Investment/Portfolio Question

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Investment/Portfolio Question

Postby jrafanelli » Thu Apr 04, 2013 9:05 pm

Sorry if I did not fill out properly.. I tried... my questions are below =) Thanks! I have too many funds to figure out % but spent a long time recording amounts/expenses/tickers.

My wife and I have been working/saving for about 2-3 years. We live on one income and invest/save the other. We have 0 debt.

Emergency funds: $~20,000
Debt: 0 debt
Tax Filing Status: Married
Tax Rate: 15% Federal, 0% State
State of Residence: Florida
Age: 29
Desired Asset allocation: 80% stocks / 20% bonds -- ish
Desired International allocation: 30% of stocks

If you want to give us a detailed breakdown within each asset class (xx% large caps, xx% mid caps, xx% bonds, xx% cash, etc.), go ahead. (Most people probably will not want to do this. If you are not sure what this means, please disregard.)
I have about 30% of my funds in stocks (mostly large cap growth), about 50% in mutual funds (mostly large cap growth/value with some diversified funds), and about 20% in muni bonds

Please provide a hint as to the size of your current total portfolio (as in high four-figures, mid five-figures, low six-figures, etc.) What might be appropriate for a very large portfolio might not be appropriate for a new investor.
Low 6 figures

Providing the split of your assets and contributions between taxable and tax-advantaged accounts is also helpful. Please include all investment and retirement accounts (yourself and spouse or civil partner, if applicable) as it's important to look at the portfolio as a unified whole rather than look at accounts in isolation. Also include the available funds in your employer provided retirement plans. For example:

I have these funds with Oppenheimer Funds

Rollover 401k/IRA
International diversified Fund A - 2,400 OIDAX 1.37%
Global opportunities Fund A 2,800 OPGIX 1.22%
Global Strategic Income 1,000 OPSIX .99%
Developing Markets Fund A 830 ODMAX 1.36%


Roth IRA
International diversified Fund A - 3300 OIDAX 1.37%
Global opportunities Fund A 3000 OPGIX 1.22%
Global Strategic Income 1,600 OPSIX .99%
Developing Markets Fund A 1100 ODMAX 1.36%
Global Fund A 2,000 OPPAX 1.22%
Intentional Small Company Fund A 1,100 OSMAX 1.29%


SEP IRA
Developing Markets Fund A 1,000 ODMAX 1.36%



Non Retirement Oppenheimer Mutual Funds
International diversified Fund A - 1400 OIDAX 1.37%
Global opportunities Fund A 1700 OPGIX 1.22%
Rising Dividends Fund A 2000 OARDX 1.06%
Developing Markets Fund A 2800 ODMAX 1.36%
Global Fund A 1600 OPPAX 1.22%
Intentional Small Company Fund A 3000 OSMAX 1.29%
Equity Income Fund Inc A 1400 OAEIX 1.06%


Oppenheimer Funds Muni Bonds
Rochester National Municipals C 11,200 ORNCX 1.84%
AMT-Free Municipals C 5800 OMFCX 1.82%


Wife's ROTH IRA at Oppenheimer Funds
International Divierisifed Fund A 3600 OIDAX 1.37%
Global Opportunities Fund A 4200 OPGIX 1.22%
Global Strategic Income Fund A 1500 OPSIX .99%
Developing Markets Fund A 2600 ODMAX 1.36%


Employer 401k (no matching)
4500 between JIGRX NEFJX JARTX

Current retirement assets

Etrade Securities
~30000


Vanguard Non Retirement
VDIGX 3100 .31%
VEIPX 3100 .30%
VGSIX 3100 .24%





Contributions

New annual Contributions
$3600 his 401k (also specify any employer matching contributions)
$xx her 403b (also specify any employer matching contributions)
$5500 his IRA/Roth IRA
$5500 her IRA/Roth IRA
$14000 taxable (for retirement, not short term goals)




Questions:
1. I recently read some Bogle and am pretty sure I need to switch all of the high expense things from Oppenheimer over to index funds, or at least low cost funds. Should I take the hit on the 5.75% loads on all my accounts now to move them, or should I just stop my monthly investments, save up, and put them in the index funds? It seems that the fee change amount alone would make up for the fees/loads in a short time. Are there certain benefits to moving some accounts into one thing or another?

2. I like the muni bond funds and receive a nice yield on them. Would I make more (I invest about 300-400 a month in them on Oppenheimer -- the class C have to stay in 1 year to not have a 1% withdrawl fee) in a total bond index fund vs keeping them there?

THANK YOU :)

--John
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Re: Investment/Portfolio Question

Postby Occupier » Thu Apr 04, 2013 11:28 pm

Don't walk away from those high cost Oppenheimer funds - run away. That extra 1% a year adds up to a lot of lost appreciation over 30 years. Do the math. 13 years ago when I joined the old list I made the change to Vanguard for all my accounts, and I have never regretted it. Take the loss, learn the lesson and move on. Regarding the bond funds, you don't get higher yields without taking on extra risk. You don't notice the extra risk until a down market when you get clobbered, but the risk is always there.

Instead of that large collection of funds, many of which will overlap, you will do just fine with 5-8 funds. They should be something like this. Vanguard Total Stock Market, Total International, Small value and small international - VSS. For bonds Total Bond, Investment Grade - short or intermediate term, and some kind of inflation protected - TIPS or WIP. You may also observe that Vanguard has some fine muni funds. Dave
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Re: Investment/Portfolio Question

Postby jrafanelli » Thu Apr 04, 2013 11:38 pm

I could probably open quite a few admiral shares.. I know I should roll my wife's roth over to a total market and total world market index.


For non-retirement I have VDIGX VEIPX VGSIX all opened up so far. Any suggestions as far as low cost and index-focused?

Is it wise to do index for non-retirement also (I know philosophically it is buy and hold forever)?
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Re: Investment/Portfolio Question

Postby rickmerrill » Thu Apr 04, 2013 11:55 pm

1. I recently read some Bogle and am pretty sure I need to switch all of the high expense things from Oppenheimer over to index funds, or at least low cost funds. Should I take the hit on the 5.75% loads on all my accounts now to move them, or should I just stop my monthly investments, save up, and put them in the index funds? It seems that the fee change amount alone would make up for the fees/loads in a short time. Are there certain benefits to moving some accounts into one thing or another?

2. I like the muni bond funds and receive a nice yield on them. Would I make more (I invest about 300-400 a month in them on Oppenheimer -- the class C have to stay in 1 year to not have a 1% withdrawl fee) in a total bond index fund vs keeping them there?


You have a good plan to save one income and live off of the other. Your investments need fixing.

Yes you should switch to low cost funds. That load is a front end sales charge - spilt milk. You are paying about 1.2% fees annually, rough average. At vanguard it would be closer to .02%. Find an online calculator for "cost of fees". In 40 years the cost will probably cost you $300,000 or more as your portfolio grows. You are getting nothing for that money. We are all about getting what the market gives us so low cost, diversified investing in the entire market is key.

The high yield muni funds are also called junk bonds. They are normally thought of as stocks because they fall more like stocks than like bonds. The amt free municipals were designed for high income folks in NYC to avoid high taxes. You don't live in NYC and have low taxes. It is not diversified outside of NY so that's a big risk. The Rochester muni is not as off but it is high expense and they don't get that yield without taking considerable risk.

You need to do some reading. Here is the reading list on the wiki http://www.bogleheads.org/readbooks.htm/url
Common Sense On Mutual Funds and The Boglehead's Guide To Investing are a good place to start.

Overall, you should be concentrating on getting a proper asset allocation and moving to lower cost index funds. If that seems daunting you don't have to do it all at once, you can do it one step at a time as you figure it all out. You should start moving the taxable money into tax advantaged. One way to do that is to sell and live off of the taxable money and contribute as much as possible to the tax advantaged stuff, 401k and IRA's. Unless you have a specific reason you don't need any taxable retirement investments.

You can have a very nice inexpensive and well diversified portfolio with three simple index funds: total stock market, total international market and total bond market. One advantage will be that when asked what percent each represents of you portfolio you might know right off the top of your head.

You should add all of the funds available in your 401k, this will come in handy later to know what the nature of each option is and the cost.

If you get stuck along the way you can ask for help here and get some really good advice. Good luck!
If I am stupid I will pay.
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Re: Investment/Portfolio Question

Postby jrafanelli » Fri Apr 05, 2013 8:42 am

Thanks I will be making the calls today ;)
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Re: Investment/Portfolio Question

Postby Skinut » Fri Apr 05, 2013 12:35 pm

What options do you have in your 401k and her 401k? You mentioned your $14k invested in taxable each year is for retirement, unless both 401k's have terrible options I would look into putting the entire amount into one or both 401k's.

Tax advantaged space is use it or lose it...
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Re: Investment/Portfolio Question

Postby jrafanelli » Sat Apr 06, 2013 10:35 am

These are the only funds available in my 401k. Expense Ratio
SSgA Cash Series U.S. Government Fund - Class L   0.75 
PIMCO Total Return Fund - Class A  0.85 
Oppenheimer Global Strategic Income Fund - Class A   0.99 
SSgA Target Retirement Income Securities Lending Series Fund - Class IX   1.33 
SSgA Target Retirement 2010 Securities Lending Series Fund - Class IX   1.12 
SSgA Target Retirement 2020 Securities Lending Series Fund - Class IX   0.96 
SSgA Target Retirement 2030 Securities Lending Series Fund - Class IX   0.94 
SSgA Target Retirement 2040 Securities Lending Series Fund - Class IX   1.00 
BlackRock Global Allocation Fund, Inc. - Investor A Class   1.16 
BlackRock Large Cap Value Fund - Investor A Class  1.27 
Janus Forty Fund - Class S   1.04 
Fidelity Advisor Leveraged Company Stock Fund - Class T 1.35
Vaughan Nelson Small Cap Value Fund - Class A 1.62
Janus Overseas Fund - Class S 1.01


Should I invest more in them than in post-tax? I can invest up to 90% of my income via my 401k (no match). Should I consider moving more then rolling it over periodically? Even their targeted funds have huge expenses. I have bolded the 3 funds I have my investments in (50% Fidelity, 25% in the other 2)

My monthly (non-roth) investments are like this: (Have 400+ dollars into my roth and wife's roth monthly)
$200 into a brokerage account -- (post tax)
$400 into various mutual funds (post-tax)
$300-400 into muni bond funds (Post tax)
10% of my income (About $300 a month) into pre-tax 401k into the above mentioned funds




Another question I had was about my muni bond funds:

As mentioned I have the following in oppenheimer muni bonds:
Rochester National Municipals C $11,200 ORNCX 1.84% expense https://www.oppenheimerfunds.com/fund/i ... Municipals
AMT-Free Municipals C $5800 OMFCX 1.82% expense https://www.oppenheimerfunds.com/fund/i ... Municipals

The links show the performance/rates (I know past performance is not a predictor of future results) and the yield. I am not chasing a rise in the price, but seeking a yield alternative in investing in these funds. I was wondering if anyone knows a calculator/formula that would show whether the yield/fees on a total bond index (or junk bond index if they have one -- which I assume would be higher yield?) would provide a better yield, or if it is just a better safety measure because of the broadness. So overall, is this a better yield (higher risk more likely) than the bond funds even when considering its large fee. The reason I chose class C is there is no load (but must maintain 1 year invested or it incurs a 1% withdrawl fee) vs Class A 5.75% load.
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Re: Investment/Portfolio Question

Postby jrafanelli » Sun Apr 07, 2013 8:17 pm

Bump ;) I know it is the weekend and people may have missed!

Thank you :)
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Re: Investment/Portfolio Question

Postby rickmerrill » Sun Apr 07, 2013 11:30 pm

These are the only funds available in my 401k. Expense Ratio
SSgA Cash Series U.S. Government Fund - Class L 0.75
PIMCO Total Return Fund - Class A 0.85
Oppenheimer Global Strategic Income Fund - Class A 0.99
SSgA Target Retirement Income Securities Lending Series Fund - Class IX 1.33
SSgA Target Retirement 2010 Securities Lending Series Fund - Class IX 1.12
SSgA Target Retirement 2020 Securities Lending Series Fund - Class IX 0.96
SSgA Target Retirement 2030 Securities Lending Series Fund - Class IX 0.94
SSgA Target Retirement 2040 Securities Lending Series Fund - Class IX 1.00
BlackRock Global Allocation Fund, Inc. - Investor A Class 1.16
BlackRock Large Cap Value Fund - Investor A Class 1.27
Janus Forty Fund - Class S 1.04
Fidelity Advisor Leveraged Company Stock Fund - Class T 1.35
Vaughan Nelson Small Cap Value Fund - Class A 1.62
Janus Overseas Fund - Class S 1.01

Should I invest more in them than in post-tax? I can invest up to 90% of my income via my 401k (no match). Should I consider moving more then rolling it over periodically? Even their targeted funds have huge expenses. I have bolded the 3 funds I have my investments in (50% Fidelity, 25% in the other 2)


Yes you should probably invest in the tax advantaged 401k rather than the taxable. As bad as the fees are they will cost you less than what you would pay in a taxable account - at least if you don't stay with your current employer for a very long time. Please explain how you can invest 90% of your income in the 401k. I don't think 17,500 is 90% of your income. If you can do in-service withdrawals from the 401k that would allow you to escape the high fees and give you better fund choices. Have you checked to make sure your plan allows this? Many times a clear winner is available in your 401k, I am not able to determine which fund/funds are, hopefully someone will help. Maybe one of the TR funds is as good as it gets.

Another question I had was about my muni bond funds:

As mentioned I have the following in oppenheimer muni bonds:
Rochester National Municipals C $11,200 ORNCX 1.84% expense https://www.oppenheimerfunds.com/fund/i ... Municipals
AMT-Free Municipals C $5800 OMFCX 1.82% expense https://www.oppenheimerfunds.com/fund/i ... Municipals

The links show the performance/rates (I know past performance is not a predictor of future results) and the yield. I am not chasing a rise in the price, but seeking a yield alternative in investing in these funds. I was wondering if anyone knows a calculator/formula that would show whether the yield/fees on a total bond index (or junk bond index if they have one -- which I assume would be higher yield?) would provide a better yield, or if it is just a better safety measure because of the broadness. So overall, is this a better yield (higher risk more likely) than the bond funds even when considering its large fee. The reason I chose class C is there is no load (but must maintain 1 year invested or it incurs a 1% withdrawl fee) vs Class A 5.75% load


The advice most often given is to take your risks on the equity side and the phrase "more money has been lost chasing yield than at the point of a gun" comes to mind. The risk/reward for these investments is not usually going to work in your favor. No, a total bond fund will not give you the same returns as a high yield bond fund but it will give you a balance to the risks you take in stocks.
If I am stupid I will pay.
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Re: Investment/Portfolio Question

Postby patrick » Mon Apr 08, 2013 12:15 am

The 5.75% load is money you have already lost. You might as well have taken out all the dollar bills in your wallet, shredded them, and then burned them until the ashes were unrecognizable. On the bright side you can save 1% a year or so in additional fees if you move out of them now.

We can't tell for sure whether total bond will be better or worse than munis. However, note that munis should pay lower yields than equally risky regular bonds due to their tax avoidance, which is likely to outweigh the tax advantage for someone in a lower tax bracket. The specific funds you mentioned do have high yields but that is because they include bonds with high credit risk (affectionately known as "junk bonds"). Take a look at how they did in 2007-2009 to see an example of how these funds can suffer huge losses. If you want to stay in high-risk munis you might have to stick with these funds -- I'm not sure there is any low cost muni fund with that much risk!

For the 401K I'd probably just go with the PIMCO Total Return fund only -- it's cheaper than the alternatives and you have plenty of money outside the 401K to buy stocks with.
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Re: Investment/Portfolio Question

Postby jrafanelli » Mon Apr 08, 2013 4:40 am

rickmerrill wrote:
These are the only funds available in my 401k. Expense Ratio
SSgA Cash Series U.S. Government Fund - Class L 0.75
PIMCO Total Return Fund - Class A 0.85
Oppenheimer Global Strategic Income Fund - Class A 0.99
SSgA Target Retirement Income Securities Lending Series Fund - Class IX 1.33
SSgA Target Retirement 2010 Securities Lending Series Fund - Class IX 1.12
SSgA Target Retirement 2020 Securities Lending Series Fund - Class IX 0.96
SSgA Target Retirement 2030 Securities Lending Series Fund - Class IX 0.94
SSgA Target Retirement 2040 Securities Lending Series Fund - Class IX 1.00
BlackRock Global Allocation Fund, Inc. - Investor A Class 1.16
BlackRock Large Cap Value Fund - Investor A Class 1.27
Janus Forty Fund - Class S 1.04
Fidelity Advisor Leveraged Company Stock Fund - Class T 1.35
Vaughan Nelson Small Cap Value Fund - Class A 1.62
Janus Overseas Fund - Class S 1.01

Should I invest more in them than in post-tax? I can invest up to 90% of my income via my 401k (no match). Should I consider moving more then rolling it over periodically? Even their targeted funds have huge expenses. I have bolded the 3 funds I have my investments in (50% Fidelity, 25% in the other 2)


Yes you should probably invest in the tax advantaged 401k rather than the taxable. As bad as the fees are they will cost you less than what you would pay in a taxable account - at least if you don't stay with your current employer for a very long time. Please explain how you can invest 90% of your income in the 401k. I don't think 17,500 is 90% of your income. If you can do in-service withdrawals from the 401k that would allow you to escape the high fees and give you better fund choices. Have you checked to make sure your plan allows this? Many times a clear winner is available in your 401k, I am not able to determine which fund/funds are, hopefully someone will help. Maybe one of the TR funds is as good as it gets.

Another question I had was about my muni bond funds:

As mentioned I have the following in oppenheimer muni bonds:
Rochester National Municipals C $11,200 ORNCX 1.84% expense https://www.oppenheimerfunds.com/fund/i ... Municipals
AMT-Free Municipals C $5800 OMFCX 1.82% expense https://www.oppenheimerfunds.com/fund/i ... Municipals

The links show the performance/rates (I know past performance is not a predictor of future results) and the yield. I am not chasing a rise in the price, but seeking a yield alternative in investing in these funds. I was wondering if anyone knows a calculator/formula that would show whether the yield/fees on a total bond index (or junk bond index if they have one -- which I assume would be higher yield?) would provide a better yield, or if it is just a better safety measure because of the broadness. So overall, is this a better yield (higher risk more likely) than the bond funds even when considering its large fee. The reason I chose class C is there is no load (but must maintain 1 year invested or it incurs a 1% withdrawl fee) vs Class A 5.75% load


The advice most often given is to take your risks on the equity side and the phrase "more money has been lost chasing yield than at the point of a gun" comes to mind. The risk/reward for these investments is not usually going to work in your favor. No, a total bond fund will not give you the same returns as a high yield bond fund but it will give you a balance to the risks you take in stocks.



I invest10% of my income (about 300 dollars a month or 3,600 in the 401k), not 90%. I have the option of putting up to 90% in.
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Re: Investment/Portfolio Question

Postby Skinut » Mon Apr 08, 2013 9:59 am

I agree with Patrick's recommendation to use the PIMCO Total Return Fund. Does your wife have access to a 401k? If so, what are her options?

Here is a link to the wiki and some thoughts around poor 401k options (scroll down to the section titled "expensive or mediocore choices), there is also a link to TFBs blog that has a calculator you can use to compute poor 401k vs. Taxable. Pretty sure the poor 401k is the best choice, but you can run the numbers for yourself.

http://www.bogleheads.org/wiki/401(k)
http://thefinancebuff.com/alternatives- ... -plan.html

You don't by chance have the option to use a PCRA? (personal choice retirement account) - it would be an option within your 401k if you have it.

Depending on the size of your employer, you can always lobby to have index funds added to your fund choices.
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