Investment Aggressive Enough

[Guest franky]

I am in a SIMPLE IRA. It is invested in Vanguard Asset Allocation Fund. I am 45 years old. Is that fund aggressive enough (or too aggresive) for someone my age? I am willing to take risk.

[John G]

Attitudes towards risk is a very personal issue. No one can tell you how you should weigh the factors. No doubt you will factor in your personal track record to date on investments, attitudes your parents imprinted on you, experiences from co-workers, etc.

Some folks also get too emotional about their investments and react poorly when the market plunges.... selling in a panic... then buying in again after the market rises.

I will try to give you some "clinical" advice. First, thanks for tell me you are 45 -- the actuarial tables would say are very likely to live another 30 or 40+ years. 45 also says you maybe about two decades away from taping into your tax sheltered account in retirement. You should probably have a portfolio heavy on equities and light on bonds. In addition, a significant part of you portfolio should be in more aggressive equities like growth companies or perhaps some international.

You need to sit down with a spreadsheet and run some numbers and see if an average return of 10%/yr gets the job done. You do not mention the current total retirement assets. If you obtain asset appreciation of just a hair over 10%, you current assets will grow 8x by the time you are age 66. Inflation would reduce that future dollar amount by about 1/2.

What mix? Well, now out comes the less clinical personal bias. I would have 50% growth, 25% blue chip stocks, 10% international and 15% bonds. While I am not familiar with this specific Vanguard fund, they are ussually a very lean operation with very low annual expenses. If I get my stuff done this weekend, I may be able to add specifics about this specific fund.

I have assumed normal health, mid 60 retirement age, and no problems with employment until you elect to retire. Here is were the personal part comes. You need to think about your facts and circumstances.

Post again if you like.

[John G]

More on the specific fund:

1. very low expense rate of .44%, no load. Very Good

2. 90% equity 10% bond right now, this ratio can vary between cash/stock/bond. Currently bolder than my prior suggestion by just a bit

3. equity part is a blend of value and growth, with emphasis on very large companies. Good, but I would like to see midcap and small cap.

4. track record over ten years is above average at 13.5% annual since the fund was started in 1998. Note, only one negative year in past 12! Good, most retirement plans work if you can over long haul make 10+% per year.

Conclusion: looks like a very decent choice for an IRA account, above average returns with low expenses, enough of a track record, Vanguard is a solid firm. Only slight negative is that the blend of assets (s/b/$) is variable, but Vanguard folks are not normally rolling the dice. I would watch the asset allocation over time, if you see wild swings of say 90% to 50% then you may want to consider a switch.

[Guest franky]

Dear John, Many, many, thanks for your input. I am not very familiar with the make-up of the specific fund. You have confirmed what others have told me about the Vanguard Funds. Thanks again for your input, suggestions, and advice. :)