Conservative guy.. concerned about my investment

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jbyoun1990
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Joined: Sat Dec 22, 2012 10:47 am

Conservative guy.. concerned about my investment

Post by jbyoun1990 »

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Last edited by jbyoun1990 on Wed Mar 20, 2013 7:19 pm, edited 1 time in total.
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InvestorNewb
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Re: Conservative guy.. concerned about my investment

Post by InvestorNewb »

I'm a new investor myself, but if I was in the US - I would just put it all into a target retirement fund and be done with it.

This way you don't even have to think about it...
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
livesoft
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Re: Conservative guy.. concerned about my investment

Post by livesoft »

Welcome to the forum.

It appears to me that there is a disconnect between what you invest in (very aggressive) and what you write " I'm a pretty conservative person". So perhaps you mean conservative outside of your investments which is perfectly OK, but inside your investments you are not being conservative.

You probably should step back and read at least 2 books on investing and mutual funds. May I suggest Bogle's "Common Sense on Mutual Funds" to start with?
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retiredjg
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Re: Conservative guy.. concerned about my investment

Post by retiredjg »

Welcome to the forum!

Where is this $10k in LifeStrategy Moderate Growth Located? Sounds like it could be either a taxable account (an ordinary account that does not have any tax advantages) or an IRA/Roth IRA.

It appears what you are trying to achieve diversification in your 401k. However, splitting $500 into 8 directions is not really helpful, but it sure could be a lot of work. Even splitting $5,000 (or maybe even $50k) in 8 directions is just a lot of work with questionable benefit.

A better approach would be to think of all your money (not including the emergency fund or "safe money") as one portfolio and diversify using all the accounts, not just within the 401k account.

It looks like you have some good choices in your 401k, but again, you don't need all those funds, just a couple will do.

In order to give you a decent suggestion of where to go from here, it would be helpful for you to provide the information requested in the link below called "Asking Portfolio Questions". It can be a little bit of work, but you'll learn a lot just by doing it. With that information, someone can help you set up a portfolio that will be easy, low cost and tax-efficient (not cost you extra taxes).
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nedsaid
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Re: Conservative guy.. concerned about my investment

Post by nedsaid »

You need an Investment Policy Statement.

You need to set a target asset allocation, determine your tolerance for risk, and write down your financial goals.

What kind of investor are you? Do you want to Index everything or tilt your portfolio towards small and value? Indexing vs. slice and dice? Or do you favor another strategy?

You need to know yourself as an investor. Another poster pointed out that you say you are a conservative person but that you invest aggressively. You need to settle this issue and put it in writing on paper. Are you aggressive, moderate, conservative?

A moderate growth fund is not "safe". It will fluctuate with the markets though not as much as aggressive growth. I think you need to research how your funds performed in the recent bad markets and see how much they dropped. Are you OK with that possibly happening again? I am not sure that you fully understand market risk.

Get something down on paper. It is okay to rewrite it and change it over time. You will do better if you have a written plan. Putting it down on paper forces you to think things through. Get the Investment Policy Worksheet off the Morningstar website and get your thoughts on paper.

It looks to me like you are off to a great start. You are miles further than I was at age 23. Congratulations!!
A fool and his money are good for business.
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retiredjg
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Re: Conservative guy.. concerned about my investment

Post by retiredjg »

I wonder if I'm missing something. Almost all of this poster's money is invested at 60% stocks and 40% bonds. That is conservative, not aggressive, for a person in his/her 20's.

Why are there comments about this being aggressive?
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FNK
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Re: Conservative guy.. concerned about my investment

Post by FNK »

Hey OP,

Your problem is that you're not comfortable with how stocks work, so you're trying to second-guess yourself and the market, a rather futile exercise.

Stocks will go up and down a lot before you retire. If you want to get an extra kick for retirement, you need to let it go.

For example, when the market is down, I'm not thinking "oh, no, my investments are down". I'm thinking "good, my next 401(k) contribution is picking up cheap stuff".

If you're as conservative as you claim you are, invest in bonds. You'll need to save more, but you won't be going through volatility.
Topic Author
jbyoun1990
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Re: Conservative guy.. concerned about my investment

Post by jbyoun1990 »

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Last edited by jbyoun1990 on Wed Mar 20, 2013 7:27 pm, edited 1 time in total.
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RyeWhiskey
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Re: Conservative guy.. concerned about my investment

Post by RyeWhiskey »

jbyoun1990 wrote:Wow, thank you for ALL of your replies.
One thing that I need to clarify (due to my error) is that when I say "conservative" in the title, it was to mean that I started out as a conservative investor to begin but gotten more moderate/aggressive till recently. So it takes a bit more out of me to invest more aggressivly.. so perhaps I'm more aggressive than I think, but anyways.... it doesn't matter. Back to the topic.

I keep my mutual fund in a taxable-account, not an IRA because I want to have a more liquidity of my assets, at least until I have more overall $$$$
Also, I agree that 8 different allocations on my 401k is not necessary and definitely considering narrowing that down.
I plan increasing the American EuroPac Growth R-4 (mostly internat'l stocks), and SSgA Aggressive Strateg Bal, and then lastly I would keep some portion of the Publix stock even if it is little since it is a private stock. I'm still unsure how much I should invest to this individual stock.
Welcome to the forum. I'm 26 so I have a similar time frame on investing. Here are my thoughts:

1) Please read through the wiki located at the top right hand corner of the page. It is full of immensely valuable information and will answer questions you didn't know you had.
2) You will need to open a Roth IRA (check out the wiki, or just google it, to see about withdrawal restrictions, etc... it's quite lenient/liquid). Your LifeStrategy fund is an excellent choice but is not tax-efficient. It will need to be placed into a Roth.
3) Scrap all the funds in your 401k and pick only one to invest in. Before I (or anyone here really) can comment of which one, we will need to know all the choices available and the expense ratios of each choice. If there is a bond index fund here it may make sense to put all your 401k funds in that and switch to the (more aggressive) LifeStrategy Growth fund thereby keeping your stock/bond allocation in check and simplifying your whole investment situation.
4) You really ought to make an Investment Policy Statement. It will help you clarify your goals, thoughts, plans, etc.. and most importantly will allow you to stay the course.

Do check out the wiki and keep us posted. :sharebeer
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retiredjg
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Re: Conservative guy.. concerned about my investment

Post by retiredjg »

jbyoun1990 wrote:One thing that I need to clarify (due to my error) is that when I say "conservative" in the title, it was to mean that I started out as a conservative investor to begin but gotten more moderate/aggressive till recently. So it takes a bit more out of me to invest more aggressivly.. so perhaps I'm more aggressive than I think, but anyways.... it doesn't matter. Back to the topic.
One approach that has been tossed around for awhile is this.
  • Nobody actually knows his/her investing tolerance until it is tested. "Tested" usually means a stock market crash, like the last one which started in 2007. Therefore a reasonable approach is to start out conservative at 50/50 or 60% stocks/40% bonds and work your way up as you gain experience and as you observe your own reaction to losing money when the market crashes. Some people are steady. Some are terrified. You don't really know how you will be (although it is good to know already that you might be less tolerant of losses than some).

    One nice thing about this approach is that it does not harm your overall end game portfolio. When your portfolio is small, it does not matter what you invest in because they gains and losses will be small either way. If you spend your first years a little too conservative, you can still end up with pretty much the same portfolio in the end. This is because right now, you portfolio is growing more by how much money you put into it. The gains, if you have any, will be so small as to hardly contribute to portfolio growth.
It seems you may be instinctively following this path. I'd encourage you to stay at a conservative stock to bond ratio until there is a crash. After that, you can consider just how much more aggressive you want to be. You might even find that more conservative suits you better.


As you read the Wiki or a book or two, you will see there are several ways in which your approach that can be improved.
I keep my mutual fund in a taxable-account, not an IRA because I want to have a more liquidity of my assets, at least until I have more overall $$$$
Well, maybe OK for now. But in the long run, you don't want bonds, or funds containing bonds, in your taxable account when you have a choice. That's because bonds throw off dividends that are taxed now, not some time in the future. This means that the bonds will be taxed at your highest tax rates as you move through your lifetime. This means that you pay more tax. It is called not being tax-efficient.

There are several ways to alleviate this issue. Once is to hold your bonds in a 401k or a traditional IRA or a Roth IRA. The nice thing about a Roth iRA is that the contributions (but not the earnings) are liquid - you can take the contributions out any time you want.

Also, I agree that 8 different allocations on my 401k is not necessary and definitely considering narrowing that down.
You really only need 1 fund in your 401k. Maybe 2 later. But for now, all you need is a balanced fund (fund that contains both stocks and bonds) at a conservative or moderately conservative stock to bond ratio.

.. lastly I would keep some portion of the Publix stock even if it is little since it is a private stock. I'm still unsure how much I should invest to this individual stock.
Up to 5% of your portfolio is fine.

Let's talk about holding all of this.
  • -SSgA S&P 500 Index - 20%
    -SSgA S&P MidCap Index - 15%
    -Royce Penn Mutual Fund - 10%
    -American EuroPac Growth R-4 - 20%
    -SSgA Conservative Strateg Bal - 15%
    -SSgA Moderate Strateg Bal - 5%
    -SSgA Aggressive Strateg Bal - 10%
The first 4 funds overlap with the last 3 funds. It makes no sense. To have an easy efficient portfolio, pick one approach or the other. Do you want all in one type funds or do you want to pick the funds to make your own all in one approach?

About the last 3 funds - they all contain the same thing, just at different ratios. It's like mixing a bucket of hot water, a bucket of warm water and a bucket of cold water together. Why not just pick warm in the first place?
pkcrafter
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Re: Conservative guy.. concerned about my investment

Post by pkcrafter »

jbyoun wrote:
One thing that I need to clarify (due to my error) is that when I say "conservative" in the title, it was to mean that I started out as a conservative investor to begin but gotten more moderate/aggressive till recently. So it takes a bit more out of me to invest more aggressivly.. so perhaps I'm more aggressive than I think, but anyways.... it doesn't matter.
Actually, it does matter--a lot. How much risk you can tolerate emotionally and financially is very important. It's one of the first decisions you have to make when you develop a risk profile and portfolio strategy. Unfortunately, as retiredjg says, you probably won't know your emotional risk tolerance until you're tested in a market crash, so it's best not to get too aggressive. And as jg also said, it's more important now to grow your assets by accumulation than it is to try and maximize returns.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
illcrx
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Re: Conservative guy.. concerned about my investment

Post by illcrx »

Well first off congratulations for starting investing at 23! I knew better and didnt start until way later in life.

First of all you are checking your investing too much, you are way too diversified in my opinion.

Since time is your greatest ally in retirement investing you dont have to be SO concerned. The US is still the most robust and constant in the world, international funds are risky for a reason, there are many stock markets that are considered "international" so know if your money is going into Brazil, or Somalia.

In my opinion put a vast majority of your account into a higher risk domestic mutual fund and call it a day, if you want international dont do more than 10% unless you keep up on international markets.

As for your Publix stock thats always a risk having too much in one single company, thats up to your comfort zone. Personally unless its on a very strong growth path its risky.

But above all else you need to start a Roth IRA, if you are not familiar with Roth's then you need to read up on them but you do not pay taxes on the withdrawls. High growth mutual funds are the way to go for you youngster, good job!
pingo
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Re: Conservative guy.. concerned about my investment

Post by pingo »

retiredjg wrote:About the last 3 funds - they all contain the same thing, just at different ratios. It's like mixing a bucket of hot water, a bucket of warm water and a bucket of cold water together. Why not just pick warm in the first place?
I loved this analogy, retiredjg. :beer

For anyone else who might be interested, I thought I'd post AA info of two SSgA Strategic Balanced Funds which I found:

SSgA Aggressive Strategic Balanced Fund (85% Stock / 15% Bond)
55% S&P 500
15% Russell Small Cap Completeness® Index
15% MSCI EAFE Index
15% Barclays Capital U.S.Aggregate Bond Index

SSgA Moderate Strategic Balanced Fund (55% Stock / 45% Bond)
35% S&P 500
10% Russell Small Cap Completeness® Index
10% MSCI EAFE Index
45% Barclays Capital U.S.Aggregate Bond Index

SSgA Conservative Strategic Balanced Fund
Unknown. :(
Perhaps OP can supply?
We can imagine...probably 15% S&P 500, 5% Sm Cap Completeness, 5% EAFE and 75% Bonds, or something...

jbyoun1990,, It'd be great to see any tickers and expense ratios that you have available for the funds you list. If there are more funds in the plan, it might be good to see the info for those, too.
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