Monday, July 03, 2006

Want your portfolio to LiveStrong? Buy one of these lifecycle funds

If you like those little yellow arm bands, you'll love the investment portfolio. Now you can buy a LiveStrong lifecycle fund from American Century. It works basically the same as all the other lifecycle funds you've seen, with the addition of an Income portfolio (which presumably you switch to after you retire.) I think that the fund mix is pretty good - and they have a 2045 option, which many places don't. They have portfolios for every ten years instead of five but I think that's fine.

They're pretty aggressive towards stock weightings - 85% stocks and 15% bonds for the 2045 portfolio, decreasing to 45% in the Income portfolio. However, the type of stocks changes dramatically - much more large cap stocks in the close-to-retirement portfolios, and a lot of growth, value, and international stuff in the far-off ones. Expenses for all types of shares are under 1.2% - so I wouldn't necessarily buy the expensive types since returns seem close. Unfortunately they don't have a long history and I wish they would have used other funds with long histories to make up the package, so they could show the individual sections' histories. No dice there unfortunately. But they all seem to be index funds so probably nothing too hard to look up.

The idea behind buying these is that you are contributing to the LiveStrong cancer research funds when you buy these. Unfortunately, I couldn't find anything on the website saying exactly how much went to the foundation. This was all they had to say about it:

In the spirit of our founder, Jim Stowers Jr., and his dedication to defeating cancer, American Century's management company will financially support the Lance Armstrong Foundation (LAF).

Founded in 1997 by Lance Armstrong, the LAF's mission is to empower and inspire people affected by cancer. Every dollar you invest in LIVESTRONG Portfolios will help determine the amount American Century's management company pays the LAF above a guaranteed amount.

Also, in support of the LAF's comprehensive approach to cancer survivorship, LIVESTRONG Portfolios will not invest in the tobacco industry.

American Century Investment Services, Inc., Distributor has entered into an agreement with the LAF for rights to use the LIVESTRONG name. Under this agreement, every dollar invested in LIVESTRONG Portfolios over the next ten years will help determine the amount American Century will pay the LAF above a guaranteed amount. Under limited circumstances, the agreement can be terminated by either party, and there will be no future payments.

I think that not investing in tobacco is a neat idea, but I think they could also go a step further and invest somewhat more in healthcare and research groups, as that would also benefit biological research efforts in general. I'm a bit leery however that the money you give them will "help determine" the amount that American Century actually forks over, and that American Century can terminate the agreement after ten years, but continue to charge people the same amount. I'd be a lot more comfortable if there were something worked into the management fees, like 5 basis points or something, so that the foundation will get a guaranteed stream of income that doesn't have to depend on what American Century does. That "guaranteed amount" could be ten bucks, I don't know.

Overall I think it's a neat idea. I think that the Lance Armstrong Foundation could stand to get more money out of it, with a more direct tie between investment and charity. It's certainly a very strong brand, but I've got a bad taste in my mouth about the fact that they seem to be using the foundation as a marketing tool without giving a lot back to them. American Century has got itself a great brand there, and I think people would really hop on this bandwagon, especially if it were spread to more charities. Maybe we could have a model where you donate 5% of your account's profits each year, and none in down years? That would be very cool and wouldn't hit you in the wallet as much, since you would only donate when the portfolio made money. It would certainly be a drag on returns but it would be for a good cause.

Well, I requested the portfolio information packet, so I'll write about what's in there when I get it. I saw the ad for this in Wired, which isn't usually a normal place to find investment company ads, so I'm interested to see where else the ads pop up, if they are indeed trying to target people other than the usual suspects.

1 comment:

AberrantEquation said...

LifeCYCLE fund?