New to investing, any portfolio advice (Roth IRA) is much appreciated!

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sociologydude76
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New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by sociologydude76 » Thu Aug 10, 2017 12:33 pm

Hello Bogleheads!

I started investing last November when I realized my savings account was actually *losing* me money due to fees. None of my friends or family ever invested in the stock market so I didn't know what I was doing. But I started reading some things and jumped into it!

Anyway, I'm 28 years old and about 2 years away from finishing my PhD. I don't have much money as a grad student, but I have saved about 10k from freelance writing over the years. I decided to start putting some of this money into trading stocks. At first I did swing trading because I didn't know any better. After reading a book by Bogle, I was sold on passive investing and index funds. And I opened a Roth IRA instead of investing in stocks only through Robinhood.

So basically, I'd like to hear any advice on re-balancing what I have now and investing for the long term. Here is my portfolio:

ROTH IRA with E-Trade (about $3,000)
Large Cap (NOXIS) $923.15 (29.65%)
Mid/Small Cap (NOMIX & NSIDX) $434.89 (13.97%)
Fixed Income (NOBOX & PEMDX) $161.54 (5.19%)
Other (TRRMX) $1,489.70 (47.84%)
International (NOINX) $94.73 (3.04%)

Basically, I'm trying to create a lazy portfolio with the comission free index funds available at E-trade. These are all the Norther Funds (https://www.bogleheads.org/wiki/Northern_Funds) equivalent to Vanguard, except for PEMDX (emerging markets bond) and TRRMX (T Rowe Price Retirement Fund) which is the "other" here. I am thinking I should probably rebalance my funds out of PEMDX and TRRMX to the Northern Index funds right? TRRMX sounds like it would be a good long term, diverse fund, but the expense ration is .76 whereas the total index fund (NOSIX) is .10.

Then I have about $8,000 in stocks with Robinhood. This is a mess so I won't list all my stocks. But the goal is to sell all my stocks (once they all break even, still waiting on a few) and then just buy a bunch of Vanguard Total Market ETFs (VTI) because they are commission free with Robinhood and not commission free with E-trade. I'm not sure if I should also buy other ETFs here that weight small/mid or international stocks too. I might keep a few individual stocks, but only about 5-10% of my portfolio (solid companies with long term growth like Visa, Google, Amazon). I'd like to hold these for 10-20 years so my savings can grow, but I also won't have to wait until retirement to use them.

So basically my questions are:

1) Should I dump the T Rowe Price retirement fund and only invest in the Northern index funds?
2) For long term investing, would VTI be an ideal ETF to invest in? Should I have some extra small/mid cap ETFs too?
3) Should I be maxing out my Roth IRA before I invest with Robinhood to buy some Vanguard ETFs?

I'll likely never be rich as a professor (unless one of my books takes off!), but I'm hoping to keep investing a little bit over time so I have 1) some good retirement money (30+ years from now) and also some savings I can use 10-20 years from now before retirement.

Thank you!

mhalley
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by mhalley » Thu Aug 10, 2017 2:50 pm

I don't see why a phd grad would not be "rich" by the time they retire.
Having a tr fund makes rebalancing more difficult, so if you want to have a 3-4 fund portfolio I would ditch it.
Whether to slice and dice is a personal decision. Many say the three fund portfolio is sufficient, but a lot like to add Reits and/or small value. The key is to decide what you want, create an ips and stick with it.
I am all for maxing roths before taxable investing, but the main thing is to ensure you have enough money to get through school. Read a couple of posts about ips, maybe search the forums for prior threads.
https://www.bogleheads.org/wiki/Investm ... _statement
https://www.whitecoatinvestor.com/how-t ... statement/

Tamarind
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by Tamarind » Thu Aug 10, 2017 3:09 pm

Just a bit of advice on your Robinhood account from someone who was in your shoes two years ago.

Sell the individual stocks if you think they should be sold. Go ahead and do it, don't wait for them to break even because they may never do so. This psychological trap is called "anchoring". Read up and break free of it. If you have some losses, those will just help offset your gains and reduce your tax bill on this bit of trading education.

Remember that while you have that account you are losing the time to have more money compounding in the index funds. Just like your savings account with hidden fees and inflation, not all losses are obvious, but all cost you real money.

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ruralavalon
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by ruralavalon » Thu Aug 10, 2017 3:41 pm

I suggest you go ahead and sell everything in the Robinhood account, don't wait.

I suggest rolling the E*Trade Roth IRA over to a Roth IRA at Vanguard. Vanguard has by far the largest selection of low expense ratio mutual funds offered anywhere. There is no need to use Northern funds that imitate Vanguard funds, or bother with using Vanguard ETFs through another firm like E*Trade.

T. Rowe Price Retirement 2050 (TRRMX) has an expense ratio of 0.76%, you can get a much lower expense ratio at Vanguard. Vanguard Target Retirement 2050 (VFIFX) has an expense ratio of 0.16%.

Just call Vanguard and they can help you with the transfer. Or you can initiate the transfer online.

Then contribute the rest of the $5.5k maximum for 2017 to the Vanguard Roth IRA as soon as you open the account. Contribute another $5.5k to the Vanguard Roth IRA in January 2018.

That may use up the $8k you get from selling the investments in the Robinhood account. I have assumed that you have earned income each year that allows you to contribute to an IRA, is that assumption correct?

In the Vanguard Roth IRA you could start simply by using one of Vanguard's target retirement funds, or Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

sociologydude76
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by sociologydude76 » Fri Aug 11, 2017 12:45 pm

mhalley wrote:I don't see why a phd grad would not be "rich" by the time they retire.
Having a tr fund makes rebalancing more difficult, so if you want to have a 3-4 fund portfolio I would ditch it.
Whether to slice and dice is a personal decision. Many say the three fund portfolio is sufficient, but a lot like to add Reits and/or small value. The key is to decide what you want, create an ips and stick with it.
I am all for maxing roths before taxable investing, but the main thing is to ensure you have enough money to get through school. Read a couple of posts about ips, maybe search the forums for prior threads.
https://www.bogleheads.org/wiki/Investm ... _statement
https://www.whitecoatinvestor.com/how-t ... statement/
Thank you!

Yes, I will probably ditch the TR fund after thinking about it some more. Again, I didn't know what I was doing when I started it.
And drafting up an IPS sounds like a great idea. I'll certainly need to make sure I have enough to get through school and once I get a regular income, I can know how much I want to invest.

As for the PhD, well I'm trying to get an academic job and the market is just terrible. I may end up going to a small school or even community college to pay the bills (and I love teaching so I don't mind that). So I could be making 40-50k with my PhD. Which is much better than the 15-20k I make in grad school!

sociologydude76
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by sociologydude76 » Fri Aug 11, 2017 12:49 pm

Tamarind wrote:Just a bit of advice on your Robinhood account from someone who was in your shoes two years ago.

Sell the individual stocks if you think they should be sold. Go ahead and do it, don't wait for them to break even because they may never do so. This psychological trap is called "anchoring". Read up and break free of it. If you have some losses, those will just help offset your gains and reduce your tax bill on this bit of trading education.

Remember that while you have that account you are losing the time to have more money compounding in the index funds. Just like your savings account with hidden fees and inflation, not all losses are obvious, but all cost you real money.
Yes, I think you are right. And that is a great point that I really didn't consider. Losing money that could be compounding is not good! I'm just so close to breaking even with all of them that I am tempted to wait just a bit longer. If I am still not even by the next couple months, I will sell it all though. Right now my account is mostly the stocks that I do want to hold on for a long term (Google, Visa, Amazon and ETFs). I'm just waiting on a tech company (PI) and Ford and REIT that gives me solid dividends anyway.

sociologydude76
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by sociologydude76 » Fri Aug 11, 2017 12:56 pm

ruralavalon wrote:I suggest you go ahead and sell everything in the Robinhood account, don't wait.

I suggest rolling the E*Trade Roth IRA over to a Roth IRA at Vanguard. Vanguard has by far the largest selection of low expense ratio mutual funds offered anywhere. There is no need to use Northern funds that imitate Vanguard funds, or bother with using Vanguard ETFs through another firm like E*Trade.

T. Rowe Price Retirement 2050 (TRRMX) has an expense ratio of 0.76%, you can get a much lower expense ratio at Vanguard. Vanguard Target Retirement 2050 (VFIFX) has an expense ratio of 0.16%.

Just call Vanguard and they can help you with the transfer. Or you can initiate the transfer online.

Then contribute the rest of the $5.5k maximum for 2017 to the Vanguard Roth IRA as soon as you open the account. Contribute another $5.5k to the Vanguard Roth IRA in January 2018.

That may use up the $8k you get from selling the investments in the Robinhood account. I have assumed that you have earned income each year that allows you to contribute to an IRA, is that assumption correct?

In the Vanguard Roth IRA you could start simply by using one of Vanguard's target retirement funds, or Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%.
If I switch into Vanguard, I do have to pay at least $75. And I'm still not sure if I have additional fees on top of that. So I was just trying to figure out why Northern Funds was so much worse than Vanguard funds. They both have super low expense ratios and seem to have about the same return.

I definitely see the appeal of getting Vanguard ETFs commission free, but Robinhood also gives me commission free Vanguard ETFs so I am unsure what the advantage would be here other than having my Roth IRA and other investing in one place.

I get a small stipend from my PhD (About 15k) that mostly goes to living expenses. My freelance writing or being an adjunct is the extra income that I get to invest. So I'm not sure if I am able to get an IRA through my school since they are the one's who pay my guaranteed salary.

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ruralavalon
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by ruralavalon » Fri Aug 11, 2017 2:19 pm

Northern does not offer a total stock market index fund for domestic stocks, they have a S&P 500 Index Fund covering stocks of larger U.S. companies. Northern does not offer a total international index fund, they have an EAFE index fund that covers only stocks of larger companies in developed markets except Canada.

Vanguard offers total market stock index funds, for both the U.S. and internationally. In general it's probably better to have the greater diversification of total market index funds.

Further, Admiral Shares of Vanguard funds have lower expense ratios than Northern funds. Long-term that will make a real difference.

Low expense ratios are critical to long-term investing performance. Vanguard blog post, "Stopping the silent killer of returns". Please see the table at the end of the post, "Cumulative impact of fees on ending wealth at various time horizons." Also, here is a calculator you could use to estimate the impact of investing expenses. Bankrate.com, "Mutual fund fees calculator".

Also, low expense ratios are the best predictor of future performance. Morningstar article. “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Earl Lemongrab
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by Earl Lemongrab » Sat Aug 12, 2017 11:09 am

sociologydude76 wrote:
Fri Aug 11, 2017 12:49 pm
I'm just so close to breaking even with all of them that I am tempted to wait just a bit longer.
This is a form of anchoring and represents poor analysis. What it ultimately says is that you think that the investments that you are "waiting to break even" will outperform the alternate investments that you would buy instead. But if you think they will outperform, why would sell them at all? The fact that something is at a loss is irrelevant to whether you should keep or sell. If you don't want it, sell it. If you want it, keep it.
This week's fortune cookie: "The stock market may be your ticket to success." I sure hope so!

sociologydude76
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by sociologydude76 » Sun Aug 13, 2017 2:38 pm

ruralavalon wrote:
Fri Aug 11, 2017 2:19 pm
Northern does not offer a total stock market index fund for domestic stocks, they have a S&P 500 Index Fund covering stocks of larger U.S. companies. Northern does not offer a total international index fund, they have an EAFE index fund that covers only stocks of larger companies in developed markets except Canada.

Vanguard offers total market stock index funds, for both the U.S. and internationally. In general it's probably better to have the greater diversification of total market index funds.

Further, Admiral Shares of Vanguard funds have lower expense ratios than Northern funds. Long-term that will make a real difference.

Low expense ratios are critical to long-term investing performance. Vanguard blog post, "Stopping the silent killer of returns". Please see the table at the end of the post, "Cumulative impact of fees on ending wealth at various time horizons." Also, here is a calculator you could use to estimate the impact of investing expenses. Bankrate.com, "Mutual fund fees calculator".

Also, low expense ratios are the best predictor of future performance. Morningstar article. “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”
Those are very good points. But wouldnt the Northern SP 500 index and the mid cap/small cap indexes would be an acceptable replacement to the Vanguard total market index? I should be getting close to the 10,000 mark, but am not there yet. Should I switch once I have enough to get to 10k?

sociologydude76
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by sociologydude76 » Sun Aug 13, 2017 2:41 pm

Earl Lemongrab wrote:
Sat Aug 12, 2017 11:09 am
sociologydude76 wrote:
Fri Aug 11, 2017 12:49 pm
I'm just so close to breaking even with all of them that I am tempted to wait just a bit longer.
This is a form of anchoring and represents poor analysis. What it ultimately says is that you think that the investments that you are "waiting to break even" will outperform the alternate investments that you would buy instead. But if you think they will outperform, why would sell them at all? The fact that something is at a loss is irrelevant to whether you should keep or sell. If you don't want it, sell it. If you want it, keep it.
Good points, thank you! I do think some of my investments may outperform in the long term (I have some senior care stock that I like for a long term play).
But there are a few tech companies that I bought into that are currently down. They tend to swing up and down rather violently so I was just waiting for the next upswing. I also like them for the long term, but it is much safer to use that money in an index fund.

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BL
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by BL » Sun Aug 13, 2017 6:38 pm

Here is a quick read to get you started investing:
https://www.etf.com/docs/IfYouCan.pdf

Vanguard funds are great if you are at Vanguard. (ETFs may be available elsewhere.)
The balanced funds are not available without cost elsewhere, AFAIK.

It is ok to play with, say, 5% of your investments as long as you stick to low-ER index funds for the rest.

pkcrafter
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by pkcrafter » Sun Aug 13, 2017 10:54 pm

ROTH IRA with E-Trade (about $3,000)
Large Cap (NOXIS) $923.15 (29.65%)
Mid/Small Cap (NOMIX & NSIDX) $434.89 (13.97%)
Fixed Income (NOBOX & PEMDX) $161.54 (5.19%)
Other (TRRMX) $1,489.70 (47.84%)
International (NOINX) $94.73 (3.04%)
I think you can stay with E-Trade until you build enough to buy Vanguard or Fidelity funds. Drop the TRP TR fund because TR funds don't go well with individual funds--duplication and and sometimes difficult to rebalance.

You could also drop mid cap and just use small. Also add emerging markets since the international fund is just developed markets. Here's how to approximate total market using S&P500 and small cap.

https://www.bogleheads.org/wiki/Approxi ... ock_market

You can also look up the page for approximating total international. When you are ready to transfer, be sure to do a custodian to custodian transfer and not a rollover.

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.

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ruralavalon
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Re: New to investing, any portfolio advice (Roth IRA) is much appreciated!

Post by ruralavalon » Mon Aug 14, 2017 9:20 am

sociologydude76 wrote:
Sun Aug 13, 2017 2:38 pm
ruralavalon wrote:
Fri Aug 11, 2017 2:19 pm
Northern does not offer a total stock market index fund for domestic stocks, they have a S&P 500 Index Fund covering stocks of larger U.S. companies. Northern does not offer a total international index fund, they have an EAFE index fund that covers only stocks of larger companies in developed markets except Canada.

Vanguard offers total market stock index funds, for both the U.S. and internationally. In general it's probably better to have the greater diversification of total market index funds.

Further, Admiral Shares of Vanguard funds have lower expense ratios than Northern funds. Long-term that will make a real difference.

Low expense ratios are critical to long-term investing performance. Vanguard blog post, "Stopping the silent killer of returns". Please see the table at the end of the post, "Cumulative impact of fees on ending wealth at various time horizons." Also, here is a calculator you could use to estimate the impact of investing expenses. Bankrate.com, "Mutual fund fees calculator".

Also, low expense ratios are the best predictor of future performance. Morningstar article. “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”
Those are very good points. But wouldnt the Northern SP 500 index and the mid cap/small cap indexes would be an acceptable replacement to the Vanguard total market index? I should be getting close to the 10,000 mark, but am not there yet. Should I switch once I have enough to get to 10k?
If you don't switch to Vanguard now I still think that you should sell the $8k in Robinhood stocks, and contribute that money to your Roth IRA now and in January 2018. Also sell the T.Rowe Price Retirement 2050 (TRRMX) ER 0.76% and PIMCO Emerging Markets Bond Fund (PEMDX) ER 1.20%, and invest in the Northern index funds. Both of those funds have high expense ratios.

I still think it would be better better to go ahead and rollover the Roth IRA to a Roth IRA at Vanguard. At Vanguard you could start by investing in either Vanguard Target Retirement 2050 (VFIFX) ER 0.16% or Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15% with a expense ratio as low as you can get at E*Trade for the Northern funds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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