Hi,
One of my friend just rolled over 100K to Vanguard from his previous employer. His dilemma:
Should he invest all at once in 50% VFIAX (Vanguard 500 Index Admiral shares) and other 50% in VTIVX (Target Retirment 2045) so should invest 20K now in each and wait for sometime.
Thanks,
Dilemma for 401K Rollover
Re: Dilemma for 401K Rollover
I don't think he should do any of the things you mentioned.
Re: Dilemma for 401K Rollover
Hi Livesoft,livesoft wrote:I don't think he should do any of the things you mentioned.
Can you please explain?
Thanks
Thanks, |
FB
Re: Dilemma for 401K Rollover
As a rule of thumb, you should either invest 100% in a Target Retirement fund or not at all. There's no point in splitting between a TR fund and another index fund, since the TR fund generally consists of index funds already. Either stick with something like the 3-fund portfolio or go 100% in the TR fund, but don't mix the two as your suggestions proposed.
Also, you are usually better off investing a lump sum all at once instead of over time, so investing $20k now and then waiting sometime(Days? Months? Years? It doesn't matter really) usually won't help and can hurt. There are numerous threads on this subject that you can read, but the short version is "If it makes you feel better, spread it out, but investing in a lump sum usually ends up being the best approach long term."
Also, you are usually better off investing a lump sum all at once instead of over time, so investing $20k now and then waiting sometime(Days? Months? Years? It doesn't matter really) usually won't help and can hurt. There are numerous threads on this subject that you can read, but the short version is "If it makes you feel better, spread it out, but investing in a lump sum usually ends up being the best approach long term."
- archbish99
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Re: Dilemma for 401K Rollover
Livesoft, in his inimitably succinct style presumably means:
- Don't split money between a target-date fund and something else. A Target Date fund is a complete portfolio, so if your friend is buying that, don't also buy something else.
- The money is coming from a 401k, where it was presumably already in the market. There's no reason to pull back to cash, then slowly reenter the market. Buy whatever funds are wanted and move on.
I'm not a financial advisor, I just play one on the Internet.
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Re: Dilemma for 401K Rollover
Since you didn't mention anything else I'm guessing this is all of his retirement assets. What was he holding in the 401k? Some (hopefully) lower cost version of that AA might be a starting point. You can probably get that with one TR fund.
I see no logic in taking the money out of the market all at once and then dribbling it back in slowly.
JW
I see no logic in taking the money out of the market all at once and then dribbling it back in slowly.
JW
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