Is the Vanguard Balanced Index Fund all I need?

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Nerdicus
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Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Mon May 12, 2014 9:31 pm

Emergency funds: 6 months of savings
Debt: No debt
Tax Filing Status: Single with no children
Tax Rate: 15% Federal, 5% State
State of Residence: AZ
Age: 38
Desired Asset allocation: 60% stocks / 40% bonds
Desired International allocation: Not interested

I am just wondering if the Vanguard Balanced Index Fund is all I really need? I’ve been looking for a good 60/40 passively managed index fund to invest the maximum amount ($5500) that you can by law into a tax deferred mutual fund and will dollar cost average it on a weekly basis, and once I hit 50 I will then do the $6500 catch-up amount. Also, I have no interest in REIT’s, international investments, multi-fund portfolios, timing the market, lump sum investing, etcetera. Because I am trying to keep things as simple as I possibly can and kind of want to do things by the book. I mean I guess I could do a lot worse I suppose. But what do you all think? Does this seem like a reasonable and neutral approach to investing, especially with the Vanguard Balanced Index Fund? I am keen to hear your thoughts gang. Cheers!

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by joe8d » Mon May 12, 2014 9:32 pm

In your case,Yes.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by HurdyGurdy » Mon May 12, 2014 9:44 pm

https://personal.vanguard.com/us/funds/ ... IntExt=INT

Indeed. Next year convert to Admiral shares ($10,000 min) at 0.09% of expense rates.
:sharebeer

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by stemikger » Mon May 12, 2014 10:29 pm

Posted by Nerdicus
Does this seem like a reasonable and neutral approach to investing, especially with the Vanguard Balanced Index Fund? I am keen to hear your thoughts gang. Cheers!
Nerdicus Posts: 6Joined: 7 May 2014
Absolutely. This is a great fund and one John Bogle keeps money in for his Grandchildren. In Common Sense On Mutual Funds, he says this is the ultimate in simplicity and it works.

You have a perfectly balanced and diversified portfolio with no fancy bells and whistles. It has everything one will need possibly for their lifetime.

When I retire, I plan on moving most of my 401K into this fund.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by freebeer » Mon May 12, 2014 10:57 pm

Of course optimizing for US only exposure ignores 2/3 of the global market capitalization, which is contrary to the core Bogleheads principle of diversification ("own the market"). It is also, arguably, performance chasing writ large: over the last 50 years the US market has out-performed ROW, but past performance is not necessarily a predictor of future results. And do you really want your investment allocation to, say, the global auto industry to include only #2 and #5 out of the top 10 manufacturers (and so on for other industries)?

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by ryk1861 » Mon May 12, 2014 10:57 pm

If you have a healthy portfolio in this fund, you are doing better than most.

Often, when discussing the intricacies of fund selection, asset allocation (with all of the slicing and dicing and theory), it is easy to lose sight of the most important factor in wealth creation over time--regular investing (preferably in low cost funds). Much of the rest is gilding the lily--but it's also the interesting part of the process for some.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Mon May 12, 2014 11:14 pm

Thanks for the feed back. Now what about the dollar cost approach? I am talking about investing whatever the legal limit is to invest at the time ($5500 at the moment) in a tax deferred mutual fund. Should I do it weekly, bi-weekly, monthly, quarterly? I am thinking of doing it like so $5500 divided by 52 and investing that amount every Thursday. Sound like a good idea?

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by supertreat » Mon May 12, 2014 11:21 pm

Statistically speaking - you're better off fulling investing all funds ASAP to maximize growth.
Assets - Liabilities = Equity + (Income - Expenses)

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Mon May 12, 2014 11:42 pm

supertreat, did you mean picking just 1 day out of the year where the share price looks really low and then investing the full $5500 all at once and then only doing this once a year from then on and on a yearly basis? Or do you mean investing the initial $5500 investment into the fund then doing a dollar cost average like I suggested? Please clarify.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by stemikger » Tue May 13, 2014 12:18 am

Nerdicus wrote:supertreat, did you mean picking just 1 day out of the year where the share price looks really low and then investing the full $5500 all at once and then only doing this once a year from then on and on a yearly basis? Or do you mean investing the initial $5500 investment into the fund then doing a dollar cost average like I suggested? Please clarify.

Dollar Cost Averging vs. Lump Sum investing can be a tough concept to understand. But as Supertreat, said, for the long term investor, Lump Sum Investing usually works out better for wealth creation. Also, picking a day where the market is down, sounds great in theory, but that is market timing and that can never really be known, so putting all $5,500 in all at once no matter where the market is will most likely be a better way to go (long term).

Here are a couple of videos that explains it in more detail.

http://www.youtube.com/watch?v=1eWLe1oh4zw

https://www.youtube.com/watch?v=WT05w_ZMEZQ
Last edited by stemikger on Tue May 13, 2014 12:22 am, edited 1 time in total.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Johm221122 » Tue May 13, 2014 12:19 am

401? I don't see you mention this
John

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by DSInvestor » Tue May 13, 2014 1:02 am

Do you have any retirement plan offered at work? A 401(k), 403(b), 457(b), SIMPLE-IRA, pension plan?

If you're self employed, you can consider a self employed retirement plan like Solo 401k which would allow you to contribute much more than $5,500/yr to Traditional IRA or Roth IRA.

Note that most Vanguard mutual funds like Vanguard Balanced Index fund have a minimum initial investment of $3,000 to open the fund. After the fund account has been established, additional investments can be as little as $100. Some thing to consider if you're not going to lump sum into an IRA account for the full $5,500.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by HurdyGurdy » Tue May 13, 2014 1:13 am

Nerdicus seems to have a 401k at work, with Fidelity funds that he does not like.
http://www.bogleheads.org/forum/viewtop ... 0#p2055680

OP did not mention the available funds in their 401k.

Since OP is in the 15% marginal tax bracket, apparently it seems OK to concentrate on a Roth IRA.

However, more info is needed! what are your available funds, with expense rates?

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by nisiprius » Tue May 13, 2014 8:46 am

In my opinion, balanced Index would be fine. Yes, it is really all you need.

1) You say you want "a good 60/40 passively managed index fund" and Vanguard Balanced Index Fund (VBINX) is exactly that. But I would ask: the second most important decision (after "how much to save") is stock allocation, so, just to be clear, you've thought about whether you want 60% stocks? It's a completely sensible number, I'm just asking have you thought about it?

2) Although I think balanced index is all you need, I feel that I need to complicate things by mentioning Vanguard LifeStrategy Moderate Growth, VSMGX. Maybe you've already considered it and rejected it. If so, you don't need to read any more.

The reason I mention it is that in my own portfolio I personally do not feel comfortable totally ignoring today's conventional wisdom, which says that you should hold some international stocks. For example, if you were to hold nothing but VBINX, and ran Vanguard's Portfolio Analysis tool (for what it's worth, which is IMHO not much), it would show this:

Image

Roughly, "VSMGX is like VBINX but with international." Just as convenient. Same $3,000 minimum.

As of 2014, LifeStrategy is indeed a 60/40 portfolio consisting entirely of index funds, and Vanguard describes the family by saying "The LifeStrategy Funds are a series of broadly diversified, low-cost funds with an all-index, fixed allocation approach." However, in the past it did not use a strictly fixed allocation, and the exact composition of what's in the funds has changed a couple of times. I don't think this ever was important, and it sounds as if the plan is to stick with "all-index, fixed allocation" going forward.

The expense ratio, I am surprised to see, is actually lower than Balanced Index, 0.15% versus 0.24% for Balanced Index. I personally do not think the difference between 0.15% and 0.24% matters. When you get to $10,000, you can promote VBINX to Admiral Shares, with a 0.09% ER, while Admiral Shares are not available for VSMGX. I don't think the difference between 0.15% and 0.09% matters, either.

Finally, in the past, LifeStrategy has behaved very similarly to Balanced Index--and has, in fact, underperformed Balanced Index--which I think is unimportant but didn't want to hide it:

Image

It's all about whether or not you want international. I am NOT making any kind of recommendation, I am saying that part of your homework is that you ought to make a conscious decision, for yourself, between these two comparable funds.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by DSInvestor » Tue May 13, 2014 9:00 am

Nerdicus, I saw that you posted this in anther thread which indicates that you have a 401k with a generous employer match. I hope you're not stopping the 401k contributions and losing that employer match to focus on IRA. The investment options in the 401k would have to be absolutely horrendous to give up a 75% match on every dollar contributed. Perhaps there is an asset allocation or balanced fund that matches your desired 60/40 AA.

If you ever change jobs, you can rollover the 401k assets to an IRA and get better investment options. Please let us know what investment options are available in your 401k.
Nerdicus wrote:Wow! I've learned more from this one post as well as this website than from all of the investment books I've read. You all rock! Anyway, since I am on a role, I am going to throw another question your way.

I've been investing into my company 401(k) for the last 4 years but just enough to get the company match. So I do have a sizable chunk sitting in it. Yet I don't have the money invested in anything, it's just sitting in a Fidelity Stable Value Fund. Well, the funds available in my 401(k) are pretty lame and the Brokerage Link rates & restrictions are just ridiculous, so I am thinking of stopping my contributions into my 401(k) and focusing solely on investing into a Vanguard IRA. Of course I am well aware of the rule of thumb that you should invest just enough into the 401(k) to get the company match otherwise if you don't than it's free money that you're leaving on the table.

However, my reasons for wanting to stop with my 401(k) have to do with my wanting complete control over my money and where I invest it, the limitations of my 401(k), using my 401(k) contributions to instead invest into a Vanguard IRA and the simple fact that I hate Fidelity.

So should I stop with the 401(k) contributions and focus instead on a Vanguard IRA or will I be shooting myself in the foot by do this and will regret it later on down the road?

Oh, just a FYI. I am basically getting a guaranteed 75% return via the company match for every dollar I contribute
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by House Blend » Tue May 13, 2014 9:38 am

Nerdicus wrote:Now what about the dollar cost approach? I am talking about investing whatever the legal limit is to invest at the time ($5500 at the moment) in a tax deferred mutual fund. Should I do it weekly, bi-weekly, monthly, quarterly? I am thinking of doing it like so $5500 divided by 52 and investing that amount every Thursday. Sound like a good idea?
Nerdicus,

The frequency that you make contributions will make absolutely no practical difference in the long run. Do what you like best. Me, I like round numbers, so I might do $500 once/month and take a holiday in December.

The one thing I would be cautious about, assuming you are going to set this up for automated investing, is that the window for 2014 contributions runs from 1/1/2014 until 4/15/2015, and then the window for 2015 runs from 1/1/2015 until 4/15/2016, etc. If your goal is to hit $5500 in 2014 contributions by some specific date, you should be using a divisor other than 52.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Tue May 13, 2014 11:48 am

Thank you for your posts everyone. And yes, I do have a 401(k) that I am going to continue to contribute too and won't stop. I realize that it would be foolish to pass up on a guaranteed 75% return via the company match, and will role it over into an IRA should my job ever end. Yet for some reason, when I did this post it didn't occur to me too mention my 401(k). My bad!

Now the overall point of this post was to determine if the traditional 60/40 allocation via dollar coast averaging in the Balanced Index Fund is the best approach to investing. Because I kept defaulting back to it every time I would read an article, read a book, saw a video or whatever about investing with varies different opinions and predictions on different asset allocations, the varies markets and the future of investing. It's all too confusing for a first time investor like myself and to me it seems like keeping it simple and doing things by the book is the best approach. However, I chose to come to boggle heads and make a post because the people hear seem to be more sane and practical about investing.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by DSInvestor » Tue May 13, 2014 1:43 pm

Nerdicus wrote:Now the overall point of this post was to determine if the traditional 60/40 allocation via dollar coast averaging in the Balanced Index Fund is the best approach to investing. Because I kept defaulting back to it every time I would read an article, read a book, saw a video or whatever about investing with varies different opinions and predictions on different asset allocations, the varies markets and the future of investing. It's all too confusing for a first time investor like myself and to me it seems like keeping it simple and doing things by the book is the best approach. However, I chose to come to boggle heads and make a post because the people hear seem to be more sane and practical about investing.
IMO, $5500 once a year is still dollar cost averaging just less frequently. In 20-40 years, it's not going to matter whether you contributed annually, quarterly, monthly, bi weekly or weekly. Your savings rate is the big thing. Even if you wanted to go with a monthly contribution, your first contribution to start the fund account in Vanguard Balanced Index fund, assuming you don't yet have a Vanguard IRA account, must be at least $3,000 to meet the minimum initial investment requirement. Once the fund account is established subsequent contributions can be as little as $100.

Another poster mentioned that the IRA contribution window for 2014 starts from 01/01/2014 to 04/15/2015. Be aware that if you use automatic transactions, any automatic contribution made after 01/01/2015 will be coded for 2015 tax year even if you have not maxed out 2014 contribution room. Any manual IRA contribution made between 01/01/2015 and 04/15/2015 will give you the option of coding the contribution for tax year 2014, 2015 or both tax years.

I will also note that what options available in your 401k may impact what is appropriate for your IRA. To get better suggestions, please post the investment options and expense ratios in the 401k. For example, if your 401k has a something like Fidelity Four In One Index fund with 85/15 AA, we may suggest that you go with a balanced fund with more bonds in the IRA, say 40/60 or 30/70, to give your overall portfolio your desired 60/40 AA. If we find a decent 60/40 fund in 401k, Vanguard Balanced Index may be a good choice in the IRA.
Last edited by DSInvestor on Tue May 13, 2014 2:12 pm, edited 1 time in total.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by placeholder » Tue May 13, 2014 2:11 pm

DSInvestor wrote:IMO, $5500 once a year is still dollar cost averaging just less frequently.
I don't understand what you mean.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by chaz » Tue May 13, 2014 2:23 pm

A very good fund - simplicity + low ER.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by DSInvestor » Tue May 13, 2014 2:28 pm

placeholder wrote:
DSInvestor wrote:IMO, $5500 once a year is still dollar cost averaging just less frequently.
I don't understand what you mean.
If OP is going to max out his IRA contribution for the next 20-30 years by making annual contributions of $5500 or whatever the max IRA contribution may be, that's dollar cost averaging with an annual contribution.

There not much difference between contributing $5500 once a year or $1375 4 times a year or $458 12 times a year. Over the next 30 years, they're all DCAing money as it becomes available. Just go with the simplest method that works best for your situation.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Christine_NM » Tue May 13, 2014 2:34 pm

Bal Index scales up nicely. If you use it, do not feel that after a few years of contributions you must dismantle it into some new collection of funds. It works best when you work least at "planning".

Put the max in every January, and save during the year for the following January.

P.S. It's my largest fund. I added some Total International but it has not made a real difference. I do not rebalance between those two funds.
16% cash 48% stock 36% bond. Retired, w/d rate 2.85%

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Tue May 13, 2014 2:57 pm

Here are the funds available in my 401(k) along with their expense ratios.

Before I came to Boggleheads and considered Vanguard
I thought of creating the following 60/40 within my 401(k) below. What do you think? Do you have any better recommendations for 60/40 fund with what I have to work with down below? Any help would be much appreciated

Additionally, I have a lump sum in the lower 5 figure range sitting in a non-ivested account within my 401(k)
How should and when should I distribute this within my 401(k) since the stock and bond share prices for each of these funds is at an all time hi?

60% stock allocation
Vanguard Institutional Index Fund Institutional Plus Shares (VIIIX) Large Blend 20% allocation
Vanguard Mid-Cap Index Fund Institutional Plus Shares (VMCPX) Mid-Cap Blend 20% allocation
Vanguard Small-Cap Index Fund Institutional Plus Shares (VSCPX) Small Blend 20% allocation

40% bond allocation
Dodge & Cox Income Fund Intermediate-Term Bond 18% allocation
SSgA U.S. Bond Index Non-Lending Series Fund Class C Intermediate-Term Bond 18% allocation
Northern Trust Treasury Inflation-Protected Securities Index Fund - Non Lending Inflation-Protected Bond 4% allocation







Stocks
Vanguard Institutional Index Fund Institutional Plus Shares (VIIIX) Large Blend 0.02%

Wellington Mid Cap Opportunities Portfolio Mid-Cap Growth 0.53%

Pyramis Small Company Fund Small Growth 0.86%

Vanguard Small-Cap Index Fund Institutional Plus Shares (VSCPX) Small Blend 0.06%

Vanguard Mid-Cap Index Fund Institutional Plus Shares (VMCPX) Mid-Cap Blend 0.06%

American Funds EuroPacific Growth Fund Class R-6 (RERGX) Foreign Large Blend 0.50%

Aberdeen Emerging Markets Fund Institutional Class (ABEMX) Diversified Emerging Mkts 1.10%

SSgA Global Equity ex U.S. Index Non-Lending Series Fund Class C Foreign Large Blend 0.19%

Bonds
Dodge & Cox Income Fund Intermediate-Term Bond 0.16%

SSgA U.S. Bond Index Non-Lending Series Fund Class C Intermediate-Term Bond 0.06%
(Note that the SSgA fund tracks the Barclasy Capital US Aggregate Bond Index)

Northern Trust Treasury Inflation-Protected Securities Index Fund - Non Lending Inflation-Protected Bond 0.07%

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by DSInvestor » Tue May 13, 2014 3:27 pm

nerdicus, you have amazing 401k investment options. In fact, your 401k may be one of the best if not the best I've seen posted here at Bogleheads. You do not need 6 funds in the 401k. If you're willing to go with Vanguard Balanced Index which is just US stocks and bonds in 60/40 AA, you can do something similar in the 401k using separate funds:

Option 1: Very simple - 2 funds.
401k:
60% Vanguard Institutional Index Fund Institutional Plus Shares (VIIIX) Large Blend 0.02% US Stocks
40% SSgA U.S. Bond Index Non-Lending Series Fund Class C Intermediate-Term Bond 0.06% Bonds

IRA:
100% Vanguard Balanced Index

Option 2:
If you wanted to approximate Total Stock Market in the 401k, hold Institutional Index and Small Cap Index in 4/1 ratio for the US stock allocation:
401k:
48% Vanguard Institutional Index Fund Institutional Plus Shares (VIIIX) Large Blend 0.02%
12% Vanguard Small-Cap Index Fund Institutional Plus Shares (VSCPX) Small Blend 0.06%
40% SSgA U.S. Bond Index Non-Lending Series Fund Class C Intermediate-Term Bond 0.06%

IRA:
100% Vanguard Balanced Index

You have an excellent 401k plan and should consider maxing it out for 17.5K. It's impossible to know what the market will do next. You've done the work to come up with desired asset allocation so I assume you're aware that stocks can fall 50% at any time and you've got a large chunk in bonds which will be more stable. Get comfortable with that fact and then move on. Decide on the mix of funds that fills your desired AA and move into it ASAP. You can never tell what the market will do. I know it seems like a lot of money now to put at risk but 30 years from now, this sum of money is going to look tiny. In the early years of accumulation, your new contributions are going to provide most of the growth in the portfolio. Your portfolio is low 5 digits today but you may be contributing 5 digits per year.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Tue May 13, 2014 3:51 pm

Option 1: Very simple - 2 funds.
401k:
60% Vanguard Institutional Index Fund Institutional Plus Shares (VIIIX) Large Blend 0.02% US Stocks
40% SSgA U.S. Bond Index Non-Lending Series Fund Class C Intermediate-Term Bond 0.06% Bonds

Yeah, I like this option because both funds track two important benchmarks which are often mentioned in articles.
The S&P 500 and Barclays Capital U.S. Bond Index Fund.

The question that I have is should I wait for the share prices to drop in both of these funds because there NAV is at an all time high? Additionally, what about the dodge and cox income fund I mentioned? How about doing that one instead of the SSgA U.S. Bond Index you mentioned? Also, if I invest in option 1 how and when should I rebalance?

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by DSInvestor » Tue May 13, 2014 4:02 pm

Nerdicus wrote:The question that I have is should I wait for the share prices to drop in both of these funds because there NAV is at an all time high? Additionally, what about the dodge and cox income fund I mentioned? How about doing that one instead of the SSgA U.S. Bond Index you mentioned? Also, if I invest in option 1 how and when should I rebalance?
You have thought about your AA, and presumably understand that stocks can suffer big declines of say 50% at any time. Get comfortable with this fact and move on. So your portfolio will be 60% stocks and if stocks fall 50%, that's a 30% decline in the overall portfolio. If you cannot sleep well with a 30% decline in your portfolio, lower your stock allocation. What if stocks continue to rise as they have done since 2009? Haven't you been in cash or stable value for 4 years already? Spend the most time on your asset allocation and your investment plan. Once you have that, fund the plan and stick to it. Ignore the noise. Don't read financial magazines. Don't watch CNBC. That stuff will just scare you and make you panic and sell or make you too nervous to invest. Stick to your plan and keep funding the portfolio through all market conditions. Come to terms with the fact that you cannot time the market.

I would go with the bond index fund rather than the actively managed Dodge and Cox fund. Here is a morningstar growth chart comparing Dodge and Cox income against two bond index funds VBMFX and AGG ETF. Notice that the dodge and cox income fund is more squiggly than the index funds and had larger declines in 2008/2009:
Image

Maybe rebalance once a year or if you see that the portfolio has deviated from your 60/40 target AA by a wide margin. If you seek 60/40 AA and see that the stocks is over 65% or under 55%, maybe it's time to rebalance.
Last edited by DSInvestor on Tue May 13, 2014 4:27 pm, edited 1 time in total.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by placeholder » Tue May 13, 2014 4:22 pm

DSInvestor wrote:If OP is going to max out his IRA contribution for the next 20-30 years by making annual contributions of $5500 or whatever the max IRA contribution may be, that's dollar cost averaging with an annual contribution.
That would only be DCA if you had a lump sum of money you were dribbling out to Roths over the period of years otherwise investing money as it becomes available isn't DCA it's just investing to plan.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Christine_NM » Tue May 13, 2014 4:28 pm

Nerdicus -

About the Dodge and Cox bond fund -- can it do anything that makes it worth the higher expense ratio? Are the managers smarter than the bond market? Can they really do anything if/when prices fall, or are they locked into the fund's objectives?

I think most of us here answer these questions in the negative and would go for the lower-priced fund.

Don't forget to be happy if bond index fund prices fall, you are buying low.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by ryk1861 » Tue May 13, 2014 5:04 pm

Is the Vanguard Balanced Index Fund all I need?
No, I think beer, pizza, and running shoes are also quite necessary. :D

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by pjstack » Wed May 14, 2014 1:48 am

I've noticed that the term "all time high" is used frequently, but I don't think the users really understand what that term really means.

"All time high" means that the market will never rise to that level again. The market will forever be lower than it is right now.

Do people really believe that? I doubt it, but just the use of the term conjures up a goblin in your head that makes investing seem more scary than it is. It leads some people to dither and attempt to market time.

In my opinion people should erase the phrase "all time high" from their vocabulary. (You aren't going to live long enough to experience "all time", anyway!)
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Thu May 15, 2014 9:15 am

I was just researching my Fidelity 401(k) and found there is a thing called Brokeragelink, which allows me to invest my contributions and company match into investments outside of the my 401(k) funds, so now I can do the Vanguard Balanced Index Fund (VBINX). Well, I’m already doing the 6% just to get the company match and have around $17k but it’s in a non-invested fund, so here is what I am thinking of doing. Transferring the minimum $3k requirement to open a VBINX account and then upping my contributions to 10% and have them invest directly into it. Yet the share price is very high so I thought about waiting until it goes down a bit to maybe $20 a share and then transfer the other $14k into it. But what do you all think? Does this seem like a wise decision and approach with my money by doing all of my investing through my 401(k), doing a 10% contribution and waiting for share prices to go down to $20 or so to transfer the other $14k? Or do you have a better suggestion(s)? I am all ears and could use your advice. I ask about my approach because this will save me another $3k out of pocket that I really don’t have right now to open up a VBINX IRA directly through Vanguard.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Toons » Thu May 15, 2014 9:30 am

Yes ,Keep It SImple :happy
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Christine_NM » Thu May 15, 2014 9:58 am

Nerdicus -

$20 is very low for Bal Index NAV. You would be waiting a long time. If you must, aim for $25 or so. $17k is a small amount compared to what you will have eventually.

Holding out for a particular price is more likely to derail your plan than to be some kind of significant bargain.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by chaz » Thu May 15, 2014 10:44 am

Christine_NM wrote:Nerdicus -

$20 is very low for Bal Index NAV. You would be waiting a long time. If you must, aim for $25 or so. $17k is a small amount compared to what you will have eventually.

Holding out for a particular price is more likely to derail your plan than to be some kind of significant bargain.
I agree. Timing is risky.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by fire5soon » Thu May 15, 2014 10:53 am

Nerdicus wrote:I was just researching my Fidelity 401(k) and found there is a thing called Brokeragelink, which allows me to invest my contributions and company match into investments outside of the my 401(k) funds, so now I can do the Vanguard Balanced Index Fund (VBINX).
Typically Fidelity charges $75 per transaction for Vanguard funds. Be careful that they don't have high fees/charges/commissions for Brokeragelink transactions as well.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by abuss368 » Thu May 15, 2014 10:54 am

Jack Bogle has often written in his many excellent books that a simple balanced index fund would serve most investors.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by InvestorNewb » Thu May 15, 2014 11:23 am

60/40 allocation seems heavy on bonds for a 38 y.o., in my opinion.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by DSInvestor » Thu May 15, 2014 11:29 am

fire5soon wrote:Typically Fidelity charges $75 per transaction for Vanguard funds. Be careful that they don't have high fees/charges/commissions for Brokeragelink transactions as well.
Excellent point by fire5soon. Here's what I find when I look up Vanguard Balanced Index at Fidelity.com:
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Thu May 15, 2014 11:56 am

Yeah, the $75 is an initial transaction fee whenever you move a certain amount from one fund to the other within your 401(k), not when you do contributions from your paycheck. So I'd be charged the $75 for either the initial $3k requirement and/or for the full amount I'd transfer over.
Last edited by Nerdicus on Thu May 15, 2014 12:10 pm, edited 1 time in total.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Thu May 15, 2014 11:58 am

Yet the only problem is that the Balanced Index fund will not turn into an Admiral Shares fund once it reaches a certain amount, so I am likely to go with the LifeStrategy Moderate Growth fund instead.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Thu May 15, 2014 12:05 pm

InvestorNewb wrote:60/40 allocation seems heavy on bonds for a 38 y.o., in my opinion.
I know it does, but I am adamant about doing a traditional 60/40 in a hybrid index fund since it'll do the rebalancing itself. Additionally, both the VBINX and VSGMX funds weren't hit as hard in 2008 like most other funds (i.e. Vanguard 500) and if you do the $10,000 growth comparison between the Vanguard 500 and both VBINX & VSGMX, you'll notice that VBINX & VSGMX aren't that far behind it. So it's about keeping a balance and also playing it safe.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by DSInvestor » Thu May 15, 2014 2:03 pm

Nerdicus wrote:Yeah, the $75 is an initial transaction fee whenever you move a certain amount from one fund to the other within your 401(k), not when you do contributions from your paycheck. So I'd be charged the $75 for either the initial $3k requirement and/or for the full amount I'd transfer over.
For regular accounts, $75 fee applies to one off purchases. Once the fund position is established $5 fee applies for automated purchases into that fund. Check to see if the $5 fee applies for the contributions via paycheck deduction.

Give some thought to the 2 fund portfolio of Vanguard Institutional index and US Bond index. It's really easy to manage. Your contributions can be set for 60/40 ratio of those two funds. Maybe once a year, check the balance of the portfolio. If you have 30K total, your AA tells you that you should have 18K in VIIIX and 12K in US bond index. If you find that VIIIX is 20K, (2K above target), simply exchange 2K VIIIX for US bond index. Piece of cake. Ignore the news, magazine and CNBC. Just follow the plan.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Thu May 15, 2014 2:37 pm

DSInvestor wrote:
Nerdicus wrote:Yeah, the $75 is an initial transaction fee whenever you move a certain amount from one fund to the other within your 401(k), not when you do contributions from your paycheck. So I'd be charged the $75 for either the initial $3k requirement and/or for the full amount I'd transfer over.
For regular accounts, $75 fee applies to one off purchases. Once the fund position is established $5 fee applies for automated purchases into that fund. Check to see if the $5 fee applies for the contributions via paycheck deduction.

Give some thought to the 2 fund portfolio of Vanguard Institutional index and US Bond index. It's really easy to manage. Your contributions can be set for 60/40 ratio of those two funds. Maybe once a year, check the balance of the portfolio. If you have 30K total, your AA tells you that you should have 18K in VIIIX and 12K in US bond index. If you find that VIIIX is 20K, (2K above target), simply exchange 2K VIIIX for US bond index. Piece of cake. Ignore the news, magazine and CNBC. Just follow the plan.
Good thinking. I just checked and in small fine print, they do charge $5 via paycheck deduction. Gotta love Fidelity! :twisted: So it looks like a Brokerage Link account might be out of the question.

Now for the "2 fund portfolio of Vanguard Institutional index and US Bond index" you suggested. I checked with 3 different Fidelity 401(k) brokers and they all stated that although the Vanguard Institutional index does have quarterly dividends, those dividends do not buy more shares but instead are added/factored into the share price. This also applies to both bond funds I mentioned earlier in this this post. If they have interest dividends and/or capital gains (both short or long-term) then they do not buy more shares but instead are added/factored into the share prices as well. In fact, this applies to all of the funds available within my 401(k). Seems kind of odd but that's what they've stated.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by DSInvestor » Thu May 15, 2014 2:56 pm

Nerdicus wrote:Good thinking. I just checked and in small fine print, they do charge $5 via paycheck deduction. Gotta love Fidelity! :twisted: So it looks like a Brokerage Link account might be out of the question.
It's actually Vanguard's fault. Vanguard funds offer rock bottom expense ratios and never charge 12b-1 fees for marketing and distribution to reimburse brokerages. This is why Vanguard funds will never be found in the "No Transaction Fee" list of funds in any brokerage firm. If you want to buy a Vanguard mutual fund, the best place to do it is at Vanguard and at Vanguard, you will have the opportunity to get promoted to Admiral shares of index funds once the fund balance exceeds 10K.

Vanguard's has the best selection of index funds IMO. Fidelity is close behind with their Spartan Index funds but they only have one asset allocation fund that holds index funds Fidelity Four-In-One Index FFNOX which maintains 85/15 AA. Vanguard has lots of asset allocation funds that hold index funds - Target Retirement series, LifeStrategy Series, Balanced Index so there's a good chance of finding one that matches any investor's desired asset allocation.

Your 401k offers institutional share classes of vanguard funds that have lower expense ratios than anything you can get in an IRA so it's a really good deal.
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Toons » Thu May 15, 2014 2:59 pm

fire5soon wrote:
Nerdicus wrote:I was just researching my Fidelity 401(k) and found there is a thing called Brokeragelink, which allows me to invest my contributions and company match into investments outside of the my 401(k) funds, so now I can do the Vanguard Balanced Index Fund (VBINX).
Typically Fidelity charges $75 per transaction for Vanguard funds. Be careful that they don't have high fees/charges/commissions for Brokeragelink transactions as well.

Just go straight to the Vanguard site and make your purchases,,,,75 bucks is 75 bucks :happy
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Fri May 16, 2014 3:07 pm

Say, I was just curios. Though it doesn't say it but the bond section of VBINX appears to track the Vanguard Total Bond Market Index Fund Investor Shares (VBMFX), and VBMFX has distributions via interests and capital gains (both short & longterm) and re-invests back into the fund buying more shares. Yet does the bond section of VBINX do the same or are the quarterly distributions strictly from the stock section? Any ideas?

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by DSInvestor » Fri May 16, 2014 3:20 pm

The election to reinvest mutual fund distributions for dividends and capital gains is made by each fund investor and not by the mutual fund. As a Vanguard investor, your options are to a) reinvest back in same fund, b) direct distributions to buy shares of other vanguard funds c) take dividends in cash via check or electronic funds transfer. You make a separate election for dividend distributions and capital gains distributions.

Most bond mutual funds make dividend distributions monthly but some, like Vanguard Inflation Protected Securities, make them quarterly.

The quarterly distributions from Vanguard Balanced Index fund will be from the entire portfolio (stocks and bonds). This is required by law.

If you look at the 2013 Qualified Dividend Income figures for Balanced Index fund, you will see that the QDI amount was 55.98% which will be from the stock dividends. The non-qualified dividend amount would be mostly from bond income.
https://personal.vanguard.com/us/insigh ... ncome-2013
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Re: Is the Vanguard Balanced Index Fund all I need?

Post by jackholloway » Fri May 16, 2014 4:39 pm

They also have the tax managed balanced fund for taxable investments, if you are planning on holding that portfolio in both.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by Nerdicus » Fri May 16, 2014 6:10 pm

Thanks for all of your support everyone. All the feedback you've given me has helped me to narrow my focus on my investing. I've chosen to go with the Vanguard Balance Index fund and just found out I can do it through a Brokerage Link account via my 401(k) and there won't be any additional fees from having it deducted from my paycheck. Also, I am not going to open an IRA but will do it exclusively through my 401(k). Now I just have one last question for you. What percentage of my income should I invest? People have mentioned doing a 10-15% range. What do you suggest? Also, just not that I cannot max out my 401(k) contributions $17,500 because I don't make that much money.

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Re: Is the Vanguard Balanced Index Fund all I need?

Post by sschullo » Fri May 16, 2014 6:19 pm

If most working Americans do what you are doing with the 60/40, the retirement crisis would end overnight!
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