First time invester, help needed please

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stt816
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First time invester, help needed please

Post by stt816 » Wed Nov 07, 2018 5:05 pm

Hi I am 27 years old. I contribute to both my 401k and roth ira. I have a emergency savings account as well.

I read "A Random walk down wall street" and it gave me some good advice along with this website. I have a plan below and was wondering what you think about it. Any advice is greatly appreciated!

Stocks 70%
U.S. Stocks (50% of total owned stocks)
Vanguard Total Stock Market Index Fund (VTSMX)

Developed international market (25% of total owned stocks)
Vanguard International Index Fund (VTMGX)

Emerging international market (25% of total owned stocks)
Vanguard Emerging Markets Index Fund (VEIEX)

BONDS 15%


no load high grade corporate bond fund
U.S. Vanguard Intermediate Term Bond (VICSX)

Foreign Bond
Vanguard Emerging Market Government Bond Fund (VGAVX)

Dividend Growth Stock
Vanguard Dividend Growth Fund (VDIGX)

Real Estate Equities (10%)
Vanguard REIT Index Fund (VGSIX)

Cash 5%
Vanguard Prime Money Market Fund (VMMXX)

Flyer24
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Re: First time invester, help needed please

Post by Flyer24 » Wed Nov 07, 2018 5:28 pm

At your age, it is more about contribution rate than allocation. Skip the cash fund.
Last edited by Flyer24 on Wed Nov 07, 2018 5:53 pm, edited 1 time in total.

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Wed Nov 07, 2018 5:47 pm

You are definitely headed in the right direction. However, have you picked the perfect funds only to find they are not available in your work plan? If yes, some modification may be in order - you do need to use your work plan.

There is no need for a cash allocation in a retirement portfolio. Maybe after you retire if you want that.

Dividend Growth Stock is not a bond fund, it's a stock fund.

Not sure the emerging markets bond fund is the best choice, but might be OK if you only have a very small slice. Why did you pick that one?

Grt2bOutdoors
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Re: First time invester, help needed please

Post by Grt2bOutdoors » Wed Nov 07, 2018 6:03 pm

Ditch Vanguard Dividend Growth - the same equities are held in Total Stock Market and it is not a fixed income fund. Put all your bonds in intermediate term bond, get rid of the cash - you aren’t market timing and you have zero cash needs if you are saving for retirement at age 27, earn that higher coupon.

No need for Emerging Bond - you have plenty of exposure to emerging markets equities. I don’t consider emerging sovereign fixed income to be a “safe haven” but that is my opinion. Take risk with equities use fixed income for stability. Do you think of safety when you hear “emerging”?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 12:02 am

retiredjg wrote:
Wed Nov 07, 2018 5:47 pm
You are definitely headed in the right direction. However, have you picked the perfect funds only to find they are not available in your work plan? If yes, some modification may be in order - you do need to use your work plan.

There is no need for a cash allocation in a retirement portfolio. Maybe after you retire if you want that.

Dividend Growth Stock is not a bond fund, it's a stock fund.

Not sure the emerging markets bond fund is the best choice, but might be OK if you only have a very small slice. Why did you pick that one?
Sorry I'm new to all of this, my work plan? Not sure what that is

I didn't pick any of these ..in the book he had categories I just narrowed it down to the vanguard ones

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 12:04 am

What I'm getting from this is skip the cash part and skip the dividend growth/emerging markets?

Would the plan below be better for me? This is the core four lazy plan.. I do want some risk as I am younger and could afford it but obviously not too much risk

Vanguard Total Bond Market Index Fund VBMFX (0.16%) VBTLX (0.06%) BND (0.06%)

Vanguard Total Stock Market Index Fund VTSMX (0.15%) VTSAX (0.04%) VTI (0.04%)

Vanguard Total International Stock Index Fund VGTSX (0.18%) VTIAX (0.11%) VXUS (0.11%)

Vanguard REIT Index Fund

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badbreath
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Re: First time invester, help needed please

Post by badbreath » Thu Nov 08, 2018 12:26 am

Yes, the second plan is much better
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

22twain
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Re: First time invester, help needed please

Post by 22twain » Thu Nov 08, 2018 12:32 am

stt816 wrote:
Thu Nov 08, 2018 12:02 am
Sorry I'm new to all of this, my work plan? Not sure what that is
He means your 401(k) plan. If you list the funds that it offers (names please, not just ticker symbols), and their expense ratios (ERs), people here can give advice about which ones you should use.
My investing princiPLEs do not include absolutely preserving princiPAL.

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dogagility
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Re: First time invester, help needed please

Post by dogagility » Thu Nov 08, 2018 4:31 am

stt816 wrote:
Thu Nov 08, 2018 12:04 am
What I'm getting from this is skip the cash part and skip the dividend growth/emerging markets?

Would the plan below be better for me? This is the core four lazy plan.. I do want some risk as I am younger and could afford it but obviously not too much risk

Vanguard Total Bond Market Index Fund VBMFX (0.16%) VBTLX (0.06%) BND (0.06%)

Vanguard Total Stock Market Index Fund VTSMX (0.15%) VTSAX (0.04%) VTI (0.04%)

Vanguard Total International Stock Index Fund VGTSX (0.18%) VTIAX (0.11%) VXUS (0.11%)

Vanguard REIT Index Fund
What is your reason for investing in a bonds at your age if this money is for retirement (assuming it will be 30 years or more until you will start withdrawing this money)? Bonds can be expected to have a lower return than stocks with a long investment time frame. People tend to use bonds to temper declines in their portfolio during times of stock market declines. This can be important to 1) psychologically reduce a person's likelihood of selling equities during such a decline or 2) reducing the chance of selling equities during a market decline at the time of withdrawal (i.e. retirement).

Realistically though... what would be the difference psychologically between seeing your portfolio decline 40% (with bonds) vs 50% (without bonds)? Would that keep your from selling your equity position?

At your age, I wouldn't recommend investing in bonds... but only you can judge your resiliency to selling after seeing paper declines in your portfolio value.
Taking "risk" since 1995.

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Thu Nov 08, 2018 8:06 am

stt816 wrote:
Thu Nov 08, 2018 12:02 am
retiredjg wrote:
Wed Nov 07, 2018 5:47 pm
You are definitely headed in the right direction. However, have you picked the perfect funds only to find they are not available in your work plan? If yes, some modification may be in order - you do need to use your work plan.

There is no need for a cash allocation in a retirement portfolio. Maybe after you retire if you want that.

Dividend Growth Stock is not a bond fund, it's a stock fund.

Not sure the emerging markets bond fund is the best choice, but might be OK if you only have a very small slice. Why did you pick that one?
Sorry I'm new to all of this, my work plan? Not sure what that is

I didn't pick any of these ..in the book he had categories I just narrowed it down to the vanguard ones
You are picking the perfect portfolio in a perfect world. It seems logical, but it might not work. Here's why.

The place to start your portfolio construction is with whatever retirement plan you have at work. It could be a 401k or a 403b or a deferred comp plan or a SIMPLE IRA or a SEP IRA. Or you may not have a work plan just yet, but you likely will later and you should use it when you get one.

If your work plan offers a 500 Index fund but not a total stock index fund, that is a fine substitution and there is no point in setting your sights on exactly a total stock index fund. That's the point I'm making.

Tell us a little more about your situation.

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 8:39 am

My work plan is a traditional 401k
I chose Vanguard Target Retirement 2055 target as my plan
It consist of the following...

Vanguard Total Stock Market Index Fund Investor Shares 54.00%
Vanguard Total International Stock Index Fund Investor Shares 36.00%
Vanguard Total Bond Market II Index Fund Investor Shares† 7.10%
Vanguard Total International Bond Index Fund Investor Shares 2.90%


My Roth IRA is with fidelity and is a fidelity freedom index 2055

Domestic Equities 63.06%
Equities 63.06%
Fidelity Total Market Index Fund - Class F 63.06%
International Equities 27.07%
Fidelity Series Global ex U.S. Index Fund 27.07%
Bonds 6.96%
Investment-Grade Debt 6.96%
Fidelity U.S. Bond Index Fund - Class F 6.96%
Long-Term U.S. Treasuries 2.90%
Fidelity Series Long-Term Treasury Bond Index Fund 2.90%
Short-Term Debt & Net Other Assets 2.91%

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 8:45 am

So I'll start with 401k and IRA, are the ones I chose listed above good investments?

I chose those a while ago without reading much, and not sure if target is better then selecting my own

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Thu Nov 08, 2018 8:46 am

Seems like you already have the perfect portfolio. :D

Are you looking for a change?

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Thu Nov 08, 2018 8:51 am

stt816 wrote:
Thu Nov 08, 2018 8:45 am
I chose those a while ago without reading much, and not sure if target is better then selecting my own
There are times when individual funds can be lower cost than target funds. Sometimes the cost is worth changing. Sometimes it is not worth the change.

For instance, if you were paying 0.5% for a target fund and could get the individual funds for 0.1%, over a long time that is enough difference to make the change to the individual funds even if you prefer the target funds.

For a year before you move to another job....probably not worth the change if you prefer the target funds.

What you have is a fine portfolio if the costs are low.

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 9:02 am

So the reason I got into all of this is, I've saved around 70k

I was either going to buy a multifamily house and rent It out and pay off the mortgage with the renters money and either sell it once it's all paid off or continue to get rent..that's what my dad brother and grandma do

Or

Invest into stocks..I wanted to do this first and maybe ourchase a small 2 family house later on..I opened an individual account and was going to pick a style as seen above..not sure if that's better then target date and throwing all of this money into my ira...I think for this account I would like to have a little more control and with retirement kind of set it and forget it if that makes sense

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 9:06 am

I'm also contributing the bare minimum for my 401k just to get the match which is 1000 dollars...is that a bad idea? Should I be putting in more? Thought I'd just do the minimum because it's not as good as Roth, and then I max out Roth every year

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Thu Nov 08, 2018 9:09 am

That changes a lot of things and more information is needed to help with that.

But first, you should not invest money for retirement in a taxable account (what you are calling a personal account) unless you already have an emergency fund and you are already filling up both the 401k and the Roth IRA.

If you do have an emergency fund and are filling both retirement accounts, its fine to invest more retirement money into a taxable account....but you probably don't want to put bonds there and you definitely do not want to put REIT there.

Do you know what your tax bracket is? If this other money is not for retirement, what do you pan to do with it?

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Thu Nov 08, 2018 9:11 am

stt816 wrote:
Thu Nov 08, 2018 9:06 am
I'm also contributing the bare minimum for my 401k just to get the match which is 1000 dollars...is that a bad idea? Should I be putting in more? Thought I'd just do the minimum because it's not as good as Roth, and then I max out Roth every year
Already posted, but I'll say it again. Fill your 401k, not just to the match, before putting retirement money into a taxable account. Tax deferment is a powerful tool and you should use it.

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 9:17 am

Ok all this is helpful..I do have an emergency fund

Would you change anything with the 401k?
What is the maximum amount with that? I saw on one website 18500? More then I thought


With 401k it has to come from your paycheck right?

I believe this is the case so what should I be doing with this money if I can't deposit it into my 401k and already maxed out my Roth for the year
Last edited by stt816 on Thu Nov 08, 2018 9:22 am, edited 1 time in total.

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Thu Nov 08, 2018 9:21 am

stt816 wrote:
Thu Nov 08, 2018 9:17 am
Ok all this is helpful

Would you change anything with the 401k? Not if the expense ratio of the Target fund is low.

What is the maximum amount with that? 5500 as well? $18.5k this year, $19k next year.

With 401k it has to come from your paycheck right? Yes, but you can send more of your paycheck to the 401k and live on the $70k.

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 9:23 am

I do side gigs that I could live on the money from that so that renders the 70k useless..I really want to invest it

I also still live at home so I'm saving a lot ...wanted to do this now so I can start saving for a house or apartment of my own or another investment

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Thu Nov 08, 2018 9:51 am

So what is it that you are saying?

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 10:14 am

That I want to invest this 70k , but don't know where I should be putting it.

I will start next year putting more money in 401k

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Thu Nov 08, 2018 10:39 am

You should not invest all of it. Since you dodged the question about an emergency fund, it seems you probably do not have one (or at least an adequate one) and don't yet see the need for one.

"Living at home" is a reasonable excuse for no emergency fund for a person who is 23 and just starting out. It is not so reasonable for a person who is 27 years old and making good money. You need a stash for loss of job, car wreck, injury, parental emergency etc.

So keep some of it in a safe place.

If you want to invest the rest in a taxable account, the usual suggestions are a total stock index and/or a total international index. This might mean you should adjust one or both of your target funds to a fund that has a higher percentage of bonds.

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 12:36 pm

I said it twice that I do have an emergency fund in the first post and in another post lol

I got around 6k in an emergency fund..I did that because I know the first steps should be creating goals/budget then emergency fund..then 401k then ira..which I got all covered

StretchNM
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Re: First time invester, help needed please

Post by StretchNM » Thu Nov 08, 2018 1:19 pm

Hi stt816, I'm new here and not anywhere near as informed as those who have responded to you. I just want to clarify "where" you are financially.

You have a 401K that you're investing in, but only to the limit of employer matching funds ($1K annually). Unknown acct value.

You have a ROTH that you contribute the yearly maximum to ($5500). Unknown acct value.

You have $6K saved in an emergency fund.

And.... you have saved $70K that you desire to "play with" investing in the stock market (or maybe buy a rental property, [which is also investing]). But you don't say where this $70K is (ROTH?, Savings Acct?, Other?).

Ok that's all. Just wanted to clarify your position. Aside from that, I got nothing for you. :)

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 1:41 pm

70k is in a savings account with my bank

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Thu Nov 08, 2018 5:30 pm

stt816 wrote:
Thu Nov 08, 2018 12:36 pm
I said it twice that I do have an emergency fund in the first post and in another post lol
Ok, I admit to not remembering it from the first post. But the second time you mentioned it was added as an edit after I had already read that post. :D

Either way, $6k is better than nothing, but it is not really an emergency fund unless you can live on it for 3 months or so. Do consider that it needs to be larger.

You want to invest that money and investing a good amount of it is not unreasonable. If the money is for retirement, invest in total stock and/or total international and consider adjusting your target funds to have more in bonds.

If the money is not for retirement, it depends on things we do not know.

stt816
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Re: First time invester, help needed please

Post by stt816 » Thu Nov 08, 2018 6:00 pm

6k I could definitely live on for 3 months. Right now I just need about 1500 a month and even that is just for "fun money" all I have as far as expenses is phone bill, gas for my car, and groceries

if I bought a investment house, id be renting it out and not being able to pay off the mortgage for 25 years or so

I plan on using this money the same but towards stocks. Not touching it for 25 years or so...I see you didn't include bonds in the personal, why is that?

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Thu Nov 08, 2018 6:18 pm

stt816 wrote:
Thu Nov 08, 2018 6:00 pm
I plan on using this money the same but towards stocks. Not touching it for 25 years or so...I see you didn't include bonds, why is that?
I think you may be thinking about accounts, not your portfolio as a whole. This is not uncommon. Most people do start out that way, but if all the money is for retirement, you need to consider your portfolio, not just each account.

I didn't include bonds because bonds are not very tax efficient when held in a taxable account. That is why I suggested just the stock funds in taxable and to adjust your target funds to more bonds to account for no bonds in the taxable account.

There is an exception to that - holding tax-exempt bonds in a taxable account is very tax efficient if you are in a high tax bracket. But we don't know your tax bracket.

So let's back up a lot and start more from the beginning (which is way different from now this thread started).....

1) You need to decide what stock to bond ratio (or "asset allocation") is appropriate for your need to take risk and your willingness to take risk in your retirement portfolio. That step has been completely left out as far as I can see. Do you have any idea what you want your stock to bond ratio to be? If yes, why did you choose that number?

2) And you need to make decisions based on your tax bracket...which I don't think we know. If your income will be similar to last year's income, you can get an estimate by comparing your taxable income (line 43 of 'Form 1040) to this chart.

http://www.moneychimp.com/features/tax_brackets.htm

If your income will be different from last year, we need to know more.

Bonehead3
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Re: First time invester, help needed please

Post by Bonehead3 » Thu Nov 08, 2018 10:54 pm

Agree with the retiredjg regarding costs. I initially recommended my son (your age) go with a target fund. I called my rep at VG and to get his take on saving fund expenses over 40 years from target to a two or three fund plan. He agreed so we went with an international stock and total stock market. The latter getting the majority. Other benefit is that at 50+, you can decide your allocation and not have the target fund do it for you.

stt816
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Re: First time invester, help needed please

Post by stt816 » Fri Nov 09, 2018 12:32 am

retiredjg wrote:
Thu Nov 08, 2018 6:18 pm
stt816 wrote:
Thu Nov 08, 2018 6:00 pm
I plan on using this money the same but towards stocks. Not touching it for 25 years or so...I see you didn't include bonds, why is that?
I think you may be thinking about accounts, not your portfolio as a whole. This is not uncommon. Most people do start out that way, but if all the money is for retirement, you need to consider your portfolio, not just each account.

I didn't include bonds because bonds are not very tax efficient when held in a taxable account. That is why I suggested just the stock funds in taxable and to adjust your target funds to more bonds to account for no bonds in the taxable account.

There is an exception to that - holding tax-exempt bonds in a taxable account is very tax efficient if you are in a high tax bracket. But we don't know your tax bracket.

So let's back up a lot and start more from the beginning (which is way different from now this thread started).....

1) You need to decide what stock to bond ratio (or "asset allocation") is appropriate for your need to take risk and your willingness to take risk in your retirement portfolio. That step has been completely left out as far as I can see. Do you have any idea what you want your stock to bond ratio to be? If yes, why did you choose that number?

2) And you need to make decisions based on your tax bracket...which I don't think we know. If your income will be similar to last year's income, you can get an estimate by comparing your taxable income (line 43 of 'Form 1040) to this chart.

http://www.moneychimp.com/features/tax_brackets.htm

If your income will be different from last year, we need to know more.
I have no idea what stock to bond ratio but wouldn't you say being at a younger age I could afford more risk?

I would be 25% tax bracket

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Fri Nov 09, 2018 6:43 am

stt816 wrote:
Fri Nov 09, 2018 12:32 am
I have no idea what stock to bond ratio but wouldn't you say being at a younger age I could afford more risk?
In general, yes. But age is only one factor.

Here is a Wiki page that discusses how to determine your asset allocation (stock to bond ratio). This is the most important of your investing decisions so you should give this some consideration rather than just skim the article.

https://www.bogleheads.org/wiki/Asset_allocation

Just for reference, the target funds you are using are probably at 90% stock and 10% bonds. You should check to be sure.

I would be 25% tax bracket
Ok. Under the new tax law, that will be the 22% tax bracket for the next several years.

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Googliebear
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Re: First time invester, help needed please

Post by Googliebear » Fri Nov 09, 2018 8:24 am

I highly recommend that you watch the following Youtube video:
https://www.youtube.com/watch?v=T71ibcZAX3I

And read the following book:
https://www.amazon.com/Simple-Path-Weal ... =j+collins

I'm forty two and have been investing for twenty years and if I would write a book of my experience, it would have been this book.

Good luck and keeping asking your questions on this board, it is truly one of the most valuable free resources you'll ever find for investing.

Mike

stt816
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Re: First time invester, help needed please

Post by stt816 » Fri Nov 09, 2018 8:48 am

Vanguard 2055 around 18k in it this is my 401k
Vanguard Total Stock Market Index Fund Investor Shares 54.00%
Vanguard Total International Stock Index Fund Investor Shares 36.00%
Vanguard Total Bond Market II Index Fund Investor Shares† 7.10%
Vanguard Total International Bond Index Fund Investor Shares 2.90%


fidelity freedom index 2055 Roth ira ust started it with 5500 in it

Domestic Equities 63.06%
Equities 63.06%
Fidelity Total Market Index Fund - Class F 63.06%
International Equities 27.07%
Fidelity Series Global ex U.S. Index Fund 27.07%
Bonds 6.96%
Investment-Grade Debt 6.96%
Fidelity U.S. Bond Index Fund - Class F 6.96%
Long-Term U.S. Treasuries 2.90%
Fidelity Series Long-Term Treasury Bond Index Fund 2.90%
Short-Term Debt & Net Other Assets 2.91%


Both look like they have a very low bond amount..no? I will make sure to read that wiki page thoroughly
Last edited by stt816 on Fri Nov 09, 2018 8:49 am, edited 1 time in total.

stt816
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Re: First time invester, help needed please

Post by stt816 » Fri Nov 09, 2018 8:48 am

Googliebear wrote:
Fri Nov 09, 2018 8:24 am
I highly recommend that you watch the following Youtube video:
https://www.youtube.com/watch?v=T71ibcZAX3I

And read the following book:
https://www.amazon.com/Simple-Path-Weal ... =j+collins

I'm forty two and have been investing for twenty years and if I would write a book of my experience, it would have been this book.

Good luck and keeping asking your questions on this board, it is truly one of the most valuable free resources you'll ever find for investing.

Mike
Thanks Mike!!

stt816
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Re: First time invester, help needed please

Post by stt816 » Fri Nov 09, 2018 9:00 am

So I read the article and I understand that stocks/bonds ratio depends on a couple things but the ones that stuck out to me are the following... Liquidity, age, and risk tolerance.

As far as liquidity , I don't see myself needing this money any time soon since I'll be saving again. I consider this money "gone" so to speak. In my mind I picture getting heavy penalties if I touch it (I know this not to be the case but it helps with keeping my hands off)

Age I got on my side, and according to the article that would be roughly my age in bonds

Risk tolerance..it sounds to me that if you're just willing to stick with it and not sell at rough times then you should be good..I'm willing to see my portfolio go down because I know if I stick with it it'll eventually come back up (unless something catastrophic happens)

Let me know if I have everything correct


Also for my 401k and IRA, bonds are really low, but in the article it says roughly your age. That would be around 10% vs 27% in bonds ..I guess that's where I'm having trouble to see what's right

How come nobody mentions REIT too much here? Are they worth looking into?

pkcrafter
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Re: First time invester, help needed please

Post by pkcrafter » Fri Nov 09, 2018 10:06 am

hello stt, you are getting good advice, so I'll just try to help organize.

1. asset allocation - Many of us will recommend 80% stock max across all accounts. Note: It can be much more difficult to hold your allocation during the panic that is present in an out of control market crash. It's also easier to ride a bear market when you don't have a lot of money at risk. How far do you think the market can drop?

2. Funding retirement - First, fill 401k to get the match, then fund IRA or Roth. Then if you still have some left to invest, add more to 401k.

3. As noted, think of all accounts as one portfolio.

4. Target funds can be good, but don't pick by date, pick by allocation that matches your target.

5. TR funds are easy, but they sometimes make it difficult to keep the target allocation across all accounts, especially bonds which should not be in taxable or Roth if it can be avoided.

6. Add the 70k to your 401k/IRA-Roth, or use the 70k as spending money and increase deduction from salary until the 70k is effectively in tax deferred accounts.

7. Focus on the the three-fund portfolio overall. Many members here will suggest 20-30% international.

Three fund

viewtopic.php?f=10&t=88005


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.

stt816
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Re: First time invester, help needed please

Post by stt816 » Fri Nov 09, 2018 11:04 am

Hi Paul I will answer back to some of the things you have said

1. asset allocation - Many of us will recommend 80% stock max across all accounts. Note: It can be much more difficult to hold your allocation during the panic that is present in an out of control market crash. It's also easier to ride a bear market when you don't have a lot of money at risk. How far do you think the market can drop?
This as noted, I'd like to be more risky. If theres a 1-10 scale, of 10 being the most risk I would say 7 or 8 risk

2. Funding retirement - First, fill 401k to get the match, then fund IRA or Roth. Then if you still have some left to invest, add more to 401k.
I already get the match which is $1000. I already put 5500 into the roth ira. To my knowledge you can't put money into a 401k if its not directly from your paycheck.

3. As noted, think of all accounts as one portfolio.
noted, good point

4. Target funds can be good, but don't pick by date, pick by allocation that matches your target.
That is something I learned in the wiki. both of the 2055's I have are riskier, with low bonds. It does match because as noted above I'd like to be riskier

5. TR funds are easy, but they sometimes make it difficult to keep the target allocation across all accounts, especially bonds which should not be in taxable or Roth if it can be avoided.

6. Add the 70k to your 401k/IRA-Roth, or use the 70k as spending money and increase deduction from salary until the 70k is effectively in tax deferred accounts.
I can easily contribute to my ira roth max amount (5500) every year... and I am contributing to my 401k to get the match. For the next year I will up how much I am contributing per pay check. The 70k I cannot put towards the 401k as it comes out of your paycheck. I need to do something with this 70k as I do not need it at all and I have all of the pre-requisites done already (401k,ira,emergency savings)...As noted as well I do side jobs that I could survive on and THAT is my spending money

7. Focus on the the three-fund portfolio overall. Many members here will suggest 20-30% international.
ok sounds good

DanEmmy
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Re: First time invester, help needed please

Post by DanEmmy » Fri Nov 09, 2018 11:42 am

When do you plan to buy the house? You should set aside (not invest) the down payment amount from your $70k stash if its in the next 5 years or so. You want at least 20% down to avoid PMI.

Edit: To add, it seems your eager to invest your $70k and that is understandable. However, considering you're doing the right things with your retirement accounts and need a EF and a house down payment, you might not need to invest as much of it as you think. For example:

1. Get employer 401k match (which you are)
2. Put aside cash for EF (maybe $25k?)
3. Max out Roth IRA (which you are)
4. Put aside cash for down payment and closing costs (maybe $45k?)
5. Up your paycheck 401k contribution as you can to fill up the remaining 401k space per year

You'll be in excellent shape.

stt816
Posts: 49
Joined: Wed Nov 07, 2018 4:59 pm

Re: First time invester, help needed please

Post by stt816 » Fri Nov 09, 2018 12:09 pm

I have an inheritance of around 50k that I am setting aside for the house. I would want close to 100k for a 20% down payment on the home. Should get me something decent.

So what I was planning on doing was this...

put the 70k into investments
up my contribution to 401k next year from my paycheck
from there, contribute to building that 50k to 100k for the down payment of the home
maxing out roth every year


I also have an account with a broker that my dad put in about 8k when i was 6 years old (year 1997). Its now 44k.

It's a Mid-Cap Growth Equity Fund



Holdings
Name
Weight (%)
IAC/INTERACTIVECORP 3.07
TRANSUNION 2.61
COPART INC. 2.61
SBA COMMUNICATIONS CORP 2.60
ALIGN TECHNOLOGY, INC. 2.45
COSTAR GROUP INC 2.26
BRIGHT HORIZONS FAMILY SOLUTIONS INC 2.23
VAIL RESORTS INC 2.16
TAKE-TWO INTERACTIVE SOFTWARE INC. 2.13
TELEFLEX INCORPORATED 2.12

Sector
Fund/Benchmark/Net
Information Technology
22.44 30.91 -8.48
Industrials
17.92 16.09 1.83
Communication
17.59 4.26 13.33
Health Care
15.69 14.58 1.11
Consumer Discretionary
10.46 16.84 -6.38
Financials
7.40 6.74 0.66
Real Estate
4.36 2.17 2.19
Consumer Staples
2.26 3.16 -0.90
Materials
1.45 3.55 -2.09
Energy
0.00 1.69 -1.69
Cash and/or Derivatives
0.42 0.00 0.42

Fees
as of current prospectus
Gross Expense Ratio 1.30%
Net Expense Ratio 1.05%


This is what it is. What do you guys think of that fitting in my portfolio...sounds like its around 8.5% growth which is good, no?

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Fri Nov 09, 2018 2:07 pm


stt816
Posts: 49
Joined: Wed Nov 07, 2018 4:59 pm

Re: First time invester, help needed please

Post by stt816 » Fri Nov 09, 2018 2:50 pm

I've read most of it, just wondering still what would be best for my specific case..I'm trying to look at the BIG picture of all my holdings
Which is this

401k work plan vanguard target 2055
90% stocks/10% bonds

Roth IRA Fidelity 2055 target
Domestic Equities
63.06%
International Equities
27.07%
Bonds
6.96%
Short-Term Debt & Net Other Assets
2.91%

'
And then the "Mid-Cap" Which I don't know much about



I will outline everything so far


401k--Use paycheck to contribute $458 per month (5500 a year). Work provides 1000 dollar match (current balance is 18k)..I know I can put more but for now my goal is to have a near equal amount, if not slightly more to saving towards a house which I consider a retirement investment as well


Roth IRA Contribute 5500 every year (current balance 5500)


Investment property- Buy 2-3 Unit home save around 100k. Currently have 50k towards this. Using my paycheck to mostly go towards this outside of 401k and roth ira


Personal Stocks/Bonds-Have 70k from my savings in this but it doesn't have anything that its going towards and that's why I made this thread. Was thinking of a 73%-85% Stock holding with the rest being bonds


I will be living off of any money I make on the side and whatever I have left from my paycheck..I DJ,tutor, and I'm a seller on eBay


Mid-Cap-- This is the fund I have had since I was 6 years old this is 44k in value now. I don't want to touch it at all but if theres something else it should be in, I'm all ears.


GM Stock--Current balance is around 5k I was thinking of placing this in higher risk company. I know this is against the philosophy but this would be my "play money" or I could place this money into the house.

DanEmmy
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Re: First time invester, help needed please

Post by DanEmmy » Fri Nov 09, 2018 10:14 pm

The mid-cap investment and GM stock are parts of your total portfolio and all asset allocation rules apply. There's no reason to overexpose yourself to mid-caps or GM.

stt816
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Joined: Wed Nov 07, 2018 4:59 pm

Re: First time invester, help needed please

Post by stt816 » Fri Nov 09, 2018 10:27 pm

So reading through all of this again helped me out.

Sounds like I should adjust my 401k and IRA to be around 25% or so bonds...sounds like 20 is the minimum from what I'm reading that you should do

While in my personal account just do us and international total market index funds..let me know if I got this right

stt816
Posts: 49
Joined: Wed Nov 07, 2018 4:59 pm

Re: First time invester, help needed please

Post by stt816 » Fri Nov 09, 2018 10:30 pm

.....

stt816
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Re: First time invester, help needed please

Post by stt816 » Sun Nov 11, 2018 9:47 am

I didn't choose mid caps..that was chosen 20 years ago by my dad ...I'd like to forget the gm stock because that will be just "play money"

Would you say it's best to change the mid caps?


I have around 127k total..what I was thinking is around 17% in bonds

So sell the 44k mid cap and bring it into all of this

So 22k in bonds in my 401k and IRA however that adds up with whatever year target I have to choose

Then the rest in stocks in a mixture of Roth ..401k..and personal account

retiredjg
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Re: First time invester, help needed please

Post by retiredjg » Sun Nov 11, 2018 10:22 am

stt816 wrote:
Sun Nov 11, 2018 9:47 am
I didn't choose mid caps..that was chosen 20 years ago by my dad ...I'd like to forget the gm stock because that will be just "play money"

Would you say it's best to change the mid caps?


I have around 127k total..what I was thinking is around 17% in bonds

So sell the 44k mid cap and bring it into all of this

So 22k in bonds in my 401k and IRA however that adds up with whatever year target I have to choose

Then the rest in stocks in a mixture of Roth ..401k..and personal account
Maybe I'm just getting too old....Information is all over the place, the thread is getting long, and I can no longer follow what you are talking about. Since you are not getting a lot of replies, maybe others are feeling this too.

Why don't you consider summarizing what you have (yes, all of it) and what you plan to do with it? Please include your tax bracket and age again so people don't have to go look for that information.

stt816
Posts: 49
Joined: Wed Nov 07, 2018 4:59 pm

Re: First time invester, help needed please

Post by stt816 » Sun Nov 11, 2018 12:22 pm

No problem, I think that is a good idea as well. Thank you, and everyone else for helping me so far. Even though it might seem this is getting no where, I actually learned a lot so far from this thread.

Age:27
Tax Bracket: 25%

What I have

Emergency Account $5000, though it might not seem like a lot this can last me around 5 months

401k Vanguard Target 2055..Current Value $18k
89.94%
Stocks

10.00%
Bonds

0.06%
Short-term reserves


Roth IRA Fidelity Freedom 2055 ...Current value $5,500
Domestic Equities
63.06%
International Equities
27.07%
Bonds
6.96%
Long-Term U.S. Treasuries
2.90%
Short-Term Debt & Net Other Assets
2.91%


Personal Account Fidelity Account (did not invest in anything yet) 60k


BlackRock Mid-Cap Account $44k (this was started by my dad when I was 7 years old, went from 9k to current value)

Bank Account savings for 2-3 Unit Investment Home 50k



My Plan
My plan is to live off money I make on the side from DJing, tutoring and whatever is left from my paycheck after contributing to 401k and roth.
My plan is to also contribute to my 50k savings in my bank account until I get to around 100k for a 20% down payment on a home


I want to set stocks/bonds ratio to around 80-85% stocks/20%-15% Bonds based on risk tolerance and age
I will also look at the BIG picture, meaning looking at all of my accounts as one. I will set the 401k and roth to hold the bonds, while my personal holds the stocks, for tax purposes




My questions
Should I sell my BlackRock Mid Cap to put that all in one place in my personal account (fidelity) and put the 60k, and 44k together into the domestic and international index funds? Hesitant to do this because it has been performing well

Should I also pick a different target year for both 401k and roth to make them have a different stock/bond ratio, or should I just do a 3 fund style (setting the percentage myself)

retiredjg
Posts: 34219
Joined: Thu Jan 10, 2008 12:56 pm

Re: First time invester, help needed please

Post by retiredjg » Sun Nov 11, 2018 12:52 pm

Thank you. This is something we can work with.

Roth IRA Fidelity Freedom 2055 ...Current value $5,500
This is the low cost index version of the Fidelity Freedom funds, right?


Personal Account Fidelity Account (did not invest in anything yet) 60k
What is this money for? If it is likely to be used for a long range goal like retirement, it should be rolled into your overall portfolio. If it is for something else, that might not be your best choice.

BlackRock Mid-Cap Account $44k (this was started by my dad when I was 7 years old, went from 9k to current value)
What is the exact name and ticker for this fund and what is it's expense ratio?

My Plan
My plan is to live off money I make on the side from DJing, tutoring and whatever is left from my paycheck after contributing to 401k and roth.
My plan is to also contribute to my 50k savings in my bank account until I get to around 100k for a 20% down payment on a home
This seems fine.
I want to set stocks/bonds ratio to around 80-85% stocks/20%-15% Bonds based on risk tolerance and age
I will also look at the BIG picture, meaning looking at all of my accounts as one. I will set the 401k and roth to hold the bonds, while my personal holds the stocks, for tax purposes
This seems fine too.



My questions
Should I sell my BlackRock Mid Cap to put that all in one place in my personal account (fidelity) and put the 60k, and 44k together into the domestic and international index funds? Hesitant to do this because it has been performing well
Maybe. Let's see what the fund actually is first.
Should I also pick a different target year for both 401k and roth to make them have a different stock/bond ratio, or should I just do a 3 fund style (setting the percentage myself)
That partially depends on what the $60k is going to be used for....

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