Retire Rich From Stanford

General Guidelines

• Maximize Your Contribution

Contribute the maximum amount allowed to your 403b plan. Ask your benefit counselor to calculate your maximum % salary reduction every January.
• Asset Allocation

Do not put all your eggs in one basket. Determine your level of risk and build a portfolio based on asset allocation with different asset classes (stock, bonds, cash etc.). The stock portion can be 50 to 100% depending on your risk tolerance and years from retirement. Diversify your domestic mutual funds by capitalization size (large, mid, small) and investment style (growth, value). Include 10 to 30% international funds to add diversification and reduce overall risk. Frank Armstrong has a good on-line book on asset allocation.
 
 
• Investment Options

SCRP provides three choices: TIAA/CREF, Fidelity and Vanguard. Among the choices offered by Stanford, TIAA is one of the safest, but the most inflexible. Do not put any money in TIAA if you are 20 years or more away from retirement because your money will grow faster in stock funds. You can always move money to TIAA later when you want fixed income. Once your money is in TIAA, it can only be withdrawn over 10 years by transferring 10% a year to TIAA Real Estate, CREF, Fidelity or Vanguard. This applies even if you leave Stanford. When you retire, TIAA has to be converted to a fixed annuity which gives you guaranteed income for life, but your nest egg will not continue to grow like stock mutual funds. Other alternatives include TIAA Real Estate, CREF, Fidelity and Vanguard bond or money market funds. CREF funds have very low expense ratios (<1%). Fidelity has a good selection of more aggressive growth funds. Vanguard has good index funds and bond funds and also relatively low expense ratios.
 
• Fund Analysis and Selection

Before picking your fund, spend some time to do a little research. Look up the past and recent performance, fund objective, investment style, capitalization size, sector allocation, top 10 holdings, expense ratio and the fund manager. Check how long the manager has been around and whether he is responsible for the past record. Check the asset size. This is important especially for small cap funds because performance tends to suffer when the fund gets too big. Check the fund's 'beta', which measures the fund's volatility compared to the S&P 500 (1=same, >1=more risky, <1=less risky). Check the fund's rating in Morningstar, or Stocksmart, Barron's and Wall Street Journal have monthly and quarterly updates on mutual funds. Information is available from the library or on-line. The websites of TIAA/CREF, Fidelity and Vanguard also have a lot of information about individual funds and retirement planning. Send for the prospectus. If you have a small portfolio, pick at least 3 funds, 1 large company, 1 small company and 1 international. For bigger portfolios, pick 1 large growth, 1 small growth, 1 large value, 1 small value, 1 large international and 1 small international. If you prefer to take less risk, pick growth and income or equity income funds or balanced funds instead. If you like to take a chance of gaining more by taking a little more risk, put a small amount in a Fidelity Select fund or a country fund, but you have to pick the right sector and the right country. Check your portfolio at least quarterly, and make changes as needed.
 
 
• Sample Portfolios
• TIAA/CREF: 40% CREF Stock, 20% Growth, 20% Global, 20% TIAA
• Fidelity Growth Portfolio: 50% Growth Company, 30% Mid Cap Stock, 20% Diversified International
• Fidelity Growth/Income Portfolio: 30% Equity Income II, 30% Low Priced Stock, 25% International Value, and 15% Spartan Investment Grade Bond
• Fidelity Aggressive Portfolio: 40% Fidelity Select Technology, 30% Fidelity Developing Communications, 30% Fidelity Select Biotechnolgy.
• Vanguard Portfolio: 50% Index 500, 25% Small Cap Index, 25% Total International Index

 
• Investment Resources on the Web
• Mutual Fund Newsgroup:

Brill's Mutual Fund Interactive Newsgroup
• Portfolio Trackers:

Microsoft Investor
Investor's Edge
Stocksmart
• Market News, Stock Quotes and Symbol Lookup:

USA Today
Bloomberg
DBC Online
Security APL Quote Server
• Fidelity Weekly Analysis and Commentary:

David Derbin's Weekly Fidelity Analyisis

Ways to contact me

Mailing Address:
Work: Bldg 420, Jordan Hall, Stanford University, Stanford, CA 94305

Telephone: (650) 725-2785