Portfolio Help

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reallyconfused
Posts: 55
Joined: Thu Dec 11, 2008 2:13 am

Portfolio Help

Post by reallyconfused » Sun Dec 14, 2008 7:20 am

Ouch...I thought I was doing reasonably well, but apparently I'm pretty clueless. I hoping the wise posters here can guide me. As Laura suggested in a previous post I've apparently made some pretty poor decisions. (Namely not maxing out my 401k but investing in a taxable account)


Emergency funds = 0 (my parents are available if an emergency were to arise)

Debt = 0

Tax Filing Status: Single

Tax Rate: 25% Federal, 9.3% California

Age: 28

Desired Asset allocation: (90 stocks / 10 bonds)

Current Intl allocation: 15%
Desired Intl allocation: 25%

Current portfolio: About 30k

Taxable
68% Vanguard Total Stock Market Index (VTSMX) (.15)
17% employer stock - I got a 15% discount on these stock from my employer.

Roth at Schwab
7% iShares CHINA (FXI) (.74)

401k
8% Dodge and Cox International (DODFX) (.65)

New annual Contributions:
401K (I've just changed my contribution limits to the max - Thanks Laura :) so I will contribute ~13000 next year including match)
Taxable - Around 25000

Funds available in 401(k):
Stock Investments
Dodge and Cox International (DODFX) (.65)
Dodge and Cox Stock (DODGX) (.52)
Harbor Cap Appreciation (HACAX) (.67)
Hartford Small Company Fund (HIASX) (.70)
Morgan Stanley U.S. Small Cap Value (MPSCX) (.84)
Spartan U.S. Equity Index Fund (FUSEX) (.1)
Spartan Extended Market Index Fund (FSEMX) (.1)

Blended Fund
Fidelity Puritan Fund (FPURX) (.61)
SSgA Target Retirement 2045 Fund C (.17)

Bond Investments
Fidelity Government Income Fund (FGOVX) (.45)
PIMCO Total Return Fund Administrative Class (PTRAX) (.67)


I've already taken Laura's suggestion of maxing out my 401k before I do taxable investments.

1) I need suggestions for my 401k investments. Should I stay with the Dodge and Cox International, or would you suggest another investment? If you think a different investment choice is better should i exchange my Dodge and Cox international holdings to the one you suggested?
2) What should i do with next year's ROTH?


And finally thank you to all posters - even those who will not reply to my post. I've learned a great deal from this fabulous site. Long live bogleheads!!!
Last edited by reallyconfused on Mon Nov 05, 2012 9:11 pm, edited 1 time in total.

Laura
Posts: 7973
Joined: Mon Feb 19, 2007 7:40 pm

Options

Post by Laura » Sun Dec 14, 2008 10:03 am

reallyconfused,

Don't feel bad because although you made some mistakes you have actually mastered the most difficult and important part of investing - saving the money. You are living below your means and have time on your side by starting early so all the basic ingredients for long term success are in place. You are now building a plan and looking for the best way to implement it.

Turning to your current portfolio I think you have a couple of options.

Starting with your emergency fund, even if your parents are available for an emergency you should build up some cash reserves. These can be used for a new car, home, or emergency dental work. Having cash available is the best way to stay out of debt. You have done a great job quickly saving $30k so take your taxable investments, sell them, and put a significant amount of that money away as cash for upcoming expenses. Take $5k of that and use it for your 2009 roth contribution to be made very early in January. You can use rest as an emergency fund and use the Vanguard Prime Money Market account or a high-yield savings account.

You should sell your ecolab stock as soon as you can. It is great to get this at a 15% discount but your income is dependent on your job and your investments should not carry the same risk.

Turning to your long term retirement investing this leaves you with your roth and the 401k. You have some excellent choices in the 401k. The best are:

Spartan U.S. Equity Index Fund (FUSEX) (.1)
Spartan Extended Market Index Fund (FSEMX) (.1)
SSgA Target Retirement 2045 Fund C (.17)

You can structure your portfolio in several different ways. Here are a few options.

Option 1

taxable
Prime Money Market (emergency and upcoming expenses)

roth
Target Retirement Fund

401k
SSgA Target Retirement 2045 Fund C (.17)

This portfolio is very low cost, broadly diversified and extremely easy to manage. It is my personal favorite.

Option 2

taxable
Prime Money Market (emergency and upcoming expenses)

roth
Total International Stock Market

401k
Spartan U.S. Equity Index Fund (FUSEX) (.1)
Spartan Extended Market Index Fund (FSEMX) (.1)
10% Fidelity Government Income Fund (FGOVX) (.45)

You mention contributing $13k to your 401k next year. The annual limit is $16.5k per person plus matching funds (if you receive them). If you cannot afford to contribute the full $16.5k don't worry. Use your taxable cash being held in the money market account to pay for some of your living expenses. This allows you to "transfer" some of the taxable money into the 401k.

You would want to contribute 10% of your total annual contributions in all accounts into the bond fund then put the roth in international. Split the rest of the 401k money 70% into equity index and 30% into extended market.

In your situation I recommend using Option 1. Let the fund companies maintain an asset allocation for you while you focus on saving as much as possible.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

pkcrafter
Posts: 13022
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

portfolio

Post by pkcrafter » Sun Dec 14, 2008 10:25 am

RC,
I looked at your previous posts and one thing jumped out
Being extreme natured I dollar cost averaged into VTSMX DAILY!
This is an very bad trait for a DIY investor. You need to understand now that you will not do well at all if you allow this to guide your investing. Once your portfolio is set up, you should not need to spend more than maybe 6 hours/year on managing it. Investors on this board who have this tendency burn the energy on posting about investing rather than tinkering with their portfolio.

You have made great strides toward getting thing in order. It's good you are maxing out the 401k, but he sure the Roth gets maxed as well. That would take priority over the 401k contributions. As to what to put in there depends on your investment strategy. You need to decide on how much you want to slice and dice vs simplicity. I suggest you lean toward simplicity to avoid your tendency to be extreme.

The two best equity funds in your 401k are Spartan index and extended market index. The two bond funds are also very good.

Consider a portfolio something like this:
U.S. large cap blend index
extended market
international
REIT
bonds
Where extended is about 25-30% of total U.S. allocation. REIT is about 10% of total equity. International is about 25% of total equity. You might also consider large value as an additional diversifier. maybe 40% of U.S. large.

Get rid of the China ETF and sell off the company stock as soon as you can realize the 15% gain. Keep company stock under 10% if possible.

Your AA is very high. What is your rational for choosing it? Also, develop your emergency fund. Take responsibility and don't depend on parents to bail you out. They may have their own problems.


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.

retiredjg
Posts: 33594
Joined: Thu Jan 10, 2008 12:56 pm

Post by retiredjg » Sun Dec 14, 2008 11:28 am

Emergency funds = 0 (my parents are available if an emergency were to arise)
This concerns me. If you've just gotten out of grad school and landed a great job, it is understandable you might not have an emergency fund at this point.

That said, you're an adult now and wonderful as they have been, you need to move toward not depending on your parents. It's the greatest give you can give them. At least some of the money you plan for taxable investing needs to go into your emergency fund until you have 12 months of expenses saved up. "If an emergency were to arise" is a phantasy. An emergency will arise, you can count on it.

"Emergency" does not necessarily mean "in the hospital with life threatening injuries". It also means a new transmission when your car dies, new carpet if the hot water heater leaks (not to mention the new hot water heater), and groceries and gas for 6 months if you get downsized or otherwise eliminated. Don't assume this cannot happen to you. Look around and put yourself in the shoes of the thousands of people who thought they were in stable jobs.

As Laura said, "Having cash available is the best way to stay out of debt."

You have recognized your tendency to being extreme natured. After reading some of the basic books like Bogleheads' Guide and Four Pillars, you might benefit especially from some of the books that deal with the psychology of investing and the mistakes that smart people make. Sorry, I've not read them yet (hoping to get some for Christmas!), so I can't recommend any one in particular. Jason Zweig seems to be very well respected around these parts.

You're doing a good job of saving and not having any debt! Good luck!

reallyconfused
Posts: 55
Joined: Thu Dec 11, 2008 2:13 am

Post by reallyconfused » Fri Dec 19, 2008 11:05 am

retiredjg, Laura and pkcrafter thank you all for your posts. I have to admit that I got some advice that I did not necessarily want to hear, but needed to hear. I've made changes and have started saving for my emergency fund.

I will liquidate my China ETF and company stock by years end.

I wanted a high AA since i've started investing a bit late. And i figured since stocks have taken a beating recently it might be good to have a slightly higher allocation of stocks vs bonds.

The one question that I can't seem to find an answer for is where to get more information on the ssga target retirement 2045 fund. I've called our 401k company (fidelity) and they have told me to contact my benefits department. My benefits department did not have any answers either. I've spent a good 2-3 hrs looking up this fund on google and ssga's own website, but to no avail. I wanted to know what asset allocation they have, and ideally to view a prospectus.

Anyways, I appreciate everyone's help so far. Thanks again.

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Post by dbr » Fri Dec 19, 2008 11:24 am

I found this document for the Comcast 401K that discusses the SSgA funds with some detail.

http://home.comcast.net/~usw1212/401ka.pdf

Does your employer publish at least this much information? If they don't they are incompetent and not acting in the interests of the employees. Note it is not news that neither HR nor general management either know or care what is in the 401K plan.

reallyconfused
Posts: 55
Joined: Thu Dec 11, 2008 2:13 am

Post by reallyconfused » Fri Dec 19, 2008 11:43 am

dbr wrote:I found this document for the Comcast 401K that discusses the SSgA funds with some detail.

http://home.comcast.net/~usw1212/401ka.pdf

Does your employer publish at least this much information? If they don't they are incompetent and not acting in the interests of the employees. Note it is not news that neither HR nor general management either know or care what is in the 401K plan.
Unfortunately they do not. They just provided the following:
"YTD Return (09/30/2008) -18.10%
NAV (12/18/2008) $6.77
52 Week Low-High (12/18/2008) $5.63-$10.42
See additional performance information.
The performance data featured represents past performance, which is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance data quoted.

Top
Overview
What it is
A lifecycle investment option (not a mutual fund).

Goal
Seeks to provide long-term capital appreciation and some stability of principal for investors planning to retire on or around the year 2045.

What it invests in
Invests in a combination of U.S. Stocks, International Stocks, Bonds and Cash, and allocates its assets among these strategies according to a pre-determined asset allocation strategy. On an annual basis, the Strategy automatically rebalances to a more conservative strategy as the year 2045 approaches. Over time, the stock allocation decreases and the bond and cash allocations increase. By the year 2045 the Strategy will be invested in its most conservative mix of cash, bond and stock investments. Once the target date is reached, the Strategy will be mapped to the Lifetime Income Strategy, the series' most conservative strategy with a mix of asset classes that remains constant over time. The Lifetime Income Strategy would typically be the choice of plan participants who are currently at retirement age or beginning to withdraw substantial portions of their investments. These funds are subject to the volatility of the financial markets in the U.S. and abroad and may be subject to the additional risk associated with investing in high yield, small cap, and foreign securities. Unit price, yield and return will vary.

Who might want to invest in it
• Someone who wants balanced exposure across the major global asset classes through indexing in a single investment vehicle.
• Someone who wants a long-term investment strategy that changes over time as his or her target retirement date approaches.

Managed by State Street Global Advisors, which provided the description for this portfolio.
Top
Expenses & Fees
Expenses & Fees
Expense Ratio as of 04/01/2008 0.17%
Please see the fund's prospectus for information regarding fee waivers, reimbursements, and expense caps that may be in effect.
For a mutual fund, the expense ratio is the total annual fund or class operating expenses (before waivers or reimbursements) paid by the fund and stated as a percent of the fund's total net assets. Where the investment option is not a mutual fund, the figure displayed in the expense ratio field is intended to reflect similar information. However, it may have been calculated using methodologies that differ from those used for mutual funds. Mutual fund data has been drawn from the most recent prospectus. For non-mutual fund investment options, the information has been provided by the trustee or plan sponsor. When no ratio is shown for these options it is due to the fact that none was available. Nevertheless, there may be fees and expenses associated with the investment option.
Top
Performance
Cumulative Total Returns 1 (%)
as of 09/30/2008

YTD -18.10
1 Month -9.14
3 Month -9.72
The performance data featured represents past performance, which is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance data quoted.
Top
Fund Facts
Fund Facts
CUSIP 85744L501
Fund Inception 12/01/2007

Top
Prices & Distributions
Price History as of 11/30/2008
52 Week Low-High $5.63 - $10.42
On 11/30/2008 $6.57"
That's it. No ticker symbol, no other links. Nada. But thank you for that link it provides a lot more information that I had. Thanks again.

retiredjg
Posts: 33594
Joined: Thu Jan 10, 2008 12:56 pm

Post by retiredjg » Fri Dec 19, 2008 12:43 pm

https://stateofmi.csplans.com/csinfo/fu ... 14db694926

Click the link at the bottom for the fund fact sheet. It's 90/10 stocks/bonds. Is that what you are looking for?

reallyconfused
Posts: 55
Joined: Thu Dec 11, 2008 2:13 am

Post by reallyconfused » Fri Dec 19, 2008 1:04 pm

retiredjg wrote:https://stateofmi.csplans.com/csinfo/fu ... 14db694926

Click the link at the bottom for the fund fact sheet. It's 90/10 stocks/bonds. Is that what you are looking for?

Thanks again retiredjg. I'm planning on pulling the trigger on Laura's option 1 plan. I'll add complexity as i accumulate more money :)

retiredjg
Posts: 33594
Joined: Thu Jan 10, 2008 12:56 pm

Post by retiredjg » Fri Dec 19, 2008 1:09 pm

reallyconfused wrote:
retiredjg wrote:https://stateofmi.csplans.com/csinfo/fu ... 14db694926

Click the link at the bottom for the fund fact sheet. It's 90/10 stocks/bonds. Is that what you are looking for?

Thanks again retiredjg. I'm planning on pulling the trigger on Laura's option 1 plan. I'll add complexity as i accumulate more money :)
But is that the information you were looking for or did I misunderstand your post?

reallyconfused
Posts: 55
Joined: Thu Dec 11, 2008 2:13 am

Post by reallyconfused » Fri Dec 19, 2008 1:21 pm

retiredjg wrote:
reallyconfused wrote:
retiredjg wrote:https://stateofmi.csplans.com/csinfo/fu ... 14db694926

Click the link at the bottom for the fund fact sheet. It's 90/10 stocks/bonds. Is that what you are looking for?

Thanks again retiredjg. I'm planning on pulling the trigger on Laura's option 1 plan. I'll add complexity as i accumulate more money :)
But is that the information you were looking for or did I misunderstand your post?

fundamentally thats what i was looking for. it would have been nice if the fund had an associated ticker, but nonetheless i'm now comfortable with the underlying securities to go ahead and switch into this fund.

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Post by dbr » Fri Dec 19, 2008 1:25 pm

There are lots of cases where 401K plans offer commingled or institutional funds that do not have tickers because the funds are not sold on exchanges. In most cases such funds are low cost, well managed options that are good for plan participants. SSgA is a very large supplier of such products. The problem comes from the employer and the plan administrator who simply do not get it about informing employees and offering transparency in investing. It is unsettling because lack of transparency is the first red flag on the path to fraud. I don't know if there is a case that can be made for lack of fiduciary execution in cases like this, but there should be even when there is in fact no harm.

retiredjg
Posts: 33594
Joined: Thu Jan 10, 2008 12:56 pm

Post by retiredjg » Fri Dec 19, 2008 1:48 pm

What boggled my mind is that I could not find the info on the SSgA site.

I understand that some things do not have a ticker. But you would think the the information about the fund would be available on their site! (I found it on the State of Michigan 457 plan site...) go figure.

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Post by dbr » Fri Dec 19, 2008 7:20 pm

retiredjg wrote:What boggled my mind is that I could not find the info on the SSgA site.

I understand that some things do not have a ticker. But you would think the the information about the fund would be available on their site! (I found it on the State of Michigan 457 plan site...) go figure.
It makes sense in that the product is offered to the vendors of 401k plans and via them to the respective employers. It would be like going to a manufacturer to find out details about private label products that are only available on contract to a certain retailer. The retailer should document the products to its customers, but the manufacturer will not document the products to the retailer's customers. Note the same product might be private labelled to different retail companies under varying names, terms, and costs that are specific to each retail company (ie employer and his employees). One danger is that the descriptions on various 457 and 401k sites that can be found may not apply to the OP in every detail as his plan may have different nuances. Probably the composition of the fund is not one of these variable nuances.

retiredjg
Posts: 33594
Joined: Thu Jan 10, 2008 12:56 pm

Post by retiredjg » Fri Dec 19, 2008 7:23 pm

dbr wrote:
retiredjg wrote:What boggled my mind is that I could not find the info on the SSgA site.

I understand that some things do not have a ticker. But you would think the the information about the fund would be available on their site! (I found it on the State of Michigan 457 plan site...) go figure.
It makes sense in that the product is offered to the vendors of 401k plans and via them to the respective employers. It would be like going to a manufacturer to find out details about private label products that are only available on contract to a certain retailer. The retailer should document the products to its customers, but the manufacturer will not document the products to the retailer's customers. Note the same product might be private labelled to different retail companies under varying names, terms, and costs that are specific to each retail company (ie employer and his employees). One danger is that the descriptions on various 457 and 401k sites that can be found may not apply to the OP in every detail as his plan may have different nuances. Probably the composition of the fund is not one of these variable nuances.
Thanks dbr. That makes sense. Unfortunately, the OP's employer was not able to provide what s/he needed. I wonder what the solution for that might be?

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