beginner looking for some help with roth ira allocation!

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dthomas714
Posts: 2
Joined: Fri Aug 22, 2014 11:33 pm

beginner looking for some help with roth ira allocation!

Post by dthomas714 » Wed Feb 03, 2016 6:51 pm

hello,
i am 27 years old 28 this march. i have a Roth Ira with vanguard with $3,522.19 in the target date 2045 fund-not sure how much i like this because hasnt even beaten s&p500. i also have about $3,500 in vghcx health care fund. the reason my portfolio is almost 50-50 split with alot toward the healthcare sector is because of vanguards minimums. So for a while depending on which funds i will buy my portfolio will be split evenly with all my funds...is that correct? since the target date is very large cap heavy . i was thinking of buying into mid cap growth fund etf, and consumer staples fund. what i need to figure out is which funds to complete my portfolio and what percent to put in each one after i have bought all the funds i need. thanks for your help! i also will be opening a roth for my wife who is 26. should i buy the same funds for her or different ? and which ones!? thanks!

mhalley
Posts: 5838
Joined: Tue Nov 20, 2007 6:02 am

Re: beginner looking for some help with roth ira allocation!

Post by mhalley » Wed Feb 03, 2016 7:56 pm

The target date fund has not beaten s&p due to the fact that it has a large % of international equities which has lagged lately, plus is not 100% stocks. So you are not comparing apples to apples when you try to compare the two funds. You and your wife should come up with a reasonable asset allocation for your overall portfolio. What each has in their account is unimportant.
Bogleheads are not that much into sector funds, with the exception of a fair amount liking Reits. A fair amount also agree that there is potential for greater returns from tilting toward small and value. There are many portfolios out there, having various percentages of the various funds. Which portfolio will win in the long run is unknown, which is why most bogleheads go with a simple three fund portfolio.
https://www.bogleheads.org/wiki/Three-fund_portfolio
The most important thing is to pick a portfolio you are happy with and stick to it. Check out some of these portfolios, and if one strikes your fancy read up on why the person that crafted the portfolio did so before jumping into it.
From White Coat Investors Blog:
"The truth is that no one knows which portfolio is going to outperform in the future. You can change all the factors you want- more or less diversification, additional risks/factors, lower costs vs additional risk or diversification, more of this and less of that. Does it matter? Absolutely. Take a look at Madsinger’s Monthly Report some time. But it doesn’t matter that much. No diversified portfolio in that report has done better than 1-2% per year more than a similarly risky portfolio over the last 15 years. Now 1-2% does matter, especially over long periods of time, but keep in mind the edge that a very complex portfolio might provide over a very simple one can easily be eaten up by advisory fees, behavioral errors, and poor tax management.
I suggest you pick a portfolio you like and think you can stick with for a few decades, and then do so. Eventually, any given portfolio will have its day in the sun. Just don’t continually change your portfolio in response to changes in the investment winds. This is the equivalent of driving while looking through the rear view mirror, or, as Dr. Bernstein likes to phrase it, skating to where the puck was."

http://whitecoatinvestor.com/150-portfo ... han-yours/

investor1
Posts: 1040
Joined: Thu Mar 15, 2012 8:15 pm

Re: beginner looking for some help with roth ira allocation!

Post by investor1 » Wed Feb 03, 2016 8:13 pm

I'd put it all in the TD 2045 fund.

mcraepat9
Posts: 936
Joined: Thu Jul 16, 2015 11:46 am

Re: beginner looking for some help with roth ira allocation!

Post by mcraepat9 » Wed Feb 03, 2016 8:35 pm

investor1 wrote:I'd put it all in the TD 2045 fund.
+1
Amateur investors are not cool-headed logicians.

dthomas714
Posts: 2
Joined: Fri Aug 22, 2014 11:33 pm

Re: beginner looking for some help with roth ira allocation!

Post by dthomas714 » Thu Feb 04, 2016 10:16 am

Thanks guys !!

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