Comments on: The Only 7 Investments You Need

By: kitty

kitty — Thu, 22 May 2008 17:16:16 +0000

“But if your asset allocation calls for bonds, this fund beat the industry average by 14% over the past 10 years and its expense ratio is 0.20%.”
If your asset allocation calls for bonds, why not just buy individual bonds? With bonds you know you’ll get your money back if you hold to maturity. Bonds aren’t like stocks, you don’t need to time the market unless you really want to speculate and play on bond value on the secondary market. If you just buy AAA bonds and hold to maturity there is virtually no risk. With bond funds you don’t have the option of holding to maturity as there is no maturity date, so you can gain value or loose value. The bond values on secondary market drop when interest rates go up. If you hold to maturity, you can simply buy individual AAA bonds when the rates are high and hold them to maturity. This way you can also control your risk-reward ratio yourself by buying bonds with different rating.

By: Greg Retzloff

Greg Retzloff — Sat, 17 May 2008 21:02:14 +0000

Kirk is on to something. Consider this all-season/long-term moderate-risk portfolio:

30%–Vanguard Total Stock Market Index (VTSMX)
30%–Vanguard Total Bond Market Index (VBMFX)
20%–Vanguard Total International Index (VGTSX)
10%–Vanguard REIT Index (VGSIX)
10%–PIMCO Commodity Real Return Strategy D (PCRDX)

PCRDX gives exposure to the Dow Jones-AIG Commodity Index and TIPS–a double inflaton hedge. REITs are generally a good allocation choice because they move counter to the rest of the U.S. stock market. PCRDX moves counter to everything, and is has been an excellent performer over the last five years, although some commodities may be due for a rest.

The volatility of this portfolio is also relatively low.

By: Kirk

Kirk — Fri, 16 May 2008 23:41:02 +0000

Pretty solid portfolio and good choices. I would add a REIT fund, specifically the Vanguard REIT ETF, and a commodity ETF. Google Roger Gibson in the Journal of Financial Planning to see how those two asset classes benefit a portfolio.

By: Brian

Brian — Fri, 16 May 2008 20:15:21 +0000

The only bad thing about the fidelity index funds is the minimum $10,000 initial investment. Since I’m just starting out my Roth IRA, that means you can’t invest in those funds for at least 2 years. (2 x $5k annual max. contribution)

By: Anna

Anna — Fri, 16 May 2008 19:29:12 +0000

I recently switched my money market account from the VMMXX fund to Vanguard’s tax-exempt money market (VMSXX) fund. The yields are 2.39% vs. 2.28% right now which means that after taxes, the second one is better. I even noticed at one point a couple weeks ago, that the yield on the tax-exempt fund was higher than the taxable one. Note: Vanguard defined the yield as “AVERAGE ANNUALIZED INCOME DIVIDEND OVER THE PAST 7 DAYS”