Wagging the retirement-income dog again
by Steve SelengutMr. Selengut is a private investor and an editorial contributor to LIFE&Health Advisor. He is the author of the book ‘The Brainwashing of the American Investor: The book that Wall Street does not want you to read.’ He can be reached at email@example.com
Ross Kerber’s Reuters “feed” entitled: “Target date funds try timing the market” is really a must read article… what it says in a nutshell is that market value growth considerations are wagging the retirement income dog yet again.
Once the gambling begins (i.e. MPT “tactical” tinkering), the retirement program ends. Here’s the link: http://www.reuters.com/article/2014/07/14/retirement-funds-idUSL2N0PE23T20140714
Yes, as Kerber points out, many of the major players (BlackRock, Fidelity, JPMorgan, Legg Mason) have started to go rogue by tinkering with allocations outside the “glide path” to retirement date specifications contained in the fund’s sales propaganda.
Target date funds have succumbed to the pressure of irrelevant market value growth comparisons… market timing indeed. Time to stand up to the fiduciary community and place these things in the speculation pile.
Just what is in your wallet?
401k participants are selecting TDFs in hoards, presuming safety and “retirement” are their operating agenda… it doesn’t seem to be, but was it ever, really.
Take a quick peek inside the Vanguard 2015 Target offering. (Vanguard was not mentioned in the article, but it too seems to be on the more speculation-than-retirees-want-to-know-about track.)
The low cost giant seems to be following the same route, but wisely not bragging about it. The 2015 Target fund (as of May 30th this year) owned over 5,000 (yes, that’s thousand) common stocks in a 52% equity allocation. The income allocation of the portfolio was yielding roughly 1.5%. Total portfolio yield under 1%?
Note that there are less than 400 common stocks that qualify as “Investment Grade Value Stocks”… repeat, then think: “just what is in my wallet”?
Seven months out from retirement, pay attention fiduciaries, is this a target “retirement’ fund or a tactical time bomb. Where’s the beef (i.e., the retirement income)!
Income purpose securities should absolutely never (ever) be performance analyzed in terms of market value… they just ain’t equities, even if packaged as such. The article, incidentally, makes no mention at all of 401k participant income expectations.
Clearly, there is something wrong with this picture. Isn’t it nice to know that there is a new breed of 401k investment out there, focused on retirement income production, and structured to absolutely grow “base income” month, after month, after month, after month, after month, after month, after month, after month, after month, after month, after month, after month, after month…