Clueless- Need Investment Advice

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Topic Author
NYC4884
Posts: 2
Joined: Tue Mar 19, 2013 5:17 am

Clueless- Need Investment Advice

Post by NYC4884 »

I am looking for direction on how to invest. I question how best to manage my investments and question if I should pay down my mortgage.
Please see my info below with an attempt on creating a draft portfolio. I would like it sense checked before placing into action.

Profile: 42 years old
2 year old
No outstanding debt except mortgage = 305k at 4.875% until 2036
Have a 2 year emergency fund in place

Old employer 401k plan = 245k
1st year in 529 = 14K
75k Cash to invest

401k = $240k
Wellington Fund / VWELX = 20%
Windsor / VWNDX = 20%
500 Index Admiral / VFIAX = 20%
Pacific Stock Index / VPADX = 10%
Develop Market Index / VDMAX = 10%
Total Bond/ VBTLX = 10 %
Long Term Bond / VBTLX = 10 %

Cash = $75k
ETF Industrial / VIS = 13%
ETF Healthcare / VHT = 12%
Total Stock / VTSMX = 25%
Total International Stock / VGTSX = 25%
Total Bond/ VBMFX= 25 %

Amy comments or advice is welcomed.

Much regards.
Valuethinker
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Joined: Fri May 11, 2007 11:07 am

Re: Clueless- Need Investment Advice

Post by Valuethinker »

OK I am not the person to detail critique.

You don't look too bad in terms of funds

*but*

there is no point holding bonds in a taxable account if you can pay down mortgage debt (we have this argument here repetitively, but I think that is unambiguously true for most investors). it's only worth having a mortgage to finance contributions in a tax deferred location.

I would, subject to paying capital gains taxes (you need to manage that) switch the sector funds into Total Stock Market.

Wellington + Windsor, from memory, adds together to be a 50/50 balanced bond equity fund (with a large cap value bias), in which case VG has a cheaper one?

Generally you want to hold fixed income, other than emergency cash (and 2 years may be too much, if you are not in a job or sector that is at risk, but I tend to argue for 12-18 months for anyone in the private sector or a vulnerable part of public sector), then it's best to hold that in tax exempt accounts.

Don't overlook the merits of ibonds. That $10k a year can add up to quite a chunk of change in a few years. Lots of threads here. Consensus is ibonds are not screamingly attractive right now, but better than most other fixed income investments.
wilked
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Re: Clueless- Need Investment Advice

Post by wilked »

Please add expense ratios
PR101
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Re: Clueless- Need Investment Advice

Post by PR101 »

1. It is better to have bonds in tax-advantaged space (because bond income generally is taxed as ordinary income) and international stocks in taxable accounts (so you can claim the foreign tax credit). So I would get rid of the Developed Market and Pacific Stock Index Funds in your 401K and allocate the funds in them to the Total Bond Fund in your 401k (or other funds in accordance with your Asset Allocation goals), and I would get rid of the Total Bond Fund in your taxable account and allocate those funds to the Total International Stock Market Index Fund or the Total Stock Market Index Fund.

2. I wouldn't be in long term bonds, since they will get clobbered when interest rates begin to rise. I would shift this to your Total Bond Fund.

3. Also not a fan of Sector Funds. Stick with broader index funds like Total Stock Market, S&P 500, or even Small Cap.
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Jay69
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Joined: Thu Feb 17, 2011 8:42 pm

Re: Clueless- Need Investment Advice

Post by Jay69 »

NYC

Welcome to the board.

A question for you, I did not see a tIRA or a Roth IRA listed, are you eligible for either? I like the idea behind a 529 but would not use one until I used all my other space as in 401k, IRA's, maybe even I-bond, etc.

Any chance for a better rate for the home?


Edit: added a "not"
Last edited by Jay69 on Wed Mar 20, 2013 3:02 pm, edited 1 time in total.
"Out of clutter, find simplicity” Albert Einstein
Default User BR
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Joined: Mon Dec 17, 2007 6:32 pm

Re: Clueless- Need Investment Advice

Post by Default User BR »

That's a poor loan rate these days. Is there a problem, bad credit, underwater? If not, refinance to a good low-rate fixed mortgage and enjoy cheap leverage and hedging against inflation and interest rate increases.


Brian
Topic Author
NYC4884
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Joined: Tue Mar 19, 2013 5:17 am

Re: Clueless- Need Investment Advice

Post by NYC4884 »

For all that responded thank you. This was definitely helpful, some good things to think about.
The advice on asset allocation was very insightful and I have already started the refinance process on my mortgage (credit is excellent).
I do have a Roth IRA but can not contribute based off current income. Still not sure how to invest the cash.
I have adjusted my approach on the roll over 401k to the following:

Vanguard
Total Stock Market Index Fund - VTSMX = 56%
Total International Stock Index Fund -VGTSX =24%
Total Bond Market Index Fund- VBMFX=20%
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Jay69
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Re: Clueless- Need Investment Advice

Post by Jay69 »

NYC

Lets take a step back here.

What do you want your final AA to look like?

Some general thoughts:

It looks like to me you are looking at each account as being seperate with a seperate AA. The trick is to add up all your accounts and pick the best funds for the right accounts based on tax treatment and ER's.

You also seem to have a fair amount of overlap and some sector bets going on, again what AA are you shooting for. I'm not really crazy about the long bonds either.

Think about using I-bond space before filling taxable. You noted you have a Roth, if that is for retirment include that in your AA.
"Out of clutter, find simplicity” Albert Einstein
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Skinut
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Re: Clueless- Need Investment Advice

Post by Skinut »

NYC4884 wrote:I do have a Roth IRA but can not contribute based off current income.
You might want to explore a Backdoor Roth, from the OP it appears you do not have any other IRAs that would prohibit you from doing one.

http://www.bogleheads.org/wiki/Backdoor_Roth_IRA
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sometimesinvestor
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Re: Clueless- Need Investment Advice

Post by sometimesinvestor »

Assuming you live in NYC or at least NY state I would take advantage of New Yorks tax break for its 529 plan and contribute 5k per year , !0k if married which seems likely but was not specified.Above that I would concentrated on retirement until you are comfortable with the level you are contributing for that latter purpose.

Do you havea 401k or similar now .Its not completely clear?
dimdum
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Joined: Fri Mar 04, 2011 1:50 pm

Re: Clueless- Need Investment Advice

Post by dimdum »

401k = $240k
Wellington Fund / VWELX = 20%
Windsor / VWNDX = 20%
500 Index Admiral / VFIAX = 20%
Pacific Stock Index / VPADX = 10%
Develop Market Index / VDMAX = 10%
Total Bond/ VBTLX = 10 %
Long Term Bond / VBTLX = 10 %

Cash = $75k
ETF Industrial / VIS = 13%
ETF Healthcare / VHT = 12%
Total Stock / VTSMX = 25%
Total International Stock / VGTSX = 25%
Total Bond/ VBMFX= 25 %
You have over-lapping funds, you think you are diversify by buying multiple fund but it reality you may not.
Pacific Stock Index / VPADX is part of Develop Market Index
Long Term Bond / VBTLX is part of Total Bond/ VBTLX
Wellington Fund and Windsor overlaps with sp500 and bonds funds.

Also you are over-weights in few sectors, they may or may not beat sp500 in long run.
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