If one were to start investing today - late to the game

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Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

If one were to start investing today - late to the game

Post by paralysisbyanalysis »

Context:
Mid 40s, married, 1 young child.
Creative freelancer, self employed.
Unpredictable income - no future guarantee of income (very little income since pandemic began).
Investment horizon - 15-20 years
We plan to keep at least a year's worth of expenses aside and not invested.

Accounts / Assets: mid 6 figures - mostly in cash and a few other random holdings
Solo 401K (no employer match, so to speak)
IRA, Roth Ira, Spouse IRA, SEP IRA, Taxable Brokerage Account, Savings Accounts
Investment Property (SFR) worth ~40k: with a tenant (no mortgage)

While not dwelling on it too much more, I'll be the first to admit I have missed out on the past decade of the market due mostly to fear, ignorance, and the foolish belief that things would come crashing down and then I would join in. In my early 20's I was scarred by the markets of the late 90's and early 2000's and then watched my father suffer in 2008. I stayed away.

Over the past decade my earnings increased significantly, but since March 2020 that has changed. I've mostly just saved the money in the bank (and did a few small things like buy an inexpensive investment property and for a couple years -- had a T-bill ladder going). But for the most part, anything other than the property is about the same as cash. All that being said, I have spent a lot of time researching about investing and chatting with my friends in finance whenever they'd allow --- and going down many wandering roads trying to learn as much as I can. I spent too much time learning about many bad ideas, but fortunately, had the wherewithal to only spend time and not money. Finally I'm here.

I've been most interested in Lazy Portfolios of one type or another. My question is really this - to someone in my situation, if one were to start today with a fair amount of cash, what investment ideas make sense for the long run? And keeping in mind, my income may decrease significantly going forward, so there may be no guarantee that I'm able to add to my positions using future income.

Ideas that are of interest:
Bogleheads 3 Fund / 4 Fund
60/40 or 70/30 Portfolio (or 80/20?)
Ray Dalio All Weather Portfolio (modified: replacing commodities with utilities)
Target Date Fund

*And with a very small amount -- creating a smaller portfolio like Hedgefundie's excellent adventure, or a Leveraged All Weather Portfolio.

Other thoughts I have -- making sure to include international equities, and having a tilt toward Asia/China/Japan somewhere mixed in.

I'd love to hear what those with more knowledge experience would do if coming to the market today with nothing in it and a fair amount of cash to deploy and a 15-20 year horizon.

Thank you!
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JupiterJones
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Location: Nashville, TN

Re: If one were to start investing today - late to the game

Post by JupiterJones »

First of all, very smart to maintain an admirably sizeable emergency fund, given your particular situation (and the current economy).

Second of all, I don't think you could go wrong with any of the following simple-but-effective and low-cost portfolios you mentioned:
  • 3-Fund
  • 4-Fund
  • Target Date (assuming Vanguard, and assuming you pick based on stock/bond ratio and not merely on the year in the fund name)
The most important decision then is what ratio of stocks to bonds you want within each of these portfolios. That's going to be up to you, but I would imagine that the common Boglehead advice of "your age in bonds" or "your age minus 10 in bonds" might be more conservative that what you're looking for. 80/20 wouldn't be crazy as far as I'm concerned, and that's about where Vanguard's Target Retirement 2040 puts it. But again, totally up to you.

Okay, I lied earlier. The true "most important" decision is simply investing in the first place. At this stage of the game, as long as you're putting some money in some sort of low-expense, broadly-diversified portfolio that roughly matches your risk tolerance, you're good to go.

And remember, this isn't a door that locks behind you after you walk through it. If you put your money in TR2035 now and later decide TR2040 or a 3-Funder better meets your needs, then you can go do that instead. No biggie.

P.S. I hadn't heard of the Ray Dalio All Weather Portfolio until your post, but I would not recommend commodities/gold investing for anything more than a small "play money" portion of one's portfolio, if even that much.
Last edited by JupiterJones on Fri Nov 20, 2020 5:10 pm, edited 1 time in total.
Stay on target...
000
Posts: 3314
Joined: Thu Jul 23, 2020 12:04 am

Re: If one were to start investing today - late to the game

Post by 000 »

Welcome.

I would go with a conservative (think max 60% in stocks) balanced portfolio containing asset classes other than stocks. Perhaps increasing the amount of stocks after/during my first major bear market.

I would not do this:
*And with a very small amount -- creating a smaller portfolio like Hedgefundie's excellent adventure, or a Leveraged All Weather Portfolio.
Putting a very small amount into a leveraged "risk parity" approach seems unlikely to meaningfully move the needle more than just buying more stocks. The exception might be in Roth accounts.

You can read about Tax efficient fund placement.

If you want more detailed answers, consider providing more information like this.
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Taylor Larimore
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Location: Miami FL

Re: If one were to start investing today - late to the game

Post by Taylor Larimore »

paralysisbyanalysis:

Welcome to the Bogleheads Forum!

To answer your question, consider The Three-Fund Portfolio and its many benefits:

The Three-Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

JupiterJones wrote: Fri Nov 20, 2020 5:06 pm First of all, very smart to maintain an admirably sizeable emergency fund, given your particular situation (and the current economy).

Second of all, I don't think you could go wrong with any of the following simple-but-effective and low-cost portfolios you mentioned:
  • 3-Fund
  • 4-Fund
  • Target Date (assuming Vanguard, and assuming you pick based on stock/bond ratio and not merely on the year in the fund name)
The most important decision then is what ratio of stocks to bonds you want within each of these portfolios. That's going to be up to you, but I would imagine that the common Boglehead advice of "your age in bonds" or "your age minus 10 in bonds" might be more conservative that what you're looking for. 80/20 wouldn't be crazy as far as I'm concerned, and that's about where Vanguard's Target Retirement 2040 puts it. But again, totally up to you.

Okay, I lied earlier. The true "most important" decision is simply investing in the first place. At this stage of the game, as long as you're putting some money in some sort of low-expense, broadly-diversified portfolio that roughly matches your risk tolerance, you're good to go.

And remember, this isn't a door that locks behind you after you walk through it. If you put your money in TR2035 now and later decide TR2040 or a 3-Funder better meets your needs, then you can go do that instead. No biggie.

P.S. I hadn't heard of the Ray Dalio All Weather Portfolio until your post, but I would not recommend commodities/gold investing for anything more than a small "play money" portion of one's portfolio, if even that much.
Thank you for your thoughtful reply.

Although I've read the data against it - what are your thoughts on dollar cost averaging in over a longer timeline -- given that there may not be future disposable income to continue deploying in investments?

To sum up where I am now:
I think one of my big hesitations is what I've been reading (perhaps it's noise, and not signal) about the 60/40, 70/30, /80/20 or any other equivalent where bonds are being used as the counter balance to the risk of stocks and vice versa --- is that in the current environment with super low interest rates, the those two assets don't appear to be balancing one another in the same manner that they historically have. At times they appear to be moving together in some ways. If historically, a downward trend in equities moves money to bonds --- increasing bond prices and decreasing the yields---- with yields so low right now, it's hard to see bonds as the reliable counter they've been to equities in the past. And the question comes up as to are we moving to new era where we have to find new ideas. That's why I've been learning about Dalio's All Weather Portfolio and modifications that others have suggested to it (such as substituting utilities in place of commodities). I'd likely not feel comfortable deploying that much into Gold (I do currently hold a small amount of GLD that I bought during the 2008-2009 and have held onto ever since -- but I don't see it working much better in the future -- so I might just leave that as is and not put much more into it.

I've also looked into the Swensen Model (Dave Swensen) - it's more complicated than a straight 60/40, 3 fund, or 4 fund strategy, but not particularly complicated. And over the past 19 years it seems to have given a better risk adjusted return, with lower volatility vs the S&P 500. But again, past performance may or may not be as relevant to where things are today.
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

000 wrote: Fri Nov 20, 2020 5:09 pm Welcome.

I would go with a conservative (think max 60% in stocks) balanced portfolio containing asset classes other than stocks. Perhaps increasing the amount of stocks after/during my first major bear market.

I would not do this:
*And with a very small amount -- creating a smaller portfolio like Hedgefundie's excellent adventure, or a Leveraged All Weather Portfolio.
Putting a very small amount into a leveraged "risk parity" approach seems unlikely to meaningfully move the needle more than just buying more stocks. The exception might be in Roth accounts.

You can read about Tax efficient fund placement.

If you want more detailed answers, consider providing more information like this.
Thank you very much.

One other idea I forgot to mention is I've also considered the Dave Swensen Model. That brings in TIPS and REITS + Bonds, Stocks, and Int'l Stocks. though it's possible I'd want want to make some slight modifications.

To your point about increasing the amount of stocks during the next major bear market -- and given I've no future income guarantee -- I'd likely dollar cost average in over a longer time period, to make sure I have $ to deploy given any downturns. Any thoughts on that?

As far as the Hedfundie's or a Leveraged All Weather approach -- when I say a small amount, I mean in relative % to the overall portfolio. It would likely be in the low 5 figures area. Looking at the portfolio visualizer for those ideas, given a longer time period, the potential appears to exist for significant opportunity (and volatility as well) but the risk adjusted return seems on par with what I'd do with my personal gambles, so to speak. Are there advantages to doing that in the Roth IRA as opposed to the SEP, traditional, or 401K? I've gone through the links you sent, but I was unable to really decipher what advantage a strategy like that would have in the Roth ----- as opposed to the other tax advantaged accounts (though they are tax deferred).

Thank you!
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

Taylor Larimore wrote: Fri Nov 20, 2020 5:19 pm paralysisbyanalysis:

Welcome to the Bogleheads Forum!

To answer your question, consider The Three-Fund Portfolio and its many benefits:

The Three-Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
Thank you Taylor.

I replied similarly to another, but the nature of my hesitation to strictly pursing that idea (though I may ultimately wind up with the 3 fund portfolio in the end, who knows?) as a starting point right now is basically that with such low interest rates, will bonds be the reliable counter to downward movements on the equities side of things? And if bonds can't be relied upon as that counter, then what? Of course, I understand that this a huge question -- I'm just wondering if, as some might say, we're entering a new paradigm. But maybe that's just noise in the end. I like what the 3 fund portfolio has done historically as far as risk adjusted return and volatility. I'm just wondering can it continue to do so with such low interest rates. I guess that's why I'm exploring multiple avenues of different lazy portfolios.
Wanderingwheelz
Posts: 648
Joined: Mon Mar 04, 2019 9:52 am

Re: If one were to start investing today - late to the game

Post by Wanderingwheelz »

paralysisbyanalysis wrote: Sat Nov 21, 2020 4:55 am
JupiterJones wrote: Fri Nov 20, 2020 5:06 pm First of all, very smart to maintain an admirably sizeable emergency fund, given your particular situation (and the current economy).

Second of all, I don't think you could go wrong with any of the following simple-but-effective and low-cost portfolios you mentioned:
  • 3-Fund
  • 4-Fund
  • Target Date (assuming Vanguard, and assuming you pick based on stock/bond ratio and not merely on the year in the fund name)
The most important decision then is what ratio of stocks to bonds you want within each of these portfolios. That's going to be up to you, but I would imagine that the common Boglehead advice of "your age in bonds" or "your age minus 10 in bonds" might be more conservative that what you're looking for. 80/20 wouldn't be crazy as far as I'm concerned, and that's about where Vanguard's Target Retirement 2040 puts it. But again, totally up to you.

Okay, I lied earlier. The true "most important" decision is simply investing in the first place. At this stage of the game, as long as you're putting some money in some sort of low-expense, broadly-diversified portfolio that roughly matches your risk tolerance, you're good to go.

And remember, this isn't a door that locks behind you after you walk through it. If you put your money in TR2035 now and later decide TR2040 or a 3-Funder better meets your needs, then you can go do that instead. No biggie.

P.S. I hadn't heard of the Ray Dalio All Weather Portfolio until your post, but I would not recommend commodities/gold investing for anything more than a small "play money" portion of one's portfolio, if even that much.
Thank you for your thoughtful reply.

Although I've read the data against it - what are your thoughts on dollar cost averaging in over a longer timeline -- given that there may not be future disposable income to continue deploying in investments?

To sum up where I am now:
I think one of my big hesitations is what I've been reading (perhaps it's noise, and not signal) about the 60/40, 70/30, /80/20 or any other equivalent where bonds are being used as the counter balance to the risk of stocks and vice versa --- is that in the current environment with super low interest rates, the those two assets don't appear to be balancing one another in the same manner that they historically have. At times they appear to be moving together in some ways. If historically, a downward trend in equities moves money to bonds --- increasing bond prices and decreasing the yields---- with yields so low right now, it's hard to see bonds as the reliable counter they've been to equities in the past. And the question comes up as to are we moving to new era where we have to find new ideas. That's why I've been learning about Dalio's All Weather Portfolio and modifications that others have suggested to it (such as substituting utilities in place of commodities). I'd likely not feel comfortable deploying that much into Gold (I do currently hold a small amount of GLD that I bought during the 2008-2009 and have held onto ever since -- but I don't see it working much better in the future -- so I might just leave that as is and not put much more into it.

I've also looked into the Swensen Model (Dave Swensen) - it's more complicated than a straight 60/40, 3 fund, or 4 fund strategy, but not particularly complicated. And over the past 19 years it seems to have given a better risk adjusted return, with lower volatility vs the S&P 500. But again, past performance may or may not be as relevant to where things are today.
I wouldn’t invest any of your money until you’ve fully embraced the notion that you are a long-term investor. This is the problem I once had, and many before me did too- we were focused on tomorrow, or next year, rather than 15-20 years down the road when some withdrawals from stocks will be needed. Volatility is the price of admission. It cannot be avoided.

If you don’t 100% believe that your 3-Fund investments will be substantially higher in 15-20 years then you’ll continue with the same failed approach that got you to be where you are today.

Attitude determines altitude, as they say. How high do you want to go? Many folks are happy having less 20 years from now, but those people aren’t Bogleheads.

Stocks and bonds will do what they do, and nobody knows what the near future will offer us. All you can do is jump on board and hold on tight.
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

Wanderingwheelz wrote: Sat Nov 21, 2020 5:44 am
paralysisbyanalysis wrote: Sat Nov 21, 2020 4:55 am
JupiterJones wrote: Fri Nov 20, 2020 5:06 pm First of all, very smart to maintain an admirably sizeable emergency fund, given your particular situation (and the current economy).

Second of all, I don't think you could go wrong with any of the following simple-but-effective and low-cost portfolios you mentioned:
  • 3-Fund
  • 4-Fund
  • Target Date (assuming Vanguard, and assuming you pick based on stock/bond ratio and not merely on the year in the fund name)
The most important decision then is what ratio of stocks to bonds you want within each of these portfolios. That's going to be up to you, but I would imagine that the common Boglehead advice of "your age in bonds" or "your age minus 10 in bonds" might be more conservative that what you're looking for. 80/20 wouldn't be crazy as far as I'm concerned, and that's about where Vanguard's Target Retirement 2040 puts it. But again, totally up to you.

Okay, I lied earlier. The true "most important" decision is simply investing in the first place. At this stage of the game, as long as you're putting some money in some sort of low-expense, broadly-diversified portfolio that roughly matches your risk tolerance, you're good to go.

And remember, this isn't a door that locks behind you after you walk through it. If you put your money in TR2035 now and later decide TR2040 or a 3-Funder better meets your needs, then you can go do that instead. No biggie.

P.S. I hadn't heard of the Ray Dalio All Weather Portfolio until your post, but I would not recommend commodities/gold investing for anything more than a small "play money" portion of one's portfolio, if even that much.
Thank you for your thoughtful reply.

Although I've read the data against it - what are your thoughts on dollar cost averaging in over a longer timeline -- given that there may not be future disposable income to continue deploying in investments?

To sum up where I am now:
I think one of my big hesitations is what I've been reading (perhaps it's noise, and not signal) about the 60/40, 70/30, /80/20 or any other equivalent where bonds are being used as the counter balance to the risk of stocks and vice versa --- is that in the current environment with super low interest rates, the those two assets don't appear to be balancing one another in the same manner that they historically have. At times they appear to be moving together in some ways. If historically, a downward trend in equities moves money to bonds --- increasing bond prices and decreasing the yields---- with yields so low right now, it's hard to see bonds as the reliable counter they've been to equities in the past. And the question comes up as to are we moving to new era where we have to find new ideas. That's why I've been learning about Dalio's All Weather Portfolio and modifications that others have suggested to it (such as substituting utilities in place of commodities). I'd likely not feel comfortable deploying that much into Gold (I do currently hold a small amount of GLD that I bought during the 2008-2009 and have held onto ever since -- but I don't see it working much better in the future -- so I might just leave that as is and not put much more into it.

I've also looked into the Swensen Model (Dave Swensen) - it's more complicated than a straight 60/40, 3 fund, or 4 fund strategy, but not particularly complicated. And over the past 19 years it seems to have given a better risk adjusted return, with lower volatility vs the S&P 500. But again, past performance may or may not be as relevant to where things are today.
I wouldn’t invest any of your money until you’ve fully embraced the notion that you are a long-term investor. This is the problem I once had, and many before me did too- we were focused on tomorrow, or next year, rather than 15-20 years down the road when some withdrawals from stocks will be needed. Volatility is the price of admission. It cannot be avoided.

If you don’t 100% believe that your 3-Fund investments will be substantially higher in 15-20 years then you’ll continue with the same failed approach that got you to be where you are today.

Attitude determines altitude, as they say. How high do you want to go? Many folks are happy having less 20 years from now, but those people aren’t Bogleheads.

Stocks and bonds will do what they do, and nobody knows what the near future will offer us. All you can do is jump on board and hold on tight.
Thank you Wanderingwheelz.

I understand what you're saying. My own career and ability to generate income has been such a huge risk for the past 20 years (never having had a consistent paycheck or even having been an employee so to speak), that if I were to look at the risk ratio of my own life, the counter to that side of career risk ----- has been to be much more risk averse with the money I've earned. (likely out of necessity at first when there wasn't much of it, and then out of fear, as it began to accumulate.) That's been sort of the balance for me. But a foolish or false balance when viewed through the lens of time.

Through all the research I've done (hence paralysis) -- guidance and advice is rarely tailored to those in my position -- there hasn't been a lot of guidance for those of us with no employer, no paycheck, no 401k (other than my solo 401k to defer taxes), no HSA, no union, no future guarantees. Those of us who's income comes sporadically and in varying amounts (talk about volatility...) ---- So it has taken a long time to be able to see how investing wasn't just adding to that risk, instead of offsetting it. That thinking started to change with age, marriage, and a child -- and thus began the long road of trying to truly educate myself about investing. Hopefully, I'm finally getting to the "how" of it all.

Thank you again.
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dogagility
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Re: If one were to start investing today - late to the game

Post by dogagility »

Welcome to the forum.
paralysisbyanalysis wrote: Sat Nov 21, 2020 6:19 am Through all the research I've done (hence paralysis) -- guidance and advice is rarely tailored to those in my position -- there hasn't been a lot of guidance for those of us with no employer, no paycheck, no 401k (other than my solo 401k to defer taxes), no HSA, no union, no future guarantees. Those of us who's income comes sporadically and in varying amounts (talk about volatility...)
The instability of your career is why a poster upthread suggested for your family to have a largish emergency fund. Only you know how truly volatile your income is and how much money you need to bridge expenses during times of low income. This should be the driver behind your emergency fund amount.

After settling on an emergency fund amount, the question becomes how to invest the remainder of your portfolio. As a poster mentioned upthread, you should be thinking long-term (15-20 years) and focusing on growth over that time period. Who cares about what most people consider "risk" (i.e. volatility)... with long-term thinking, volatility does not matter. With long-term thinking, a person can weather market "risk" without panic selling.

In your situation and if you can have a truly long-term view of the market, I would suggest an asset allocation of 80:20 (stock:bonds). If you have access to a target retirement fund or a fund like Vanguard's Life Strategy, I would suggest investing your entire portfolio in such a fund. Lump sum; not dollar cost averaging.

Then... be done with it. Don't peek at the performance all the time. Keep plowing money available into it over the coming years.
All children spill milk. Learn to smile and wipe it up. -- A Farmer's Wife
Ed 2
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Joined: Sat May 15, 2010 9:34 am

Re: If one were to start investing today - late to the game

Post by Ed 2 »

paralysisbyanalysis wrote: Sat Nov 21, 2020 5:22 am
Taylor Larimore wrote: Fri Nov 20, 2020 5:19 pm paralysisbyanalysis:

Welcome to the Bogleheads Forum!

To answer your question, consider The Three-Fund Portfolio and its many benefits:

The Three-Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
Thank you Taylor.

I replied similarly to another, but the nature of my hesitation to strictly pursing that idea (though I may ultimately wind up with the 3 fund portfolio in the end, who knows?) as a starting point right now is basically that with such low interest rates, will bonds be the reliable counter to downward movements on the equities side of things? And if bonds can't be relied upon as that counter, then what? Of course, I understand that this a huge question -- I'm just wondering if, as some might say, we're entering a new paradigm. But maybe that's just noise in the end. I like what the 3 fund portfolio has done historically as far as risk adjusted return and volatility. I'm just wondering can it continue to do so with such low interest rates. I guess that's why I'm exploring multiple avenues of different lazy portfolios.
Taylor gave you the BEST option for you . Just do what he recommends!!! Given your risk tolerance and your history doing wrong things wrong time this is the best advice. By doing otherwise you will be doing the same what you have done so far. Stop listening your guts. Good luck!
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

dogagility wrote: Sat Nov 21, 2020 6:39 am Welcome to the forum.
paralysisbyanalysis wrote: Sat Nov 21, 2020 6:19 am Through all the research I've done (hence paralysis) -- guidance and advice is rarely tailored to those in my position -- there hasn't been a lot of guidance for those of us with no employer, no paycheck, no 401k (other than my solo 401k to defer taxes), no HSA, no union, no future guarantees. Those of us who's income comes sporadically and in varying amounts (talk about volatility...)
The instability of your career is why a poster upthread suggested for your family to have a largish emergency fund. Only you know how truly volatile your income is and how much money you need to bridge expenses during times of low income. This should be the driver behind your emergency fund amount.

After settling on an emergency fund amount, the question becomes how to invest the remainder of your portfolio. As a poster mentioned upthread, you should be thinking long-term (15-20 years) and focusing on growth over that time period. Who cares about what most people consider "risk" (i.e. volatility)... with long-term thinking, volatility does not matter. With long-term thinking, a person can weather market "risk" without panic selling.

In your situation and if you can have a truly long-term view of the market, I would suggest an asset allocation of 80:20 (stock:bonds). If you have access to a target retirement fund or a fund like Vanguard's Life Strategy, I would suggest investing your entire portfolio in such a fund. Lump sum; not dollar cost averaging.

Then... be done with it. Don't peek at the performance all the time. Keep plowing money available into it over the coming years.
Thank you. I appreciate the consideration and thoughtfulness.
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

Ed 2 wrote: Sat Nov 21, 2020 6:46 am
paralysisbyanalysis wrote: Sat Nov 21, 2020 5:22 am
Taylor Larimore wrote: Fri Nov 20, 2020 5:19 pm paralysisbyanalysis:

Welcome to the Bogleheads Forum!

To answer your question, consider The Three-Fund Portfolio and its many benefits:

The Three-Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
Thank you Taylor.

I replied similarly to another, but the nature of my hesitation to strictly pursing that idea (though I may ultimately wind up with the 3 fund portfolio in the end, who knows?) as a starting point right now is basically that with such low interest rates, will bonds be the reliable counter to downward movements on the equities side of things? And if bonds can't be relied upon as that counter, then what? Of course, I understand that this a huge question -- I'm just wondering if, as some might say, we're entering a new paradigm. But maybe that's just noise in the end. I like what the 3 fund portfolio has done historically as far as risk adjusted return and volatility. I'm just wondering can it continue to do so with such low interest rates. I guess that's why I'm exploring multiple avenues of different lazy portfolios.
Taylor gave you the BEST option for you . Just do what he recommends!!! Given your risk tolerance and your history doing wrong things wrong time this is the best advice. By doing otherwise you will be doing the same what you have done so far. Stop listening your guts. Good luck!
Thanks.
SimplicityNow
Posts: 540
Joined: Fri Aug 05, 2016 10:31 am

Re: If one were to start investing today - late to the game

Post by SimplicityNow »

Taylor Larimore wrote: Fri Nov 20, 2020 5:19 pm paralysisbyanalysis:

Welcome to the Bogleheads Forum!

To answer your question, consider The Three-Fund Portfolio and its many benefits:

The Three-Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
^^^^ This
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wander
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Joined: Sat Oct 04, 2008 9:10 am

Re: If one were to start investing today - late to the game

Post by wander »

I picked one portfolio and sticked to it last 20 years. There were many times I disliked my porfolio and questioned about the choice I made when other portfolios did well. But, there were times it did well.
I focus on something that I can control, saving, for example: If I can put away $2 instead of $1, I've made a return 100% right there.
Wanderingwheelz
Posts: 648
Joined: Mon Mar 04, 2019 9:52 am

Re: If one were to start investing today - late to the game

Post by Wanderingwheelz »

paralysisbyanalysis wrote: Sat Nov 21, 2020 6:19 am
Wanderingwheelz wrote: Sat Nov 21, 2020 5:44 am
paralysisbyanalysis wrote: Sat Nov 21, 2020 4:55 am
JupiterJones wrote: Fri Nov 20, 2020 5:06 pm First of all, very smart to maintain an admirably sizeable emergency fund, given your particular situation (and the current economy).

Second of all, I don't think you could go wrong with any of the following simple-but-effective and low-cost portfolios you mentioned:
  • 3-Fund
  • 4-Fund
  • Target Date (assuming Vanguard, and assuming you pick based on stock/bond ratio and not merely on the year in the fund name)
The most important decision then is what ratio of stocks to bonds you want within each of these portfolios. That's going to be up to you, but I would imagine that the common Boglehead advice of "your age in bonds" or "your age minus 10 in bonds" might be more conservative that what you're looking for. 80/20 wouldn't be crazy as far as I'm concerned, and that's about where Vanguard's Target Retirement 2040 puts it. But again, totally up to you.

Okay, I lied earlier. The true "most important" decision is simply investing in the first place. At this stage of the game, as long as you're putting some money in some sort of low-expense, broadly-diversified portfolio that roughly matches your risk tolerance, you're good to go.

And remember, this isn't a door that locks behind you after you walk through it. If you put your money in TR2035 now and later decide TR2040 or a 3-Funder better meets your needs, then you can go do that instead. No biggie.

P.S. I hadn't heard of the Ray Dalio All Weather Portfolio until your post, but I would not recommend commodities/gold investing for anything more than a small "play money" portion of one's portfolio, if even that much.
Thank you for your thoughtful reply.

Although I've read the data against it - what are your thoughts on dollar cost averaging in over a longer timeline -- given that there may not be future disposable income to continue deploying in investments?

To sum up where I am now:
I think one of my big hesitations is what I've been reading (perhaps it's noise, and not signal) about the 60/40, 70/30, /80/20 or any other equivalent where bonds are being used as the counter balance to the risk of stocks and vice versa --- is that in the current environment with super low interest rates, the those two assets don't appear to be balancing one another in the same manner that they historically have. At times they appear to be moving together in some ways. If historically, a downward trend in equities moves money to bonds --- increasing bond prices and decreasing the yields---- with yields so low right now, it's hard to see bonds as the reliable counter they've been to equities in the past. And the question comes up as to are we moving to new era where we have to find new ideas. That's why I've been learning about Dalio's All Weather Portfolio and modifications that others have suggested to it (such as substituting utilities in place of commodities). I'd likely not feel comfortable deploying that much into Gold (I do currently hold a small amount of GLD that I bought during the 2008-2009 and have held onto ever since -- but I don't see it working much better in the future -- so I might just leave that as is and not put much more into it.

I've also looked into the Swensen Model (Dave Swensen) - it's more complicated than a straight 60/40, 3 fund, or 4 fund strategy, but not particularly complicated. And over the past 19 years it seems to have given a better risk adjusted return, with lower volatility vs the S&P 500. But again, past performance may or may not be as relevant to where things are today.
I wouldn’t invest any of your money until you’ve fully embraced the notion that you are a long-term investor. This is the problem I once had, and many before me did too- we were focused on tomorrow, or next year, rather than 15-20 years down the road when some withdrawals from stocks will be needed. Volatility is the price of admission. It cannot be avoided.

If you don’t 100% believe that your 3-Fund investments will be substantially higher in 15-20 years then you’ll continue with the same failed approach that got you to be where you are today.

Attitude determines altitude, as they say. How high do you want to go? Many folks are happy having less 20 years from now, but those people aren’t Bogleheads.

Stocks and bonds will do what they do, and nobody knows what the near future will offer us. All you can do is jump on board and hold on tight.
Thank you Wanderingwheelz.

I understand what you're saying. My own career and ability to generate income has been such a huge risk for the past 20 years (never having had a consistent paycheck or even having been an employee so to speak), that if I were to look at the risk ratio of my own life, the counter to that side of career risk ----- has been to be much more risk averse with the money I've earned. (likely out of necessity at first when there wasn't much of it, and then out of fear, as it began to accumulate.) That's been sort of the balance for me. But a foolish or false balance when viewed through the lens of time.

Through all the research I've done (hence paralysis) -- guidance and advice is rarely tailored to those in my position -- there hasn't been a lot of guidance for those of us with no employer, no paycheck, no 401k (other than my solo 401k to defer taxes), no HSA, no union, no future guarantees. Those of us who's income comes sporadically and in varying amounts (talk about volatility...) ---- So it has taken a long time to be able to see how investing wasn't just adding to that risk, instead of offsetting it. That thinking started to change with age, marriage, and a child -- and thus began the long road of trying to truly educate myself about investing. Hopefully, I'm finally getting to the "how" of it all.

Thank you again.
You’re not alone. My wife and I are both business owners and our joint incomes have swung by six figures from one year to the next several times.

The things you view as risks are the very things that, in my opinion, are the exact reasons why you need to get allocated properly and never look back. Allow those hard working people that have more security and benefits than you do (the employees of mega corps) carry you down the road of success.
User avatar
ruralavalon
Posts: 19726
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: If one were to start investing today - late to the game

Post by ruralavalon »

Mid 40s, married, 1 young child.
Creative freelancer, self employed.
Unpredictable income - no future guarantee of income (very little income since pandemic began).
Investment horizon - 15-20 years
We plan to keep at least a year's worth of expenses aside and not invested.
Through all the research I've done (hence paralysis) -- guidance and advice is rarely tailored to those in my position -- there hasn't been a lot of guidance for those of us with no employer, no paycheck, no 401k (other than my solo 401k to defer taxes), no HSA, no union, no future guarantees. Those of us who's income comes sporadically and in varying amounts (talk about volatility...) ---- So it has taken a long time to be able to see how investing wasn't just adding to that risk, instead of offsetting it. That thinking started to change with age, marriage, and a child -- and thus began the long road of trying to truly educate myself about investing. Hopefully, I'm finally getting to the "how" of it all.
Your large emergency fund is a reasonable approach to the erratic income of self-emplyment.

Your username, paralysisbyanalysis, is very apt. Just getting started is important. Just getting started is the most important thing you can do. So stop agonizing about details like super low interest rates, alternative investments, and whether we are entering some new era of investing.

I think the exit from the paralysis is by simplicity, like a one-fund portfolio. Use a single all-in-one balanced fund in all of your tax-advantaged accounts.

In your mid-40s a suitable balanced fund might be Vanguard Balanced Index Fund (VBIAX) 60% stocks/40% bonds, or Vanguard LifeStrategy Moderate Growth Fund (VSMGX), 60/40, or Vanguard LifeStrategy Conservative Growth Fund (VSCGX) 40/60, or a target date fund like Vanguard Target Retirement 2035 or 2040 Fund (VTTHX or VFORX). Just pick one, all are good choices in my opinion.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

Wanderingwheelz wrote: Sat Nov 21, 2020 12:09 pm
paralysisbyanalysis wrote: Sat Nov 21, 2020 6:19 am
Wanderingwheelz wrote: Sat Nov 21, 2020 5:44 am
paralysisbyanalysis wrote: Sat Nov 21, 2020 4:55 am
JupiterJones wrote: Fri Nov 20, 2020 5:06 pm First of all, very smart to maintain an admirably sizeable emergency fund, given your particular situation (and the current economy).

Second of all, I don't think you could go wrong with any of the following simple-but-effective and low-cost portfolios you mentioned:
  • 3-Fund
  • 4-Fund
  • Target Date (assuming Vanguard, and assuming you pick based on stock/bond ratio and not merely on the year in the fund name)
The most important decision then is what ratio of stocks to bonds you want within each of these portfolios. That's going to be up to you, but I would imagine that the common Boglehead advice of "your age in bonds" or "your age minus 10 in bonds" might be more conservative that what you're looking for. 80/20 wouldn't be crazy as far as I'm concerned, and that's about where Vanguard's Target Retirement 2040 puts it. But again, totally up to you.

Okay, I lied earlier. The true "most important" decision is simply investing in the first place. At this stage of the game, as long as you're putting some money in some sort of low-expense, broadly-diversified portfolio that roughly matches your risk tolerance, you're good to go.

And remember, this isn't a door that locks behind you after you walk through it. If you put your money in TR2035 now and later decide TR2040 or a 3-Funder better meets your needs, then you can go do that instead. No biggie.

P.S. I hadn't heard of the Ray Dalio All Weather Portfolio until your post, but I would not recommend commodities/gold investing for anything more than a small "play money" portion of one's portfolio, if even that much.
Thank you for your thoughtful reply.

Although I've read the data against it - what are your thoughts on dollar cost averaging in over a longer timeline -- given that there may not be future disposable income to continue deploying in investments?

To sum up where I am now:
I think one of my big hesitations is what I've been reading (perhaps it's noise, and not signal) about the 60/40, 70/30, /80/20 or any other equivalent where bonds are being used as the counter balance to the risk of stocks and vice versa --- is that in the current environment with super low interest rates, the those two assets don't appear to be balancing one another in the same manner that they historically have. At times they appear to be moving together in some ways. If historically, a downward trend in equities moves money to bonds --- increasing bond prices and decreasing the yields---- with yields so low right now, it's hard to see bonds as the reliable counter they've been to equities in the past. And the question comes up as to are we moving to new era where we have to find new ideas. That's why I've been learning about Dalio's All Weather Portfolio and modifications that others have suggested to it (such as substituting utilities in place of commodities). I'd likely not feel comfortable deploying that much into Gold (I do currently hold a small amount of GLD that I bought during the 2008-2009 and have held onto ever since -- but I don't see it working much better in the future -- so I might just leave that as is and not put much more into it.

I've also looked into the Swensen Model (Dave Swensen) - it's more complicated than a straight 60/40, 3 fund, or 4 fund strategy, but not particularly complicated. And over the past 19 years it seems to have given a better risk adjusted return, with lower volatility vs the S&P 500. But again, past performance may or may not be as relevant to where things are today.
I wouldn’t invest any of your money until you’ve fully embraced the notion that you are a long-term investor. This is the problem I once had, and many before me did too- we were focused on tomorrow, or next year, rather than 15-20 years down the road when some withdrawals from stocks will be needed. Volatility is the price of admission. It cannot be avoided.

If you don’t 100% believe that your 3-Fund investments will be substantially higher in 15-20 years then you’ll continue with the same failed approach that got you to be where you are today.

Attitude determines altitude, as they say. How high do you want to go? Many folks are happy having less 20 years from now, but those people aren’t Bogleheads.

Stocks and bonds will do what they do, and nobody knows what the near future will offer us. All you can do is jump on board and hold on tight.
Thank you Wanderingwheelz.

I understand what you're saying. My own career and ability to generate income has been such a huge risk for the past 20 years (never having had a consistent paycheck or even having been an employee so to speak), that if I were to look at the risk ratio of my own life, the counter to that side of career risk ----- has been to be much more risk averse with the money I've earned. (likely out of necessity at first when there wasn't much of it, and then out of fear, as it began to accumulate.) That's been sort of the balance for me. But a foolish or false balance when viewed through the lens of time.

Through all the research I've done (hence paralysis) -- guidance and advice is rarely tailored to those in my position -- there hasn't been a lot of guidance for those of us with no employer, no paycheck, no 401k (other than my solo 401k to defer taxes), no HSA, no union, no future guarantees. Those of us who's income comes sporadically and in varying amounts (talk about volatility...) ---- So it has taken a long time to be able to see how investing wasn't just adding to that risk, instead of offsetting it. That thinking started to change with age, marriage, and a child -- and thus began the long road of trying to truly educate myself about investing. Hopefully, I'm finally getting to the "how" of it all.

Thank you again.
You’re not alone. My wife and I are both business owners and our joint incomes have swung by six figures from one year to the next several times.

The things you view as risks are the very things that, in my opinion, are the exact reasons why you need to get allocated properly and never look back. Allow those hard working people that have more security and benefits than you do (the employees of mega corps) carry you down the road of success.

Yes, this how i've found myself here. Thank you!
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

ruralavalon wrote: Sat Nov 21, 2020 1:41 pm
Mid 40s, married, 1 young child.
Creative freelancer, self employed.
Unpredictable income - no future guarantee of income (very little income since pandemic began).
Investment horizon - 15-20 years
We plan to keep at least a year's worth of expenses aside and not invested.
Through all the research I've done (hence paralysis) -- guidance and advice is rarely tailored to those in my position -- there hasn't been a lot of guidance for those of us with no employer, no paycheck, no 401k (other than my solo 401k to defer taxes), no HSA, no union, no future guarantees. Those of us who's income comes sporadically and in varying amounts (talk about volatility...) ---- So it has taken a long time to be able to see how investing wasn't just adding to that risk, instead of offsetting it. That thinking started to change with age, marriage, and a child -- and thus began the long road of trying to truly educate myself about investing. Hopefully, I'm finally getting to the "how" of it all.
Your large emergency fund is a reasonable approach to the erratic income of self-emplyment.

Your username, paralysisbyanalysis, is very apt. Just getting started is important. Just getting started is the most important thing you can do. So stop agonizing about details like super low interest rates, alternative investments, and whether we are entering some new era of investing.

I think the exit from the paralysis is by simplicity, like a one-fund portfolio. Use a single all-in-one balanced fund in all of your tax-advantaged accounts.

In your mid-40s a suitable balanced fund might be Vanguard Balanced Index Fund (VBIAX) 60% stocks/40% bonds, or Vanguard LifeStrategy Moderate Growth Fund (VSMGX), 60/40, or Vanguard LifeStrategy Conservative Growth Fund (VSCGX) 40/60, or a target date fund like Vanguard Target Retirement 2035 or 2040 Fund (VTTHX or VFORX). Just pick one, all are good choices in my opinion.
Thank you very much. This is very helpful!
000
Posts: 3314
Joined: Thu Jul 23, 2020 12:04 am

Re: If one were to start investing today - late to the game

Post by 000 »

paralysisbyanalysis wrote: Sat Nov 21, 2020 5:11 am One other idea I forgot to mention is I've also considered the Dave Swensen Model. That brings in TIPS and REITS + Bonds, Stocks, and Int'l Stocks. though it's possible I'd want want to make some slight modifications.
That's fine. If you own real estate yourself, you should consider if a REIT tilt is really needed though.
paralysisbyanalysis wrote: Sat Nov 21, 2020 5:11 am To your point about increasing the amount of stocks during the next major bear market -- and given I've no future income guarantee -- I'd likely dollar cost average in over a longer time period, to make sure I have $ to deploy given any downturns. Any thoughts on that?
I was actually thinking that one shouldn't go too heavy into stocks until one has personally experienced a bear with money invested. As far as dollar cost averaging, it only mildly reduces risk: once the DCA is over, you're fully exposed to the whatever percentage you have in various asset classes.
paralysisbyanalysis wrote: Sat Nov 21, 2020 5:11 am As far as the Hedfundie's or a Leveraged All Weather approach -- when I say a small amount, I mean in relative % to the overall portfolio. It would likely be in the low 5 figures area. Looking at the portfolio visualizer for those ideas, given a longer time period, the potential appears to exist for significant opportunity (and volatility as well) but the risk adjusted return seems on par with what I'd do with my personal gambles, so to speak. Are there advantages to doing that in the Roth IRA as opposed to the SEP, traditional, or 401K? I've gone through the links you sent, but I was unable to really decipher what advantage a strategy like that would have in the Roth ----- as opposed to the other tax advantaged accounts (though they are tax deferred).
Ideally I would want the highest growth asset in Roth, then taxable, then the lowest growth asset in tax-deferred because I'll have to pay taxes on tax-deferred in the future. It would be a real bummer to spend a lot of time and worry trying to beat the market, and then succeed in the most highly taxed account (tax-deferred). Of course, if the higher risk approach doesn't actually deliver higher returns, then the Roth space would be wasted... but if I were confident enough to try something like the HFEA I would definitely do it in Roth so the growth would be tax-free.

--

You mentioned being concerned about interest rate movements adversely affecting bonds. Cash does well (relative to bonds) in a rising interest rate environment because the cash gets immediately reinvested at higher rates. Some portfolios, like the Harry Browne Permanent Portfolio, have an explicit cash allocation (although the HBPP has too little stocks for my taste and was intended to be used alongside a Variable Portfolio). Floating rate bonds should act likewise, but typically have a lot more credit risk (and temporary downward movement during crises) than cash.
Robert20
Posts: 208
Joined: Fri Apr 10, 2020 10:51 pm

Re: If one were to start investing today - late to the game

Post by Robert20 »

paralysisbyanalysis wrote: Fri Nov 20, 2020 2:48 pm Context:
Mid 40s, married, 1 young child.
Creative freelancer, self employed.
Unpredictable income - no future guarantee of income (very little income since pandemic began).
Investment horizon - 15-20 years
We plan to keep at least a year's worth of expenses aside and not invested.

Accounts / Assets: mid 6 figures - mostly in cash and a few other random holdings
Solo 401K (no employer match, so to speak)
IRA, Roth Ira, Spouse IRA, SEP IRA, Taxable Brokerage Account, Savings Accounts
Investment Property (SFR) worth ~40k: with a tenant (no mortgage)

While not dwelling on it too much more, I'll be the first to admit I have missed out on the past decade of the market due mostly to fear, ignorance, and the foolish belief that things would come crashing down and then I would join in. In my early 20's I was scarred by the markets of the late 90's and early 2000's and then watched my father suffer in 2008. I stayed away.

Over the past decade my earnings increased significantly, but since March 2020 that has changed. I've mostly just saved the money in the bank (and did a few small things like buy an inexpensive investment property and for a couple years -- had a T-bill ladder going). But for the most part, anything other than the property is about the same as cash. All that being said, I have spent a lot of time researching about investing and chatting with my friends in finance whenever they'd allow --- and going down many wandering roads trying to learn as much as I can. I spent too much time learning about many bad ideas, but fortunately, had the wherewithal to only spend time and not money. Finally I'm here.

I've been most interested in Lazy Portfolios of one type or another. My question is really this - to someone in my situation, if one were to start today with a fair amount of cash, what investment ideas make sense for the long run? And keeping in mind, my income may decrease significantly going forward, so there may be no guarantee that I'm able to add to my positions using future income.

Ideas that are of interest:
Bogleheads 3 Fund / 4 Fund
60/40 or 70/30 Portfolio (or 80/20?)
Ray Dalio All Weather Portfolio (modified: replacing commodities with utilities)
Target Date Fund

*And with a very small amount -- creating a smaller portfolio like Hedgefundie's excellent adventure, or a Leveraged All Weather Portfolio.

Other thoughts I have -- making sure to include international equities, and having a tilt toward Asia/China/Japan somewhere mixed in.

I'd love to hear what those with more knowledge experience would do if coming to the market today with nothing in it and a fair amount of cash to deploy and a 15-20 year horizon.

Thank you!
No one knows what will happen in next 20-30 years (by the time u retire).. All u/we can do is to invest monthly/weekly/daily SOME amount without fail.

Use 1 or 2 or 3 funds portfolio... thats all we can do..

May be stocks will GO UP or down OR BITCOIN will be trend OR something else might come up in next 20 years.
jjface
Posts: 3090
Joined: Thu Mar 19, 2015 6:18 pm

Re: If one were to start investing today - late to the game

Post by jjface »

Welcome
btw you are not late to the game with mid 6 figures.
tindel
Posts: 170
Joined: Sun Nov 12, 2017 10:06 am

Re: If one were to start investing today - late to the game

Post by tindel »

Something to realize is that you have been investing all of these years! You have been investing in low interest 'safe' investments - no shame in that, especially considering your income profile. Most people call these safe investments 'fixed-income'. You're essentially 100% bonds or 'fixed income'. In my mind your stash has grown so much that you are no longer content with your current 0/100 stock/fixed-income investment portfolio. That's great! Pick a new allocation and run with it for a while, and realize it's not a binary decision.

I'm a little shocked at the recommendations to go 80/20 after being 0/100 all of these years... you're obviously a conservative investor, I'd suggest between a 60/40 and 30/70 portfolio until you get comfortable, wait a year or two, and then readjust as appropriate. I would highly recommend setting up an IPS and to revisit it every year or two: https://www.bogleheads.org/wiki/Investm ... _statement

I agree that a mid-six-figure portfolio is respectable at your age - good job!

Extras... since you own your own home (an assumption) and an investment property, I see no need for REITs... for individuals, I recommend I-bonds over TIPS.
BigMoneyNoWhammies
Posts: 268
Joined: Tue Jul 11, 2017 11:58 am

Re: If one were to start investing today - late to the game

Post by BigMoneyNoWhammies »

paralysisbyanalysis wrote: Fri Nov 20, 2020 2:48 pm Context:
Mid 40s, married, 1 young child.
Creative freelancer, self employed.
Unpredictable income - no future guarantee of income (very little income since pandemic began).
Investment horizon - 15-20 years
We plan to keep at least a year's worth of expenses aside and not invested.

Accounts / Assets: mid 6 figures - mostly in cash and a few other random holdings
Solo 401K (no employer match, so to speak)
IRA, Roth Ira, Spouse IRA, SEP IRA, Taxable Brokerage Account, Savings Accounts
Investment Property (SFR) worth ~40k: with a tenant (no mortgage)

While not dwelling on it too much more, I'll be the first to admit I have missed out on the past decade of the market due mostly to fear, ignorance, and the foolish belief that things would come crashing down and then I would join in. In my early 20's I was scarred by the markets of the late 90's and early 2000's and then watched my father suffer in 2008. I stayed away.

Over the past decade my earnings increased significantly, but since March 2020 that has changed. I've mostly just saved the money in the bank (and did a few small things like buy an inexpensive investment property and for a couple years -- had a T-bill ladder going). But for the most part, anything other than the property is about the same as cash. All that being said, I have spent a lot of time researching about investing and chatting with my friends in finance whenever they'd allow --- and going down many wandering roads trying to learn as much as I can. I spent too much time learning about many bad ideas, but fortunately, had the wherewithal to only spend time and not money. Finally I'm here.

I've been most interested in Lazy Portfolios of one type or another. My question is really this - to someone in my situation, if one were to start today with a fair amount of cash, what investment ideas make sense for the long run? And keeping in mind, my income may decrease significantly going forward, so there may be no guarantee that I'm able to add to my positions using future income.

Ideas that are of interest:
Bogleheads 3 Fund / 4 Fund
60/40 or 70/30 Portfolio (or 80/20?)
Ray Dalio All Weather Portfolio (modified: replacing commodities with utilities)
Target Date Fund

*And with a very small amount -- creating a smaller portfolio like Hedgefundie's excellent adventure, or a Leveraged All Weather Portfolio.

Other thoughts I have -- making sure to include international equities, and having a tilt toward Asia/China/Japan somewhere mixed in.

I'd love to hear what those with more knowledge experience would do if coming to the market today with nothing in it and a fair amount of cash to deploy and a 15-20 year horizon.

Thank you!
If I was buying into the market today in your situation I'd lump sum it to 100% equities minus the emergency fund, but given your described reaction to the last few major market downturns this is too aggressive for you to stick with. I'd tend to agree with others that an 80/20 asset allocation is also probably too aggressive for your personal risk tolerance. The standard 60/40 total market stocks/total bonds portfolio is a good starting point for you. The Wiki has some good info on getting started and the best accounts for holding different types of investments to minimize tax liability.

As someone who utilizes the Hedgefundie risk parity strategy in their IRA, I'd advise that it likely would be hard for someone as risk averse as you to be able to stick with it in the long run and that it is best to avoid allocating any funds to it.

Since your income situation is potentially volatile, I agree with your thinking about maintaining 1 year's worth of expenses. Covid won't last forever but it could still be a year or more before things are back to "normal."

The "should I include international in my AA or not?" is probably the longest running debate on this forum - many strongly favor holding some international funds for better diversification and others are adamant that with so many US domiciled businesses getting significant portions of their income overseas that the benefit of international is effectively built in and as a result only hold total US market funds for the equity portions of their portfolios. It's perfectly reasonable for you to do either, though I suspect some would question why you specifically want the Asian tilt.
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

BigMoneyNoWhammies wrote: Sun Nov 22, 2020 4:00 am
paralysisbyanalysis wrote: Fri Nov 20, 2020 2:48 pm Context:
Mid 40s, married, 1 young child.
Creative freelancer, self employed.
Unpredictable income - no future guarantee of income (very little income since pandemic began).
Investment horizon - 15-20 years
We plan to keep at least a year's worth of expenses aside and not invested.

Accounts / Assets: mid 6 figures - mostly in cash and a few other random holdings
Solo 401K (no employer match, so to speak)
IRA, Roth Ira, Spouse IRA, SEP IRA, Taxable Brokerage Account, Savings Accounts
Investment Property (SFR) worth ~40k: with a tenant (no mortgage)

While not dwelling on it too much more, I'll be the first to admit I have missed out on the past decade of the market due mostly to fear, ignorance, and the foolish belief that things would come crashing down and then I would join in. In my early 20's I was scarred by the markets of the late 90's and early 2000's and then watched my father suffer in 2008. I stayed away.

Over the past decade my earnings increased significantly, but since March 2020 that has changed. I've mostly just saved the money in the bank (and did a few small things like buy an inexpensive investment property and for a couple years -- had a T-bill ladder going). But for the most part, anything other than the property is about the same as cash. All that being said, I have spent a lot of time researching about investing and chatting with my friends in finance whenever they'd allow --- and going down many wandering roads trying to learn as much as I can. I spent too much time learning about many bad ideas, but fortunately, had the wherewithal to only spend time and not money. Finally I'm here.

I've been most interested in Lazy Portfolios of one type or another. My question is really this - to someone in my situation, if one were to start today with a fair amount of cash, what investment ideas make sense for the long run? And keeping in mind, my income may decrease significantly going forward, so there may be no guarantee that I'm able to add to my positions using future income.

Ideas that are of interest:
Bogleheads 3 Fund / 4 Fund
60/40 or 70/30 Portfolio (or 80/20?)
Ray Dalio All Weather Portfolio (modified: replacing commodities with utilities)
Target Date Fund

*And with a very small amount -- creating a smaller portfolio like Hedgefundie's excellent adventure, or a Leveraged All Weather Portfolio.

Other thoughts I have -- making sure to include international equities, and having a tilt toward Asia/China/Japan somewhere mixed in.

I'd love to hear what those with more knowledge experience would do if coming to the market today with nothing in it and a fair amount of cash to deploy and a 15-20 year horizon.

Thank you!
If I was buying into the market today in your situation I'd lump sum it to 100% equities minus the emergency fund, but given your described reaction to the last few major market downturns this is too aggressive for you to stick with. I'd tend to agree with others that an 80/20 asset allocation is also probably too aggressive for your personal risk tolerance. The standard 60/40 total market stocks/total bonds portfolio is a good starting point for you. The Wiki has some good info on getting started and the best accounts for holding different types of investments to minimize tax liability.

As someone who utilizes the Hedgefundie risk parity strategy in their IRA, I'd advise that it likely would be hard for someone as risk averse as you to be able to stick with it in the long run and that it is best to avoid allocating any funds to it.

Since your income situation is potentially volatile, I agree with your thinking about maintaining 1 year's worth of expenses. Covid won't last forever but it could still be a year or more before things are back to "normal."

The "should I include international in my AA or not?" is probably the longest running debate on this forum - many strongly favor holding some international funds for better diversification and others are adamant that with so many US domiciled businesses getting significant portions of their income overseas that the benefit of international is effectively built in and as a result only hold total US market funds for the equity portions of their portfolios. It's perfectly reasonable for you to do either, though I suspect some would question why you specifically want the Asian tilt.
Thank you so much for your thoughts. While I'm fairly risk averse in what might be deemed my investing profile, I'd likely say that I'm much more risk tolerant than the masses in my career / life -- creative freelancer -- and sticking with it for 20 years at this point --- through some very difficult times. So the (lack of) investing side has likely been what I thought was the balance to a highly risky career and life --- and, had I acted with much fervor on the investing ideas I'd had earlier on (without much understanding of things) -- I'd likely have done some disservice to my future self -- how that disservice would stack up against staying (mostly) out of the market for the past 10 years is best left as water under the bridge at this point.

I certainly have made small speculative plays (perhaps stupid plays with some element of dumb luck -----Bitcoin early in and also a bit too early out, some reverse ETF's during 2008-2009, and a small long GLD play from the same time period which i still hold today). I am not averse to the occasional gamble here and there. And there's the investment property as well -- half a continent away from me, site unseen to this day, other than photos. It's fairly small in overall portfolio %, but by no means a low risk situation -- but it is a calculated risk. And this is how I look at the Hedgefundie risk parity strategy or some variation of a leveraged All Weather Portfolio. My thoughts are to allocate a small % to the "play" money aspect of things -- (perhaps one of those mentioned ideas above) and then take the bulk of my investment funds into some much more risk adjusted either conservative or moderate allocation.

Is it completely out of whack to consider trying two similar, but slightly varied strategies simultaneously by virtually dividing the money into different "buckets" so to speak? I'm sure many will advise against this -- and say just do the a target date fund / lifecycle fund / or a 3 fund portfolio and be done with it. But I don't see why I can't ask the question.

Aside from the volatility of my income, I want to point out, that perhaps counterintuitively to what others might assume, when I'm of the age to need to start taking distributions from my retirement accounts, my income will likely be significantly lower. Aside from the most sought after in our industry, the general trend is that the rest of us have a good run of say 5-15 years, and have to squirrel away what we can -- as there can be significant paydays -- but the question is always, how long can one keep this up? There is no normal, and the average across the chart is in the low 5 figures income, while those at the top hit the 7 figure range.

So when I do begin to withdraw funds, I'll likely be 1-2 tax brackets lower than I am currently. This is also why I tend to want to understand more about which accounts would be ideal for me to hold what where. My assumption is, unless things go completely upside down, I'll have more money in my investment accounts at that point in time, but likely a lower income than I currently have now. (That is-----unless what I'm coming to understand about investing, and what everyone in this forum seems to understand --- is suddenly turned completely upside down over the next 20 years).

As for international and specifically Asia, those are ideas that come from some major investors I try to follow and also from some influential thinkers I follow regarding the current (and future) political, economic, and technological landscapes of the world. And also from speaking with my friends who are in finance (on the analyst, risk side of things ---- investors, not traders) --- who tend to be always looking for the bigger picture long term trends. If I were to do such a tilt, it would be just a small tilt and I'm not set on it by any means.

Thank you again. This is very helpful.
User avatar
ruralavalon
Posts: 19726
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: If one were to start investing today - late to the game

Post by ruralavalon »

paralysisbyanalysis wrote: Sun Nov 22, 2020 9:35 am
BigMoneyNoWhammies wrote: Sun Nov 22, 2020 4:00 am
paralysisbyanalysis wrote: Fri Nov 20, 2020 2:48 pm Context:
Mid 40s, married, 1 young child.
Creative freelancer, self employed.
Unpredictable income - no future guarantee of income (very little income since pandemic began).
Investment horizon - 15-20 years
We plan to keep at least a year's worth of expenses aside and not invested.

Accounts / Assets: mid 6 figures - mostly in cash and a few other random holdings
Solo 401K (no employer match, so to speak)
IRA, Roth Ira, Spouse IRA, SEP IRA, Taxable Brokerage Account, Savings Accounts
Investment Property (SFR) worth ~40k: with a tenant (no mortgage)

While not dwelling on it too much more, I'll be the first to admit I have missed out on the past decade of the market due mostly to fear, ignorance, and the foolish belief that things would come crashing down and then I would join in. In my early 20's I was scarred by the markets of the late 90's and early 2000's and then watched my father suffer in 2008. I stayed away.

Over the past decade my earnings increased significantly, but since March 2020 that has changed. I've mostly just saved the money in the bank (and did a few small things like buy an inexpensive investment property and for a couple years -- had a T-bill ladder going). But for the most part, anything other than the property is about the same as cash. All that being said, I have spent a lot of time researching about investing and chatting with my friends in finance whenever they'd allow --- and going down many wandering roads trying to learn as much as I can. I spent too much time learning about many bad ideas, but fortunately, had the wherewithal to only spend time and not money. Finally I'm here.

I've been most interested in Lazy Portfolios of one type or another. My question is really this - to someone in my situation, if one were to start today with a fair amount of cash, what investment ideas make sense for the long run? And keeping in mind, my income may decrease significantly going forward, so there may be no guarantee that I'm able to add to my positions using future income.

Ideas that are of interest:
Bogleheads 3 Fund / 4 Fund
60/40 or 70/30 Portfolio (or 80/20?)
Ray Dalio All Weather Portfolio (modified: replacing commodities with utilities)
Target Date Fund

*And with a very small amount -- creating a smaller portfolio like Hedgefundie's excellent adventure, or a Leveraged All Weather Portfolio.

Other thoughts I have -- making sure to include international equities, and having a tilt toward Asia/China/Japan somewhere mixed in.

I'd love to hear what those with more knowledge experience would do if coming to the market today with nothing in it and a fair amount of cash to deploy and a 15-20 year horizon.

Thank you!
If I was buying into the market today in your situation I'd lump sum it to 100% equities minus the emergency fund, but given your described reaction to the last few major market downturns this is too aggressive for you to stick with. I'd tend to agree with others that an 80/20 asset allocation is also probably too aggressive for your personal risk tolerance. The standard 60/40 total market stocks/total bonds portfolio is a good starting point for you. The Wiki has some good info on getting started and the best accounts for holding different types of investments to minimize tax liability.

As someone who utilizes the Hedgefundie risk parity strategy in their IRA, I'd advise that it likely would be hard for someone as risk averse as you to be able to stick with it in the long run and that it is best to avoid allocating any funds to it.

Since your income situation is potentially volatile, I agree with your thinking about maintaining 1 year's worth of expenses. Covid won't last forever but it could still be a year or more before things are back to "normal."

The "should I include international in my AA or not?" is probably the longest running debate on this forum - many strongly favor holding some international funds for better diversification and others are adamant that with so many US domiciled businesses getting significant portions of their income overseas that the benefit of international is effectively built in and as a result only hold total US market funds for the equity portions of their portfolios. It's perfectly reasonable for you to do either, though I suspect some would question why you specifically want the Asian tilt.
Thank you so much for your thoughts. While I'm fairly risk averse in what might be deemed my investing profile, I'd likely say that I'm much more risk tolerant than the masses in my career / life -- creative freelancer -- and sticking with it for 20 years at this point --- through some very difficult times. So the (lack of) investing side has likely been what I thought was the balance to a highly risky career and life --- and, had I acted with much fervor on the investing ideas I'd had earlier on (without much understanding of things) -- I'd likely have done some disservice to my future self -- how that disservice would stack up against staying (mostly) out of the market for the past 10 years is best left as water under the bridge at this point.

I certainly have made small speculative plays (perhaps stupid plays with some element of dumb luck -----Bitcoin early in and also a bit too early out, some reverse ETF's during 2008-2009, and a small long GLD play from the same time period which i still hold today). I am not averse to the occasional gamble here and there. And there's the investment property as well -- half a continent away from me, site unseen to this day, other than photos. It's fairly small in overall portfolio %, but by no means a low risk situation -- but it is a calculated risk. And this is how I look at the Hedgefundie risk parity strategy or some variation of a leveraged All Weather Portfolio. My thoughts are to allocate a small % to the "play" money aspect of things -- (perhaps one of those mentioned ideas above) and then take the bulk of my investment funds into some much more risk adjusted either conservative or moderate allocation.

Is it completely out of whack to consider trying two similar, but slightly varied strategies simultaneously by virtually dividing the money into different "buckets" so to speak? I'm sure many will advise against this -- and say just do the a target date fund / lifecycle fund / or a 3 fund portfolio and be done with it. But I don't see why I can't ask the question.

Aside from the volatility of my income, I want to point out, that perhaps counterintuitively to what others might assume, when I'm of the age to need to start taking distributions from my retirement accounts, my income will likely be significantly lower. Aside from the most sought after in our industry, the general trend is that the rest of us have a good run of say 5-15 years, and have to squirrel away what we can -- as there can be significant paydays -- but the question is always, how long can one keep this up? There is no normal, and the average across the chart is in the low 5 figures income, while those at the top hit the 7 figure range.

So when I do begin to withdraw funds, I'll likely be 1-2 tax brackets lower than I am currently. This is also why I tend to want to understand more about which accounts would be ideal for me to hold what where. My assumption is, unless things go completely upside down, I'll have more money in my investment accounts at that point in time, but likely a lower income than I currently have now. (That is-----unless what I'm coming to understand about investing, and what everyone in this forum seems to understand --- is suddenly turned completely upside down over the next 20 years).

As for international and specifically Asia, those are ideas that come from some major investors I try to follow and also from some influential thinkers I follow regarding the current (and future) political, economic, and technological landscapes of the world. And also from speaking with my friends who are in finance (on the analyst, risk side of things ---- investors, not traders) --- who tend to be always looking for the bigger picture long term trends. If I were to do such a tilt, it would be just a small tilt and I'm not set on it by any means.

Thank you again. This is very helpful.
I understand being "fairly risk averse" in your investing, because of your high risk in being self-employed. I was self-employed

I suggest skipping speculative plays and gambling. Don't dabble with play money, this is your real life not Monopoly.

Since you will be 1-2 tax brackets lower in retirement, it's a good idea to make maximum annual contributions to your traditional tax-deferred accounts. A high rate of contributions is more important than the tactical issues you are agonizing about.

I still think the exit from your paralysis is by simplicity, like a one-fund portfolio. Use a single all-in-one balanced fund in all of your tax-advantaged accounts.

In your mid-40s a suitable balanced fund might be Vanguard Balanced Index Fund (VBIAX) 60% stocks/40% bonds, or Vanguard LifeStrategy Moderate Growth Fund (VSMGX), 60/40, or Vanguard LifeStrategy Conservative Growth Fund (VSCGX) 40/60, or a target date fund like Vanguard Target Retirement 2035 or 2040 Fund (VTTHX or VFORX). Just pick one, all are good choices in my opinion.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
L82GAME
Posts: 364
Joined: Sat Dec 07, 2019 9:29 am

Re: If one were to start investing today - late to the game

Post by L82GAME »

Hi Paralysisbyanalysis,

Please note my user name...I can relate to your sentiments of getting started later. :beer

Without knowing more about the current distribution of assets and holdings, it’s hard to give portfolio structure advice. See here: viewtopic.php?f=1&t=6212

But very generally:
  • Pat yourself on the back for recognizing your need to put together a plan and focus on moving forward in an informed manner, and don’t dwell on regretting past decisions
  • Listen to Taylor’s and others’ advice; start simply
  • You can add complexity later if you choose, but it’s not necessary
  • Focus on your asset allocation. Pending further info about your current portfolio (see link above), you may want to start with a lower percentage in stocks so that you can increase your allocation to equities in the future without the tax implications of unwinding too high of an equities percentage if you decide you’re more risk averse than anticipated (i.e., asset location and your taxable account).
  • Don’t start out with the inclusion of alternative asset classes like gold and real estate (ibid: second bullet above)
“Simplicity is the ultimate sophistication.” - Lao Tzu
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

000 wrote: Sat Nov 21, 2020 5:22 pm
paralysisbyanalysis wrote: Sat Nov 21, 2020 5:11 am One other idea I forgot to mention is I've also considered the Dave Swensen Model. That brings in TIPS and REITS + Bonds, Stocks, and Int'l Stocks. though it's possible I'd want want to make some slight modifications.
That's fine. If you own real estate yourself, you should consider if a REIT tilt is really needed though.
paralysisbyanalysis wrote: Sat Nov 21, 2020 5:11 am To your point about increasing the amount of stocks during the next major bear market -- and given I've no future income guarantee -- I'd likely dollar cost average in over a longer time period, to make sure I have $ to deploy given any downturns. Any thoughts on that?
I was actually thinking that one shouldn't go too heavy into stocks until one has personally experienced a bear with money invested. As far as dollar cost averaging, it only mildly reduces risk: once the DCA is over, you're fully exposed to the whatever percentage you have in various asset classes.
paralysisbyanalysis wrote: Sat Nov 21, 2020 5:11 am As far as the Hedfundie's or a Leveraged All Weather approach -- when I say a small amount, I mean in relative % to the overall portfolio. It would likely be in the low 5 figures area. Looking at the portfolio visualizer for those ideas, given a longer time period, the potential appears to exist for significant opportunity (and volatility as well) but the risk adjusted return seems on par with what I'd do with my personal gambles, so to speak. Are there advantages to doing that in the Roth IRA as opposed to the SEP, traditional, or 401K? I've gone through the links you sent, but I was unable to really decipher what advantage a strategy like that would have in the Roth ----- as opposed to the other tax advantaged accounts (though they are tax deferred).
Ideally I would want the highest growth asset in Roth, then taxable, then the lowest growth asset in tax-deferred because I'll have to pay taxes on tax-deferred in the future. It would be a real bummer to spend a lot of time and worry trying to beat the market, and then succeed in the most highly taxed account (tax-deferred). Of course, if the higher risk approach doesn't actually deliver higher returns, then the Roth space would be wasted... but if I were confident enough to try something like the HFEA I would definitely do it in Roth so the growth would be tax-free.

--

You mentioned being concerned about interest rate movements adversely affecting bonds. Cash does well (relative to bonds) in a rising interest rate environment because the cash gets immediately reinvested at higher rates. Some portfolios, like the Harry Browne Permanent Portfolio, have an explicit cash allocation (although the HBPP has too little stocks for my taste and was intended to be used alongside a Variable Portfolio). Floating rate bonds should act likewise, but typically have a lot more credit risk (and temporary downward movement during crises) than cash.
This is all so very helpful, I really appreciate the thoughtful responses! Thank you so much!
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

jjface wrote: Sat Nov 21, 2020 5:57 pm Welcome
btw you are not late to the game with mid 6 figures.
Thank you for the perspective shift!
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

ruralavalon wrote: Sun Nov 22, 2020 10:36 am
paralysisbyanalysis wrote: Sun Nov 22, 2020 9:35 am
BigMoneyNoWhammies wrote: Sun Nov 22, 2020 4:00 am
paralysisbyanalysis wrote: Fri Nov 20, 2020 2:48 pm Context:
Mid 40s, married, 1 young child.
Creative freelancer, self employed.
Unpredictable income - no future guarantee of income (very little income since pandemic began).
Investment horizon - 15-20 years
We plan to keep at least a year's worth of expenses aside and not invested.

Accounts / Assets: mid 6 figures - mostly in cash and a few other random holdings
Solo 401K (no employer match, so to speak)
IRA, Roth Ira, Spouse IRA, SEP IRA, Taxable Brokerage Account, Savings Accounts
Investment Property (SFR) worth ~40k: with a tenant (no mortgage)

While not dwelling on it too much more, I'll be the first to admit I have missed out on the past decade of the market due mostly to fear, ignorance, and the foolish belief that things would come crashing down and then I would join in. In my early 20's I was scarred by the markets of the late 90's and early 2000's and then watched my father suffer in 2008. I stayed away.

Over the past decade my earnings increased significantly, but since March 2020 that has changed. I've mostly just saved the money in the bank (and did a few small things like buy an inexpensive investment property and for a couple years -- had a T-bill ladder going). But for the most part, anything other than the property is about the same as cash. All that being said, I have spent a lot of time researching about investing and chatting with my friends in finance whenever they'd allow --- and going down many wandering roads trying to learn as much as I can. I spent too much time learning about many bad ideas, but fortunately, had the wherewithal to only spend time and not money. Finally I'm here.

I've been most interested in Lazy Portfolios of one type or another. My question is really this - to someone in my situation, if one were to start today with a fair amount of cash, what investment ideas make sense for the long run? And keeping in mind, my income may decrease significantly going forward, so there may be no guarantee that I'm able to add to my positions using future income.

Ideas that are of interest:
Bogleheads 3 Fund / 4 Fund
60/40 or 70/30 Portfolio (or 80/20?)
Ray Dalio All Weather Portfolio (modified: replacing commodities with utilities)
Target Date Fund

*And with a very small amount -- creating a smaller portfolio like Hedgefundie's excellent adventure, or a Leveraged All Weather Portfolio.

Other thoughts I have -- making sure to include international equities, and having a tilt toward Asia/China/Japan somewhere mixed in.

I'd love to hear what those with more knowledge experience would do if coming to the market today with nothing in it and a fair amount of cash to deploy and a 15-20 year horizon.

Thank you!
If I was buying into the market today in your situation I'd lump sum it to 100% equities minus the emergency fund, but given your described reaction to the last few major market downturns this is too aggressive for you to stick with. I'd tend to agree with others that an 80/20 asset allocation is also probably too aggressive for your personal risk tolerance. The standard 60/40 total market stocks/total bonds portfolio is a good starting point for you. The Wiki has some good info on getting started and the best accounts for holding different types of investments to minimize tax liability.

As someone who utilizes the Hedgefundie risk parity strategy in their IRA, I'd advise that it likely would be hard for someone as risk averse as you to be able to stick with it in the long run and that it is best to avoid allocating any funds to it.

Since your income situation is potentially volatile, I agree with your thinking about maintaining 1 year's worth of expenses. Covid won't last forever but it could still be a year or more before things are back to "normal."

The "should I include international in my AA or not?" is probably the longest running debate on this forum - many strongly favor holding some international funds for better diversification and others are adamant that with so many US domiciled businesses getting significant portions of their income overseas that the benefit of international is effectively built in and as a result only hold total US market funds for the equity portions of their portfolios. It's perfectly reasonable for you to do either, though I suspect some would question why you specifically want the Asian tilt.
Thank you so much for your thoughts. While I'm fairly risk averse in what might be deemed my investing profile, I'd likely say that I'm much more risk tolerant than the masses in my career / life -- creative freelancer -- and sticking with it for 20 years at this point --- through some very difficult times. So the (lack of) investing side has likely been what I thought was the balance to a highly risky career and life --- and, had I acted with much fervor on the investing ideas I'd had earlier on (without much understanding of things) -- I'd likely have done some disservice to my future self -- how that disservice would stack up against staying (mostly) out of the market for the past 10 years is best left as water under the bridge at this point.

I certainly have made small speculative plays (perhaps stupid plays with some element of dumb luck -----Bitcoin early in and also a bit too early out, some reverse ETF's during 2008-2009, and a small long GLD play from the same time period which i still hold today). I am not averse to the occasional gamble here and there. And there's the investment property as well -- half a continent away from me, site unseen to this day, other than photos. It's fairly small in overall portfolio %, but by no means a low risk situation -- but it is a calculated risk. And this is how I look at the Hedgefundie risk parity strategy or some variation of a leveraged All Weather Portfolio. My thoughts are to allocate a small % to the "play" money aspect of things -- (perhaps one of those mentioned ideas above) and then take the bulk of my investment funds into some much more risk adjusted either conservative or moderate allocation.

Is it completely out of whack to consider trying two similar, but slightly varied strategies simultaneously by virtually dividing the money into different "buckets" so to speak? I'm sure many will advise against this -- and say just do the a target date fund / lifecycle fund / or a 3 fund portfolio and be done with it. But I don't see why I can't ask the question.

Aside from the volatility of my income, I want to point out, that perhaps counterintuitively to what others might assume, when I'm of the age to need to start taking distributions from my retirement accounts, my income will likely be significantly lower. Aside from the most sought after in our industry, the general trend is that the rest of us have a good run of say 5-15 years, and have to squirrel away what we can -- as there can be significant paydays -- but the question is always, how long can one keep this up? There is no normal, and the average across the chart is in the low 5 figures income, while those at the top hit the 7 figure range.

So when I do begin to withdraw funds, I'll likely be 1-2 tax brackets lower than I am currently. This is also why I tend to want to understand more about which accounts would be ideal for me to hold what where. My assumption is, unless things go completely upside down, I'll have more money in my investment accounts at that point in time, but likely a lower income than I currently have now. (That is-----unless what I'm coming to understand about investing, and what everyone in this forum seems to understand --- is suddenly turned completely upside down over the next 20 years).

As for international and specifically Asia, those are ideas that come from some major investors I try to follow and also from some influential thinkers I follow regarding the current (and future) political, economic, and technological landscapes of the world. And also from speaking with my friends who are in finance (on the analyst, risk side of things ---- investors, not traders) --- who tend to be always looking for the bigger picture long term trends. If I were to do such a tilt, it would be just a small tilt and I'm not set on it by any means.

Thank you again. This is very helpful.
I understand being "fairly risk averse" in your investing, because of your high risk in being self-employed. I was self-employed

I suggest skipping speculative plays and gambling. Don't dabble with play money, this is your real life not Monopoly.

Since you will be 1-2 tax brackets lower in retirement, it's a good idea to make maximum annual contributions to your traditional tax-deferred accounts. A high rate of contributions is more important than the tactical issues you are agonizing about.

I still think the exit from your paralysis is by simplicity, like a one-fund portfolio. Use a single all-in-one balanced fund in all of your tax-advantaged accounts.

In your mid-40s a suitable balanced fund might be Vanguard Balanced Index Fund (VBIAX) 60% stocks/40% bonds, or Vanguard LifeStrategy Moderate Growth Fund (VSMGX), 60/40, or Vanguard LifeStrategy Conservative Growth Fund (VSCGX) 40/60, or a target date fund like Vanguard Target Retirement 2035 or 2040 Fund (VTTHX or VFORX). Just pick one, all are good choices in my opinion.
Thank you for specific suggestions. Very helpful!
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

L82GAME wrote: Sun Nov 22, 2020 11:09 am Hi Paralysisbyanalysis,

Please note my user name...I can relate to your sentiments of getting started later. :beer

Without knowing more about the current distribution of assets and holdings, it’s hard to give portfolio structure advice. See here: viewtopic.php?f=1&t=6212

But very generally:
  • Pat yourself on the back for recognizing your need to put together a plan and focus on moving forward in an informed manner, and don’t dwell on regretting past decisions
  • Listen to Taylor’s and others’ advice; start simply
  • You can add complexity later if you choose, but it’s not necessary
  • Focus on your asset allocation. Pending further info about your current portfolio (see link above), you may want to start with a lower percentage in stocks so that you can increase your allocation to equities in the future without the tax implications of unwinding too high of an equities percentage if you decide you’re more risk averse than anticipated (i.e., asset location and your taxable account).
  • Don’t start out with the inclusion of alternative asset classes like gold and real estate (ibid: second bullet above)
Thank you L82GAME. This makes a lot of sense. I didn't write much about my current portfolio because it's not something I'm attached to. And from a % of investable assets, it's a very small amount. But to give you some sort of idea:

GLD bought during crash of '08-'09. (very small %)

An investment SFR with a tenant -- purchased in cash. lower value (mid 5 figures), but with a decent return (and the accompanying risk)

I did some T-Bills ladders a few years ago when interest rates were more rewarding. But then moved that $ to high interest savings accounts, which have since, lost most of their yield.

Currently holding a large % of my portfolio in some short term treasury ETF's as they are better than any money market rates I can find from my online broker.

One purely speculative play - high dividend stock and accompanying volatility (mid 4 figures).

Tiny amounts in a TIPS etf as well as a bond etf.

I would certainly liquidate all of my holdings other than the SFR Investment property at this point.

Multiple tax deferred accounts. One Roth IRA and an empty Roth 401k. 3/5 of my investable $ is in my traditional solo 401k, account. 2/5 is in taxable accounts.
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

tindel wrote: Sun Nov 22, 2020 12:08 am Something to realize is that you have been investing all of these years! You have been investing in low interest 'safe' investments - no shame in that, especially considering your income profile. Most people call these safe investments 'fixed-income'. You're essentially 100% bonds or 'fixed income'. In my mind your stash has grown so much that you are no longer content with your current 0/100 stock/fixed-income investment portfolio. That's great! Pick a new allocation and run with it for a while, and realize it's not a binary decision.

I'm a little shocked at the recommendations to go 80/20 after being 0/100 all of these years... you're obviously a conservative investor, I'd suggest between a 60/40 and 30/70 portfolio until you get comfortable, wait a year or two, and then readjust as appropriate. I would highly recommend setting up an IPS and to revisit it every year or two: https://www.bogleheads.org/wiki/Investm ... _statement

I agree that a mid-six-figure portfolio is respectable at your age - good job!

Extras... since you own your own home (an assumption) and an investment property, I see no need for REITs... for individuals, I recommend I-bonds over TIPS.
Tindel thank you for the perspective shift. Reframing is very helpful. In many ways that's what I'm looking to do --- to pick a new allocation -- something more in line with the next 15-25 years and begin that journey to where I'd like things to go. I will have a look at the IPS -- it's not something I'm familiar with as of yet (at least, not by that term).

In regards to your assumption of us owning our primary residence, we do not. Being residents of a major metro in one of the most expensive RE markets in the US, in one of the more expensive areas of that market--- well, when I was younger and had less money it was too far out of reach -----and as things changed and we began to accumulate some $, the area gentrified and became even more unattainable. Rents pale in comparison to housing costs, so even with the massive growth local RE has on offer, I've always viewed it as a difficult proposition --- and I never wanted to be "house poor". Unless we sold and moved to another area altogether, it would be difficult to realize profits local RE has on offer. So, instead we opted for the investment property in a cheaper market with better yield, but less opportunity for growth.
BigMoneyNoWhammies
Posts: 268
Joined: Tue Jul 11, 2017 11:58 am

Re: If one were to start investing today - late to the game

Post by BigMoneyNoWhammies »

paralysisbyanalysis wrote: Sun Nov 22, 2020 9:35 am
BigMoneyNoWhammies wrote: Sun Nov 22, 2020 4:00 am
paralysisbyanalysis wrote: Fri Nov 20, 2020 2:48 pm Context:
Mid 40s, married, 1 young child.
Creative freelancer, self employed.
Unpredictable income - no future guarantee of income (very little income since pandemic began).
Investment horizon - 15-20 years
We plan to keep at least a year's worth of expenses aside and not invested.

Accounts / Assets: mid 6 figures - mostly in cash and a few other random holdings
Solo 401K (no employer match, so to speak)
IRA, Roth Ira, Spouse IRA, SEP IRA, Taxable Brokerage Account, Savings Accounts
Investment Property (SFR) worth ~40k: with a tenant (no mortgage)

While not dwelling on it too much more, I'll be the first to admit I have missed out on the past decade of the market due mostly to fear, ignorance, and the foolish belief that things would come crashing down and then I would join in. In my early 20's I was scarred by the markets of the late 90's and early 2000's and then watched my father suffer in 2008. I stayed away.

Over the past decade my earnings increased significantly, but since March 2020 that has changed. I've mostly just saved the money in the bank (and did a few small things like buy an inexpensive investment property and for a couple years -- had a T-bill ladder going). But for the most part, anything other than the property is about the same as cash. All that being said, I have spent a lot of time researching about investing and chatting with my friends in finance whenever they'd allow --- and going down many wandering roads trying to learn as much as I can. I spent too much time learning about many bad ideas, but fortunately, had the wherewithal to only spend time and not money. Finally I'm here.

I've been most interested in Lazy Portfolios of one type or another. My question is really this - to someone in my situation, if one were to start today with a fair amount of cash, what investment ideas make sense for the long run? And keeping in mind, my income may decrease significantly going forward, so there may be no guarantee that I'm able to add to my positions using future income.

Ideas that are of interest:
Bogleheads 3 Fund / 4 Fund
60/40 or 70/30 Portfolio (or 80/20?)
Ray Dalio All Weather Portfolio (modified: replacing commodities with utilities)
Target Date Fund

*And with a very small amount -- creating a smaller portfolio like Hedgefundie's excellent adventure, or a Leveraged All Weather Portfolio.

Other thoughts I have -- making sure to include international equities, and having a tilt toward Asia/China/Japan somewhere mixed in.

I'd love to hear what those with more knowledge experience would do if coming to the market today with nothing in it and a fair amount of cash to deploy and a 15-20 year horizon.

Thank you!
If I was buying into the market today in your situation I'd lump sum it to 100% equities minus the emergency fund, but given your described reaction to the last few major market downturns this is too aggressive for you to stick with. I'd tend to agree with others that an 80/20 asset allocation is also probably too aggressive for your personal risk tolerance. The standard 60/40 total market stocks/total bonds portfolio is a good starting point for you. The Wiki has some good info on getting started and the best accounts for holding different types of investments to minimize tax liability.

As someone who utilizes the Hedgefundie risk parity strategy in their IRA, I'd advise that it likely would be hard for someone as risk averse as you to be able to stick with it in the long run and that it is best to avoid allocating any funds to it.

Since your income situation is potentially volatile, I agree with your thinking about maintaining 1 year's worth of expenses. Covid won't last forever but it could still be a year or more before things are back to "normal."

The "should I include international in my AA or not?" is probably the longest running debate on this forum - many strongly favor holding some international funds for better diversification and others are adamant that with so many US domiciled businesses getting significant portions of their income overseas that the benefit of international is effectively built in and as a result only hold total US market funds for the equity portions of their portfolios. It's perfectly reasonable for you to do either, though I suspect some would question why you specifically want the Asian tilt.
Thank you so much for your thoughts. While I'm fairly risk averse in what might be deemed my investing profile, I'd likely say that I'm much more risk tolerant than the masses in my career / life -- creative freelancer -- and sticking with it for 20 years at this point --- through some very difficult times. So the (lack of) investing side has likely been what I thought was the balance to a highly risky career and life --- and, had I acted with much fervor on the investing ideas I'd had earlier on (without much understanding of things) -- I'd likely have done some disservice to my future self -- how that disservice would stack up against staying (mostly) out of the market for the past 10 years is best left as water under the bridge at this point.

I certainly have made small speculative plays (perhaps stupid plays with some element of dumb luck -----Bitcoin early in and also a bit too early out, some reverse ETF's during 2008-2009, and a small long GLD play from the same time period which i still hold today). I am not averse to the occasional gamble here and there. And there's the investment property as well -- half a continent away from me, site unseen to this day, other than photos. It's fairly small in overall portfolio %, but by no means a low risk situation -- but it is a calculated risk. And this is how I look at the Hedgefundie risk parity strategy or some variation of a leveraged All Weather Portfolio. My thoughts are to allocate a small % to the "play" money aspect of things -- (perhaps one of those mentioned ideas above) and then take the bulk of my investment funds into some much more risk adjusted either conservative or moderate allocation.

Is it completely out of whack to consider trying two similar, but slightly varied strategies simultaneously by virtually dividing the money into different "buckets" so to speak? I'm sure many will advise against this -- and say just do the a target date fund / lifecycle fund / or a 3 fund portfolio and be done with it. But I don't see why I can't ask the question.

Aside from the volatility of my income, I want to point out, that perhaps counterintuitively to what others might assume, when I'm of the age to need to start taking distributions from my retirement accounts, my income will likely be significantly lower. Aside from the most sought after in our industry, the general trend is that the rest of us have a good run of say 5-15 years, and have to squirrel away what we can -- as there can be significant paydays -- but the question is always, how long can one keep this up? There is no normal, and the average across the chart is in the low 5 figures income, while those at the top hit the 7 figure range.

So when I do begin to withdraw funds, I'll likely be 1-2 tax brackets lower than I am currently. This is also why I tend to want to understand more about which accounts would be ideal for me to hold what where. My assumption is, unless things go completely upside down, I'll have more money in my investment accounts at that point in time, but likely a lower income than I currently have now. (That is-----unless what I'm coming to understand about investing, and what everyone in this forum seems to understand --- is suddenly turned completely upside down over the next 20 years).

As for international and specifically Asia, those are ideas that come from some major investors I try to follow and also from some influential thinkers I follow regarding the current (and future) political, economic, and technological landscapes of the world. And also from speaking with my friends who are in finance (on the analyst, risk side of things ---- investors, not traders) --- who tend to be always looking for the bigger picture long term trends. If I were to do such a tilt, it would be just a small tilt and I'm not set on it by any means.

Thank you again. This is very helpful.

If you think you can handle taking a small portion of your total portfolio (5% or less) and putting in the HEDGEFUNDIE strategy I don't think many would disagree with you doing so, myself included. Many here have a very small % of their portfolios for "play money" or home run shots, though this is not universal. I have a % of my Roth IRA in the strategy as a home run play. If it skyrockets, great. If not, it's such a small percentage of my total portfolio that it doesn't set me back in terms of my retirement timeline. With a few exceptions this is how the vast majority of those on this board who are utilizing it, so you'd be fine doing so as well. The issue with this strategy is that while in the long term it appears to have a decent chance for returns significantly above the market and a fairly good chance to return moderately above market returns long term, it has a slim yet not insignificant chance to totally implode depending on changes in fed policy and/or market forces. So just keep the total % towards it low and you'll be fine. My worry was more that if you're someone who checks your accounts regularly, that there can be some significant day to day swings in the funds the strategy holds, and I wasn't sure if that was something that might cause you to panic sell or worry. If you haven't read through the thread describing the strategy (which also has some good questions raised by others concerning the validity of the strategy) I recommend doing so. It's ridiculously long but the first 10-15 pages should be enough for you to get the gist of the risks and the nuts and bolts of its setup.

Most people end up in the same boat in terms of being in a lower tax bracket in retirement than during their peak earning years. This is why you see many here have a Roth IRA but use traditional pre-tax contributions for their 401ks/403bs/other employer sponsored plans, because they expect their tax liabilities to be lower down the line. If you think you'll be in this situation it's probably best to use pre-tax contributions. This link will be a good read for you since you're interested in where to best place different funds depending on account type:

https://www.bogleheads.org/wiki/Asset_a ... e_accounts

I personally am in the don't hold any separate international camp, so I can't speak to the wisdom of the Asian tilt you're talking about. Some who do hold international here do slice and dice their international holdings in the same way people have tilts in their US only holdings, such as emerging markets vs. developed markets, but I'm sure others with more experience in this area can comment with a more informed perspective.
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

BigMoneyNoWhammies wrote: Tue Nov 24, 2020 1:01 am
paralysisbyanalysis wrote: Sun Nov 22, 2020 9:35 am
BigMoneyNoWhammies wrote: Sun Nov 22, 2020 4:00 am
paralysisbyanalysis wrote: Fri Nov 20, 2020 2:48 pm Context:
Mid 40s, married, 1 young child.
Creative freelancer, self employed.
Unpredictable income - no future guarantee of income (very little income since pandemic began).
Investment horizon - 15-20 years
We plan to keep at least a year's worth of expenses aside and not invested.

Accounts / Assets: mid 6 figures - mostly in cash and a few other random holdings
Solo 401K (no employer match, so to speak)
IRA, Roth Ira, Spouse IRA, SEP IRA, Taxable Brokerage Account, Savings Accounts
Investment Property (SFR) worth ~40k: with a tenant (no mortgage)

While not dwelling on it too much more, I'll be the first to admit I have missed out on the past decade of the market due mostly to fear, ignorance, and the foolish belief that things would come crashing down and then I would join in. In my early 20's I was scarred by the markets of the late 90's and early 2000's and then watched my father suffer in 2008. I stayed away.

Over the past decade my earnings increased significantly, but since March 2020 that has changed. I've mostly just saved the money in the bank (and did a few small things like buy an inexpensive investment property and for a couple years -- had a T-bill ladder going). But for the most part, anything other than the property is about the same as cash. All that being said, I have spent a lot of time researching about investing and chatting with my friends in finance whenever they'd allow --- and going down many wandering roads trying to learn as much as I can. I spent too much time learning about many bad ideas, but fortunately, had the wherewithal to only spend time and not money. Finally I'm here.

I've been most interested in Lazy Portfolios of one type or another. My question is really this - to someone in my situation, if one were to start today with a fair amount of cash, what investment ideas make sense for the long run? And keeping in mind, my income may decrease significantly going forward, so there may be no guarantee that I'm able to add to my positions using future income.

Ideas that are of interest:
Bogleheads 3 Fund / 4 Fund
60/40 or 70/30 Portfolio (or 80/20?)
Ray Dalio All Weather Portfolio (modified: replacing commodities with utilities)
Target Date Fund

*And with a very small amount -- creating a smaller portfolio like Hedgefundie's excellent adventure, or a Leveraged All Weather Portfolio.

Other thoughts I have -- making sure to include international equities, and having a tilt toward Asia/China/Japan somewhere mixed in.

I'd love to hear what those with more knowledge experience would do if coming to the market today with nothing in it and a fair amount of cash to deploy and a 15-20 year horizon.

Thank you!
If I was buying into the market today in your situation I'd lump sum it to 100% equities minus the emergency fund, but given your described reaction to the last few major market downturns this is too aggressive for you to stick with. I'd tend to agree with others that an 80/20 asset allocation is also probably too aggressive for your personal risk tolerance. The standard 60/40 total market stocks/total bonds portfolio is a good starting point for you. The Wiki has some good info on getting started and the best accounts for holding different types of investments to minimize tax liability.

As someone who utilizes the Hedgefundie risk parity strategy in their IRA, I'd advise that it likely would be hard for someone as risk averse as you to be able to stick with it in the long run and that it is best to avoid allocating any funds to it.

Since your income situation is potentially volatile, I agree with your thinking about maintaining 1 year's worth of expenses. Covid won't last forever but it could still be a year or more before things are back to "normal."

The "should I include international in my AA or not?" is probably the longest running debate on this forum - many strongly favor holding some international funds for better diversification and others are adamant that with so many US domiciled businesses getting significant portions of their income overseas that the benefit of international is effectively built in and as a result only hold total US market funds for the equity portions of their portfolios. It's perfectly reasonable for you to do either, though I suspect some would question why you specifically want the Asian tilt.
Thank you so much for your thoughts. While I'm fairly risk averse in what might be deemed my investing profile, I'd likely say that I'm much more risk tolerant than the masses in my career / life -- creative freelancer -- and sticking with it for 20 years at this point --- through some very difficult times. So the (lack of) investing side has likely been what I thought was the balance to a highly risky career and life --- and, had I acted with much fervor on the investing ideas I'd had earlier on (without much understanding of things) -- I'd likely have done some disservice to my future self -- how that disservice would stack up against staying (mostly) out of the market for the past 10 years is best left as water under the bridge at this point.

I certainly have made small speculative plays (perhaps stupid plays with some element of dumb luck -----Bitcoin early in and also a bit too early out, some reverse ETF's during 2008-2009, and a small long GLD play from the same time period which i still hold today). I am not averse to the occasional gamble here and there. And there's the investment property as well -- half a continent away from me, site unseen to this day, other than photos. It's fairly small in overall portfolio %, but by no means a low risk situation -- but it is a calculated risk. And this is how I look at the Hedgefundie risk parity strategy or some variation of a leveraged All Weather Portfolio. My thoughts are to allocate a small % to the "play" money aspect of things -- (perhaps one of those mentioned ideas above) and then take the bulk of my investment funds into some much more risk adjusted either conservative or moderate allocation.

Is it completely out of whack to consider trying two similar, but slightly varied strategies simultaneously by virtually dividing the money into different "buckets" so to speak? I'm sure many will advise against this -- and say just do the a target date fund / lifecycle fund / or a 3 fund portfolio and be done with it. But I don't see why I can't ask the question.

Aside from the volatility of my income, I want to point out, that perhaps counterintuitively to what others might assume, when I'm of the age to need to start taking distributions from my retirement accounts, my income will likely be significantly lower. Aside from the most sought after in our industry, the general trend is that the rest of us have a good run of say 5-15 years, and have to squirrel away what we can -- as there can be significant paydays -- but the question is always, how long can one keep this up? There is no normal, and the average across the chart is in the low 5 figures income, while those at the top hit the 7 figure range.

So when I do begin to withdraw funds, I'll likely be 1-2 tax brackets lower than I am currently. This is also why I tend to want to understand more about which accounts would be ideal for me to hold what where. My assumption is, unless things go completely upside down, I'll have more money in my investment accounts at that point in time, but likely a lower income than I currently have now. (That is-----unless what I'm coming to understand about investing, and what everyone in this forum seems to understand --- is suddenly turned completely upside down over the next 20 years).

As for international and specifically Asia, those are ideas that come from some major investors I try to follow and also from some influential thinkers I follow regarding the current (and future) political, economic, and technological landscapes of the world. And also from speaking with my friends who are in finance (on the analyst, risk side of things ---- investors, not traders) --- who tend to be always looking for the bigger picture long term trends. If I were to do such a tilt, it would be just a small tilt and I'm not set on it by any means.

Thank you again. This is very helpful.

If you think you can handle taking a small portion of your total portfolio (5% or less) and putting in the HEDGEFUNDIE strategy I don't think many would disagree with you doing so, myself included. Many here have a very small % of their portfolios for "play money" or home run shots, though this is not universal. I have a % of my Roth IRA in the strategy as a home run play. If it skyrockets, great. If not, it's such a small percentage of my total portfolio that it doesn't set me back in terms of my retirement timeline. With a few exceptions this is how the vast majority of those on this board who are utilizing it, so you'd be fine doing so as well. The issue with this strategy is that while in the long term it appears to have a decent chance for returns significantly above the market and a fairly good chance to return moderately above market returns long term, it has a slim yet not insignificant chance to totally implode depending on changes in fed policy and/or market forces. So just keep the total % towards it low and you'll be fine. My worry was more that if you're someone who checks your accounts regularly, that there can be some significant day to day swings in the funds the strategy holds, and I wasn't sure if that was something that might cause you to panic sell or worry. If you haven't read through the thread describing the strategy (which also has some good questions raised by others concerning the validity of the strategy) I recommend doing so. It's ridiculously long but the first 10-15 pages should be enough for you to get the gist of the risks and the nuts and bolts of its setup.

Most people end up in the same boat in terms of being in a lower tax bracket in retirement than during their peak earning years. This is why you see many here have a Roth IRA but use traditional pre-tax contributions for their 401ks/403bs/other employer sponsored plans, because they expect their tax liabilities to be lower down the line. If you think you'll be in this situation it's probably best to use pre-tax contributions. This link will be a good read for you since you're interested in where to best place different funds depending on account type:

https://www.bogleheads.org/wiki/Asset_a ... e_accounts

I personally am in the don't hold any separate international camp, so I can't speak to the wisdom of the Asian tilt you're talking about. Some who do hold international here do slice and dice their international holdings in the same way people have tilts in their US only holdings, such as emerging markets vs. developed markets, but I'm sure others with more experience in this area can comment with a more informed perspective.
Thank you for the clarifications. Everything you've written is in alignment with the ideas and approach that I've been thinking about.This forum has been tremendously helpful. As you and many others have suggested, the bulk of my investment will be something fairly straight forward and simple-- likely a Target Date, LifeStrategy, 3 Fund / 4 Fund portfolio, 60/40 Total Market/Bonds -------- or something along those lines -- probably taking a more cautious approach to start with and see how I handle ups and downs and, if/when I feel more comfortable ----- THEN moving to a more aggressive allocation. And alongside it, possibly, allocating <5% to some sort of risk adjusted return based home run shot. Thank you!
diceman3
Posts: 30
Joined: Fri Nov 29, 2013 8:40 am

Re: If one were to start investing today - late to the game

Post by diceman3 »

........... VTINX and go to sleep!
DEBTINATOR
Posts: 109
Joined: Thu Oct 20, 2011 8:05 pm

Re: If one were to start investing today - late to the game

Post by DEBTINATOR »

Dont the over think it.

Pick an allocation...70/30 or 60/40. It doesn’t matter much.

Implement 3 fund.

Rebalance or TLH.
JPM
Posts: 160
Joined: Sun Aug 19, 2018 2:29 pm

Re: If one were to start investing today - late to the game

Post by JPM »

For a guy/gal with unpredictable income, OP has been a remarkably good saver. Continuing to be a good saver is probably the most important aspect of retirement planning. Or educational planning for the young child.

I agree that a high-risk career may indicate a low to moderate risk investment approach. A high risk career that is not going gangbusters in your mid 40s may be a luxury for a family man.

In mid 40s with a young child, if OP hasn't made it big, in most creative fields not likely to make it really big in the future unless a novelist. Not really likely at that. Musicians and actors not usually making it big after middle age unless a well-known character actor. Not unheard of but...

Maybe taking a job teaching in the creative field would make sense with a retirement to finance and a young child to educate in the 20-25 years ahead. A 20-25 year teaching career in HS or state university system would yield a decent pension. An old friend of mine did this and it worked out well. Didn't squash the bug entirely though. I think I saw her in a Depends commercial awhile back, so she still had an agent into her sixties. Good performers often make great teachers.

In investments' future returns, nobody knows nothing, and that is what the Boglehead plan is predicated on. It should work for most people most of the time.

Right now, bond yields are very low and stock P/Es are high. Gov't debt is high at all levels worldwide and this circumstance usually leads to inflation at some point, but maybe not real soon. Right now, the pandemic-related panic-induced recession and unemployment are powerful deflationary forces. They will take time to reverse, but how much time is anyone's guess. Meanwhile, the federal government will take measures to "stimulate" the economy and such measures will benefit some disproportionately. Who they will be is anyone's guess. Globalization should be revived with the coming change in US government, augmenting another deflationary force as far as the US economy is concerned. How these conflicting inflationary and deflationary forces will play out in the US and world financial markets is anyone's guess.
Pdxnative
Posts: 303
Joined: Sat Nov 07, 2015 2:17 pm

Re: If one were to start investing today - late to the game

Post by Pdxnative »

With your situation and what you’ve shared about your investment history and views, I’d suggest easing into this. Make it a two year plan, and you don’t need to have it all figured out in advance. You know you’ll want more equities. Why not set a target to have 30% of investable assets in stocks by this time next year, commit to weekly or monthly contributions to get there no matter what happens. “Stocks” can be a total market fund or an all in one fund with high equity exposure, which would give you international exposure with minimal hassle. Then get to your ultimate target over the following year, which will give you the next year to settle on an allocation target (which seems to me will likely be 60/40).

Honestly, with your lack of time in the market I think the greatest danger right now is to dive in right before a crash (which could happen any time), reverse course and never reenter. Better to take it slow even if it means a smaller taste of market gains in the short term.

I’d make the emergency fund 18 months just to help your confidence. And if you want to boost returns on the cash side you can explore bank bonuses.
User avatar
Taylor Larimore
Advisory Board
Posts: 30039
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

The Three-Fund Portfolio

Post by Taylor Larimore »

paralysisbyanalysis:

Consider the many benefits of The Three-Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom:"There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
ivgrivchuck
Posts: 309
Joined: Sun Sep 27, 2020 6:20 pm

Re: If one were to start investing today - late to the game

Post by ivgrivchuck »

paralysisbyanalysis wrote: Tue Nov 24, 2020 3:30 am
Thank you for the clarifications. Everything you've written is in alignment with the ideas and approach that I've been thinking about.This forum has been tremendously helpful. As you and many others have suggested, the bulk of my investment will be something fairly straight forward and simple-- likely a Target Date, LifeStrategy, 3 Fund / 4 Fund portfolio, 60/40 Total Market/Bonds -------- or something along those lines -- probably taking a more cautious approach to start with and see how I handle ups and downs and, if/when I feel more comfortable ----- THEN moving to a more aggressive allocation. And alongside it, possibly, allocating <5% to some sort of risk adjusted return based home run shot. Thank you!
Don't over complicate things. Considering your history, a basic 60/40, 30% in international, 3-fund sounds like a perfect fit.

Remember that you must always be mentally prepared to lose 50% of the money you invest in stocks, which in case of 60/40 would be 30% of your portfolio. That's perfectly normal, and you must be prepared to stay the course when it happens.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
User avatar
Taylor Larimore
Advisory Board
Posts: 30039
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

"I Don't Know, and I Don't Care"

Post by Taylor Larimore »

Bogleheads:

This wonderful article by Jason Zweig belongs here:

I Don't Know, and I Don't Care.

Best wishes
Taylor
Jack Bogle's Words of Wisdom: Deep Down, I remain absolutely confident that the vast majority of American families would be well served by owning their equity holding in a Standard & Poor's 500 Index fund (or a total stock market index fund) and holding their bonds in a total bond market index fund."
"Simplicity is the master key to financial success." -- Jack Bogle
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

JPM wrote: Sat Nov 28, 2020 4:45 pm For a guy/gal with unpredictable income, OP has been a remarkably good saver. Continuing to be a good saver is probably the most important aspect of retirement planning. Or educational planning for the young child.

I agree that a high-risk career may indicate a low to moderate risk investment approach. A high risk career that is not going gangbusters in your mid 40s may be a luxury for a family man.

In mid 40s with a young child, if OP hasn't made it big, in most creative fields not likely to make it really big in the future unless a novelist. Not really likely at that. Musicians and actors not usually making it big after middle age unless a well-known character actor. Not unheard of but...
Good observations. (Not an actor or musician, but work with them). Strangely,in February before the shutdown I was up for the most amount of jobs (and the largest jobs) in my career -- everything had the appearance it was coming together after 20 years of grinding. (The kind of situation that alters future projections of who I could be in this industry). It looked like a turning point was starting -- then March came with the lockdown and the industry stopped completely. By the time it picked back up 6 months later (albeit, ever so slightly compared to pre-Covid) many things have changed and it's very possible I'll have to try and climb that same hill all over again. Whether I can get as much traction this time around is TBD.
JPM wrote: Sat Nov 28, 2020 4:45 pm Maybe taking a job teaching in the creative field would make sense with a retirement to finance and a young child to educate in the 20-25 years ahead. A 20-25 year teaching career in HS or state university system would yield a decent pension. An old friend of mine did this and it worked out well. Didn't squash the bug entirely though. I think I saw her in a Depends commercial awhile back, so she still had an agent into her sixties. Good performers often make great teachers.

In investments' future returns, nobody knows nothing, and that is what the Boglehead plan is predicated on. It should work for most people most of the time.

Right now, bond yields are very low and stock P/Es are high. Gov't debt is high at all levels worldwide and this circumstance usually leads to inflation at some point, but maybe not real soon. Right now, the pandemic-related panic-induced recession and unemployment are powerful deflationary forces. They will take time to reverse, but how much time is anyone's guess. Meanwhile, the federal government will take measures to "stimulate" the economy and such measures will benefit some disproportionately. Who they will be is anyone's guess. Globalization should be revived with the coming change in US government, augmenting another deflationary force as far as the US economy is concerned. How these conflicting inflationary and deflationary forces will play out in the US and world financial markets is anyone's guess.
Exactly. This is my largest concern. The set it and forget it mentality has worked very well historically. On the other hand, we've also never seen this situation in any comparable context. I'd really like to set it and forget it, but think I need to have some sort of counter balance given the uncertainty (and I'm not completely convinced bonds will counter the way they have before).

Thanks for your insight and understanding of the situation.
Topic Author
paralysisbyanalysis
Posts: 18
Joined: Fri Nov 20, 2020 10:10 am

Re: If one were to start investing today - late to the game

Post by paralysisbyanalysis »

Pdxnative wrote: Sat Nov 28, 2020 5:45 pm With your situation and what you’ve shared about your investment history and views, I’d suggest easing into this. Make it a two year plan, and you don’t need to have it all figured out in advance. You know you’ll want more equities. Why not set a target to have 30% of investable assets in stocks by this time next year, commit to weekly or monthly contributions to get there no matter what happens. “Stocks” can be a total market fund or an all in one fund with high equity exposure, which would give you international exposure with minimal hassle. Then get to your ultimate target over the following year, which will give you the next year to settle on an allocation target (which seems to me will likely be 60/40).
Thank you. This is interesting and possibly an approach I'd be more comfortable with.
Pdxnative wrote: Sat Nov 28, 2020 5:45 pm Honestly, with your lack of time in the market I think the greatest danger right now is to dive in right before a crash (which could happen any time), reverse course and never reenter. Better to take it slow even if it means a smaller taste of market gains in the short term.
Bingo - this is flashing red in my mind constantly.
Pdxnative wrote: Sat Nov 28, 2020 5:45 pm I’d make the emergency fund 18 months just to help your confidence. And if you want to boost returns on the cash side you can explore bank bonuses.
Noted. Thanks.
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