Keep your retirement finances drama-free. If you’re retired or on the brink of retirement and you want a relatively simple low-cost investment that won’t lead you astray, your search should start with Vanguard mutual funds.

Let me be clear: This article isn’t a sales pitch. I don’t work for Vanguard and I have no affiliation with the company except as a shareholder in their funds.

Why Vanguard

Vanguard has more than $7 trillion under its management and is the only mutual fund company with a financial structure built to benefit the shareholders in its mutual funds.

The company’s funds are known for low expenses and the lower tax exposure that comes from low turnover. It should go without saying that Vanguard funds are no-load funds. No sales commission, no sales pressure.

From Vanguard’s offering of excellent funds, here are nine that I like for retirees.

This is the first fund my wife and I invest in every year. In January, we make our annual withdrawal from long-term investments to cover our expenses for the year ahead. This fund is also where we keep our emergency cash.

Because this fund holds no stocks, our finances are remarkably emotion-free. No matter what’s happening in the stock market at any given moment, we know that won’t affect us until the following calendar year. If you’ve never tried managing your money like this, I recommend it.

You won’t get rich in this fund, but you’ll probably earn nearly 100 times as much as you’d get in a typical bank savings account paying (this is really disgusting!) 0.01% interest.

Over the past 15 years, this fund appreciated at 3.27%.

Balanced funds: boringly beautiful

Balanced funds hold both stocks and bonds. Over the years their shareholders are statistically likely to have above-average success as investors.

Why is that? Not because the funds themselves have any magic. It’s because the combination of growth and stability make you more likely to be content to leave your money where it is instead of trying to figure out when to buy and when to sell.

None of the following eight balanced funds is designed to normally hold much more than about 60% in equities. That means they aren’t likely to suffer the sort of major losses of all-equity funds.

Any one of these could make a good one-fund portfolio for a retiree. But don’t choose at random; the differences matter.

If you’re already retired, this fund of funds has your back. With an equity stake of only about 35% and the diversification of (indirectly) owning more than 10,000 stocks and 24,000 bonds, you just won’t go very far wrong. You’ll get some growth plus a good measure of stability.

If you like the target date concept but want a bit more equity exposure, it’s easy to pick a variation focused on a later year such as 2020 or 2025.

Vanguard LifeStrategy Funds

These funds of funds come in varying combinations of equity exposure, from 20% to 80%, though I’m excluding the most aggressive one from this discussion. All the bonds in these funds, by the way, are investment grade. No junk. LifeStrategy Income Fund VASIX, +0.35% typically holds only about 20% of its portfolio in equity funds, with the rest in bonds, perhaps a good fit for investors with ample resources (more than they think they’ll ever need, in other words) and those who are very skittish about the stock market. LifeStrategy Conservative Growth VSCGX, +0.39% doubles that equity stake to about 40%, perhaps the right choice for conservative retirees who want some growth but are not willing to go very far out on a limb to get it. LifeStrategy Moderate Growth VSMGX, +0.48% is very similar, but with a 60/40 split of equities and bonds. This provides more growth, although still without much excitement. Two funds for retirees who don’t know a lot about investing Often over the past 20 years I have recommended Vanguard Wellesley Income Fund VWIAX, +0.24% and/or Vanguard Wellington Fund VWENX, +0.25% .For conservative retirees that I don’t know well, Wellesley has become what I regard as my best piece of advice.Wellesley has been taking good care of investors since 1970. Its portfolio is normally 40% in equities, 60% in bonds. This is a low-cost actively managed fund, holding about 70 large-cap stocks (mostly value stocks) and about 1,300 bonds.For those who are less conservative, Wellington is my go-to suggestion, especially for people who value a very long track record.Wellington has been in business since 1929 and was the industry’s very first balanced fund.Wellington’s typical 60/40 […]

source Opinion: The 9 best Vanguard funds for retirees

editor Retirement planning, Stocks , , ,

Leave a Reply