New to investment!

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Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

New to investment!

Post by Labelle »

Hi BH’s
Excuse me in advance on my English, I am still in school learning English.
I am 35 years old, immigrant from Africa. I have no consumer debt, I owe 62k on my mortgage.
I recently opened a Roth IRA at vanguard and want to start investing for retirement but I have no clue on what to invest in or how it works beside what I read online, YouTube etc...
For someone who started late investing, what should I buy? How to best allocate my portfolio?
I intend to max my Roth IRA every year.
I thank you all in advance.

*UPDATE*
I am a US citizen.

Emergency funds: six months emergency fund 25k in a saving account.

Debt: mortgage house worth about 125-135k,owe 62k on 3.75APR planing on paying it off with in the next 3-4 years.

Tax Filing Status: Head Of Household.

Tax Rate: 22% Federal, 3.07% State

State of Residence: PA

Age:34
I planned on contributing 6k a year on the Roth IRA and 19500k on the 457b.
Salary is 90k a year

Desired Asset allocation: 60%stocks 20%bonds
Desired International allocation: not sure of %

Currently:
Roth IRA 6k with vanguard
457b with prudential
I have pension through my job.

457b has these funds available:
Stable Value
-Prudential Stable Value Fund, ER N/A

Fixed Income-International Core Bond
-Vanguard Total Bond Market Index Fund Admiral Shares, ER 0.05%

Fixed Income-Core Plus Bond
-Prudential Total Return Bond Fund, ER 0.33%

Fixed Income -High Yield Bond
-PGIM High Yield Fund-Class R6, ER 0.40%

Fixed Income-Global Bond
-PGIM Global Total Return Fund- Class R6, ER 0.56%

Allocation-Target -Date Retirement Income (With Income Guarantee)
-Prudential Day One IncomeFlex Target Balanced Fund, ER 1.34%

Allocation-Target Date 2000-2010
-T.Row Price Retirement 2010 Fund,ER 0.37%

Allocation Target Date 2015
-T.Row Price Retirement|2015 Fund| Class, ER 0.40%

Allocation Target Date 2020
-T.Row Price Retirement 2020 Fund, ER 0.43%

-T.Row price Retirement 2025 Fund, ER 0.47%
-T.Row Price Retirement 2030 fund ,ER 0.49%
-T.Row Price Retirement 2035 Fund, ER 0.50%
-T.Row Price Retirement 2040 fund, ER 0.51%
-T.Row Price Retirement 2045 Fund, ER 0.52%
-T.Row Price Retirement 2050 Fund, ER 0.52%
-T.Row Price Retirement 2055 Fund ER 0.52%
-T.Row Price Retirement 2060 Fund, ER 0.52%

Allocation 30% to 50% Equity
-T.Row Price Retirement Balance Fund, ER 0.35%

Allocation -Balanced Blend
-American Funds American Balanced Fund class R-6, ER 0.26%

Large Cap -Blend
-Harbor Large Cap Value Fund Retirement, ER 0.55%
-Vanguard Institutional Index Fund Institutional Shares, ER 0.04%
-Wells Fargo Disciplined U.S Core Fund, ER 0.41%

Large Cap- Growth
- Wells Fargo Growth Fund-Class R6 , ER 0.75%

Mid Cap- Value
-Mid Cap Value/ Robeco Boston, ER 0.71%

Mid Cap-Blend
-QMA Mike Cap Index Fund, ER 0.08%

Mild Cap-Growth
-Baron Growth Fund International Shares, ER 1.04%
-Eagle Mike Cap Growth Fund(IS Platform), ER 0.72%

Small Cap-Value
-Small Cap Value/Victory Fund, ER 0.86%

Small Cap -Blend
-QMA Small Cap Index Fund, ER 0.08

Global-Growth
-SA/OFII Strategy, ER 0.64%

International-Large Blend
-TIAA-CREF International Equity Index Fund Institutional, ER 0.06%

International-Large Growth
-American Fund EuroPacific Growth Fund Class R-6, 0.46%


How do choose from all of theses funds?!
Last edited by Labelle on Sun Aug 16, 2020 7:08 am, edited 4 times in total.
Compound
Posts: 838
Joined: Mon May 26, 2014 1:32 pm

Re: New to investment!

Post by Compound »

Congratulations on starting your investment journey. Bogleheads has a ton of resources to help you. In particular reading through articles in the wiki can be very helpful. Here’s a link to get you started:

https://www.bogleheads.org/wiki/Getting_started
lakpr
Posts: 6217
Joined: Fri Mar 18, 2011 9:59 am

Re: New to investment!

Post by lakpr »

Labelle,

Welcome to the forum.

I suggest that you invest that Roth IRA, assuming you have the minimum of $3000 necessary, entirely into VTSAX, Vanguard Total Stock Market Index fund.

The basic premise of Roth-IRA is that, in exchange for payment of taxes here and now, all future growth is tax free (well almost; it is subject to age 59.5 for withdrawals, otherwise there is tax and penalties due on the 'growth' of the money). It is in your interest to maximize that tax-free growth. Stated in other words, you should invest in your Roth IRA only in those asset classes that provide you highest expected returns; in other words, stocks.

Do not waste your Roth IRA space by investing in bonds or blended funds, etc.

You can also start with the "Getting Started" link above that @Compound provided. A key point that you should come away after reading that link is that, Boglehead philosophy believes in owning the entire market, not just slices of it, and certainly not individual stocks. In other words, buy Total Stock Market Index funds; not growth stocks, not value stocks, etc. Similarly, buy the Total Bond Market Index fund and the Total International Equities Index fund.

Or you can also combine the domestic index and the international index together -- and by VTWAX, Vanguard Total World Equities Index fund, a two-in-one-fund solution
dbr
Posts: 33842
Joined: Sun Mar 04, 2007 9:50 am

Re: New to investment!

Post by dbr »

lakpr wrote: Sat Aug 15, 2020 8:08 am
You can also start with the "Getting Started" link above that @Compound provided.
There is absolutely no replacement for sitting back and systematically reading the material in "getting started", in the Wiki, and in the books you will find on the Wiki reading list. People who write books and who have posted the Wiki have spent a lot of time and effort thinking through how to best present a comprehensive and well thought through discussion.

The forum is good for answering all kinds of questions and for discussing an amazing range of stuff, but I would not ever suggest going out and investing by expecting posters here to just tell you what to do. The actual result will be a confounding range of advice and long discussions of "one more way to do this." Once you have your own plan it can be a good discussion to seek comments on it.
retiredjg
Posts: 42242
Joined: Thu Jan 10, 2008 12:56 pm

Re: New to investment!

Post by retiredjg »

Labelle wrote: Sat Aug 15, 2020 5:01 am Hi BH’s
Excuse me in advance on my English, I am still in school learning English.
I am 35 years old, immigrant from Africa. I have no consumer debt, I owe 62k on my mortgage.
I recently opened a Roth IRA at vanguard and want to start investing for retirement but I have no clue on what to invest in or how it works beside what I read online, YouTube etc...
For someone who started late investing, what should I buy? How to best allocate my portfolio?
I intend to max my Roth IRA every year.
I thank you all in advance.
If you have no other accounts to use, for example a 401k or similar plan at work, I suggest picking an all in one mutual fund that contains a stock to bond ratio you are comfortable with. Examples would be a low cost Target Date fund or one of the LifeStrategy Funds offered at Vanguard.

The Target funds and the LifeStrategy funds contain pretty much the same thing. The target funds increase the bond allocation over the years. The LifeStrategy funds are static - they stay at the same stock to bond ratio over time.

If you do not have an idea of what stock to bond ratio you want, that is your first decision. The "getting started" link may help you with that and/or you may want to discuss it with people here.

Just based on age, I'd suggest anything between 20% bonds and 35% bonds is a place to start thinking. But there is more involved, particularly if this is your first investment.

You will run into suggestions to use "the 3 fund portfolio". The Target funds and the LifeStrategy funds contain all the components of "the 3 funder," but also include a small allocation to international bonds.

By the way....your English is perfect. :D
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

Thank you so much for your response.
I do have 457b from my job no match and pension.
Investing is just so confusing and overwhelming To me.
pkcrafter
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Contact:

Re: New to investment!

Post by pkcrafter »

The 3-fund portfolio...

viewtopic.php?f=10&t=88005

You have to decide on an asset allocation, which can be tricky for new investors because you probably won't know your real risk tolerance until you experience a market drop complete with all the news and speculation. A good starting place at your age might be 60-80% stock.


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: 42242
Joined: Thu Jan 10, 2008 12:56 pm

Re: New to investment!

Post by retiredjg »

Labelle wrote: Sat Aug 15, 2020 10:09 am Thank you so much for your response.
I do have 457b from my job no match and pension.
Investing is just so confusing and overwhelming To me.
It is confusing to all of us at first. :happy

If you are able to save more than just enough to fill the Roth IRA, you should use the 457 as well. A 457 combined with a pension is likely to be a "governmental" 457 as opposed to a "non-governmental 457. Do you know?
Mario2222
Posts: 64
Joined: Mon Dec 24, 2018 12:16 am

Re: New to investment!

Post by Mario2222 »

I'm a new investor like you. I invested my Roth IRA in vanguard target date fund. I immigrated from Africa like you.
User avatar
FrugalInvestor
Posts: 5677
Joined: Fri Nov 07, 2008 12:20 am

Re: New to investment!

Post by FrugalInvestor »

Labelle wrote: Sat Aug 15, 2020 10:09 am Investing is just so confusing and overwhelming To me.
It doesn't need to be but those who make money from other people's investments will often make it sound as complicated as possible to convince you that you need to pay them for their help. Doing so is usually a mistake.

There's no big rush. Take your time to read and ask questions here. Investing when done right does NOT need to be complicated. It can actually be very simple and straightforward. Let the Bogleheads show you how to do that. As we like to say 'ignore the noise' which usually just overcomplicates and adds expense.

Welcome!
Have a plan, stay the course and simplify, but most importantly....Ignore the Noise!
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

It is a governmental 457b. I work for the state in city I live in.
retiredjg wrote: Sat Aug 15, 2020 10:38 am [quote=Labelle post_id=5434315 time=<a href="tel:1597504152">1597504152</a> user_id=164601]
Thank you so much for your response.
I do have 457b from my job no match and pension.
Investing is just so confusing and overwhelming To me.
It is confusing to all of us at first. :happy

If you are able to save more than just enough to fill the Roth IRA, you should use the 457 as well. A 457 combined with a pension is likely to be a "governmental" 457 as opposed to a "non-governmental 457. Do you know?
[/quote]
retiredjg wrote: Sat Aug 15, 2020 10:38 am [quote=Labelle post_id=5434315 time=<a href="tel:1597504152">1597504152</a> user_id=164601]
Thank you so much for your response.
I do have 457b from my job no match and pension.
Investing is just so confusing and overwhelming To me.
It is confusing to all of us at first. :happy

If you are able to save more than just enough to fill the Roth IRA, you should use the 457 as well. A 457 combined with a pension is likely to be a "governmental" 457 as opposed to a "non-governmental 457. Do you know?
[/quote]


It is a governmental 457b. I work for the state I live in.
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

FrugalInvestor wrote: Sat Aug 15, 2020 11:03 am
Labelle wrote: Sat Aug 15, 2020 10:09 am Investing is just so confusing and overwhelming To me.
It doesn't need to be but those who make money from other people's investments will often make it sound as complicated as possible to convince you that you need to pay them for their help. Doing so is usually a mistake.

There's no big rush. Take your time to read and ask questions here. Investing when done right does NOT need to be complicated. It can actually be very simple and straightforward. Let the Bogleheads show you how to do that. As we like to say 'ignore the noise' which usually just overcomplicates and adds expense.

Welcome!
Thank you for the warm welcome and I appreciate the time you took to respond to my post.
I feel already that I am heading to the right direction, finding this forum by accident was blessing!
User avatar
abuss368
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Re: New to investment!

Post by abuss368 »

Labelle wrote: Sat Aug 15, 2020 5:01 am Hi BH’s
Excuse me in advance on my English, I am still in school learning English.
I am 35 years old, immigrant from Africa. I have no consumer debt, I owe 62k on my mortgage.
I recently opened a Roth IRA at vanguard and want to start investing for retirement but I have no clue on what to invest in or how it works beside what I read online, YouTube etc...
For someone who started late investing, what should I buy? How to best allocate my portfolio?
I intend to max my Roth IRA every year.
I thank you all in advance.
You are starting a wonderful journey. I would encourage you to read many books such as all of John Bogle’s and The three Boglehead books.

You will gain so much knowledge. I certainly did.
John C. Bogle: “Simplicity is the master key to financial success."
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

Mario2222 wrote: Sat Aug 15, 2020 10:48 am I'm a new investor like you. I invested my Roth IRA in vanguard target date fund. I immigrated from Africa like you.
It’s a pleasure to meet you here on this platform! I am from the west side of Africa. I never knew about investment until recently googling about Financial Independency!
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

pkcrafter wrote: Sat Aug 15, 2020 10:26 am The 3-fund portfolio...

viewtopic.php?f=10&t=88005

You have to decide on an asset allocation, which can be tricky for new investors because you probably won't know your real risk tolerance until you experience a market drop complete with all the news and speculation. A good starting place at your age might be 60-80% stock.


Paul
Thank you for your input. I am thinking 60-80% stock as well, and the rest I am not sure.
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

Compound wrote: Sat Aug 15, 2020 6:24 am Congratulations on starting your investment journey. Bogleheads has a ton of resources to help you. In particular reading through articles in the wiki can be very helpful. Here’s a link to get you started:

https://www.bogleheads.org/wiki/Getting_started
Thank you for the link and much appreciate your input.
retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: New to investment!

Post by retiredjg »

Labelle wrote: Sat Aug 15, 2020 11:05 am It is a governmental 457b. I work for the state I live in.
Good. Many of these are excellent plans.

Keep learning about the basic building blocks of a simple portfolio (US stocks, foreign stocks, bonds or other fixed income investments) and you will probably find some very good low cost choices for those building blocks in your 457. And you may also find some "all-in-one-fund" choices (usually a Target Date fund).

People here can help with those choices.
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

retiredjg wrote: Sat Aug 15, 2020 11:58 am
Labelle wrote: Sat Aug 15, 2020 11:05 am It is a governmental 457b. I work for the state I live in.
Good. Many of these are excellent plans.

Keep learning about the basic building blocks of a simple portfolio (US stocks, foreign stocks, bonds or other fixed income investments) and you will probably find some very good low cost choices for those building blocks in your 457. And you may also find some "all-in-one-fund" choices (usually a Target Date fund).

People here can help with those choices.

About Target Date Fund, I once heard listening to a financial podcast that most of the TDF are load with bonds, if i may ask you, what’s your input on that in the aspect of rate of return.
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

abuss368 wrote: Sat Aug 15, 2020 11:34 am
Labelle wrote: Sat Aug 15, 2020 5:01 am Hi BH’s
Excuse me in advance on my English, I am still in school learning English.
I am 35 years old, immigrant from Africa. I have no consumer debt, I owe 62k on my mortgage.
I recently opened a Roth IRA at vanguard and want to start investing for retirement but I have no clue on what to invest in or how it works beside what I read online, YouTube etc...
For someone who started late investing, what should I buy? How to best allocate my portfolio?
I intend to max my Roth IRA every year.
I thank you all in advance.
You are starting a wonderful journey. I would encourage you to read many books such as all of John Bogle’s and The three Boglehead books.

You will gain so much knowledge. I certainly did.
Thank you so much. I am on it lol I am overwhelmed and exiting at the same time!
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

retiredjg wrote: Sat Aug 15, 2020 9:32 am
Labelle wrote: Sat Aug 15, 2020 5:01 am Hi BH’s
Excuse me in advance on my English, I am still in school learning English.
I am 35 years old, immigrant from Africa. I have no consumer debt, I owe 62k on my mortgage.
I recently opened a Roth IRA at vanguard and want to start investing for retirement but I have no clue on what to invest in or how it works beside what I read online, YouTube etc...
For someone who started late investing, what should I buy? How to best allocate my portfolio?
I intend to max my Roth IRA every year.
I thank you all in advance.
If you have no other accounts to use, for example a 401k or similar plan at work, I suggest picking an all in one mutual fund that contains a stock to bond ratio you are comfortable with. Examples would be a low cost Target Date fund or one of the LifeStrategy Funds offered at Vanguard.

The Target funds and the LifeStrategy funds contain pretty much the same thing. The target funds increase the bond allocation over the years. The LifeStrategy funds are static - they stay at the same stock to bond ratio over time.

If you do not have an idea of what stock to bond ratio you want, that is your first decision. The "getting started" link may help you with that and/or you may want to discuss it with people here.

Just based on age, I'd suggest anything between 20% bonds and 35% bonds is a place to start thinking. But there is more involved, particularly if this is your first investment.

You will run into suggestions to use "the 3 fund portfolio". The Target funds and the LifeStrategy funds contain all the components of "the 3 funder," but also include a small allocation to international bonds.

By the way....your English is perfect. :D
Thank you so much for your suggestions!!!
At first I was skeptical of posting due to grammar error, but now I feel ok. Thank you.
User avatar
Watty
Posts: 20909
Joined: Wed Oct 10, 2007 3:55 pm

Re: New to investment!

Post by Watty »

Welcome to the US and the Bogleheads. Your English is great!.

Here are a few links that might be useful.

The getting started wiki.

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

The book "The Bogleheads Guide to Investing" is very understandable for someone that does not have a background in investing. If you get a used copy or find it in a library try to make sure that it is the most current edition.

https://www.amazon.com/Bogleheads-Guide ... 0470067365

There is a suggested format for posting questions about how you should invest. You do not need to follow it exactly. That will give a lot of additional information that will help people give good suggestions. Just going through getting all your information together in that format will really help you understand a lot more about your situation.

viewtopic.php?t=6212

There is also a wiki on choosing between a Roth and a Traditional IRA or 401k.

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

They are both great choices and one of the reasons that deciding between them is so difficult is that the best choice for most people is to have some of both. Until you are on track to have maybe $50K a year in retirement income be cautious about just contributing to Roth accounts. Even if you decide to use a traditional IRA in the future having the money you have already put in the Roth will likely work out great for you in the future.
Labelle wrote: Sat Aug 15, 2020 10:09 am Investing is just so confusing and overwhelming To me.
One great thing about retirement accounts is that later on you can change your mind about what you want to invest in and there are no tax issues when you move the money around.

This means that right now you just need to mainly just avoid making a bad choice, what you invest in now does not need to be perfect. There is a quote you will sometimes see here, "The enemy of a good plan is the dream of a perfect plan."

In a non retirement account(also called a taxable account) when you sell and investment to move the money to some other investment you may have to pay taxes on any capital gains that you have had if your investments have increased in value. You do not have to pay the taxes on capital gains in a retirement account.

In retirement accounts target date funds are a very good choice even if they may not be perfect so for now they would be a good safe choice to use while you are learning more about investing. For example if you expect to retire in 30 years when you are 65 in the year 2050 then you would just use a 2050 Target Date fund. In a few years you move that money into some other sort of investment without having to worry about tax issues since that would be in a retirement account.

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

For a long time I mainly just invested in target date funds because I did not have a specific reason not to. In the right situation they are a fantastic choice.

I can't remember where I read it but this really stuck with me. That is that there are really only a three things that you can control in investing. They are;

1) How much you save or spend each year.

2) Your asset allocation. This is how much you own in different asset classes like stocks and bonds. For example you may hear someone say they have 70% stocks and 30% bonds in their retirement account.

3) Keeping your investment costs as low as possible. This has a lot larger impact than many people realize. This is critically important, the actual math is more complicated but paying a 1% fee for 33 year could be around a third of your money.

If you can just keep focused on these three things you can do great. Doing things like picking superior investments or timing the stock market is not possible to reliably do so you can avoid those by just using investments like index funds and target date funds.
Labelle wrote: Sat Aug 15, 2020 5:01 am ....immigrant from Africa.
Something to keep in mind is that the various retirement accounts are specific to the US and things will be very complicated if you do not decide to stay in the US for the rest of your life. They were Indian but I have known several people that were working in the US, and even became US citizens, who may return to India someday so they were really concerned about the tax issue of having US retirement accounts.

I don't really understand all the details of how it works and the details will depend on any tax treaties between countries but if you think it is likely that you will retire somewhere else be sure to look into that.
retiredjg
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Re: New to investment!

Post by retiredjg »

Labelle wrote: Sat Aug 15, 2020 12:07 pm About Target Date Fund, I once heard listening to a financial podcast that most of the TDF are load with bonds, if i may ask you, what’s your input on that in the aspect of rate of return.
The rate of return will depend on the ratio between stocks and bonds. At Vanguard, the most aggressive target fund in the series (Target 2065) has about 90.5% stocks and 9.5% bonds. The most conservative fund in the series (Income) has 30% stocks and 70% bonds.

You pick the fund based on how aggressive you want your portfolio to be. Part of your choice has to do with how you feel about seeing your money disappear when the market takes a downturn.

https://investor.vanguard.com/mutual-fu ... etirement/
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Watty
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Re: New to investment!

Post by Watty »

Labelle wrote: Sat Aug 15, 2020 12:07 pm About Target Date Fund, I once heard listening to a financial podcast that most of the TDF are load with bonds, if i may ask you, what’s your input on that in the aspect of rate of return.
Even here there are endless discussions about what the perfect asset allocation is but few people agree and no one really knows what that is.

If you look at the 2050 target date funds for different companies(Vanguard, Fidelity, etc.) they will often have significantly different asset allocations too.

Right now the market is near an all time high do there are lots of people who are saying that being 100% stocks is OK. Part of that is that there has not be a really bad stock market decline since 2008 so many younger investors have never been through a real bad stock market so they may be feeling overconfident.

There is nothing that says that you have to invest in the target date fund that matches the year you expect to retire. For example if you expect to retire in 2050 you could buy the 2040 or 2060 target date funds if you wanted to use a different asset allocation.

Using a bit higher or lower percentage of bonds likely does not make a huge difference. The key is setting your asset allocation then sticking with it so that you are not changing your asset allocation just because of the way that you feel.

One big advantage of just starting out is that having something like 10% of your money in bonds may not make a big difference one way or the other. For example if you contributed $6,000 to your Roth this year then you might have $600 in bonds. That will not really make a big difference one way or the other so I would not focus on that while you are learning more.
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abuss368
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Re: New to investment!

Post by abuss368 »

Labelle wrote: Sat Aug 15, 2020 12:10 pm
abuss368 wrote: Sat Aug 15, 2020 11:34 am
Labelle wrote: Sat Aug 15, 2020 5:01 am Hi BH’s
Excuse me in advance on my English, I am still in school learning English.
I am 35 years old, immigrant from Africa. I have no consumer debt, I owe 62k on my mortgage.
I recently opened a Roth IRA at vanguard and want to start investing for retirement but I have no clue on what to invest in or how it works beside what I read online, YouTube etc...
For someone who started late investing, what should I buy? How to best allocate my portfolio?
I intend to max my Roth IRA every year.
I thank you all in advance.
You are starting a wonderful journey. I would encourage you to read many books such as all of John Bogle’s and The three Boglehead books.

You will gain so much knowledge. I certainly did.
Thank you so much. I am on it lol I am overwhelmed and exiting at the same time!
That is normal and all of us can certainly relate as we all passed through that stage on our lifelong journeys!

Keep posting questions here on Bogleheads as you will gain much.
John C. Bogle: “Simplicity is the master key to financial success."
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

Watty wrote: Sat Aug 15, 2020 12:21 pm Welcome to the US and the Bogleheads. Your English is great!.

Here are a few links that might be useful.

The getting started wiki.

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

The book "The Bogleheads Guide to Investing" is very understandable for someone that does not have a background in investing. If you get a used copy or find it in a library try to make sure that it is the most current edition.

https://www.amazon.com/Bogleheads-Guide ... 0470067365

There is a suggested format for posting questions about how you should invest. You do not need to follow it exactly. That will give a lot of additional information that will help people give good suggestions. Just going through getting all your information together in that format will really help you understand a lot more about your situation.

viewtopic.php?t=6212

There is also a wiki on choosing between a Roth and a Traditional IRA or 401k.

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

They are both great choices and one of the reasons that deciding between them is so difficult is that the best choice for most people is to have some of both. Until you are on track to have maybe $50K a year in retirement income be cautious about just contributing to Roth accounts. Even if you decide to use a traditional IRA in the future having the money you have already put in the Roth will likely work out great for you in the future.
Labelle wrote: Sat Aug 15, 2020 10:09 am Investing is just so confusing and overwhelming To me.
One great thing about retirement accounts is that later on you can change your mind about what you want to invest in and there are no tax issues when you move the money around.

This means that right now you just need to mainly just avoid making a bad choice, what you invest in now does not need to be perfect. There is a quote you will sometimes see here, "The enemy of a good plan is the dream of a perfect plan."

In a non retirement account(also called a taxable account) when you sell and investment to move the money to some other investment you may have to pay taxes on any capital gains that you have had if your investments have increased in value. You do not have to pay the taxes on capital gains in a retirement account.

In retirement accounts target date funds are a very good choice even if they may not be perfect so for now they would be a good safe choice to use while you are learning more about investing. For example if you expect to retire in 30 years when you are 65 in the year 2050 then you would just use a 2050 Target Date fund. In a few years you move that money into some other sort of investment without having to worry about tax issues since that would be in a retirement account.

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

For a long time I mainly just invested in target date funds because I did not have a specific reason not to. In the right situation they are a fantastic choice.

I can't remember where I read it but this really stuck with me. That is that there are really only a three things that you can control in investing. They are;

1) How much you save or spend each year.

2) Your asset allocation. This is how much you own in different asset classes like stocks and bonds. For example you may hear someone say they have 70% stocks and 30% bonds in their retirement account.

3) Keeping your investment costs as low as possible. This has a lot larger impact than many people realize. This is critically important, the actual math is more complicated but paying a 1% fee for 33 year could be around a third of your money.

If you can just keep focused on these three things you can do great. Doing things like picking superior investments or timing the stock market is not possible to reliably do so you can avoid those by just using investments like index funds and target date funds.
Labelle wrote: Sat Aug 15, 2020 5:01 am ....immigrant from Africa.
Something to keep in mind is that the various retirement accounts are specific to the US and things will be very complicated if you do not decide to stay in the US for the rest of your life. They were Indian but I have known several people that were working in the US, and even became US citizens, who may return to India someday so they were really concerned about the tax issue of having US retirement accounts.

I don't really understand all the details of how it works and the details will depend on any tax treaties between countries but if you think it is likely that you will retire somewhere else be sure to look into that.
I greatly appreciate your advice. I am taking everything 1 steep at the time, as I learn along the way.
I intend to retire in the US, I probably will visit stay couple of months out of the year in Africa as still have some family members back there.
Last edited by Labelle on Sat Aug 15, 2020 2:02 pm, edited 1 time in total.
User avatar
BL
Posts: 9533
Joined: Sun Mar 01, 2009 2:28 pm

Re: New to investment!

Post by BL »

You have received good advice. Watty has covered most of what you need to be concerned about.

Vanguard Target Date funds can be purchased at Vanguard with a minimum starting amount of $1,000. These have US stocks and bonds and International stocks and bonds. As suggested, start with this if you don't have 3,000 as you can change to another fund (or the 3-fund portfolio) easily in a Vanguard retirement account such as Roth or traditional IRAs.
The furthest out dates all have around 10% bonds, which I consider plenty aggressive. Choose any date that has about the preferred amount of bonds.

A short ETF with a lot of great information packed into its 16 pages is free at:
https://www.etf.com/docs/IfYouCan.pdf
The Wiki has a lot of good information, even links to videos, as does the Bogleheads Guide to Investing and other books listed in the Wiki.

If you want help with choices at 457, post the name, ticker, and ER (expense ratio) of each available. There may or may not be a small annual charge.
Look for index funds with low ER percents. ERs below 0.1% are wonderful, below 0.5% are reasonable, and above 1.0% are expensive. For example, an S&P 500 fund and a bond fund or guaranteed income are all you really need.
Last edited by BL on Sun Aug 16, 2020 3:34 pm, edited 1 time in total.
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

BL wrote: Sat Aug 15, 2020 1:59 pm You have received good advice. Watty has covered most of what you need to be concerned about.

Vanguard Target Date funds can be purchased at Vanguard with a minimum starting amount of $1,000. These have US stocks and bonds and International stocks and bonds. As suggested, start with this if you don't have 3,000 as you can change to another fund (or the 3-fund portfolio) easily in a Vanguard retirement account such as Roth or traditional IRAs.
The furthest out dates all have around 10% bonds, which I consider plenty aggressive. Choose any date that has about the preferred amount of bonds.

A short ETF with a lot of great information packed into its 16 pages is free at:
https://www.etf.com/docs/IfYouCan.pdf
The Wiki has a lot of good information, even links to videos, as does the Bogleheads Guide to Investing and other books listed in the Wiki.

If you want help with choices at 457, post the name, ticker, and ER (exchange rate) of each available. There may or may not be a small annual charge.
Look for index funds with low ER percents. ERs below 0.1% are wonderful, below 0.5% are reasonable, and above 1.0% are expensive. For example, an S&P 500 fund and a bond fund or guaranteed income are all you really need.
I have 6k deposit in the Roth IRA.
The 457b has two options Pre-Tax Deferrals and Roth Deferrals through Prudential. I have no idea if I should go pre-tax or Roth!
User avatar
ruralavalon
Posts: 19711
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: New to investment!

Post by ruralavalon »

Welcome to the forum :) .

It is good to see that you are debt free, other than the mortgage note.

it would be good if you could provide more information. Please see this for information needed and format: "Asking Portfolio Questions". Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

Labelle wrote: Sat Aug 15, 2020 5:01 am Hi BH’s
Excuse me in advance on my English, I am still in school learning English.
I am 35 years old, immigrant from Africa. I have no consumer debt, I owe 62k on my mortgage.
I recently opened a Roth IRA at vanguard and want to start investing for retirement but I have no clue on what to invest in or how it works beside what I read online, YouTube etc...
For someone who started late investing, what should I buy? How to best allocate my portfolio?
I intend to max my Roth IRA every year.
I thank you all in advance.
Labelle wrote: Sat Aug 15, 2020 10:09 am Thank you so much for your response.
I do have 457b from my job no match and pension.
Investing is just so confusing and overwhelming To me.
What funds are offered in your employer's 457 plan? Please give fund names, tickers and expense ratios.

About how much (in dollars) do you believe that you may be able to contribute annually to investing (total, all accounts)? Does the plan permit Roth contributions?

Here is a general account funding priority that usually works well for many people (when there is no high interest debt or HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, SIMPLE IRA, TSP, etc.) enough to get the full employer match (the match is like free money, your best possible investment);
2) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances;
3) Contribute the remainder of the maximum employee contribution to the work-based accounts; and
4) Contribute to a taxable investing account.

"If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA." Please see the wiki article "Prioritizing investments".

Labelle wrote: Sat Aug 15, 2020 2:17 pmI have 6k deposit in the Roth IRA.
The 457b has two options Pre-Tax Deferrals and Roth Deferrals through Prudential. I have no idea if I should go pre-tax or Roth!
Will you be eligible for a substantial pension in addition to Social Security? What is your profession or occupation? How much do you currently have in traditional tax-deferred accounts? For most people traditional deductible contributions will likely be better.

The income tax code is progressive, with a lower tax rate for lower income. Retirement usually means that employment income has ended. Therefore, most people are in a lower tax bracket in retirement and for most people traditional deductible 401k contributions will probably be better.

Because the tax code is progressive, when you withdraw from your accounts in retirement the income is not all taxed at the marginal tax rate specified for your tax bracket. TFB blog post, "The case against Roth 401k". Because the tax code is progressive, "Until you know you can generate from your Traditional 401(k) enough income to fill the lower brackets, it doesn’t make sense to contribute to a Roth 401(k). For people without a traditional defined benefit pension plan, it means the majority of the retirement savings should go to a Traditional 401(k), not Roth."

Will you be eligible for a substantial pension in addition to Social Security? A pension changes that analysis, so that Roth contributions are likely better if you have a significant pension coming in addition to Social Security. TFB blog post, "Most TSP participants should switch to the Roth TSP". That post discussed the effect of a federal pension, but the analysis should hold for other pensions.

Wiki article, "Traditional vs Roth".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

ruralavalon wrote: Sat Aug 15, 2020 2:19 pm Welcome to the forum :) .

It is good to see that you are debt free, other than the mortgage note.

it would be good if you could provide more information. Please see this for information needed and format: "Asking Portfolio Questions". Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

Labelle wrote: Sat Aug 15, 2020 5:01 am Hi BH’s
Excuse me in advance on my English, I am still in school learning English.
I am 35 years old, immigrant from Africa. I have no consumer debt, I owe 62k on my mortgage.
I recently opened a Roth IRA at vanguard and want to start investing for retirement but I have no clue on what to invest in or how it works beside what I read online, YouTube etc...
For someone who started late investing, what should I buy? How to best allocate my portfolio?
I intend to max my Roth IRA every year.
I thank you all in advance.
Labelle wrote: Sat Aug 15, 2020 10:09 am Thank you so much for your response.
I do have 457b from my job no match and pension.
Investing is just so confusing and overwhelming To me.
What funds are offered in your employer's 457 plan? Please give fund names, tickers and expense ratios.

About how much (in dollars) do you believe that you may be able to contribute annually to investing (total, all accounts)? Does the plan permit Roth contributions?

Here is a general account funding priority that usually works well for many people (when there is no high interest debt or HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, SIMPLE IRA, TSP, etc.) enough to get the full employer match (the match is like free money, your best possible investment);
2) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances;
3) Contribute the remainder of the maximum employee contribution to the work-based accounts; and
4) Contribute to a taxable investing account.

"If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA." Please see the wiki article "Prioritizing investments".

Labelle wrote: Sat Aug 15, 2020 2:17 pmI have 6k deposit in the Roth IRA.
The 457b has two options Pre-Tax Deferrals and Roth Deferrals through Prudential. I have no idea if I should go pre-tax or Roth!
Will you be eligible for a substantial pension in addition to Social Security? What is your profession or occupation? How much do you currently have in traditional tax-deferred accounts? For most people traditional deductible contributions will likely be better.

The income tax code is progressive, with a lower tax rate for lower income. Retirement usually means that employment income has ended. Therefore, most people are in a lower tax bracket in retirement and for most people traditional deductible 401k contributions will probably be better.

Because the tax code is progressive, when you withdraw from your accounts in retirement the income is not all taxed at the marginal tax rate specified for your tax bracket. TFB blog post, "The case against Roth 401k". Because the tax code is progressive, "Until you know you can generate from your Traditional 401(k) enough income to fill the lower brackets, it doesn’t make sense to contribute to a Roth 401(k). For people without a traditional defined benefit pension plan, it means the majority of the retirement savings should go to a Traditional 401(k), not Roth."

Will you be eligible for a substantial pension in addition to Social Security? A pension changes that analysis, so that Roth contributions are likely better if you have a significant pension coming in addition to Social Security. TFB blog post, "Most TSP participants should switch to the Roth TSP". That post discussed the effect of a federal pension, but the analysis should hold for other pensions.

Wiki article, "Traditional vs Roth".
Yes I will eligible for a pension, about 40k Year if I am not mistaken. I have to look more into the pension.
User avatar
BL
Posts: 9533
Joined: Sun Mar 01, 2009 2:28 pm

Re: New to investment!

Post by BL »

Your English is outstanding, so no worries there!

We don't know if you are a US citizen or might return to your native country someday. There are tax agreements between various countries that could affect the decision to invest in IRAs or 401k/457 accounts. There are tax experts that specialize in those areas, perhaps for specific countries, but I don't have that knowledge. I would want to know before investing too heavily, especially if you might leave the country before age ~60 when there are penalties for early withdrawals in tax-deferred, or gains in Roth accounts.
457b has these funds available:
Stable Value
-Prudential Stable Value Fund, ER N/A
What is the yield?
Fixed Income-International Core Bond
-Vanguard Total Bond Market Index Fund Admiral Shares, ER 0.05%

Fixed Income-Core Plus Bond
-Prudential Total Return Bond Fund, ER 0.33%

Fixed Income -High Yield Bond
-PGIM High Yield Fund-Class R6, ER 0.40%

Fixed Income-Global Bond
-PGIM Global Total Return Fund- Class R6, ER 0.56%

Allocation-Target -Date Retirement Income (With Income Guarantee)
-Prudential Day One IncomeFlex Target Balanced Fund, ER 1.34%

Allocation-Target Date 2000-2010
-T.Row Price Retirement 2010 Fund,ER 0.37%

Allocation Target Date 2015
-T.Row Price Retirement|2015 Fund| Class, ER 0.40%

Allocation Target Date 2020
-T.Row Price Retirement 2020 Fund, ER 0.43%

-T.Row price Retirement 2025 Fund, ER 0.47%
-T.Row Price Retirement 2030 fund ,ER 0.49%
-T.Row Price Retirement 2035 Fund, ER 0.50%
-T.Row Price Retirement 2040 fund, ER 0.51%
-T.Row Price Retirement 2045 Fund, ER 0.52%
-T.Row Price Retirement 2050 Fund, ER 0.52%
-T.Row Price Retirement 2055 Fund ER 0.52%
-T.Row Price Retirement 2060 Fund, ER 0.52%

Allocation 30% to 50% Equity
-T.Row Price Retirement Balance Fund, ER 0.35%

Allocation -Balanced Blend
-American Funds American Balanced Fund class R-6, ER 0.26%

Large Cap -Blend
-Harbor Large Cap Value Fund Retirement, ER 0.55%
-Vanguard Institutional Index Fund Institutional Shares, ER 0.04%
-Wells Fargo Disciplined U.S Core Fund, ER 0.41%

Large Cap- Growth
- Wells Fargo Growth Fund-Class R6 , ER 0.75%

Mid Cap- Value
-Mid Cap Value/ Robeco Boston, ER 0.71%

Mid Cap-Blend
-QMA Mike Cap Index Fund, ER 0.08%

Mild Cap-Growth
-Baron Growth Fund International Shares, ER 1.04%
-Eagle Mike Cap Growth Fund(IS Platform), ER 0.72%

Small Cap-Value
-Small Cap Value/Victory Fund, ER 0.86%

Small Cap -Blend
-QMA Small Cap Index Fund, ER 0.08

Global-Growth
-SA/OFII Strategy, ER 0.64%

International-Large Blend
-TIAA-CREF International Equity Index Fund Institutional, ER 0.06%

International-Large Growth
-American Fund EuroPacific Growth Fund Class R-6, 0.46%


How do choose from all of theses funds?!
The colored are low-ER index funds. A large cap, international, and bond fund are all you need. Adding some small and mid-cap is optional. If you look at your whole portfolio, a total stock market in Roth IRA and would include some small and mid cap stocks, so you might ignore those in 457 for simplicity.
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

BL wrote: Sat Aug 15, 2020 8:57 pm Your English is outstanding, so no worries there!

We don't know if you are a US citizen or might return to your native country someday. There are tax agreements between various countries that could affect the decision to invest in IRAs or 401k/457 accounts. There are tax experts that specialize in those areas, perhaps for specific countries, but I don't have that knowledge. I would want to know before investing too heavily, especially if you might leave the country before age ~60 when there are penalties for early withdrawals in tax-deferred, or gains in Roth accounts.
457b has these funds available:
Stable Value
-Prudential Stable Value Fund, ER N/A
What is the yield?
Fixed Income-International Core Bond
-Vanguard Total Bond Market Index Fund Admiral Shares, ER 0.05%

Fixed Income-Core Plus Bond
-Prudential Total Return Bond Fund, ER 0.33%

Fixed Income -High Yield Bond
-PGIM High Yield Fund-Class R6, ER 0.40%

Fixed Income-Global Bond
-PGIM Global Total Return Fund- Class R6, ER 0.56%

Allocation-Target -Date Retirement Income (With Income Guarantee)
-Prudential Day One IncomeFlex Target Balanced Fund, ER 1.34%

Allocation-Target Date 2000-2010
-T.Row Price Retirement 2010 Fund,ER 0.37%

Allocation Target Date 2015
-T.Row Price Retirement|2015 Fund| Class, ER 0.40%

Allocation Target Date 2020
-T.Row Price Retirement 2020 Fund, ER 0.43%

-T.Row price Retirement 2025 Fund, ER 0.47%
-T.Row Price Retirement 2030 fund ,ER 0.49%
-T.Row Price Retirement 2035 Fund, ER 0.50%
-T.Row Price Retirement 2040 fund, ER 0.51%
-T.Row Price Retirement 2045 Fund, ER 0.52%
-T.Row Price Retirement 2050 Fund, ER 0.52%
-T.Row Price Retirement 2055 Fund ER 0.52%
-T.Row Price Retirement 2060 Fund, ER 0.52%

Allocation 30% to 50% Equity
-T.Row Price Retirement Balance Fund, ER 0.35%

Allocation -Balanced Blend
-American Funds American Balanced Fund class R-6, ER 0.26%

Large Cap -Blend
-Harbor Large Cap Value Fund Retirement, ER 0.55%
-Vanguard Institutional Index Fund Institutional Shares, ER 0.04%
-Wells Fargo Disciplined U.S Core Fund, ER 0.41%

Large Cap- Growth
- Wells Fargo Growth Fund-Class R6 , ER 0.75%

Mid Cap- Value
-Mid Cap Value/ Robeco Boston, ER 0.71%

Mid Cap-Blend
-QMA Mike Cap Index Fund, ER 0.08%

Mild Cap-Growth
-Baron Growth Fund International Shares, ER 1.04%
-Eagle Mike Cap Growth Fund(IS Platform), ER 0.72%

Small Cap-Value
-Small Cap Value/Victory Fund, ER 0.86%

Small Cap -Blend
-QMA Small Cap Index Fund, ER 0.08

Global-Growth
-SA/OFII Strategy, ER 0.64%

International-Large Blend
-TIAA-CREF International Equity Index Fund Institutional, ER 0.06%

International-Large Growth
-American Fund EuroPacific Growth Fund Class R-6, 0.46%


How do choose from all of theses funds?!
The colored are low-ER index funds. A large cap, international, and bond fund are all you need. Adding some small and mid-cap is optional. If you look at your whole portfolio, a total stock market in Roth IRA and would include some small and mid cap stocks, so you might ignore those in 457 for simplicity.

1year 2.77%
3years N/A
5years N/A
retiredjg
Posts: 42242
Joined: Thu Jan 10, 2008 12:56 pm

Re: New to investment!

Post by retiredjg »

Labelle wrote: Sat Aug 15, 2020 5:01 am Desired Asset allocation: 60%stocks 20%bonds
This total of stocks and bonds needs to be 100%

Desired International allocation: not sure of %
Suggestions range from 0% of stocks to 50% of stocks...so opinions are all over the place on this. A middle of the road 20% to 30% of the stock allocation is a good place to start if you don't have your own opinion yet.


These are the funds to choose in this plan in order to build "the 3 fund portfolio" if you are interested in that.

-Vanguard Institutional Index Fund Institutional Shares, ER 0.04%. (this is the S&P 500 Index)
-TIAA-CREF International Equity Index Fund Institutional, ER 0.06%
-Vanguard Total Bond Market Index Fund Admiral Shares, ER 0.05%. (could be split with the stable value fund)
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

retiredjg wrote: Sun Aug 16, 2020 6:00 am
Labelle wrote: Sat Aug 15, 2020 5:01 am Desired Asset allocation: 60%stocks 20%bonds
This total of stocks and bonds needs to be 100%

Desired International allocation: not sure of %
Suggestions range from 0% of stocks to 50% of stocks...so opinions are all over the place on this. A middle of the road 20% to 30% of the stock allocation is a good place to start if you don't have your own opinion yet.


These are the funds to choose in this plan in order to build "the 3 fund portfolio" if you are interested in that.

-Vanguard Institutional Index Fund Institutional Shares, ER 0.04%. (this is the S&P 500 Index)
-TIAA-CREF International Equity Index Fund Institutional, ER 0.06%
-Vanguard Total Bond Market Index Fund Admiral Shares, ER 0.05%. (could be split with the stable value fund)
I can’t thank you BH’s enough for all your advices and suggestions!!
Funny think is I picked these funds to invest in based on all the advices and suggestions I got from you all!!!
I m thinking
-Vanguard Institutional Index Fund Institutional Shares, ER 0.04%. (this is the S&P 500 Index) 70%
-TIAA-CREF International Equity Index Fund Institutional, ER 0.06%
10%
-Vanguard Total Bond Market Index Fund Admira 20%
What you think?!
retiredjg
Posts: 42242
Joined: Thu Jan 10, 2008 12:56 pm

Re: New to investment!

Post by retiredjg »

If you think an 80% stock and 20% bond portfolio is right for you, this is a good plan.

A portfolio that is 80% stock can be expected to lose 40% of its value in a serious market downturn. There is no guarantee would would not be more. If you think you could "stay the course" (not sell your holdings) with this type of drop, it is a good asset allocation for you.

Some people have suggested that new investors invest conservatively (say 60% stock) at first and move to a more aggressive stance once they are accustomed to market swings and extended downturns.
User avatar
ruralavalon
Posts: 19711
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: New to investment!

Post by ruralavalon »

It's great to see that you will make the maximum annual contributions to both the 457 plan and your Roth IRA. That is a savings rate of 29%, which is very good. Its good to see that is a governmental 457 plan.



Asset allocation.
Age:34
I planned on contributing 6k a year on the Roth IRA and 19500k on the 457b.
Salary is 90k a year

Desired Asset allocation: 60%stocks 20%bonds
Desired International allocation: not sure of %
In my opinion your choice of 20% bonds is reasonable at age 34.

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities", no longer available online. Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). (You can find lots of debate here on international allocation, opinions ranging all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box, upper right, this page).

Morningstar (11/14/2019), "Revisiting the Case for International". "The case for diversifying internationally isn’t as strong as it used to be, especially if you’re looking for significant risk reduction or consistently better returns. From a portfolio perspective, we typically recommend a healthy international weighting--roughly 25% of total assets--for investors with longer time horizons."

That works out to about 20% bonds, 20% international stocks, and 60% domestic stocks. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.




Fund selection.
In selecting funds strive for a combination of both broad diversification (to reduce risk) and low expense ratios (to increase your net return). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Please see:
1) Wiki article "Three-fund portfolio";
2) Forum discussion, "The Three-Fund Portfolio"; and
3) Taylor Larimore post, "Articles recommending the three-fund portfolio".


In my opinion in your employer's 457 plan these are the funds to consider using:
1) Vanguard Institutional Index Fund Institutional Shares, (S&P 500 index fund, over 80% of U.S. stock market) (VINIX) ER 0.04%;
2) TIAA-CREF International Equity Index Fund Institutional (MSCI EAFE index, developed markets only) (TCIEX) ER 0.06%; and
3) Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05

For domestic stocks I suggest using a total stock market index fund where available. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations".

In my opinion in a plan that lacks a total stock market index fund, a S&P 500 index fund is good enough by itself for a domestic stock allocation. A S&P 500 index fund covers over 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies. In the 28 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical. portfolio visualizer, 1993-2020. So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little difference in performance.

See also:
1) Allan Roth, CBS Moneywatch (02/03/2010), "John C. Bogle on the S&P 500 vs. the Total Stock Market"; and
2) Wall Street Physician (01/17/2019), "Should You Invest in the S&P 500 or the Total Stock Market?".

If you want to add the small-cap index market fund, then an 82/18 mix of the S&P 500 and small-cap index funds will mimic the content of a total stock market index fund. Wiki article, "Approximating total stock market". In my opinion this is not necessary, it is optional if you prefer to do this.

To make portfolio management and rebalancing easy it is often better to have at least one large tax-advantaged account which contains all three basic asset types (bonds, international stocks, and domestic stocks). Don’t try to put all components of the asset allocation in every account.

In your Roth IRA I suggest using I suggest using Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%




Traditional vs Roth contributions.
Because you are just starting with nothing yet in traditional tax-deferred accounts, some of your contributions should be traditional for the tax-deduction. Because you have a state pension you should make some Roth contributions. So you could do 1/2 traditional and 1/2 Roth contributions to your 457 account.

It is hard to say what the exact division should be. That depends on what your earnings and tax bracket might be in the future. What is your profession or occupation?

Because the tax code is progressive, when you withdraw from your 401k in retirement the income is not all taxed at the marginal tax rate specified for your tax bracket. TFB blog post, "The case against Roth 401k". Because the tax code is progressive, "Until you know you can generate from your Traditional 401(k) enough income to fill the lower brackets, it doesn’t make sense to contribute to a Roth 401(k). For people without a traditional defined benefit pension plan, it means the majority of the retirement savings should go to a Traditional 401(k), not Roth."

A pension changes that analysis, so that Roth contributions are likely better if you have a significant pension coming in addition to Social Security. TFB blog post, "Most TSP participants should switch to the Roth TSP". That post discussed the effect of a federal pension, but the analysis should hold for other pensions.

Wiki article, "Traditional vs Roth".



Education.
A quick education for a beginning investor is Dr. Bernstein's free short on-line book, "If You Can". Also take a look at the Boglehead’s wiki, the "getting started" link I give below.

To go beyond the most basic I suggest that you also read one or two books on investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the investing basics. Morningstar, "Investing Classroom".

If you have any questions just ask.

I hope that this helps.
Last edited by ruralavalon on Sun Aug 16, 2020 10:44 am, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
Labelle
Posts: 24
Joined: Sat Aug 15, 2020 4:42 am

Re: New to investment!

Post by Labelle »

retiredjg wrote: Sun Aug 16, 2020 10:00 am If you think an 80% stock and 20% bond portfolio is right for you, this is a good plan.

A portfolio that is 80% stock can be expected to lose 40% of its value in a serious market downturn. There is no guarantee would would not be more. If you think you could "stay the course" (not sell your holdings) with this type of drop, it is a good asset allocation for you.

Some people have suggested that new investors invest conservatively (say 60% stock) at first and move to a more aggressive stance once they are accustomed to market swings and extended downturns.
Totally makes sense!!
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