I'm looking for help with the allocation of my—very new—403(b) account. I'm relatively new to investing, am halfway through Graham's classic, have familiarized myself on a very basic level with this amazing website and am looking forward to really digging into it in the coming weeks, months, and years to learn as much as I can; for the moment, though, I'd like to request some pointers to get my portfolio in shape. But before I begin, I'd like to offer my sincere thanks to Laura for those helpful, well-written, and warm welcome posts, as well as the book recommendations, which were duly noted and promptly added to my library list. Update: I'd also like to thank retiredjg, ruralavalon, and aristotelian for their thoughtful feedback.
What follows is my current and, per Boglehead guidelines, pertinent information:
- Emergency funds: Current: $1K; Goal: $6K (update: per feedback, I'll put this toward paying down my first priority, credit card debt)
- $7K credit at 19.99%, $3K at 0% (balance transfer) — currently applying “avalanche” method; on-track to pay off Aug. 2018 (this is my first priority)
$20K student loans at 2.65%—6.88%; on-track to pay off Aug. 2020* (update: will apply the "avalanche" method to these debts, as well, by tackling the highest-rate loans first)
*New job in November 2017 will significantly lower both of the above target dates to 2018 year end.
Tax Rate: 15% Federal*, State: 3.75%
*New job in November 2017 will place me in 25% Federal, State: 3.75%
State of Residence: IL
Desired Asset allocation: 70% equity:30% bonds
Desired International allocation: 40% of equity
My 403(b) allows me to chose Fidelity and/or TIAA-CREF and both offer nearly the same funds:
My employer's 403(b) contributions:
- -Unmatched contributions: 5% of eligible earnings; funded entirely by my employer
-Matched contributions: 1%-5%. I am currently contributing 5% in order to receive full match
So, 15% total.
Update: I am contributing 5% to get the full match but retiring my credit card debt as quickly as possible is my top fiscal priority; I will be able to retire this debt in August, 2018, at which point I'll:
- - Max out my emergency fund
-Continue contributing to 403(b) up to my company's match
-Open a Roth and max contributions
-Max out 403(b)
-Anything leftover will go to taxable investing (need to do more homework here - any pointers/links?)
After researching my employer's fund options on Morningstar and incorporating the much-appreciated feedback I've received so far from retiredjg, ruralavalon, and aristotelian, here is my second portfolio draft. Cliff’s Notes: The elegance of simplicity speaks to me, so a 3- or 4-fund lazy portfolio is my current goal (changed from a Swensen-model. I'm of the mindset to get something right done the first time, which will allow me to leave well enough alone, aside from rebalancing, etc. I also have the option to go through Fidelity to access all of their funds (per this page, it seems a few of their funds offer lower fees than Vanguard -- thoughts?) so, although I'm not necessarily limited by these, I would assume the ones offered in my 401(b) would be the best ones to start with.
Portfolio Draft v2 (Update: took out TIPS and REIT from v1 thanks to feedback)
- 70% Equity
- 70% Domestic
- 80% Large cap - 34% of portfolio
VINIX (Vanguard Institutional Index Fund Institutional; ER 0.04)
20 % Mid cap - 8% of portfolio
VIEIX (Vanguard Extended Market Index Instl; ER 0.06%)
- 30% International
- International developed equity - 28% of portfolio
VTSNX (Vanguard Total International Stock Index Fund Institutional Shares; ER 0.09%)
- 30% Bonds
- U.S. Treasury Securities
VBTIX (Vanguard Total Market Bond Market Index I; ER 0.04%)
Current total portfolio: low four-figures (began in January, 2017). Currently only have a 403(b) but will open a Roth IRA after credit card debt is paid off (Aug 2018).
- 1. What’s the best piece of investing advice you’ve ever been given?
My best piece of advice was given to me by my dear and belated cousin, who had been a stockbroker in NYC for most of his life. He told me (when I was about 18 and had just started reading about investing) to only invest what you can stand to lose. Now, in retrospect, I’m leaning towards the idea that he meant speculating, but I’m sure any investor who has gone through a major crash might disagree.
2. What are your thoughts on roboadvisors? I've read up on Betterment, Wealthfront, Wisebanyan, etc., but wanted to check in with the pros.
Thank you, all, in advance for your time and great help with this. I sincerely appreciate it and look forward to one day being able to pass on my knowledge to others.
All the best,