New To BogleHeads, Young Professional

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

New To BogleHeads, Young Professional

Postby StrangerDanger » Sat Jan 26, 2013 11:11 am

I'm a 32 year old young professional in need of some advice.

Due to schooling, I didn't save much during my younger years. I currently have 120k in pre-tax retirement funds and roth IRA, at 100% equities, over domestic/intl/large/mid/small cap low cost index funds. I have 150k cash on hand, and will likely be buying a modest home soon (I currently rent). I have 200k in low interest loans (~3%) which I am paying off on the slow boat. No CC debt. I have a modest amount of precious metals (20k).

All said, I will put 45k into pre-tax funds and roth this year, and after taxes, save close to 10k a month in cash.

Should I stay 100% equities in low cost index funds? Is this too much risk for a 32 year old in my position? What kind of asset allocation should I pursue? Is my pursuit of wealth growth through primarily stocks not risky enough? What about real estate?

I have buddies who have said the collective "we" need to "catch up" with those younger than us by pursuing riskier investments, and they have mainly lost their shirts. Is it time to learn more about things like real estate, and branch out, or should I predominately stay in the markets?

Thanks in advance, and I look forward to learning more via this forum.
StrangerDanger
 
Posts: 10
Joined: Sat Jan 26, 2013 10:58 am

Re: New To BogleHeads, Young Professional

Postby StrangerDanger » Sat Jan 26, 2013 12:40 pm

I meet with an estate planner soon. I don't know the first thing about trusts, etc.

Should I get a professional, low-cost wealth manager as well?

My income should continue to rise for a while, but nothing is guaranteed. I already have all the disability, health, life, umbrella insurances I need.

Thank you in advance.
StrangerDanger
 
Posts: 10
Joined: Sat Jan 26, 2013 10:58 am

Re: New To BogleHeads, Young Professional

Postby Occupier » Sat Jan 26, 2013 12:55 pm

Your ahead of where I was at your age, and I still managed to retire at 60. So your not really in need of catching up. You should read either the early Larry Swedroe or William Bernstein books which may be in the library in your town. Look for the ones published in the first 5 years of the last decade. They all discuss 100% equity allocations and they basically conclude that the extra volatility over, say, an 80/20 stock bond portfolio costs you more in down markets than you gain in up markets by having 100% equities. I cant recall whether the optimal percentage was 20% or something like 15%. That assumes you don't add to losses in a down market by selling out at a low and missing a market recovery. If your that kind of investor, you want a much larger bond allocation.
As to "branching out," don't buy into an alternative investment that you don't understand. I have seen smart people make disasterious mistakes in real estate. Further since real estate investing is highly leveraged, the losses are multiplied by the leverage. You really need to have a head for real estate to make money in it, and few people do. So my suggestion is make a good choice in buying a home and pay of the mortgage as fast as you can, and live long and prosper. Dave
Occupier
 
Posts: 284
Joined: Wed Feb 01, 2012 10:21 pm

Re: New To BogleHeads, Young Professional

Postby retiredjg » Sat Jan 26, 2013 12:59 pm

welcome to the forum!

I don't see what your concern is all about. You don't seem all that "behind" to me. It's all about getting rid of debt and saving. You've got the savings part down, at least for now.

Should I stay 100% equities in low cost index funds? No to 100% equities. Yes to Index funds.

Is it time to learn more about things like real estate, and branch out, or should I predominately stay in the markets? Real estate is something to consider, if you have an interest, after you get the other things in life in order. Real estate is not a reliable substitute for investments. And not everybody is good at it.

I meet with an estate planner soon. I don't know the first thing about trusts, etc. Why do you think you need an estate planner or trusts?

Should I get a professional, low-cost wealth manager as well? Not necessarily. See if you can do it on your own. Investing can be very simple.

Wiki article link: Getting Started
retiredjg
 
Posts: 18874
Joined: Thu Jan 10, 2008 12:56 pm

Re: New To BogleHeads, Young Professional

Postby Grt2bOutdoors » Sat Jan 26, 2013 1:07 pm

StrangerDanger wrote:I meet with an estate planner soon. I don't know the first thing about trusts, etc.

Should I get a professional, low-cost wealth manager as well?

My income should continue to rise for a while, but nothing is guaranteed. I already have all the disability, health, life, umbrella insurances I need.

Thank you in advance.


Hello and welcome to the forum!
viewtopic.php?t=6212 - Please edit your first post in the format shown to the left. I'm sure you'll get some better advice after that.
"Luck is not a strategy" Asking Portfolio Questions
Grt2bOutdoors
 
Posts: 10960
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: New To BogleHeads, Young Professional

Postby StrangerDanger » Sat Jan 26, 2013 4:28 pm

Occupier wrote:Your ahead of where I was at your age, and I still managed to retire at 60. So your not really in need of catching up. You should read either the early Larry Swedroe or William Bernstein books which may be in the library in your town. Look for the ones published in the first 5 years of the last decade. They all discuss 100% equity allocations and they basically conclude that the extra volatility over, say, an 80/20 stock bond portfolio costs you more in down markets than you gain in up markets by having 100% equities. I cant recall whether the optimal percentage was 20% or something like 15%. That assumes you don't add to losses in a down market by selling out at a low and missing a market recovery. If your that kind of investor, you want a much larger bond allocation.
As to "branching out," don't buy into an alternative investment that you don't understand. I have seen smart people make disasterious mistakes in real estate. Further since real estate investing is highly leveraged, the losses are multiplied by the leverage. You really need to have a head for real estate to make money in it, and few people do. So my suggestion is make a good choice in buying a home and pay of the mortgage as fast as you can, and live long and prosper. Dave



Thanks for the advice. I think the "catching up" notion is one propelled by my colleagues...probably because they keep losing their shirts in investments. Like me, they also took forever in school and are just now making a few bucks.

I understand a small bit about stock allocations, but what about bonds? Are there types which are better for the young crowd?

I saw alot of high school buds get slammed in the real estate bubble, so I'm skiddish. At the same time, it's something I'd like to be able to invest in, theoretically, but are the returns available comparable to equities with the added burden of active management?

Thanks again, Dave.
StrangerDanger
 
Posts: 10
Joined: Sat Jan 26, 2013 10:58 am

Re: New To BogleHeads, Young Professional

Postby StrangerDanger » Sat Jan 26, 2013 4:30 pm

Thanks for the response.

If not 100% equities, what ratio of asset allocation do you recommend?

I appreciate the real estate advice.

I've been told estate planning is key for folks who have a high potential net worth who need to protect their assets from lawsuits, and pass them down to kids. No?

Thanks for the getting started link.

retiredjg wrote:welcome to the forum!

I don't see what your concern is all about. You don't seem all that "behind" to me. It's all about getting rid of debt and saving. You've got the savings part down, at least for now.

Should I stay 100% equities in low cost index funds? No to 100% equities. Yes to Index funds.

Is it time to learn more about things like real estate, and branch out, or should I predominately stay in the markets? Real estate is something to consider, if you have an interest, after you get the other things in life in order. Real estate is not a reliable substitute for investments. And not everybody is good at it.

I meet with an estate planner soon. I don't know the first thing about trusts, etc. Why do you think you need an estate planner or trusts?

Should I get a professional, low-cost wealth manager as well? Not necessarily. See if you can do it on your own. Investing can be very simple.

Wiki article link: Getting Started
StrangerDanger
 
Posts: 10
Joined: Sat Jan 26, 2013 10:58 am

Re: New To BogleHeads, Young Professional

Postby StrangerDanger » Sat Jan 26, 2013 4:30 pm

Grt2bOutdoors wrote:
StrangerDanger wrote:I meet with an estate planner soon. I don't know the first thing about trusts, etc.

Should I get a professional, low-cost wealth manager as well?

My income should continue to rise for a while, but nothing is guaranteed. I already have all the disability, health, life, umbrella insurances I need.

Thank you in advance.


Hello and welcome to the forum!
viewtopic.php?t=6212 - Please edit your first post in the format shown to the left. I'm sure you'll get some better advice after that.


Thanks!
StrangerDanger
 
Posts: 10
Joined: Sat Jan 26, 2013 10:58 am

Re: New To BogleHeads, Young Professional

Postby bogleblitz » Sat Jan 26, 2013 5:00 pm

Books recommend age in bonds. So 32 year old can have 32% in bonds.
I recommend 20% for you since you are currently 100 equities.
User avatar
bogleblitz
 
Posts: 312
Joined: Mon Oct 01, 2012 2:51 pm

Re: New To BogleHeads, Young Professional

Postby retiredjg » Sat Jan 26, 2013 5:46 pm

If not 100% equities, what ratio of asset allocation do you recommend?

You'll need to decide that and you can find information to help in that Getting Started link (under investment planning).

I'd suggest no less than 20% bonds (cause every portfolio needs some bonds) and up to 32% bonds (your age) as a place to start thinking. You can get more conservative than that if you are a conservative investor (no hint of that in your case).

I've been told estate planning is key for folks who have a high potential net worth who need to protect their assets from lawsuits, and pass them down to kids. No?

I have no idea. Never ventured into real estate. Real estate is a LOT of TROUBLE. That's fine for people who really like it and have a knack for it (I know several). But it is not for me or anyone who just doesn't just plain have a desire to be involved in it. I didn't sense that in you (so far). My opinion, for what it's worth.
retiredjg
 
Posts: 18874
Joined: Thu Jan 10, 2008 12:56 pm

Re: New To BogleHeads, Young Professional

Postby Beat The Street » Sat Jan 26, 2013 5:59 pm

I would not rule out a low cost wealth manager. It could be well worth paying 0.25%-0.50% per year if it saves you from a big mistake. As you learn more and more you can decide whether or not they are still worth the costs. It usually does not cost anything to interview these advisors, just make sure they are fee only and truly low cost. They won't hard sell you anything, but you may learn a great deal from a good one in a short amount of time then choose to do it on your own. It's something to think about.
“Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have—or don’t have—in their portfolio.” -Taleb
Beat The Street
 
Posts: 253
Joined: Wed Sep 26, 2012 3:09 pm

Re: New To BogleHeads, Young Professional

Postby supertreat » Sat Jan 26, 2013 9:44 pm

Are you sure you qualify for a ROTH? I think 2013 income limit for filing jointly is 188k.
Assets - Liabilities = Equity + (Income - Expenses)
supertreat
 
Posts: 281
Joined: Sat Nov 03, 2007 11:57 pm

Re: New To BogleHeads, Young Professional

Postby aua868s » Sat Jan 26, 2013 10:24 pm

StrangerDanger wrote:All said, I will put 45k into pre-tax funds and roth this year, and after taxes, save close to 10k a month in cash.


StrangerDanger
I am trying to find avenues to increase my Pre-Tax saving money. You will manage to sock away 45K in pre-tax funds this year? how? My -Pre Tax saving is as follows adds up to 29.5K.
* 401K = 17.5K
* ROTH IRA = 5.5K
* HSA = 6.5K

Do you mind sharing any other avenues for saving more PreTax money?

Thanks
My Plan: * Age-10 in Fixed Income until I reach age 60, 50/50 thereafter. * Equity: 50/50 US/Int'l, Fixed Income: IRA CDs/I-Bonds. * Everything over 4 months' expenses gets invested.
aua868s
 
Posts: 25
Joined: Thu Dec 27, 2012 5:05 am

Re: New To BogleHeads, Young Professional

Postby Watty » Sat Jan 26, 2013 11:37 pm

StrangerDanger wrote:I meet with an estate planner soon. I don't know the first thing about trusts, etc.

Watch out for this, if they start to try to sell you any sort of annunity or life insurance for "estate planning" then run because they are not working in your best interest. Getting wills and the related documents in order is a good idea but from what you posted it looks like your net worth is less than $100K right now so you have a long time until you will have any real estate planning issues.

Should I get a professional, low-cost wealth manager as well?

Define low cost. The math does not exactely work out this way but consider that if you invest $100K with someone today and you pay them 1% a year for the next 33 years until you retire at 65, then you have in effect paid them a third of your initial $100K.

You need to be very realistic about just what they might actually be able to do for you and not believe them they if they say that they will pick out superior investments. If they were able to pick superior stocks or mutual funds then they could make a fortune working or trading on will street and they would not be working for you for a small amount each year. At best they could help you with things like avoiding unessary taxes, asset allocation, setting up savings goal, etc.


My income should continue to rise for a while, but nothing is guaranteed. I already have all the disability, health, life, umbrella insurances I need.

Thank you in advance.
User avatar
Watty
 
Posts: 4981
Joined: Wed Oct 10, 2007 3:55 pm

Re: New To BogleHeads, Young Professional

Postby StrangerDanger » Tue Jan 29, 2013 11:50 am

supertreat wrote:Are you sure you qualify for a ROTH? I think 2013 income limit for filing jointly is 188k.


Back door Roth. No income limit.
StrangerDanger
 
Posts: 10
Joined: Sat Jan 26, 2013 10:58 am

Re: New To BogleHeads, Young Professional

Postby StrangerDanger » Tue Jan 29, 2013 11:52 am

aua868s wrote:
StrangerDanger wrote:All said, I will put 45k into pre-tax funds and roth this year, and after taxes, save close to 10k a month in cash.


StrangerDanger
I am trying to find avenues to increase my Pre-Tax saving money. You will manage to sock away 45K in pre-tax funds this year? how? My -Pre Tax saving is as follows adds up to 29.5K.
* 401K = 17.5K
* ROTH IRA = 5.5K
* HSA = 6.5K

Do you mind sharing any other avenues for saving more PreTax money?

Thanks


Pretax and Roth is 45k. 17.5 x 2 for my pretax retirement accounts, 5500 x 2 for Roth for myself and wife. So, I guess 46k through pretax plus Roth.
StrangerDanger
 
Posts: 10
Joined: Sat Jan 26, 2013 10:58 am

Re: New To BogleHeads, Young Professional

Postby StrangerDanger » Tue Jan 29, 2013 12:10 pm

Watty wrote:
StrangerDanger wrote:I meet with an estate planner soon. I don't know the first thing about trusts, etc.

Watch out for this, if they start to try to sell you any sort of annunity or life insurance for "estate planning" then run because they are not working in your best interest. Getting wills and the related documents in order is a good idea but from what you posted it looks like your net worth is less than $100K right now so you have a long time until you will have any real estate planning issues.

Should I get a professional, low-cost wealth manager as well?

Define low cost. The math does not exactely work out this way but consider that if you invest $100K with someone today and you pay them 1% a year for the next 33 years until you retire at 65, then you have in effect paid them a third of your initial $100K.

You need to be very realistic about just what they might actually be able to do for you and not believe them they if they say that they will pick out superior investments. If they were able to pick superior stocks or mutual funds then they could make a fortune working or trading on will street and they would not be working for you for a small amount each year. At best they could help you with things like avoiding unessary taxes, asset allocation, setting up savings goal, etc.


My income should continue to rise for a while, but nothing is guaranteed. I already have all the disability, health, life, umbrella insurances I need.

Thank you in advance.



Thanks for all the advice.
StrangerDanger
 
Posts: 10
Joined: Sat Jan 26, 2013 10:58 am


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: azumz, ChicagoMedStudent, clearsky, Hikerchick, just frank, rshellhammer, sleepysurf, Tristan and 82 guests