I am retired. Are asset allocation funds a good investment or are there hidden high expenses from so much tra

from so much trading. It seems if they are that actively managed that the expenses must be high?? comments please.

You are right - it's just useless bells and whistles.

You can keep it simple. There are 2 things you can't afford to lose in retirement: your principal and your purchasing power. Stocks that increase dividends over time take care of that.

Let's say a stock pays a 5% dividend. It means $1.25 on a $25.00 stock. If the company increases the dividend to, say, $1.45 (16% hike), the market will adjust the stock price to yield 5% - $29.00. So, your principle grows, and your income rises faster than inflation.

Asset allocation funds invest in other funds. They add a layer of expenses to do this, so, yes, they are expensive.

You can achieve the same objective by montitoring your investments and periodically re-allocating your investments yourself. This would give you the same risk/return with 1 less layer of expenses. The question is whether you are knowledgeable enough and disciplined enough to maintain that allocation. If not, the asset allocation fund is a convenient way to go. As you know, you pay for convenience.

no id guy answered it perfectly. too much trading - bad for portfolio, particularly since its been widely noted that frequent portfolio turnover takes away any excess returns (and it is extremely arguable whether such funds have consistently outperformed the funds that don't reallocate their portfolios). Another important stipulation is your current tax situation. Frequent portfolio turnover also means more capital gains taxes one would be required to pay instead of deferring these taxes for longer time periods (as is the case with funds that dont reallocate). Bottomline, these funds charge higher fees for returns that historically have not fared exceptionally well when compared to benchmarks.

As your 1st responder mentioned, they generally are investing in other funds of the same family and they do have additional expenses. But from mutual fund company to mutual fund company expenses vary greatly as do returns. If attempting to pick and choose among different mutual funds gives you worry that you had rather avoid, then these asset allocation funds do have advantages. Most are of the target retirement types. But others are of different types.

Here is one for a retired person to consider perhaps.

Vanguard Target 2005 VTOVX 55% bonds 44% stocks. Expense ratio 0.21% very reasonable. 3 year annual return 7.39%. Not great but it is geared to retirees and has a large holding of bonds, which many investment professionals think that retirees should have in their portfolios to add stability at the expense of return I might add.

Vanguard is considered one of the lowest expense mutual fund companies. They manage perhaps $500 billion+ in mutual fund assets.

https://flagship.vanguard.com/VGApp/hnw/...

The big question facing yourself though is the portion of assets that you wish to be invested in each asset class. Having 50% of your assets in bonds may not be your cup of tea.

Another type of asset allocation fund is one that allocates assets geographically rather than between stocks and bonds.

Here is an example of one of those.

https://flagship.vanguard.com/VGApp/hnw/...

The expenses of this fund are 0.72%. Higher than the other but still way below average.

expenses come from the mutual fund family, not the actual fund itself...vanguard and fidelity offer excellent asses allocation funds...sometimes called retiremnt funds with little or no fees. check them out