Soooo new and sooo lost...
Re: Soooo new and sooo lost...
Just wanted to commend the OP for posting here and, more importantly, doing the reading and responding to the comments. I think it's really impressive how much you have internalized in such a short time period. Many, if not most (including many in this forum), took a far longer (and costlier) path to arrive at where you are already. Kudos.
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- Posts: 67
- Joined: Sun Mar 11, 2007 11:32 pm
Re: Soooo new and sooo lost...
I hear you loud and clear on wanting to take some risk, so I'll throw in my two cents. I recommend you think of your portfolio in two buckets: (1) The Nest Egg and (2) The Risky Bets (or whatever you want to call it. And I would manage the two differently...zmcpherson wrote: 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.
: P
Nest Egg: Set this up as a Roth IRA at Vanguard. Pick 2 or 3 mutual funds, no more for now. For now I'd go with 40% US total stock market, 40% total international stocks, 20% total bond market, and call it a day. Since this is in a Roth, if you exchange these for other funds later, there are no tax consequences, so it's really not that big of a deal what you pick. Also, in the grand scheme, $10,000 is only 2 years of IRA contributions, and you're 27. You are making very different decisions than someone who's 60 and has 35 years of IRA contributions to manage. Contribute to the IRA, and keep reading and learning, and readjust in a couple of years when you're (hopefully) around $20,000+. Just let the ship start sailing and course correct down the road. But just go with Vanguard index funds for the nest egg.
Risky Bets: Ok, I would allocate 10% of your new contributions (after Roth is funded and after emergency fund is funded) to risky bets. If you want to go risky, with more upside and downside, think about individual stocks that you may know more than the average investor (e.g. telecommunications? software?). If individual stocks aren't your thing, Risky Mutual Fund A vs. B...who knows? Just go with your gut and see what happens. BUT, just make this a single-digit percentage of your total portfolio. Make a spreadsheet tracking your purchase price and date and sell price and date, and compare it against a comparable Vanguard index funds on those dates to find out if you can beat the market or not.
I do have a couple of risky stocks in my portfolio (Telefonica, and private equity shares from a former employer). Those two account for 9% of our portfolio.
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- Posts: 58
- Joined: Tue Apr 17, 2012 8:20 pm
Re: Soooo new and sooo lost...
I see what you guys are saying about the names now, but to be honest, a few days ago the ticker abbreviations made more sense as I didnt know the terminology behind the abbreviations. Total stock market, small growth, small caps, international market, total bond market, etc. were all pretty lost on me and might as well have been in greek. Now that I have read up a little bit, the names are actually sticking with me a bit more, so I suppose I can/should start switching over.
What about this:
70% total stock or VTSMX
and 30% bond market or VBMFX
for this first 10k
After 15-20k,I will pick up The international stocks and maybe do a 50/30/20 or a 40/40/20 total stock/international stock/bond market.
After that I do want to play something a bit more risky but i will put no more than 5ish% into it and like nomad said, I will track my progress, and if I discover that I cant beat em', Ill join em' : p
Thank you jody for those kind words. Honestly, its not hard for me to be here, I know this should be important to me and I should be making every effort to understand as much as I possibly can. What I am in disbelief to, is how amazing it is to be able to find such an active and helpful community such as this. I was thinking about it last night and I realized that, at the end of the day, this is still my money, but never the less you guys took it upon yourselves and took the time to help someone else out and explain mutual funds and retirement savings, contributing 60 comments in a few days is astounding. So do not be surprised at my effort to learn, be more surprised at the quantity and the effort of the people willing to teach : P
What about this:
70% total stock or VTSMX
and 30% bond market or VBMFX
for this first 10k
After 15-20k,I will pick up The international stocks and maybe do a 50/30/20 or a 40/40/20 total stock/international stock/bond market.
After that I do want to play something a bit more risky but i will put no more than 5ish% into it and like nomad said, I will track my progress, and if I discover that I cant beat em', Ill join em' : p
Thank you jody for those kind words. Honestly, its not hard for me to be here, I know this should be important to me and I should be making every effort to understand as much as I possibly can. What I am in disbelief to, is how amazing it is to be able to find such an active and helpful community such as this. I was thinking about it last night and I realized that, at the end of the day, this is still my money, but never the less you guys took it upon yourselves and took the time to help someone else out and explain mutual funds and retirement savings, contributing 60 comments in a few days is astounding. So do not be surprised at my effort to learn, be more surprised at the quantity and the effort of the people willing to teach : P
Re: Soooo new and sooo lost...
Your new plan is quite reasonable. For your risky play, which some people do enjoy, I would just encourage you not to put your retirement at risk by increasing it over time. 5% is fine, but there is a reasonable chance that you *will* beat the market initially with that segment of your portfolio. However, if you do well for the first year or two, what does that mean? Does that mean that you are an investing prodigy, and that you can in a few spare moments of your time consistently beat full-time experts on wall street who possess nearly unlimited research, computation, and resources at their disposal?
Or...does it mean that you got lucky?
If it occurs, it is most likely the latter.
That's not to say that adding a small-cap (or small-cap growth, if you so choose) allocation at some point in excess of 5% is a bad idea. But you should always know what you are investing in, and why you are choosing to invest in it.
Stick around these forums, and delve into the reading list. By the time you have $20k in your Roth IRA, you will have accumulated enough knowledge and understanding to decide whether or not tilting your portfolio (i.e. adding a small cap portion or other asset class such as REITs) is for you.
Or...does it mean that you got lucky?
If it occurs, it is most likely the latter.
That's not to say that adding a small-cap (or small-cap growth, if you so choose) allocation at some point in excess of 5% is a bad idea. But you should always know what you are investing in, and why you are choosing to invest in it.
Stick around these forums, and delve into the reading list. By the time you have $20k in your Roth IRA, you will have accumulated enough knowledge and understanding to decide whether or not tilting your portfolio (i.e. adding a small cap portion or other asset class such as REITs) is for you.
Retirement investing is a marathon.
Re: Soooo new and sooo lost...
You've really taken a fancy to small growth. It's okay. We've all been in love.
Here's an exercise for your consideration:
Go to Morningstar.com and enter VISGX for a quote. Go to the Growth Chart and click Maximum. On that chart, click to the right of every index to eliminate all lines except the one for VISGX. Good. Now add VEXMX (VG Extended Mkt Idx Fund). What do you see?
What I see is that VEXMX ever-so-slightly beat VISGX for a few years and that currently VISGX is ever-so-slighlty beating VEXMX. But for the most part they indistinguishible in their performance and behavior. (The behavior of particlar assets can be as or more important than their performance.) So with a fund like VEXMX, you should be able to get what you're looking for in VISGX. The difference?
VG Ext Mkt holds vastly more equities than VG SG Idx Fund for greater diversification of risk. VEXMX holds mid caps and small caps (at almost 50:50), growth and value (at around 50:50) so your making less of a bet on Growth (which I think most reasearch confirms that there is nothing special that "growth" has over "value", except for the tendency to be "overvalued".) Also, VEXMX is is lower cost and more efficient because it has lower turnover since less securities move in and out of it's respective index.
I have to go. I'll complete my thoughts shortly. (sorry)
Here's an exercise for your consideration:
Go to Morningstar.com and enter VISGX for a quote. Go to the Growth Chart and click Maximum. On that chart, click to the right of every index to eliminate all lines except the one for VISGX. Good. Now add VEXMX (VG Extended Mkt Idx Fund). What do you see?
What I see is that VEXMX ever-so-slightly beat VISGX for a few years and that currently VISGX is ever-so-slighlty beating VEXMX. But for the most part they indistinguishible in their performance and behavior. (The behavior of particlar assets can be as or more important than their performance.) So with a fund like VEXMX, you should be able to get what you're looking for in VISGX. The difference?
VG Ext Mkt holds vastly more equities than VG SG Idx Fund for greater diversification of risk. VEXMX holds mid caps and small caps (at almost 50:50), growth and value (at around 50:50) so your making less of a bet on Growth (which I think most reasearch confirms that there is nothing special that "growth" has over "value", except for the tendency to be "overvalued".) Also, VEXMX is is lower cost and more efficient because it has lower turnover since less securities move in and out of it's respective index.
I have to go. I'll complete my thoughts shortly. (sorry)
- ruralavalon
- Posts: 26353
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Soooo new and sooo lost...
Now you've got it . A reasonable plan in my opinion. Start total market, then experiment later in small (5%) bits if still so inclined.zmcpherson wrote: What about this:
70% total stock or VTSMX
and 30% bond market or VBMFX
for this first 10k
After 15-20k,I will pick up The international stocks and maybe do a 50/30/20 or a 40/40/20 total stock/international stock/bond market.
After that I do want to play something a bit more risky but i will put no more than 5ish% into it and like nomad said, I will track my progress, and if I discover that I cant beat em', Ill join em' : p
Don't forget to get some investing education, try here for reading ideas -- http://www.bogleheads.org/readbooks.htm .
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
- Taylor Larimore
- Posts: 32842
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
A superior plan.
zmcpherson{
Best wishes.
Taylor
Congratulations! Looks like an excellent plan to me.What about this:
70% total stock or VTSMX
and 30% bond market or VBMFX
for this first 10k
After 15-20k,I will pick up The international stocks and maybe do a 50/30/20 or a 40/40/20 total stock/international stock/bond market.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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- Posts: 58
- Joined: Tue Apr 17, 2012 8:20 pm
Re: Soooo new and sooo lost...
lol I would love to recap my 4 day progression with you guys...
day 1:
100% JGMIX or 50% JGMIX and 50% PJP
day 2:
50% VTSMX 25% JGMIX and 25% RYVYX
day 3:
Plan 1 - 75-80% VISGX and 20-25% VBMFX
Plan 2 - VTSMX %40, VBMFX 30%, and VISGX 30% and turn it into VTSMX %55, VBMFX 30%, VISGX 15%
day 4:
70% VTSMX and 30% VBMFX and turn it into 50/30/20 or a 40/40/20 total stock/international stock/bond market
Its been quite the roller coaster and after going through my older posts, I can only imagine that a few of you hit your head against your desk a few times while reading my posts : P
One last thought/question.
After going through all the posts again I noticed ruralavalon mentioning etf's, I noticed VTI and BND are vanguards total stocks and bonds
What is the difference between:
70% VTSMX and 30% VBMFX
and
70% VTI and 30% BND?
day 1:
100% JGMIX or 50% JGMIX and 50% PJP
day 2:
50% VTSMX 25% JGMIX and 25% RYVYX
day 3:
Plan 1 - 75-80% VISGX and 20-25% VBMFX
Plan 2 - VTSMX %40, VBMFX 30%, and VISGX 30% and turn it into VTSMX %55, VBMFX 30%, VISGX 15%
day 4:
70% VTSMX and 30% VBMFX and turn it into 50/30/20 or a 40/40/20 total stock/international stock/bond market
Its been quite the roller coaster and after going through my older posts, I can only imagine that a few of you hit your head against your desk a few times while reading my posts : P
One last thought/question.
After going through all the posts again I noticed ruralavalon mentioning etf's, I noticed VTI and BND are vanguards total stocks and bonds
What is the difference between:
70% VTSMX and 30% VBMFX
and
70% VTI and 30% BND?
Re: Soooo new and sooo lost...
Sheeeeesh. I hadn't seen that there is a second page of comments till after I submitted my last post. No surprise there. I'm usually behind the curve!
Your current plan is great. Humor me as l finish my earlier thought out of sheer compulsion. We slight might end up in a good place.
Someday you'll probably have a 401k-like plan with poor options except for an S&P 500 fund. VG Ext Mkt Idx Fund is the rest of the stock market that's not in the S&P 500 so investors can diversify U.S. holdings to the nth degree (and it ain't so bad for overweighting littler stocks, although around here a popular choice is small cap value).
So taking into account all your posts plus the feedback, let me propose the following for your consideration (not earth shatterring and not very different):
Roth IRA 100% Vanguard Target 2030 Retirement Fund OR Lifestrategy Growth Fund
*Target 2030 is 72% stocks / 28% bonds (vs. your original 70/30) and slowly adds bonds overtime
*Lifestrategy Growth is fixed at 80/20.
*Either costs the same as what you propose.
*Both are made of the exact same funds as you propose.
*Equities in both are 70% U.S (VTSMX) / 30% International.
*Bonds are from Vg Total Bond fund.
*Each covers every stock from the largest to the smallest.
*You wouldn't have to wait to be invested in foreign markets.
*Each rebalances funds for you (and will do a much better job!)
*You can hardly get any simpler or more diversified.
Once you have enough saved, you can split your money into the individual funds (Total U.S., Total Int'l, Total Bond) and increase the proportion of international and/or small via VEXMX for spice. At that point, you may even have an employer-sponsored 401k which would necessitate splitting, relocating and reweighting assets anyway.
Your current plan is great. Humor me as l finish my earlier thought out of sheer compulsion. We slight might end up in a good place.
Someday you'll probably have a 401k-like plan with poor options except for an S&P 500 fund. VG Ext Mkt Idx Fund is the rest of the stock market that's not in the S&P 500 so investors can diversify U.S. holdings to the nth degree (and it ain't so bad for overweighting littler stocks, although around here a popular choice is small cap value).
So taking into account all your posts plus the feedback, let me propose the following for your consideration (not earth shatterring and not very different):
Roth IRA 100% Vanguard Target 2030 Retirement Fund OR Lifestrategy Growth Fund
*Target 2030 is 72% stocks / 28% bonds (vs. your original 70/30) and slowly adds bonds overtime
*Lifestrategy Growth is fixed at 80/20.
*Either costs the same as what you propose.
*Both are made of the exact same funds as you propose.
*Equities in both are 70% U.S (VTSMX) / 30% International.
*Bonds are from Vg Total Bond fund.
*Each covers every stock from the largest to the smallest.
*You wouldn't have to wait to be invested in foreign markets.
*Each rebalances funds for you (and will do a much better job!)
*You can hardly get any simpler or more diversified.
Once you have enough saved, you can split your money into the individual funds (Total U.S., Total Int'l, Total Bond) and increase the proportion of international and/or small via VEXMX for spice. At that point, you may even have an employer-sponsored 401k which would necessitate splitting, relocating and reweighting assets anyway.
Last edited by pingo on Sun Apr 22, 2012 11:17 pm, edited 4 times in total.
Re: Soooo new and sooo lost...
Four days! For many of us it took forty years to get to where you are today. You've just won one of life's knowledge lotteries! Treasure the education and make it grow.zmcpherson wrote:lol I would love to recap my 4 day progression with you guys...
day 4:
70% VTSMX and 30% VBMFX and turn it into 50/30/20 or a 40/40/20 total stock/international stock/bond market
Last edited by BigFoot48 on Fri Apr 20, 2012 5:44 pm, edited 1 time in total.
Retired |
Two-time in top-10 in Bogleheads S&P500 contest; 18-time loser
Re: Soooo new and sooo lost...
No difference in the underlying assets, but stick with traditional mutual funds for now, unless you stay at the brokerage house you mentioned. The ETFs would require opening a brokerage account (another $20/year if at Vanguard), and you wouldn't have every penny in the assets because you can't purchase fractional shares, which you get in the mutual funds. You have to worry about bid/ask spreads (?)--wait. Better yet, look up ETFs in the Wiki.zmcpherson wrote:lol I would love to recap my 4 day progression with you guys...
day 1:
100% JGMIX or 50% JGMIX and 50% PJP
day 2:
50% VTSMX 25% JGMIX and 25% RYVYX
day 3:
Plan 1 - 75-80% VISGX and 20-25% VBMFX
Plan 2 - VTSMX %40, VBMFX 30%, and VISGX 30% and turn it into VTSMX %55, VBMFX 30%, VISGX 15%
day 4:
70% VTSMX and 30% VBMFX and turn it into 50/30/20 or a 40/40/20 total stock/international stock/bond market
Its been quite the roller coaster and after going through my older posts, I can only imagine that a few of you hit your head against your desk a few times while reading my posts : P
One last thought/question.
After going through all the posts again I noticed ruralavalon mentioning etf's, I noticed VTI and BND are vanguards total stocks and bonds
What is the difference between:
70% VTSMX and 30% VBMFX
and
70% VTI and 30% BND?
Congratulations on your journey!
Re: Soooo new and sooo lost...
Zach,
good job of coming up with a solid plan. Now the tough part of "staying the course" begins.
good job of coming up with a solid plan. Now the tough part of "staying the course" begins.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
Re: Soooo new and sooo lost...
About ETFs:zmcpherson wrote: One last thought/question.
After going through all the posts again I noticed ruralavalon mentioning etf's, I noticed VTI and BND are vanguards total stocks and bonds
What is the difference between:
70% VTSMX and 30% VBMFX
and
70% VTI and 30% BND?
1. There is no difference in the holdings of those two portfolios; the Vanguard ETFs are different share classes of the underlying mutual fund. ETFs are a tad more complicated to work with than mutual funds.
2. VTI and BND are slightly cheaper than VTSMX and VBMFX. However, they are the same (or very close) in cost to the Admiral Shares versions of those mutual funds, VTSAX and VBTLX. You can invest in Admiral Shares index funds for fund balances above $10,000.
3. ETFs are traded like regular stocks. This means that they have prices that fluctuate throughout the day, whereas mutual funds have a price (NAV, which stands for Net Asset Value) that is determined after market close each day. Some people try to take advantage of this; on average, it ends up a wash. It can add an element of stress to deal with this, but some enjoy the 'game' of limit orders.
4. There is no minimum balance to an ETF aside from the price of a single share.
5. Because ETFs are similar to shares of stock, you can only purchase and sell full shares. With a mutual fund, you can buy exactly $10,000, or $100, or $50. With an ETF, you have to buy in multiples of the current price, which is usually somewhere between $25-150.
6. There may be higher transaction fees with ETFs. You lose the bid/ask spread to the market maker. For a buy/hold/rebalance investor, this is usually negligible in the long run.
7. There are various other minor nuances in working with ETFs, such as the need to open a brokerage account, premium/discount, no restrictions (with some exceptions) on frequent transactions, partial share issuance (but not redemption) as dividends...
Basically, in your situation, going for ETFs rather than mutual funds does nothing but add unnecessary complication. Though VTI and BND are slightly cheaper than VTSMX and VBMFX, on and account balance of $10,000 you're literally talking about a few dollars per year. Once your account balance is higher, you can switch to Admiral Shares, and there is no longer any cost benefit to the ETFs. I'm not an expert in ETFs, but I think this covers the basics. My advice - ignore them for now (and maybe forever).
Retirement investing is a marathon.
- archbish99
- Posts: 1649
- Joined: Fri Jun 10, 2011 6:02 pm
Re: Soooo new and sooo lost...
Agreed. Unless you are in a situation where ETFs hold a distinct advantage for you, stick with mutual funds.kenyan wrote:Basically, in your situation, going for ETFs rather than mutual funds does nothing but add unnecessary complication. Though VTI and BND are slightly cheaper than VTSMX and VBMFX, on and account balance of $10,000 you're literally talking about a few dollars per year. Once your account balance is higher, you can switch to Admiral Shares, and there is no longer any cost benefit to the ETFs. I'm not an expert in ETFs, but I think this covers the basics. My advice - ignore them for now (and maybe forever).
The main place where you'll be in that situation is if you have an account somewhere other than Vanguard which you can't move away from (employer's 401k, for example), you don't have good mutual fund options for every asset category, but you do have a brokerage account. In that specific case, it's often cheaper to buy ETFs at a low commission in the brokerage rather than paying a higher commission to purchase an external mutual fund or pay the increased ER for the closest no-fee mutual fund.
I'm not a financial advisor, I just play one on the Internet.
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- Posts: 58
- Joined: Tue Apr 17, 2012 8:20 pm
Re: Soooo new and sooo lost...
Thanks for the explanations, that cleared up my question : )
Would anyone else recommend pingo's suggesting of 100% in Vanguard Target Retirement 2030 Fund (VTHRX) or Vanguard LifeStrategy Growth Fund (VASGX)?
Would anyone else recommend pingo's suggesting of 100% in Vanguard Target Retirement 2030 Fund (VTHRX) or Vanguard LifeStrategy Growth Fund (VASGX)?
Re: Soooo new and sooo lost...
Both are perfectly good options when you are just starting out with an IRA and don't have enough invested to purchase the full asset allocation you desire. Eventually, when you have a high enough balance, you'll want to convert to Admiral shares at your desired asset allocation since Admiral shares have lower expense ratios. Since there are no tax consequences to selling shares in an IRA, there are no real downsides to using balanced funds like these two early on. Some people avoid balanced funds in taxable accounts because it's easier to manage the tax consequences of a sell with separate funds, but that's not a concern with an IRA.zmcpherson wrote:Would anyone else recommend pingo's suggesting of 100% in Vanguard Target Retirement 2030 Fund (VTHRX) or Vanguard LifeStrategy Growth Fund (VASGX)?
- ruralavalon
- Posts: 26353
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Soooo new and sooo lost...
I still like your day 4 plan, 70/30 total stock/total bond at the start.zmcpherson wrote:What about this:
70% total stock or VTSMX
and 30% bond market or VBMFX
for this first 10k
After 15-20k,I will pick up The international stocks and maybe do a 50/30/20 or a 40/40/20 total stock/international stock/bond market.
. . . . .
Would anyone else recommend pingo's suggesting of 100% in Vanguard Target Retirement 2030 Fund (VTHRX) or Vanguard LifeStrategy Growth Fund (VASGX)?
With $10k you have enough in the IRA to do this allocation at the start, so you have no real need to use a TR or Lifestrategy fund as a starter. A TR or Lifestrategy fund is good for someone who wants ultra simplicity (single fund investing), or who has only $3k or so to start out. With $10k you have enough to skip that step.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Soooo new and sooo lost...
Your plan has received the endorsement of many posters, including that of Taylor Larimore who is one of the best. Ignore them at your peril ! That approval, and and the fact that it is your plan is enough. I am so impressed with how far you've come. I know you will invest well. My congratulations to you, yet again.Taylor Larimore wrote:zmcpherson{
Congratulations! Looks like an excellent plan to me.What about this:
70% total stock or VTSMX
and 30% bond market or VBMFX
for this first 10k
After 15-20k,I will pick up The international stocks and maybe do a 50/30/20 or a 40/40/20 total stock/international stock/bond market.
Best wishes.
Taylor
I'm longwinded, so I may have confused things with my blatherings. I apologize. I offer the following only in hopes of clarifying how my suggestions were meant to aid the execution of your well-thought plan (this is how we learn and teach on this forum). That is all.
70/30 total stock/total bond is an excellent portfolio with a total ER of 0.192%.
--------->Target 2025 (VTTVX) is also excellent with a total ER of 0.18%.
--------->Target 2025 (VTTVX) will be 70% total+int'l stock / 30% total bonds in a year or so.
One normally moves from less bonds to more bonds. In your plan, going from 70/30 to 80/20 is the opposite direction. It doesn't hurt the plan given your age, amount of assets and how your deposits will likely play out, but you should be aware of it.zmcpherson wrote:After 15-20k,I will pick up The international stocks and maybe do a 50/30/20 or a 40/40/20 total stock/international stock/bond market.
Your plan is also that in a year or two you could eventually move to:
50/30/20 Total U.S. Stock, Total Int'l, Total Bond with a total ER of 0.20%.
56/24/20 is the breakdown of both LifeStrategy Growth (VASGX) and Target 2030 (VTHRX), each with ER 0.18%.
LifeStrategy Growth and Target 2030 (or 2025, depending) are really close to the asset allocation you want. Splitting your money later on into the funds as you envision them would require minimal shifts in AA.
Eventualy, you'll save enough to use Vanguard Admiral Share funds which can lower the ERs even more.
You have enough knowledge and guts to make a good plan work. Stick to it and don't stop learning, my friend.
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- Posts: 58
- Joined: Tue Apr 17, 2012 8:20 pm
Re: Soooo new and sooo lost...
The admiral shares have low ER's...
Wouldnt it make more sense just to keep investing everything into either VASGX, VTHRX, or VTTVX at an er of .18 until I hit 30k (as the asset distribution is roughly equal), and from there allocate 10k into total stock admiral, intentional stock admiral, and total bonds admiral as for a combined ER of those funds is something crazy like .07?
It seems like you would win on both ends, .18 er instead of .19ish at the beginning and then .07 to .18 at the end and you would have roughly the same assets.
Also, this got me thinking. I know I can contribute 5k/year into a roth ira, but can I contribute outside money to the same fund. For a hypothetical example, I put 7k into total stocks and 3k into bonds with my original IRA contributions. Then in a few months, can I contribute 3k more and put it into stocks and turn the total stock into admiral shares? Or, on the plan above, would I have to wait 4 more years to have a total of 30k to move everything over to admiral shares?
Wouldnt it make more sense just to keep investing everything into either VASGX, VTHRX, or VTTVX at an er of .18 until I hit 30k (as the asset distribution is roughly equal), and from there allocate 10k into total stock admiral, intentional stock admiral, and total bonds admiral as for a combined ER of those funds is something crazy like .07?
It seems like you would win on both ends, .18 er instead of .19ish at the beginning and then .07 to .18 at the end and you would have roughly the same assets.
Also, this got me thinking. I know I can contribute 5k/year into a roth ira, but can I contribute outside money to the same fund. For a hypothetical example, I put 7k into total stocks and 3k into bonds with my original IRA contributions. Then in a few months, can I contribute 3k more and put it into stocks and turn the total stock into admiral shares? Or, on the plan above, would I have to wait 4 more years to have a total of 30k to move everything over to admiral shares?
Re: Soooo new and sooo lost...
No, you have to have the $10,000 in each fund, not a total of it in two places like IRA and taxable.
Sounds like you need the advice given by one of our experts here which is something like: a perfect plan is the enemy of the good. If you don't go with something that is agreed to sound pretty good, your analysis paralysis will keep you uninvested for the long term.
Sounds like you need the advice given by one of our experts here which is something like: a perfect plan is the enemy of the good. If you don't go with something that is agreed to sound pretty good, your analysis paralysis will keep you uninvested for the long term.
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- Joined: Tue Apr 17, 2012 8:20 pm
Re: Soooo new and sooo lost...
I know you have to have 10k in each fund. My question was, whether it would be better to keep contributing to one of the long term retirement funds until I can afford to go straight to admiral shares in all the funds (or even just one of the funds) as the long term retirement funds have lower ER's than the normal total stock/bond market funds. And Im not delaying to look for the perfect plan, I am just trying to grasp the reasoning behind decisions so I can develop a better knowledge base.
Also it would be helpful to know if I can contribute to these funds outside of IRA contributions to get them to admiral shares quicker
Also it would be helpful to know if I can contribute to these funds outside of IRA contributions to get them to admiral shares quicker
Re: Soooo new and sooo lost...
Have I mentioned the "Asking Portfolio Questions" link?zmcpherson wrote:Holy crap the admiral shares have low ER's...
Wouldnt it make more sense just to keep investing everything into either VASGX, VTHRX, or VTTVX at an er of .18 until I hit 30k (as the asset distribution is roughly equal), and from there allocate 10k into total stock admiral, intentional stock admiral, and total bonds admiral as for a combined ER of those funds is something crazy like .07?
It seems like you would win on both ends, .18 er instead of .19ish at the beginning and then .07 to .18 at the end and you would have roughly the same assets.
Also, this got me thinking. I know I can contribute 5k/year into a roth ira, but can I contribute outside money to the same fund. For a hypothetical example, I put 7k into total stocks and 3k into bonds with my original IRA contributions. Then in a few months, can I contribute 3k more and put it into stocks and turn the total stock into admiral shares? Or, on the plan above, would I have to wait 4 more years to have a total of 30k to move everything over to admiral shares?
The oft cited link to "Asking Portfolio Questions" helps us to avoid running around in some the circles we've seen in this thread. I'm on a clunky smartphone, so I can't provide the link again, but it's in this thread.
Before investing taxable it may be better to have sat down with your accountant friend to see what other tax advantaged investment space you may be setting up this year. If, for example, all savings can go into your IRA and also, say, a Solo 401k (or whatever he will be recommending), then taxable investing is unnecessary and you can use separate funds or put it all in a target/lifestrategy funds. If you invest in taxable, using separate funds will be more advantageous to keep tax inefficient assets out of taxable accounts. Unnecessary taxation eats away at returns unnecessarily.
Why not execute a plan in the IRA and save other money to build up your emergency savings? Once you know what other options are available/suggested by your friend, take the time to prepare a new post according to the recommended format and we'll give you our input.
At this point I'm afraid further suggestions may less-advisaeable. For example, I would not have brought up target or lifestrategy funds had I known taxable investing were going to be part of the picture because they are not optimal when taxable accounts are involved.
Moral of the story: help us help you help us help you by assembling the information. It is for your benefit and ours.
Last edited by pingo on Mon Apr 23, 2012 3:26 pm, edited 2 times in total.
- archbish99
- Posts: 1649
- Joined: Fri Jun 10, 2011 6:02 pm
Re: Soooo new and sooo lost...
The count is separate for the instance inside the IRA and the instance outside. Don't mess with your AA substantially just to get the Admiral shares. It also helps that the single funds hold a version of TBM with an Admiral-like expense ratio.zmcpherson wrote:I know you have to have 10k in each fund. My question was, whether it would be better to keep contributing to one of the long term retirement funds until I can afford to go straight to admiral shares in all the funds (or even just one of the funds) as the long term retirement funds have lower ER's than the normal total stock/bond market funds. And Im not delaying to look for the perfect plan, I am just trying to grasp the reasoning behind decisions so I can develop a better knowledge base.
Also it would be helpful to know if I can contribute to these funds outside of IRA contributions to get them to admiral shares quicker
To hold on to your allocation, you'd need to stay in the single fund until you have:
- The minimum for Admiral shares in your largest fund
- The minimum for Investor shares in your smallest fund
I'm not a financial advisor, I just play one on the Internet.
Re: Soooo new and sooo lost...
Also, there is a point where lowing the expense ratios can a fun challenge, but much less meaningful. All else being equal, going from 1+% to 0.20% is a big deal; going from 0.20% to 0.11%, not so much.
In fact, it was on this site that I learned that Vg Target Funds were so efficiently maintained and rebalanced last year, that they actually overcame the expense disadvantage versus the same portfolio held in Admiral class funds, narrowly outdoing the latter (and I mean narrowly).
Will the advantage persist? It doesn't concern me. ~0.18% is already low. There are other factors that may take precedence, like proper cost and tax efficient fund placement, appropriate asset allocation, etc.
In fact, it was on this site that I learned that Vg Target Funds were so efficiently maintained and rebalanced last year, that they actually overcame the expense disadvantage versus the same portfolio held in Admiral class funds, narrowly outdoing the latter (and I mean narrowly).
Will the advantage persist? It doesn't concern me. ~0.18% is already low. There are other factors that may take precedence, like proper cost and tax efficient fund placement, appropriate asset allocation, etc.
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- Posts: 58
- Joined: Tue Apr 17, 2012 8:20 pm
Re: Soooo new and sooo lost...
lol sorry, I didnt mean to throw up another tricky question on an already seemingly solved thread, I just had the question in fresh in my mind. Completely ignore the question above and ill discuss taxable investments with my accountant a few years down the road when I get 20k into my IRA and build up the EF (or maybe Ill come bug you guys again : P)
Last, seemingly, harmless question:
Does anyone take to heart the rule of thumb, 110 or 100 minus your age is the maximum stock holdings? And this is just out of curiosity and for my own edification, but when comparing the target retirement funds 2025, 2030, 2035 and 2040. 2040 would be more my target retirement year (I would be 55/56) but the stock/bond ratio is 90/10 which seems pretty risky/high to me. I suppose I would have to ask, is the reason that a few of the posters above suggested 2025 and 2030 to me is because they felt that 90/10 was also too risky/high for them to comfortably make the recommendation?
Last, seemingly, harmless question:
Does anyone take to heart the rule of thumb, 110 or 100 minus your age is the maximum stock holdings? And this is just out of curiosity and for my own edification, but when comparing the target retirement funds 2025, 2030, 2035 and 2040. 2040 would be more my target retirement year (I would be 55/56) but the stock/bond ratio is 90/10 which seems pretty risky/high to me. I suppose I would have to ask, is the reason that a few of the posters above suggested 2025 and 2030 to me is because they felt that 90/10 was also too risky/high for them to comfortably make the recommendation?
Re: Soooo new and sooo lost...
zmcpherson wrote:lol sorry, I didnt mean to throw up another tricky question on an already seemingly solved thread, I just had the question in fresh in my mind. Completely ignore the question above and ill discuss taxable investments with my accountant a few years down the road when I get 20k into my IRA and build up the EF (or maybe Ill come bug you guys again : P)
Last, seemingly, harmless question:
Does anyone take to heart the rule of thumb, 110 or 100 minus your age is the maximum stock holdings? And this is just out of curiosity and for my own edification, but when comparing the target retirement funds 2025, 2030, 2035 and 2040. 2040 would be more my target retirement year (I would be 55/56) but the stock/bond ratio is 90/10 which seems pretty risky/high to me. I suppose I would have to ask, is the reason that a few of the posters above suggested 2025 and 2030 to me is because they felt that 90/10 was also too risky/high for them to comfortably make the recommendation?
No harm done. We like questions. We just want to get it right.
The suggested Target Funds are based on your indicated AAs. It is best to determine your willingness and need for risk, risk tolerance, what have you, and build an appropriate portfolio around it. Target Funds can be wonderful investment vehicles, but going by the date may place one's portfolio at an inappropriate level of risk for that investor. As expertly made as Vanguard Target funds are, the AA May not appropriate for everybody.
Here, we tend to tell even the most aggressively inclined to hold a minimum of 20% in Bonds. The trade-off according to historicall returns, versus 100% equities, is a very tiny amount amount of return for significantly less risk. Benjamin Graham (Buffet's teacher) recommends no less than 25% bonds, no more than 75% bonds.
I think of equity risk in terms of speeds. 100% stocks is like driving 100 mph (don't crash!). 90 is hardly safer, but 80 is significantly less so. The dynamics of driving 75 are even better, as there's nothing that says that driving recklessly will get you there sooner. And then there are those who prefer driving 60. Regardless, at some poiny one has the get off the freeway and maneuver the streets and roads until your arrival at your destination. In investing, age-in-bonds helps slow us down in time to get off safely. Other formulas can do the same, depending on your desire for risk, or lack thereof.
Re: Soooo new and sooo lost...
In addition to the lower ERs, I think the primary difference for you is that there would be no need to do this:zmcpherson wrote: What is the difference between:
70% VTSMX and 30% VBMFX
and
70% VTI and 30% BND?
You could just jump into your ideal allocation immediately because there are no minimum balance requirements for ETFs. Moreover, ETFs are not difficult to use. Not as easy as mutual funds, granted, but fairly simple once you've made a couple of transactions. And although mutual funds do have an advantage in being able to buy fractional shares, on the other side of the scale is being able to know the price of the ETF shares you're purchasing at the time of purchase...with mutual funds, you won't know until after market close. I'm not saying that you should use ETFs, but the decision to use mutual funds isn't as lopsided as many like to believe. I personally own no mutual funds outside of my 401k, and I like it that way.zmcpherson wrote: 70% VTSMX and 30% VBMFX and turn it into 50/30/20 or a 40/40/20 total stock/international stock/bond market
Something else to consider: if you're only going to have one equity fund, you might look at Vanguard Total World. The ETF (VT) is quite cheap. The mutual fund (VTWSX) will cost you a few more dollars per year over VTSMX, but you get global diversification.