|Expense Ratio (net)||0.16%|
|Category||Allocation--30% to 50% Equity|
|Last Cap Gain||0.00|
|Morningstar Risk Rating||Below Average|
|Beta (3Y Monthly)||0.57|
|5y Average Return||N/A|
|Average for Category||N/A|
|Inception Date||May 14, 2001|
It was mostly a footnote to my financial progress. At the time our net worth was around $500,000, so we had meaningful investments, but I was nowhere near financial independence or retirement. My net worth had recently crested $1 million and I was beginning to entertain thoughts of early retirement.
Coasting on very strong recent returns, it can be tempting to use your larger nest egg as a reason to pull back on your savings rate, or let a too-aggressive asset allocation ride. If you've been watching your portfolio grow by leaps and bounds for the past decade, take a moment to congratulate yourself for your part in it: your contributions, your investment selections, and your perseverance through periods of market volatility.
Not only did the Federal Reserve Open Market Committee leave interest rates unchanged at its June meeting, but the Fed indicated that it was standing ready to cut rates later this year if the economy showed signs of further weakening. You may find that your enlarged portfolio is also courting a good bit of risk, which can be particularly problematic if retirement or spending on other goals is close at hand. If you're still accumulating assets for retirement, check on whether your current portfolio balance, combined with your savings rate, puts you on track to reach whatever goal you're working toward.
The Aggressive bucket portfolios, which are geared toward new retirees who can tolerate some equity-related volatility, feature a roughly 35% allocation to bonds. The conservative versions, meanwhile, target a 60% fixed-income allocation and are geared toward retirees with shorter time horizons (life expectancies) who are drawing heavily on their portfolios for current living expenses.
The ability to pay a dividend is also an indication of a company's financial strength and quality: Dividend payers have higher financial health grades, per Morningstar, than non-dividend-payers, and they're also more likely to have moats. There are a two key types of dividend-paying companies, which Morningstar director of global exchange-traded fund research Ben Johnson has helpfully called "growers" and "yielders." In turn, you can sort funds based on which types of companies they tend to emphasize. Growers have shown a tendency to increase their dividends over the years, which helps them deliver a pleasing balance between growing their businesses and paying income to shareholders.
Finally, while I've often argued that retirees shouldn't prioritize income production because it can lead them into risky territory, I do think yielders can work well as part of the Bucket approach. As a retiree spends from Bucket 1 (cash for ongoing living expenses), he or she can refill it, at least partially, with current income distributions. The good news for yield-seekers is that my baseline Bucket portfolios--both those composed of mutual funds and ETFs--have seen their yields tick up since I last shone the spotlight on their income production in September 2017.