New low income investor

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Topic Author
Motohead8
Posts: 4
Joined: Fri May 30, 2014 11:24 am

New low income investor

Post by Motohead8 »

Emergency funds: 13k
Debt: No debt
Tax Filing Status: Single
Tax Rate: 15% Federal, 0% State
State of Residence: FL
Age: 30
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 27% of stocks

Current assets

Taxable (non retirement)
15% Vanguard 500 Index (VFINX) (0.17)
15% Vanguard Euro Stock Index (VEURX) (0.26)
19% Vangaurd Inter-Term Bond Index (VBIIX) (0.20)

Roth IRA
90% Vanguard Target Retirement 2050 (VFIFX) (0.18) [19,753]
- 63% Vanguard Total Stock Market Index
- 27% Vanguard Total International Stock Index
- 8% Vanguard Total Bond Market II Index
- 2% Vanguard Total International Bond Index

Simple IRA
10% Money Market [$2,174]

Total of All Retirement: $21,927
Total of All Accounts: $42,706

Contributions

New annual Contributions
$2942 Roth IRA
$2100 Simple IRA (including my 3% plus the 3% employer match)
I'm no longer contributing to my taxable account, only to my savings.


Available funds

Funds available in SIMPLE IRA
- I'm being told any fund is available.

Hello all, I'm new to investing and am looking to keep things simple. I don't make much but sack away as much as my budget allows and contribute the rest to a savings account to help pay my way through school. I have about 6mths worth of an emergency fund, zero debt, a new car that is paid off, and a little play money left over each month. I'm currently using the Vanguard Total Retirement 2050 as a guide to set my retirement allocation because I have no experience investing. My questions involve retirement investing along with non-retirement investing.

Questions:
1. I'm currently contributing enough to get the maximum employer matching in my SIMPLE IRA, however I'm looking for some advice on what fund to choose. Would it be smart to just put it into the same fund as my Roth (Vanguard Total Retirement 2050)? It seems to perform well and has a low ER but I'm wondering if it's a better idea to diversify a bit from this? I basically have unlimited funds to choose from according to the advisor.

2. Next year I'll begin receiving distributions from an ESOP plan of an old employer. Which account should I roll this into? Will rolling this over effect my yearly maximum contributions? How would you recommend I invest this?

3. I've recently invested $20k (over 12wks) into a taxable account with Vanguard but I'm no longer making contributions. The plan is to use this money to invest in real estate in the near future (1-3yrs). I was told by an advisor to switch my bonds to a short term fund because interest rates are so low. Should I switch it to the Vanguard Short Bond Index or just move it all to the stock funds I currently hold? I'd like to keep it conservative but still want to beat the .75% my savings offers. I'm really at a loss for what to do with allocation here.
Faith20879
Posts: 1242
Joined: Fri Mar 02, 2007 9:16 am

Re: New low income investor

Post by Faith20879 »

Hello Welcome!
you wrote:1. I'm currently contributing enough to get the maximum employer matching in my SIMPLE IRA, however I'm looking for some advice on what fund to choose. Would it be smart to just put it into the same fund as my Roth (Vanguard Total Retirement 2050)? It seems to perform well and has a low ER but I'm wondering if it's a better idea to diversify a bit from this? I basically have unlimited funds to choose from according to the advisor.
VG 2050 is diversified, thus is a fine selection. I would say stick with it until you have read some of the recommended books and have figure out all the pieces of Asset Allocation. Our wiki has a wonderful section about getting started http://www.bogleheads.org/wiki/Getting_started. You may find it helpful.

Faith
Woodshark
Posts: 709
Joined: Fri Jan 07, 2011 3:09 pm

Re: New low income investor

Post by Woodshark »

I'm looking for some advice on what fund to choose. Would it be smart to just put it into the same fund as my Roth (Vanguard Total Retirement 2050)? It seems to perform well and has a low ER but I'm wondering if it's a better idea to diversify a bit from this?
Yes, it would be very smart to put it in Vanguard Target Retirement 2050. It already has the diversification you need. That along with low costs are your fundamental building blocks for your core holdings as you build wealth.

Oh, and congrats for saving so much, even though your income is lower (for now) That will change as time goes on. Good habits, started early, pay big dividends because time is your friend as you accumulate wealth.
Calm Man
Posts: 2917
Joined: Wed Sep 19, 2012 9:35 am

Re: New low income investor

Post by Calm Man »

OP, copied and pasted from your opening statement:
zero debt, a new car that is paid off

Umm, why are you paying off a new car if you have no debt?
lululu
Posts: 1378
Joined: Thu Apr 10, 2014 4:23 pm

Re: New low income investor

Post by lululu »

Calm Man wrote:OP, copied and pasted from your opening statement:
zero debt, a new car that is paid off

Umm, why are you paying off a new car if you have no debt?
He said it was paid off.
User avatar
hoppy08520
Posts: 2193
Joined: Sat Feb 18, 2012 10:36 am

Re: New low income investor

Post by hoppy08520 »

Hello and welcome to the forum.

I agree with the others on holding target date funds.
Motohead8 wrote:3. I've recently invested $20k (over 12wks) into a taxable account with Vanguard but I'm no longer making contributions. The plan is to use this money to invest in real estate in the near future (1-3yrs). I was told by an advisor to switch my bonds to a short term fund because interest rates are so low. Should I switch it to the Vanguard Short Bond Index or just move it all to the stock funds I currently hold? I'd like to keep it conservative but still want to beat the .75% my savings offers. I'm really at a loss for what to do with allocation here.
If you intend to use this money in 1 to 3 years, then you should park it in something more stable such as short-term bonds, a savings account, or CDs, or else you could see a lot of these savings disappear when you want them. The stock market lost 50% of its value from 2008 into 2009 before gaining it back over a period of several years. That could happen again. If you're a patient, long-term investor, then that's not a problem, but since this is money earmarked toward short-term spending plans, you should not be holding so much of it in stock funds.
Topic Author
Motohead8
Posts: 4
Joined: Fri May 30, 2014 11:24 am

Re: New low income investor

Post by Motohead8 »

Thank you all, I'm moving forward with the Vanguard 2050.
lululu wrote:
Calm Man wrote:OP, copied and pasted from your opening statement:
zero debt, a new car that is paid off

Umm, why are you paying off a new car if you have no debt?
He said it was paid off.
Yep, I purchased the car and made payments for a few months before paying it off just to build some loan history with my credit union. I only brought this up because most will tell you to pay off debts before investing.
hoppy08520 wrote:Hello and welcome to the forum.

I agree with the others on holding target date funds.
Motohead8 wrote:3. I've recently invested $20k (over 12wks) into a taxable account with Vanguard but I'm no longer making contributions. The plan is to use this money to invest in real estate in the near future (1-3yrs). I was told by an advisor to switch my bonds to a short term fund because interest rates are so low. Should I switch it to the Vanguard Short Bond Index or just move it all to the stock funds I currently hold? I'd like to keep it conservative but still want to beat the .75% my savings offers. I'm really at a loss for what to do with allocation here.
If you intend to use this money in 1 to 3 years, then you should park it in something more stable such as short-term bonds, a savings account, or CDs, or else you could see a lot of these savings disappear when you want them. The stock market lost 50% of its value from 2008 into 2009 before gaining it back over a period of several years. That could happen again. If you're a patient, long-term investor, then that's not a problem, but since this is money earmarked toward short-term spending plans, you should not be holding so much of it in stock funds.
This was originally in my savings (.75%) but I just wasn't satisfied with the return. Of the 40k in the account, I took half and invested in these funds. So even if the market drops 50% I'd only lose 25% of my total non-retirement. (The other havlf being my nestegg and savings for school)

The way I see it, with me being able to pull out of the market, I find the chances of that happening in the near future unlikely so I'm comfortable gambling a little. I still have the larger portion in bonds (granted I need to move them to short term). Would you recommend I allocate more toward the bonds? I find bonds risky right now considering interest rates have no where to go but up. Thoughts?
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