Has anyone researched the new Vanguard Managed Payout Funds. As I understand it each of these funds is structured to pay either 3, 5 or 7% (annually) in dividends, payment being made each month. The lower dividend-paying funds are projected to have more capital growth over time.

It sounds interesting, but of course, if you own the fund you lose control on how it is invested.

We are presently looking into these funds. It has been very frustrating for me for the past few years trying to figure out what to do to get income out of our investments. Then CD rates took a dive so I renewed for only 6 months while I figure it out.
I always thought saving the money was the hard part but it was nothing compared to figuring which pile to take money out of regularly.
Fidelity has a similar deal but your principal goes to zero with the withdrawals by the end of the term.

quote:

Originally posted by dontay:
Fidelity has a similar deal but your principal goes to zero with the withdrawals by the end of the term.

Since we have a Fidelity IRA account, I'd be interested in taking a looks at these. What are they called?

Fidelity Income Replacement Funds. Smart Payment Program.
Note that the big difference is that with Fidelity you pick the end date and at that time all your fund is gone. But, you get higher payments than with Vanguard which preserves your original amount.

Dontay,
Slight twist on the Vanguard statement...
Vanguard "tries" to preserve your original amount but that may be a stretch in today's market. These funds set a fixed monthly dividend once per year. They will start at the stated yields: 3, 5, or 7%. The fund managers will set a new dividend figure after the year is up and it may be up or down depending on the fund's health.


The underlying investments needs to have enough income to make the monthly payments or they will return capital. They can also have investment loss... The 3 funds were started in May 2008 and are all down about 5%.

Read the prospectus carefully and look at the funds investment strategy / holdings.

They make all that clear in their prospectus (which is very thick for these funds!!) I am always reluctant to invest in funds of funds because they are controlled by committees and therefore only marginal performers at best.

They also make it clear that the funds may invest in their hedge fund if and when they start it up. Given the recent performance of hedge funds I'm not sure at all whether I wish to be involved. Returns on CD's are crap but they don't drop 5% in a month. At least not until the sky falls.

These funds almost sound like variable rate annuities. They need a very careful look.