Nervous investor checking in

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Luv2savmoney
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Joined: Tue May 06, 2014 7:35 am

Nervous investor checking in

Post by Luv2savmoney » Tue May 06, 2014 6:59 pm

Age:34
Income: 110K
I was a bit late to launch in life for various reasons and hence have not been able to save from an early age.
I do feel a bit nervous around investing but feel that the more I read this forum, the less nervous I am. I really appreciate the repeat posts which say the same thing again and again since they help maintain sanity for nervous investors. Since in general I do have a disciplined approach to things, I hope it will be beneficial as long as I read this forum.
Anyways back to me,
I am less likely to mess with retirement accounts partly because there is less chance to do so.
I do like my taxable money to not drop badly especially at this stage of my life. Hopefully I will be more comfortable as the portfolio size grows
I have emergency funds saved up

Now to portfolio

I have a 401K and Roth while wife (homemaker) has a Traditional IRA. She is 29. We are maximizing contributions in these accounts since last year and are on track for doing so this year as well.

Total - approx 150K

His 401K - 96K

MM S&P 500 Index(Northrn Trst) $46K
Small Cap Index (Northern) $15K
Select PIMCO Total Return $34K
Small Cap Value (Invesco) $1K


His 401K choices

Guaranteed
investment current rate
Fixed Interest Fund 2.40%

Intermediate Term Bond

Prm Core Bond (Babson) 0.61%
Select PIMCO Total Return 0.85%

Asset Allocation/Lifestyle

RetireSMART Conservative SIA-4I 0.75%
RetireSMART Moderate SIA-5I 0.83%
RetireSMART Moderate Growth SIA-6I 0.89%
RetireSMART Growth SIA-7I 0.95%
Balanced (American) SIA-KU 0.65%

Large Cap Value

Large-Cap Value (Eaton Vance) SIA-GD 0.99%
Dvrsfd Eqty Inc (Columbia) SIA-PN 0.96%

Large Cap Core

MM S&P 500 Index(Northrn Trst) SIA-YX 0.48%

Large Cap Growth

Sel Gr Opprts (Sands/Delaware) SIA-YD 0.94%
Growth America (American) SIA-GW 0.68%

Mid Cap Value

Mid Cap Value Oppty (Columbia) SIA-OQ 1.10%

Mid Cap Core

Levd Co Stck(Fidelity Advisor) SIA-VI 1.34%

Mid Cap Growth

Sel Md Cp Gr II (TRP/Frontier) SIA-W 0.85%

Small Cap Value

Small Cap Value (Invesco) SIA-HF 1.15%

Small Cap Core

Small Cap Index (Northern) SIA-RV 0.90%

Small Cap Growth

Sel Sm Cp Gr (W&R/Wllngtn/Mnt) SIA-YC 1.06%

Intl/Global Large Value

Cap Wrld Gr and Inc (American) SIA-PY 0.80%

Intl/Global Large Core

EuroPacific Growth (American) SIA-KR 0.85%
Intl Value (Thornburg) SIA-CJ 1.0%

Intl/Global Large Growth

Premier Global (OFI) SIA-TD 1.05%

His Roth

VGSLX Vanguard REIT Index Fund Admiral Shares (REIT) -11K - 0.10%
NAESX Vanguard Small-Cap Index Fund Investor Shares - 5.5K -0.24%
VTIAX Vanguard Total International Stock Index Fund Admiral Shares - 10K - 0.14%

Her Traditional

VIMAX Vanguard Mid-Cap Index Fund Admiral Shares - 14.7K

Taxable

VWINX Vanguard Wellesley Income Fund Investor Shares - 10.5K
VGTSX Vanguard Total International Stock Index Fund Investor Shares - 3 K

Questions

1) Does this look like a good path to retirement?
2) Anything that looks like a major mistake? General comments?
3) Am I diversified enough at this stage? I can save about 1500 per month and am planning to put in VWINX and VGTSX in taxable account at 80% and 20% respectively.

Johm221122
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Re: Nervous investor checking in

Post by Johm221122 » Tue May 06, 2014 7:57 pm

Wellselly is not tax efficient
http://www.bogleheads.org/wiki/Principl ... _placement

I would take guaranteed fund at 2 4% over Pimco(kind of high exspense rate )
Welcome to forum
John
Edit what AA do you want ?

Luv2savmoney
Posts: 74
Joined: Tue May 06, 2014 7:35 am

Re: Nervous investor checking in

Post by Luv2savmoney » Tue May 06, 2014 9:56 pm

thanks for your reply. Any reason why you would recommend the 2.40% guaranteed? It has an expense ratio of 0.59%. The details about the fund are a bit confusing. It is called massmutual core sagic. On the other hand PIMCO has yielded better results

I am looking for 80/20 mix. The reason i chose VWINX was just being nervous. As I looked at the price and performance it seemed to drop the least during the recession and hence chose it for the taxable account. Any other recommendations?

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LH
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Re: Nervous investor checking in

Post by LH » Tue May 06, 2014 11:37 pm

What is your overall Asset allocation? You have a hodgepodge of things.

I treat my wife and my allocation as one portfolio. It takes a spreadsheet to do it, which may be too complex.

my allocation is
13 percent each: US TSM, US SCV US REIT Europe, australiaasia, emerging,
9.5 percent each US TIPS, US aggregate Bonds
3 percent gold

that is just what worked for me, its nothing special. But I know what it is, and I rebalance to it across accounts.

You have growth, scv, and funds I dont know what they are. I would simplify it.

You basically need

1) US TSM
2) US bonds
3) International stock

at minimum.

I would focus on getting that as cheaply as possible, which usually entails vanguard funds. A SP500 fund, is a good proxy for US total stock market, most plans will have sp500 fund, and its usually one of the cheaper expense funds.

An 80/20 mix, would come out to be 40 US TSM, 40 international stock, 20 Bonds, if you split stock 50/50. Another way is to split stocks 30 percent foreign 70 percent US. 25 foreign stock 55 US stock 20 bonds.

then you would have to decide on bonds, nominals versus TIPS, or a TIPS/nominal split.

If you can get this down, and know what you actually have, and track it, and rebalance it, then worry about getting into SCV and such.

I would just keep it real simple.

Bob's not my name
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Re: Nervous investor checking in

Post by Bob's not my name » Wed May 07, 2014 5:13 am

Johm221122 wrote:Wellesley is not tax efficient
Even when LTCG and QD are taxed at 0%? The OP is in that bracket.

Grt2bOutdoors
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Re: Nervous investor checking in

Post by Grt2bOutdoors » Wed May 07, 2014 7:49 am

Luv2savmoney wrote:thanks for your reply. Any reason why you would recommend the 2.40% guaranteed? It has an expense ratio of 0.59%. The details about the fund are a bit confusing. It is called massmutual core sagic. On the other hand PIMCO has yielded better results

I am looking for 80/20 mix. The reason i chose VWINX was just being nervous. As I looked at the price and performance it seemed to drop the least during the recession and hence chose it for the taxable account. Any other recommendations?
Money that is not to be risked should not be in the stock market. You said it yourself - "you are nervous". What is the primary function of that $1,500 per month you are saving today? Is it for a future purchase of something in the short term/mid term or long term? Wellesley holds a mix of common equity, preferred stock and bonds, is about 35% equity and 65% bonds. It typically invests in value stocks.
If holding it makes you sleep well at night and you can continue to stay the course, then I would recommend you continue with it. You don't want to fall into the trap of switching between funds due to recency bias - that is, the fund declined less in value during the last market drop and the current fund I'm in tanked, so let me switch. It is far better to select your asset allocation, draft your Investment Policy Statement and then stay the course.

Your 401k - get out of the Invesco Small Value fund - it's er is 1.15%, the Small Cap Index option is 25 basis points (bps) cheaper at 90bps. If you want to hold small value index - purchase it in your Vanguard IRA, the er there is like 24bps.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

dickenjb
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Location: Philadelphia PA

Re: Nervous investor checking in

Post by dickenjb » Wed May 07, 2014 8:15 am

Johm221122 wrote:Wellselly is not tax efficient
http://www.bogleheads.org/wiki/Principl ... _placement

I would take guaranteed fund at 2 4% over Pimco(kind of high exspense rate )
Welcome to forum
John
Edit what AA do you want ?
+1 on both these points.

I would hold the Stable Value Find over PIMCO

I would sell Wellesley and hold only Total International in taxable.

If you are so nervous, why 80/20 AA? Consider 70/30 or 60/40. At this point how much you save is more important than what you invest in.

Johm221122
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Re: Nervous investor checking in

Post by Johm221122 » Wed May 07, 2014 8:36 am

Bob's not my name wrote:
Johm221122 wrote:Wellesley is not tax efficient
Even when LTCG and QD are taxed at 0%? The OP is in that bracket.
I would not want to put $1500 a month into any taxable balanced fund.At 34 this will come large amount with large amount of yearly income.Bonds in tax deffered, savings bonds or municipal bonds.Current tax code is subject to change and balanced funds are not efficient in taxable.If I held balanced fund put in tax advantaged account.
From WIKI
"If you have a balanced fund in a taxable account, you cannot sell only the bonds (to hold bonds in a different account, or to hold fewer bonds, or to hold a different type of bonds); you have to sell the whole fund, which can result in realizing a capital gain."
From WIKI Balanced funds
" Tax considerations: In an attempt to increase a portfolio’s tax efficiency , investors having both taxable and tax-advantaged accounts may find holding individual asset class funds preferable to holding a single balanced fund. Under this scenario, tax-efficient investments (such as broad-market stock index funds/exchange-traded funds, and tax-managed funds) are held in taxable accounts and tax-inefficient investments (such as high yielding taxable bonds and actively managed stock funds) in tax-advantaged accounts. Such an asset location policy also provides flexibility for the investor to strategically realize losses in the more volatile equity asset classes held in the taxable account."

I just think balanced funds for long term investing In taxable could become tax headache that is easily avoided

John

Johm221122
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Re: Nervous investor checking in

Post by Johm221122 » Wed May 07, 2014 8:43 am

Luv2savmoney wrote:thanks for your reply. Any reason why you would recommend the 2.40% guaranteed? It has an expense ratio of 0.59%. The details about the fund are a bit confusing. It is called massmutual core sagic. On the other hand PIMCO has yielded better results

I am looking for 80/20 mix. The reason i chose VWINX was just being nervous. As I looked at the price and performance it seemed to drop the least during the recession and hence chose it for the taxable account. Any other recommendations?
Pimco has had good results because of falling interest rates and good manager.Both may not continue 2.40% guaranteed is a good rate in today's environment.
John
Last edited by Johm221122 on Wed May 07, 2014 8:45 am, edited 1 time in total.

Bob's not my name
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Re: Nervous investor checking in

Post by Bob's not my name » Wed May 07, 2014 8:45 am

A tax windfall maybe. Realizing LTCG at 0% sounds pretty good to me. Harvesting losses sounds good too. There have been many threads discussing bonds in taxable at current low rates. I don't see any particular reason to hold Wellesley at all, but the tax arguments are primarily for folks above the 15% bracket and for times when bond yields are higher than 2%.

Johm221122
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Joined: Fri May 13, 2011 6:27 pm

Re: Nervous investor checking in

Post by Johm221122 » Wed May 07, 2014 8:48 am

Bob's not my name wrote:A tax windfall maybe. Realizing LTCG at 0% sounds pretty good to me. Harvesting losses sounds good too. There have been many threads discussing bonds in taxable at current low rates. I don't see any particular reason to hold Wellesley at all, but the tax arguments are primarily for folks above the 15% bracket and for times when bond yields are higher than 2%.
Short term(right now) I see your point.$1500 a month for long term balanced fund in taxable I don't think so.
John

Bob's not my name
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Re: Nervous investor checking in

Post by Bob's not my name » Wed May 07, 2014 8:52 am

I agree with that.

pkcrafter
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Re: Nervous investor checking in

Post by pkcrafter » Wed May 07, 2014 9:45 am

I am looking for 80/20 mix. The reason i chose VWINX was just being nervous.
These statements are incompatible and may be a red flag on your overall AA.
I do feel a bit nervous around investing but feel that the more I read this forum, the less nervous I am. I really appreciate the repeat posts which say the same thing again and again since they help maintain sanity for nervous investors
.
It's true that the more you learn the more comfortable you will be with risk, but you also might have to go through a market downfall before you can really evaluate your risk tolerance.
I do like my taxable money to not drop badly especially at this stage of my life. Hopefully I will be more comfortable as the portfolio size grows
I'm not sure what the taxable comment means, but you have to look at the entire retirement portfolio as one, so it should not matter where the risk resides. Don't look at risk on a single fund basis. I don't think you'll be more comfortable when the portfolio grows because it just means you can lose more $$, but here's a little insight to help you hold under stress.

To help you cope, think of it this way: You will lose money in a crash, but the loss is in the price of your stocks, not in the amount of stock you own–it is still all there. Selling when the market is down locks in loss and that converts what should have been shallow risk and temporary loss into permanent loss.

http://www.bogleheads.org/blog/perspect ... es-series/

Smart investing is almost all about behavior. Consider lowering your AA to maybe 60/40 until you learn a bit more about risk and behavioral pitfalls, and you have experienced a drawdown.

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.

Luv2savmoney
Posts: 74
Joined: Tue May 06, 2014 7:35 am

Re: Nervous investor checking in

Post by Luv2savmoney » Wed May 07, 2014 9:08 pm

Gentlemen and ladies(if any),

thanks for the valuable insights. I have been reading a lot today and researching the same thanks to some links posted here.

I did an exercise using the funds I have exposure to in VG currently and the low cost options & my current exposure funds in 401K. I did a little research into tax efficiency of each of the funds on a spreadsheet using morningstar and ranked them as such on a simple spreadsheet.

Details are below along with expense ratios. I excluded expense ratios for VG funds as they are very low and excluded other funds in my 401K which sound a bit complicated or have high expense ratios

Efficient Funds

1) S&P 500 - MIEYX - 401K - 0.85%
2) Mid Cap Index - VIMAX - VG
3) Small cap Index - NSIDX - 401K - 0.90%
4) Small cal Index - NAESX - VG

Moderately Efficient Funds

1) Vanguard International - VGTSX - VG
2) Vanguard International Admiral - VTIAX - VG
3) Select PIMCO - MSPGX - 401K - 0.85%

Least Efficient Funds

1) REIT fund - VGSLX - VG
2) Wellesley Income fund - VWINX - VG
3) Small Cap Value - VSCAX.lw- 401K - 1.15%
4) Babson Core Bond Fund - MCBYX - 401K - 0.61%

Questions.

1) Is above looking right?
2) What would be my next step besides trying to place these funds?
Since I am limited in 401K and maximizing my contribution it seems that I cannot simply choose my asset allocation but rather force myself into an allocation..Little chicken before egg scenario here or am I overthinking it?

Waba
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Re: Nervous investor checking in

Post by Waba » Thu May 08, 2014 1:09 am

I would ditch NSIDX and move that money into VSCAC.lw

It has the higher ER but it also has had consistent good performance/good sharpe ratio over last 10yr

If you pay close to 1% for small cap fund, I would want it to be something that makes it worth it.

NSIDX consistently trails VB with 2% per year. (NSIDX has a 0.15 ER listed on Morningstar, with a 0.9 ER it would trail almost 3%)

Johm221122
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Re: Nervous investor checking in

Post by Johm221122 » Thu May 08, 2014 7:52 am

Try to think of it this way.
Pick asset allocation you want
Pick best 401 funds(500 index fund and guaranteed fund or Pimco)
Pick taxable, you want most tax efficient (total international?)
Pick IRA(what ever you need to fill AA) IRA is the catch all you can pick almost anything

Investment plan
http://www.bogleheads.org/wiki/Investme ... _statement

Give some thought to PKCRAFTER advice above

John

Luv2savmoney
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Re: Nervous investor checking in

Post by Luv2savmoney » Sun May 11, 2014 12:45 pm

Thanks for all the helpful advice guys

How does this look?

401K
MIEYX - S&P 500 index-0.48% - 72K
MCBYX - Bobson Bond Fund - 0.61% - 10K
Gauranteed return 2.4% - Sagic - 0.59% - 14K

Roth
VGSLX-REIT - 12K
VWINX - Wellesly - 15K

Traditional
VIMAX - mid cap - 10K
VEIEX - Emerging markets - 8K

Taxable
VTMSX - Tax managed small cap - 10K
VTIAX - International - 10K

After all said and done, Bonds - 21%, Stocks -72%, REIT-7%

Johm221122
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Joined: Fri May 13, 2011 6:27 pm

Re: Nervous investor checking in

Post by Johm221122 » Sun May 11, 2014 2:13 pm

Luv2savmoney wrote:Thanks for all the helpful advice guys

How does this look?

401K
MIEYX - S&P 500 index-0.48% - 72K
MCBYX - Bobson Bond Fund - 0.61% - 10K
Gauranteed return 2.4% - Sagic - 0.59% - 14K

Roth
VGSLX-REIT - 12K
VWINX - Wellesly - 15K

Traditional
VIMAX - mid cap - 10K
VEIEX - Emerging markets - 8K

Taxable
VTMSX - Tax managed small cap - 10K
VTIAX - International - 10K

After all said and done, Bonds - 21%, Stocks -72%, REIT-7%
Looks good, if you like it.Are you going to keep adding to wifes traditional?
John

Luv2savmoney
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Re: Nervous investor checking in

Post by Luv2savmoney » Sun May 11, 2014 4:15 pm

yes but both our IRAs are maxed out for this year. So next year. Any particular reason you ask?

Johm221122
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Re: Nervous investor checking in

Post by Johm221122 » Sun May 11, 2014 4:33 pm

Luv2savmoney wrote:yes but both our IRAs are maxed out for this year. So next year. Any particular reason you ask?
So you can keep adding to funds in IRA, if you didn't they would 've become seriously under weight
John

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