401K, it might be convenient to use a 1-fund solution for the IRAs so you can manage the 401K independently of the other accounts. If your 401K has good options, it might be convenient to roll the traditional IRA into the plan to consolidate the tax-deferred assets.

Would you be fine with a possible 30% reduction in asset value in a bear market? If not, 60% stocks is too high.
Risk is not a guarantor of return.

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Re: One Fund? Really?

Post by lostdog » Tue Apr 25, 2017 12:14 pm

If you have a taxable account that will be part of your portfolio I would go with your 3 fund portfolio. It makes things much more simple.

If a taxable account is not in the picture either or will work. If you value simplicity more than the .07% or .08% saved then go with the one fund portfolio and you're set for life. If you decide to go with Vanguard pick Life Strategy Moderate Growth(60/40). When you get up there in age change to Life Strategy Conservative Growth(40/60). This is just my opinion. Super simple solution.

Note that I would not go with a one fund solution if a taxable account is involved.

Cheers
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cjcerny
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Re: One Fund? Really?

Post by cjcerny » Tue Apr 25, 2017 12:22 pm

If you will be forced to withdraw from this fund on a yearly basis at some point (RMD), I do not like the 1 fund idea. I think it would be better to have two funds with a low correlation so that you will always have a fund that is doing well that year to withdraw that RMD from.

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Re: One Fund? Really?

Post by RadAudit » Tue Apr 25, 2017 12:27 pm

Pax wrote:(1) Wow!One fund...still wrapping my head around this..
I like to think of it as six to eight of "my guys" taking care of the assets in the portfolio and the one fund concept is providing direction on asset allocation. That rationalization seems as good as any.
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Re: One Fund? Really?

Post by avalpert » Tue Apr 25, 2017 1:35 pm

cjcerny wrote:If you will be forced to withdraw from this fund on a yearly basis at some point (RMD), I do not like the 1 fund idea. I think it would be better to have two funds with a low correlation so that you will always have a fund that is doing well that year to withdraw that RMD from.
Why would this matter at all?

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Re: One Fund? Really?

Post by jalbert » Tue Apr 25, 2017 8:20 pm

cjcerny wrote:If you will be forced to withdraw from this fund on a yearly basis at some point (RMD), I do not like the 1 fund idea. I think it would be better to have two funds with a low correlation so that you will always have a fund that is doing well that year to withdraw that RMD from.
If you also rebalance the separate funds, then there is no difference.
Risk is not a guarantor of return.

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BL
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Re: One Fund? Really?

Post by BL » Tue Apr 25, 2017 10:21 pm

I loved having a balanced fund in my small IRA. No thinking required when RMDs, QCDs, and rollovers are done.

It might be possible that you could save a bit by separate funds, but then when you rebalance them you are back to the same AA anyway.

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Pajamas
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Re: One Fund? Really?

Post by Pajamas » Tue Apr 25, 2017 11:13 pm

Not only is that one fund actually a small portfolio of funds, each of those funds in the portfolio contains many different individual stocks or bonds.

Pax
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Re: One Fund? Really?

Post by Pax » Wed Apr 26, 2017 9:37 am

State Street Target Retirement FDs are the only available in my 401K
My 401K only has State Street Target Retirement Funds. Are they any good? Also, I notice that the 2030 is a 70 stocks / 30 bonds portfolio. And from what the feedback that I have received a 60/40 or 50/50 has been recommended. I wonder why these target funds seem more aggressive. I would have expect that coming from a broker they would be more conservative, instead.

In any case are State Street Target Retirement Funds as good as VG and Fidos? Are they reputible? And does it matter? I ask because I have not heard from State Street much and that's my only choice.

One Fund Idea Applied ?
So it looks like I could do 3 one funds: 1 - Traditional IRA (Fidelity), 1 - ROTH IRA (Fidelity), 1 - 401k (State Street), 1-HSA (TBD)
or I could do this: Pick Target with Higher Stocks on the Traditional IRA (Fidelity) and ROTH IRA (Fidelity). And use 401k (BONDS) and HSA (Cash/BONDS) to balance it out.

State Street Target Retirement 2025
Target-Date 2025 ER= 0.15 65 stocks / 35 bonds - that only 8 years from now!
Fund Category Average
Cash 4.21% 5.47%
Convertibles 0.01% 0.12%
Domestic Bond 31.13% 28.74%
Preferred Stock 0.01% 0.11%
Foreign Bond 2.55% 3.70%
Foreign Stock 24.87% 19.63%
Others 0.20% 3.18%
Domestic Stock 37.02% 39.04%

State Street Target Retirement 2030
Target-Date 2030 ER= 0.15 70 stocks / 30 bonds -
Fund Category
Average
Cash 4.30% 4.36%
Convertibles 0.00% 0.08%
Domestic Bond 24.52% 21.36%
Preferred Stock 0.01% 0.08%
Foreign Bond 1.66% 2.52%
Foreign Stock 27.94% 22.99%
Others 0.17% 3.56%
Domestic Stock 41.39% 45.06%

retiredjg
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Re: One Fund? Really?

Post by retiredjg » Wed Apr 26, 2017 12:44 pm

Pax wrote: I wonder why these target funds seem more aggressive.
This is common and is said to have occurred because of a "return war" between the different companies. Pick a target fund by the stock to bond ratio, not the date in the name.
In any case are State Street Target Retirement Funds as good as VG and Fidos?[/color][/b] Are they reputible? And does it matter? I ask because I have not heard from State Street much and that's my only choice.
State Street funds are reputable and fine. It is the cost that matters and the choices in your plan are low cost.
So it looks like I could do 3 one funds: 1 - Traditional IRA (Fidelity), 1 - ROTH IRA (Fidelity), 1 - 401k (State Street), 1-HSA (TBD)
This is how it probably should be done. In each case, pick the fund by the stock to bond ratio. State Street and Fidelity may or may not have the same date in the name. At Fidelity don't accidentally buy the non-index version.

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Re: One Fund? Really?

Post by jalbert » Wed Apr 26, 2017 2:18 pm

When the all-in-one funds don't fully fit your needs, it may be simpler to use individual funds. Holding ITOT, IXUS, and AGG (or ITOT, IXUS, VGIT, and TIP) or fidelity equivalents in the 401k might be easier. Using an earlier year target date fund is fine, but then you still have to watch the glide path to be sure it continues to be what you want.
Risk is not a guarantor of return.

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Re: One Fund? Really?

Post by cjcerny » Wed Apr 26, 2017 2:26 pm

avalpert wrote:
cjcerny wrote:If you will be forced to withdraw from this fund on a yearly basis at some point (RMD), I do not like the 1 fund idea. I think it would be better to have two funds with a low correlation so that you will always have a fund that is doing well that year to withdraw that RMD from.
Why would this matter at all?
Math-wise, it doesn't matter. Psychologically, I think it's a good trick to play on yourself. If your 60/40 balanced fund is down 20% for the year, it's tough to take the RMD from a fund that is down 20%. If you can take the RMD from a fund that is up every year regardless, it's just easier to do, even if you know in the back of your mind that it is a trick. Our society is replete with stuff like this and it still works, even though we know it is a trick.

Pax
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Re: One Fund? Really?

Post by Pax » Wed Apr 26, 2017 4:16 pm

Just want to thank all of you! I have cashed quit a bit of my positions in preparationto make this move ' a la boglehead ' and I should be ready to formulate my final portfolios options: one fund and 3-fund soon. I will, however, take several weeks more before I take action. I have a vacation next week and I want to relax and deal with this when I get back. I have been up late a night in the home office going back and forth with all this.

LTC and Annuities
I also need to look at Long Tem Care, as well. And see if annuities can play a part in my retirement plan. On annuites, I wonder what happens if the insurance company goes belly up and with the TLC I am concerned about premiums rising. I think there are threads on LTC in Boggleheads waiting for me to read them!

And I have to tell you.. You ROCK!! :sharebeer

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Re: One Fund? Really?

Post by alex_686 » Wed Apr 26, 2017 4:26 pm

Pax wrote:On annuites, I wonder what happens if the insurance company goes belly up


While not risk free, life insurance is very low risk. State regulators provided strict guidelines on actuarial assumptions and expected returns on assets. The insurance company's models must be reviewed and approved. In short, everybody is playing more or less from the same rule book. Assets are held in a segregated account which should be sufficient to cover your policy even if the company went bankrupt. The insurance company is there to provide a backstop in case their model falls apart - for example a long period of lower than expected interest rates - like today. If that happens then you may only receive a partial payout. But as I have said before, this is a very low risk compared to other risks out there.

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Re: One Fund? Really?

Post by abuss368 » Wed Apr 26, 2017 4:35 pm

I would have no problem with $1 MILLION in a LifeStrategy or Target fund.
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Re: One Fund? Really?

Post by retiredjg » Wed Apr 26, 2017 4:38 pm

Pax wrote: And see if annuities can play a part in my retirement plan.
If you mean investing now in something called an annuity, the answer is almost certainly no. Most (all?) are high cost vehicles that give a nice kickback to the salesperson and little benefit to the customer. Better to invest your money in mutual funds.

If you mean purchasing a SPIA (like buying a pension) when you are in retirement, yes...that kind of annuity can certainly play a part in a good retirement plan.

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Re: One Fund? Really?

Post by Dandy » Wed Apr 26, 2017 7:17 pm

It depends on the fund. A nicely balanced fund that fits closely with your desired allocation and risk tolerance is fine. You may need to revisit as you age during retirement and your expenses or risk tolerance changes. I find it hard to find a single fund that I would be comfortable with - too many compromises -- at least for now.

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Re: One Fund? Really?

Post by joe8d » Wed Apr 26, 2017 8:33 pm

100% TSM would be ok.
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Dandy
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Re: One Fund? Really?

Post by Dandy » Wed Apr 26, 2017 9:46 pm

100% TSM would be ok.
Not for me or for most people. It is my largest holding though.

Pax
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Re: One Fund? Really?

Post by Pax » Thu Apr 27, 2017 9:40 am

joe8d wrote:100% TSM would be ok.
Would that be too risky for 57 year old?

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Re: One Fund? Really?

Post by retiredjg » Thu Apr 27, 2017 9:46 am

Pax wrote:
joe8d wrote:100% TSM would be ok.
Would that be too risky for 57 year old?
Probably. Have you decided what your stock to bond ratio should be? If not, you need to stop and back up and take care of that first.

Pax
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Re: One Fund? Really?

Post by Pax » Thu Apr 27, 2017 10:13 am

retiredjg wrote:
Pax wrote:
joe8d wrote:100% TSM would be ok.
Would that be too risky for 57 year old?
Probably. Have you decided what your stock to bond ratio should be? If not, you need to stop and back up and take care of that first.
That's the most important decision, right?
I started thinking 70 stocks / 30 bonds but now I down to 60/40 and considering something a little lower 55/45 or even 50/50.
I feel like a child learning to know "what I want". Historically, I have been very risk tolerant but the way I see it because I am 57 and since I want to retire at 68, I only have 11 years of tolerance to large market swing (i.e, probbaly only one more crash) before I need the money to live without working.
Actually, maybe I need to realize that I will still be investing during the initial 5-10 years of my retirement, right?
I cannot thank you enough for sheding some light wth your replies! Fiat Lux! :idea:

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Re: One Fund? Really?

Post by retiredjg » Thu Apr 27, 2017 4:21 pm

Pax wrote:That's the most important decision, right?
I started thinking 70 stocks / 30 bonds but now I down to 60/40 and considering something a little lower 55/45 or even 50/50.
I think 70/30 is a little aggressive for a 57 year old, but even Vanguard has been known to recommend something in that neighborhood with their target funds. Opinions vary. I would suggest 60/40 (or maybe 65/35) but not lower, while you are working.

Why? You still need to be trying to grow the portfolio the portfolio a little. When you get down into the 55% stock and 50% stock range, that's getting closer to preserving what you have with some growth but not much.
I feel like a child learning to know "what I want". Historically, I have been very risk tolerant but the way I see it because I am 57 and since I want to retire at 68, I only have 11 years of tolerance to large market swing (i.e, probbaly only one more crash) before I need the money to live without working.
As you reach retirement, you should try to already be IN a preservation portfolio. Maybe 40% stock. Maybe 50% stock. In other words, no matter where you start today, you need a plan to "glide" down to preservation mode a few years BEFORE you actually need the money. You don't want to arrive at retirement day and find your portfolio has shrunk too much because of a crash.
Actually, maybe I need to realize that I will still be investing during the initial 5-10 years of my retirement, right?
I would think you will be investing for the rest of your life, not just the initial 5 to 10 years of retirement.


Whatever number you decide on, it appears your portfolio can be achieved in two different ways.

First, you can hold a target fund in the 401k, Roth IRA and tIRA because it appears there is a low cost target fund available in each location. In each case you would pick the target fund by the stock to bond ratio you want. Ignore the date in the name of the fund. In fact, you may end up with different dates in different company's funds.

Or second, you can use the individual mutual funds (or ETFs if you prefer) you already identified and build the portfolio that way. This assumes that at least some of those funds are available in your 401k. This will be a little lower cost but you will have to do the work of keeping it balanced at least once a year.

Either approach is fine.

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Re: One Fund? Really?

Post by blaugranamd » Fri Apr 28, 2017 9:39 am

Don't let the notion of "one fund" fool you. You have to get a good understanding what what a fund is to overcome this mental road block. If you own one fund that holds 10k stocks and get 7% return per year rather than owning 3 funds that own the same stocks split into three groups that on aggregate get 7% return you still get the same return. I think what attracts people to the more funds instinctively is seeing the sub categories pulling "higher" returns and it feels like you're missing out when in reality you're capturing those returns just like everyone else.

Yes there are other more complex tax strategy based allocation but not everyone is interested or capable of doing that. If you looked at all the people on this board with three and four fund portfolios, myself included, they're probably not that different from a VG or Fido TR index fund.
-- Don't mistake more funds for more diversity: Total Int'l + Total Market = 7k to 10k stocks -- | -- Market return does NOT = average nor 50th percentile, rather 80-90th percentile long term ---

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Re: One Fund? Really?

Post by blaugranamd » Fri Apr 28, 2017 9:50 am

Pax wrote: I am 57 and since I want to retire at 68, I only have 11 years of tolerance to large market swing (i.e, probbaly only one more crash) before I need the money to live without working.
You are misleading yourself in a very common way. Your investment horizon is NOT 11 years, but rather to your life expectancy. You will hopefully have 20+ years in retirement as well thus 31 more years of investing. If you have the equivalent of 5-10 years worth of expenses in cash and low risk bonds, ie the 30-40 percent of your portfolio, your stocks will survive a market crash that takes 10 years to recover it's value. While this is a bit of an over simplification, it's the entire point of the glide path concept and shifting to a more conservative allocation.
-- Don't mistake more funds for more diversity: Total Int'l + Total Market = 7k to 10k stocks -- | -- Market return does NOT = average nor 50th percentile, rather 80-90th percentile long term ---

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Re: One Fund? Really?

Post by Taylor Larimore » Fri Apr 28, 2017 9:51 am

Pax:

You are on the right track. Read my Simplicity link below.

Congratulations and best wishes.

Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

Pax
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Re: One Fund? Really?

Post by Pax » Fri Apr 28, 2017 12:50 pm

Taylor:

I am honored that you replied to my post!
And Just a wonderful post on Simplicity!

I am getting there, I am still between the One Fund and Three-Fund (below). I see that the 3-Fund is actually a 1-Fund plus 3-Fund. :oops:
I am almost ready to flip a coin :)

One Fund
401k - State Street Global Advisors Target Retirement 2025 Fund ( SSBSX ?) 0.15%
Fidelity Traditional IRA - 100% Fidelity Freedom 2025 Index Fund (FQIFX) 0.15%
Fidelity Roth IRA - 100% Fidelity Freedom 2025 Index Fund (FQIFX) 0.15%
HSA - 100% Vanguard Total Bond Market Index Fund Investor Share (VBMFX) 0.16% (plus $72/yr Alliant CU Invst Fee)

Three Fund and One Fund
Fidelity Traditional and ROTH IRA (Three Fund)
35% Fidelity Total Market Index Fund (FSTVX) ER=0.45 0.045% or iShares Core S&P Total U.S. Stock Market ETF (ITOT) ER=0.03
35% Fidelity Total International Index Fund premium (FTIPX)ER=0.11 (or FSIVX 0.08%) or iShares Core MSCI Total Intl Stock (IXUS) ER=0.11
30% Fidelity U.S. Bond Index Fund (FSITX) 0.05% or iShares Core U.S. Aggregate Bond ETF (AGG) ER=0.05
401k (One Fund - State Street Global Advisors Target Retirement 2025 Fund ( SSBSX ?) 0.15%
HSA (One Fund) - 100% Vanguard Total Bond Market Index Fund Investor Share (VBMFX) 0.16% (plus $72/yr Alliant CU Invst Fee)

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Re: One Fund? Really?

Post by Pax » Fri Apr 28, 2017 12:59 pm

blaugranamd wrote:
Pax wrote: I am 57 and since I want to retire at 68, I only have 11 years of tolerance to large market swing (i.e, probbaly only one more crash) before I need the money to live without working.
You are misleading yourself in a very common way. Your investment horizon is NOT 11 years, but rather to your life expectancy. You will hopefully have 20+ years in retirement as well thus 31 more years of investing. If you have the equivalent of 5-10 years worth of expenses in cash and low risk bonds, ie the 30-40 percent of your portfolio, your stocks will survive a market crash that takes 10 years to recover it's value. While this is a bit of an over simplification, it's the entire point of the glide path concept and shifting to a more conservative allocation.
Well, thanks. This makes me lean toward taking (a little more) risk now to keep my funds growing. 55 Stock/45 bond -> to 60/40.

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Taylor Larimore
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Investment horizon?

Post by Taylor Larimore » Fri Apr 28, 2017 3:08 pm

Your investment horizon is NOT 11 years, but rather to your life expectancy.
Bogleheads:

It should be longer than that for planning purposes. Half of us will live beyond the "life expectancy" tables.

Best wishes.
Taylor (age 93)
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Investment horizon?

Post by Pax » Fri Apr 28, 2017 3:28 pm

Taylor Larimore wrote:
Your investment horizon is NOT 11 years, but rather to your life expectancy.
Bogleheads:

It should be longer than that for planning purposes. Half of us will live beyond the "life expectancy" tables.

Best wishes.
Taylor (age 93)
That's outsanding. Dad was 94 when he passed and Mom is 97 and still alive!

So, would you agree than, then it would be OK to take a little more risk now to keep my funds growing?

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Re: One Fund? Really?

Post by MnD » Fri Apr 28, 2017 3:43 pm

pkcrafter wrote: I agree, 70/30 is too high. Lower AA when heading into retirement in order to reduce risk/volatility because you may run into "bad sequence of returns risk," which means a market crash at the wrong time. Posters have mentioned the tax issue, but one way around that is to use Vanguard tax-managed balanced (50/50) in taxable and a freedom fund in all tax-advantaged accounts.
Paul
I think this reflects recency bias when during the past couple of sharply declining stock markets were accompanied by declining interest rates and bond holding appreciation.In contrast, higher bond allocations just made things worse for people retiring in 1965-1969, all start years that failed at 50:50 and the 4% rule.

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Re: One Fund? Really?

Post by retiredjg » Fri Apr 28, 2017 4:06 pm

Pax wrote:I am almost ready to flip a coin :)
Neither of these is a bad idea. Both are good ideas. It just depends on whether you want the lower cost or the less management on your part - either is low cost enough.

I would mention that the one with individual funds has a higher allocation to international. Half and half is a lot. That is not the same as too much but be sure you are really committed to that before going there.

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Re: One Fund? Really?

Post by BogleMelon » Fri Apr 28, 2017 4:10 pm

When you own "1 world", that means you can not get more diversified!
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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Re: One Fund? Really?

Post by grabiner » Fri Apr 28, 2017 10:05 pm

Pax wrote:My 401K only has State Street Target Retirement Funds. Are they any good?
They look very good.
Also, I notice that the 2030 is a 70 stocks / 30 bonds portfolio. And from what the feedback that I have received a 60/40 or 50/50 has been recommended.
State Street's numbers look close to normal, but what matters is your own risk tolerance. Nothing forbids you from choosing a fund five years before or after your planned retirement date, in order to take less or more risk than the fund company believes is appropriate for the average investor.
State Street Target Retirement 2025
Target-Date 2025 ER= 0.15 65 stocks / 35 bonds
These are very good numbers. Vanguard's corresponding fund has 0.14% expenses, and is also 65% stock.
that only 8 years from now!
But you won't take all the money out in 8 years if you retire in 2025. If you live 30 years in retirement, you will take the money out in 8-38 years, and the large part of the money you won't touch for 15 years can be invested with a higher risk level.

Vanguard has this logic with its own target retirement funds; they continue to become more conservative until seven years after the target date, when they merge into the 30%-stock Target Retirement Income. Vanguard still has a 2010 fund which is 31% stock, and which will merge out of existence in a few months.
State Street Target Retirement 2030
Target-Date 2030 ER= 0.15 70 stocks / 30 bonds
Vanguard's equivalent has the same 0.15% expense ratio, and 72% stock.
Wiki David Grabiner

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