Question after reading Bogleheads Guide to Investing

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IRAMachinations
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Joined: Sun Jun 18, 2017 7:34 pm

Question after reading Bogleheads Guide to Investing

Post by IRAMachinations » Sun Jun 18, 2017 7:49 pm

Hello All,

Just finished reading Bogleheads Guide to Investing and I really enjoyed it. I had a few questions about the book and my specific situation.

First about the book, in one chapter it talks about hypothetical portfolios. For a young investor it lays out a portfolio which is 80% total stock index and 20% total bond index. If this hypothetical portfolio were set up, would there only be two total things in it? The total stock and bond indexes?

Secondly, my specific situation. My father recently passed and along with some cash I've inherited part of his traditional IRA. I knew enough when I got it that I shouldn't be paying for actively managed things, but also knew I didn't have a clue what to do with it (hence reading the guide to investing). Now I've got a question. At first my plan was to set it up as if someone between my age (30) and my fathers age (60) were the actual holder of the account. This way it would have slightly less risk, a feeling I have just because it's money from my father and I'd be pretty upset if went down the tubes. When I looked at the holdings, it was all different stock funds (no bonds, this was a mistake right? Seems risky). I've started balancing it a bit to reflect a middle-age investor as the guide to investing recommends. However, someone recently suggested an idea and I'm looking for additional opinions. They suggested calculating what the required RMDs would be and to put enough money into a high dividend yielding mutual fund to reap close to the amount needed for the RMD. Then just move that a money market account and do whatever with it (my plan is to split it into my own IRA and the rest in a brokerage account/savings/spending as needed). What are thoughts on this approach?
Additionally, I was a little confused about how to differentiate between funds for the IRA (his or mine) and other options for a normal brokerage account. He left enough cash for me to open an IRA and fully fund it for this year (I have a pension plan I've contributed to through work currently but don't have an additional IRA), as well as have enough left over to start a brokerage account. What kind of things should be in the advantaged Roth IRA vs in the normal brokerage account? Thanks for all the help.

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StevieG72
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Re: Question after reading Bogleheads Guide to Investing

Post by StevieG72 » Sun Jun 18, 2017 11:38 pm

Welcome to the forum!

Yes the 80/20 portfolio could have just 2 funds and that would be perfectly simple. With investing less is more.

Bonds & REITs should be in tax advantage accounts / stocks in taxable.

Check out the Wiki for more suggested reads. Bogleheads Guide to Investing is one of my favorites. I also like All About Assett Allocation by Rick Ferri, & A Random Walk Down Wallstreet.
Fools think their own way is right, but the wise listen to others.

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BL
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Re: Question after reading Bogleheads Guide to Investing

Post by BL » Mon Jun 19, 2017 12:30 am

I would like to suggest a quick read for some Boglehead type advice in a nutshell:
https://www.etf.com/docs/IfYouCan.pdf

This suggests the 3-fund portfolio of Total US stock, total International stock, and total bond market as all you really need. The 1/3 of each ratio is reasonable for a 30 year old, or could be more or less bond % based on individual decision.

You could even put it into a balanced fund with the desired bond % for even greater simplicity. A 60/40 Life Strategy Moderate is a good all-around type, but there are lots of other good choices at Vanguard, including target date (90/10 down to 30/70), Wellington (active 60/40), Balanced (no international 60/40), and others with more or less bond %.

AlohaJoe
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Re: Question after reading Bogleheads Guide to Investing

Post by AlohaJoe » Mon Jun 19, 2017 12:55 am

IRAMachinations wrote:For a young investor it lays out a portfolio which is 80% total stock index and 20% total bond index. If this hypothetical portfolio were set up, would there only be two total things in it? The total stock and bond indexes?


Correct.

They suggested calculating what the required RMDs would be and to put enough money into a high dividend yielding mutual fund


Not many people here think that dividend investing makes sense. If you search for "dividend investing" or "total return investing" you'll find hundreds of posts about it.

What kind of things should be in the advantaged Roth IRA vs in the normal brokerage account? Thanks for all the help.


There's a wiki page on tax-efficient fund placement: https://www.bogleheads.org/wiki/Tax-eff ... _placement

IRAMachinations
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Re: Question after reading Bogleheads Guide to Investing

Post by IRAMachinations » Tue Jun 20, 2017 6:40 am

Thanks so much for the thorough response :)

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