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June 26, 2008

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Good, simple advice.

I am transferring my Roth IRA from a loaded American Fund account to a low-cost Vanguard Roth IRA. FMF -- What do you think of the target retirement date funds? How do they compare with a simple, index fund?

Stephen - they are basically a pool of index funds if you look at their holdings. An index of indexes if you will. I looked at one for my retirement age and found it wasn't as heavily weighted in stocks as I would like, so I am doing my own allocation with Vanguard index funds.

Hey FMF,

With the Dow crashing nearly 400 points today, why don't you give us an update on your index fund portfolio. Oh yeah, no doubt you're heavily buying today as that's what you normally do when the market drops like this so tell us how much you're buying now if you don't mind.

I can't vouch for FMF, but I put a purchase order in today for $15,000 worth of retirement funds that will process at the bell tomorrow. I've got a 18 year investment window so I'm thinking the odds or recouping my funds is looking pretty good.

I would agree with diversification and "buy and hold", BUT re-allocate your long-term retirement funds on a quarterly basis. If you must day-trade or time the market, then $10,000 is all I would wager. Playing the market game is fun and sometimes you win big. I'd much rather play that game then risking it all in Las Vegas. Do whatever gives you satisfaction, within limits. Life's too short!

I'll repeat what I posted before. The most respected investor in the country, Warren Buffet, was recently quoted as saying not to expect more than 6-7% annual returns in any diversified portfolio going forward, long term. The days of 10-15% returns in the stock market are long gone. Adjust your expectations accordingly and plug those numbers into the retirement calculator to see if you need to save more.

Trask --

I'll give an update of my net worth in mid-July and cover this issue then.

@Kevin - I found basically the same thing. Vanguard's TRF was too mild for me. I just supplement with some additional equities and the re-balancing is *almost* on auto-pilot :)

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