Investment strategy for a crazy globe trotter

[nc1983]

Hello everyone,

Long time lurker, first time poster. I'd like to start by saying bravo on this amazing community you guys have built. It's inspiring seeing all the people here, contributing and helping people find their way through the complexities of investing.

I'll make this as brief as possible. My wife and I are both 32 and quitting our careers next April to travel the world for about 1 1/2 to 2 years. It was this, or get locked into a mortgage at 32. We decided the mortgage can come later

We currently have:
$220k in the bank, stupidly earning like .001% interest. (will have about $250k after we sell the cars)
$52k in taxable, individual stocks (Apple, Google, Netflix, Tesla)
$32k in IRA Vanguard lifestyle growth fund (during our year of travel making no income, it was recommended to look at converting this to a ROTH IRA)

We are setting aside $65k for the trip.
Leaving a $50k nest egg for our return to float us while we get back into our careers (which we aren't expecting to take long)
Hoping to invest $100k-$130k in something that will "work" for us while we are gone. It's actually my hope, to let this be a basis for a retirement fund that we will not touch and continue to contribute to upon our return.

I've met with a family recommended financial advisor. He put together a plan but my instincts and own research make concerned about his plan.

He wants me to invest about $80k in REITs and $50k in American Funds. This does not seem like sound investing to me. All the REITs are new prospects with no historical records therefor to me, seem to be extremely high risk. And I've been reading terrible things about American Funds and their high fees. Their brochure is amazing but upon further research it doesn't seem so peachy.

It seems many here are quite comfortable and happy with a Vanguard three or four fund portfolio as seen here viewtopic.php?f=10&t=88005. I realize this may be playing it safe and result in a lower yield, but it seems to make the most sense so far. I'm sure it's clear based on my verbiage that I'm new to this and I hope this doesn't come off as lazy, but I'm looking for advice.

Does this sound like a reasonable game plan? Does anyone have any suggestions or alterations I should make?

I've read over the other posts asking similar questions but I feel this career break we are taking puts a bit of a unique angle on the situation. Thanks in advance and I apologize if I'm missing any information or not asking this correctly.

[White Coat Investor]

You're right to be concerned. You mistook a commissioned salesman for an advisor.

[CABob]

I think that your instinct is correct regarding the advisor. I would suggest you consider one of Vanguard's Life Strategy or Target Retirement funds. These are set-it and forget-it funds that you don't have to be concerned about rebalancing and adjusting for the duration and they should be just find in a couple of years. You could do the same thing using a three fund portfolio except there may be a need for rebalancing.

[protagonist]

Hi, nc.

First, bravo for taking two years to see the world while you are still young. IMHO that is more valuable than making more money....you have an impressive nest egg for a 32 yo couple.

I would consider putting most of your trip money ($65K) into a "high yield" online (?) savings account and tie it to your local bank or wherever you draw your money. I use SFGI Direct, which was yielding 1.06% last I checked, and money transfers into and out of my Fidelity account rarely take more than 2 minutes of my time and rarely take more than 24 hours to process (excluding weekends).

I would invest the rest of your savings in some proportion between a low-fee broad-based stock index fund (or two or three) and some fixed income investment (I use mostly long-term high yielding CDs...others use bonds) according to your risk tolerance. This is more or less what I expect most people here to say as well. The Vanguard portfolios to which you refer make sense, and at your ages and with your savings you can afford a fair amount of risk, if you can stomach it.. I am assuming you are out of debt, and I am also assuming that you will not need to tap into much of the money when you return from your trip (i.e. you either have employment lined up or have no trouble finding employment). Otherwise you might want to keep some extra liquid cash so you won't be forced to sell in a down market to meet expenses- oh, I see you already have that covered.

Realize that a portfolio of 4 individual stocks is likely to be quite volatile. This could pose a problem if you need to sell.

I would also recommend that you get a simple book on simple investing so that you understand what you are doing and why, and so that you can make your own choices rationally, rather than being a potential victim of advice. The ones highly recommended on this forum tend to be sensible. Yes, I know, I am giving advice. So also read what I am saying critically.

Good luck. It sounds like you have a great perspective on life's priorities. Enjoy.

[nc1983]

Hi, nc.

First, bravo for taking two years to see the world while you are still young. IMHO that is more valuable than making more money....you have an impressive nest egg for a 32 yo couple.

I would consider putting most of your trip money ($65K) into a "high yield" online (?) savings account and tie it to your local bank or wherever you draw your money. I use SFGI Direct, which was yielding 1.06% last I checked, and money transfers into and out of my Fidelity account rarely take more than 2 minutes of my time and rarely take more than 24 hours to process (excluding weekends).

I would invest the rest of your savings in some proportion between a low-fee broad-based stock index fund (or two or three) and some fixed income investment (I use mostly long-term high yielding CDs...others use bonds) according to your risk tolerance. This is more or less what I expect most people here to say as well. The Vanguard portfolios to which you refer make sense, and at your ages and with your savings you can afford a fair amount of risk, if you can stomach it.. I am assuming you are out of debt, and I am also assuming that you will not need to tap into much of the money when you return from your trip (i.e. you either have employment lined up or have no trouble finding employment). Otherwise you might want to keep some extra liquid cash so you won't be forced to sell in a down market to meet expenses- oh, I see you already have that covered.

Realize that a portfolio of 4 individual stocks is likely to be quite volatile. This could pose a problem if you need to sell.

I would also recommend that you get a simple book on simple investing so that you understand what you are doing and why, and so that you can make your own choices rationally, rather than being a potential victim of advice. The ones highly recommended on this forum tend to be sensible. Yes, I know, I am giving advice. So also read what I am saying critically.

Good luck. It sounds like you have a great perspective on life's priorities. Enjoy.

You guys are all awesome thank you. This makes me feel better about what I was thinking.

Protagonist - Yes, you are right no debt so that really helps us set out worry free. We are really excited for this life changing adventure I've started reading Tony Robbins MMTG, and although the book has some great tips, I couldn't get through Tony's ramblings. That book could have been 20 pages instead of 700. I ended up finding a summary online and that was much more efficient lol. Anyway, I'll definitely check out some of the other book recommendations on here.

Thanks again!

[protagonist]

I couldn't get through Tony's ramblings. That book could have been 20 pages instead of 700. .

Thanks again!

That is the sign of a good investment book. IMHO, most books on investing could easily be 5 pages instead of 700.

[dolphintraveler]

Hi NC -

I have the same recommendations keeping it simple with the 3 or 4 fund portfolio or for your situation in particular the even more straight forward with the Vanguard's Life Strategy or Target Retirement funds previously mentioned. I would run away from the advisor and never look back. Keeping it simple would be best. I would recommend other books from
https://www.bogleheads.org/wiki/Books:_ ... nd_reviews
[You may have time to read on your travels, but if you prefer not to read about finances now, remember to start upon your return. They are not thick. One quick read is: "If You Can: How Millennials Can Get Rich Slowly" by William Bernstein which has a free download. It's the first one on the link above. We "found" this site after our return and have since read many of the books, including the Bogleheads books.]

For the amount of cash to have on return, consider having enough to get you through getting at least one job, basic needs including a form of transport. If you have family you can live with for a bit that can help with the costs of rent, etc.

We did the same thing in our early 30's - a decade ago. We took over two years off to travel around the world (our intention was prior to kids, we had already sold our house (to move for work purposes) so were mortgage free). Best thing we ever did.

Where we returned to (CA) we needed a car upon our return just to survive living with family and be able to job hunt. We did excellent outreach with our former employers (before we left, while gone, and upon return) and they hired us back - for them rather quickly - but it did take ~ 8 weeks for the first one and 12 weeks for the second. We used some of our cash cushion, time and physical abilities to do large much needed repairs on an aging parent's house (this was way more than what we could have rented, but was important to us).

It felt really good to have the large cash cushion to do those things, we had parked a vehicle at a relative's garage for the duration (not recommended, even though they drove it once a month for us and we kept it insured, it still had a mouse problem). As soon as we landed the first job we also landed a cheap short term rental which worked well (felt much larger than a hotel room, but was really small by American standards).

Though we thought we actually had enough cash when we left to also put a down payment on a house, the housing marketed had skyrocketed in our absence. This was our first signal something was wrong (we could not afford to buy the house we sold despite double the down payment and triple the income). We didn't buy again until 6 years after our return (which worked to our financial credit), due to the research and value of what was available and watching the prices decline in our area for that duration.

The stock market had climbed and so had our retirement accounts - so we were happy when we came back and found ourselves to have a higher net worth. We really lucked out - and it was luck. The stock market had climbed. It then went down, but we had secured jobs, were maxing out retirement accounts and so we were buying it on sale. Mentally (and financially) we couldn't have asked for better. If you don't luck out and it crashes while you're gone, don't panic, you will come back you will earn more, and you will be able to keep plugging away for retirement for many more years.

Other random bits:
We used First Republic for our cash ATM needs. Their free ATM reimbursements world wide really worked for us. We had our Savings transferred every month for our expected nominal (non-flight) outlay and that kept us from having to do too many money moves on the road. Our credit cards (very rarely used - flights and safari and the Galapagos) were auto paid by our savings account. We had a little bit of hard US cash (and in those days traveler's checks - may have used 1?) just in case. We had also done all the zippers (done ourselves) on pants that you could imagine for camera (now a days perhaps a phone) and daily money (we also did money belts too for passports, cards and cash).

Enjoy your adventure! One of my favorite quotes goes something like this - "the difference between an ordeal and an adventure is attitude."

- Dolphin Traveler

[halfnine]

The year you take off I would work up until your encroach the 15% tax bracket before leaving. Then the year without income convert your IRA into a ROTH up to the 15% bracket (as a married couple and off the top of my head that should allow you to convert all of it). That year also cash out any longterm capital gains at 0%. Make sure you plan enough in advance such that the capital gains will be long term (held over 1 year). And to make the most of longterm capital gains and converting the IRA put any bonds you want to own inside the IRA and hold your stocks in your taxable.

For travel, you should each have your own credit cards and each have your own travel bank accounts. By each having separate accounts you will have redundancy in case you have problems with any account or any card.

[Erwin]

Hello everyone,

Long time lurker, first time poster. I'd like to start by saying bravo on this amazing community you guys have built. It's inspiring seeing all the people here, contributing and helping people find their way through the complexities of investing.

I'll make this as brief as possible. My wife and I are both 32 and quitting our careers next April to travel the world for about 1 1/2 to 2 years. It was this, or get locked into a mortgage at 32. We decided the mortgage can come later

We currently have:
$220k in the bank, stupidly earning like .001% interest. (will have about $250k after we sell the cars)
$52k in taxable, individual stocks (Apple, Google, Netflix, Tesla)
$32k in IRA Vanguard lifestyle growth fund (during our year of travel making no income, it was recommended to look at converting this to a ROTH IRA)

We are setting aside $65k for the trip.
Leaving a $50k nest egg for our return to float us while we get back into our careers (which we aren't expecting to take long)
Hoping to invest $100k-$130k in something that will "work" for us while we are gone. It's actually my hope, to let this be a basis for a retirement fund that we will not touch and continue to contribute to upon our return.

I've met with a family recommended financial advisor. He put together a plan but my instincts and own research make concerned about his plan.

He wants me to invest about $80k in REITs and $50k in American Funds. This does not seem like sound investing to me. All the REITs are new prospects with no historical records therefor to me, seem to be extremely high risk. And I've been reading terrible things about American Funds and their high fees. Their brochure is amazing but upon further research it doesn't seem so peachy.

It seems many here are quite comfortable and happy with a Vanguard three or four fund portfolio as seen here viewtopic.php?f=10&t=88005. I realize this may be playing it safe and result in a lower yield, but it seems to make the most sense so far. I'm sure it's clear based on my verbiage that I'm new to this and I hope this doesn't come off as lazy, but I'm looking for advice.

Does this sound like a reasonable game plan? Does anyone have any suggestions or alterations I should make?

I've read over the other posts asking similar questions but I feel this career break we are taking puts a bit of a unique angle on the situation. Thanks in advance and I apologize if I'm missing any information or not asking this correctly.

I wish I had the wisdom and courage to embark in the adventure you are about to do. I was smart to pull the plug at 55 (one minute after I determined that I had enough to sustain us for the rest of our lives). and have traveled enough since then. But there is nothing better than to do it when you are young. I leave the investments advice to others. Enjoy it!!!

[protagonist]

I wish I had the wisdom and courage to embark in the adventure you are about to do. I was smart to pull the plug at 55 (one minute after I determined that I had enough to sustain us for the rest of our lives). and have traveled enough since then. But there is nothing better than to do it when you are young. I leave the investments advice to others. Enjoy it!!!

Having done it several times in my youth (typically with at least two powers of ten less money than the OP and virtually no security), I would second that sentiment. Among other things, now that I am in my early 60s and retired for 7 years, I find it freed me from the "bucket list syndrome" of so many things left to do in life and so little time. That makes life simpler and more content in retirement. On top of which, I think (for reasons that do not make apparent sense to me) that one tends to be more adventurous and more of a risk-taker in one's youth, which makes adventure that much more rewarding. The risk/reward relationship, as applied to almost everything, might be one of the few absolute truths in the universe.

[Taylor Larimore]

We currently have:
$220k in the bank, stupidly earning like .001% interest. (will have about $250k after we sell the cars)
$52k in taxable, individual stocks (Apple, Google, Netflix, Tesla)
$32k in IRA Vanguard lifestyle growth fund (during our year of travel making no income, it was recommended to look at converting this to a ROTH IRA)

nc1983:

Welcome to the Bogleheads Forum and thank you for your complimentary remarks.

I admire you for your desire to see the world while you have the opportunity.

I would not invest funds in a taxable account into a target-type fund which are tax-inefficient. Either stocks or bonds will be in the wrong type account.

In my opinion, The Three Fund Portfolio could be ideal for the reasons listed in the link.

Best Wishes.
Taylor

[supalong52]

We're doing something similar. I'm 35, wife is 29. Leaving jobs to travel for nine months. We're leaving in two and a half months. There's a lot to plan. Wish you the best of luck!

ETA:

We stick mostly to a three-fund portfolio (U.S. stock, int'l stock, BND), but threw in a muni bond fund for kicks given our asset allocation, availability of tax advantaged space and tax bracket.