Soooo new and sooo lost...

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zmcpherson
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Soooo new and sooo lost...

Post by zmcpherson »

*edit (I told you guys I would get around to it) : )

Emergency funds = Working on it. I save $350 a week or roughly 21.5% of my income.
Debt: No outstanding consumer debt and I pay off my credit cards every month
Tax Filing Status: Single No Children
Tax Rate: Do not have the paper work with me but I make roughly 85k a year with no 401k option
Age: 27

Questions:
I have 10k sitting in an Roth IRA Account (I deposited 2011 and 2012 last week) what do I do with it?
Im new to etf's and mutual funds, what are some good picks to diversify?
Last edited by zmcpherson on Thu Apr 19, 2012 4:34 pm, edited 1 time in total.
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mhc
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Re: Soooo new and sooo lost...

Post by mhc »

Zach,

welcome to the fourm!

The Wiki is a great place to start learning. Here is a good place to start:

http://www.bogleheads.org/wiki/Getting_Started

Where do you have your Roth?

Most people around here favor Vanguard. For someone just starting out, Target Retirement funds are a good place to start. They have the whole US stock market, whole international stock market, and a Total Bond Fund. It provides a well diversified, low cost fund.

What is your money in right now? Is it a money market fund? If so, leave it there for now, and spend a little time figuring out a game plan. The people on this forum will gladly help you.

It is hard to give specific recommendations without knowing more info. On the Getting Started page, there is a section on asking questions. Follow those guidelines, and you will get some good responses.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
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zmcpherson
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Re: Soooo new and sooo lost...

Post by zmcpherson »

Sorry I wanted to update this right after I posted, but i found out that it takes awhile for it to post : P

I set up my account at Scottrade, I did a bunch of research and it seemed like they got the best reviews with their no fees IRA's, they seemed to be no.1 or no. 2 in every category. After reading through this site a bit though I can see that you guys really favor Vangaurd. I suppose I will have to give them a look.

Right now the 10k isnt invested into anything, its been sitting in the Roth IRA account for the last few days. Im seeking advice on what to do with it : P.

I read through the posting guidelines and here is my financial standing:

Im a single 27 year old with no kids. This next year I'm slated to make about 85k'ish and my company does not offer a 401k. I have no debt and Im putting $350 a week into savings.

If anyone has any advice into which specific funds I should put the money, or if investing in JGMIX is a good investment it would be extremely helpful. I feel like every day that the money is sitting there is just another day wasted. : )

Thanks guys
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White Coat Investor
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Re: Soooo new and sooo lost...

Post by White Coat Investor »

Slow down. There's no rush.

Despite what you'd think, past performance doesn't predict future performance with mutual funds. You're better off choosing based on cost, as that's the only thing that persists.

Here's a series I wrote about designing your portfolio. Some of the books recommended on this site do a better job than I did too. But my posts are free. :)

http://whitecoatinvestor.com/designing- ... l-setting/
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Default User BR
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Re: Soooo new and sooo lost...

Post by Default User BR »

Vanguard mutual funds accounts don't charge fees if you sign up for electronic delivery. So that's still an option. Scottrade will charge commission for most things that you buy, although they do have a selection of no-transaction-fee ETFs.

The advice to get settled in and do some reading and research is excellent.


Brian
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LH
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Re: Soooo new and sooo lost...

Post by LH »

If you have access to ETFs, and are just starting out, its pretty straightforward.

1)low fees
2)index funds

1+2 = Vanguard ETFs. Its pretty simple. Vanguard just keeps lowering its funds/etf expense ratios. They are usually the lowest. You do not have to be at vanguard, to use vanguard ETFs.

3)choose a stock bond split. For your age, just starting out, and investing for 40 years down the road. You could start out 100 percent stock. Which is what I would do. That or 90/10. Now currently, under the environment we are in, the replies on the board here might average having you start at 70/30 or something. Some 20 somethings are going 50/50 I think. anyway, choose some sort of split. BONDS = AGE, is another rule of thumb.

4)Choose the asset allocation, keep it simple starting out, here are some ETF.

VT = vanguard whole world stock market
BND = aggregate bond market
VTI = US total stock market

You could simply go 100 percent VT, and own a slice of whole world stock market, and be done with it. That gets you US + international stocks. IF you want some bonds throw in BND.

The key at your level starting out is
1)saving
2)investing which means staying the course.
3) Time is a smear - not the instant you are experiencing.

Remember, if the market TANKS 2 years into your investing, this is good for you, because then you are buying cheap. When investing for 40 years hence, you are not going to experience each moment of time individually at the end, you are going to feel the effects of the average price you bought in at. But when you live through it, you experience each moment in excruciating detail if you allow yourself too. If the market drops 80 percent, its hey, I get to buy cheap, stocks are on sale. Its not, omg I "lost" 80 percent of the first 2 years of my money invested. To achieve stock market returns, you have to take the "ride", and its a rollercoaster.

If say the first two years you bought 1000 dollars worth of stock at 100 dollars, you would have 10 shares of that stock.
Lets say it drops 80 percent to 20 dollars. The next two years you buy another 1000 dollars at 20. You would have 50 shares of that stock.

Now 40 years later. That stock is trading at 1500 dollars.

Ask yourself, WHERE did you make your money really? the 100 dollar purchase went up 15 times, the 20 dollar purchase went up 75 times.

At the end, its the brutal feeling times, where you are BUYING, that really really pay off.


If you can stay the course, put it in, and forget about it, I would just start off with VT. Read some. Just starting out, you do not need to do much. beyond save, invest, stay the course.

http://finance.yahoo.com/q?s=VT
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BL
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Re: Soooo new and sooo lost...

Post by BL »

It is very good that you are trying to figure this out at such a young age. Any of the suggested ETF or Vanguard mutual funds will give you a good start while you continue to study. I would check to see how much it costs to move funds out also. Perfect doesn't have to be the goal; pretty good will be fine. Avoiding the big mistakes is also very important: avoid any sales pitches on insurance/annuities/investments and only consider term insurance (if you need it). There will always be friends or others trying to help you spend your money with their various pitches. Vanguard is not the only good place to invest, but it and Fidelity (Spartan Funds) have some of the lowest ER (expense rate) funds available.

It is important that you also build up an emergency fund of 3-6 months, or more if your job/industry appears volatile. This should not be invested in the stock market, buy you can look around here for suggestions on how to get a little better interest on on-line FDIC-insured bank accounts, etc. You might also have an account for future purchases such as a house down-payment or to pay cash for a car. When you have some built up, you can also buy I-Bonds through the US treasury which might give you a little more interest but are tied up for a year.

I liked the book, Bogleheads Guide to Investing, and suggest you buy it as an easy to read reference. There are other recommended books in the Wiki here on this site.

Not everyone agrees with everything, even here on this site, but if you can invest in low-cost mutual funds that cover the whole US and probably International markets and add at least 20% bonds, and also live below your means, you will do fine.

You will be tempted to tinker with your investments. If you decide to do that, stick to just 5% of your funds so you don't destroy your retirement!
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bertilak
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Re: Soooo new and sooo lost...

Post by bertilak »

LH wrote:To achieve stock market returns, you have to take the "ride", and its a rollercoaster.
I like that quote and will likely steal it. :beer

I also like to say "Ya gotta be in it to win it."

Another way to look at it is that at any given point in time you don't know if you are closer to a top or a bottom. The ODDS are in favor of being closer to the bottom if you truly believe that in the long run the economy creates wealth and that market prices will keep up with that, even though short term progress may be erratic. We also don't know where to draw the line between short and long term.
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ruralavalon
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Re: Soooo new and sooo lost...

Post by ruralavalon »

Welcome to the forum :) .

Its great that you are starting young.

!.do a little reading, such as -- Wiki article link: Getting Started ; and http://www.norstad.org/finance/total.html .

2. Decide on an asset allocation that's reasonable for you -- Wiki article link: Asset Allocation .

3. Look for broad diversification and low expense, buy a mix of the following funds, or the ETF versions. This is the mix (asset allocation) I would suggest for a start. --
50%, Vanguard Total Stock Market Index Fund Investor Shares (VTSMX), or ETF = VTI, er = 0.07%
25%, Vanguard Total International Stock Index Fund Investor Shares (VGTSX), or ETF = VXUS, er = 0.18%
25%, Vanguard Total Bond Market Index Fund Investor Shares (VBMFX) or ETF = BND, er = 0.11%.

4. Think about transferring the IRA to Vanguard, for easy access to their many very low expense funds.

5. For the time being put that extra $350 per month into a savings account to build up an emergency fund, and after you have accumulated a few thousand extra open an individual taxable account at Vanguard or another low cost provider,
Last edited by ruralavalon on Wed Apr 18, 2012 10:23 am, edited 1 time in total.
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dailybagel
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Re: Soooo new and sooo lost...

Post by dailybagel »

BL mentioned an emergency fund above. Do you have one? How large is it in terms of your monthly spending or monthly income?
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BigFoot48
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Re: Soooo new and sooo lost...

Post by BigFoot48 »

Keep in mind that it would be optimum if your monthly savings, after you've established your emergency fund, could be invested with no commissions or fees. If that can be done at Scotttrade, fine, but if you chose to go the Vanguard fund/ETF way and there are fees, then you might want to move your account to Vanguard.

I would follow ruralavalons above advice.
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zmcpherson
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Re: Soooo new and sooo lost...

Post by zmcpherson »

Wow, the response on this site is incredible. I had no idea this forum was so active.

I do not currently have a savings emergency fund yet, I suppose I will put my extra cash towards that this year, great call.

I took a look at VTSMX, VGTSX, and VBMFX and it looks like none of them come that close to the market average. I realize that Im pretty new to investing but isnt the point of funds is to keep up with the average, and if youre lucky, maybe even squeak out ahead?

Looking at JGMIX and RYVYX, I realize the expense ratio is high but they are killing it. I was thinking about doing half/half or at least maybe 1/4,1/4, and 1/2 into VTSMX. Any thoughts?

Ill look at ETF's right now, frankly I havent looked at them at all so I cant really make mention of them.

Thank you guys again
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Hawkeye5
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Re: Soooo new and sooo lost...

Post by Hawkeye5 »

"I realize that I'm pretty new to investing but isnt the point of funds is to keep up with the average, and if youre lucky, maybe even squeak out ahead?"

That is what an active money manager wants you to believe. The fact is they can't out perform market averages over the long term. Short term, some do. Long term they may significantly under perform market averages.

Someone will come along with charts and data to demonstrate the futility of active management long term performance compared with actual market benchmark averages.

There was an article on Yahoo Finance entitled: 84 percent of stock funds underperformed market benchmarks last year (2011) that you may want to look for.
Last edited by Hawkeye5 on Wed Apr 18, 2012 1:19 pm, edited 2 times in total.
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Toons
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Re: Soooo new and sooo lost...

Post by Toons »

Keep it Simple :happy
Vanguard Balanced Index Fund
https://personal.vanguard.com/us/funds/ ... IntExt=INT
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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BL
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Re: Soooo new and sooo lost...

Post by BL »

zmcpherson wrote:
Looking at JGMIX and RYVYX, I realize the expense ratio is high but they are killing it. I was thinking about doing half/half or at least maybe 1/4,1/4, and 1/2 into VTSMX. Any thoughts?
The first one appears to be a small growth fund and the second a leveraged fund. Both can be expected to possible be a huge roller coaster ride, much more so than the total stock market. So you could be lucky or not. It looks like the second one did great the last 3 years but 3.14% for the last 10 years and negative since inception, about 12 years. So I guess you want to buy in high. Perhaps you will also deal with a load or backward load also when you buy it. I still suggest limiting it to 5% if you must try it.
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ruralavalon
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Re: Soooo new and sooo lost...

Post by ruralavalon »

I took a look at VTSMX, VGTSX, and VBMFX and it looks like none of them come that close to the market average.
You are incorrect, see this data from Morningstar.

For Total Stock Market -- http://quote.morningstar.com/fund/f.aspx?t=VTSMX .
For Total International see -- http://quote.morningstar.com/fund/f.aspx?t=VGTSX .
For Total Bond Market see -- http://quote.morningstar.com/fund/f.aspx?t=VBMFX .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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BigFoot48
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Re: Soooo new and sooo lost...

Post by BigFoot48 »

zmcpherson wrote:Looking at JGMIX and RYVYX, I realize the expense ratio is high but they are killing it. I was thinking about doing half/half or at least maybe 1/4,1/4, and 1/2 into VTSMX. Any thoughts?
Here's the Morningstar chart showing the growth of $10,000 of RYVYX as compared to Vanguard Balanced Fund VBINX over the past 12 years. (JGMIX is also shown for the short period it has existed.) How would you have reacted to the gyrations of RYVYX over that period, not to mention the return? http://quote.morningstar.com/fund/chart ... %2C0%22%7D
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englishgirl
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Re: Soooo new and sooo lost...

Post by englishgirl »

Zach, welcome to the forum! But you're trying to pick funds without any idea why or what on earth is going on. Sorry to be blunt, but you said yourself you were lost, so...

OK, I had to google JGMIX to see how much they were killing it by. And then I googled JGMIX vs. S&P500. So, looking at the 3 year chart, wooo, it's way ahead! But looking at the 1 year chart, the S&P500 is ahead. What's going on? I tried to find a 10 year chart, and it seems this fund only came into being in 2009. In other words, all we've got is 3 years to go on, and 3 years ago (give or take a month), we had a gigantic drop in stock prices. Everything was down, and all performance since then has been based solely on what's been rising faster since the dip for the "great recession".

So then I googled RYVYX, and that's beating the S&P500 on 3 year chart of total returns, but look at 5 and 10 years. RYVYX is winning at 5 years, but had a much greater dip in early "09 - would you have had the stomach to hold on and wait for an upturn, or would you have panicked and sold? In a 10 year comparison, the S&P500 index is winning. Barely.

But here's the deal - the fees on RYVYX are 1.92% versus whatever you could get a Vanguard index fund for, say, 0.07%. JGMIX is not as high fees, but still way up there. So now take your total return, and subtract the fees. Ouch. You've had wild swings up and down, and all the while the fund managers have raked their fees off the top. Whereas you could have had milder swings and kept more of your money in a Vanguard fund.

So that's the deal on fees. Why pay for some manager to mess around with your money on the premise that he can not only kill it over a 3 month or 1 year period, but over the rest of your investing life? Or will you know when to pull the plug and switch out the fund the minute the manager stops killing it?

And then what to invest in - have you thought about building a diversified portfolio of stocks and bonds, or are you looking at finance sites and picking what look to be hot funds? I suspect it's the latter. I did that myself back in the day. It's OK to mull over the hot funds, and figure out what's going on. What's not OK (or at least, what is painful when you realize your mistake) is to rush in to buy them without undersanding. Hang around, read some more, and you'll figure out stuff. In the meantime, do nothing with your money.

As for VTSMX not coming close to the market average, VTSMX effectively IS the market. How can it not be returning the market average? You mean the average of all mutual fund returns? I don't know how to find that out - I do know that each year one sector or other will outperform others. So, yes, VTSMX is likely to underperform a sector. Or a managed fund that is doing well. Or even bonds. I suggest you google Callan Periodic Table and look at which markets/sectors have been hot each year. Is it easier to buy the market in stocks and bonds, or try to predict in advance which sector will perform best and chase the hot fund?

If you don't want to figure out a portfolio, you could do a lot worse than picking a target retirement or other balanced fund. They'll take the guesswork out of the equation.
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kenyan
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Re: Soooo new and sooo lost...

Post by kenyan »

Welcome, Zach.

Actual results for these funds aside (which above posters are correcting you on), you're falling prey to the line of thinking that most uninformed (and many informed) investors have.

Past performance does not guarantee future results.

Every mutual fund is required by law to state this in their documentation. Why? Because it's true.

"Sure," you might think, "but past performance is likely a strong indicator of future results, even if it's not a guarantee."

Wrong. There are countless academic studies that show otherwise. Do you know what the strongest indicator of future performance (within a market sector) is? Cost. The more that funds charge you, the greater the likelihood they will trail the market, particularly in the long term. It doesn't matter how funds did in the past; what matters is how they will do from now on. If you buy today, you don't earn a penny from how the fund did yesterday.

As far as VTSMX, VGTSX, and VBMFX not earning the 'market average,' that's incorrect. They earn exactly what they're expected to. They mirror the market (index) they track, charge a smidgen of fees, and you earn the balance. It's a little more complicated than that, but not much. That's what indexing is. You seek to earn exactly the market return for the indices you choose. Actively managed funds generally seek to beat the market return, but most fail. Many that appear to be 'winning' are doing so through excess risk-taking (such as concentrated bets, use of leverage, etc.) and that risk can show up any time through large losses. Others that appear to be 'winning' could just be the effect of survivorship bias.

Edit: I do not blame you one iota for following this line of thinking. I believed the same things a few scant years ago, ogling past returns to choose my funds (without really knowing what I was buying) and scoffing at the boring index funds. Most people believe the same thing...Bogleheads are here to inform otherwise.
Retirement investing is a marathon.
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Taylor Larimore
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Average ?

Post by Taylor Larimore »

Hi Zach:
I took a look at VTSMX, VGTSX, and VBMFX and it looks like none of them come that close to the market average.
Actually, these three funds have returns that are well above average (and lower risk, too).

THE THREE-FUND PORTFOLIO

Best wishes
Taylor
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zmcpherson
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Re: Soooo new and sooo lost...

Post by zmcpherson »

Does vanguard charge IRA fee's? .... such as opening an account, maintaining an account, depositing money, and buying mutual funds other then Vanguard's?
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roymeo
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Re: Soooo new and sooo lost...

Post by roymeo »

No it doesn't charge IRA fees. There are the usual expense ratios in funds and ETF's, but those exist everywhere, and Vanguard's expense ratios are low.
There are probably fees to buy other fund families (you'd need a brokerage account, i'd guess) but I'm not sure--I've never been interested in it.

(and I stand corrected in the next post. Oops, I forgot about having to take electronic document delivery.)
Last edited by roymeo on Fri Apr 20, 2012 6:59 pm, edited 1 time in total.
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Re: Soooo new and sooo lost...

Post by ruralavalon »

Vanguard IRA Fact Sheet wrote:No fees if you sign up to receive statements and other important documents electronically or if you're a Voyager, Voyager Select, or Flagship client. Otherwise, a $20 fee applies to each fund in an account with a balance of less than $10,000.
https://personal.vanguard.com/us/whatwe ... Link=facet . If you want to know more, just call them at the number on the Fact Sheet.
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starling
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Re: Soooo new and sooo lost...

Post by starling »

If you make $85,000 per year, curious why are you only saving $350/month? (less than 5%)

Increasing savings (perhaps driven by a decrease in spending) might be a very good place for you to focus. At age 27, 15% would be a good target IMHO.
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zmcpherson
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Re: Soooo new and sooo lost...

Post by zmcpherson »

$350 a week, im putting 21.5% a month into savings : P

Ill look into switching over to vangaurd tomorrow, the VGSTX looks interesting.
pingo
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Re: Soooo new and sooo lost...

Post by pingo »

Welcome to Bogleheads! You're getting some good comments. First and foremost:

1. High praises for putting $10,000 in a Roth IRA! Your rate of savings, keeping costs low, asset allocation (risk exposure) and how you handle present and future taxes should have a more meaningful impact on building wealth than swingin' for the fences.

2. This thread can be more helpful if we have more specifics. See Answering Portfolio Questions. Some stuff won't apply (e.g. % Large Value, 401k options). but it helps us see the big picture. For example, I believe somewhere in this thread you put that your single and you make $85,000/yr, but it's good to see all this information in one spot at the top. It's important to your taxes, and thus investing. Are you an actual employee of the company you work for? Do you have side income? Could you produce side income? I am not great with this stuff, but the tax gurus may see where you might (I only mean MIGHT) qualify for a tax-deductible vehicle to further reduce the tax burden on all the wealthbuilding we'd like to see happen. Even if you don't qualify, it takes us to the next steps.

About PJP and JGMIX: PJP appears to be a sector bet on pharmaceuticals. Personally, I think there are so many great sector bets to be played. If I put my money in all or most of them, I'd end up with the same expected return and lower risk because of diversification. But at that point I'd more or less end up with the market. Broader-reaching index funds used in a long term strategy keeps all your eggs from being in one basket, and owning the market is simpler and low cost.

JGMIX appears to be an actively-managed small growth fund. If it outperforms the S&P 500, it's because small cap growth stocks outperformed large cap stocks (apples vs. oranges). JGMIX has not really done better or worse than than, say, the Vanguard Small Cap Growth Index Fund (VISGX), but you'd have been better off with Vanguard's lower costs, broader diversification (it holds more companies), and the index does not worry about manager selection (and neither would you). See why we like index funds?

But I suppose overweighting your portfolio to small growth could be called a kind of a factor bet? (Not sure.) Is there anything else about small growth that would otherwise make you want to focus so much of your portfolio on it? Probably not. (Don't let the word "growth" fool ya!) You could achieve greater diversification by investing in both small growth and small value (again: less eggs in one basket, just in case), but then you end up with the whole small cap index. And then there are large caps which can do well when small does poorly, and which would help smooth returns for lower risk...

Take your time. Read more. Drink it in. You're off to a great start!
Last edited by pingo on Thu Apr 19, 2012 9:41 am, edited 5 times in total.
pingo
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Re: Soooo new and sooo lost...

Post by pingo »

zmcpherson wrote:$350 a week, im putting 21.5% a month into savings : P
I envy you!
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JupiterJones
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Re: Soooo new and sooo lost...

Post by JupiterJones »

zmcpherson wrote: I do not currently have a savings emergency fund yet, I suppose I will put my extra cash towards that this year, great call.

I always liken starting out investing to starting out a training or diet program. You have a have a certain basic, base level of fitness first. It's not really a good idea to go from overwweight and sitting on the couch all day to suddenly strapping on your 20-year-old Chuck Taylors and starting a hardcore marathon training schedule. You'll likely injure yourself and wind up less healthy that you started! And then you'll never reach your goal of finishing that marathon.

Same with "fiscal fitness". I strongly feel that you have to first build a solid foundation of financial health before jumping into the marathons of investing.

Investing is great, and it should be a goal for everyone... eventually. But not if you don't have an emergency fund, or if you're underinsured, or if you have a mountain of high-inerest consumer debt.

So, good for you for making the e-fund a priority! I'd suggest evaluating the rest of your financial picture while you're at it.

JJ
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Re: Soooo new and sooo lost...

Post by YDNAL »

zmcpherson wrote:I am 27 years old and I just contributed 5k to my 2011 Roth IRA and 5k to my 2012 Roth IRA, yeah me, but now I have 10k sitting in an account and Im not quite sure what to do with it.
I have been looking at mutual funds and etf's all day and the two that caught my eye were JGMIX and PJP. Are these decent bets? Im not entirely sure what to look for in either but their performance tracking looked pretty solid. Should I just invest in one, should I invest in both? If both, what ratio? Also if these are bad bets, what are some decent ones so I have an idea for future investing.
Welcome to the Forum, Zach!

Well, Zach, "betting" in the Market can be dangerous to your financial health. My signature gives you a hint about past performance.

Here is Janus Triton S JGMIX.
1. What do you know about Janus as a mutual fund company?
2. What is your take on diversification and costs?
3. What do you know about JGMIX that I just linked above?
zmcpherson wrote:My next question is, I have been doing pretty good about saving $350 a week from my paychecks for this last year. Obviously this year all that money went to my IRA's, but now that I have 2012 paid for, what should I be doing with the $350 a week? should I throw it into savings to build a nest egg or should I be throwing it into mutual funds/etfs's? If I should do the later, how often should I be adding it to my account, and which is the better investment route?

Thanks for the help,
Zach
Congratulations on saving in general.

Have you seen the Bogleheads Wiki's start-up kit?
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
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zmcpherson
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Re: Soooo new and sooo lost...

Post by zmcpherson »

This could be fun. I'll play.

1. They are a 5 star morningstar company
2. Janus has a fairly low turnover at 42%.
3. They have a 1 star for risk and a 4-5 star on return depending on which site you consult.
4. They have 21% assets in the top 10 holdings
5. They are 95% stock in 86ish holdings which is not near the amount of vanguards but...
6. Since its inception 5 years ago its finished in the 1% of all mutual funds
7. And they have had the same managers since its inception.
8. Its costs seem high in comparison to Vanguards (.20ish ratio to 1.19), but that extra 1% doesnt seem to be a factor in their returns.
9. And what that chart tells me is that all their holdings performed fairly well, a chunk of them really well.

After hearing about the solid returns from Vanguards funds, I wasnt planning on going 100% JGMIX. I was thinking about doing like 55% VISGX, 30% VBMFX, and possibly 15% JGMIX for spice (obviously rough ratios).

And to answer pingo's question, I work for a contracting company for T-Mobile doing software/app development. The contracting company has no 401k which blows. I do have side work though, a few different 1099's, I was actually was able to claim large losses on both of those and keep a large chunk of money. This year Im setting up an S Corp (Just filed all the paper work) and am rolling up a benefits, a 401k matching program, and an IRA package into the bi laws. A good friend of mine has his CPA license and is walking me through it (if I misspoke about something in the previous sentence, he is still going through tax season and hasnt sat me down yet, he just told me to file for an S Corp and wait till he's done).

Thank you guys for the words of encouragement and the links, I feel like Im a little closer to understanding the big picture than when I first posted "lost" .... keep everything coming, I love the feed back : P
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kenyan
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Re: Soooo new and sooo lost...

Post by kenyan »

Even if you're solely focused on past returns, you should probably go through this exercise, because comparing this fund to various broad index funds is a bit of apples-to-oranges.

JGMIX is a Small Growth Fund. Putting aside for now why you've decided to invest in Small Growth, you should compare it to a Small Growth Index Fund.

Vanguard offers one, as do many other companies.

1. Go to www.morningstar.com
2. In the "Quote" box up top, type in "JGMIX" and hit enter.
3. You get a plot, with a bar over it that says "Growth of 10K." Click on that bar.
4. Now you get a larger plot. Click in the box that says "Compare to Symbol." Type in "VISGX" to compare to Vanguard's Small Growth Index Fund.
5. Focus your attention only on your JGMIX fund and the line for Vanguard Small Cap Growth Index Inv.

Which is better? Well...they're about the same. The index fund is ahead for most of the timeline, but the endpoints are similar.

JGMIX looks so great to you because it happened to start near the bottom of the market, and it happens to invest in a sector of the market that has done well over the time it has existed. The index fund performance over that same time period is almost identical.

Now, on the one hand that means the fund management team has, over this period, overcome their excess expenses by just enough to break even with the index. Will they keep doing so? Who knows, but the odds are against them in the long run. In addition, Vanguard now offers a "Small Growth Index Fund Admiral Shares" Fund for balances over $10,000 that is even cheaper. You get the cost difference.

There is nothing special about JGMIX. The management has been able to provide excess performance in their market segment only equal to their excess cost. The net result is that you could invest in the index fund, be more diversified across that market segment, and have better prospects for future returns.
Retirement investing is a marathon.
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Re: Soooo new and sooo lost...

Post by YDNAL »

zmcpherson wrote:This could be fun. I'll play.

1. They are a 5 star morningstar company
2. Janus has a fairly low turnover at 42%.
3. They have a 1 star for risk and a 4-5 star on return depending on which site you consult.
4. They have 21% assets in the top 10 holdings
5. They are 95% stock in 86ish holdings which is not near the amount of vanguards but...
6. Since its inception 5 years ago its finished in the 1% of all mutual funds
7. And they have had the same managers since its inception.
8. Its costs seem high in comparison to Vanguards (.20ish ratio to 1.19), but that extra 1% doesnt seem to be a factor in their returns.
9. And what that chart tells me is that all their holdings performed fairly well, a chunk of them really well.
You didn't read Warren Buffett's quote in my signature... did you?

First, you don't know much about Janus' history... do you?
http://blogs.wsj.com/law/2006/08/01/pri ... for-janus/
Second, throw out ALL past returns.
Third, throw out MorningSTARS.
Fourth, always compare apples to apples. Like, when buying a car, don't compare an SUV and a Smart car.
Fifth, have you seen the reading list?
http://www.bogleheads.org/readbooks.htm/url
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
pingo
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Re: Soooo new and sooo lost...

Post by pingo »

zmcpherson wrote:This could be fun. I'll play.
Me, too!
zmcpherson wrote:1. They are a 5 star morningstar company. Does this mean it has reached it's Zenith? Studies show quite clearly that using M* ratings can be misleading--through no intent by M*--because it's still no determiner of future performance. JGMIX has just as good a chance as any other fund to wind up as a 1 or 2 star fund in the future.
2. Janus has a fairly low turnover at 42%.This is fine.
3. They have a 1 star for risk and a 4-5 star on return depending on which site you consult. See above and below.
4. They have 21% assets in the top 10 holdings
5. They are 95% stock in 86ish holdings which is not near the amount of vanguards but... 5% cash also produces a drag on returns and complicates accurate tracking of one's asset allocation, but they can't go all in b/c then cash isn't available for special opportunities.
6. Since its inception 5 years ago its finished in the 1% of all mutual funds. I haven't checked, but that must mean the VG Sm Cap Growth Idx Fund is there, too. But will it continue to rank high over longer periods? It is an academic and arithmetic certainty that a low cost index fund will rank high for it's category over long periods and even higher accordinging to tax efficiency even though almost always rank rank as 3* funds due to producing the market's return minus costs. Perhaps someone will correct me on this, but the M* Star rankings are for fairly short-term performance (1, 2, 3 or 5 years or something like that).
7. And they have had the same managers since its inception.5 yrs is the avg stay for a manager, especially if he or she is good and can use his/her performance to negotiate for higher pay in another fund. And Janus has made a lot of unsettling fund manager changes in the last few years.
8. Its costs seem high in comparison to Vanguards (.20ish ratio to 1.19), but that extra 1% doesnt seem to be a factor in their returns. Costs are always a factor. Here's your best bet, confirmed again and again by the academics and also by M* research: the surest way to be in the top quartile of funds is to be in the bottom quartile of costs. There is no other, more likely determinant of performance than costs. And beyond the expense ratios there can be brokerage fees, portfolio turnover, drag produced by assets in cash, and tax inefficiency to consider.
9. And what that chart tells me is that all their holdings performed fairly well, a chunk of them really well. ...meh.

After hearing about the solid returns from Vanguards funds, I wasnt planning on going 100% JGMIX. I was thinking about doing like 55% VISGX, 30% VBMFX, and possibly 15% JGMIX for spice (obviously rough ratios). You're taking important steps, but we still have a ways to go. Consider our input a part of your due diligence. I compliment you on your desire to study up on your options and your willingness to engage in this discussion. I have confidence that you will do well.

And to answer pingo's question, I work for a contracting company for T-Mobile doing software/app development. The contracting company has no 401k which blows. I do have side work though, a few different 1099's, I was actually was able to claim large losses on both of those and keep a large chunk of money. This year Im setting up an S Corp (Just filed all the paper work) and am rolling up a benefits, a 401k matching program, and an IRA package into the bi laws. A good friend of mine has his CPA license and is walking me through it (if I misspoke about something in the previous sentence, he is still going through tax season and hasnt sat me down yet, he just told me to file for an S Corp and wait till he's done).

Thank you guys for the words of encouragement and the links, I feel like Im a little closer to understanding the big picture than when I first posted "lost" .... keep everything coming, I love the feed back : P
Thank you for answering those questions, zmchperson. That information (as well as information your accountant friend will tell you) is a BIG deal. It will have a major impact on returns and will even influence your asset allocation, which might or might not end up including JGMIX once all is said and done. :mrgreen:

If it'll be a while before you sit down with your accountant (and I assume you'll read a book or two) you might want to begin a new post for help with portfolio. Otherwise, let's get all those details together for a party (editing your first post in this thread) and following that format we keep pestering you about: Answering Portfolio Questions!
Last edited by pingo on Thu Apr 19, 2012 2:54 pm, edited 9 times in total.
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kenyan
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Re: Soooo new and sooo lost...

Post by kenyan »

YDNAL wrote: Third, throw out MorningSTARS.
To elaborate on this point, even Morningstar has admitted that their Star ratings are basically useless in predicting future performance of funds, particularly when trying to predict outperformance (they may have some use for identifying the crappiest of the crap).

This is part of the reason they've started their "forward-looking" Gold-Silver-Bronze etc. ratings. It remains to be seen if they have any meaningful predictive capability; they just started doing them in the past year. It might be noted, to Morningstar's credit, that one of the biggest factors in their "forward-looking" ratings is the expense of the fund.
Retirement investing is a marathon.
pingo
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Re: Soooo new and sooo lost...

Post by pingo »

I prematurely submitted my last post, to which I have added a bunch of stuff.
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zmcpherson
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Re: Soooo new and sooo lost...

Post by zmcpherson »

Wow, thank you for pointing that out, its uncanny how similar they are. I swear I looked at that fund (I even made mention of it), for some reason I guess I just missed that. When you point that out it makes no sense to put anything into JGMIX. Wow, again.

If no one minds me asking...

What ratios into what funds are people using?

I read the 3-fold portfolio but it seems that the group is pretty split about further diversification.

Alright rethinking my strategy and for sure changing to vanguard, I just talked to them and as long as your account is over 10k there are no yearly fees, which isnt be a problem. So, what about 20-25% VBMFX and 75-80% VISGX to start out with?

I guess I can address this issue further down the road, and im not necessarily insisting on this fund, but I would like to add something like 5% RYVYX. Does anyone have anything risky in their portfolio or is everyone pretty much straightforward vangaurd? and am I nuts for wanting to play the ponies a little?


*edit

haha wow i missed alot of posts while writing this post. YES, I will get around to editing my first post to follow the guidelines.... right after I take my lunch : ) . And I will get around to answering those posts that were between my last two as well.
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ruralavalon
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Re: Soooo new and sooo lost...

Post by ruralavalon »

zmcpherson

In choosing funds look for 2 things, both very important --

1. Broad diversification in an index fund, because there are no "sure bets" in the financial markets. And there is no "free lunch" in investing, since any expectation of extra return comes with extra risk. Market history and simple arithmetic show that indexing outperforms managed funds consistently. Besides being simple, total market type funds are tax efficient (generate little tax liability unless sold). -- http://www.norstad.org/finance/total.html . VISGX is an index fund, but not broadly diversifierd like a total market fund.

2. Low expenses, because even seemingly small expenses have a large effect in eroding your net returns. Example: if returns are 5% in a given year, an expense ratio of 1.5% eats up 30% of your gain for that year. RYVYX has an expense ratio of 1.92%, way too high.

If you want to take a long shot on something, trying to goose returns, put the core of your portfolio in the 3 total matrket index funds (VTSMX, VGTSX, and VBMFX), and to add a little spice throw in Vanguard's small cap index NAESX at about 5 or 10% of the total portfolio.
Last edited by ruralavalon on Thu Apr 19, 2012 3:20 pm, edited 3 times in total.
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pingo
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Re: Soooo new and sooo lost...

Post by pingo »

zmcpherson wrote:Does anyone have anything risky in their portfolio or is everyone pretty much straightforward vangaurd?
For most of us, we have to pick the best (lowest cost) options in our 401k, 403b, 457b, etc. and then use IRAs or other vehicles to make up for the most important stuff that our employer plans lack, e.g. One may believe that small caps will outpace large caps in the long run, but given that they are higher risk, and if one's employer only offers an SC fund at 1.75% ER, it makes no sense to use that fund because it loses any exploitable advantage over, say, an S&P 500 fund with a 0.33 ER. It's one reason we sometimes don't include spicier investments, especially if the possible advantages (unknown) pale in comparison to the known advantages of another course of action. It's the overall asset allocation that is most important, and some aspects are more important than others in more or less this order: stocks vs. bonds, U.S. vs. International, small vs. large, growth vs. value, nominals vs. real).

Enjoy lunch! :sharebeer

P.S. Oh yeah. After all my lecturing, I should clarify my wife and I are pretty much at boring old market weights in our portfolio, but would you believe I hold a couple (exactly 2) individual stocks? I don't trade, it is a tiny part of my portfolio, I don't recommend anyone do it, and it is completely unnecessary! But yeah, most people have their way of spicing up their day.
Last edited by pingo on Thu Apr 19, 2012 5:25 pm, edited 3 times in total.
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Re: Soooo new and sooo lost...

Post by ruralavalon »

Soooo new and sooo lost... wrote:Does anyone have anything risky in their portfolio or is everyone pretty much straightforward vangaurd? and am I nuts for wanting to play the ponies a little?
We own the 3 total market funds as the core of our portfolio, and have only 5% of the portfolio in each of these --
Vanguard Small-Cap Value Index Fund
Vanguard REIT Index Fund
Vanguard Precious Metals and Mining Fund

The point being that almost all is in the 3 total market type funds, to cover all the bases with broad diversification at very low cost.

Since you are " Soooo new and sooo lost...", don't try to get too fancy in the beginning :) .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: Soooo new and sooo lost...

Post by YDNAL »

zmcpherson wrote:Wow, thank you for pointing that out, its uncanny how similar they are. I swear I looked at that fund (I even made mention of it), for some reason I guess I just missed that. When you point that out it makes no sense to put anything into JGMIX. Wow, again.

Alright rethinking my strategy and for sure changing to vanguard, I just talked to them and as long as your account is over 10k there are no yearly fees, which isnt be a problem. So, what about 20-25% VBMFX and 75-80% VISGX to start out with?

I guess I can address this issue further down the road, and im not necessarily insisting on this fund, but I would like to add something like 5% RYVYX. Does anyone have anything risky in their portfolio or is everyone pretty much straightforward vangaurd? and am I nuts for wanting to play the ponies a little?
Wow is right, Zach.

You need to slow down and order a couple of good books from the list I linked previously.

Two questions:

1. Are you interested in Small Cap Growth (VISGX) because of recent performance in the Asset Class?
http://www.invesco.com/pdf/HAR-BRO-1.pdf

2. What is "special" about a Fund (RYVYX) holding 100 Stocks (Large Growth-type)?
http://portfolios.morningstar.com/fund/ ... ture=en-us

Code: Select all

RYVYX TOP 10 HOLDINGS

Apple, Inc.	14.38
Microsoft Corporation	6.96
Google, Inc. Class A	4.26
Oracle Corporation	3.77
Intel Corp	3.61
Qualcomm, Inc.	2.96
Cisco Systems Inc	2.93
Amazon.com Inc	2.37
Comcast Corp Class A	1.62
Amgen Inc	1.38
Total	44.24
Last edited by YDNAL on Thu Apr 19, 2012 3:16 pm, edited 1 time in total.
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archbish99
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Re: Soooo new and sooo lost...

Post by archbish99 »

zmcpherson wrote:If no one minds me asking...

What ratios into what funds are people using?

I read the 3-fold portfolio but it seems that the group is pretty split about further diversification.
More mutual funds don't provide any further diversification -- it provides intentional overlap to skew from the market weighting.

Total Stock Market contains virtually every stock in the US Stock market. Every other domestic fund will be a subset of TSM's holdings. The same goes for Total International -- every international fund will be a subset of TISM's holdings. You can't get more diversified without getting into non-publically-traded stocks.

What you can do is bet that the market is wrong to undervalue companies in certain classes. If you're certain that small stocks will outperform, you can add a small-cap fund to increase how much you have in small-caps. Same stocks, but you hold more of some stocks. If you're certain that REITs will outperform, you can buy an REIT fund, duplicating your existing REIT holdings in TSM so that you hold more REITs than the market does.

Personally, I don't like betting that the market is wrong. Small caps have higher performance, but correspondingly higher risk. I'll trust that the market has appropriately priced that risk-reward balance into the stock price, and stick with market weighting. Others want to increase their risk and corresponding potential return, so they'll overweight some companies and consequently underweight everything else. That's fine, but know that you're not diversifying, you're betting.
I'm not a financial advisor, I just play one on the Internet.
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Taylor Larimore
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Diversifying or betting ?

Post by Taylor Larimore »

archbish99
Personally, I don't like betting that the market is wrong. Small caps have higher performance, but correspondingly higher risk. I'll trust that the market has appropriately priced that risk-reward balance into the stock price, and stick with market weighting. Others want to increase their risk and corresponding potential return, so they'll overweight some companies and consequently underweight everything else. That's fine, but know that you're not diversifying, you're betting.
Words of wisdom.

Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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zmcpherson
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Re: Soooo new and sooo lost...

Post by zmcpherson »

this forum is incredible, I took a half an hour to eat a sandwich and got 5-6 replies back : P

The mutual fund RYVYX was primarily used for an example as something risky, I understand that many funds like this are pretty much considered betting, I was just curious if anyone else, like pingo, had a few things buried in their portfolio.

I have not actually seen this before. http://www.invesco.com/pdf/HAR-BRO-1.pdf. No particular reason for the small caps other then I like a little risk. I guess this is just something that I have to get used to. When I see VTSMX and VISGX I get so much more excited for the ladder. To me, it just looks sexier though I understand that VTSMX is 190b while VISGX is 9.2b

Im reading http://www.norstad.org/finance/total.html now ... and actually I have read through every link posted thus far as well as all your signatures... it just take some stupid questions and a few answers to make it come full circle for me. 2-3 days ago i had no idea what an index or a mutual fund was : P
pingo
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Re: Soooo new and sooo lost...

Post by pingo »

Dang it! Another edit above. :oops:
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Re: Soooo new and sooo lost...

Post by zmcpherson »

lol pingo you crack me up, I just read this
You're taking important steps, but we still have a ways to go.
: P
pingo
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Re: Soooo new and sooo lost...

Post by pingo »

zmcpherson wrote:lol pingo you crack me up, I just read this
You're taking important steps, but we still have a ways to go.
: P
They only laugh when I'm not trying to be funny. Too bad it's rarely the other way around. (sigh)
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zmcpherson
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Re: Soooo new and sooo lost...

Post by zmcpherson »

haha I realize that I have a ways to go... I just appreciate the "we" attitude on this forum :wink:


Alright...

VBMFX, VTSMX, and VGISX are all 3k min to start, I currently have 10k into the account

What if I did VTSMX %40, VBMFX 30%, and VGISX 30% to start out with, save up my emergency fund while slowly turning my portfolio to VTSMX %55, VBMFX 30%, VGISX 15%? If I increase my savings just a touch I should be able to do both by the end of the year.

Am I still overvaluing VGISX and would I be shooting myself in the foot that much if I skip over VGTSX?
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Re: Soooo new and sooo lost...

Post by starling »

OP: while slowly turning my portfolio to VTSMX %55, VBMFX 30%, VGISX 15%?
I assume you meant to type VGSIX (Vanguard REIT Index Fund Investor Shares) and not VGISX (Virtus Global Real Estate Securities I).

This indicates that your target allocation is 55% stock, 30% bond, 15% REIT. If so, then I would invest 70/30 into VTSMX/VBMFX until your total balance is $20,000 at which point the VGSIX (REIT) fund minimum of $3,000 would put you right at your target allocation of 15%. Otherwise you will be significantly overweighted in REITs. You said it could be as early as the end of the year, so what's the rush?

Also, 15% allocation for VGSIX (REIT) seems high. Most Bogleheads allocate REITs up to 10% of their total portfolio according to a forum poll. Also consider that your VTSMX already holds 1.72% in REITs. By waiting until your account balance reaches $20,000, you will give yourself time to sort out your asset allocation questions (e.g. VGSIX, VGTSX‎). Even though 70/30 VTSMX/VBMFX may not seem very glamorous, it is a very solid AA that holds thousands of stocks and bonds and would be appropriate for you for many years.
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Re: Soooo new and sooo lost...

Post by YDNAL »

starling wrote:
OP: while slowly turning my portfolio to VTSMX %55, VBMFX 30%, VGISX 15%?
I assume you meant to type VGSIX (Vanguard REIT Index Fund Investor Shares) and not VGISX (Virtus Global Real Estate Securities I).
OP has been talking about Vanguard Small-Cap Growth Index Fund (VISGX) since yesterday.
https://personal.vanguard.com/us/funds/ ... IntExt=INT
Thu Apr 19, 2012 3:47 pm, zmcpherson wrote:Alright rethinking my strategy and for sure changing to vanguard, I just talked to them and as long as your account is over 10k there are no yearly fees, which isnt be a problem. So, what about 20-25% VBMFX and 75-80% VISGX to start out with?
Isn't it wonderful when fund names are excluded and possible transposition of letters create nothing but confusion!!
Last edited by YDNAL on Fri Apr 20, 2012 9:00 am, edited 1 time in total.
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starling
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Re: Soooo new and sooo lost...

Post by starling »

YDNAL wrote:
starling wrote:
OP: while slowly turning my portfolio to VTSMX %55, VBMFX 30%, VGISX 15%?
I assume you meant to type VGSIX (Vanguard REIT Index Fund Investor Shares) and not VGISX (Virtus Global Real Estate Securities I).
OP has been talking about Vanguard Small-Cap Growth Index Fund (VISGX) since yesterday.
https://personal.vanguard.com/us/funds/ ... IntExt=INT

Isn't it wonderful when fund names are excluded and transposition of letters create nothing but confusion!!
Very confusing! I was thinking that REITs were coming out of left field!

I stand by my advice even if you replace Vanguard REIT Index Fund Investor Shares (VGSIX ) with Vanguard Small-Cap Growth Index Fund (VISGX).
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