Indecisive about how to invest-- 35 years old

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ralphboy
Posts: 91
Joined: Thu Apr 23, 2020 7:09 pm

Indecisive about how to invest-- 35 years old

Post by ralphboy »

Emergency funds: $30,000 (This is my checking, savings, and emergency amount. I plan on buying a car in 5 years)

Debt: None

Tax Filing Status: Single

Tax Rate: 12% Federal, 0% State (I think?)

State of Residence: FL

Age: 35

Desired Asset allocation: Undecided
Desired International allocation: Undecided

Approximate size of total portfolio: 106k

Current retirement assets

Fidelity Taxable
.02% cash (Like $7)
20% Invesco Nasdaq Internet ETF (PNQI) (expense ratio 0.60%) *
10% Global X Social Media ETF (SOCL) (expense ratio 0.65%) *
9% Fidelity Multi-Asset Index Fund (FFNOX) (expense ratio 0.12%)

Fidelity Roth IRA
6% Fidelity 500 Index Fund (FXAIX) (expense ratio 0.015%)
1% Fidelity Extended Market Index Fund (FSMAX) (expense ratio 0.035%)
3% Fidelity International Index Fund (FSPSX) (expense ratio 0.035%)
2% Fidelity U.S. Bond Index Fund (FXNAX) (expense ratio 0.025%)

401k
10% State Street S&P 500 (Don't see a ticker listed, link to the fund https://my.voya.com/static/epweb/pdf/ffs/CHWZ.PDF) ("The Indirect
Expenses combined with the Direct Expenses form the Total Annual Operating Expense Ratio ("TAOER"). The TAOER of Class N will equal .023% annually. )
5% American EuroPacific Growth R6 (RERGX) (expense ratio 0.46%)
3% Baird Aggregate Bond Fund (Not sure because it says institutional BAGIX and investor BAGSX) (Not sure expense ratio for instiutional 0.30% and expense ratio for investor 0.55%)
1% State Street S&P MidCap Index (Don't see a ticker, link to the fund https://my.voya.com/static/epweb/pdf/ffs/CHXH.PDF) ("The Indirect
Expenses combined with the Direct Expenses form the Total Annual Operating Expense Ratio ("TAOER"). The TAOER of Class XIV will equal .02% annually")
.6% DFA US Small Cap I (DFSTX) (Management Fee 0.30%,Total Operating Expense Ratio 0.33%, Net Expense Ratio (to investor) 0.33%)

Company match? Yes, $400-500 a year for 401k and 8% of income given as stock

Company stock
29% Publix, private, employee-owned grocery store

Cryptocurrency
1% Cardano (ADA)

Contributions

New annual Contributions
Approximately $4,000-$5,000 with employer contribution towards my 401k

Available funds

Funds available in my 401(k)

1) Invesco Stable Value Trust Fund Class B1 (Total Annual Expense Ratio 0.30%)
2) Baird Aggregate Bond Fund (expense ratio 0.30% for insitutional shares and 0.55% for investor shares)
3) T. Rowe Price Value Fund I Class (TRPIX) (expense information 0.64% (gross) and 0.63% (net))
4) State Street S&P 500 Index Fund
5) T. Rowe Price Blue Chip Growth Trust (Class T4) (Trustee Fee* 0.4%, Total Annual Operating
Expenses per $1,000 is $4.00)
6) State Street S&P MidCap Index
7) DFA US Small Cap I (Total Operating Expense Ratio 0.37%)
8) American EuroPacific Growth R6 (RERGX) (Fund expense ratio 0.49%)
9) Publix Stock
10) State Street Conservative Strategic Balance Fund -Class 1
11) State Street Moderate Strategic Balanced Fund -Class 1
12) State Street Aggressive Strategic Balance Fund -Class 1

Questions:

1. What asset allocation would you suggest for an individual with $52,000 in his fidelity accounts and won't be adding any more to it? [I find myself being really on the fence about how to invest. I go back and forth between "Go all in and be as aggressive as possible since I only have $52,000 in total between my brokerage and roth ira and I won't be adding any more to it unless I get a better job. I also think "I don't want to lose what I got" and "You can't predict the future, so it is good to dabble in a little of everything" so I think a well-rounded approach might be a good idea.

I have looked at bond threads and have tried to understand what was being discussed (Way beyond my paygrade) and it seems that the majority of people my age and older feel like bonds are a bad idea and to make as much money as possible for as long as possible and then when you want to retire switch to bonds. Many young people and people in their 50s+ were being really aggressive, many doing 100% stocks.

I have also looked at the international threads and couldn't make heads or tails of the situation with opinions being all over the place.

All of these things combined with not being able to predict the future, makes choosing an asset allocation feel like an impossible task. I really don't want to spend everyday following world events and trying to figure out what to have and what amount needs to be moved to where and I originally thought a "set it and forget it" fund with only 1 investment would be a good idea.

I thought a Fidelity Freedom Index Fund would be a good option but then read that being conservative too far out from retirement might not be such a good idea. So I then was recommended FFNOX which I invested my Roth in at first but then I looked at a thread talking about the changes to FFNOX and came to the conclusion that it was a good fund but the changes made it worse. So I decided to create the old FFNOX by investing in 4 things in my IRA. I don't know if the new FFNOX versus the old FFNOX will make a big difference in the long run.

So basically, I have no idea what to do and I guess if I don't know what I want then it would be hard for you all to help me :mrgreen: ]

2. Do you think I am making a good decision by how I am investing my 401k? [The same uncertainty about bonds and international apply here as well. I was contemplating doing something like 83% S&P 500, 8% S&P Midcap, and 9% in DFA US Small Cap I. At the current point in time I feel like international and bonds are basically like putting my money in the bank and not really growing.

I am investing my 401k as follows, $100 a week divided in the following %s:
Baird Aggregate Bond Fund 15%
State Street S&P 500 Index Fund 51%
State Street S&P MidCap Index 6%
DFA US Small Cap I 3%
American EuroPacific Growth R6 25% ]

Note:
* I plan on selling PNQI and SOCL in my taxable account and move $6,000 to fund my roth IRA (I'm waiting for there value to go up, with the remaining money I was thinking of investing:
75% in the Fidelity Total Market Index Fund (FSKAX) (expense ratio 0.015%)
25% in the Fidelity Total International Index Fund (FTIHX) (expense ratio 0.060%)

and then each year selling them to fund the roth IRA
Nyc10036
Posts: 976
Joined: Wed Oct 05, 2016 6:29 pm

Re: Indecisive about how to invest-- 35 years old

Post by Nyc10036 »

State Street S&P 500 Index Fund ---> 401K
that's a no-brainer


Fidelity U.S. Bond Index Fund (FXNAX) ---> Roth IRA


Fidelity Total Stock Market Index (FSKAX) ---> taxable
for all future investments
turn off dividend re-investments in everything you currently have in your taxable
vtsnowdin
Posts: 116
Joined: Thu Dec 30, 2021 3:54 pm

Re: Indecisive about how to invest-- 35 years old

Post by vtsnowdin »

Can you sell the company stock as it is given to you and move the cash to a whole market index fund or is it hostage?
exodusNH
Posts: 1926
Joined: Wed Jan 06, 2021 8:21 pm

Re: Indecisive about how to invest-- 35 years old

Post by exodusNH »

ralphboy wrote: Thu Jan 13, 2022 11:17 am Emergency funds: $30,000 (This is my checking, savings, and emergency amount. I plan on buying a car in 5 years)

Debt: None

Tax Filing Status: Single

Tax Rate: 12% Federal, 0% State (I think?)

State of Residence: FL

Age: 35

Desired Asset allocation: Undecided
Desired International allocation: Undecided

Approximate size of total portfolio: 106k

Current retirement assets

Fidelity Taxable
.02% cash (Like $7)
20% Invesco Nasdaq Internet ETF (PNQI) (expense ratio 0.60%) *
10% Global X Social Media ETF (SOCL) (expense ratio 0.65%) *
9% Fidelity Multi-Asset Index Fund (FFNOX) (expense ratio 0.12%)

Fidelity Roth IRA
6% Fidelity 500 Index Fund (FXAIX) (expense ratio 0.015%)
1% Fidelity Extended Market Index Fund (FSMAX) (expense ratio 0.035%)
3% Fidelity International Index Fund (FSPSX) (expense ratio 0.035%)
2% Fidelity U.S. Bond Index Fund (FXNAX) (expense ratio 0.025%)

401k
10% State Street S&P 500 (Don't see a ticker listed, link to the fund https://my.voya.com/static/epweb/pdf/ffs/CHWZ.PDF) ("The Indirect
Expenses combined with the Direct Expenses form the Total Annual Operating Expense Ratio ("TAOER"). The TAOER of Class N will equal .023% annually. )
5% American EuroPacific Growth R6 (RERGX) (expense ratio 0.46%)
3% Baird Aggregate Bond Fund (Not sure because it says institutional BAGIX and investor BAGSX) (Not sure expense ratio for instiutional 0.30% and expense ratio for investor 0.55%)
1% State Street S&P MidCap Index (Don't see a ticker, link to the fund https://my.voya.com/static/epweb/pdf/ffs/CHXH.PDF) ("The Indirect
Expenses combined with the Direct Expenses form the Total Annual Operating Expense Ratio ("TAOER"). The TAOER of Class XIV will equal .02% annually")
.6% DFA US Small Cap I (DFSTX) (Management Fee 0.30%,Total Operating Expense Ratio 0.33%, Net Expense Ratio (to investor) 0.33%)

Company match? Yes, $400-500 a year for 401k and 8% of income given as stock

Company stock
29% Publix, private, employee-owned grocery store

Cryptocurrency
1% Cardano (ADA)

Contributions

New annual Contributions
Approximately $4,000-$5,000 with employer contribution towards my 401k

Available funds

Funds available in my 401(k)

1) Invesco Stable Value Trust Fund Class B1 (Total Annual Expense Ratio 0.30%)
2) Baird Aggregate Bond Fund (expense ratio 0.30% for insitutional shares and 0.55% for investor shares)
3) T. Rowe Price Value Fund I Class (TRPIX) (expense information 0.64% (gross) and 0.63% (net))
4) State Street S&P 500 Index Fund
5) T. Rowe Price Blue Chip Growth Trust (Class T4) (Trustee Fee* 0.4%, Total Annual Operating
Expenses per $1,000 is $4.00)
6) State Street S&P MidCap Index
7) DFA US Small Cap I (Total Operating Expense Ratio 0.37%)
8) American EuroPacific Growth R6 (RERGX) (Fund expense ratio 0.49%)
9) Publix Stock
10) State Street Conservative Strategic Balance Fund -Class 1
11) State Street Moderate Strategic Balanced Fund -Class 1
12) State Street Aggressive Strategic Balance Fund -Class 1

Questions:

1. What asset allocation would you suggest for an individual with $52,000 in his fidelity accounts and won't be adding any more to it? [I find myself being really on the fence about how to invest. I go back and forth between "Go all in and be as aggressive as possible since I only have $52,000 in total between my brokerage and roth ira and I won't be adding any more to it unless I get a better job. I also think "I don't want to lose what I got" and "You can't predict the future, so it is good to dabble in a little of everything" so I think a well-rounded approach might be a good idea.

I have looked at bond threads and have tried to understand what was being discussed (Way beyond my paygrade) and it seems that the majority of people my age and older feel like bonds are a bad idea and to make as much money as possible for as long as possible and then when you want to retire switch to bonds. Many young people and people in their 50s+ were being really aggressive, many doing 100% stocks.

I have also looked at the international threads and couldn't make heads or tails of the situation with opinions being all over the place.

All of these things combined with not being able to predict the future, makes choosing an asset allocation feel like an impossible task. I really don't want to spend everyday following world events and trying to figure out what to have and what amount needs to be moved to where and I originally thought a "set it and forget it" fund with only 1 investment would be a good idea.

I thought a Fidelity Freedom Index Fund would be a good option but then read that being conservative too far out from retirement might not be such a good idea. So I then was recommended FFNOX which I invested my Roth in at first but then I looked at a thread talking about the changes to FFNOX and came to the conclusion that it was a good fund but the changes made it worse. So I decided to create the old FFNOX by investing in 4 things in my IRA. I don't know if the new FFNOX versus the old FFNOX will make a big difference in the long run.

So basically, I have no idea what to do and I guess if I don't know what I want then it would be hard for you all to help me :mrgreen: ]

2. Do you think I am making a good decision by how I am investing my 401k? [The same uncertainty about bonds and international apply here as well. I was contemplating doing something like 83% S&P 500, 8% S&P Midcap, and 9% in DFA US Small Cap I. At the current point in time I feel like international and bonds are basically like putting my money in the bank and not really growing.

I am investing my 401k as follows, $100 a week divided in the following %s:
Baird Aggregate Bond Fund 15%
State Street S&P 500 Index Fund 51%
State Street S&P MidCap Index 6%
DFA US Small Cap I 3%
American EuroPacific Growth R6 25% ]

Note:
* I plan on selling PNQI and SOCL in my taxable account and move $6,000 to fund my roth IRA (I'm waiting for there value to go up, with the remaining money I was thinking of investing:
75% in the Fidelity Total Market Index Fund (FSKAX) (expense ratio 0.015%)
25% in the Fidelity Total International Index Fund (FTIHX) (expense ratio 0.060%)

and then each year selling them to fund the roth IRA
In your Roth, sell the bond fund and out the funds in your equities. Roth is where you want to hold the assets with the highest expected growth. You can then hold slightly more bonds in your 401k.

Regarding those two funds in taxable you want to sell to find your Roth, "waiting for the value to go up" probably won't work out the way you want it to. However, if you sell them in taxable and then buy them in your Roth, your actual position will not have shifted, just which pocket you're holding the money in.

You could then sell the funds in the Roth when you're comfortable with them.
User avatar
mrpotatoheadsays
Posts: 471
Joined: Fri Mar 16, 2012 2:36 pm

Re: Indecisive about how to invest-- 35 years old

Post by mrpotatoheadsays »

ralphboy wrote: Thu Jan 13, 2022 11:17 am 2. Do you think I am making a good decision by how I am investing my 401k?
No. These are likely assets that you won't be touching for 40+ years; time is your friend.

Historically, over the long-term, small has outperformed large and value has outperformed growth. Evidence can be obtained by analyzing long-term periods; e.g the 1930-2019 annualized nominal return of asset classes was:

US small-cap value: 13.7%
US small-cap blend: 12.2%
US large-cap value: 11.1%
S&P 500 (US large-cap blend): 9.8% <------ Classic Boglehead approach

Had one invested $100 in each asset class in 1930 and just left it alone, at the end of 2019, it would have been worth:

US small-cap value: $10,420,013
US small-cap blend: $3,284,759
US large-cap value: $1,304,783
S&P 500 (US large-cap blend): $457,701

Go 100% into DFA US Small Cap I. While its expenses are higher than comparables; its potential return grossly exceeds that delta.

If you can go small and/or value cheaper outside your 401k and want to reduce allocation to small, the only other "good" option in your 401k is the S&P 500 fund.
aristotelian
Posts: 9959
Joined: Wed Jan 11, 2017 8:05 pm

Re: Indecisive about how to invest-- 35 years old

Post by aristotelian »

Nyc10036 wrote: Thu Jan 13, 2022 11:35 am State Street S&P 500 Index Fund ---> 401K
that's a no-brainer


Fidelity U.S. Bond Index Fund (FXNAX) ---> Roth IRA


Fidelity Total Stock Market Index (FSKAX) ---> taxable
for all future investments
turn off dividend re-investments in everything you currently have in your taxable
I would not waste the Roth space with a bond index yielding under 2%. The whole point of Roth is to take advantage of tax free gains.
Doc7
Posts: 592
Joined: Fri Aug 24, 2007 12:55 pm

Re: Indecisive about how to invest-- 35 years old

Post by Doc7 »

mrpotatoheadsays wrote: Thu Jan 13, 2022 11:58 am
ralphboy wrote: Thu Jan 13, 2022 11:17 am 2. Do you think I am making a good decision by how I am investing my 401k?
No. These are likely assets that you won't be touching for 40+ years; time is your friend.

Historically, over the long-term, small has outperformed large and value has outperformed growth. Evidence can be obtained by analyzing long-term periods; e.g the 1930-2019 annualized nominal return of asset classes was:

US small-cap value: 13.7%
US small-cap blend: 12.2%
US large-cap value: 11.1%
S&P 500 (US large-cap blend): 9.8% <------ Classic Boglehead approach

Had one invested $100 in each asset class in 1930 and just left it alone, at the end of 2019, it would have been worth:

US small-cap value: $10,420,013
US small-cap blend: $3,284,759
US large-cap value: $1,304,783
S&P 500 (US large-cap blend): $457,701

Go 100% into DFA US Small Cap I. While its expenses are higher than comparables; its potential return grossly exceeds that delta.

If you can go small and/or value cheaper outside your 401k and want to reduce allocation to small, the only other "good" option in your 401k is the S&P 500 fund.


:confused :| :confused
wetgear
Posts: 572
Joined: Thu Apr 06, 2017 10:14 am

Re: Indecisive about how to invest-- 35 years old

Post by wetgear »

1) I think you are looking at this question a bit wrong. Your AA should be for your entire portfolio not just the Fidelity accounts. AA is extremely personal (need, ability, and willingness to take risk) and no one will tell you what it should be but most would probably agree that the realm of reasonable for someone in your situation would be between 100/0 - 65/35. Regarding international there is no consensus and you'll get recommendations between 0 - 50%. 0 because of American exceptionalism and past performance and 50% because that's about the market weight of international. The one thing most will agree with is that 20% probably won't harm much but may help.

2) I think you have slightly overcomplicated the 401k with too many funds and are paying too high of expenses on most of them. The SS S&P 500 is clearly the best fund in the 401k. You have no good international options here, hold them elsewhere in the portfolio if you decide to have international. Your Baird Aggregate Bond Fund might be worth holding but check your plan documents not the internet search engine for the ER. 0.3 is acceptable if need be but 0.55 is not. Confirm within the plan what the fees are, they have to make that information available to you. You hold too much in your company stock and this is very risky, sell it and buy more of the S&P 500 fund. Keep at most 5% of your total portfolio in company stock most here would recommend 0% even if you work for Apple.

Check out the 3 fund portfolio that is heavily recommended here: https://www.bogleheads.org/wiki/Three-fund_portfolio
You have a handful of investments that don't fall into the big 3 category so you should consider getting rid of those and just buying the 3 funds.
exodusNH
Posts: 1926
Joined: Wed Jan 06, 2021 8:21 pm

Re: Indecisive about how to invest-- 35 years old

Post by exodusNH »

wetgear wrote: Thu Jan 13, 2022 12:19 pm 1) I think you are looking at this question a bit wrong. Your AA should be for your entire portfolio not just the Fidelity accounts. AA is extremely personal (need, ability, and willingness to take risk) and no one will tell you what it should be but most would probably agree that the realm of reasonable for someone in your situation would be between 100/0 - 65/35. Regarding international there is no consensus and you'll get recommendations between 0 - 50%. 0 because of American exceptionalism and past performance and 50% because that's about the market weight of international. The one thing most will agree with is that 20% probably won't harm much but may help.

2) I think you have slightly overcomplicated the 401k with too many funds and are paying too high of expenses on most of them. The SS S&P 500 is clearly the best fund in the 401k. You have no good international options here, hold them elsewhere in the portfolio if you decide to have international. Your Baird Aggregate Bond Fund might be worth holding but check your plan documents not the internet search engine for the ER. 0.3 is acceptable if need be but 0.55 is not. Confirm within the plan what the fees are, they have to make that information available to you. You hold too much in your company stock and this is very risky, sell it and buy more of the S&P 500 fund. Keep at most 5% of your total portfolio in company stock most here would recommend 0% even if you work for Apple.

Check out the 3 fund portfolio that is heavily recommended here: https://www.bogleheads.org/wiki/Three-fund_portfolio
You have a handful of investments that don't fall into the big 3 category so you should consider getting rid of those and just buying the 3 funds.
It looks like he works at Publix. The stock is private and there are some limits on being able to sell it.
Nyc10036
Posts: 976
Joined: Wed Oct 05, 2016 6:29 pm

Re: Indecisive about how to invest-- 35 years old

Post by Nyc10036 »

aristotelian wrote: Thu Jan 13, 2022 12:00 pm
Nyc10036 wrote: Thu Jan 13, 2022 11:35 am State Street S&P 500 Index Fund ---> 401K
that's a no-brainer


Fidelity U.S. Bond Index Fund (FXNAX) ---> Roth IRA


Fidelity Total Stock Market Index (FSKAX) ---> taxable
for all future investments
turn off dividend re-investments in everything you currently have in your taxable
I would not waste the Roth space with a bond index yielding under 2%. The whole point of Roth is to take advantage of tax free gains.
Where would you put bond index?
Or would you have him 100% in stocks?
Sagefemme
Posts: 161
Joined: Mon Mar 12, 2018 9:31 pm

Re: Indecisive about how to invest-- 35 years old

Post by Sagefemme »

When my 401K (like yours) had no bond INDEX fund I decided alright then, I'll have no bonds in the 401K. I held 100% S&P Index in that account for many years. Eventually my company added a bond index fund and at that point I did start having bonds in the 401K. I was just stubborn about expense ratios and refused to pay higher fees for non-index bonds.

In the big picture, though, my spouse and I at your age had all stocks (and only 401Ks; no taxable or Roth accounts). I had the impression that bonds were for old people. Now I am an old person (spouse and I are both 60) and our AA is 50-50. But we had little or no bond exposure until we were in our 50s. It worked well for us. Note that when the market crashed in 2008 we took the strategy of "just don't look at balances--wait it out!" I did not look for years, literally. My spouse never looks, so that worked out for him :happy
aristotelian
Posts: 9959
Joined: Wed Jan 11, 2017 8:05 pm

Re: Indecisive about how to invest-- 35 years old

Post by aristotelian »

Nyc10036 wrote: Thu Jan 13, 2022 12:41 pm
aristotelian wrote: Thu Jan 13, 2022 12:00 pm
Nyc10036 wrote: Thu Jan 13, 2022 11:35 am State Street S&P 500 Index Fund ---> 401K
that's a no-brainer


Fidelity U.S. Bond Index Fund (FXNAX) ---> Roth IRA


Fidelity Total Stock Market Index (FSKAX) ---> taxable
for all future investments
turn off dividend re-investments in everything you currently have in your taxable
I would not waste the Roth space with a bond index yielding under 2%. The whole point of Roth is to take advantage of tax free gains.
Where would you put bond index?
Or would you have him 100% in stocks?
I would probably do something like 1/3 Intermediate Treasury bond fund (such as VFIUX) in Roth, 1/3 in the Baird bond fund in 401k, and 1/3 in some combination of muni bonds, I Bonds, or EE bonds. Or just the Baird fund in the 401k for simplicity, especially if it is the one with the 0.3% expense ratio.
exodusNH
Posts: 1926
Joined: Wed Jan 06, 2021 8:21 pm

Re: Indecisive about how to invest-- 35 years old

Post by exodusNH »

Nyc10036 wrote: Thu Jan 13, 2022 12:41 pm
aristotelian wrote: Thu Jan 13, 2022 12:00 pm
Nyc10036 wrote: Thu Jan 13, 2022 11:35 am State Street S&P 500 Index Fund ---> 401K
that's a no-brainer


Fidelity U.S. Bond Index Fund (FXNAX) ---> Roth IRA


Fidelity Total Stock Market Index (FSKAX) ---> taxable
for all future investments
turn off dividend re-investments in everything you currently have in your taxable
I would not waste the Roth space with a bond index yielding under 2%. The whole point of Roth is to take advantage of tax free gains.
Where would you put bond index?
Or would you have him 100% in stocks?
The Baird bond fund in his 401k. Or, honestly, at the intermediate bond fund yield and his low tax rate, taxable would be fine. It should be a couple of years before those rise enough to be a concern. But at 12% tax, it's not a terrible idea.
Fallible
Posts: 7989
Joined: Fri Nov 27, 2009 4:44 pm

Re: Indecisive about how to invest-- 35 years old

Post by Fallible »

ralphboy wrote: Thu Jan 13, 2022 11:17 am ...
Questions:

1. What asset allocation would you suggest for an individual with $52,000 in his fidelity accounts and won't be adding any more to it? [I find myself being really on the fence about how to invest. I go back and forth between "Go all in and be as aggressive as possible since I only have $52,000 in total between my brokerage and roth ira and I won't be adding any more to it unless I get a better job. I also think "I don't want to lose what I got" and "You can't predict the future, so it is good to dabble in a little of everything" so I think a well-rounded approach might be a good idea.
...
It is NOT "good to dabble in a little of everything," not when you are still learning how to invest, how to set an allocation, how to determine your personal tolerance for risk, how to understand risk in general, and how to develop an overall investing plan. These are among the investing basics and you can learn about them from the BH wiki, beginning with the "Bogleheads Investment Philosophy," "Asset allocation" (with links to "Risk tolerance" and a guideline series on "Ability, willingness, and need to take risk"), and "Getting started":

https://www.bogleheads.org/wiki/Boglehe ... philosophy

1. Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

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

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

There also is an excellent book, All About Asset Allocation, 2nd ed., by pro Boglehead Rick Ferri.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
Nyc10036
Posts: 976
Joined: Wed Oct 05, 2016 6:29 pm

Re: Indecisive about how to invest-- 35 years old

Post by Nyc10036 »

aristotelian wrote: Thu Jan 13, 2022 1:10 pm
Nyc10036 wrote: Thu Jan 13, 2022 12:41 pm
aristotelian wrote: Thu Jan 13, 2022 12:00 pm
Nyc10036 wrote: Thu Jan 13, 2022 11:35 am State Street S&P 500 Index Fund ---> 401K
that's a no-brainer


Fidelity U.S. Bond Index Fund (FXNAX) ---> Roth IRA


Fidelity Total Stock Market Index (FSKAX) ---> taxable
for all future investments
turn off dividend re-investments in everything you currently have in your taxable
I would not waste the Roth space with a bond index yielding under 2%. The whole point of Roth is to take advantage of tax free gains.
Where would you put bond index?
Or would you have him 100% in stocks?
I would probably do something like 1/3 Intermediate Treasury bond fund (such as VFIUX) in Roth, 1/3 in the Baird bond fund in 401k, and 1/3 in some combination of muni bonds, I Bonds, or EE bonds. Or just the Baird fund in the 401k for simplicity, especially if it is the one with the 0.3% expense ratio.
Is there a difference betwen having a bond fund in a 401K versus in a Roth IRA?

.
aristotelian
Posts: 9959
Joined: Wed Jan 11, 2017 8:05 pm

Re: Indecisive about how to invest-- 35 years old

Post by aristotelian »

Nyc10036 wrote: Thu Jan 13, 2022 3:35 pm
aristotelian wrote: Thu Jan 13, 2022 1:10 pm
Nyc10036 wrote: Thu Jan 13, 2022 12:41 pm
aristotelian wrote: Thu Jan 13, 2022 12:00 pm
Nyc10036 wrote: Thu Jan 13, 2022 11:35 am State Street S&P 500 Index Fund ---> 401K
that's a no-brainer


Fidelity U.S. Bond Index Fund (FXNAX) ---> Roth IRA


Fidelity Total Stock Market Index (FSKAX) ---> taxable
for all future investments
turn off dividend re-investments in everything you currently have in your taxable
I would not waste the Roth space with a bond index yielding under 2%. The whole point of Roth is to take advantage of tax free gains.
Where would you put bond index?
Or would you have him 100% in stocks?
I would probably do something like 1/3 Intermediate Treasury bond fund (such as VFIUX) in Roth, 1/3 in the Baird bond fund in 401k, and 1/3 in some combination of muni bonds, I Bonds, or EE bonds. Or just the Baird fund in the 401k for simplicity, especially if it is the one with the 0.3% expense ratio.
Is there a difference betwen having a bond fund in a 401K versus in a Roth IRA?

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Yes, the gains in Roth are tax free so you generally want the highest return asset (stocks) there. You will have to pay tax on gains in 401k at your marginal rate in retirement so all things equal you would rather have the lowest return asset (bonds) there. Your 401k bond fund has a slightly higher expense ratio and appears to overweight somewhat higher risk bonds so that makes the decision somewhat more complicated.
Late2Brake
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Re: Indecisive about how to invest-- 35 years old

Post by Late2Brake »

mrpotatoheadsays wrote: Thu Jan 13, 2022 11:58 am
ralphboy wrote: Thu Jan 13, 2022 11:17 am 2. Do you think I am making a good decision by how I am investing my 401k?
No. These are likely assets that you won't be touching for 40+ years; time is your friend.

Historically, over the long-term, small has outperformed large and value has outperformed growth. Evidence can be obtained by analyzing long-term periods; e.g the 1930-2019 annualized nominal return of asset classes was:

US small-cap value: 13.7%
US small-cap blend: 12.2%
US large-cap value: 11.1%
S&P 500 (US large-cap blend): 9.8% <------ Classic Boglehead approach

Had one invested $100 in each asset class in 1930 and just left it alone, at the end of 2019, it would have been worth:

US small-cap value: $10,420,013
US small-cap blend: $3,284,759
US large-cap value: $1,304,783
S&P 500 (US large-cap blend): $457,701

Go 100% into DFA US Small Cap I. While its expenses are higher than comparables; its potential return grossly exceeds that delta.

If you can go small and/or value cheaper outside your 401k and want to reduce allocation to small, the only other "good" option in your 401k is the S&P 500 fund.
For my education (and the Ops) is the reason you come up with the above the very long range? I tested your theory and dont see it.

https://www.portfoliovisualizer.com/bac ... ion3_3=100

It only goes back to 2016 but if you remove the small mid it goes back to 1994.

Thanks!!
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mrpotatoheadsays
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Re: Indecisive about how to invest-- 35 years old

Post by mrpotatoheadsays »

Late2Brake wrote: Thu Jan 13, 2022 4:09 pm It only goes back to 2016 but if you remove the small mid it goes back to 1994.
Academia has concluded that "long-term" in investing is 25 to 30 years. Therefore, in order to benefit from historic premiums one must hold an asset 25 to 30 years. The 1930-2019 time frame is a fair range to identify those premiums, however academia demands more (which we don't have yet).

Your range of years is a fair sample, but it's only one sample. Nonetheless, premiums are identified:

Jan 1994 - Dec 2021 (asset class return is example/benchmark fund plus 2022 expenses)
-------------------------------------------------------------------------------------------------------------
S&P 500 via ... State Street S&P 500 Index N: 10.61% + 0.16% = 10.77%
US small-cap blend via ... DFA US Small Cap I: 10.80% + 0.33% = 11.13%
US small-cap blend via ... DFA US Micro Cap I: 11.36% + 0.44% = 11.80%
US small-cap value via ... DFA US Small Cap Value I: 11.43% + 0.39% = 11.83%

The small-cap benchmark used small and micro in its sampling. Smaller small historically outperformed small; smaller small includes micro. Many small-cap funds often, inappropriately, include as much mid-cap as small-cap.

For the OP, even a ~1% premium can be worth the small-cap ride.
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ralphboy
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Re: Indecisive about how to invest-- 35 years old

Post by ralphboy »

I thought I was creating a total stock market fund in my 401k by investing in the s&p 500, s&p midcap, and DFA US Small Cap I (https://www.bogleheads.org/wiki/Approxi ... ock_market). FXAIX + FSMAX isn't similar to FSKAX? I thought I was creating the same AA in both accounts by doing 60% domestic, 25% international, and 15% bonds. I know I have PNQI and SOCL which makes things out of balance, but those were purchased when I had a broker at another brokerage firm.

FXAIX-https://fundresearch.fidelity.com/mutua ... /315911750
FSMAX-https://fundresearch.fidelity.com/mutua ... /315911743

There is a penalty and I believe it is a big one if I take out my employer given stock. Of the Publix stock, 70% was given to me ($22,000).
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