Bogleheads

[brian1984]

Hey all - 1st post here. I'm posting to hear your opinions on which vanguard funds and allocations I should invest in. I am 24, and have $40K in an online savings account earning 3%. I also have emergency funds covered in my checking account. I'd like to move the entire 40K from savings and create a portfolio in Vanguard. I currently work, but my employer does not offer 401K. I plan on investing an additional $15K/year. Here is what I've come up with:

ROTH IRA:
$5,000 Vanguard REIT Index (VGSIX) (0.20%)

Taxable:
$10,000 Vanguard FTSE All-World ex-US Index Inv (VFWIX) (0.40%)
$15,000 Vanguard Total Stock Mkt Idx (VTSMX) (0.15%)
$10,000 Vanguard Total Intl Stock Index (VGTSX) (0.27%)

Is this too aggressive? Please let me know your thoughts/recommendations!

[YDNAL]

brian1984,

Welcome to the forum.

[prouddad]

It really depends on what your target asset allocation is. If you want to hold the REIT index, a tax-deferred account is the way to go.

I would not buy VGTSX in a taxable account because you do not take advantage of the foreign tax credit. Just looking at it, you have a large international exposure. Most people would recommend between 20 and 40%, but that is a personal decision.

Also, what is your risk tolerance? You do not have any bonds at all. Even a very aggressive portfolio should have some bond exposure. Do you have an emergency fund already?

[mudfud]

Any reason why you are investing in both VFWIX and VGSTX?

In more general terms, you could should up with something like an Investment policy statement (IPS) so that you have a basic framework, goals etc. And then the key is to resist the temptation to tweak it all the time.

Best,
Mud
_________________
"Are you sure you have tested an a priori hypothesis?"

[PiperWarrior]

Welcome to the forum!

[brian1984]

Thanks guys. I know I have a lot to learn in terms of investing, but that's why I'm here. My risk tolerance is high, I think a 90/10 allocation would suit my needs well. If you were in my situation, how would you allocate the $40K among the various Vanguard funds?

---

Investment Philosophy: "Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

Asset Allocation: Maintain overall 90% stock allocation + 40% fixed-income allocation until home purchase to accommodate both short-term and long-term requirements.

Funds & Accounts: Use low cost mutual funds - index funds preferably - which do not overlap and provide maximum diversification across asset classes. Try to shelter tax-inefficient funds in tax-advantaged accounts to reduce tax drag.

Target Allocation:
VTSMX - Total Stock Market Fund 40%
VGTSX - Total Int'l Market Fund 20%
VGSIX - Vanguard REIT Index 12.5% - Roth
VISVX - Small-Cap Value Index 17.5%
VBLTX - Long-term Bond Index - 10%

Other considerations: Automate future contributions wherever possible. Rebalance yearly. No market timing.

[PiperWarrior]

[brian1984]

Thanks Piper! Does this look good?

ROTH IRA ($5K):
12.5% Vanguard REIT Index (VGSIX) (0.20%)

Taxable ($35K):
45% Vanguard FTSE All-World ex-US Index Inv (VFWIX) (0.40%)
32.5% Vanguard Total Stock Mkt Idx (VTSMX) (0.15%)
10% Vanguard Short-Term Bond Index (VBISX) (0.18%)

[PiperWarrior]

[brian1984]

OK, will do. What are your thoughts on:

VISVX - Small-Cap Value Index 17.5%

Is it worth including a small cap fund?

[YDNAL]

[PiperWarrior]

[jhd]