Deployment of investments

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avbferry
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Deployment of investments

Post by avbferry »

I am about to start investing in VT. Just wondering, which method is recommended, should I
(1) Invest one lump sum upfront or over several months? My concern with investing over several months is that it raises commissions incurred (I currently pay 19.99 per trade)
(2) I intend to do rebalancing on a yearly basis. Should I be investing the same sum of money I had put in over the past 12 months? Or should this be increased for inflation and so on?

Thanks :)
Last edited by avbferry on Sat Jul 21, 2012 2:41 pm, edited 1 time in total.
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Noobvestor
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Re: Getting started with investments

Post by Noobvestor »

Depends on your personality as much as anything - benefits to either approach: http://lazytraders.com/insights/dca-or- ... investing/ If you have a good balanced portfolio you are comfortable with risk-wise, then dumping it all in is probably the way to go.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
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CABob
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Re: Getting started with investments

Post by CABob »

avbferry wrote:I am about to start investing in VT. Just wondering, which method is recommended, should I
(1) Invest one lump sum upfront or over several months? My concern with investing over several months is that it raises commissions incurred (I currently pay 19.99 per trade) This is a subject that is often discussed on this forum. If you do a search you should find many conversations on the subject. A good starting point would be the Wiki at http://www.bogleheads.org/wiki/Lump_sum_vs_DCA. Another consideration is transaction costs. One guideline I used when I started investing is to keep commissions at 1% or less (hopefully much less). Using this guideline a commission of $20 would indicate that each purchase should be for $2000 or more.
(2) I intend to do rebalancing on a yearly basis. Should I be investing the same sum of money I had put in over the past 12 months? Or should this be increased for inflation and so on? Your question confuses me. Rebalancing generally refers to adjusting your asset allocation within your current portfolio so there would not necessarily be any new money involved. New investments should be a budget item in your expenditures and it is what you want it to be subject to the limitation of your assets so inflation does not enter into the picture. Perhaps I misunderstood your question.
Bob
Default User BR
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Re: Getting started with investments

Post by Default User BR »

avbferry wrote:I am about to start investing in VT. Just wondering, which method is recommended, should I
(1) Invest one lump sum upfront or over several months? My concern with investing over several months is that it raises commissions incurred (I currently pay 19.99 per trade)
(2) I intend to do rebalancing on a yearly basis. Should I be investing the same sum of money I had put in over the past 12 months? Or should this be increased for inflation and so on?
Why are you paying $20 commissions? Where is this account held? What sort of investments are you planning?


Brian
Bob's not my name
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Re: Getting started with investments

Post by Bob's not my name »

Default User BR wrote:Where is this account held?
In Vermont.
Topic Author
avbferry
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Re: Getting started with investments

Post by avbferry »

CABob wrote:Your question confuses me. Rebalancing generally refers to adjusting your asset allocation within your current portfolio so there would not necessarily be any new money involved. New investments should be a budget item in your expenditures and it is what you want it to be subject to the limitation of your assets so inflation does not enter into the picture. Perhaps I misunderstood your question.[/color]
I believe I hadn't made myself clear. Basically each year I intend to set aside about 6000 to invest in both VT and a bond ETF and I intend to maintain 75/25 allocation. So suppose after 1 year, the allocation turns to 50/50, then I would just buy more equity than bond to bring my allocation back on track. The question then is whether the 6000 figure should be maintained or increased each year?
Default User BR wrote: Why are you paying $20 commissions? Where is this account held? What sort of investments are you planning?
Brian
I use a local US brokerage called Etrade. I intend to buy VT and a local bond ETF.
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CABob
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Re: Getting started with investments

Post by CABob »

avbferry wrote: I believe I hadn't made myself clear. Basically each year I intend to set aside about 6000 to invest in both VT and a bond ETF and I intend to maintain 75/25 allocation. So suppose after 1 year, the allocation turns to 50/50, then I would just buy more equity than bond to bring my allocation back on track.
Correct. This is the usual scenerio for rebalancing. which can be done with new money going into the portfolio or moving money already in the portfolio around or a combination of the two to get back to your target allocations.

The question then is whether the 6000 figure should be maintained or increased each year?This is where I get confused. This deals with how much you save (invest) rather than the rebalancing process. It certainly makes sense to increase savings as your income increases. Saving $6K if your income is $12K is noble but perhaps not reasonable. Saving $6K if your income is $200K will probably not get you to a comfortable retirement.
Bob
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Re: Deployment of investments

Post by pkcrafter »

You can rebalance with new money, but why use ETrade when you can just use Vanguard and have no commissions? Also, this must be a taxable account, so are you maxing tax deferred options?

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Topic Author
avbferry
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Re: Deployment of investments

Post by avbferry »

pkcrafter wrote:You can rebalance with new money, but why use ETrade when you can just use Vanguard and have no commissions? Also, this must be a taxable account, so are you maxing tax deferred options?

Paul
Vanguard does not accept foreign investors.
Bob's not my name
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Re: Deployment of investments

Post by Bob's not my name »

You may have already seen these (your prior threads indicate you already know the issues), but here are a couple of threads by foreign Vanguard investors:

http://www.bogleheads.org/forum/viewtopic.php?t=70895

http://www.bogleheads.org/forum/viewtopic.php?t=54298
Default User BR
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Re: Deployment of investments

Post by Default User BR »

avbferry wrote:
pkcrafter wrote:You can rebalance with new money, but why use ETrade when you can just use Vanguard and have no commissions? Also, this must be a taxable account, so are you maxing tax deferred options?
Vanguard does not accept foreign investors.
What about TD Ameritrade? I don't recall their policies with regards to foreign residence, but they have a good selection of no-commission ETFs.


Brian
Topic Author
avbferry
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Re: Deployment of investments

Post by avbferry »

Default User BR wrote: What about TD Ameritrade? I don't recall their policies with regards to foreign residence, but they have a good selection of no-commission ETFs.


Brian
Hi Brian, I did do some research on US brokerages before. For someone trading infrequently, the cost savings aren't substantial since funding of US brokerages would have to be done by costly telegraphic transfers.
Default User BR
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Re: Deployment of investments

Post by Default User BR »

avbferry wrote:Hi Brian, I did do some research on US brokerages before. For someone trading infrequently, the cost savings aren't substantial since funding of US brokerages would have to be done by costly telegraphic transfers.
I'm confused. You stated above that you were using a local US brokerage, ETrade. Why is it not a problem there?


Brian
Topic Author
avbferry
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Re: Deployment of investments

Post by avbferry »

Default User BR wrote:
avbferry wrote:Hi Brian, I did do some research on US brokerages before. For someone trading infrequently, the cost savings aren't substantial since funding of US brokerages would have to be done by costly telegraphic transfers.
I'm confused. You stated above that you were using a local US brokerage, ETrade. Why is it not a problem there?


Brian
The local US brokerage allows us to deposit cheques at their local branch thus saving us on the telegraphic transfer fees.
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