Since the posts, markets have been volatile as European countries have struggled with a debt crisis and the U.S. has faced a debt ceiling impasse, threatening default on U.S. Treasury debt. A huge positive of the approach used by the new account is that it is very easy to follow ongoing performance. The alternative that most investors face is relying on their advisors to produce reports months down the road.
Let's look at the performance:
CLICK TO ENLARGE Note that the performance is for both the account, .89%, versus the benchmark index, 1.04%.
It is also easy to ascertain that the portfolio is positioned in conformance with the asset allocation by model.
As can be seen, each asset class is within 1% of target.
What does the portfolio actually look like?
When the account reaches the draw-down phase, the amounts will be taken out of cash which comprises approximately 10% of the account. Also, at that time, special consideration will be paid to ensure that at least 60% of the annual income need is met with interest and dividends of the portfolio's assets.
The bottom line is that this is a process that, with some guidance, most investors can carry out on their own. Although Schwab was used here, other brokers offer similar tools. The process focuses on the important questions: the appropriate asset allocation model and the appropriate asset sectors. It doesn't sidetrack investors into the time-consuming, difficult, and, frankly, many times under-performing tasks of trying to pick individual stocks or time the markets. It is an approach that historically has outperformed 70% to 80% of professional managers after fees are accounted for. It is an approach that is 100% transparent in an industry not known for its transparency.
Disclosure: This post is for educational purposes. Investors should do their own research before investing. None of the funds mentioned should be construed as recommendations.