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Looking at an Investment Strategy for Retirement
By JLP | January 4, 2006
DISCLAIMER: This post is not meant to be a recommendation. If you choose to implement this idea, it will be at your own risk.
In the past, I have talked about a possible retirement investment strategy utilizing exchange-traded funds (ETFs). I wanted to show in more detail just how this strategy would have worked, had it been implemented last year. For this example we will assume the following:
- A beginning account value of $1,000,000.
- A 5% withdrawal taken at the beginning of the first year. So, for this example $50,000 is withdrawn and the remainder ($950,000) is invested in the portfolio.
- Dividends are left in the cash account
- Fees (.277% FOLIOfn + .55% management fee = .827% Total) are based on the average account value for the year ($1,007,817 + $950,000)/2 = $978,908. In addition, each ETF has an internal management fee.
- All ETFs are iShares
|
Ticker |
% |
12/31/04 |
12/30/05 |
+ Dividends |
Total |
|
IYM |
4 |
$38,000 |
$38,890 |
$653 |
$39,544 |
|
IYC |
4 |
$38,000 |
$37,019 |
$94 |
$37,113 |
|
IYK |
4 |
$38,000 |
$37,957 |
$614 |
$38,572 |
|
IYE |
4 |
$38,000 |
$50,682 |
$470 |
$51,152 |
|
IYF |
4 |
$38,000 |
$39,327 |
$798 |
$40,125 |
|
IYH |
4 |
$38,000 |
$40,609 |
$295 |
$40,904 |
|
IYJ |
4 |
$38,000 |
$39,101 |
$428 |
$39,529 |
|
IYW |
4 |
$38,000 |
$38,988 |
$58 |
$39,046 |
|
IYZ |
4 |
$38,000 |
$35,748 |
$1,273 |
$37,021 |
|
IDU |
4 |
$38,000 |
$42,292 |
$1,210 |
$43,502 |
|
EFA |
20 |
$190,000 |
$211,376 |
$3,948 |
$215,324 |
|
AGG |
20 |
$190,000 |
$186,642 |
$7,587 |
$194,229 |
|
LQD |
20 |
$190,000 |
$183,458 |
$8,734 |
$192,193 |
|
Totals |
|
$950,000 |
$982,090 |
$26,163 |
$1,008,253 |
|
|
- Fees |
$8,097 |
|||
|
|
Total Ending Value |
$1,000,156 |
|||
The total return after fees on this portfolio was 5.28%( ($1,000,156 – $950,000)/$950,000 = .0528). Coincidentally, the return for the iShares Dow Jones Total Market Index (IYY) was 5.40% (including dividends).
This is a work in progress so please feel free to post any questions or comments.
Topics: Exchange-Traded Funds, Investing, Retirement Planning | 4 Comments »
January 6th, 2006 at 9:59 am
[...] All Things Financial – JLP talks about his financial history and two financial “events” of significance. He also has talks about an interesting investment strategy using ETFs that’s worth a look. [...]
January 9th, 2006 at 4:57 am
Carnival of Investing
Welcome to this week’s edition of the Carnival of Investing. As a summary of each piece, I’m listing each author’s reason for submitting the post to the carnival (for those that submitted one) and/or a bit of the post itself
October 4th, 2006 at 3:51 pm
I like your mix, but you might consider using a few of the new Wisdom Tree ETFs specifically targeting dividend paying stocks. http://www.wisdomtree.com/
December 28th, 2006 at 3:27 pm
[...] Looking at an Investment Strategy For Retirement – January 4th, 2006 [...]