For over a year I debated with myself and with some of you whether to keep the IRAs intact and pay them out gradually per regulations, or whether to cash them out this year while taxes are still fairly low and either take the cash or put it into Roth IRAs in this special tax year for Roth conversions.
In the end I decided upon maintaining the IRAs. That decision requires a conservative style of investing and that means primarily an income-producing portfolio. I had already probably 50% in income vehicles in the IRAs, but now it is virtually 100% as of last week and this. The new lineup, their percentages of the total, and their Yahoo or MarketWatch trailing yields are as follows:
PTTRX Pimco Total Return 40% 3.9%
LSBDX Loomis Sayles Bond 13.3% 6.0%
PIMIX Pimco Income 13.3% 5.5%
PEBIX Pimco Emerging Mkt Bond 6.7% 5.5%
EDV Vanguard Extended Duration 6.7% 4.2%
CMO PrB 6.7% 9.0% (at cost)
GIM Global Income (Sovereign) 6.7% 5.3% (bought part, will add on pullbacks)
ASA ASA Ltd. (global gold stocks) 6.7 4.0% (includes capital gains)
Note: The yields here are cash yields, not total returns as in the chart, and, except for ASA, do not include capital gains "dividends".
Thirteen precent of the funds (PEBIX + GIM) are explicitly in foreign bonds and the other bond funds except for EDV can be in foreign bonds on discretionary grounds.
ASA was the first US-listed closed end fund devoted to gold stocks. It was originally headquartered in South Africa but re-incorporated in Bermuda in the 1990's. As the South African mines depleted and new mines sprang up everywhere, they have diversified but still remain entirely in non-US gold companies except for Newmont. They have a classic lineup and sell at a discount. Their new board has fretted about that disount and has been buying in stock in an attempt to close the discount. I personally think that is wasted money in the sense that it reduces the funds under management. There is a lot of solid research evidence to show that closed-end fund discounts exist for unknown reasons (or in spite of known ones) and are usually hard to close. In the case of ASA's board it has done nothing to narrow the discount, so we can still get a 5-10% discount on the holdings when we buy.
So there is still some dollar hedging in this portfolio by my choice and doubtless also in some of the more general funds like PTTRX and LSBDX.
I checked with Vanguard on immediate cash lifetime annuities for a comparison with this program's income and mandatory distributions as prescribed by the IRS. Vanguard are now paying very low lifetime annuity rates, and they involute to zero when the insureds pass away. So this new fund lineup should do well for the immediate and hopefully intermediate future, and I always have the right to change my mind and my lineup!
Also I have the taxable accounts which are doing very nicely with about 80% in short term municipals. The Goldman Sachs 2010 municipal market advisory opinion cut to the chase regarding the possibility of massive state defaults on general obligation bonds. GS regard it as extremely unlikely. That and the fact I am at the short end of the duration spectrum is comforting. The rest of the taxable funds are in various hedge-like mutuals and a few Vanguard commodity stock funds (energy and metals). And then there is the gold, held separately and at about 12% of overall totals.