Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

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alamander
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Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by alamander » Sun Apr 08, 2018 12:05 pm

About to rollover a profit sharing plan from microcorp to Vanguard. I was thinking of the LifeStrategy Conservative Growth Fund (VSCGX). But I happened to mention that to our TIAA advisor (we have TIAA from previous job); he said well, a single fund wouldn't be good because if the market is down you'd want to pull from the bond side during that month (or however long). But by definition I'd be drawing on the stock/bond mix. He wasn't criticizing Vanguard but the idea of a single fund in retirement rather than say, two funds (one stock, one bond). Does this point of view have validity, in your opinions?

123
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by 123 » Sun Apr 08, 2018 12:10 pm

I believe the LifeStrategy funds will likely try to maintain their asset allocation on a day-to-day basis so you have active re-balancing on a far more rigorous and consistent level than anyone would do as an individual.
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dbr
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by dbr » Sun Apr 08, 2018 12:15 pm

I understand also that he is wrong because the fund rebalances internally. You have to be caught with a large withdrawal at a time of very fast movement in the market to have a problem with this. I don't know if this is incompetence or lying on the part of that advisor.

2pedals
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by 2pedals » Sun Apr 08, 2018 12:31 pm

alamander wrote:
Sun Apr 08, 2018 12:05 pm
About to rollover a profit sharing plan from microcorp to Vanguard. I was thinking of the LifeStrategy Conservative Growth Fund (VSCGX). But I happened to mention that to our TIAA advisor (we have TIAA from previous job); he said well, a single fund wouldn't be good because if the market is down you'd want to pull from the bond side during that month (or however long). But by definition I'd be drawing on the stock/bond mix. He wasn't criticizing Vanguard but the idea of a single fund in retirement rather than say, two funds (one stock, one bond). Does this point of view have validity, in your opinions?
Not to me. You talking about trying self adjust asset allocation (AA) by reacting to market performance.

You need to consider your desire to maintain your AA without any intervention on your part. How important is that to you? LifeStrategy helps you achieve that for you automatically. If the market goes down your AA is readjusted. If the market goes up your AA is readjusted. If you withdraw :dollar your AA is maintained automatically. If your money is in a taxable account may not be tax efficient to do so. Your assets are to be rolled over into a tax deferred account, right?
Last edited by 2pedals on Sun Apr 08, 2018 9:02 pm, edited 1 time in total.

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ruralavalon
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by ruralavalon » Sun Apr 08, 2018 12:37 pm

In my opinion a LifeStrategy fund is a good idea, especially if only tax-advantaged accounts are involved. The advisor is wrong.
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michaelc
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by michaelc » Sun Apr 08, 2018 12:47 pm

I also have been considering transferring my Roth with TRP Capital Appreciation fund over to Vanguard and use either the 3 fund portfolio or Life Strategy Moderate Growth in a Roth.
But.....PRWCX (Capital Appreciation) has been such a phenomenal performer over the last 10 years with a 10 year return of 9.47%, and 11.29% since inception, why mess with a good thing?? Even with it higher .71% ER calculated, the fund EASILY has outperformed any of the Vanguard 3 fund index portfolios or any of the LS funds.

Can any booglehead give me good reason to switch to Vanguard with this performance from PRWCX??

http://performance.morningstar.com/fund ... ture=en_US

dbr
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by dbr » Sun Apr 08, 2018 1:06 pm

michaelc wrote:
Sun Apr 08, 2018 12:47 pm

Can any booglehead give me good reason to switch to Vanguard with this performance from PRWCX??
I don't accept labels whether "bogle" or "boogle," but the answer to your question is there is no reason a person should replace this fund with some particular set of Vanguard funds if the risk and return you expect for that fund meets your objectives as well as anything else. I do suggest ten years recent history is not a valid data set to estimate the future risk and return. There is enough uncertainty in investment returns that actual future performance of that fund could easily exceed or fall short of any of the LS funds. One certainty is that a 0.70% expense ratio is a constant headwind that Vanguard funds don't have, so if there is a strategy one part of it is to avoid excessive costs.

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cfs
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by cfs » Sun Apr 08, 2018 1:19 pm

Already then, getting back to Mister Alamander's question. I would not say that your adviser is trying to trick you, it is possible that he or she is not familiar with how Vanguard's LS funds are managed and re-balanced. Just do what you need to do, good luck with your investments, y gracias por leer ~cfs~
~ Member of the Active Retired Force since 2014 ~

John Z
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by John Z » Sun Apr 08, 2018 1:34 pm

alamander wrote:
Sun Apr 08, 2018 12:05 pm
He wasn't criticizing Vanguard but the idea of a single fund in retirement rather than say, two funds (one stock, one bond). Does this point of view have validity, in your opinions?
Yes, it is best to have separate bond and stock funds when withdrawing during retirement. If not you have no control over what you sell, stocks or bonds, you have to do both. There are many withdrawal strategies, one of them being bonds first, another prime harvesting, etc. where you control/decide what funds to withdraw from.

Author McClung at
http://livingoffyourmoney.com/
has written extensively about money/investments in retirement. You can purchase his book, or, he provides the first 3 chapters free in a pdf download where chapter 3 is one of the best chapters discussing withdrawal strategies and it becomes clear that you need separate funds to maximize your retirement withdrawals. Hope this helps.

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Taylor Larimore
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"What Experts Say About Past Performance"

Post by Taylor Larimore » Sun Apr 08, 2018 1:35 pm

michaelc wrote:
Sun Apr 08, 2018 12:47 pm
PRWCX (Capital Appreciation) has been such a phenomenal performer over the last 10 years with a 10 year return of 9.47%, and 11.29% since inception, why mess with a good thing?? Even with it higher .71% ER calculated, the fund EASILY has outperformed any of the Vanguard 3 fund index portfolios or any of the LS funds.

Can any boglehead give me good reason to switch to Vanguard with this performance from PRWCX??
What Experts Say About Past Performance.

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

alamander
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by alamander » Sun Apr 08, 2018 1:59 pm

Thanks all. First, yes the money will be held in an IRA (so not post-tax). Second, while the majority of respondents see a single balanced fund as fine due to auto rebalancing, John Z agrees on the need for separate funds to be able to control withdrawals. So maybe the TIAA fellow was passing on something he had been taught was correct. Couldn't the issue be solved by modeling, or is that even needed?

dbr
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by dbr » Sun Apr 08, 2018 2:06 pm

alamander wrote:
Sun Apr 08, 2018 1:59 pm
Thanks all. First, yes the money will be held in an IRA (so not post-tax). Second, while the majority of respondents see a single balanced fund as fine due to auto rebalancing, John Z agrees on the need for separate funds to be able to control withdrawals. So maybe the TIAA fellow was passing on something he had been taught was correct. Couldn't the issue be solved by modeling, or is that even needed?
I don't think John Z and the advisor are talking about the same thing. From what you wrote the advisor is talking about something that doesn't happen because the fund will have already drawn from bonds to buy stocks which transfers to you drawing from bonds when you sell stocks. What is involved in the things John Z mentioned is that the asset allocation is not kept constant. Those techniques are defeated by holding a balanced fund. Whether such tactics are advised is a different discussion.

alamander
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by alamander » Sun Apr 08, 2018 2:13 pm

dbr wrote:
Sun Apr 08, 2018 2:06 pm
alamander wrote:
Sun Apr 08, 2018 1:59 pm
Thanks all. First, yes the money will be held in an IRA (so not post-tax). Second, while the majority of respondents see a single balanced fund as fine due to auto rebalancing, John Z agrees on the need for separate funds to be able to control withdrawals. So maybe the TIAA fellow was passing on something he had been taught was correct. Couldn't the issue be solved by modeling, or is that even needed?
I don't think John Z and the advisor are talking about the same thing. From what you wrote the advisor is talking about something that doesn't happen because the fund will have already drawn from bonds to buy stocks which transfers to you drawing from bonds when you sell stocks. What is involved in the things John Z mentioned is that the asset allocation is not kept constant. Those techniques are defeated by holding a balanced fund. Whether such tactics are advised is a different discussion.
I see. The issue then is whether asset allocation should be held constant -- John Z is suggesting no, you need to have levers to be able to sell what you need when appropriate (hence allocation is not a primary concern).

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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by drk » Sun Apr 08, 2018 2:17 pm

cfs wrote:
Sun Apr 08, 2018 1:19 pm
Already then, getting back to Mister Alamander's question. I would not say that your adviser is trying to trick you, it is possible that he or she is not familiar with how Vanguard's LS funds are managed and re-balanced. Just do what you need to do, good luck with your investments, y gracias por leer ~cfs~
I agree. It's unlikely that the advisor is nefarious. He may have another dangerous combination of tendencies for a financial advisor, though: low information (not understanding how balanced funds work) and over-confidence (stating incorrect information as though it were fact without seeking more information).

dbr
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by dbr » Sun Apr 08, 2018 2:27 pm

alamander wrote:
Sun Apr 08, 2018 2:13 pm


I see. The issue then is whether asset allocation should be held constant -- John Z is suggesting no, you need to have levers to be able to sell what you need when appropriate (hence allocation is not a primary concern).
I would say not need but can. There are always smart people looking for ways to manage investments that provide a benefit from one tactic or another and there is credible evidence that there are benefits to be had to some degree and under some circumstances. Whether this should be advised as a must do for anyone is another question. I tend to comment on that from the point of view that if you have to ask you shouldn't, but that does not prevent a person looking into things and deciding for themselves. Try reading McClung's book and see what you think of what is involved.

alamander
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by alamander » Sun Apr 08, 2018 7:56 pm

dbr wrote:
Sun Apr 08, 2018 2:27 pm
I would say not need but can. There are always smart people looking for ways to manage investments that provide a benefit from one tactic or another and there is credible evidence that there are benefits to be had to some degree and under some circumstances. Whether this should be advised as a must do for anyone is another question. I tend to comment on that from the point of view that if you have to ask you shouldn't, but that does not prevent a person looking into things and deciding for themselves. Try reading McClung's book and see what you think of what is involved.
Thank you. I will probably do that; however, I am so attracted by simplicity that I will probably go with the LifeStrategy fund, since it does not appear by the common Boglehead wisdom, displayed in this thread, to be a bad thing (in spite of being just a single fund).

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CWRadio
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by CWRadio » Sun Apr 08, 2018 8:12 pm

Additional information can be found at:

For Retirement Cash Flow, All-in-One Investments May Not Fit the Bill
http://investors.morningstar.com/news/c ... ctCode=mle
and
Risks of RMD Withdrawal From A Single Fund IRA
viewtopic.php?f=1&t=168506&p=2542972#p2542972

Paul

Dominic
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by Dominic » Sun Apr 08, 2018 8:29 pm

Unless you have significant taxable investments, LifeStrategy (or Target Date) funds are perfectly fine. They cost slightly more in terms of expense ratio, but we're talking about 10 basis points or less here, which is really not a lot. If this makes life easier for you, or helps you stay on track, then it's worth it to use one fund instead of 2-3 funds.

The key components of the Boglehead philosophy are keeping portfolios simple (can't get any simpler than one fund), keeping costs low (can't get that much cheaper), and holding a diversified portfolio (the LifeStrategy funds hold almost all publicly traded assets). There's nothing anti-Boglehead about a one-fund portfolio.

123
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Re: Single Vanguard LifeStrategy fund for retirement vs 2- or 3-fund approach

Post by 123 » Sun Apr 08, 2018 8:42 pm

The Vanguard LifeStrategy funds are each fund-of-funds. Each of them includes a predefined mix of 4 other Vanguard funds. So you are getting an automatic 4-fund mix. If the asset allocation of the 4 funds works for you (it may not be perfect but "good enough") one of the LifeStrategy funds may be a good choice for you.
The closest helping hand is at the end of your own arm.

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