24yo could use some guidance

[ImprezaRacer13]

Hi bogleheads,

Age: 24
EF: 5 months
Tax Bracket: 15%
Debt: Car - $13,400 @ 3.9% <- will only make the monthly payments, then additional payments would be coming from allocated dollars for EF completion

Desired Asset Allocation:
80% Stock (70% TSM, 30% International)
20% Bond

Taxable Account: $9,400 - Keeping separate..for now
44.8% Blue Chip Growth (FBGRX) - 0.94%
26.9% Low-Priced Stock (FLPSX) - 0.83%
28.4% Strategic Real Return (FSRRX) - 0.76%


Roth IRA through Fidelity: $4,400
10% Cash Reserves <- Still figuring out how to utilize this
20% iShares Barclays US Aggregated Bond Fund (AGG) - 0.22% <-Moved funds from Fidelity New Markets Income (FNMIX)
2.4% Annaly Management REIT (NLY) - Down 8%

403(b) through Fidelity: $9,100
10.7% Spartan Total Stock Market (FSTVX) - 0.07%
4.3% Spartan Global ex-US (FSGDX) - 0.28%
12.5% Contrafund K (FCNKX) - 0.69%
13.0% Low Priced Stock K (FLPKX) - 0.83%
11.2% Blue Chip Growth K (FBGKX) - 0.75%
4.1% Capital & Income (FAGIX) - 0.76% <- To keep the 20% bond holdings in Roth IRA, this will be phased out
4.9% Government Money Market (SPAXX) - 0.42%
2.7% Small Cap Value (FCPVX) - 1.13%
2.5% Small Cap Discovery (FSCRX) - 1.08%

>>>Have started moving money to Spartan Total Stock Index and Spartan Global ex-US Index. It'll only be for a short time that I will be under the $10k minimum investment until merging this account with pension money.

Incoming from pension funding when our department is officially sold: ~$8,000


Thank you!

Edit:
- Included taxable account, but still undecided whether to include in long-term investment or use for new car/house down payment (though not in foreseeable future).
- Changed the questions for the original ones have been answered.

[pkcrafter]

Welcome to the forum.

2a. Since I do not have enough investment yet for one Spartan index fund ($10,000 min)

First thing to do is check with your company plan administrators to find out if the 10k minimum is waived. If it is waived, that will significantly change the recommendations.


Paul

[YDNAL]

.

ImprezaRacer13, welcome to the Forum.

You made me look.

1. I feel like I have too many funds, and there is more than likely some overlapping, so some guidance on which ones to eliminate would be awesome.

Yes, < $10K in the 403B and I counted 10 Funds. Regarding Spartan Funds, do as Paul suggested because minimums are typically waived.

Also, take a look here.
http://www.bogleheads.org/wiki/Three-fund_portfolio

Have you seen this?
http://www.bogleheads.org/readbooks.htm

[Watty]

Selecting three or four broad index funds is plenty, especially until you have a couple of year's income saved up.

If you have good credit then you might be able to refinance your car loan to get a lower interest rate. PenFed has them as low as 1.99% . Even if you didn't qualify for the best rate when you got the car loan, then having it for a while might have actually improved your credit score a lot. (They can be joined by making around a $20 donation or even by being a blood donor)

https://www.penfed.org/used-auto-loan/

This might not seem like a huge savings but it would be a couple of hundred dollars a year that could be put in the retirement account which could grow to be a very significant amount in 70 years by the time you are 94. The power of compounding is amazing when you start young so a few hours work to refinance the car now could pay for the better part of a years expenses late in your retirment.

[TA_Lurker]

Hi bogleheads,

Age: 24

EF: $3,600 (about 4 months)

Debt: Car - $13,400 @ 3.9%

Roth IRA through Fidelity: $4,400
1.1% Cash Reserves, $50
28.72% Low Priced Stock (FLPSX) - 0.83%
62.22% New Markets Income (FNMIX) - 0.87%
7.59% Annaly Management REIT (NLY)

403(b) through Fidelity: < $10,000
20.79% Contrafund K (FCNKX) - 0.69%
19.95% Low Priced Stock K (FLPKX) - 0.83%
18.19% Blue Chip Growth K (FBGKX) - 0.75%
16.27% Capital & Income (FAGIX) - 0.76%
7.37% Government Money Market (SPAXX) - 0.42%
5.69% Mega Cap Stock (FGRTX) - 0.79%
4.25% Small Cap Value (FCPVX) - 1.13%
3.86% Small Cap Discovery (FSCRX) - 1.08%
2.47% OTC K (FOCKX) - 0.83%
1.16% Strategic Dividend & Income (FSDIX) - 0.84%

Available Funds Through 403(b):
-Freedom K 2000-2055

Hi Impreza, my suggestions are as follows:

1) Learn more about the Fidelity Freedom Funds, pick one that has a stock/bond split that suits your risk tolerance, and then invest everything in that fund. Why do I say this? I know this is a less entertaining solution than picking a "slice and dice" portfolio but in around here we consider "boring" to be a feature, not a bug. At your asset level there's very little to be gained by divying up your assets amongst several funds and there's a lot to be lost in terms of time and effort spent trying to balance such a portfolio. To borrow a phrase, "set it and forget it".

2) At this stage of your investing life cycle contributions will be your biggest source of growth. You should persue personal and career opportunities that will lead to future growth in income, be sure to minimize reoccuring expenses, and focus on increasing your savings rate over time. Time is on your side. Set a goal to max out your 401k contributions by age X and then get to work.

3) Increase your emergency fund. I know at your age $3,600 feels like a lot of money but unemployment is still a very serious problem in this country. $3,600 won't last long if you become one of the many unlucky people out of work for an extended period of time.

[ImprezaRacer13]

Thank you for the responses, much more helpful and quick than Reddit.

@Paul
With my 403(b) plan, the minimums are typically waived as long as at least $200 are contributed each month until reaching the minimum. I saw this was also written in the prospectus for most of the funds I own, but I did not see that stated for the Spartan funds. I got discouraged when I noticed that difference, but I'll ask. The department I am in is to be sold to another company within the next few months, so I have been more focused on getting the Emergency Fund in a better situation.

@YDNAL
Haha, cool picture! For now, I have a 2010 Impreza 2.5i but after it is driven into the ground (hopefully after 300,000 miles..) I'm planning on getting a WRx, as long as it is a practical situation. I've looked at the Three Fund Portfolio and I would really like to do something like that with Vanguard funds. However, if needed, I can start it with iShares ETFs.

@Watty
Hmm, that's an interesting idea - refinancing the car. I'll look in to it, thanks.

@TA_Lurker
1. I dabbled with a Freedom fund for a few weeks. People in various forums weren't responding well to those funds, so I didn't thinking too much of them. I'll research them, because they do make sense for my situation. However, if I were to lose my job, I could then combine the 403(b) with my not-tenured pension money into a portfolio suggested by bogleheads.
2-3. I agree that contributions will be the biggest source of growth, however at the moment I am working on building up the Emergency Fund so once I get that up to maybe $5,000, I'll start contributing more to the Roth.

[ImprezaRacer13]

Update: According to the prospectus for the Spartan 500 Index (FUSEX), there is a $10 annual fee for holdings under $10,000.

[jaytheman]

I would stick to 3 or 4 low cost funds. Re. the Roth you could also use any of the Vanguard ETFs. I suspect that you would only contribute once or twice a year so the brokerage fee should not bother you too much. Would the Vanguard ETF like VIT be there to pick up more of the international that you want?

[ImprezaRacer13]

Hi Jay,

If you recommend going with the Vanguard ETFs over iShares ETFs, which for Fidelity users do not have transaction fees, would you recommend just moving the Roth IRA over to Vanguard?

[YDNAL]

@YDNAL
Haha, cool picture! For now, I have a 2010 Impreza 2.5i but after it is driven into the ground (hopefully after 300,000 miles..) I'm planning on getting a WRx, as long as it is a practical situation. I've looked at the Three Fund Portfolio and I would really like to do something like that with Vanguard funds. However, if needed, I can start it with iShares ETFs.

Yes, a 3 Fund portfolio is just right for some like you starting out. More importantly, don't forget to improve your human capital - your most important asset (financially speaking). Good luck!

I owned the 1972 Datzun 240Z and loved it. Cars never stop scratching certain itches that we have.

[jaytheman]

Hi Jay,

If you recommend going with the Vanguard ETFs over iShares ETFs, which for Fidelity users do not have transaction fees, would you recommend just moving the Roth IRA over to Vanguard?

I am a big Vanguard fan but I would not move an existing account Fidelity account (they are good also) with all that hassle with the choice of the iShares ETFs for free. Eventually you will have enough money there that a transaction fee on Vanguard ETF would not concern you but the important thing now is to get an index fund of the asset class that you want to track. Since it is a Roth you can change without capital gains.

I use some iShare ETFs (e.g. TIP) and the rates are very good also. Just compare the rates and the index that they track. Others may feel strong I don't feel this is a major item right now.

I must have been drinking too much coffee. The Vanguard ETF would have been VXUS not VIT, I think iShares equivalent would be EFA. VXUS has a very nice ER but right now I would not switch just for this. Others might.

[ImprezaRacer13]

@YDNAL
Ooo, that's a flashy car and I agree. Hopefully in a few years I can find a nice 2009-2012 WRx on the cheap to at least act as a numbing agent to that itch!
Reading up on the Three Fund Portfolio, would you recommend altering the allocations at all? I feel that I'd be more in line for a 15-20% bond holding. Looking at the "Core Four," I'm liking the REIT holding aspect, for I have a little bit invested already..though if NLY would ever rebound (of course I bought it when it was 18/share), I think I would put that money into iShare's REIT ETF. Thanks!

@jaytheman
Okay, I'll stick with Fidelity with the money that is already invested. However, in a few months I will have about $8,000 coming from my state pension plan that will have to be put somewhere. Would you recommend that going to Vanguard, at least? In order to purchase any Vanguard index funds through Fidelity, I'm looking at a $75 transaction fee. o_O

[YDNAL]

@YDNAL
Ooo, that's a flashy car and I agree. Hopefully in a few years I can find a nice 2009-2012 WRx on the cheap to at least act as a numbing agent to that itch!
Reading up on the Three Fund Portfolio, would you recommend altering the allocations at all? I feel that I'd be more in line for a 15-20% bond holding. Looking at the "Core Four," I'm liking the REIT holding aspect, for I have a little bit invested already..though if NLY would ever rebound (of course I bought it when it was 18/share), I think I would put that money into iShare's REIT ETF. Thanks!

The allocation should meet your ability and need for risk.

• You are starting out young with a very looooong window to retirement and can use all projected returns/growth from Equity risk that you can mentally (in the gut) absorb.
• I think that a 20% Bond allocation is just fine to help with diversification and in case you need to rebalance and buy some of those Stocks when the Market goes in the (%@&&#%. <-- I challenge you to figure out what that means!

[ImprezaRacer13]

Thank you for all the help, guys. Today I sold off my holdings in the Roth, but keeping the NLY mREIT, in order to purchase either Vanguard's BND or iShares' AGG bond ETFs tomorrow. Also, I sold off a bit of holdings in my 403(b) and transferred some to the Spartan Total Stock Market and Global ex-US funds. My plan, after all your help, is to hold the bonds only in the Roth with the Total Stock and International holdings in the 403(b).

Now my question is how to go about the transition to, in essence, the 3-Fund Portfolio with a very small holding in REIT? I don't necessarily want to just move everything over in one fell swoop because if history is any indicator, I'm keeping cautious of April and May. Would it be best to move the money over little-by-little, or am I just being paranoid and should just go for it?

[ImprezaRacer13]

Updated information and a couple more questions for you guys. Thanks