Nervous Newbie Investor

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Topic Author
Firefighter535
Posts: 9
Joined: Fri Dec 11, 2015 9:33 am

Nervous Newbie Investor

Post by Firefighter535 »

Emergency funds: 6 months Credit Union Savings.
Debt: Mortgage 30 yr @ 4% owe 90k
Checking: 25k
CD Ladder: 1year to 5 year $10k
US Treasury I-Bond: $10k
Tax Filing Status: Married Filing Jointly, 1 dependent child
Tax Rate: 25% Federal, 0% State
State of Residence:Florida
Age: 48
Desired Asset allocation: 60% stocks / 40% bonds

Taxable: $200k
30% Vanguard Total Stock Market Admiral Shares
24% Vanguard Total International Stock Admiral Shares
40% Vanguard Total Bond Market Admiral Shares
06% Vanguard REIT Index Fund
Vanguard Intermediate-Term Treasury Fund: $15000

Pension
Florida Retirement System 28yrs @ 82% of current salary

Employee Health Savings Account: $10k

Roth IRA at Vanguard
$10k in Vanguard Balanced Index Fund Admiral Shares (VBIAX)

Employee 457 Plan: Nationwide Retirement solutions: $18k in 60% stock 40% bond

Post Health Employment Plan
Nationwide Retirement Solutions: 30k 60% stocks 40% Bonds

1. I've read the bogleheads guide to investing and retirement and have read many posts on this forum to learn what i can. I am trying to get my portfolio settled in so i can stay the course and reallocate when necessary. I understand the need to max out my IRA and 457 tax deferred accounts along with my HSA. I'm starting to get a bit nervous and am unsure about my 4 core fund setup. I've lost about $11k over the past two months in these funds all together. I keep wanting to move the $200k into something more conservative. Is this just newbie jitters? I welcome any input. I want to thank those that take the time to contribute there knowledge and advise to this great forum.

2. I currently have a UTMA account for my 16 year old son. $15k in Vanguard Total Stock Market index fund. Is this to aggressive? Should I exchange it to the Balanced index fund or another?
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Toons
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Location: Hills of Tennessee

Re: Nervous Newbie Investor

Post by Toons »

I've lost about $11k over the past two months in these funds all together. I keep wanting to move the $200k into something more conservative. Is this just newbie jitters? I welcome any input. I want to thank those that take the time to contribute there knowledge and advise to this great forum.
I currently have a UTMA account for my 16
old son. $15k in Vanguard Total Stock Market index .. Is this to aggressive? Should I exchange it to the Balanced index fund or another?


Yes it is "newbie jitters"
2 Months?
When Investing monies try to think in terms of decades,retirement.
Focusing on monthly stock market gyrations will force to make moves that will derail your plan.
Regarding the UTMA.
Not sure when you need to draw on the money.
If it is for college then yes it is too aggressive,as college is around the corner.
If I needed to draw monies for college in a couple years it would be in a savings account or cds.
Total Stock Market is an investment I would consider at bare minimum 5 years out. :happy
(Balanced Index Fund is an excellent choice for long term investing)
Last edited by Toons on Wed Feb 10, 2016 3:44 pm, edited 1 time in total.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
scone
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Re: Nervous Newbie Investor

Post by scone »

Welcome! :D

You should do what you need to do, so as to be comfortable and sleep at night. Right now isn't a bad time to buy stocks, since prices are down. But if that doesn't suit you, put part of your new contributions in stock, and part in bonds, each month. Don't sell your stock, you'll only realize the loss.

BTW, why 25k in checking?
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore
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Dale_G
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Re: Nervous Newbie Investor

Post by Dale_G »

Firefighter535 wrote: 1. I've read the bogleheads guide to investing and retirement and have read many posts on this forum to learn what i can. I am trying to get my portfolio settled in so i can stay the course and reallocate when necessary. I understand the need to max out my IRA and 457 tax deferred accounts along with my HSA. I'm starting to get a bit nervous and am unsure about my 4 core fund setup. I've lost about $11k over the past two months in these funds all together. I keep wanting to move the $200k into something more conservative. Is this just newbie jitters? I welcome any input. I want to thank those that take the time to contribute there knowledge and advise to this great forum.
Firefighter, I think you are right, it is likely to just be newbie jitters. Unfortunately, it might take 5, 10, or 15 or more years to overcome the newbie jitters. Some never learn, but most who stick to the program figure it out.

I am 78 years old, but I remember long long ago (before you were born) that I sold all of my stocks every time I was going to take a two week overseas vacation. I got over it.

Because I got over it, the portfolio today is of a size that I can (and do) lose more than 11k in less than an hour. And over the past year, I have lost what amounts to about 60 times my first year Engineering salary. Inflation may have something to do with this. :D I don't like it much, but it bothers me not.

Over time, hopefully you will come to accept the fact that the market moves both up and down without worrying about the down part.

Good luck to you,

Dale
Volatility is my friend
Topic Author
Firefighter535
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Joined: Fri Dec 11, 2015 9:33 am

Re: Nervous Newbie Investor

Post by Firefighter535 »

Thank you Dale, I'm gonna do my best to hold steady. I'm still settling in. :happy
Morik
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Re: Nervous Newbie Investor

Post by Morik »

One thing that I do which may or may not help is to re-frame your thinking.

"I lost $11k in the market over the past 2 months" --> "My contributions are buying more stock than before!"
and in non-taxable accounts: "Cmon, fall some more so I can fulfill my OCD desire to sell my entire position during TLH!" (when you have multiple lots and most are in the red, but a few are still in the green)
Valdeselad
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Re: Nervous Newbie Investor

Post by Valdeselad »

It is normal to feel nervous or anxious when the markets are volatile, but as others have stated it is best to focus on the long term. The current market environment is completely normal and in the long run it is probably just noise that you will not even remember.

Instead of worrying, focus on the fact that you have constructed a fantastic low-cost, diversified and tax efficient portfolio that will serve you and your family very well over time.
Well done! :sharebeer

*Edited to add -- the one move you might consider in this market is your REIT holding in your taxable account. If you have a capital loss with this holding, you may consider selling it, taking the tax loss and putting the funds into either total stock index or total international index. This would give you a nice three-fund taxable portfolio, provide you with some tax losses, improve your overall tax-efficiency and simplify your portfolio just a bit.
bdpb
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Re: Nervous Newbie Investor

Post by bdpb »

Firefighter535 wrote: Taxable: $200k
06% Vanguard REIT Index Fund
If you're concerned about losing 11k, what are you going to do when the stock market goes down another 10% or 20% or 30%? That's what should drive your decision on whether you own too much in stocks.

If you are going to sell stocks, you should sell this REIT fund in taxable. REITs are very tax inefficient and the extra tax cost is probably eliminating any diversification benefits. You should probably sell REITs anyway and invest in something else.
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ruralavalon
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Location: Illinois

Re: Nervous Newbie Investor

Post by ruralavalon »

Nervous is normal, don't be too concerned.

Think long-term, think about decades not months. In my opinion your 60/40 asset allocation is reasonable for age 48. Just stick with it, don't sell off, and continue to contribute. The mutual funds that you are using are very good choices. For someone your age a drop in the market is an opportunity to buy at lower prices.

I would not use the REIT fund in a taxable account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
Firefighter535
Posts: 9
Joined: Fri Dec 11, 2015 9:33 am

Re: Nervous Newbie Investor

Post by Firefighter535 »

Thank you all for the replies, I greatly appreciate it. I've decided to part with the REIT and do my best to stay the course... re allocating as needed. 8-)
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Toons
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Location: Hills of Tennessee

Re: Nervous Newbie Investor

Post by Toons »

Firefighter535 wrote:Thank you all for the replies, I greatly appreciate it. I've decided to part with the REIT and do my best to stay the course... re allocating as needed. 8-)
Excellent Idea,,,,
Control what you can.
How much to save and invest.
The American economy is not going out of business :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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riptide
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Re: Nervous Newbie Investor

Post by riptide »

Firefighter,
I have been just like you....


Unrealized Gain/Loss
- $30,967.41 (-12.71%)


Look at these terrible numbers for me this year, I am holding steady, staying the course, it is uncomfortable, but I have been encouraged by these experienced wise investors here. I am not doing anything right now, you can do it, stay on the course.
Brokerage account-100% stocks | VG total Market 55% | VG small cap value 20% | VG Reit index 25% | | TSP Account 75C/25S | C Fund75%, S25%, | | Bonds: U.S. Treasury 5 year Note, 1 year T Bill
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in_reality
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Re: Nervous Newbie Investor

Post by in_reality »

Dale_G wrote: I am 78 years old, but I remember long long ago (before you were born) that I sold all of my stocks every time I was going to take a two week overseas vacation. I got over it.
Seriously....wow!
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Toons
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Location: Hills of Tennessee

Re: Nervous Newbie Investor

Post by Toons »

riptide wrote:Firefighter,
I have been just like you....


Unrealized Gain/Loss
- $30,967.41 (-12.71%)


Look at these terrible numbers for me this year, I am holding steady, staying the course, it is uncomfortable, but I have been encouraged by these experienced wise investors here. I am not doing anything right now, you can do it, stay on the course.
If the market handed it back to you today,,,,,,,,,,,,,,,,
what would you do with it :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Dandy
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Re: Nervous Newbie Investor

Post by Dandy »

Sounds like a bit of newbie jitters. Hey I am retired and in great shape and I have jitters with this market. Risk tolerance is very tricky and many times you can get a read on it in volatile times. Sometimes it is a misread. You seem to be in good shape. Your allocation is not extreme for your age. Not sure what age you plan to retire but when you get within 5 years or so you may wish to rethink your allocation. That doesn't mean change it just assess your need to take risk vs how safe your retirement funding seems to be.

You can make such a reassessment now but if you are motivated by fear you may overreact. If you need to sleep better maybe moving some money out each month might be better than the whole 200k at once. If you moved 25k or 50k this month and the same next month you might find when next month comes the market might be more to your comfort level and you don't have to continue down that path. If the market stabilized and you still want to move money out then that might mean you need to have a more conservative equity allocation.
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JupiterJones
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Re: Nervous Newbie Investor

Post by JupiterJones »

Firefighter535 wrote: I've lost about $11k over the past two months in these funds all together.
More accurately, the going market price that you could sell your shares in those funds has decreased by $11k. You haven't really "lost" any money since you're not going to sell those shares at that price. (But you are continuing to buy shares at this bargain-basement price, so that's good!)

Check out this graph of the S&P 500 back in the 2000s:

https://www.google.com/finance?chdnp=1& ... mAHqm6mQCg

Now that was a heck of drop! And you might've been tempted to abandon ship and sell your shares at some point in 2008. Many people did, which was a shame, because it turned their "loss on paper" to a genuine loss of lots of real, actual money. Not to mention they missed out on what happened next:

https://www.google.com/finance?chdnp=1& ... mAHqm6mQCg

So yeah, totally newbie jitters. Although "oldbies" get the jitters too...
"Stay on target! Stay on target!"
Topic Author
Firefighter535
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Joined: Fri Dec 11, 2015 9:33 am

Re: Nervous Newbie Investor

Post by Firefighter535 »

In regards to the 60/40 allocation, I wanted to know if I should go with the even simpler route of
1/3 Vanguard Total Stock Market Fund
1/3 Vanguard Total International Stock Market Fund
1/3 Vanguard Total Bond Market Fund
LateStarter1975
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Re: Nervous Newbie Investor

Post by LateStarter1975 »

Firefighter535
One way I avoid these kind of jitters is not to look often at my portfolio. I re-balance annually on 1st of January and don't bother to check for several months. I check a maximum of once every quarter. My contributions to my retirement accounts go in automatically. This way, you don't see the actual bleeding on your accounts...especially when you're not planning to retire in the next few years.
I'm not one of those here that re-balance on every RBD....I'm nowhere near that sophisticated. I like my life simple and it helps me sleep well at night. I usually get to know the market is bleeding when people post about it here...then I shrug and continue with my life.
Good luck and stay the course!
Debt is dangerous...simple is beautiful
Topic Author
Firefighter535
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Re: Nervous Newbie Investor

Post by Firefighter535 »

[quote="LateStarter1975"]Firefighter535
I re-balance annually on 1st of January and don't bother to check for several months. I check a maximum of once every quarter.

I think I'm pretty close to settling in with my allocations and I like the thought of re balancing every January with a quarterly review. Thank you all for calming my nerves.
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JupiterJones
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Re: Nervous Newbie Investor

Post by JupiterJones »

My rebalance date is my birthday*. I'm such an investment nerd that I see it as a sort of birthday treat. :-)

*And any time a part of my allocation is more than 5% out-of-whack.
"Stay on target! Stay on target!"
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ofcmetz
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Re: Nervous Newbie Investor

Post by ofcmetz »

Are you continuing to fund the 457B? I wonder how you got such a large taxable account compared to it? I'm in police work (17 years), but we have both a 457B and 403B plan at my employer so almost everything ends up in tax deferred.

I've taken losses a little bigger than yours since the start of the year and it's not fun at all. I have only been looking every week or two when I update my spreadsheet. Since the start of the year, I've put in over 5K and I'm still down over 15K even with contributions. It helped me to read some investing history books to really give me a feel for how the market moves historically. If you aren't using margin and have a nice pension like we do then you will have time to ride through most bear markets and corrections. It's about having an iron stomach and turning off the news if it's getting to you.

Best of luck and stay safe.
Never underestimate the power of the force of low cost index funds.
selters
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Re: Nervous Newbie Investor

Post by selters »

Maybe 60/40 is not for you at your age. You may want to reduce your stock allocation over time to something more conservative, like "age in bonds", by directing new contributions to bonds. Depending on the size of your contributions and on the performance of the market, you'll be at your target in "a few" years.
Swansea
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Re: Nervous Newbie Investor

Post by Swansea »

To keep things in perspective, you may want to see were your taxable portfolio was 3 years ago. If your allocation was the same, you should be sitting on some nice gains despite the recent decline.
I retired with about 60% of my salary as a pension with a COLA, and find that I still put away monies for investment. Generally, but depending up circumstances such as mortgage debt, household debt, etc., folks with a defined pension plan can take more investment risk. However, the numbers can line up properly, but if you are uncomfortable with volatility, then you should be more conservative.
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ruralavalon
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Re: Nervous Newbie Investor

Post by ruralavalon »

Firefighter535 wrote:In regards to the 60/40 allocation, I wanted to know if I should go with the even simpler route of
1/3 Vanguard Total Stock Market Fund
1/3 Vanguard Total International Stock Market Fund
1/3 Vanguard Total Bond Market Fund
That 67/33 asset allocation would be more volatile and less conservative, I think that's a poor idea since you are so "nervous" and "wanting to move . . . into something more conservative" at your current 60/40 asset allocation.

Just stick with your current asset allocation, don't sell off, and continue to contribute.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
Firefighter535
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Re: Nervous Newbie Investor

Post by Firefighter535 »

[quote="ofcmetz"]Are you continuing to fund the 457B? I wonder how you got such a large taxable account compared to it? I'm in police work (17 years), but we have both a 457B and 403B plan at my employer so almost everything ends up in tax deferred.

Unfortunately I started my 457 plan late. I'm gonna add the maximum aloud for 2016 in the near future ($18k). I'm also fortunate to have a pension coming to me and will be entering the Florida DROP in a few weeks.
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