I'm "Almost" Embarrassed to Ask This

[Mountaineer]

Hello PPers,

I have been thinking about investing my portfolio in only the Vanguard Target Retirement Income fund in order to simplify matters in case I expire before my wife (she does not care much about investing strategies or details) or if I become incompetent to manage our current portfolio.  Would you all be so kind as to comment on the pros and cons of the Permananent Portfolio vs. the VG TR Income fund for one who is retired and in the distribution phase of investing.  Thanks.

... Mountaineer

[KevinW]

Actually IMO conservative Boglehead portfolios are very similar to the PP, are almost as good, and are OK in situations where the PP can't be used for some reason.

PP pros:
- can be implemented with lower expenses than TRI ("Target Retirement Income")
- the rationale behind the 4x25 allocation can be used to rationalize price movements which can be comforting during corrections
- cash component simplifies household cash management; no emergency fund vs. portfolio debate
- physical gold is an insurance policy against complete financial collapse, and more realistically, an insurance policy against doing something rash when worried about financial collapse
- physical gold can also satisfy the urge to hold physical artifacts, instead of more dubious heirlooms like art, fine china, jewelry, etc.
- no credit risk in bonds or cash; TRI's bond and cash components include corporate bonds
- institutional diversification; assets held by numerous custodians and also directly by yourself
- higher historical returns

TRI pros:
- one mutual fund which can be held directly at Vanguard; extremely simple
- automatically rebalances itself
- can put in trade orders 24/7 without regard to commissions, when the market is open, or little scraps of uninvestable cash
- simplifies paperwork and taxes; only one, major institution to deal with (flip side of institutional diversification)
- seems less weird to other people (hey some people care about that)
- no gold component and the associated baggage (flip side of gold benefits)
- higher short term returns

You might also look at Vanguard LifeStrategy Conservative Growth which is a simpler more Boglehead-ish 40/60 allocation. TRI is a witches' brew of assets in arbitrary-seeming allocations. I think I like TRI a little better but it's a close call. It's hard to say which will work better going forward.

Are you sure your wife can't learn? Mine is also uninterested in investing, but was willing to learn when I explained how much we could save by doing a yearly rebalance and reconnoiter ourselves instead of paying an advisor. Explaining how to do that, and basic PP principles, only took an hour, and the new PP book is on the shelf as a reference.

Also double check that you aren't considering this change solely due to recency bias. 2013 is shaping up to be a bad year for the PP, but historically the PP has had higher returns and lower volatility than conservative Boglehead portfolios.

[stuper1]

Mountaineer,

You might consider the Wellesley income fund also, which has outperformed TRI by about 2% annually on average, and with a $50k investment has almost the same expense ratio.  There was a thread a while back about simple PP alternatives for people in your situation.  I think somebody recommended the Wellesley income fund, supplemented perhaps with say 15% gold (rebalance yearly).

[Mountaineer]

Thank you for the thoughts KevinW and Stuper1.  Really appreciate the time you took to do so.  Will give me some ideas to chew on.

... Mountaineer

[stuper1]

Below is the link to the previous thread I mentioned.  I may have mischaracterized what it was about a bit, but you may find some helpful ideas if you didn't see it earlier.

http://gyroscopicinvesting.com/forum/va ... /#msg60872

[ns2]

I don't think my wife would be able to handle the PP after I'm gone either (I'm 17 years older, BTW). I transferred both of our Roth IRA's to Vanguard and invested in Wellesely as a starter and my advice to her if I'm gone tomorrow is to keep the physical gold we have stashed away and put everything else in that fund.

Had a bad experience with a target-date fund in 2008. It was T. Rowe Price which had a stock heavy philosophy at the time so you can imagine how that went. Also, the expense ratio was way more than I'm willing to spend nowadays, especially when you consider what a good job they did protecting my assets (sarcasm intended).

[melveyr]

The vanguard target retirement income fund is great. I love that they added hedged international bonds. You own a little bit of everything with that fund and at an extremely reasonable expense ratio. The only way to get burned with that fund is through a bad inflation or abandoning ship to chase something hot.

[Mountaineer]

Thanks again folks for the comments and the link.  Really appreciate your thoughts.

... Mountaineer

[ns2]

The vanguard target retirement income fund is great. I love that they added hedged international bonds. You own a little bit of everything with that fund and at an extremely reasonable expense ratio. The only way to get burned with that fund is through a bad inflation or abandoning ship to chase something hot.

Would you see this fund + a good chunk of gold as a good alternative to the PP?

That's the kind of thing I'd like to find for my wife to make it simple and maybe even me in case all the alcohol I've been drinking doesn't prevent Alzheimer's as well as they say.

I think the Vanguard fund is actually available in my wife's 401k. I have run away from target-date funds like the plague since my own bad experience but maybe I should look into it.

[melveyr]

The vanguard target retirement income fund is great. I love that they added hedged international bonds. You own a little bit of everything with that fund and at an extremely reasonable expense ratio. The only way to get burned with that fund is through a bad inflation or abandoning ship to chase something hot.

Would you see this fund + a good chunk of gold as a good alternative to the PP?

Definitely. Something like 85% Target Retirement and 15% gold should be fairly robust. No way to know what the perfect amount allocated to gold would be but I agree that some is better than none.

[dualstow]

I would love the Target Retirement funds if I weren't such a busybody with investments. The pp doesn't let me tinker enough as it is. But, a Target Retirement + a small vp would do it.
- - - - -

That's the kind of thing I'd like to find for my wife to make it simple and maybe even me in case all the alcohol I've been drinking doesn't prevent Alzheimer's as well as they say.

I know that was (pickled) tongue-in-cheek, but I did read recently that resveratrol pills may counteract the effects of exercise.
Still under debate. Once source of many: http://www.winespectator.com/webfeature/show/id/48747

[Ad Orientem]

I don't think my wife would be able to handle the PP after I'm gone either (I'm 17 years older, BTW). I transferred both of our Roth IRA's to Vanguard and invested in Wellesely as a starter and my advice to her if I'm gone tomorrow is to keep the physical gold we have stashed away and put everything else in that fund.

+1

I would be pretty comfortable with that portfolio.

[Ad Orientem]

If your looking for simplicity + safety one might also consider PRPFX. The E/R is a bit steep but it's a decent fund for those seeking 1 stop shopping. For my part if I ever chose to go with something other than a 4 x 25% PP I would probably just go with something Bogleheadish and throw in a slug of gold. Vanguard's Wellesely is an excellent choice.

[stuper1]

Are there any Fidelity funds that are similar to Vanguard's TRI or Wellesley?

[ns2]

Are there any Fidelity funds that are similar to Vanguard's TRI or Wellesley?

Yes and no. Similar portfolio structures, but MUCH higher expense ratios. You can probably buy PRPFX with no transaction fee from Fido though.

You can buy PRPFX for free on Fidelity.

The Vanguard funds cost an outrageous $75 to buy at Fidelity. They try to steer you to their own higher expense funds, of course.

Instead of paying the fee I just moved both of our Roth accounts to Vanguard. It was pretty easy to do but took a while.

[Mountaineer]

Just wanted to give folks an update on what I decided to do re. my original post in this thread.  My wife and I spoke with a Vanguard CFP this afternoon who was very knowledgable and answered all our questions - best VG CFP that I've dealt with in over 10 years.  So, over the last several days we:

1. Reviewed our Investment Policy Statement and updated to reflect our current needs.

2. Reviewed our Vanguard prepared financial plan with a Vanguard CFP.

3. Moved all IRA funds to Vanguard Target Retirement Income fund.

4. Made minor adjustments to our taxable funds to be consistent with the IPS.

Thanks again to all who helped us think through this.  REALLY appreciate the insights from all.  Expectation is that we have simplified our portfolio and likely have a bit better probability of not running out of money when we are 125 years old (tongue in cheek) 

... Mountaineer