TRP Capital Apprec fund too agressive for 60 year old?

[michaelc]

Hi,

For 15 years now, my Roth IRA has been with T. Rowe Price's Capital Appreciation Fund (PRWCX) and now at 60, with 5-7 more years left until retirement, I am wondering if this fund is a bit too risky/aggressive? I know it has has a stellar run for many years now, but I am wondering about it's performance going forward. I have 175K in it and I maxed it out every year with $7,500.

Many other retirement asset are in my TIAA 403(b) ($626,000.00).

Would a more conservative choice be one of the Vanguard balanced index funds, like Vanguard Balanced Index Admiral Shares, or maybe the Vanguard Life Strategy Moderate Growth Fund, or a mix of Wellington and Wellesley?

Thanks
Michael

[tibbitts]

Hi,

For 15 years now, my Roth IRA has been with T. Rowe Price's Capital Appreciation Fund (PRWCX) and now at 60, with 5-7 more years left until retirement, I am wondering if this fund is a bit too risky/aggressive? I know it has has a stellar run for many years now, but I am wondering about it's performance going forward. I have 175K in it and I maxed it out every year with $7,500.

Many other retirement asset are in my TIAA 403(b) ($626,000.00).

Would a more conservative choice be one of the Vanguard balanced index funds, like Vanguard Balanced Index Admiral Shares, or maybe the Vanguard Life Strategy Moderate Growth Fund, or a mix of Wellington and Wellesley?

Thanks
Michael

I wouldn't be any more concerned about that fund than say Wellesley/Wellington or any other somewhat conservative active fund. Bogleheads will object to the expense ratio but whatever. If you want you could add another fund or two alongside PRWCX but I wouldn't hesitate to just leave it as is either.

[sycamore]

The Bogleheads philosophy says that the more important question is not whether TRP Capital Apprec fund is too aggressive but whether your portfolio's asset allocation is appropriate for your personal risk tolerance. Better to focus on the portfolio and not the individual funds.

Do you have a target asset allocation for your overall portfolio?

Do you have a target sub-asset allocation for stocks, e.g. for growth versus value, large versus small? It's better to decide on those choices first, and then decide if a particular fund fits your preferences.

[tibbitts]

The Bogleheads philosophy says that the more important question is not whether TRP Capital Apprec fund is too aggressive but whether your portfolio's asset allocation is appropriate for your personal risk tolerance. Better to focus on the portfolio and not the individual funds.

Do you have a target asset allocation for your overall portfolio?

Do you have a target sub-asset allocation for stocks, e.g. for growth versus value, large versus small? It's better to decide on those choices first, and then decide if a particular fund fits your preferences.

I would say with a fund like this one you're sort of relying on the fund managers to possibly move around somewhat in terms of style etc., so it's not like you'd go about choosing an index fund in that respect.

[crefwatch]

Michael, you don't make it clear whether you would have to change financial services providers to switch from a TRP fund to a Vanguard Fund. I doubt you can get Vanguard at a TRP branded IRA account.

There a bit of prejudice against managed funds at Bogleheads, but I happen to own Cap Appreciation at age 71. But it's only 3% of our joint Qualified Assets. I agree with you that it is risky, but you don't describe whether that has bothered you at all, until now. A halfway measure could be to stop reinvesting divs and CG distributions. We keep two years in cash, to avoid possible selling-low during retirement.

Rhetorically, what has been your response to declines in "safe" assets like Total Bond Market the last 12 months?

[Makefile]

There a bit of prejudice against managed funds at Bogleheads, but I happen to own Cap Appreciation at age 71. But it's only 3% of our joint Qualified Assets. I agree with you that it is risky, but you don't describe whether that has bothered you at all, until now. A halfway measure could be to stop reinvesting divs and CG distributions. We keep two years in cash, to avoid possible selling-low during retirement.

Bogle thought TRP was a reputable active fund provider, including being willing to close funds with high past performance to avoid harming existing shareholders (including this fund) and not hyping up star managers. Their sin was ERs being too high.

[michaelc]

There a bit of prejudice against managed funds at Bogleheads, but I happen to own Cap Appreciation at age 71. But it's only 3% of our joint Qualified Assets. I agree with you that it is risky, but you don't describe whether that has bothered you at all, until now. A halfway measure could be to stop reinvesting divs and CG distributions. We keep two years in cash, to avoid possible selling-low during retirement.

Bogle thought TRP was a reputable active fund provider, including being willing to close funds with high past performance to avoid harming existing shareholders (including this fund) and not hyping up star managers. Their sin was ERs being too high.

Personally, I wouldn't consider Cap Appreciation ER of .68 as "too high"

[persimmon_tree]

Although past performance is no guarantee of the future, why not go to Morningstar and compare PRWCX and VBIAX, up and down years.
Also, one can establish a small position in VBIAX, to really get involved.
Disclaimer: I own a position in PRWCX, and I am planning to keep it. I am in my upper 50s.

[sycamore]

The Bogleheads philosophy says that the more important question is not whether TRP Capital Apprec fund is too aggressive but whether your portfolio's asset allocation is appropriate for your personal risk tolerance. Better to focus on the portfolio and not the individual funds.

Do you have a target asset allocation for your overall portfolio?

Do you have a target sub-asset allocation for stocks, e.g. for growth versus value, large versus small? It's better to decide on those choices first, and then decide if a particular fund fits your preferences.

I would say with a fund like this one you're sort of relying on the fund managers to possibly move around somewhat in terms of style etc., so it's not like you'd go about choosing an index fund in that respect.

Agree that having a "no particular style" mandate on the fund can be a reasonable choice assuming one accepts that their portfolio's AA style can drift.

As far as the overall stock/bond ratio goes, personally I'd want to know the max/min that the fund manager could use. If a fund could range from 100/0 to 0/100, I'd say forget it. But a narrower range of AA can be reasonable too, assuming one's overall risk tolerance allows for the max drift.

From the Cap Apprec prospectus:

Principal Investment Strategies
The fund normally invests at least 50% of its total assets in stocks and the remaining assets are
generally invested in corporate and government debt (including mortgage- and asset-backed
securities) and bank loans (which represent an interest in amounts owed by a borrower to a
syndicate of lenders) in keeping with the fund’s objective. The fund may also invest up to 25%
of its total assets in foreign securities.
...

[RetiredCSProf]

Michael, you don't make it clear whether you would have to change financial services providers to switch from a TRP fund to a Vanguard Fund. I doubt you can get Vanguard at a TRP branded IRA account.

Vanguard mutual funds (and ETFs) are available at TRowe with no transaction fees, but must be held in a brokerage account and not in a mutual-fund account.