Old Newbie Looking For The Same Advice?

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mintChocolateChip
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Old Newbie Looking For The Same Advice?

Post by mintChocolateChip » Sun Oct 21, 2018 4:28 pm

Hi, I'm looking for your input. I'm 35, married, baby 7mo out, although I didn't grow up with a family that invested. Fortunately, I didn't grow up with a family that spent a lot either, they put what money they had in a savings account, so that's what I do. I have about $100k saved and here is where I need help.

I read it a million times to not time the market. Maybe I just need someone to respond to me directly instead of reading it said to someone else, but I'm afraid of putting it in now - even with softer words like "market correction, " it's still scary.

I'm kind of sure I know where I'll put it - a 3 fund Vanguard portfolio, weighed towards stocks. My 401k is mostly stocks and is well funded, which makes my hesitation here really weird. I'm also a bit scared that I don't know how much I should put in a Money Market fund vs. 3 portfolios (which I consider long term) vs. something medium-term (like for the next 6mo, 1yr, 2yr - for things like a new car that I need + baby expenses). I also need to learn more about health insurance accounts - I just have a FSA for now, which adds to the scariness and hesitation.

Am I personalizing it to much? Is the plan put it all in?

Edit: I'll take sandtrap/J's advice; I edited the main post for ease of use:
------------------------------------------------------------------------------------------

Income
Combined $180k, including average bonuses
Ages: both 35
Emergency funds: I'll take $10k and ensure it's here - that's more than enough for 6mo for me.
Debts:
  • $230k mortage @ 3.75%

Assets that aren't in the right place
Cash: 100k
Money Market: $100k (really, $110k, but taking $10k for emergency)



My 401k (18% contribution + 4% match) = $300k total
Fund (Ticker) Expense Ratio % Invested
Vanguard Total Stock Market Index Fund Institutional Plus Shares (VSMPX) 0.02% 54%
Vanguard Total International Stock Index Fund Institutional Plus Shares (VTPSX) 0.02% 35%
Total Bond Market II Index Fund Institutional Shares (VTBNX) 8%
Vanguard Total International Bond Index Fund Institutional Shares (VTIFX) 0.07% 3%

Her 401k (16% contribution + 4% match) = $70k total
Sorry, I can't get to her details right now. It's a target date fund with ~80% stocks/ 20% bonds


Pre-Tax
FSA: $1500



Looking at arcticpineapplecorp's comment about an IPS (Investment Policy Statement - https://www.bogleheads.org/wiki/Investm ... _statement), here is some relevant information:
Short Term Goals/Needs
  • 1st Child in 7mo
  • New Car @ $28k within 1 year
  • New Car @ $28k within 3 years
  • New furnace + AC within 2 years = $5k
Long Term Goals/Needs
  • Frugal and no behavioral patterns in us seem to be changing that
  • No plans to buy a bigger house or have more children
  • Fund 50% of a state college for 1 child -or- some other 401k/savings
  • Plan to retire ~60-65, with $50k after taxes in today's dollars, without social security factored in
  • At least one of us would need assisted care for the last few years of life

Notes
  • My job is very secure, hers is mostly secure

Goals for this post
  • Best allocation of the $100k cash and $100k money market to meet the short term goals (with an unknown of the expense of a 1st child) and maximize the value of the rest -- which is to say could be a lot better since cash isn't gaining value - paying off the mortgage or many safe investments are better than what I'm doing.
  • Identify my problem/fear/hesitation with moving that money somewhere with more risk (stocks, bonds, etc.) so it maximizes it's value. I'm not sure if the root cause is my lack of knowledge, therefore, plan or me being illogical because it's "my money" making me overly attached. If this is the cause, I hope to resolve it before it also makes me a helicopter parent.
  • Start, if not complete, a plan to get my financial plan and literacy to a reasonable level
Last edited by mintChocolateChip on Sun Oct 21, 2018 10:01 pm, edited 3 times in total.

pkcrafter
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Re: Old Newbie Looking For The Same Advice?

Post by pkcrafter » Sun Oct 21, 2018 6:36 pm

Welcome,
mintChocolateChip wrote:
Sun Oct 21, 2018 4:28 pm
Hi, I'm looking for your input. I'm 35, married, baby 7mo out, although I didn't grow up with a family that invested. Fortunately, I didn't grow up with a family that spent a lot either, they put what money they had in a savings account, so that's what I do. I have about $100k saved and here is where I need help.
This sounds like you haven't invested anything, but below you say you have a 401k. Any IRAs? It would be very helpful if you follow the format in this link. You and the board need to look at all holdings and overall asset allocation as one portfolio.

viewtopic.php?f=1&t=6212
I read it a million times to not time the market. Maybe I just need someone to respond to me directly instead of reading it said to someone else, but I'm afraid of putting it in now - even with softer words like "market correction, " it's still scary.
Yes, but you are already in the market. What is the asset allocation (AA - % stock funds/bond funds) there? What is AA including the taxable account? Provide more information and we can help.
I'm kind of sure I know where I'll put it - a 3 fund Vanguard portfolio, weighed towards stocks. My 401k is mostly stocks and is well funded, which makes my hesitation here really weird. I'm also a bit scared that I don't know how much I should put in a Money Market fund vs. 3 portfolios (which I consider long term) vs. something medium-term (like for the next 6mo, 1yr, 2yr - for things like a new car that I need + baby expenses). I also need to learn more about health insurance accounts - I just have a FSA for now, which adds to the scariness and hesitation.
Assets targeted for retirement is one goal, one AA. Short term goals are separate and require their own AA. You also need an emergency fund.
Am I personalizing it to much? Is the plan put it all in?
No the plan is not put it all in. First decide on an AA, then we can help determine how to put it in.

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.

Grt2bOutdoors
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Re: Old Newbie Looking For The Same Advice?

Post by Grt2bOutdoors » Sun Oct 21, 2018 7:28 pm

mintChocolateChip wrote:
Sun Oct 21, 2018 4:28 pm
Hi, I'm looking for your input. I'm 35, married, baby 7mo out, although I didn't grow up with a family that invested. Fortunately, I didn't grow up with a family that spent a lot either, they put what money they had in a savings account, so that's what I do. I have about $100k saved and here is where I need help.

I read it a million times to not time the market. Maybe I just need someone to respond to me directly instead of reading it said to someone else, but I'm afraid of putting it in now - even with softer words like "market correction, " it's still scary.

I'm kind of sure I know where I'll put it - a 3 fund Vanguard portfolio, weighed towards stocks. My 401k is mostly stocks and is well funded, which makes my hesitation here really weird. I'm also a bit scared that I don't know how much I should put in a Money Market fund vs. 3 portfolios (which I consider long term) vs. something medium-term (like for the next 6mo, 1yr, 2yr - for things like a new car that I need + baby expenses). I also need to learn more about health insurance accounts - I just have a FSA for now, which adds to the scariness and hesitation.

Am I personalizing it to much? Is the plan put it all in?
Welcome to the forum!
No - the plan is not to put it all in the market. What I do and recommend is to have enough in savings (money market fund) some call it an e-fund or emergency fund that permits you to pay for unexpected expenses. Some say 6 months, but if you are in a profession where your job is not stable or it may take you an extended period of time to find new employment, then it would not be unreasonable to keep 1-2 years in there. You don't have to keep it all in a money market fund, you could use short term certificate of deposits if the after-tax yield is higher. For funds that you may not need in the next 5 years, then certainly investing some portion of it could make sense. If you need the monies in less than 5 years, then its best not to place it "in the market" or "at risk". Sure, markets could recover sooner, or they could just "drift".

What is your desired asset allocation for invested assets? Do you have an Investment Policy Statement? Read the wiki for examples of both.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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arcticpineapplecorp.
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Re: Old Newbie Looking For The Same Advice?

Post by arcticpineapplecorp. » Sun Oct 21, 2018 7:34 pm

Welcome to the group!

do you have an IPS? What's an IPS? An investment policy statement. It's your plan. Your guide. It helps you concretize your decision making. Read more here:

https://www.bogleheads.org/wiki/Investm ... _statement

If you still have questions after reading that...keep asking questions!

You can also try asking porfolio questions:

viewtopic.php?t=6212

But I would start with trying to determine your IPS and then come back with additional portfolio questions if needed.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

mintChocolateChip
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Re: Old Newbie Looking For The Same Advice?

Post by mintChocolateChip » Sun Oct 21, 2018 7:43 pm

Paul,

That's probably part of my problem: I see a 401k and investing the remaining money after expenses as two completely separate things until you just said "This sounds like you haven't invested anything, but below you say you have a 401k." I was (so fortunately) guided into the 401k, which is probably a big reason I have it. I'm realizing how financially illiterate I am. I'll follow the structure in the link you provided as much as I can (honestly, you lost be a bit on the "including the taxable account" part until I read through that link).


Savings Account (aka Emergency fund?): $100k me + $80k her (she's about as financial literate as I am). I don't have the exact number, but this will last us years - we don't spend a lot. I'd like to do more than leave this in my bank account.
Debt: ~230k mortgage @ ~3.75%. Cars paid off, but both old - 1 definitely needs to be replaced soon. She really wants a SUV for the baby, but a modest one - lets say $28k for that.
Tax Filing Status: married
Tax Rate - Federal: 24% (looking at this: https://turbotax.intuit.com/tax-tools/c ... x-bracket/)
Tax Rate - State: 3%
State: PA
Age: 35
Desired asset allocation: 80/20 -- this is where my financial illiteracy shows - that seems appropriate given my age and the fact that my target dated 401k says I should be doing that even though it's 90/10.
Desired international allocation: not sure

Current retirement assets

Taxable:
My 410k: $300k, 90% stocks / 10% bonds
Her 401k: $70k, 80% stocks / 20% bonds



Thank you so much for your help and sorry if I'm missing the mark on your questions.

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Sandtrap
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Re: Old Newbie Looking For The Same Advice?

Post by Sandtrap » Sun Oct 21, 2018 8:06 pm

mintChocolateChip wrote:
Sun Oct 21, 2018 7:43 pm
Paul,

That's probably part of my problem: I see a 401k and investing the remaining money after expenses as two completely separate things until you just said "This sounds like you haven't invested anything, but below you say you have a 401k." I was (so fortunately) guided into the 401k, which is probably a big reason I have it. I'm realizing how financially illiterate I am. I'll follow the structure in the link you provided as much as I can (honestly, you lost be a bit on the "including the taxable account" part until I read through that link).


Savings Account (aka Emergency fund?): $100k me + $80k her (she's about as financial literate as I am). I don't have the exact number, but this will last us years - we don't spend a lot. I'd like to do more than leave this in my bank account.
Debt: ~230k mortgage @ ~3.75%. Cars paid off, but both old - 1 definitely needs to be replaced soon. She really wants a SUV for the baby, but a modest one - lets say $28k for that.
Tax Filing Status: married
Tax Rate - Federal: 24% (looking at this: https://turbotax.intuit.com/tax-tools/c ... x-bracket/)
Tax Rate - State: 3%
State: PA
Age: 35
Desired asset allocation: 80/20 -- this is where my financial illiteracy shows - that seems appropriate given my age and the fact that my target dated 401k says I should be doing that even though it's 90/10.
Desired international allocation: not sure

Current retirement assets

Taxable:
My 410k: $300k, 90% stocks / 10% bonds
Her 401k: $70k, 80% stocks / 20% bonds



Thank you so much for your help and sorry if I'm missing the mark on your questions.
1. Do you have short and intermediate term/horizon large expenditures?
For this, "besides the Emergency Fund", allocate to High Yield Accounts, CD ladders, Short term treasuries, etc. with security of principal and liquidity appropriate to the need.

2. Use these tools to ascertain your overall allocation across accounts, and other tools for projections, etc.
ONLINE FINANCIAL TOOLS
PORFOLIO VISUALIZERS, PROJECTIONS, AND ANALYSIS
https://www.portfoliovisualizer.com
Firecalc. Retirement. How long will your money last?
https://www.firecalc.com
Morningstar Instant Xray
http://www.morningstar.com/portfolio.ht ... Entry.aspx
Optimal Retirement Planner (I-ORP)
https://www.i-orp.com/paper/index.html

3. Please list your funds, etc, in the 401k's, etc, per forum format. Names + tickers + expense ratios + % of total.
The makeup of the portfolio funds is also important while constructing your target allocation.

4. Depending on job security, spouse employment (interrupted if another child?), the size of your Emergency Fund can be adjusted.

* You can edit your original post and put the format data in it for easier viewing for others.

thanks
j

pkcrafter
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Re: Old Newbie Looking For The Same Advice?

Post by pkcrafter » Sun Oct 21, 2018 8:50 pm

mintChocolateChip wrote:
Sun Oct 21, 2018 7:43 pm
Paul,

That's probably part of my problem: I see a 401k and investing the remaining money after expenses as two completely separate things until you just said "This sounds like you haven't invested anything, but below you say you have a 401k." I was (so fortunately) guided into the 401k, which is probably a big reason I have it. I'm realizing how financially illiterate I am. I'll follow the structure in the link you provided as much as I can (honestly, you lost be a bit on the "including the taxable account" part until I read through that link).


Savings Account (aka Emergency fund?): $100k me + $80k her (she's about as financial literate as I am). I don't have the exact number, but this will last us years - we don't spend a lot. I'd like to do more than leave this in my bank account.

Emergency fund sounds too large. Also, it's for emergencies and needs to accessible quickly., not invested/tied up.

Debt: ~230k mortgage @ ~3.75%. Cars paid off, but both old - 1 definitely needs to be replaced soon. She really wants a SUV for the baby, but a modest one - lets say $28k for that.
Tax Filing Status: married
Tax Rate - Federal: 24% (looking at this: https://turbotax.intuit.com/tax-tools/c ... x-bracket/)
Tax Rate - State: 3%
State: PA
Age: 35
Desired asset allocation: 80/20 -- this is where my financial illiteracy shows - that seems appropriate given my age and the fact that my target dated 401k says I should be doing that even though it's 90/10.

Based on just what you've said, it seems like 80/20 is out of your comfort zone. Also, you are higher than 80/20. 80/20 is the max many of us recommend for any investor.

Desired international allocation: not sure

Recommendations usually range from 20-40% international

Current retirement assets

Taxable:
My 410k: $300k, 90% stocks / 10% bonds
Her 401k: $70k, 80% stocks / 20% bonds

Taxable: You didn't list anything. Is this all cash? If it's marked for retirement, then your AA is not 80/20. If not for retirement, don't list it with retirement assets.

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.

MakeSenseOf5b1U7k9
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Re: Old Newbie Looking For The Same Advice?

Post by MakeSenseOf5b1U7k9 » Sun Oct 21, 2018 9:27 pm

Sorry, not related to the OP's questions. Please delete if not allowed.

Thanks a lot for this link, wow! Excellent tool to get insight into retirement planning.
Sandtrap wrote:
Sun Oct 21, 2018 8:06 pm
Optimal Retirement Planner (I-ORP)
https://www.i-orp.com/paper/index.html

j

mintChocolateChip
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Re: Old Newbie Looking For The Same Advice?

Post by mintChocolateChip » Sun Oct 21, 2018 9:53 pm

First, thanks everyone for your help so far. I'm sure I haven't been the easiest to work with. I promise I'm not trying to be hard. I took Sandtrap/J's advice and added more info to the OP in the Edit section, the part before is unchanged.

Thanks arcticpineapplecorp's for the IPS. I put some of what I read in OP and am reading the rest of that, along with Sandtrap's other links.

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Sandtrap
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Re: Old Newbie Looking For The Same Advice?

Post by Sandtrap » Mon Oct 22, 2018 8:53 am

1 of many actionable suggestions:

1 Two cars + HVAC repairs = $66k + new child ( incl any loss of spouse income) = ?

Deploy to either or some > High yield accounts, MM, Short and Int Term Brokered CD Ladder, Treasuries, etc. for security of principal and liquidity.

2 Emergency Fund > 3-6 Mos income or expenses depending on your risk tolerance (sleep factor).

3 On hand: Cash (100k) + MM (100k) + Exist EF (10k) =$ 210k

4 $210k - #1 & #2 = investable cash.

5 Deploy #4 perhps in this order:

A. Maximize tax advantaged space, 401k, 529, HSA, etc.
B. Contribute to your taxable space portfolio fund allocations.
C. or pay down any debt with higher interest rates in first priority.

Your proportions of all of the above (when and how much, all at once or in increments) are unique to your risk tolerance.
Given the "newbie uncertainty" level, maybe bit by bit over time a you are comfortable (sleep factor). It is better to be more conservative thn rush above one's comfort zone and be reactive later to market fluctuations or emergency financial need, etc.

Given the above, take "arctic pineapple's advice and really hammer down your IPS into something you can easily implement (read ruralavalon's posts on simplicity) and "stick to it".

j :happy
Last edited by Sandtrap on Tue Oct 23, 2018 8:13 am, edited 1 time in total.

Jack FFR1846
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Re: Old Newbie Looking For The Same Advice?

Post by Jack FFR1846 » Mon Oct 22, 2018 9:47 am

Are you simply too scared to put your savings into the market? This is not unusual and I felt this way for a very long time, but I knew that leaving the money in the bank at 0% interest wasn't the way to go. What I did was paid off all of my debts, then paid off my mortgage, then bought US Savings bonds. Will a 60/40 stock/bond portfolio beat this? Probably. Will bank interest beat this? No. If you're too scared, maybe go the way I did.

After a LOT of time and reading BH a lot and doing my own analysis, I did start investing in a better self directed way with low cost funds. I had at least been saving over the years in 401k plans so had been invested in something. Here's the thing....you can do the conservative pay off thing as described above and then later decide to sell some savings bonds and put that money into "something" that seems more risky. The fact that you have money to invest puts you ahead of a lot of people out there who would have to take out a loan to pay a sudden $1k bill.
Bogle: Smart Beta is stupid

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