Tom - while all the above are good funds and advice, the actual investments you use are the easy part but must come AFTER you address the following (horse before the cart):
If you are pessimistic (like me) in the ability to accurately and consistently predict the markets and unforeseen events, then you need a "Passive" portfolio of mutual funds or exchange-traded funds (ETFs) that own the entire market at a very low cost. Vanguard, Schwab, Fidelity, and others have those passively-managed, low-cost funds.
That 2008-09 market crash wasn't too unusual since it just happened back in 2000-02. The asset allocation and how you react in up/down markets is almost more important than the actual investments you use.
Once you know whether you want an Active or Passive portfolio and are comfortable with your initial allocation (ie 60/40), then the funds can be selected. Hope that helps!
Invest With Purpose www.appliedcapital.com
I would recommend you find a Fund Family (Fidelity, Legg Mason, American Funds, etc.) that you trust and and talk to an advisor from there to explore your options. There are too many options of funds out there and at any given time one could be out performing another. As long as you have a sound strategy and the right habits you should feel comfortable talking with someone face to face.
It's important to note that there are a number of other factors to think about when picking the appropriate fund not just what's "hot" today. Talk with with a specialist and find out what would be right for you.
Hope this helps.
Tom, I too like T. Rowe Price Capital Appreciation. A more conservative option would be FPA Crescent. If you have more questions, feel free to contact me through this website. My office is in Woodland Hills.
T. Rowe Price Capital Appreciation is a great fund that has performed in the top 1% of all moderate allocation funds in the past 10 years and is beating the moderate allocation category by over 5% so far this year. The ticker symbol is PRWCX.
Hi Tom - I would suggest the Vanguard Balanced Index Inv. (VBINX). The initial investment is only $3.000 and the annual expenses ratio is only 0.24% with no load fees. The fund invests roughly 60% in stocks and 40% in bonds by tracking two indexes that represent broad barometers for the U.S. equity and U.S. taxable bond markets. There are over 3,000 stock holdings and over 4,000 bond holdings in this fund which allows for excellent diversification. The bonds are all investment grade. This fund would be appropriate if you have a long-term time horizon and you want growth and some income—and you are willing to accept stock and bond market volatility.
Vanguard Wellington Fund. It's been in business since 1929
Hi Tom - There are some great options when it comes to balanced funds - many have been mentioned in response to your question. In the current interest rate environment, it may make sense to look at the TYPES of bonds that comprise the fixed income portion of your portfolio. It is highly likely that rates will continue to rise from historic lows. If this scenario plays out, you will be well served to hold fixed income investments that have a lower duration (lower interest rate risk) and to avoid overweighting U.S. government bonds.
Given your request for a 60/40 split you have some good answers above. I want to highlight your 40% bond allocation. In the past this was the safe part of the portfolio. It still has the lower volatility of the two, but be aware many balanced funds index against the US Aggregate for the 40% bond portion. At the end of 2012 this index had over 35% in US treasuries. The current duration is 5.61 (Barclays website - 9/10/13). This means if rates rose 1% over short-term the price would drop approximately 5.6%. A healthy bond allocation may be warranted, but looking at different underlying sectors and different maturities are worth considering.
Tom, I would recommend that you do some of your own research, not even exactly so much to select investment choices, but more to find out where you are more comfortable in the active vs. passive debate and to develop a personal financial strategy in general.
For many of my clients, I utilize institutional third party money managers, or strategists that do their own extensive research and develop alogirithms to determine when they should allocate to certain asset classes. These money managers invest basically in ETF’s. The fees are low. I get to invest my clients money in low-cost ETF’s, and utilize money managers that I have screened for integrity, past performance, risk and volatility, and that I believe their investment strategy is sound.
I believe that the great majority of returns comes from being in the proper asset allocation. I believe that by actively managing low cost ETF’s with what I believe are some of the best money managers gives my clients the best of both arguments.
As for investing 40% in bonds; I understand that historically this has been a sound strategy. But I am very concerned that interest rates will rise, perhaps significantly. If this happens, people with large bond positions can get hurt badly. I believe we are probably entering a bond bear market. This is after a sustained 30 year bull market. If you are to invest in bonds, I recommend you stay with short duration bonds, perhaps TIPS going forward. If this makes sense to you, please refer back to my first sentence; do some of your own research. Seek advice from a local financial professional, preferably a CFP(R) who agrees with your philosophy.