(PUB) Investing 2015

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17 Morningstar FundInvestor August 2015
tion-Protected Securities fund; its performance has
been respectable, and its fees are low.
Bucket 3 is the growth engine of the portfolio, so it’s
dominated by equity funds. Silver-rated T. Rowe Price
Dividend Growth, a large-blend fund, is the core equity
position in the portfolio; like Vanguard Dividend
Growth VDIGX, it prioritizes high-quality companies
with a history of growing their dividends; its dividend
is not high in absolute terms. I also included a posi-
tion in T. Rowe Price Equity Index 500 ; while not as
inexpensive as some rival S& P 500 trackers, it gives
the portfolio exposure to sectors that the T. Rowe
Price Dividend Growth fund is light on, such as tech-
nology. T. Rowe Price Mid-Cap Growth and Mid-
Cap Value are closed to new investors, so I used a
small position in T. Rowe Price Diversified Small
Cap Growth to give the portfolio exposure to small
caps. For foreign-stock exposure, I used Bronze-
rated T. Rowe Price Overseas Stock; because it lacks
significant small-cap and mid-cap and emerging-
markets exposure, I added a small position in T. Rowe
Price International Discovery. Finally, I added a
small position in T. Rowe Price Real Assets to supply
inflation protection; the fund focuses on natural-
resources stocks and REITs. Investors aiming to
simplify could reasonably stick with the two core
equity positions—T. Rowe Price Dividend Growth and
T. Rowe Price Overseas Stock—and skip some of the
smaller positions.
Moderate Bucket Portfolio
Anticipated Time Horizon: 20 or more years
This portfolio contains the same holdings as the
aggressive T. Rowe portfolio, differing only in its
allocations to them. Because it’s geared toward
retirees with shorter time horizons, it includes larger
positions in high-quality short- and intermediate-
term bonds and smaller positions in equities. To help
reduce volatility, it omits the position in T. Rowe
Price International Discovery.
Conservative Bucket Portfolio
Anticipated Time Horizon: 20 or more years
In contrast with the aggressive and moderate portfo-
lios, both of which emphasize growth to varying
extents, this portfolio is geared toward older retirees
with shorter time horizons. As such, its focus is
on preserving purchasing power and funding living
expenses; capital appreciation is secondary. Its
growth prospects are relatively low, so it would not
be appropriate for younger retirees unless they are
extremely risk-averse and—more importantly—have
more than enough money to last throughout their
retirement years. K
Contact Christine Benz at
Bucket 3: Years 11 and Beyond
25% T. Rowe Price Dividend Growth PRDGX
10% T. Rowe Price Equity Index 500 PREIX
5% T. Rowe Price Diversified Small Cap Growth PRDSX
5% T. Rowe Price Real Assets PRAFX
10% T. Rowe Price Overseas Stock TROSX
5% T. Rowe Price International Discovery PRIDX
Bucket 2: Years 3–10
10% T. Rowe Price Short-Term Bond
10% T. Rowe Price Inflation-Protected Bond
20% T. Rowe Price New Income
Bucket 3: Years 11 and Beyond
20% T. Rowe Price Dividend Growth
10% T. Rowe Price Equity Index 500
5% T. Rowe Price Diversified Small Cap Growth
5% T. Rowe Price Real Assets
10% T. Rowe Price Overseas Stock
Bucket 1: Years 1–2
10% Cash (money market funds and accounts, CDs, checking
and savings accounts, and so forth; percentages will vary
based on the amount of assets and retiree’s spending rate)
Bucket 1: Years 1–2
12% Cash (money market funds and accounts, CDs, checking
and savings accounts, and so forth; percentages will vary
based on the amount of assets and retiree’s spending rate)
Bucket 2: Years 3–10
13% T. Rowe Price Short-Term Bond
10% T. Rowe Price Inflation-Protected Bond
25% T. Rowe Price New Income
Bucket 3: 11 Years and Beyond
20% T. Rowe Price Dividend Growth
10% T. Rowe Price Equity Index
10% T. Rowe Price Overseas Stock