Letters
Model Mutual Fund Portfolio
Regarding “Model Mutual Fund and ETF Portfolios: Value and Small Stocks Impact Returns” by James B. Cloonan in the March 2012 AAII Journal: Near the end of the article, there is a recommendation to hold a minimum of four different mutual funds. This recommendation runs counter to research by Richard A. Ferri, who points out in “The Power of Passive Investing” (John Wiley & Sons, 2010) that “The more bets that an investor makes on actively managed funds the lower their probability for outperforming the markets.”
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The second point I would make is that the Vanguard 500 Index fund (VFINX) is an inappropriate benchmark, considering that the portfolio holds five mid-cap funds and two small-cap funds. While not a perfect benchmark, the Vanguard Total Stock Market Index fund (VTSMX) would be an improvement.
Lowell Herr
James Cloonan responds:
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Discussion
Thanks for timely info on municipals.
Would be helpful for article on recordkeeping to include:
Buying accrued interest
Buying at premium
Buying at discount
Recordkeeping needed at sale, maturity or early redemption
posted 10 months ago by Mrs.Jerry from Texas
I want to thank Dr. cloonan for a great service, help and education to individual investors and his insights and knowledge about invesments. I want to ask a question about Model Shadow porfolio and SSR Report which is more risky and higher return. Second I want to thank Dr. Cloonan about a new concept correlation coeffcient to reduce portfolio risk but not reduce return and using REITS to reduce overall risk but not reduce reurn.
I will appreciate if he makes some comments and also how I can find information about stock correlation coefficients.
Thanks again,
Yours Sincerely(jindalprem@yahoo.com)
posted 10 months ago by Prem from Pennsylvania
David from Maryland eschews the bucket strategy because of "...the whims of the stock market". He further states, "Retirement is completely about income replacement. My income in retirement has to be there."
Either David is very rich or he and his wife will never retire. Following the logic, David's net worth on his day of retirement must equal his projected spending throughout the 30-40 year period, already adjusted for future inflation. In order to achieve this, David needs to accurately forecast his future spending, anticipate unforeseen emergency and medical expenses, accurately forecast future inflation, and know the exact dates he and his wife will die.
Good luck David.
posted 10 months ago by EdwardjK from New Jersey
