HSA Investment Guidance

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Kilgore Trout
Posts: 6
Joined: Sun Mar 19, 2017 12:17 am

HSA Investment Guidance

Post by Kilgore Trout » Mon Mar 20, 2017 9:48 am

Hello!

I have about $8k sitting in an HSA that is not being invested. A sin, I know!

Have been trying to determine where to place the funds and hoping someone can help.

My full financial picture is here.

There are two options in the HSA - mutual funds through Devenir or a brokerage account through TD.

The mutual funds are on the expensive side - I've listed them below.

If I am reading TD's documentation correctly, there are commission-free ETFs available but there's also a lot of other fine print about the fees so not exactly sure what I am getting into there. Honestly the mutual funds sound easier but my blended ER would be around .50 with the funds I've proposed below.

So, my questions:

-Mutual Fund through Devenir or ETFs through TD?

-Should I put $500 a month towards investments until most of the entire amount is invested, leaving $500 or so in the case of an emergency? I'm 44 and don't use the HSA for much other than Dentist and Eye at this point. The thought behind the $500/month is it gets me in the dollar cost averaging space. Or should I just invest it all at one time?

-If I go with mutual funds, any suggestions? I was thinking:

    30% - JPMorgan Equity Index Select - HLEIX - .46
    25% - BlackRock Small Cap Index³ - MDSKX - .52
    25% - BlackRock International Index Inv³ -MDIIX - .40
    20% - One of the Bonds (probably BMOAX)

Appreciate the help!

Devenir Funds Available

Note, there are a ton available but only a handful under 1% ER. So I've only detail those under 1% ER.

Principal MidCap¹ - PMBSX - .97
American Century Diversified Bond - ADFIX - .60
Eaton Vance Glbl Macr Absolute Return⁴ - BMOAX - .39
JPMorgan Limited Duration Bd³ - ONUAX - .97
MainStay High Yield Corporate Bond³ - MHCAX - .96
PIMCO Real Return³ - PRRDX - .98
PIMCO Total Return D³ - PTTDX - .76
Templeton Global Bond³ - TPINX - .96
Principal LifeTime Strategic Inc¹ - PLSSX - .97
JPMorgan US Government Money Market1 - MJGXX - .61

JPMorgan Mid Cap Growth³
BlackRock Advantage Small Cap Growth³ -
Royce Premier Invmt
MainStay ICAP Equity³
JPMorgan Large Cap Growth³
Deutsche Global Growth²
BlackRock US Total Bond Index Investor³
Thornburg International Value³
T. Rowe Price Real Estate³
Principal LifeTime 2010¹
Principal LifeTime 2015¹
Principal LifeTime 2025¹
Principal LifeTime 2020¹
Principal SAM Conservative Growth¹
Principal SAM Flexible Income¹
Principal LifeTime 2030¹
Principal LifeTime 2035¹
Principal LifeTime 2040¹
Principal LifeTime Strategic Inc¹
Principal SAM Balanced¹
Principal LifeTime 2045¹
Principal LifeTime 2050¹
Principal LifeTime 2055¹
Principal SAM Balanced¹
Principal SAM Conservative Bal¹
Principal SAM Conservative Growth¹
Principal SAM Flexible Income¹

Kilgore Trout
Posts: 6
Joined: Sun Mar 19, 2017 12:17 am

Re: HSA Investment Guidance

Post by Kilgore Trout » Tue Mar 21, 2017 3:19 pm

Found out some additional information from TD.

Apparently they have a number of commission-free ETFs and about 30 from Vanguard. Which is good news, I think.

So, being new to this, I am wondering if 3 ETFs from TD, mimicking a 3-Fund Portfolio, is the way to go?

Or would it be better to go the mutual fund route I proposed in the first post?

Any dangers I should be aware of in choosing the ETFs through TD over the funds in Denevir?

Also, better to dollar-cost average and send $500-$1000 a month to the investment channel until it's all invested or go lump sum?

Appreciate the guidance - new to investing on my own so appreciate the counsel of others who have been here before!

KT

bloom2708
Posts: 2680
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: HSA Investment Guidance

Post by bloom2708 » Tue Mar 21, 2017 3:24 pm

Our HSA stays around $10k. I looked into "investing" the funds into the brokerage option. There was a $24/month fee associated and like you, $1,000($500 for you) has to be kept in the non-brokerage area.

The amount isn't statistically significant enough to warrant investing. I had doubts that gains/interest would exceed the $24 fee many months (also not great expense ratios). We spend (some of) the money on healthcare throughout the year, so I don't see the amount going up to $50k or some amount where being invested would matter.

I know one strategy is to pay out of pocket for all medical (if possible) and let your HSA grow for 20-30 years. If that is what you plan to do, then you should try to duplicate a 2 or 3 fund. Total US/Total US bond. Add international if you have a good option or just bump international in your other accounts. My company puts $2,500 into the HSA each year, so I feel spending it is like spending "their" money. You do get the triple tax savings so we max the $6,750 by putting in $4250 of our own money in each year.

I default to the more simple solution unless there is a compelling reason. Stock investing with $8k or $10k won't make or break your retirement. Therefore I just keep it in the core HSA fund that is essentially a money market.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

Ethelred
Posts: 212
Joined: Sun Oct 30, 2016 9:38 am

Re: HSA Investment Guidance

Post by Ethelred » Tue Mar 21, 2017 3:31 pm

Remember your asset allocation can be spread across all your accounts. Use the TD brokerage to buy one ETF that's part of your allocation, and then just buy correspondingly less of that asset in your other accounts.

bloom2708
Posts: 2680
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: HSA Investment Guidance

Post by bloom2708 » Tue Mar 21, 2017 3:33 pm

Ethelred wrote:Remember your asset allocation can be spread across all your accounts. Use the TD brokerage to buy one ETF that's part of your allocation, and then just buy correspondingly less of that asset in your other accounts.


Just keep in mind that if you pick a 100% stock fund and stocks drop 40%, that your HSA will drop ~40%. If you are investing the HSA dollars, then that should be accounted for if you should need the funds for a medical situation that is larger.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

NiceUnparticularMan
Posts: 1740
Joined: Sat Mar 11, 2017 7:51 am

Re: HSA Investment Guidance

Post by NiceUnparticularMan » Tue Mar 21, 2017 8:31 pm

We treat our HSA as a long-term investment account. It takes an annual transfer, but we get it to HSA Bank who then gets it to TD Ameritrade where we then use commission-free Vanguard ETFs. And we then treat that as just part of our overall portfolio. We've also got our taxable account with TD Ameritrade, and although they show up as two different accounts, we can manage them both from one portal, which is kinda nice. Again, all that is using commission-free Vanguard ETFs.

By the way, this rather cumbersome process means there is a small amount of HSA money sitting in cash at any given time. Although the yield isn't the greatest, and the number is small in the greater scheme, as a matter of principle I roughly account for that as part of the cash portion of our overall portfolio, so somewhere else in the portfolio there is a bit more in riskier assets offsetting those cash holdings.

TropikThunder
Posts: 589
Joined: Sun Apr 03, 2016 5:41 pm

Re: HSA Investment Guidance

Post by TropikThunder » Tue Mar 21, 2017 8:41 pm

bloom2708 wrote:
Ethelred wrote:Remember your asset allocation can be spread across all your accounts. Use the TD brokerage to buy one ETF that's part of your allocation, and then just buy correspondingly less of that asset in your other accounts.


Just keep in mind that if you pick a 100% stock fund and stocks drop 40%, that your HSA will drop ~40%. If you are investing the HSA dollars, then that should be accounted for if you should need the funds for a medical situation that is larger.


Both valid points. My intention is to use my HSA as a stealth IRA and pay medical expenses out of pocket (with my Quicksilver 1.5% rewards card :beer ). I'm fully aware that this intention may lose out to future circumstances, so my philosophy is to hold bonds in my HSA in case I need to withdraw any for medical bills (as ethelred pointed out, I don't want to lock in a stock loss if I need the money at a market low). Therefore, my only fund in my HSA is BIV (Vanguard Intermediate Bond ETF). ETF rather then mutual fund due to trading cost (BIV is commission-free at TDA).

Keep it simple, it's not worth it to try to manage 3-4 ETF's in an HSA if you're regularly contributing small-ish amounts. For example, I have no minimum balance requirement in my HSA and my employer contributes $50 per month, so I move $100 to $150 every other week, which buys 1 or 2 shares of BIV (currently ~$83/share). If I had more then one fund it would be harder to keep in balance.

lsui
Posts: 19
Joined: Sun Mar 05, 2017 9:26 pm

Re: HSA Investment Guidance

Post by lsui » Wed Mar 22, 2017 1:12 am

Sounds like your custodian is HSA Bank, which I also use. In case you are not aware, if you send all the money to TDA and leave 0 balance in your HSA Bank cash account, they will not charge you the $2.5/month fee, only the $3 investment fee.

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