I am retired and take educated guesses on all things financial.

May 13, 2008

May 13, 2008: MONEY Mag Proclaims The Perfect Investment Plan

Many readers are beyond the GED-level intellectual stimulation of general finance magazines. However, I find thumbing through them a respite from the more technical and eclectic information more sophisticated investors use as a basis for investigating potential portfolio prospects.

In Money's latest issue, the cover page boldly bellows that inside,on page 72, are "The Only Seven Investments You Need Now". The arrows hitting a bulls eye next to the pronouncement is a nice touch. Not knowing if now meant last Monday, or next week or month, I flipped over to the article which was team-written by a Money Quartet of contributors to see what priceless investment gifts were bestowed upon us.

The article itself is not bad. Some advice on ignoring talking heads and the hype of business tv is correct. Somehow, they fail to mention the hype of magazines such as Money, but I digress. The premise is to invest simply and in proportion to your career stage. This is good advice for the novice and probably a reminder to all of us that we can be too smart by half at times trying to be brilliant strategists within the world of speculating/investing.

The seven investments this team assembled are as follows:

Blue Chip Stock Fund: Fidelity Spartan 500 Index (FSMKX)

Blue Chip Foreign Stock Fund: Vanguard Total International Stock Fung (VGTSX)

Small Company Fund: T. Rowe Price New Horizons (PRNHX)

Value Fund: Vanguard Value Index (VIVAX)

High Quality Bond Fund: Vanguard Total Bond Market Index (VBMFX)

Inflation Protected Bond Fund: Vanguard Inflation Protected Securities Fund (VIPSX)

Money Market Fund: Fidelity Cash Reserves (FDRXX)

What proportion to hold them?
Early to mid-career has the pie sliced at 30% Blue Chip Foreign, 40% Blue Chip U.S., 5% Value, 5% Small-Cap, 10% High Quality Bond, 5% Inflation Protected Bond and 5% Cash.
Late Career has the pie sliced at 25% Blue Chip Foreign, 30% Blue Chip U.S., 2.5% Value, 2.5% Small-Cap, 20% High Quality Bond, 10% Inflation Protected Bond and 10% Cash.
Retirement has the pie sliced as 20% Blue Chip U.S., 15% Blue Chip Foreign, 20% Cash, 30% High Quality Bond, 10% Inflation-Protected Bond, 2.5% Small-Cap and 2.5% Value.

I believe that one can do much better using ETFs and other investment products that capture themes more than an index - especially in what may prove to be extraordinary economic times. I also am skeptical of the one size fits all approach, even if it is stated as in the life of a career (who knows what stage of career one is in, really?). Still, their approach is not bad. It is unlikely to do the average doofus harm.

But how many of these simplistic programs can we honestly take seriously, knowing that the best laid investment plans usually are wrong, given changing world events and time?


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