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Retirement Account Maintenance

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February 01, 2013 - Retirement Account Maintenance - by Morningstar Investment Research

Bucket Portfolio Maintenance - There's More Than One Way to Get It Done

The bucket strategy for retirement income appears to be a model of simplicity, at least on the surface. Simply segment your investment portfolio based on when you expect to need the money, slot in the appropriate investments for each segment, then happily harvest living expenses from your portfolio for the rest of your life (provided your withdrawal rate is sustainable, of course). The key premise of bucketing is that by maintaining a liquid pool of assets at all times--consisting of one to two years' worth of living expenses--a retiree can maintain a stable standard of living while also holding a diversified pool of assets that may undergo short-term fluctuations. That sounds straightforward enough. But things start to get somewhat more complicated when it comes to "bucket maintenance"--where to go for cash when, or ideally before, the cash bucket runs dry. Morningstar director of personal finance Christine Benz outlined the pros and cons of many common bucket-maintenance strategies and gave her suggestions on which ones are the best.

Making Sense of Survivorship Bias

How does Morningstar deal with the issue of survivorship bias in calculating a fund's performance relative to its category?

Morningstar assistant site editor Adam Zoll tackled this question, pointing out that's fund data pages deal with the issue of survivorship bias in different ways depending on the time frame. Survivorship bias refers to how historical fund performance data can be skewed if you consider only existing funds rather than also including funds that have been liquidated or merged into other funds. By only including existing funds--or "survivors"--performance data might not accurately reflect a fund's performance relative to all of its competitors dur ing the time period in question.

Among the other topics we addressed this week:

M&A Market Awaits Clearer Economic Signals. The means and motives for deals are in place, but macroeconomic fears will likely keep the M&A market in waiting.

Prominent Putnam Manager Resigns. Manager behind the firm's absolute return funds leaves; four comanagers to take over.

Fairholme Will Soon Close Its Doors to New Investors. Manager Bruce Berkowitz is looking for a smaller, core group of long-term shareholders who have a thorough understanding of his deep-value process.

Longleaf Partners Global Closes After Just 3 1/2 Weeks. Plus, a PIMCO Ginnie Mae manager de parts, Fidelity to merge away two funds, more Vanguard fund expense ratios come down, and more.

Will Your Foreign Fund Still Be Around in 2018? The odds are worse if it targets just one country or region.

There's More to Fund Investing Than Mutual Funds. Total return and risk-adjusted performance both support the view that mutual funds, closed-end funds, and exchange-traded funds are not created equal.

Are U.S. Large-Cap Funds Fully Valued? A look at how some of our favorite funds measure up using Morningstar's price/fair value ratio.

Don't Let Daily Money Market NAVs Obscure the Big Picture. Big fund shops are disclosing daily net asset values for money market funds, but should you care?

Black Swans, Fragility, and Fu nd Investing. Looking at volatility-adjusted performance is not enough to determine a fund's risk profile.

SPY Celebrates 20 Years While Its Older Brother Nears 23. Let's set the record straight about the world's first ETF--it wasn't SPY.

The ETF Industry Turns 20. A look back on the 20th anniversary of the first and most successful ETF in the U.S.

Investing in China: Getting Around the Great Wall. An A-Share ETF provides more diversified exposure but has a unique structure and carries additional risks.

Concentrated Funds That Keep Volatility in Check. Despite holding no more than 50 stocks, these funds keep a lid on downside risk relative to their peers.

Call Options Help Juice Payouts From This Equity Fund. Nuveen Equity Premium Income has low fees and a decent track record and has exhibited lower-than-average risk characteristics than its peers.

The 5 Biggest Misperceptions Investors Have About National Oilwell Varco. We think these concerns are unfairly punishing this wide-moat firm.

Plenty of Cheap Debt to Go Around. U.S. banks have repaired their balance sheets and have ample credit capacity available to provide commitment letters supporting M&A activity.

IShares Files for 8 More Target-Maturity Fixed-Income ETFs. Plus, the week's best- and worst-performing funds.

3 Small-Cap, Narrow-Moat Values. These firms may not dominate the headlines, but their shares look to be undervalued today.

Why Are Investors Buying Bonds? Some look to derisk as retirement draws near, while others are steering clear.

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