The end is nigh, to hear some tell it. The baby-boom generation, 78 million of us born between 1946 and 1964, is turning 60, and the pace of our “aging” is going to gather steam over the next several years.
Beginning with 2006, more than 4 million boomers will hit “retirement age” every year. Are you one of them? Well, let me tell you, if you’re too old to start a new job, then you’re too old to ignore lackluster performance in your mutual funds.
Time is running out on your efforts to rebuild a retirement nest egg devastated by the bear market.
You’ve got to take action.
The first action you must take is to untie yourself from a drifting and waterlogged market. Stock prices could remain flat for years—as they did in the ’70s. That means thinking about alternatives to index funds.
The second action you must take is to shift from buy-and-hold. The long-running bull market in stocks that began in 1982 and lasted until 2000 certainly made buy-and-hold investing appear wise. But a sideways market turns buy-and-hold into buy-and-pray-for-a-miracle.
And that isn’t a strategy. Yes, you could go back to saving hard, scrimping and doing without. But you didn’t work hard your entire life to have the rewards snatched from you now. That’s so unfair.
So get active with your retirement portfolio. After all, you don’t really have a choice.
Vanguard Award: Best Fund for Retirement
If you were to tell me that you could buy just one Vanguard fund—or indeed, one fund in any family—this is what I’d tell you.
This is a fund that pretty much guarantees you two things that I think you’ll value. One is a good night’s sleep. In a world where madness stalks, the value of discipline, logic and accountability is great. That is one reason subscribers to The Independent Adviser for Vanguard Investors have loved this fund since I began recommending it.
The second reason is…and this even surprises investors in the fund…a very impressive performance. It has an average annual return of 13.3% over the last 5 years.
What’s the secret? Well, if Warren Buffett has a long-lost brother, his name is James Barrow. And Barrow is this fund’s secret. You see, Barrow doesn’t “pick” stocks, any more than Buffett does.
He collects, and owns, companies. Companies that are simple, have high current cash flow, that you can buy and hold for a long time, that are unaffected by business fads, that boast yields 150% greater than the index, price-to-book (that’s two-thirds of the index), and P/Es that are 35% less than the index.
Like a great athlete, Barrow makes his results look effortless, graceful and deceptively easy. He knows, in Jack Bogle’s words, “the majesty of simplicity.” Which may account for his ability to rise above market turmoil and deliver such stunning results, so consistently.
As Vanguard investors, you and I are blessed to have access to James Barrow. But be careful. In the fund he’s best known for, Windsor II, you only get Barrow at “half-strength.” Yes, Windsor II is a great fund, but he has another fund, much smaller, and it is all Barrow, and leaping ahead right now.
THIS Is the Fund to Buy
As you can tell, I admire Barrow hugely. I studied him all through the 1990s, and there was never a time when he strayed from very clear principles.
Others derided him when technology took off in 1998 and 1999—just as they denounced Warren Buffett. But today, again like Buffett, Barrow has been totally vindicated. Vindicated with boring food companies, dull utilities and unglamorous retailers. All bought for cents on the dollar. All making huge profits. In Buffett’s own self-deprecating words, “Contain your excitement.”
What if you already own Windsor II? I think it’s fine, but I want you to consider adding Barrow’s other fund to your portfolio.
I am so enthusiastic about this fund that I am putting a great deal of my own money…my family’s money…and the money of my wealthiest clients into it.
That’s how much I believe in James Barrow and his own fund.
