Which type of Vangaurd [fund]?

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intotheblue
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Which type of Vangaurd [fund]?

Post by intotheblue »

So..I'm set on opening up a Vanguard retirement account. I'm probably going to go with Wellington and one other account. I am trying to decide between a target-based retirement account vs Lifestrategy moderate growth. I'm trying to see which will be overall cheaper and if I will ever have to manage or rebalance any of these accounts or if I can just leave them alone and keep putting money into them. Does anyone have any experience/can offer any advice on Vanguard? Thanks
Topic Author
intotheblue
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Re: Which type of Vangaurd [fund]?

Post by intotheblue »

Does anyone have any experience/advice with these Vanguards? Thanks : )
aristotelian
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Re: Which type of Vangaurd [fund]?

Post by aristotelian »

intotheblue wrote:Does anyone have any experience/advice with these Vanguards? Thanks : )
I think just about everyone on this board has experience with Vanguard. Please read the Wiki and check the posting guidelines to provide details of your current portfolio. Vanguard has hundreds of good funds but which one is right for you depends on your situation.
bloom2708
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Re: Which type of Vangaurd [fund]?

Post by bloom2708 »

Welcome.

Wellington is a good "active" fund. One thing to note, Wellington does completely overlap with a LifeStrategy or Target Date fund.

You do not need both. Wellington has about 99 stocks and 700 bonds. 65/35 stocks to bonds. Does that fit your desired asset allocation at your current age?

The LifeStrategy funds are made up of 4 funds: Total US Stock index, Total International Stock index, Total US Bond index, Total International Bond index

Personally I would go with the LifeStrategy fund that most closely matches your asset allocation 80/20, 60/40. Better diversification.

An alternative is the 3 fund portfolio. You drop International Bonds (from Lifestrategy) and just buy the 3. Total US, Total International and Total US Bond. You pick your percentages of stocks and bonds and US stocks to International (20 to 50% for International of your stock allocation).

We use a 3 fund approach. 60/40 with 20% International. It is pretty easy to maintain. Rebalance one time per year if you get "off".
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SmileyFace
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Re: Which type of Vangaurd [fund]?

Post by SmileyFace »

bloom2708 wrote: Wellington is a good "active" fund. One thing to note, Wellington does completely overlap with a LifeStrategy or Target Date fund.
While many of the holdings overlap, as you point out - Wellington is a managed fund - while LifeStrategy is composed of Index funds. So if someone wanted to pick two funds, one active and one passive, I believe this would be a good combo. OP could drop half in Wellington and half in LifeStrategy-Growth (if these meet his AA) and never worry about re-balancing.
Personally - since I fully believe in indexing I'd go with just LifeStrategy.
bloom2708
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Re: Which type of Vangaurd [fund]?

Post by bloom2708 »

Thanks DaftInvestor. I think we are saying the same thing.

If you buy the Total US Stock market index (in the LifeStrategy funds) and that is 3,575 stocks.

Wellington has 99 stocks from the US. Now, there may be some/few (any?) that are not in the 3,575. My point was you are buying MORE of the 99. You already own them in Total US.

Bonds might be a little different because there are so many different types of bonds. But they tend to all act the same.

Active/Managed vs. Index vs. some of each. I guess I don't tend to recommend "some of each" but I know some might do that for "excitement".
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ps56k
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Re: Which type of Vangaurd [fund]?

Post by ps56k »

intotheblue wrote:So..I'm set on opening up a Vanguard retirement account. I'm probably going to go with Wellington and one other account.
Just a couple of baseline Q&A -
- what age are you, risk tolerance, etc...
-
rattlenap
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Re: Which type of Vangaurd [fund]?

Post by rattlenap »

bloom2708 wrote:Welcome.

Wellington is a good "active" fund. One thing to note, Wellington does completely overlap with a LifeStrategy or Target Date fund.

You do not need both. Wellington has about 99 stocks and 700 bonds. 65/35 stocks to bonds. Does that fit your desired asset allocation at your current age?

The LifeStrategy funds are made up of 4 funds: Total US Stock index, Total International Stock index, Total US Bond index, Total International Bond index

Personally I would go with the LifeStrategy fund that most closely matches your asset allocation 80/20, 60/40. Better diversification.

An alternative is the 3 fund portfolio. You drop International Bonds (from Lifestrategy) and just buy the 3. Total US, Total International and Total US Bond. You pick your percentages of stocks and bonds and US stocks to International (20 to 50% for International of your stock allocation).

We use a 3 fund approach. 60/40 with 20% International. It is pretty easy to maintain. Rebalance one time per year if you get "off".
Is that 20% of your stock portion or 20% of your entire portfolio?
bloom2708
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Re: Which type of Vangaurd [fund]?

Post by bloom2708 »

rattlenap wrote:Is that 20% of your stock portion or 20% of your entire portfolio?
20% of the your stocks would be International. 80% US. Some prefer 25, 30, all the way up to 50%.

If your stock to bond was 80/20, then (20% of 80% = 16% International and 64% US and 20% US Bond.
dbr
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Re: Which type of Vangaurd [fund]?

Post by dbr »

intotheblue wrote:So..I'm set on opening up a Vanguard retirement account. I'm probably going to go with Wellington and one other account. I am trying to decide between a target-based retirement account vs Lifestrategy moderate growth. I'm trying to see which will be overall cheaper and if I will ever have to manage or rebalance any of these accounts or if I can just leave them alone and keep putting money into them. Does anyone have any experience/can offer any advice on Vanguard? Thanks
What one's personal experience is would be irrelevant because the facts are available to answer your questions. You can look up the expense ratios and the turnover ratio to see which is cheapest. As a perspective all of these funds are cheap enough it isn't worth worrying about the difference. The advice on Vanguard is that if you intend to invest in Vanguard mutual funds it makes sense to open the account at Vanguard.

By definition when you invest in a single fund in an account you don't usually have an intention of rebalancing. The funds themselves maintain their target allocation. If you are going to hold two different funds that both hold stocks and bonds in different proportions then sooner or later you probably will be out of balance and have to do something. Rather than combine multiple and overlapping balanced funds it might be simpler to invest in a three fund portfolio of US and international stocks and total bond and just rebalance if you need to. If you have other investments elsewhere, though, you should consider your portfolio asset allocation as a whole, so you might need to do some management of the whole portfolio in that case.
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Re: Which type of Vangaurd [fund]?

Post by pkcrafter »

intotheblue wrote:So..I'm set on opening up a Vanguard retirement account. I'm probably going to go with Wellington and one other account. I am trying to decide between a target-based retirement account vs Lifestrategy moderate growth. I'm trying to see which will be overall cheaper and if I will ever have to manage or rebalance any of these accounts or if I can just leave them alone and keep putting money into them. Does anyone have any experience/can offer any advice on Vanguard? Thanks
Welcome,

What you say "retirement account" do you mean an IRA or Roth, or taxable? It makes a difference on recommendations.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Topic Author
intotheblue
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Re: Which type of Vangaurd [fund]?

Post by intotheblue »

This sounds dumb, but are the Wellington and LifeStrategy funds 401K? I have a retirement 401K and 357B through work with Transamerica---can I still put money into these Vanguard accounts? Will these accounts be taxed then when I take money out now or in retirement? I guess I'm a bit confused on how the Vanguards work. I'm also thinking of a Vanguard target-based retirement account (2025). I'm 38. How is the different/better than the Lifestrategy? Thanks!
BogleMelon
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Re: Which type of Vangaurd [fund]?

Post by BogleMelon »

intotheblue wrote:This sounds dumb, but are the Wellington and LifeStrategy funds 401K? I have a retirement 401K and 357B through work with Transamerica---can I still put money into these Vanguard accounts? Will these accounts be taxed then when I take money out now or in retirement? I guess I'm a bit confused on how the Vanguards work. I'm also thinking of a Vanguard target-based retirement account (2025). I'm 38. How is the different/better than the Lifestrategy? Thanks!
There is a broker (company) that is called Vanguard. And it happens that this company has its own mutual funds which is refferred to as Vanguard funds. So don't confuse between both, the product and the company.
Now there is the "Account" which is a separate thing. 401K is an account that is sponsored by your employer. The employer should provide you with all the information such as which broker (company) your 401K account will be at and which funds are available for you to buy in the 401K account. So you are not free to buy any fund in the 401K.

For the 401K taxes, you will be taxed when you withdraw the money. When you fund your account it will be through your paycheck (direct deduction) and will be pre-tax (will reduce your taxable income for the year).
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather
dbr
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Re: Which type of Vangaurd [fund]?

Post by dbr »

intotheblue wrote:This sounds dumb, but are the Wellington and LifeStrategy funds 401K? I have a retirement 401K and 357B through work with Transamerica---can I still put money into these Vanguard accounts? Will these accounts be taxed then when I take money out now or in retirement? I guess I'm a bit confused on how the Vanguards work. I'm also thinking of a Vanguard target-based retirement account (2025). I'm 38. How is the different/better than the Lifestrategy? Thanks!
You seem to be confused between funds and accounts. Accounts are holders for funds. An account can be a 401k account supplied by an employer, or it can be an individual account (IRA or Roth IRA, the"I" meaning individual) or there can be 403, 457, Simple, and all kinds of other accounts. An account can be a plain taxable account that the investor is using to save for retirement, and that could be called a "retirement" account by some people. What funds can be purchased in any given account depends on the account and at what company it is open. A typical 401K or 403b might be very restricted in its investment options. An IRA or taxable brokerage account at most brokers could hold almost anything. Some fund companies offer funds in their account that other brokers might refuse to hold, but that is rare.

Generally lifestrategy funds of all kinds are intended for people to use for retirement savings whatever kind of account they are in, but a person can certainly invest in something else, and a person can invest in a lifestrategy fund for any reason at any time in any account, usually.
dbr
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Re: Which type of Vangaurd [fund]?

Post by dbr »

Good comment above about the taxes. The critical distinction of importance is whether or not the money placed in the account is taxed in the year the income is earned or if the income tax is deferred until the money is withdrawn. 401k, 403b, IRA and some others allow the income tax to be deferred. A Roth IRA requires the income placed in the account to be taxed the year it is earned, but all gains in the account are tax free thereafter. Income placed in a "taxable" account is taxed when earned, dividends, interest, and capital gains distributions are taxed in the year distributed, and capital gains are taxed in the year sales are made. If the account is inherited basis is stepped up and taxable capital gains are wiped out. Somewhere there is a book or article that lays all these fundamentals out.
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intotheblue
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Re: Which type of Vangaurd [fund]?

Post by intotheblue »

Thanks for your help! My main question is this...I basically can go on the Vanguard.com, buy a "fund" like Wellington and just have this fund on Vanguard.com--it doesn't have to be a 401K or anything? If I keep this account on Vanguard what happens when I retire? I sell it? I close it, take the $, then pay taxes? Sorry, I've never done this kind of thing before; I just have had retirement accounts with employers before. Thanks
dbr
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Re: Which type of Vangaurd [fund]?

Post by dbr »

intotheblue wrote:Thanks for your help! My main question is this...I basically can go on the Vanguard.com, buy a "fund" like Wellington and just have this fund on Vanguard.com--it doesn't have to be a 401K or anything? If I keep this account on Vanguard what happens when I retire? I sell it? I close it, take the $, then pay taxes? Sorry, I've never done this kind of thing before; I just have had retirement accounts with employers before. Thanks
Anyone can open a "regular" or what we call a "taxable" account at a broker and buy investment that are available on the market, such as a fund like Wellington. It isn't necessary for that to be in an account that has specific tax advantages that can only be held under certain circumstances. When you retire you just keep on with the account and do whatever you want with what is in it. That includes doing nothing and leaving everything alone, selling something if you want the money, etc. Actually closing the account would be unlikely. If you do sell something you might have some capital gains that would be taxed. The whole time you own the investments there can be dividends or other distributions that are taxable in the year received.

You might note that Vanguard.com is a web site that is an electronic interface to your account that you can use to enter orders to buy or sell things and to see information about your investments. The actual investments are held by a holding company via Vanguard the brokerage company and Vanguard funds themselves are actually independent entities owned by those investing in them, sort of, and you can look up details about how Vanguard is structured and managed. One can also buy, sell, etc. by calling Vanguard, or any other broker, or by writing them a letter as well.
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