Golden Years Portfolio
is created for a retired couple in the 15% federal tax bracket. The couple receives Social Security payments but needs another $8,000 a year in income from this portfolio.
Even though the primary purpose of this portfolio is income, Roge has chosen only two bond funds. "I try to minimize the amount of bonds for retired clients," he says. "Over a 10-year period, you're much better off being in equities."
"We have retired people, if their accounts are large enough, who can be 80% in equities because the remaining 20% is a big enough piece to throw off absolute income," he adds.
Roge places 25% of the portfolio in
J.P. Morgan Institutional Disciplined Equity
, which requires a minimum initial investment of $1 million, unless you're investing through a participating adviser. The retail version, however,
J.P. Morgan Disciplined Equity
, requires only a $2,500 initial investment. (The expense ratio, though, at 0.75%, is higher than the institutional version's 0.45%.)
Ronald W. Roge
R.W. Roge & Co.
Roge is a nationally recognized financial adviser and has been named one of the nation's best advisers by several publications. His investment advisory firm was organized in 1986. He received his Certified Financial Planner designation from the College for Financial Planning.
Roge likes the fund because it maintains the same industry weightings as the
"without blindly buying" the same stocks as the S&P benchmark. "If you maintain the industry weightings but have a valuation overlay, you should be able to do better," he says. In fact, the fund's 26.9% return for the year through Nov. 25 beats the S&P 500's 24.0% return by nearly 3 percentage points.
Roge has two internationally oriented funds in the portfolio.
, with a 10% allocation, is a global fund that invests in stocks around the world and in the U.S. Fund manager Helen Young Hayes "has basically defied gravity," says Roge. While the fund has returned an average of 23.3% annually over the past three years, its assets have exploded to $14 billion as of Oct. 1.
Even so, "I've been waiting for the fund to underperform, and it hasn't," he says. Janus Worldwide has returned 16.6% this year, versus 10.1% for the average global fund tracked by
Lipper Analytical Services
. Roge also likes the fact that the fund comes from a familiar company, Janus. "You want to make people feel comfortable when they are first investing, and sometimes a familiar fund is the way to do it," he says.
Another 5% is in
UMB Scout Worldwide
a little-known, $88 million fund with an excellent track record managed by the investment advisory arm of
. The fund has a unique investment strategy: It buys foreign stocks mostly through their ADRs, which are traded on the
New York Stock Exchange
. It has no foreign offices, thus its expenses are very low, just 80 basis points. Its 16.4% return for the year easily beats the 9.4% average return for international funds tracked by Lipper Analytical Services.
Roge says he put 10% of the portfolio into
Harbor Capital Appreciation
"to get in a little more exposure to technology." The fund has about 30% of its assets in tech stocks and has returned 25.1% year to date.
Tweedy Browne American Value
boasts "great value managers of the
tradition," says Roge. (Graham is considered the father of value investing.) The fund, which makes up 7.5% of the portfolio, invests in value companies of all sizes. It is returning 7.2% in a year that has not been kind to value funds.
The small-cap portion of the portfolio comes from a 7.5% allotment to
Royce Total Return
. Fund manager Charles Royce "has been successfully managing small-caps over a long period of time," he says. "It's not shooting the lights out, but it has held up extremely well over the small-cap correction." During the tumultuous third quarter, the fund lost only 11.3% versus 21.6% for the average small-cap fund. For the year, it is up 2.7%.
Roge is among the legions of admirers of
manager Bill Gross. He has placed 20% of the portfolio with Gross, so "you have the largest bond-fund manager in the country handling your account." The fund invests mostly in higher-quality, intermediate-term bonds. It has returned 8.4% this year.
To round out the bond portfolio with some higher-yielding bonds, Roge puts 15% into
Janus Flexible Income
, "a top-performing eclectic bond fund" that invests in government bonds, corporate bonds, junk bonds and mortgages. It has returned 7.3% this year.
Overall, the portfolio should return an average of 8% annually -- sometimes more, sometimes less. "There will be years when it will return 20%," Roge says. But the owners should be able to take out $8,000 a year without draining the capital and assuming only moderate risk.