On Jun 18, 2008, at 8:41 PM, Joseph Catron wrote:
> How can I track the growth, or lack thereof, of a MetLife asset
> allocation portfolio
> (http://www.metlife.com/Applications/Corporate/WPS/CDA/
> PageGenerator/0,4773,P7751,00.html)?
> I'm very new to the world of 403(b)s, owning small pieces of the
> companies I'm paid to organize against, etc.
>
> Also, while I have your attention: I understand that an AAP is
> preferable to a straightforward portfolio, if only because I'm lazy
> and have other priorities. But at this (relatively young) point in my
> life, assuming I want to make money, I'm better off with the
> "aggressive allocation portfolio," right?
These are your only options? They're "funds of funds," meaning that the money you put into the fund is then divided among a number of other funds. That means you're paying two layers of fees, which should substantially reduce returns. And since about 3/4 of investment managers underperform the market averages, you could be paying a lot for subpar results.
I don't see any price histories, and the funds are all too new to present any meaningful stats ("beta n/a").
Yes, in theory a young person should put more money into an "aggressive" portfolio, but a lot of these aggressive funds are crap, because by definition they invest in risky securities. The other standard theory is that you should put 100 less your age percent into stocks (e.g., if you're 25, you put 75% into stocks), and the remainder into bonds. As you age, you should adjust the allocation according to the formula. There are mutual funds that do this automatically for you.
As I've said before, most people who are saving for retirement or other long-term considerations should just put their money in a low- cost index fund and forget about trying to beat the market (or hiring "aggressive" managers who try to beat the market for you). Unless you're Soros or Buffett, you probably can't do it. If it's an option, it's hard to beat the Vanguard funds, which have very low fees, especially for their index funds.
The fees really matter (and I don't see any info on fees for the Met Life funds, but I'm guessing they're not small). The long-term average return on U.S. stocks is around 7% a year. If you start with $10,000 and do nothing else, it would grow to $76,123 is 30 years. At a 1% fee, which is slightly below the industry average (and not the lowest by any means) would take the return down to 6%, meaning that after 30 years, you've got $57,435. That's a 25% hit just because of a 1% fee. A fee of 0.15%, which is what Vanguard charges on its index funds, would bring the yield down to 6.85%, giving you $72,985 at the end of 30 years. The hit is just 4%. Of course, if you're lucky, the manager will earn higher returns and you'll be glad to pay the fee. If you're lucky. But the odds are against you.
Doug