Morningstar Advisor - Summer 2007 - 16

Gray Matters company match rate of 3%, needs to contribute 4.9%. If pensions or other incomes will be available in retirement, you can further reduce the savings rate. Overall, according to the Ibbotson study, meeting retirement goals is possible with reasonable savings rate. Not surprisingly, there is a premium on starting early. Those who do save early can save without a significant impact on their lifestyles. A critical inflection point, however, occurs at age 35 to 40. The study shows that the recommended savings rate for investors starting to save at age 25 typically more than doubles if they wait until age 45 to start saving, and triples if they wait until age 55 to start. Since the markets, governmental health and retirement programs, and individuals’ personal circumstances are ever changing, this savings guideline should be considered just that— a guideline. Advisors and their clients should monitor their progress and check back with the guideline periodically to adjust their savings rate to ensure they’re on track to reach their retirement goals. K Too Many Oranges Hedge fund managers often wrongly categorize their strategies, making apple-to-apple evaluations difficult. by John Rekenthaler In most hedge-fund databases, including Morningstar’s, funds supply their peer groups by selecting from a list of available investment categories. This system of self-categorization differs from what is done with mutual funds, which are placed into peer groups by the database company, sometimes over the noisy protests of fund managements. This discrepancy occurs because unlike with mutual funds, which have publicly available data on portfolio holdings mandated by the SEC, no outside party has systematic access to the portfolio holdings of hedge funds. In the absence of such information, it is understandable that most databases rely on hedge funds to provide their own, self-selected categories. Such a process raises questions about consistency. Do all hedge funds use the same descriptors in similar fashion? Or are there differences in interpretation among the hedge funds that can lead to (broadly) similar funds being placed into different categories? A simple way of answering these questions is to examine the return patterns of the funds, testing them against readily definable expectations. For example, one might study the relationship between a long-only U.S. stock fund and the performance of the S&P 500 index. If the two items tend to move in unison, we can say with some assurance that the fund is probably as advertised. If on the other hand, the allegedly long-only U.S. stock fund consistently drops when the S&P 500 rises, we can comfortably call that a mis-categorization. For this study, we examined the monthly returns of four equity hedge-fund categories: equity net long, equity net short, equity market neutral, and equity variable. By restricting ourselves to U.S.-based equity categories, as opposed to categories that must be modeled by a more complex set of risk factors, we were able to establish simple but reliable tests to This article is based on a new study by Roger Ibbotson, Ph.D, Peng Chen, Ph.D., CFA, and James Xiong, Ph.D., CFA, of Ibbotson Associates, a subsidiary of Morningstar, Inc., and Robert P. Kreitler, CFP, and Charles F. Kreitler of Kreitler Associates. To read the full research paper, “National Savings Rate Guidelines for Individuals,” go to: http://MorningstarAdvisor.com/uploaded/pdf/ Savings.pdf 16 Morningstar Advisor Summer 2007
http://MorningstarAdvisor.com/uploaded/pdf/Savings.pdf

Morningstar Advisor - Summer 2007

Table of Contents for the Digital Edition of Morningstar Advisor - Summer 2007

Morningstar Advisor - Summer 2007
Contents
Letter from the Publisher
Get to Know the Bond “All-Stars”
Research Briefs
Our Stewardship Test Gets Tougher
Save It for Later
Too Many Oranges
Best of Both Worlds
No Two Clients Are Alike
When It Comes to VAs, It’s Seller Beware
Hands On: Finding the Suitable Fund Share Class for Your Client
Fund Style Can Drift Off Course
Sticking to Their Style, Through Thick and Thin
Marathon Man
Growth, With a Chaser
A Menu of Ideas to Fill Five Market Baskets
Funds: Finding Funds with Conviction
Stocks: So You Say You Want Income?
All Eyes on China
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
What’s New at Morningstar and on the Web
The Advisor’s Economic Moat
Morningstar Advisor - Summer 2007 - Intro
Morningstar Advisor - Summer 2007 - Morningstar Advisor - Summer 2007
Morningstar Advisor - Summer 2007 - Cover2
Morningstar Advisor - Summer 2007 - Contents
Morningstar Advisor - Summer 2007 - 2
Morningstar Advisor - Summer 2007 - 3
Morningstar Advisor - Summer 2007 - 4
Morningstar Advisor - Summer 2007 - Letter from the Publisher
Morningstar Advisor - Summer 2007 - 6
Morningstar Advisor - Summer 2007 - 7
Morningstar Advisor - Summer 2007 - Get to Know the Bond “All-Stars”
Morningstar Advisor - Summer 2007 - 9
Morningstar Advisor - Summer 2007 - Research Briefs
Morningstar Advisor - Summer 2007 - 11
Morningstar Advisor - Summer 2007 - Our Stewardship Test Gets Tougher
Morningstar Advisor - Summer 2007 - 13
Morningstar Advisor - Summer 2007 - Save It for Later
Morningstar Advisor - Summer 2007 - 15
Morningstar Advisor - Summer 2007 - Too Many Oranges
Morningstar Advisor - Summer 2007 - 17
Morningstar Advisor - Summer 2007 - Best of Both Worlds
Morningstar Advisor - Summer 2007 - 19
Morningstar Advisor - Summer 2007 - 20
Morningstar Advisor - Summer 2007 - No Two Clients Are Alike
Morningstar Advisor - Summer 2007 - When It Comes to VAs, It’s Seller Beware
Morningstar Advisor - Summer 2007 - 23
Morningstar Advisor - Summer 2007 - 24
Morningstar Advisor - Summer 2007 - 25
Morningstar Advisor - Summer 2007 - 26
Morningstar Advisor - Summer 2007 - 27
Morningstar Advisor - Summer 2007 - 28
Morningstar Advisor - Summer 2007 - Hands On: Finding the Suitable Fund Share Class for Your Client
Morningstar Advisor - Summer 2007 - 30
Morningstar Advisor - Summer 2007 - 31
Morningstar Advisor - Summer 2007 - 32
Morningstar Advisor - Summer 2007 - 33
Morningstar Advisor - Summer 2007 - Fund Style Can Drift Off Course
Morningstar Advisor - Summer 2007 - 35
Morningstar Advisor - Summer 2007 - 36
Morningstar Advisor - Summer 2007 - Sticking to Their Style, Through Thick and Thin
Morningstar Advisor - Summer 2007 - 38
Morningstar Advisor - Summer 2007 - 39
Morningstar Advisor - Summer 2007 - 40
Morningstar Advisor - Summer 2007 - 41
Morningstar Advisor - Summer 2007 - 42
Morningstar Advisor - Summer 2007 - Marathon Man
Morningstar Advisor - Summer 2007 - 44
Morningstar Advisor - Summer 2007 - 45
Morningstar Advisor - Summer 2007 - 46
Morningstar Advisor - Summer 2007 - 47
Morningstar Advisor - Summer 2007 - Growth, With a Chaser
Morningstar Advisor - Summer 2007 - 49
Morningstar Advisor - Summer 2007 - 50
Morningstar Advisor - Summer 2007 - 51
Morningstar Advisor - Summer 2007 - A Menu of Ideas to Fill Five Market Baskets
Morningstar Advisor - Summer 2007 - 53
Morningstar Advisor - Summer 2007 - 54
Morningstar Advisor - Summer 2007 - 55
Morningstar Advisor - Summer 2007 - 56
Morningstar Advisor - Summer 2007 - 57
Morningstar Advisor - Summer 2007 - Funds: Finding Funds with Conviction
Morningstar Advisor - Summer 2007 - 59
Morningstar Advisor - Summer 2007 - Stocks: So You Say You Want Income?
Morningstar Advisor - Summer 2007 - 61
Morningstar Advisor - Summer 2007 - 62
Morningstar Advisor - Summer 2007 - All Eyes on China
Morningstar Advisor - Summer 2007 - 64
Morningstar Advisor - Summer 2007 - 65
Morningstar Advisor - Summer 2007 - 66
Morningstar Advisor - Summer 2007 - 67
Morningstar Advisor - Summer 2007 - Mutual Fund Analyst Picks
Morningstar Advisor - Summer 2007 - 69
Morningstar Advisor - Summer 2007 - 70
Morningstar Advisor - Summer 2007 - 71
Morningstar Advisor - Summer 2007 - Undervalued Stocks
Morningstar Advisor - Summer 2007 - 73
Morningstar Advisor - Summer 2007 - Most Popular Variable Annuities
Morningstar Advisor - Summer 2007 - 75
Morningstar Advisor - Summer 2007 - What’s New at Morningstar and on the Web
Morningstar Advisor - Summer 2007 - 77
Morningstar Advisor - Summer 2007 - 78
Morningstar Advisor - Summer 2007 - 79
Morningstar Advisor - Summer 2007 - The Advisor’s Economic Moat
Morningstar Advisor - Summer 2007 - Cover3
Morningstar Advisor - Summer 2007 - Cover4
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