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 Post subject: Asset Allocation
PostPosted: Wed Sep 15, 2010 11:36 am 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
Right now my asset allocation is, as advised by my Ernst & Young advisor...this is the most aggressive advisable asset allocation for me. I now know better than to trust them.
My total return has been 4.56% ytd My allocation and return for each.

Fund Allocation Return
FRS Select Moderate Balanced Fund (A20) 3% 5%
FRS Select U.S. Stock Market Index Fund (S10) 34% 2.67%
Prudential Mid-Cap Quantitative Core Equity Fund (S40) 32% 10.08 %
FRS Select Foreign Stock Index Fund (F10) 31% 1.27%


How do I make this better? Here are my choices
Balanced
FRS Select Conservative Balanced Fund (A10)
FRS Select Moderate Balanced Fund (A20)
FRS Select Aggressive Balanced Fund (A30)
Money Market FRS Select Yield Plus Money Market Active Fund (M10)
Inflation-Protected Securities
FRS Select U.S. Treasury Securities Index Fund (T10)
Core Bond FRS Select U.S. Bond Enhanced Index Fund (B15)
PIMCO Total Return Fund (B20)
Intermediate Bond Pyramis Intermediate Duration Pool Fund (B35)
High Yield Bond FRS Select High Yield Fund (B50)
All Cap Core FRS Select U.S. Stock Market Index Fund (S10)
Large Cap Core Pioneer Fund (S20)
Large Cap Value FRS Select U.S. Large Value Stock Active Fund (S25)
Large Cap Growth FRS Select U.S. Large Growth Stock Active Fund (S30)
Mid Cap Core Prudential Mid-Cap Quantitative Core Equity Fund (S40)
All Cap Growth Fidelity Growth Company Fund (S80)
Small Cap Value American Beacon Small-Cap Value Fund (S99)
Fidelity Low-Priced Stock Fund (S90)
Small Cap Core T. Rowe Price Small-Cap Stock Fund (S97)
Foreign Stock Funds FRS Select Foreign Stock Index Fund (F10)
American Funds EuroPacific Growth Fund (F20)
Global Stock Funds American Funds New Perspective Fund (F40)

Quite frankly I just want to ignore this part of my portfolio and concentrate on my target date account with TRowe Price. This is "free money" after all and it would be stupid to do that.

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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 11:41 am 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
Here are the fees associated for each Annual Long- Term Average Downside Upside
For a 10,000 investment. I hope this helps someone else as well. I am ready to throw caution to the wind and just put it all in stocks, but we all know that would probably be really stupid.
FRS Select U.S. Stock Market Index Fund (S10) $2 $60 $17,200 $7,200 $39,200
Pioneer Fund (S20) $74 $2,496 $15,800 $7,000 $34,200
Specialty U.S. Stock Funds
FRS Select U.S. Large Value Stock Active Fund (S25) $19 $595 $16,600 $7,400 $35,500
FRS Select U.S. Large Growth Stock Active Fund (S30) $40 $1,280 $16,200 $6,300 $39,600
Prudential Mid-Cap Quantitative Core Equity Fund (S40) $35 $1,109 $17,100 $6,600 $41,000
Fidelity Growth Company Fund (S80) $68 $2,272 $15,800 $5,100 $43,500
Fidelity Low-Priced Stock Fund (S90) $74 $2,496 $16,300 $6,900 $35,700 closed
T. Rowe Price Small Cap Stock Fund (S97) $93 $3,235 $15,600 $5,900 $39,200
American Beacon Small Cap Value Fund (S99) $82 $2,802 $16,200 $6,000 $39,400

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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 12:08 pm 
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Posts: 5209
fantasma wrote:
Here are the fees associated for each Annual Long- Term Average Downside Upside
For a 10,000 investment. I hope this helps someone else as well. I am ready to throw caution to the wind and just put it all in stocks, but we all know that would probably be really stupid.
FRS Select U.S. Stock Market Index Fund (S10) $2 $60 $17,200 $7,200 $39,200
Pioneer Fund (S20) $74 $2,496 $15,800 $7,000 $34,200
Specialty U.S. Stock Funds
FRS Select U.S. Large Value Stock Active Fund (S25) $19 $595 $16,600 $7,400 $35,500
FRS Select U.S. Large Growth Stock Active Fund (S30) $40 $1,280 $16,200 $6,300 $39,600
Prudential Mid-Cap Quantitative Core Equity Fund (S40) $35 $1,109 $17,100 $6,600 $41,000
Fidelity Growth Company Fund (S80) $68 $2,272 $15,800 $5,100 $43,500
Fidelity Low-Priced Stock Fund (S90) $74 $2,496 $16,300 $6,900 $35,700 closed
T. Rowe Price Small Cap Stock Fund (S97) $93 $3,235 $15,600 $5,900 $39,200
American Beacon Small Cap Value Fund (S99) $82 $2,802 $16,200 $6,000 $39,400



I don't understand your table!

But looking at one single fund, the TRP small cap fund, if the $93 is the total annual expense for a $10000 investment then it looks like you are getting the funds at cost. If that is the case then that is excellent.

I can't say that I am wow-ed by the list of funds available to you but I have seen worse. It would be nice if you had a good low-cost index fund available but I don't see one in your list. There are two funds in your list that I know are leaders in their category - not cheap but well managed with a good track record. The Pimco Total Return fund and the American Funds Europacific growth. I own Europacific growth in my retirement accounts but I get it very cheap

I also generally agree with your advisor that you should be in somewhat aggressive funds based on your age (20s or 30s as I recall). But if that makes you feel uncomfortable then by all means switch to something more conservative. YOU are the one who has to be able to sleep at night, not your advisor.

It's also not clear to me if this is retirement money (tax deferred) or taxable. If it is retirement money then I think owning the Pimco total return fund is fine. If it is taxable money then you may not want the income because taxes will take away from the return.

Your YTD date return has lagged the S&P index but not by a horrible amount. You have exposure to foreign sticks...which I like and they have lagged a little according to your stats. You can't blame that on your advisor.


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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 12:13 pm 

Joined: Tue Sep 23, 2008 6:05 am
Posts: 330
Well.... In all fairness, that IS a pretty aggressive allocation.

I am curious as to why there are no small to ultra-small cap funds though? Aggressive portfolios typically have some % into that. I guess if you really want to slice and dice something a bit more volatile, you can get rid of the balanced fund and some of the total market fund, and put that into one of the small cap funds.

However, what I would be most interested in is the expense ratio and the loads associated with those funds. I don't know what they are and am too lazy to look them up right now, but if your average ER is high enough, it would dampen your returns.

As you go about this though, I hope that you will keep in mind that the name of the game here isn't so much to figure out ways to juice your gains (because there are always ways to do that), but rather, to manage your risks to a reasonable level that you can sleep soundly with.

Also, please note that despite the cap sizes, there may be a lot of correlations between these funds. Part of asset allocation is to reduce correlation, and hence, decrease your overall volatility and risk.

For ideas for your starting point, http://www.bogleheads.org/wiki/Lazy_Portfolios.


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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 12:24 pm 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
DoingHomework wrote:
fantasma wrote:
Here are the fees associated for each Annual Long- Term Average Downside Upside
For a 10,000 investment. I hope this helps someone else as well. I am ready to throw caution to the wind and just put it all in stocks, but we all know that would probably be really stupid.
FRS Select U.S. Stock Market Index Fund (S10) $2 $60 $17,200 $7,200 $39,200
Pioneer Fund (S20) $74 $2,496 $15,800 $7,000 $34,200
Specialty U.S. Stock Funds
FRS Select U.S. Large Value Stock Active Fund (S25) $19 $595 $16,600 $7,400 $35,500
FRS Select U.S. Large Growth Stock Active Fund (S30) $40 $1,280 $16,200 $6,300 $39,600
Prudential Mid-Cap Quantitative Core Equity Fund (S40) $35 $1,109 $17,100 $6,600 $41,000
Fidelity Growth Company Fund (S80) $68 $2,272 $15,800 $5,100 $43,500
Fidelity Low-Priced Stock Fund (S90) $74 $2,496 $16,300 $6,900 $35,700 closed
T. Rowe Price Small Cap Stock Fund (S97) $93 $3,235 $15,600 $5,900 $39,200
American Beacon Small Cap Value Fund (S99) $82 $2,802 $16,200 $6,000 $39,400


I don't understand your table!

But looking at one single fund, the TRP small cap fund, if the $93 is the total annual expense for a $10000 investment then it looks like you are getting the funds at cost. If that is the case then that is excellent.

I can't say that I am wow-ed by the list of funds available to you but I have seen worse. It would be nice if you had a good low-cost index fund available but I don't see one in your list. There are two funds in your list that I know are leaders in their category - not cheap but well managed with a good track record. The Pimco Total Return fund and the American Funds Europacific growth. I own Europacific growth in my retirement accounts but I get it very cheap

I also generally agree with your advisor that you should be in somewhat aggressive funds based on your age (20s or 30s as I recall). But if that makes you feel uncomfortable then by all means switch to something more conservative. YOU are the one who has to be able to sleep at night, not your advisor.

It's also not clear to me if this is retirement money (tax deferred) or taxable. If it is retirement money then I think owning the Pimco total return fund is fine. If it is taxable money then you may not want the income because taxes will take away from the return.

Your YTD date return has lagged the S&P index but not by a horrible amount. You have exposure to foreign sticks...which I like and they have lagged a little according to your stats. You can't blame that on your advisor.

EDIT
The large numbers is the upside/average and downside of investments. The money is 9% of my monthly salary the state pays into this account. It doesn't come out of my check. My deferred compensation account is the money that comes out of my check pre-tax that money goes to the TRowe Price target date 2045. The funny thing is I will "retire" before I am eligible to receive any of these money.

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Last edited by fantasma on Wed Sep 15, 2010 1:22 pm, edited 1 time in total.

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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 12:45 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5209
Quote:
FRS Select U.S. Large Value Stock Active Fund (S25) $19 $595 $16,600 $7,400 $35,500


So are you saying that this fund has annual expense of $19 on a $10000 investment and that it has a potential growth to $35,500 in a good year and decrease to $7400 in a bad year? If so, I would completely ignore the last two numbers! They are basically meaningless.

If so, $19 on $10000 is very good. Vanguard Total Stock Market would be $18. And the Vanguard Total Stock Market fund has only returned 2.59% year to date. You have beat that.

It does not sound to me like your advisor is failing you. You might give him or her a call and explain that you are nervous about being so aggressive (assuming that you are). It probably does not matter that much to the advisor how you invest and it does not sound to me, from what little you have said, that you are being poorly advised or that the advisor is getting big fees from you.


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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 12:47 pm 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
ekrabs wrote:
Well.... In all fairness, that IS a pretty aggressive allocation.

I am curious as to why there are no small to ultra-small cap funds though? Aggressive portfolios typically have some % into that. I guess if you really want to slice and dice something a bit more volatile, you can get rid of the balanced fund and some of the total market fund, and put that into one of the small cap funds.

However, what I would be most interested in is the expense ratio and the loads associated with those funds. I don't know what they are and am too lazy to look them up right now, but if your average ER is high enough, it would dampen your returns.

As you go about this though, I hope that you will keep in mind that the name of the game here isn't so much to figure out ways to juice your gains (because there are always ways to do that), but rather, to manage your risks to a reasonable level that you can sleep soundly with.

Also, please note that despite the cap sizes, there may be a lot of correlations between these funds. Part of asset allocation is to reduce correlation, and hence, decrease your overall volatility and risk.

For ideas for your starting point, http://www.bogleheads.org/wiki/Lazy_Portfolios.

The smallest amounts are the yearly expenses and the next one is how much it would cost over the span of 30 yrs.

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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 12:56 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5209
Wow! You have access to a stock market index fund with a 0.02% expense ratio. That blows even Vanguard away.

You have good funds available and you have a professional advisor available to you. Why not just get the advisor's advice and follow it? The advice you get will be greatly improved if you are honest with the advisor about your feelings and emotions with regard to investing. There is nothing wrong with being a little bit conservative and sharing that with the advisor. If you are then told to be very aggressive I would look for advice elsewhere.

All in all it sounds to me like you are one of teh lucky ones with an excellent retirement plan available to you.


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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 12:56 pm 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
DoingHomework wrote:
Quote:
FRS Select U.S. Large Value Stock Active Fund (S25) $19 $595 $16,600 $7,400 $35,500


So are you saying that this fund has annual expense of $19 on a $10000 investment and that it has a potential growth to $35,500 in a good year and decrease to $7400 in a bad year? If so, I would completely ignore the last two numbers! They are basically meaningless.

If so, $19 on $10000 is very good. Vanguard Total Stock Market would be $18. And the Vanguard Total Stock Market fund has only returned 2.59% year to date. You have beat that.

It does not sound to me like your advisor is failing you. You might give him or her a call and explain that you are nervous about being so aggressive (assuming that you are). It probably does not matter that much to the advisor how you invest and it does not sound to me, from what little you have said, that you are being poorly advised or that the advisor is getting big fees from you.


Oh no! I am not nervous about being an aggressive investor. I get to gage how aggressive I want the money allocated. Until I turn about 35-40 is when I will probably change the risk level.
My 30 years is at the ripe old age of 57 :P . 35 yrs of working at 62. After that I can't work for my agency anymore, unless I am absolutely needed.

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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 1:02 pm 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
I am told, that I do have one the best plans out there....I prefer to double check.

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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 1:04 pm 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
DoingHomework wrote:
Quote:
FRS Select U.S. Large Value Stock Active Fund (S25) $19 $595 $16,600 $7,400 $35,500


So are you saying that this fund has annual expense of $19 on a $10000 investment and that it has a potential growth to $35,500 in a good year and decrease to $7400 in a bad year? If so, I would completely ignore the last two numbers! They are basically meaningless.

If so, $19 on $10000 is very good. Vanguard Total Stock Market would be $18. And the Vanguard Total Stock Market fund has only returned 2.59% year to date. You have beat that.

It does not sound to me like your advisor is failing you. You might give him or her a call and explain that you are nervous about being so aggressive (assuming that you are). It probably does not matter that much to the advisor how you invest and it does not sound to me, from what little you have said, that you are being poorly advised or that the advisor is getting big fees from you.


19$ that's how much it cost per year and 595$ after about 30 years.

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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 1:25 pm 
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Fantasma, what exactly is your question/goal? I first thought you wanted something less aggressive but that does not seem to be teh case.


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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 1:29 pm 

Joined: Wed Oct 07, 2009 4:16 pm
Posts: 959
DoingHomework wrote:
Fantasma, what exactly is your question/goal? I first thought you wanted something less aggressive but that does not seem to be teh case.


What are your suggestions for me to do better? I know so little I don't even yet know what are the right questions to ask. I don't even know what a small or large cap stock/fund is.

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 Post subject: Re: Asset Allocation
PostPosted: Wed Sep 15, 2010 2:17 pm 
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fantasma wrote:
DoingHomework wrote:
Fantasma, what exactly is your question/goal? I first thought you wanted something less aggressive but that does not seem to be teh case.


What are your suggestions for me to do better? I know so little I don't even yet know what are the right questions to ask. I don't even know what a small or large cap stock/fund is.


Small cap = small capitalization. Capitalization means the overall size of a company. A small cap company might be one worth less than $10 billion overall. A large cap might be worth more than $10 billion. Most of the big companies you have heard of are large caps. You've probably heard of very few small caps unless you live near them or do business with them. Small cap stocks often grow faster and have higher returns but are also more likely to fail and lose your money. Large cap companies are already large and don't typically grow very fast. Think of GE as a large cap stock. It would be very difficult for GE to double in size over the next few years.

If you are 30 years old you have a long time until retirement. That means you can tolerate more risk than, say, a 60 year old. But it doesn't mean you have to take on more risk. The same long time horizon means that you can settle for a smaller return every year with less risk.

I can't recommend anything specific for you but I can tell you what I personally would invest in given your fund choices. I would put most of my money, probably about 60% in the total stock market index fund. I would put half the rest in Europacific Growth and the remaining 20% in Pimco Total Return.

But I would reiterate that it sounds like you have a good professional advisor availabel to you so I would take advantage of that.


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 Post subject: Re: Asset Allocation
PostPosted: Thu Sep 16, 2010 10:48 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1560
fantasma wrote:
What are your suggestions for me to do better? I know so little I don't even yet know what are the right questions to ask. I don't even know what a small or large cap stock/fund is.


My suggestion is that in order for you to know what to ask and to feel comfortable with what your asset allocation is or should be, you need to give yourself an education in the fundamentals. Read JD's post on Lifestyles of the Rich and Boring and when you're done, go download the http://www.transparentinvesting.com/uploads/wholestory.pdf document and read that.

Beyond that, there are a whole bunch of easy to understand books that address asset allocation. But start with the links above and then if you feel like you need to learn more, come back here and I'll make some recommendations to you.


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