Introducing: Life-Cycle ETFs!

July 10th, 2008  |  Published in Asset Allocation  |  1 Comment

It was only a matter of time before ETFs, or exchange traded funds, came in life-cycle flavors. Brokerages started offering life-cycle mutual funds, or target date and target retirement, a few years ago and they’ve become very popular options for folks who want a simple investment product that does all the work for them. No asset allocation, no rebalancing, the brokerage, in its infinite wisdom, handles all that for you based on the target date of the fund you choose.

Life-Cycle ETFs differ from life-cycle mutual funds in the same way as ETFs in general differ from mutual funds. The cost trade-off is usually in the expense ratio and commission charges. With a mutual fund, you pay a higher expense ratio but have little commissions (for example at Vanguard, you can buy most Vanguard funds without paying a fee). With ETFs, you pay a commission per trade but less in expense ratios.

Otherwise, they’re pretty much the same.

10 Rules: KISS – Keep It Simple Stupid

December 23rd, 2006  |  Published in Investing  |  Comments Off on 10 Rules: KISS – Keep It Simple Stupid

The third tip of Forbes ten rules for building wealth is one that, I think, applies to almost everything in life: keep things simple. Forbes recommends that you choose three or four index funds that will give you some good exposure – that is, a nice mix of risk and reward instead of all in one asset class (though most funds will be a mix of stocks and bonds, they say an ETF is the way to go if you want to dabble in commodities) or geographic area.

One tip that I think is worth investigating are Target Retirement funds that change their allocation over the years, and will automatically rebalance the assets for you, as you get closer and closer to retirement. I think that target retirement funds are definitely very popular nowadays and they are the definition of KISS.

Source: Fortune