Paying a % For Ins For An Agressive Fund?

[IntenseOperator]

Looking at an aggressive mutual fund as part of my retirement package. It has done +13.5 % for the last 5 years up to last December, since then all has dumped except energy (I think that was it's inception 5 yrs ago). I'm thinking of just throwing 3 or 4 thousand/year into to it for a few years to see how it does. You have to lock in for 8. I can pay .35% to get a guarantee on the principle money I put in, in case the fund takes a total dump. Every couple years, I can raise my guarantee if I agree to extend the hold for another 7 years. Prudential has what is called Growth Return Option (GRO). I believe it's an aggressive Morningstar fund put into a Prudential annuity, if I want the insurance on my principle, if that makes sense.

I am looking to buy into something when it's low. I'm also looking to throw some money into play, an aggressive fund. I don't have the time or the talent right now to do anything on my own. Was wondering if adding the insurance protection is worth it.

 

[selkirk]

IO just some questions,
1.how much did it lose last year,
2.what are the returns the last six years.
3. what is the min you need to invest
4. what are there major holdings, can they short, ie. why did they lose out, did they not have any holdings in energy.
5. why do they need such a long hold period 8 years to be locked in...
6. what are the management fees, and are there any perfomance fees.


thanks
selkirk

 

[IntenseOperator]

#1&2 I asked what the performance has been and was given the last 5 years thru last Dec. (+13.5) I will look into that further though and get some kind of answer. These type funds have not been around that long (from what I'm told).

#3 $1000/yr

#4 The energy part was just a general comment by me, about most all mutuals (& stocks) dumping last year except those involved with energy.

This is a general idea of what I'm looking at...

AST Aggressive Asset Allocation Portfolio

99.5 % Equities, .05% Fixed Income

Large-Cap Growth/40% ...
AST Marsico Capitol Growth/24%, AST T Rowe Price Large Cap Growth/16%

Large-Cap Value/28.3%....
AST Large-Cap Value/14.1%, AST Alliance Bernstein Growth & Income/14.2%

International Growth/12% ....
AST International Growth

International Value/10%...
AST International Value

and 6 other smaller % pieces

I believe I am using a product of Morningstar and possibly insuring it through Prudential.

#5 Any of these type products, especially those involving any type monetary guarantee, have minimum periods to hold them. I asked, and if I desired, I could stop funding it at any time, but would have to wait till the 8 years was up to move any money involved.

#6

Annual Fees and Charges

Mortality & Expense Risk Charge :0.50%
Administration Charge:0.15%
Distribution Charge (years 1-8 only):0.60%
---------------------------------------------------------

Total (Years 1-8): 1.25%

if I insure my principle: 0.35%

Total now (Years 1-8): 1.6%

Total (Years 9+) 1.0% (without dist charge above)


hope I covered everything

 

[selkirk]

IO would be good if you knew how these funds did or collection did over the years.

it seems this is a collection of mutual funds, and you are buying one product and they hold these funds.

so would you buy this fund and it would hold these funds, or is that how the fund is divided.

if so do these ind. funds charge the parent fund their managment fees, and then you pay a fee on top of that.

also on returns, though they are new, there should be some data....also maybe some of these funds are around longer.

though they can say it returned 13%...ect... how many years did it beat the index.


also why you what to know year by year is simple...
did it make
positive returns, or did one year it lost 20-30%. though this may not seem important....
one is easier to take than the other (wide fluctuations)

thanks
selkirk

 

[IntenseOperator]

Thank you Selkirk for the responses. I called the gentleman I was in contact with about all this and asked him a couple of questions that you had brought up (left in his voicemail). This being an annuity, I was also told most allow you to withdraw up to 10% at any time without penalty. He has yet to return my call. :shrug: I'm getting the feeling I was just suppose to sign on the dotted line with this guy and not be stupid enough to attempt to become informed. I dunno.

I may be back to square one in my search for an aggressive vehicle/product to add to my normal retirement plan.:0corn

I really appreciate the fact (you brought up) that each individual fund charges the parent company which in turn charges me. Didn't think about that angle.

again, thanks for taking the time to provide the info

The gentleman I dealt with that hasn't returned my call in two days was one of the higher ups in the midwest for World Financial Group (an Aegon Company). New outfit with a business plan much similar to MLM.

 

[selkirk]

IO have had 3 or 4 examples of these type of guaranteed products and for the most part feel they do not work out very well for the investor.

1. 20 year ago, around 1988, wow time does fly... anyways there was Royal Trust in cdn. they sold plenty of mutual funds, most avg. some good, some bad. they would later lose a bundle on British real estate, and was bought out by Royal Bank of Canada.

anyways they managed three balanced funds, or funds of funds. income, growth, balanced. basically was atracted to the low mer, of around 1-1.25%. however within a few months found out that all of the funds they owned charged a fee to the parent fund, I owned. so fees, and fees. would have been better picking out a few funds.

also all of the funds were theirs, some decent however some lagged did not matter.
the fund always seemed to trail the main index, so killed it....2.50%mer++ when the final fees were figured in, and hard to keep track of that many funds.

2. GICS/CD guaranteed...bought into this for my RRSP (IRA), made an average of 14%, though this may seem good would have made more in the market...one of the better bull markets...also hard to track, the average for the month, for 5 years...yikes....most of these products have limited upside.

3. 5 year futures guaranteed certificate. this is sold to idiots, and in the late 90s bought one, for $5000, just to see how it would do.....

futures can be very volatile invested in about a year and my gains would be 10%+++ per month....also losses can be sharp got caought in a coffee short squeeze and lost all gains, and around 5000US.

so I thought get a free play on futures through this cert...also it was tradeable so could sell at any time... there are a few problems...

the company that guarantees these products are not going to take big chances, they never did the most it grew to was 5900, after 5 years, made just over 500, wowo...wow....... the problem is bank of montreal the backer is not going to lose money, so they hire these managers... and if these managers want more business they take little or no chances... boring...

was not liquid so could always sell it, however the spread was 3% between bid and ask. garbage.

4. BULLS in 1995 Merril Lynch sold a product in Toronto and issued them at $10 to encourage retail investors.

for 10 you got double the sp 500 over a 5 year period. however at the end you would get back your money if the market tanked, you were guaranteed your money back $10.

the insurance cost .15 a unit, so let us say the sp goes up and the index notes after 5 year are at 21.15. the investor would get 21. .15 of every share went for insurance.

this worked out well, bought large positon at 10 and it went over 20. only sold around 74 million as many investor did not buy in since the market rallied for two weeks going into the issue...that is short term and dumb thinking.

thanks
selkirk

 

[selkirk]

the few things do not like about the product is long hold time period just to get your money back.

let us say these funds are average at best or below, plus the fees, you may be tempted to keep them to get the guarantee...so you hold a bad invesment for 8-9 years.

though there is just one product there are a lot of funds, moving parts would want to track how they are doing compared to other funds.

fees, hate fund of funds, would rather pick out 3 good funds or etfs.

most products that offer a guarantee ussually charge for this and when compared to just investments in the chosen markets. investors with a guaranteed trails the results of the other investors.

if the investment makes no money, ( a brutal bear market, has happend before) though you did lose to inflation. 2-5% and if the US fed does not wake up could be 5-10% a year. that is how much your dollar is losing in purchasing power.

IO would pick out two or three mutual funds, make sure the fees are low, low, low. and the fund has beat the index.

also check what the company invests in, and if you are comfrotable, also look at etfs, do not need much.

and for 4000 a year, could slowly build up a porfolio of etf.
would not take to much time, especially once it is set up.

good luck
thanks
selkirk

 

[Doughboy]

If you want an aggressive mutual fund with a fantastic track record, then look at the CGM Focus Fund. CGMFX is the symbol. Manager can go anywhere to invest, and get short also. He bets big, but is usually right.

 

[kneifl]

If you want an aggressive mutual fund with a fantastic track record, then look at the CGM Focus Fund. CGMFX is the symbol. Manager can go anywhere to invest, and get short also. He bets big, but is usually right.

Exactly. Heebner is brilliant and this fund has brought solid returns the past 5+ yrs. Just watch your retirement portfolio grow with this guy - beats the market consistently. Can not say enough good things about this fund - have a lot of money wrapped up in it and have made a lot off of it.

kneifl