bruce
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Posts: 56
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Post by bruce on Nov 2, 2023 23:48:03 GMT
After having a heart attack and triple bypass, I have decided to streamline my portfolio. My wife and I are 75, and she has little knowledge or interest in investing. Our current portfolio consists of eight funds; the two I plan on keeping are VTI and PIMIX in a 50/50 split, with instructions to rebalance back to 50/50 annually. The sole purpose of creating the two-fund portfolio is to make my wife comfortable with the mechanics of her nest egg. Portfolio held in a Traditional IRA.
Comments or suggestions?
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Post by yogibearbull on Nov 3, 2023 0:06:55 GMT
50% VTI + 50% PIMIX looks GOOD. In PV backtesting since 04/2007 (PIMIX inception), it BEATS both passive VBINX and active VWELX. VTI is mostly LC but also has decent SC/MC; PIMIX is a multisector bond fund that includes sovereigns, corporates, HYs, EMs. So those 2 funds do cover a huge territory. Effective-equity is 61.93%. But be prepared for occasional drawdowns - e.g. -31% during GFC, -15% during pandemic. It would have supported 9.42% SWR (safe withdrawal rate with COLA). www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=iHkDHQQrdVRVQetlgnt3T |
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Post by catdog on Nov 3, 2023 1:47:45 GMT
This may go without saying, but can we assume that between the two fund portfolio and your wife is a sizeable emergency fund?
catdog
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Post by Chahta on Nov 3, 2023 2:02:01 GMT
After having a heart attack and triple bypass, I have decided to streamline my portfolio. My wife and I are 75, and she has little knowledge or interest in investing. Our current portfolio consists of eight funds; the two I plan on keeping are VTI and PIMIX in a 50/50 split, with instructions to rebalance back to 50/50 annually. The sole purpose of creating the two-fund portfolio is to make my wife comfortable with the mechanics of her nest egg. Portfolio held in a Traditional IRA. Comments or suggestions? What are your thoughts for the instructions on the withdrawal rate? |
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Post by gman57 on Nov 3, 2023 15:29:29 GMT
After having a heart attack and triple bypass, I have decided to streamline my portfolio. My wife and I are 75, and she has little knowledge or interest in investing. Our current portfolio consists of eight funds; the two I plan on keeping are VTI and PIMIX in a 50/50 split, with instructions to rebalance back to 50/50 annually. The sole purpose of creating the two-fund portfolio is to make my wife comfortable with the mechanics of her nest egg. Portfolio held in a Traditional IRA. Comments or suggestions? I'm there, although I use VOO instead of VTI. After 20-30 years of buying and selling everything under the sun I decided to follow the advice I've been reading the last 20-30 years and go indexing as far as equities. I've always had some index but played around with everything else way too much. Sometimes I made good money and sometimes I lost good money. I figure why bother. Now it's VOO 50%, PIMIX 43% , CASH 7% -- that's it. I have a few stragglers I'm waiting to break even on but after that I'm done. I did switch one account over to all index a year or 2 ago and it's done the best in that timeframe. I might add one more bond fund at some point. I did have 60%/40% VOO/VTI but then figured why hold VTI at all since 80% of VTI is VOO companies anyways. I decided to go with the big boys...VOO. |
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Deleted
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Post by Deleted on Nov 3, 2023 16:05:16 GMT
I am 81 with 79 yo spouse who is not interested in our investments. Therefore, like you, I have simplified. I am 20% VTI, 20% SCHD, 10% VGT and 50% (T-Bills + CDs + MM). All my T-Bills and CD's are < 1r maturity and typically returning 5%. I have been researching what I will invest in as these instruments mature. Based on your OP and others here I have put PIMIX at the head of the list. I'll do this when I am convinced yield curve returns to positive slope. I include SCHD for a Value balance and I just can't get away from the techs.
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marg
Ensign
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Post by marg on Nov 3, 2023 17:42:19 GMT
@steelpony. where do you see for a money manager? give example pls..Thank you
@@axe , for me, I'm thinking invest in long term T-Notes (5,7,10) if I can earn at least 5% , I'm contented. SS seems cover my basic expenses.
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Post by steelpony10 on Nov 3, 2023 18:14:32 GMT
marg , Financial managers would be for people with no interest, knowledge or capability of managing their finances for a fee of course, maybe 1% of AUM for example. I know of two single retirees and one high income family offhand that do this. We do not use one presently but as a surviving spouse I may in the future. For my wife it’s just a “suggestion” for a possible future circumstance. Jointly we’re all set for now with a portfolio that requires little oversight or spend down.
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bruce
Lieutenant
Posts: 56
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Post by bruce on Nov 3, 2023 19:10:05 GMT
I want to thank all of you for your relevant and helpful replies. Responses in order of replies are as follows.
Yogi,
Thank you for confirming the idea based on PV. I, too, ran the 5, 10, and 15-year metrics using PV, which led me to choose PIMIX vs VBTLX. I ran a 50/50 VTI / VBTLX, a 50/50 VTI / PIMIX, and one using my current eight-fund portfolio. While PIMIX was the clear winner performance-wise, what surprised me was the higher Sharpe and Sortino ratios for the PIMIX portfolio. Now, I hope the next 15 years in the bond market are suitable for PIMIX's continued outperformance.
Steely,
Thank you for your concerns. I am finally feeling like myself again. We have employed an advisor since 2006 and have been happy with the service. My concerns going forward are the advisor's age and the likelihood the business might be sold, causing the advisory fees to skyrocket and possible change in strategy.
Cat,
We have adequate reserves, and her RMDs will leave her with excess cash on an ongoing basis.
Chahta,
Her withdrawal rate will be dictated by the RMD, which is currently around 4.5%
Thanks for all the input. Does anyone have any comments on how PIMIX will fare over the next fifteen years vs VBTLX? Thanks again, guys. I appreciate the time you have given to reply.
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Post by saratoga on Nov 3, 2023 20:14:27 GMT
If you have more than 1/2 million dollars, I would choose 50% (or more) in TRAIX (PRWCX) and 50% in PRUIX (SP500) at T. Rowe Price.
Both are institutional class funds and open for a total investments of 1/2 million dollars or more.
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Post by Mustang on Nov 3, 2023 21:06:36 GMT
Everyone has opinions on which funds to own. I have read some suggestions recently that have me thinking. Regardless of the funds picked, they should have a negative correlation to each other. A perfect 100% negative correlation would be one fund going down while the other goes up the same amount but nothing in the real world is perfect. RMDs are a good method for determining how much to withdraw. It is a variable or dynamic withdrawal method. It will protect the portfolio's value better than fixed withdrawal methods pretty much eliminating longevity risk but the dollar withdrawal will go up and down according to portfolio value complicating budgets. There is research that shows how an investor withdraws money is just as important as the funds selected. "History shows that your success can vary widely using the same portfolio and the same overall withdrawal rate, without changing your investments or taking on more risk. It all depends on how you withdraw from different asset classes like stocks and bonds." money.com/best-retirement-withdrawal-strategies/He tested every 30-year retirement period starting in 1928. He looked at six withdrawal methods taking the exact same dollar amount from each. From worst to best: 3-yr Moving Average (79% success rate), 7-yr Moving Average (81% success rate with the lowest ending balance), Last Year's Performance (86% success rate), Rebalancing (88% success rate), Equal Withdrawals (90% success rate), and CAPE Median (91% success rate). CAPE Median had the highest ending balance with Equal Withdrawals. I tested Equal Withdrawals using two of my funds and found little difference in their outcome but I only tested two retirement periods. Thinking buy low, sell high I originally picket Last Year's Performance but after re-reading the article I'm leaning toward 50/50. I want to keep it as simple as possible for my wife. This article is pretty much the only research I've found that discusses how to withdraw money. |
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Post by FD1000 on Nov 4, 2023 4:20:40 GMT
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Post by liftlock on Nov 4, 2023 12:38:42 GMT
Everyone has opinions on which funds to own. I have read some suggestions recently that have me thinking. Regardless of the funds picked, they should have a negative correlation to each other. A perfect 100% negative correlation would be one fund going down while the other goes up the same amount but nothing in the real world is perfect. RMDs are a good method for determining how much to withdraw. It is a variable or dynamic withdrawal method. It will protect the portfolio's value better than fixed withdrawal methods pretty much eliminating longevity risk but the dollar withdrawal will go up and down according to portfolio value complicating budgets. There is research that shows how an investor withdraws money is just as important as the funds selected. "History shows that your success can vary widely using the same portfolio and the same overall withdrawal rate, without changing your investments or taking on more risk. It all depends on how you withdraw from different asset classes like stocks and bonds." money.com/best-retirement-withdrawal-strategies/He tested every 30-year retirement period starting in 1928. He looked at six withdrawal methods taking the exact same dollar amount from each. From worst to best: 3-yr Moving Average (79% success rate), 7-yr Moving Average (81% success rate with the lowest ending balance), Last Year's Performance (86% success rate), Rebalancing (88% success rate), Equal Withdrawals (90% success rate), and CAPE Median (91% success rate). CAPE Median had the highest ending balance with Equal Withdrawals. I tested Equal Withdrawals using two of my funds and found little difference in their outcome but I only tested two retirement periods. Thinking buy low, sell high I originally picket Last Year's Performance but after re-reading the article I'm leaning toward 50/50. I want to keep it as simple as possible for my wife. This article is pretty much the only research I've found that discusses how to withdraw money. James Cloonan, the founder of AAII, authored a book called "Investing at Level 3", upon his retirement. Cloonan suggests that retirees allocate about 4-7 years of living expenses to safer less volatile assets (cash and short term bonds) with the balance of assets allocated to higher returning equities. Cloonan argues that the major risk to a retirees is insufficient long term returns that could be generated by a higher asset allocation to equities. The basic withdrawal strategy is to consume the less volatile assets while the market is down, giving equities time to recover from losses and return to new highs. The specific rules for how to accomplish this are covered in his book. www.amazon.com/Investing-At-Level3-Level-3/dp/1883328292 |
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Post by racqueteer on Nov 4, 2023 13:06:45 GMT
I think this is often overlooked. No doubt PIMIX is a great fund and may very well remain so. That said, expecting the fund's performance to continue as it did while holding assets which were hugely undervalued is probably unrealistic. A lot of that is probably still rolling off the books; so all I can say is, don't expect that 15-year data to be giving you a true picture of things. |
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Post by FD1000 on Nov 4, 2023 13:28:18 GMT
Mustang , I looked at the article you posted at money.com/best-retirement-withdrawal-strategies/ You can see right away that the best choices are the ones that end up with more stocks at the end. Equal Withdrawals vs rebalance. If we start with 50/50 + one million on 01/2010 + 4% withdrawal. rebalance: I end up with 1.49 million ( www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=6WWxcADDTd9V0E3mZpaOpx) Equal Withdrawals: for that one I will run PV twice, $500K for each one. VTI: ended with 1.388 ( www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4PUPc7heQzypyHZSsKgkdR) BND ended with 374K ( www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=7PUUsikBzSsflOySGb3g3b) Sure, this one beat rebalance (1.388+374) = 1.76 vs 1.49.
But wait, rebalance still has 50/50. Equal Withdrawals now is at 79/31 stocks/bonds and a lot more risk/SD...it makes no sense to me.
IMO, Last Year Performance Strategy is the closest to what you should do. You increase your stocks portion as you age slowly. The older you are, the more stocks you have because you have fewer years to live. I would change one thing, I would keep it at 50/50 to age 70-75, to keep equal risk at the start of your retirement, then I would start using Last Year Performance Strategy.
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Post by Mustang on Nov 4, 2023 18:35:47 GMT
James Cloonan, the founder of AAII, authored a book called "Investing at Level 3", upon his retirement. Cloonan suggests that retirees allocate about 4-7 years of living expenses to safer less volatile assets (cash and short term bonds) with the balance of assets allocated to higher returning equities. Cloonan argues that the major risk to a retirees is insufficient long term returns that could be generated by a higher asset allocation to equities. The basic withdrawal strategy is to consume the less volatile assets while the market is down, giving equities time to recover from losses and return to new highs. The specific rules for how to accomplish this are covered in his book. www.amazon.com/Investing-At-Level3-Level-3/dp/1883328292This sounds like Harold Evensky's (The Dean of Financial Planning and Father of the Bucket Strategy) "two bucket" cash flow strategy. I've read articles about his work before but I've lost the links. From my notes: Harold Evensky, who pioneered the bucket approach, said in a 2010 interview that the sensible number of buckets for a do-it-yourself investor was two. He is said to have simply bolted on a cash account to his total return portfolios. Distributions are only from growth. Cash is spent first and replenished from growth. A failure is when cash runs out and is refilled from principal.
He said in the interview, "We had it in place in 1987 [on Black Monday] when it looked like the world was coming to an end."
I remember "Black Monday" 1987. As the market fell it hit all of the preset computer sell orders. "It was a striking wake-up call for the market, individual investors, and the Fed, seeing the gains of the prior year wiped out in a matter of hours. Worse, there was no compelling fundamental reason for the crash, which occurred mainly as a result of programmatic trading and investor panic." www.investopedia.com/ask/answers/042115/what-caused-black-monday-stock-market-crash-1987.asp
His approach does require rebalancing to keep the proportions correct. "If your stocks are way down and bonds are flat, and you need to sell some bonds and buy stocks to bring it back to your investment policy, you can take a portion from your cash bucket."
There are drawbacks to all cash withdrawal strategies. One of the drawbacks to the bucket strategy is that it is possible to empty the cash/bond bucket forcing a premature sell of the stock bucket. But, hat would take a prolonged depressed bond market.
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bruce
Lieutenant
Posts: 56
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Post by bruce on Nov 4, 2023 18:38:13 GMT
1) 50/50 VTI/PIMIX means about 60/40. 2) I would not look at 15 years, just 5 years. PIMIX best days were until 5 years ago. It's AUM are at 124 billion. PIMIX performance during 2008-18 is in the history books as one of the best and I bet will never return. It made over 9% with SD=4.7 + Sharp=1.79 which is much better than allocation funds at 60/40, see ( www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=10AdTRHTNOecadgdXDrqgZ). In the last 5 years PIMIX made only 2.15 average annually, while RCTIX doubled that ( www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4AZ5p9qx31eDeZxLj0xquk) 3) The next problem are the year 2022-3 were typical bonds did badly and why PIMIX looks better 4) VTI/PIMIX isn't bad 50/50 VTI/RCTIX is better, but PIMIX will exist for decades. RCTIX? I'm not sure. 5) For 60/40 I can use PRWCX, but who knows what will happen in 10 years. The manager can leave. See the results here( www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=DcRb2vpbkp2wp6KTHRHjr). Thank you for your input. I agree with all five points stated in your previous post. 1.) We have used a 65/35 allocation since 2005 at points, letting it run to 70/30 before rebalancing. The PIMIX/VTI portfolio comes close to replicating that mix while allowing a simple 50/50 annual rebalance strategy. 2.) Could not agree more that the outperformance of the past will not be duplicated; I do, however, "expect," based on its strategy and management, that it may outperform VBTLX and DAPFX, the only other contenders considered for the fixed 50% allocation. PIMIX outperformed those two over the past three months, YTD, 1yr, 3yr, 5yr etc. 3.) Check 4.) I would not consider RCTIX for a widows portfolio based solely on its short existence. 5.) A single actively managed mutual fund is also a non-starter for me. In addition, manager changes and prolonged recession ( depressed price ) may cause multiple RMDs to shrink a portfolio faster than a 50/"50" one. Our resources allow for many options, which I would consider if we had no children or grandchildren. Constructing a portfolio that is simple to manage and continues to take advantage of market returns and experienced management was the objective. I appreciate everyone's input. |
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sgra
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Post by sgra on Nov 4, 2023 21:09:27 GMT
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bruce
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Post by bruce on Nov 4, 2023 21:21:56 GMT
Sorry, it looks like my dyslexia is kicking in. I meant to write DFAPX. |
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Post by steadyeddy on Nov 4, 2023 21:43:30 GMT
I just worry about 50% in PIMIX given its black-box nature. Having said that, I have 22% of net worth in PIMIX today. And it has been handling the recent volatility well.
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Deleted
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Post by Deleted on Nov 4, 2023 22:20:49 GMT
I suggest PBRNX. it was designed as a one fund set and forget it investment for those in retirement.
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bruce
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Post by bruce on Nov 4, 2023 22:52:47 GMT
I suggest PBRNX. it was designed as a one fund set and forget it investment for those in retirement. DJ, Thank you for your suggestion, but backtesting shows it would leave too much on the table: $1,231,090 vs. $958,749 ( 50/50 VTI/PIMIX VS. PBRNX ). Data based on life of PBRNX, Jan, 2015. |
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Post by steadyeddy on Nov 4, 2023 23:43:54 GMT
I suggest PBRNX. it was designed as a one fund set and forget it investment for those in retirement. I like PBRNX. Is there a brokerage where this fund is available with no transaction fee? |
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Deleted
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Post by Deleted on Nov 5, 2023 0:42:24 GMT
I suggest PBRNX. it was designed as a one fund set and forget it investment for those in retirement. I like PBRNX. Is there a brokerage where this fund is available with no transaction fee? Not that I know of. Thru Vanguard, the initial minimum investment is $50,000 with a $25 transaction fee. There may be other share classes of the fund that are NTF but with higher expense ratios. |
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Post by steadyeddy on Nov 5, 2023 2:17:54 GMT
I like PBRNX. Is there a brokerage where this fund is available with no transaction fee? Not that I know of. Thru Vanguard, the initial minimum investment is $50,000 with a $25 transaction fee. There may be other share classes of the fund that are NTF but with higher expense ratios. That is the real issue in wading into PBRNX; I think it may be available to advisors on certain platforms. |
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Post by yogibearbull on Nov 5, 2023 10:38:38 GMT
There are 3 classes PBRAX (ER 0.80%, min $1K), PBRDX (ER 0.60%, min $1 million)), PBRNX (ER 0.35%, $1 million).
PBRAX is no-load/NTF at Fido and Schwab.
It's the last/income fund in the Pimco TDF series that has fund of funds. Its effective-equity 62.5% (nominal 39.6% only; so really moderate-allocation but nominally conservative-allocation). It uses stocks + bonds (including TIPS) + futures + options. Keep this in mind when comparing it with other TDF Income funds.
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Post by steadyeddy on Nov 5, 2023 14:11:27 GMT
There are 3 classes PBRAX (ER 0.80%, min $1K), PBRDX (ER 0.60%, min $1 million)), PBRNX (ER 0.35%, $1 million). PBRAX is no-load/NTF at Fido and Schwab. It's the last/income fund in the Pimco TDF series that has fund of funds. Its effective-equity 62.5% (nominal 39.6% only; so really moderate-allocation but nominally conservative-allocation). It uses stocks + bonds (including TIPS) + futures + options. Keep this in mind when comparing it with other TDF Income funds. Thanks yogibearbull.. as always you are a fountain (mountain?) of knowledge..💚 |
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Post by habsui on Nov 5, 2023 18:34:08 GMT
There are 3 classes PBRAX (ER 0.80%, min $1K), PBRDX (ER 0.60%, min $1 million)), PBRNX (ER 0.35%, $1 million). PBRAX is no-load/NTF at Fido and Schwab. It's the last/income fund in the Pimco TDF series that has fund of funds. Its effective-equity 62.5% (nominal 39.6% only; so really moderate-allocation but nominally conservative-allocation). It uses stocks + bonds (including TIPS) + futures + options. Keep this in mind when comparing it with other TDF Income funds. Where can you look up easily effective equity?
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Post by yogibearbull on Nov 5, 2023 18:49:04 GMT
habsui, I have been using it for years. It is just Relative_SD, i.e. SDfund/SDbenchmark. SP500 is a suitable benchmark for equity funds and hybrids. It can be calculated manually from M* data, PV runs, etc.
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Post by retiredat48 on Nov 6, 2023 15:24:40 GMT
Hi bruce ,... Good guidance in this thread. Couple comments: --I would go with an S&P 500 low cost index fund, such as VOO, versus total stock market. Long story, but I like the aspect of a fund investing in the top 500 companies in terms of fundamentals, AND which by policy each year discards the 5 to 10 downward business performing ones, with the top 5-10 best growing companies. And with VOO you would be doing what Buffett says he is doing for his spouse! --I may have missed this but how are you accommodating for your spouse if she becomes unable to make decisions etc? Do you have a son/daughter (s) that could handle the portfolio? How about a very low-cost advisor such as at Vanguard, to continue on? $300-$500 fee range. --Key decision is whether or not you want a MANAGED bond fund (like PIMIX)versus a by-rule broad based indexed bond fund, to lock in for a lifetime. I have opted for "(active) managed bond funds", so if a really unusual situation evolved (like zero percent interest rates) they could make needed decisions on fixed income asset allocation. Best wishes... R48 |
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