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By Jason Stipp and Christine Benz | 01-28-2015 02:00 PM

How to Use Morningstar's Retirement Portfolios

Savers and retirees alike can turn to our portfolios for ideas about asset allocation, benchmarking, and specific investments, says Christine Benz.

Jason Stipp: I'm Jason Stipp for Morningstar. Christine Benz, our director of personal finance, has created a series of retirement saver and in-retirement bucket portfolios for investors. They're quite popular on But how should you apply these portfolios to your own? Here to offer some tips is Christine Benz.

Christine, thanks for joining me.

Christine Benz: Jason, great to be here.

Stipp: First, how many of these portfolios do you have and how did you decide how they would be allocated?

Benz: So, the first set of portfolios we created were the six retirement bucket portfolios geared toward people already retired, and we created three traditional mutual fund portfolios from conservative to more aggressive as well as three exchange-traded fund portfolios also ranging from conservative to more aggressive. So, those were the six portfolios for retirees.

We saw that investors were interested in them. They liked that we brought together some of our favorite fund picks into well-diversified portfolios. So, we decided to roll out what we call Retirement Saver portfolios. These are geared toward people who are still working, still in accumulation mode. Here again, we have three traditional mutual fund portfolios, ranging from very aggressive (geared toward people in their 20s and 30s) to much more conservative portfolios (geared toward people who are getting close to retirement). So, here again, we have the traditional, active mutual fund portfolios as well as portfolios consisting strictly of exchange-traded funds.

Stipp: So, a set for folks in retirement and a set for folks who are saving for retirement. And you have some overarching principles to these portfolios that apply to both sets. Can you talk about some of those?

Benz: The portfolios are all geared toward retirement, so they are not geared toward helping investors save for any shorter-term goals that they might have. They are all geared toward retirement. We focused on low costs within each of the portfolios, so even within the portfolios consisting of active funds, we focused on very low costs because our data here at Morningstar show that that's a great way to stack the deck in your favor--in favor of long-term success. We tried to be minimalist when putting together the portfolios. So, we tried not to have too many moving parts. The portfolios max out at 10 or 11 holdings. Some of the portfolios have fewer. So, we tried to illustrate how investors can get by with fewer funds that require less oversight on an ongoing basis.

We are also going to be using a strategic approach to asset allocation. So, we are not going to try to time the market or get too active in terms of our asset allocation. We will periodically rebalance the portfolios to show how rebalancing works. We will also use the portfolios that are geared toward retirees to demonstrate how they can deliver cash flow during retirement, but we are definitely not going to be using a tactical approach to asset allocation. We are not going to say, "OK, the market in 2015 is seeming volatile--we are going to downplay stocks." That's not a skill set that we believe we have here at Morningstar. So, we are going to focus on a long-term, strategic buy-and-hold approach to asset allocation.

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