Selecting a Retirement Portfolio

| March 14, 2016

This project is due on Thursday, May 5th at 8 am. (pacific time)

Retirement is a long way away for almost all FIN 296 students. So it is a bit ironic that retirement investing is one of the first decisions you will make after getting your post-graduation job! But there are two reasons why this is important so soon. First, starting to save for retirement is much easier the earlier you start. And second, often employers match your contributions with their own money. Almost no-one can afford to give away free money.

It is likely your future employer will offer 401k (for profit companies) or 403b (not-for profits). If not, you have access to IRA’s or MyRA’s. This project requires you to make investment decisions as though you were doing it now and to rationalize how you make these decisions. As you have seen the investment world is complex. But that does not change your need to get started.

There are four no-load mutual fund families that are huge and it is likely your future employer will use one of these. So I have designed the project around these four companies (there are hundreds of possibilities). You will be going online to do this research and because the data screens are fairly dense it would be best to do this on a desktop and not a tablet or phone.

Select one of the following firms. I suggest you spend ten minutes looking at the four websites and evaluating which may be easiest to use. If you want to use ETFs you must pick Vanguard or Fidelity. State your selection. select “investment products” then “mutual funds” or “ETFs” select “vanguard mutual funds” or “vanguard ETFs” select “Products and Services” then “mutual funds” select “personal investing” then select “View our Mutual Funds”

note: you can use Morningstar:

Indicate if you will use a Roth or Traditional retirement account (IRA, 401k or 403b) and why you made that choice between Roth and Traditional.

Indicate if you are using active funds or passive (index) funds and why.

Indicate if you are using exchange-traded funds or mutual funds and why.

If you are using mutual funds indicate if you are going to use target date funds, balanced funds or a portfolio of individual funds and why you made that selection.

Indicate your choice of a single fund or a portfolio of funds and describe, in some detail the characteristics of the fund or funds you have chosen. Which funds might you use (mutual or exchange traded)?

What is your age when you start working, when you retire and when you might die (sorry, but it’s part of life). (You do not need to explain these).

Guess at how much you can save every month?

Estimate how much you will have in your account when you retire using your calculator. Use a rate of 2-5% depending on how much risk you think you would take and the number of years you will work. (Those rates may seem low but we are talking about real rates of return, i.e. after inflation.

Estimate how much you can withdraw every month for the rest of your life during retirement using the same rate again using your calculator.

Much of your grade will be based on how well/completely you describe your logic in making your choices.

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