With some common retirement scenarios in mind, we have assembled the following three model fund portfolios.
We started with a list of top no-load funds, then cut funds that were too risky for most retirees. (For example, we axed funds that invest exclusively in technology.)
For diversity, you'll find both large- and small-company funds, and those that use growth and value styles.
We included an equity-income category in the list because many retirees prefer to invest in stocks that pay dividends.
Columbia Real Estate Equity and Vanguard REIT Index invest in publicly held companies that own and manage real estate. You'll find a mix of corporate, high-yield and municipal-bond funds in the bond section.
Except for the third portfolio, we assumed the funds would be held in a tax-deferred account.
Portfolio I, for long-term growth: Oakmark Select, 25 percent; TCW Galileo Select Equities, 25 percent; Skyline Special Equities, 10 percent; Artisan International, 25 percent; and Harbor Bond, 15 percent.
This portfolio is suitable for an investor who won't need to raid the account for at least seven years and can therefore afford to hold 85 percent in stock funds.
Investments are spread among growth- and value-style funds: TCW Galileo Select Equities for growth, and Oakmark Select for value. Small-company stocks are represented by Skyline Special Equities, international stocks by the Artisan fund. Harbor Bond invests in high-quality corporate bonds and mortgage-backed securities.
Portfolio II, for growth and income: Selected American Shares, 30 percent; Invesco Equity Income, 20 percent; Columbia Real Estate Equity, 10 percent; Deutsche International Equity, 10 percent; and Harbor Bond, 30 percent.
This portfolio is suitable for someone who will withdraw modest amounts from a tax-deferred account.
Selected American Shares is the core stock holding, and we added two dividend-paying stock funds. We allocated part of the portfolio to international stocks by including Deutsche International Equity, which has a value tilt.
Portfolio III is for those who want low costs and no surprises: Vanguard Total Stock Market Index, 50 percent; Vanguard Total Bond Market Index, 25 percent; Vanguard Short Term Bond Index, 25 percent. Simplicity and low expenses are central to this portfolio of diversified index funds. Index funds are tax-efficient, making them fine for a taxable portfolio.
The Vanguard Total Stock Market Index fund tracks the Wilshire 5000 index, the broadest measure of the U.S. stock market. Vanguard Total Bond Market Index holds a sampling of all types of bonds.