07-July-2010:

I have selected a new age-based fund to benchmark against.  This fund is a true 529 age-based fund (as opposed to a retirment fund).  For now, please see this write up:  http://followmy529.com/age-based-mutual-fund/finding-an-age-based-529-mutual-fund/

24-Feb-2010:

I thought choosing an age-based fund to follow was going to be the easy part (as compared to finding an actively managed fund). I thought wrong.

I wanted to use a Fidelity age-based fund as the baseline to compare my performance against.  Fidelity happens to be my state’s 529 broker and a very well respected investment company.  The problem is, its aged-based funds that are available for 529 contributions do not have ticker symbols; therefore, you cannot follow their performance.  I could download the fund prospectus once a quarter and get the fund performance as it compares with a benchmark (like the S&P 500). But I would not know if that would be an apples-to-apples comparison against my fund. Time periods may differ slightly, the way Fidelity measures the S&P 500 benchmark may differ slightly, etc.

No problem! I thought. I can figure a way around this; I am a clever person. I would just choose an age-based fund from another company; just about every company has them now. Come to find out, however, none of them has a ticker symbol. I imagine this gives the investment companies more freedom and fewer rules and regulations to follow than if the funds were traded on the open market. A cost-cutting measure, which I can understand. The lower the expense ratio, the higher the return for the investor.

So, I returned to the Fidelity age-based fund I would have picked, UNIQUE Portfolio 2027. I decided to try to find a traditional age-based retirement fund (with a ticker symbol) that appeared to be similar to the asset allocation of the UNIQUE Portfolio 2027. After some searching, I found T. Rowe Price’s age-based retirement fund T. Rowe Price Retirement 2045 (ticker: TRRKX). I feel this has a similar asset mix to Fidelity’s UNIQUE 2027 fund.

I will have to compare the asset mix every five years or so. The Fidelity UNIQUE 2027 will morph into a more conservative portfolio a lot quicker than the T. Rowe Price Retirement 2045 fund. Every five years, I will have to change my hypothetical T. Rowe Price holdings to the T. Rowe Price fund that matches the asset allocation of the UNIQUE Portfolio 2027 most closely at that time.

The T. Rowe Price website has a nice tool that shows the changing allocation over time: http://individual.troweprice.com/public/Retail/Mutual-Funds/Retirement-Funds/RDF-2045?v_linkcomp=link&linkplmt=RN&v_link=findFundModule. You can see below that today, it is 90% stock/10% fixed income. The stock portion is divided into 72% domestic and 18% international. In 2028, the fund will be 82% stock/18% fixed income, which is way too aggressive and not representative of the asset allocation of the Fidelity UNIQUE fund at that time.

T. Rowe Price 2045 Asset Allocation: CY 2010

T. Rowe Price 2045 Asset Allocation: CY 2028