New job, investment help please

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New job, investment help please

Postby slbnoob » Fri Jul 26, 2013 1:51 pm

Hello everyone. Lot of information on this form for me. I am 29 years old, graduated with a PhD, recently married, and working in an O&G major in TX for 9 months now. I have done some general reading but would really appreciate some specific investment advise.

My salary is $100K excluding bonus. My wife also works now but I am not counting on her working much longer.

Total funds: Me and my wife = $50K. We are looking to buy a house. So at least $40K of our savings is reserved for down payment. We will increase this with time and reserve the rest for Emergency funds ($10K+).
Debt: One car loan ($28K with 0% interest). No school loan.
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, 0% State
State of Residence: TX
Age: 29
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 30% of stocks

Currently, I contribute 6% to 401K, matched by my employer. The 401K is through Hewitt Associates and there are really not a lot of choices in terms of the funds. The following 7 are my options (Composite Benchmarks):

Short Term Fixed Income (ER 0.002%): CG 6 mo. T-Bill;35%, ML US Treasury 1-3 year; 35%, BC US Tips; 2.5%, BC US Aggregate; 27.5%
Intermediate Fixed Income (ER 0.000%): CG 6 mo. T-Bill; 1%, ML US Treasury 1-3 year; 1%, BC US Aggregate; 98%
Conservative Balanced Fund (ER 0.032%): CG 6 mo. T-Bill; 2.5%, MSCI Emerging Markets ND; 3.2%, ML US Treasury 1-3 year; 2.5%, Russell 1000; 9.2%, BC US Tips; 10%, S&P 500; 11.2%, Russell MidCap; .7%, Russell 2000; 2.9%, MSCI EAFE ND; 12.8%, BC US Aggregate; 40%, Stable Value @ 5% per annum; 5%
Moderate Balanced Fund (ER 0.036): Russell 1000; 16.45%, S&P 500; 14.45%, Russell MidCap; 1.8%, Russell 2000; 7.3%, MSCI Emerging Markets ND; 4%, MSCI EAFE ND; 16%, BC US Aggregate; 28%, BC US Tips; 7%, Stable Value @ 5% per annum; 2%, CG 6 mo. T-Bill; 1.5%, ML US Treasury 1-3 year; 1.5%
Aggressive Balanced Fund (ER 0.04%): Russell 1000; 22.5%, S&P 500; 20%, Russell MidCap; 2.5%, Russell 2000; 10%, MSCI Emerging Markets ND; 4.8%, MSCI EAFE ND; 19.2%, BC US Aggregate; 15%, BC US Tips; 4%, CG 6 mo. T-Bill; 1%, ML US Treasury 1-3; 1%
Global Equity Fund (ER 0.09%): Russell 1000; 17.05%, S&P 500; 20.25%, Russell MidCap; 1.4%, Russell 2000; 5.3%, MSCI Emerging Markets ND; 10.8%, MSCI EAFE ND; 43.2%, CG 6 mo. T-Bill; 1%, ML US Treasury 1-3 year; 1%
U.S. Equity Fund (ER 0.00%): Russell 1000; 37.8%, S&P 500; 45.5%, Russell MidCap; 3%, Russell 2000; 11.7%, CG 6 mo. T-Bill; 1%, ML US Treasury 1-3 year; 1%

I have directed my contribution to the "Moderately Balanced Fund" (60% stocks, 40% bonds, 0.036% ER) and my employers to the "US Equity fund" (0.00% ER). Many of you are suggesting the "Aggressively Balanced Fund" (80% stocks, 20% bonds, 0.04% ER) and I will change my contribution to this fund.

I do not have any other investment but I want to start now.

Questions:
1. Any advise on the split of my 401K? I am sorry I could not find ticker symbols for the funds. I am only considering those 3 funds. There is one global equity (very volatile) and other company stocks (even more volatile) which I do not want to be investing in for 401K.

2. I am considering opening a Roth IRA and contribute the annual maximum. Which broker/online platform should I use?

3. I want to dollar cost average my investments over time and invest them in either a MF or ETF. From what I have read, ETF has some cost advantages. Do I really need to be actively concerned about the bid-ask spread issue if I want to invest slowly over time in a few ETFs? I am considering a 100% stock portfolio covering 2 index tracking (S&P, Russell) and 2-3 sector tracking ETFs in 1-2 years. Obviously I am going to be starting very small ($500-1000 pm). Does this make any sense at all? Later on, I would diversify more to bonds.

4. Would I much rather go the MF route and avoid ETF if I do not "know" ETFs very well? Why?

5. Again, which broker is recommended for MF/ETF? I am leaning towards Vanguard for Vanguard ETFs as they can be bought/sold commission free.

Thank you!
Last edited by slbnoob on Mon Jul 29, 2013 10:22 am, edited 1 time in total.
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Re: New job, investment help please

Postby JoMoney » Fri Jul 26, 2013 4:02 pm

I agree with your gut instinct to go with Vanguard, I would suggest owning Mutual Funds rather than ETF's. There is no bid-ask spread on mutual funds, there is no broker commission on mutual funds with Vanguard, you can easily add small amounts to a mutual fund and not worry about broker commissions and owning fractional shares. The ability to trade an ETF intra-day is not necessarily an advantage. There are lots of "traders" with faster systems that can front run your trading ability. For a long-term buy and hold investor there's nothing wrong with pricing things at the close of the day.
If you do go with an ETF I would still recommend Vanguard. In most cases Vanguard's ETF's have the lowest expense ratios, and Vanguard's business model and culture is such that they are most likely to keep their expense ratios low. You don't want to buy what you think is a low expense ETF today only to have it raised in the future, you could then switch ETF companies but then you would have a tax liability.
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Re: New job, investment help please

Postby FNK » Fri Jul 26, 2013 5:13 pm

If you have a strong stomach, and given your age, it would be advisable to:

1) Max out your 401 contribution ($17.5K).
2) Put everything into the 80/20 fund for now.
3) Not touch anything until you read a Boglehead book or two.

The aggressive fund will go up and down. Ignore that, you have a lot of time till retirement.
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Re: New job, investment help please

Postby stlutz » Fri Jul 26, 2013 9:26 pm

One question for you: Could you list all of the available funds in your 401K plan and their expense ratios? One specific question is whether any of the balanced funds you've mentioned have any allocation to foreign stocks.

I think FNK makes a good point about making the maximum deductible contribution you can to your 401K first. The expense ratios on the funds you've listed a super low, so a first glace it looks like you have a good plan.

However, if you do go the Roth route, a couple of questions. First, which assets classes are you looking to target? S&P, Russell, MSCI, CRSP etc. all have indexes that target similar asset classes. There is no huge difference between a large cap. S&P index and a large cap. Russell index, for example. Generally, people here like to start with total market funds because they give you access to large, mid, and small-cap stocks, all types of sectors, and growth and value stocks.

If you are looking for a couple of stock funds for your Roth account, VG Total Stock index and VG Total International index are the places to start. Whether you use the fund version or the ETF version is purely a matter of taste--they are actually the same underlying fund.

Forget the sector funds--you'll have exposure to all of the sectors in a total market fund anyhow.
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Re: New job, investment help please

Postby ruralavalon » Sat Jul 27, 2013 7:12 pm

Welcome to the forum :) .

Try to max out both the 401k and the IRA if possible. Good choices are offered in your 401k, even though you list only a few one you list will be excellent for you.

Questions:
1. Any advise on the split of my 401K? I am sorry I could not find ticker symbols for the funds. I am only considering those 3 funds. There is one global equity (very volatile) and other company stocks (even more volatile) which I do not want to be investing in for 401K.
Use the "Aggressively Balanced Fund" (80% stocks, 20% bonds, 0.04% ER), by itself. Its the stock/bond asset allocation you say you desire. Thats a reasonable allocation for you. And its the lowest investing expense of the three you list, and very low compared to such funds offered elsewhere. Hands down the best choice.

2. I am considering opening a Roth IRA and contribute the annual maximum. Which broker/online platform should I use?Use Vanguard, the broadest selection, of diversified or sector, low expense funds offered anywhere.

3. I want to dollar cost average my investments over time and invest them in either a MF or ETF. From what I have read, ETF has some cost advantages. Do I really need to be actively concerned about the bid-ask spread issue if I want to invest slowly over time in a few ETFs? I am considering a 100% stock portfolio covering 2 index tracking (S&P, Russell) and 2-3 sector tracking ETFs in 1-2 years. Obviously I am going to be starting very small ($500-1000 pm). Does this make any sense at all? Later on, I would diversify more to bonds.
Read this about the costs of ETFs, Index Universe, "Understanding the True Costs of ETFs" . Cost advantage to ETFs is small, especially at Vanguard when you get to Admiral class shares for regular funds they are about equal. ETFS do allow low initial minimum investments, regular mutual funds require more to start. But its better to start simple with one or a few very diversified funds rather than multiple sector bets. For Vanguard ETFs, bid/ask spreads are relatively small, Vanguard, "Average bid/ask spread", but thats not always true at other companies or for narrowly focused sector ETFs of the type you mention.

My suggestion would be to use regular mutual funds rather than ETFs to start, and to use broadly diversified funds rather than sector funds when you begin.

If you can tell us more exactly whats in that "Aggressively Balanced Fund" in the 401k, like (1) does it include interntional stock, (2) does it include stocks all sizes of domestic companies, and (3) what indexes does it use, then better suggestions could be made for what to use the IRA.


4. Would I much rather go the MF route and avoid ETF if I do not "know" ETFs very well? Why?
I suggest the regular mutual fund route. Simpler, easier to start with. Here are the Pros and cons: Wiki article link: ETFs vs Mutual Funds ; and livesoft post, "Where is the big advantage in ETFs?" .

5. Again, which broker is recommended for MF/ETF? I am leaning towards Vanguard for Vanguard ETFs as they can be bought/sold commission free.
Vanguard, whether you go ETFs or regular funds, same reason-- the broad array of low expense funds of all types to choose from.
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Re: New job, investment help please

Postby slbnoob » Mon Jul 29, 2013 10:27 am

FNK wrote:If you have a strong stomach, and given your age, it would be advisable to:

1) Max out your 401 contribution ($17.5K).
3) Not touch anything until you read a Boglehead book or two.


I am really not keen to max out my 401 (currently, 6% will make it $6K annually). Given the lack of choices in my 401K, I do not want to keep most of my savings in this "basket". That is why I wanted to keep the bulk of my savings in "more well-known / invested" funds. Also, I do not foresee a lot of savings in the next 1-2 years (house buying, major travels, other expenses), I will only max out my employer's contribution.

I do want to max out my Roth IRA since it is only $5.5K. Later on, with availability of more funds, I may consider maxing out my 401K.

Do you recommend not investing in any MF till I get more knowledge? I was hoping to start the process small and learn and grow with it.
Last edited by slbnoob on Mon Jul 29, 2013 10:38 am, edited 1 time in total.
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Re: New job, investment help please

Postby slbnoob » Mon Jul 29, 2013 10:32 am

stlutz wrote:One question for you: Could you list all of the available funds in your 401K plan and their expense ratios? One specific question is whether any of the balanced funds you've mentioned have any allocation to foreign stocks.

I think FNK makes a good point about making the maximum deductible contribution you can to your 401K first. The expense ratios on the funds you've listed a super low, so a first glace it looks like you have a good plan.

However, if you do go the Roth route, a couple of questions. First, which assets classes are you looking to target? S&P, Russell, MSCI, CRSP etc. all have indexes that target similar asset classes. There is no huge difference between a large cap. S&P index and a large cap. Russell index, for example. Generally, people here like to start with total market funds because they give you access to large, mid, and small-cap stocks, all types of sectors, and growth and value stocks.

If you are looking for a couple of stock funds for your Roth account, VG Total Stock index and VG Total International index are the places to start. Whether you use the fund version or the ETF version is purely a matter of taste--they are actually the same underlying fund.

Forget the sector funds--you'll have exposure to all of the sectors in a total market fund anyhow.


I have now edited my original post, listing all the 7 funds with their ER. The balanced funds do have exposure to foreign stocks and even currency. I don't exactly understand the Composite Benchmarks.

Now, would you recommend me:
1) transferring my contribution to the "Aggressive Balanced Fund"?
2) opening a Roth IRA account, and allocating a split of $5.5K to the VG Total Stock index and VG Total International index MFs?
Last edited by slbnoob on Mon Jul 29, 2013 10:58 am, edited 1 time in total.
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Re: New job, investment help please

Postby slbnoob » Mon Jul 29, 2013 10:36 am

ruralavalon wrote:My suggestion would be to use regular mutual funds rather than ETFs to start, and to use broadly diversified funds rather than sector funds when you begin.

If you can tell us more exactly whats in that "Aggressively Balanced Fund" in the 401k, like (1) does it include interntional stock, (2) does it include stocks all sizes of domestic companies, and (3) what indexes does it use, then better suggestions could be made for what to use the IRA.[/color]

4. Would I much rather go the MF route and avoid ETF if I do not "know" ETFs very well? Why?
I suggest the regular mutual fund route. Simpler, easier to start with. Here are the Pros and cons: Wiki article link: ETFs vs Mutual Funds ; and livesoft post, "Where is the big advantage in ETFs?" .

Thanks for your suggestion. I will transfer my contribution to the "Aggressive Balanced fund" now. I have now edited my original post with more details on the choices in my 401K.
What would you recommend for the Roth IRA?
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Re: New job, investment help please

Postby FNK » Mon Jul 29, 2013 11:31 am

slbnoob wrote:I am really not keen to max out my 401 (currently, 6% will make it $6K annually). Given the lack of choices in my 401K, I do not want to keep most of my savings in this "basket". That is why I wanted to keep the bulk of my savings in "more well-known / invested" funds. Also, I do not foresee a lot of savings in the next 1-2 years (house buying, major travels, other expenses), I will only max out my employer's contribution.

I do want to max out my Roth IRA since it is only $5.5K. Later on, with availability of more funds, I may consider maxing out my 401K.

Do you recommend not investing in any MF till I get more knowledge? I was hoping to start the process small and learn and grow with it.

It is true that you don't have many choices. After figuring out the boglehead ideas, you will realize that you don't *need* many choices. The choices you have are fantastic.

Maxing out Roth IRAs instead of/along with 401 is fine as well. For simplicity, put everything into the Vanguard LifeStrategy Growth Fund and read the books.
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Re: New job, investment help please

Postby ruralavalon » Tue Jul 30, 2013 7:47 am

slbnoob wrote:My salary is $100K excluding bonus. My wife also works now but I am not counting on her working much longer.
. . . . .
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, 0% State
. . . . .
Age: 29
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 30% of stocks

ruralavalon wrote:If you can tell us more exactly whats in that "Aggressively Balanced Fund" in the 401k, like (1) does it include interntional stock, (2) does it include stocks all sizes of domestic companies, and (3) what indexes does it use, then better suggestions could be made for what to use the IRA.


Aggressive Balanced Fund (ER 0.04%): Russell 1000; 22.5%, S&P 500; 20%, Russell MidCap; 2.5%, Russell 2000; 10%, MSCI Emerging Markets ND; 4.8%, MSCI EAFE ND; 19.2%, BC US Aggregate; 15%, BC US Tips; 4%, CG 6 mo. T-Bill; 1%, ML US Treasury 1-3; 1%
. . . . .
I am really not keen to max out my 401 (currently, 6% will make it $6K annually). . . . . . Also, I do not foresee a lot of savings in the next 1-2 years (house buying, major travels, other expenses), I will only max out my employer's contribution.

I do want to max out my Roth IRA since it is only $5.5K. Later on, with availability of more funds, I may consider maxing out my 401K.


Thanks for your suggestion. I will transfer my contribution to the "Aggressive Balanced fund" now. I have now edited my original post with more details on the choices in my 401K.
What would you recommend for the Roth IRA?

That "Aggressive Balanced Fund" is more comprehensive than I had expected, Its very diversified. It covers high quality intermediate term bonds, TIPS and some T-bills. It covers large, mid-sized and small domestic stocks, and in international covers both developed and emerging markets. All it lacks, in my opinion, is mid-sized and small international companies.

In your IRA you could add a small portion of Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) to make up for that omission in the in the 401k, about 02 - 03% will do that (52% X .79 X .3 X .2 = 2.5%). But thats not at all necessary. Ordinarily I don't suggest ETFs, but a regular MF would have a required initial minimum investment of $3k. You don't need that much, in the very beginning, to fill in for the omission in the "Aggressive Balanced Fund". An ETF lets you start with a smaller amount. I like and agree with FNKs idea of then using Vanguard LifeStrategy Growth Fund (VASGX) for nearly all or all of the IRA. It has the same allocation you want and is suitable for you. It is very similar to the "Aggressive Balanced Fund", but does cover international mid-sized and small companies. This will make for a very simple, easy to manage portfolio in the desired asset allocation. Rebalancing will hardly be necessary.


So here is how you could start your investment portfolio, in the desired asset allocation, with very good diversification, very low investing expenses, with a simple easy to manage set of funds. The percentages are rounded off. You should adjust the percentages to reflect the dollar amount of the employer match/contribution:

401k (adds $6k/yr; 52 % of annual contributions; plus unspecified employer match/contribution.)
52%, Aggressive Balanced Fund, er = 0.04%, (79/21 stock/bond; ~ 30% of stocks in int'l)

Roth IRA @ Vanguard (adds $5.5k/yr; 48% of annual contributions)
03%, Vanguard FTSE All-World ex-US Small-Cap ETF (VSS), er = 0.25% (int'l mid/small caps, VSS, on Morningstar)
45%, Vanguard LifeStrategy Growth Fund (VASGX), er = 0.17%, (80/20 stock/bond; ~ 30% of stocks in int'l, VASGX, Vanguard)


I see that you have mentioned an employer contribution or maybe a match ("I will only max out my employer's contribution."). If there is an employer match, then make sure you contribute enough to the 401k to get the full match each year. Its free money; never turn down free money, its better than any investment. Since you have no debt, the account funding priority each year should be: (1) enough in the 401k to get the full match; (2) then max out the IRA(s); and (3) then depending on availability of funds any additional you can to the 401k. So you seem to have that correct in your planning already. Wiki article link: Prioritizing investments .

You can also have a Roth IRA in your wife's name tax-protecting another $5.5k/yr, even though she will not be employed you are allowed to fund that from your income. I understand there are limits to what you can set aside for investing, just store this idea away for possible future use.

By the way, since your are just starting work this year only recieving a partial year of salary your tax bracket will be lower. And in future years a little additional contribution to your 401k, giving some additional tax deduction, might lower your tax bracket, please see this calculator moneychimp.com, "Tax Brackets" ; and moneychimp.com, "Tax Calculator". That, in turn, would lower the cost of putting money into the Roth IRA(s). But this is definitely fine-tuning, another idea to store away for possible future use.


I hope that this helps.
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Re: New job, investment help please

Postby slbnoob » Tue Jul 30, 2013 9:26 am

I really appreciate everyone's help here. What I take out from the conversation so far is:

ruralavalon wrote:In your IRA you could add a small portion of Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) to make up for that omission in the in the 401k, about 02 - 03% will do that (52% X .79 X .3 X .2 = 2.5%). But thats not at all necessary. Ordinarily I don't suggest ETFs, but a regular MF would have a required initial minimum investment of $3k. You don't need that much, in the very beginning, to fill in for the omission in the "Aggressive Balanced Fund". An ETF lets you start with a smaller amount. I like and agree with FNKs idea of then using Vanguard LifeStrategy Growth Fund (VASGX) for nearly all or all of the IRA. It has the same allocation you want and is suitable for you. It is very similar to the "Aggressive Balanced Fund", but does cover international mid-sized and small companies. This will make for a very simple, easy to manage portfolio in the desired asset allocation. Rebalancing will hardly be necessary.
Initially, I was looking at (Vanguard) ETFs for small minimum investment and lower costs. I am not going to be day trading, instead I will simply buy and hold. From the discussions, I am now leaning towards having MFs for Roth IRA. For ETFs, I may open a separate brokerage account later on and start small and learn.

So here is how you could start your investment portfolio, in the desired asset allocation, with very good diversification, very low investing expenses, with a simple easy to manage set of funds. The percentages are rounded off. You should adjust the percentages to reflect the dollar amount of the employer match/contribution:

401k (adds $6k/yr; 52 % of annual contributions; plus unspecified employer match/contribution.)
52%, Aggressive Balanced Fund, er = 0.04%, (79/21 stock/bond; ~ 30% of stocks in int'l)

Roth IRA @ Vanguard (adds $5.5k/yr; 48% of annual contributions)
03%, Vanguard FTSE All-World ex-US Small-Cap ETF (VSS), er = 0.25% (int'l mid/small caps, VSS, on Morningstar)
45%, Vanguard LifeStrategy Growth Fund (VASGX), er = 0.17%, (80/20 stock/bond; ~ 30% of stocks in int'l, VASGX, Vanguard)

I see that you have mentioned an employer contribution or maybe a match ("I will only max out my employer's contribution."). If there is an employer match, then make sure you contribute enough to the 401k to get the full match each year. Its free money; never turn down free money, its better than any investment. Since you have no debt, the account funding priority each year should be: (1) enough in the 401k to get the full match; (2) then max out the IRA(s); and (3) then depending on availability of funds any additional you can to the 401k. So you seem to have that correct in your planning already. Wiki article link: Prioritizing investments .
I already max out my employer's contribution.

You can also have a Roth IRA in your wife's name tax-protecting another $5.5k/yr, even though she will not be employed you are allowed to fund that from your income. I understand there are limits to what you can set aside for investing, just store this idea away for possible future use.
I will be opening a Roth IRA account in my as well as my wife's name. I have until April 2014 to put $5.5K in each. I will open these accounts with Vanguard. The funds that I will consider are: Vanguard LifeStrategy Growth Fund (VASGX), VG Total Stock index and VG Total International index, Retirement 2040. I will need to look closely into these funds (and more) and see what is suitable for me. I will report back with what I go ahead with. I am still welcome to suggestions.

By the way, since your are just starting work this year only recieving a partial year of salary your tax bracket will be lower. And in future years a little additional contribution to your 401k, giving some additional tax deduction, might lower your tax bracket, please see this calculator moneychimp.com, "Tax Brackets" ; and moneychimp.com, "Tax Calculator". That, in turn, would lower the cost of putting money into the Roth IRA(s). But this is definitely fine-tuning, another idea to store away for possible future use.
Very useful advise (I didn't think of) about lowering my tax bracket by contributing more to my 401K. I will consider doing this once I am done with my spending requirements.

I hope that this helps.
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Re: New job, investment help please

Postby ruralavalon » Wed Jul 31, 2013 2:16 pm

slnoob wrote:Initially, I was looking at (Vanguard) ETFs for small minimum investment and lower costs. I am not going to be day trading, instead I will simply buy and hold. From the discussions, I am now leaning towards having MFs for Roth IRA. For ETFs, I may open a separate brokerage account later on and start small and learn.

You can buy ETFs in a Vanguard IRA account, just like you can regular mutual funds, and don't need a separate brokerage account to do that. We have a brokerage feature with our rollover IRA account, so we can hold Treasurys in it. In the sign up process you are asked if you want a brokerage component added to your IRA. There will be no comission fees for buying or selling Vanguard ETFs.
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Re: New job, investment help please

Postby slbnoob » Sat Aug 03, 2013 2:58 pm

So after reading and then reading again everyone's replies and a lot of other posts on this forum, I have decided the following for me and my wife's Roth IRA:

His Roth IRA
Vanguard Total Stock Market Index Fund Investor Shares (VTSMX, 0.17% ER) 0%
Vanguard Total International Stock Index Fund Investor Shares (VGTSX, 0.22% ER) 60%
Vanguard Total Bond Market Index Fund Investor Shares (VBMFX, 0.20% ER) 40%

Her Roth IRA
Vanguard Total Stock Market Index Fund Investor Shares (VTSMX, 0.17% ER) 100%

Note that overall for Roth IRA, my AA is 50% US stocks, 30% Intl. stocks, 20% US bonds.

Detailed in my original/first post, my 401K is split among the "Aggressive Balanced fund" and "US Equity fund". The AA comes out approximately to be 78% US stocks, 12% Intl. stocks, 10% US bonds.

After maxing out my Roth IRA, when I do have more funds available, I will open a taxable brokerage account and buy some US stocks MFs. Overall, my portfolio will look like 90% stocks, 10% bonds. I am leaning towards this rather aggressive overall portfolio at least to begin with. With time, perhaps I will incorporate more bonds to balance it to 80-20. Please let me know if the plan for Roth IRA looks good as I can change it and then start it.

My primary reason to go with these funds separately instead of the Target Retirement funds is that I can qualify for Admiral shares (with my next year's contribution) which will lower my overall ER. This was brought to my attention by reventon in this post.

Next question is about market timing, and for which I may get some flak: Should I open this account now or wait perhaps till August-end/September when supposedly QE related decisions will be taken? Just asking :)

Please respond whatever your opinion may be.
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Re: New job, investment help please

Postby ruralavalon » Sun Aug 04, 2013 10:57 am

slbnoob wrote:So after reading and then reading again everyone's replies and a lot of other posts on this forum, I have decided the following for me and my wife's Roth IRA:

His Roth IRA
Vanguard Total Stock Market Index Fund Investor Shares (VTSMX, 0.17% ER) 0%
Vanguard Total International Stock Index Fund Investor Shares (VGTSX, 0.22% ER) 60%
Vanguard Total Bond Market Index Fund Investor Shares (VBMFX, 0.20% ER) 40%

Her Roth IRA
Vanguard Total Stock Market Index Fund Investor Shares (VTSMX, 0.17% ER) 100%

Fund selection is good, but I see a starting-up type issue. The max annual contribution to an IRA is $5.5k. But the required initial minimum investment for each of these funds is $3k per fund per account. So with the first year's contribution you will not be able to buy both funds you want initially for His Roth IRA.


slnoob wrote:Note that overall for Roth IRA, my AA is 50% US stocks, 30% Intl. stocks, 20% US bonds.

Detailed in my original/first post, my 401K is split among the "Aggressive Balanced fund" and "US Equity fund". The AA comes out approximately to be 78% US stocks, 12% Intl. stocks, 10% US bonds.

But what is the overall asset allocation for all three acounts taken together? Does that match your desired asset allocation, or not? Don't just look at the accounts separately, instead look at the entire portfolio as a single unified whole.


slnoob wrote: Next question is about market timing, and for which I may get some flak: Should I open this account now or wait perhaps till August-end/September when supposedly QE related decisions will be taken? Just asking :D

Consider yourself flakked. Once you settle on a good plan and good fund selection, just go ahead.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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ruralavalon
 
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Re: New job, investment help please

Postby slbnoob » Sun Aug 04, 2013 7:33 pm

ruralavalon wrote:Fund selection is good, but I see a starting-up type issue. The max annual contribution to an IRA is $5.5k. But the required initial minimum investment for each of these funds is $3k per fund per account. So with the first year's contribution you will not be able to buy both funds you want initially for His Roth IRA.
haha yes, I thought of that later too and am struggling to come up with a convenient solution. Easiest solution is just to buy 1 fund this year and balance it with next year's contribution. Another is to perhaps buy an ETF. I have been discouraged to venture into that category with any experience; do not want any surprises.

But what is the overall asset allocation for all three acounts taken together? Does that match your desired asset allocation, or not? Don't just look at the accounts separately, instead look at the entire portfolio as a single unified whole.
I was indeed for the overall AA to come out approximately 78% US stocks, 12% Intl. stocks, 10% US bonds. However this one fund issue will affect that a little. I will make myself comfortable as it is only for less than 8 months. I will reach my intended AA at the next opportunity with either next year's Roth IRA contribution or a taxable account.

Consider yourself flakked. Once you settle on a good plan and good fund selection, just go ahead.
My gut says to be more patient. I might need to sleep on this a few nights. :)


Thanks for taking time out to reply !
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Re: New job, investment help please

Postby ruralavalon » Mon Aug 05, 2013 8:05 am

slnoob wrote:thought of that later too and am struggling to come up with a convenient solution. Easiest solution is just to buy 1 fund this year and balance it with next year's contribution. Another is to perhaps buy an ETF. I have been discouraged to venture into that category with any experience; do not want any surprises.

A single fund temporary solution for this year could be Vanguard LifeStrategy Growth Fund (VASGX), 80/20 stock/bond.
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