Whats the Best Investment in for My Needs?

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arca
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Whats the Best Investment in for My Needs?

Post by arca » Fri Nov 29, 2019 3:52 pm

Hi everyone,

It was suggested I create a new post about my investment needs. I couldn't answer my other thread for a long time because of an emergency hospital visit which is why I'm creating this new one. My apologies for this. Now onto my request:

A little about me:
I live in NY and am in my late 40s, not working, have no wife or kids, get $300/week on the side. I have the following:

- $80,000 to invest.

- $30,000 as emergency funds.

- $0 debt.

- Desired Asset allocation: 20% stocks, 80% bonds.

- Desired International allocation: None.

Goals
My aim for an investment is nothing too fancy or risky. I want to be able to sleep at night secure that I chose a good investment and not worry about its risks all the time.

Finding steady work is not impossible but hard due to personal reasons which I will NOT disclose. I can however be able to put $70 - 100/week into investing. But this amount will increase if my side income rises more than my current $300/week.

Specific Investments
I was thinking of putting $30,000 emergency funds into an MMF. This means talking all my money out of my bank except for $5,000 in a checking account for immediate needs. If I need more money I can just withdraw from the MMF into the checking account.

As for the $80,000, I want to invest it in a passively-managed balanced index fund to avoid expense ratios if possible with a 20 stock/80 bond allocation. I would like to invest in a tax-free Roth. But since I’m not working, I can’t contribute the default $6,000/year it requires.

Apart from the above, ideally, I would like to invest in 3 investments: passively-managed balanced index fund, MMF and Roth. This is something only possible in an ideal setting when I find consistent, permanent work. Let me know if you think this is a good idea also.

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Re: Whats the Best Investment in for My Needs?

Post by snailderby » Fri Nov 29, 2019 4:10 pm

I'm sorry to hear about the emergency hospital visit. Hope you are feeling better now.

If you want a 20/80 split with no international stocks, $16,000 in VTSAX and $64,000 in VBTLX should fit the bill. The Vanguard Wellesley Income Fund (VWIAX) may also come close to fitting your needs. It has roughly 1/3 in stocks and 2/3 in bonds. But it probably won't be as tax-efficient in a taxable account.

Even if you can't contribute to a Roth IRA or 401(k), I think the long term capital gains rate in 2020 is 0% for single filers with a taxable income of less than $40,000 a year.
Last edited by snailderby on Fri Nov 29, 2019 4:15 pm, edited 1 time in total.

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Re: Whats the Best Investment in for My Needs?

Post by mortfree » Fri Nov 29, 2019 4:13 pm

snailderby wrote:
Fri Nov 29, 2019 4:10 pm
If you want a 20/80 split with no international stocks...

$16,000 in VBTLX.
$64,000 in VTSAX.
How is that 20 stocks, 80 bonds?

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Re: Whats the Best Investment in for My Needs?

Post by snailderby » Fri Nov 29, 2019 4:15 pm

mortfree wrote:
Fri Nov 29, 2019 4:13 pm
snailderby wrote:
Fri Nov 29, 2019 4:10 pm
If you want a 20/80 split with no international stocks...

$16,000 in VBTLX.
$64,000 in VTSAX.
How is that 20 stocks, 80 bonds?
Sorry. Got it reversed. Edited.

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Re: Whats the Best Investment in for My Needs?

Post by Dottie57 » Fri Nov 29, 2019 4:15 pm

I would bump up stocks to 25-30% so that you can make a bit above inflation.

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Re: Whats the Best Investment in for My Needs?

Post by pkcrafter » Fri Nov 29, 2019 5:37 pm

I agree with Dottie, you won't keep up with inflation if you hold only 20% in stocks. But to answer your question, look at Vanguard's Lifestrategy Income Fund

https://investor.vanguard.com/mutual-fu ... estrategy/#/


Paul
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Re: Whats the Best Investment in for My Needs?

Post by rkhusky » Sat Nov 30, 2019 9:55 am

And if you decide you want a bit more stock, Vanguard's Target Retirement Income is 30% stock, 70% bonds.

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Re: Whats the Best Investment in for My Needs?

Post by snailderby » Sat Nov 30, 2019 10:33 am

The Vanguard Life Strategy and Target-Date funds have 40% of their equity portion in international stocks. That might be a good thing, but OP said his desired international allocation was "none."

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Re: Whats the Best Investment in for My Needs?

Post by Wiggums » Sat Nov 30, 2019 10:38 am

All reasonable suggestions. Let us know what you decide.

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Re: Whats the Best Investment in for My Needs?

Post by pkcrafter » Sat Nov 30, 2019 12:00 pm

snailderby wrote:
Sat Nov 30, 2019 10:33 am
The Vanguard Life Strategy and Target-Date funds have 40% of their equity portion in international stocks. That might be a good thing, but OP said his desired international allocation was "none."
Yes, correct. I think those that suggested a TR or LS fund were providing a suggestion that is easy to do with no manual rebalancing, and all-in-one funds tend to mask the extent of a drawdown. Asset allocation decisions almost always require a compromise. In this case it's the ease of a LS or TR fund versus the high allocation to international.

Another possibility is Fidelity Freedom Index 2005, which is ~26% stock. International is ~34% of that 26%.

A third possibility is Vanguard Wellesley, which is ~36% stock. International is ~15% of that. Again a compromise. You get auto rebalancing with lower international, but somewhat higher stock allocation than you wanted. Also, as mentioned above, 20% stock is not enough to keep up with loss of purchasing power from inflation.

acra, your other choice here is to hold total stock market at 20-30% and total bond or a tax-efficient bond fund at 80-70%.


Paul
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Re: Whats the Best Investment in for My Needs?

Post by snailderby » Sat Nov 30, 2019 3:08 pm

pkcrafter wrote:
Sat Nov 30, 2019 12:00 pm
Yes, correct. I think those that suggested a TR or LS fund were providing a suggestion that is easy to do with no manual rebalancing, and all-in-one funds tend to mask the extent of a drawdown. Asset allocation decisions almost always require a compromise. In this case it's the ease of a LS or TR fund versus the high allocation to international.

Another possibility is Fidelity Freedom Index 2005, which is ~26% stock. International is ~34% of that 26%.

A third possibility is Vanguard Wellesley, which is ~36% stock. International is ~15% of that. Again a compromise. You get auto rebalancing with lower international, but somewhat higher stock allocation than you wanted. Also, as mentioned above, 20% stock is not enough to keep up with loss of purchasing power from inflation.

acra, your other choice here is to hold total stock market at 20-30% and total bond or a tax-efficient bond fund at 80-70%.
+1. Those all sound like good options!

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Re: Whats the Best Investment in for My Needs?

Post by arca » Sat Nov 30, 2019 11:52 pm

snailderby wrote:
Fri Nov 29, 2019 4:10 pm
I'm sorry to hear about the emergency hospital visit. Hope you are feeling better now.

If you want a 20/80 split with no international stocks, $16,000 in VTSAX and $64,000 in VBTLX should fit the bill. The Vanguard Wellesley Income Fund (VWIAX) may also come close to fitting your needs. It has roughly 1/3 in stocks and 2/3 in bonds. But it probably won't be as tax-efficient in a taxable account.
HI snailderby. Thank you for the "get well card." Appreciate that. Your suggestion of VBTLX sounds good. But VTSAX sounds a tad too risky for me with a 4 risk profile rating.

Your other suggestion of the balanced fund, VWIAX sounds very good. The 3 issues I have with it are, a $50,000 min investment, activeley managed which means fees and 40/60 stock allocation which is too risky for me. HOWEVER, they do offer the same vehicle in investor shares with a $3,000 min requirement with a 40/60 allocation. Wish it were 20/80 or 30/70 though.
Even if you can't contribute to a Roth IRA or 401(k), I think the long term capital gains rate in 2020 is 0% for single filers with a taxable income of less than $40,000 a year.
Wow! That sounds good. But am I supposed to contribute something to a Roth anyway?

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Re: Whats the Best Investment in for My Needs?

Post by arca » Sat Nov 30, 2019 11:57 pm

Dottie57 wrote:
Fri Nov 29, 2019 4:15 pm
I would bump up stocks to 25-30% so that you can make a bit above inflation.
But inflation since 1980s has been historically low. Even since 2009 inflation has been on average 2.5%. So I dont think that may be a factor.

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Re: Whats the Best Investment in for My Needs?

Post by arca » Sun Dec 01, 2019 12:02 am

snailderby wrote:
Sat Nov 30, 2019 10:33 am
The Vanguard Life Strategy and Target-Date funds have 40% of their equity portion in international stocks. That might be a good thing, but OP said his desired international allocation was "none."
Appreciate the suggestion. But 40% international in that fund is too risky. I'm averse to international. My uncle got burned with investing in italy stocks and bonds. Worst nation in europe to invest in. btw. I'm steering clear of that.

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Re: Whats the Best Investment in for My Needs?

Post by arca » Sun Dec 01, 2019 12:04 am

rkhusky wrote:
Sat Nov 30, 2019 9:55 am
And if you decide you want a bit more stock, Vanguard's Target Retirement Income is 30% stock, 70% bonds.
Very good choice. The only thing I dont like about it is that 15% on the bond side is international. If it werent for that I'd invest in it in a heart beat.

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Re: Whats the Best Investment in for My Needs?

Post by dru808 » Sun Dec 01, 2019 12:12 am

arca wrote:
Sat Nov 30, 2019 11:52 pm
snailderby wrote:
Fri Nov 29, 2019 4:10 pm
I'm sorry to hear about the emergency hospital visit. Hope you are feeling better now.

If you want a 20/80 split with no international stocks, $16,000 in VTSAX and $64,000 in VBTLX should fit the bill. The Vanguard Wellesley Income Fund (VWIAX) may also come close to fitting your needs. It has roughly 1/3 in stocks and 2/3 in bonds. But it probably won't be as tax-efficient in a taxable account.
HI snailderby. Thank you for the "get well card." Appreciate that. Your suggestion of VBTLX sounds good. But VTSAX sounds a tad too risky for me with a 4 risk profile rating.

Your other suggestion of the balanced fund, VWIAX sounds very good. The 3 issues I have with it are, a $50,000 min investment, activeley managed which means fees and 40/60 stock allocation which is too risky for me. HOWEVER, they do offer the same vehicle in investor shares with a $3,000 min requirement with a 40/60 allocation. Wish it were 20/80 or 30/70 though.
Even if you can't contribute to a Roth IRA or 401(k), I think the long term capital gains rate in 2020 is 0% for single filers with a taxable income of less than $40,000 a year.
Wow! That sounds good. But am I supposed to contribute something to a Roth anyway?

I don’t think you’re understanding allocation risk, you don’t want a 4 risk profile rating but you request a 20/80 stock bond portfolio. The 4 risk rating would only be the 20% of your portfolio the other 80 relegated to a 2-3 risk bond fund.

If you can’t handle the 4 risk on the 20% stock portion, you’re better off in 100% bonds.

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Re: Whats the Best Investment in for My Needs?

Post by arca » Sun Dec 01, 2019 12:13 am

pkcrafter wrote:
Sat Nov 30, 2019 12:00 pm
Yes, correct. I think those that suggested a TR or LS fund were providing a suggestion that is easy to do with no manual rebalancing, and all-in-one funds tend to mask the extent of a drawdown. Asset allocation decisions almost always require a compromise. In this case it's the ease of a LS or TR fund versus the high allocation to international.
Would you mind breaking what you said down in a bit more layman's terms?
acra, your other choice here is to hold total stock market at 20-30% and total bond or a tax-efficient bond fund at 80-70%.
In terms of tax efficient bond fund, which do you personally suggest?

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Re: Whats the Best Investment in for My Needs?

Post by dru808 » Sun Dec 01, 2019 12:15 am

The (4) risk on vtsax 80% combined with the bond (2-3) risk would be equivalent or less to the risk rating on Wellesley (3)

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Re: Whats the Best Investment in for My Needs?

Post by dru808 » Sun Dec 01, 2019 12:16 am

arca wrote:
Sun Dec 01, 2019 12:13 am
pkcrafter wrote:
Sat Nov 30, 2019 12:00 pm
Yes, correct. I think those that suggested a TR or LS fund were providing a suggestion that is easy to do with no manual rebalancing, and all-in-one funds tend to mask the extent of a drawdown. Asset allocation decisions almost always require a compromise. In this case it's the ease of a LS or TR fund versus the high allocation to international.
Would you mind breaking what you said down in a bit more layman's terms?
acra, your other choice here is to hold total stock market at 20-30% and total bond or a tax-efficient bond fund at 80-70%.
In terms of tax efficient bond fund, which do you personally suggest?

If

He’s saying you’re trading the international exposure you don’t want for the ease of use of automatic rebalancing. Look into m1 if you want 20/80 no international, set it and forget it 20/80.

You don’t need tax efficiency, you don’t have income. If you need one, you’d look at a municipal bond fund.

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Re: Whats the Best Investment in for My Needs?

Post by arca » Sun Dec 01, 2019 12:22 am

dru808 wrote:
Sun Dec 01, 2019 12:12 am
I don’t think you’re understanding allocation risk, you don’t want a 4 risk profile rating but you request a 20/80 stock bond portfolio. The 4 risk rating would only be the 20% of your portfolio the other 80 relegated to a 2-3 risk bond fund.
But a 4 risk rating just sounds a bit too risky. I wouldnt want to expose my investment to repeat a 2008-like tragedy in the future.
If you can’t handle the 4 risk on the 20% stock portion, you’re better off in 100% bonds.
I think 20 - 30% stock mix and risk rating of less than a 4 on stocks should be reasonable. But since you sound like you know what youre talking about, let me know what you personally suggest along my needs.

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Re: Whats the Best Investment in for My Needs?

Post by dru808 » Sun Dec 01, 2019 12:25 am

arca wrote:
Sun Dec 01, 2019 12:22 am
dru808 wrote:
Sun Dec 01, 2019 12:12 am
I don’t think you’re understanding allocation risk, you don’t want a 4 risk profile rating but you request a 20/80 stock bond portfolio. The 4 risk rating would only be the 20% of your portfolio the other 80 relegated to a 2-3 risk bond fund.
But a 4 risk rating just sounds a bit too risky. I wouldnt want to expose my investment to repeat a 2008-like tragedy in the future.
If you can’t handle the 4 risk on the 20% stock portion, you’re better off in 100% bonds.
I think 20 - 30% stock mix and risk rating of less than a 4 on stocks should be reasonable. But since you sound like you know what youre talking about, let me know what you personally suggest along my needs.

You aren’t getting a 3 risk index stock fund. In 2008 with a 20/80 portfolio you’d only drawdown 10%. If you don’t want any drawdown you’re best off in a short term treasury bond fund or keeping your money in the money market. Total bond has the risk of losing principal.

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Re: Whats the Best Investment in for My Needs?

Post by dru808 » Sun Dec 01, 2019 12:28 am

Here’s an easy way of doing it. If you’re placing your risk level at 3 or less and that’s all you are deciding on, go with Wellesley or go with m1, no international 3 risk or less? 20/80 vti/vgsh.

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Re: Whats the Best Investment in for My Needs?

Post by dru808 » Sun Dec 01, 2019 12:35 am

You’ve been asking this same question since 2014, you don’t have the risk tolerance for equities in the least bit. 100% mmf is my suggestion. Keep it where it is.

Good luck

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Re: Whats the Best Investment in for My Needs?

Post by Dottie57 » Sun Dec 01, 2019 8:33 am

arca wrote:
Sat Nov 30, 2019 11:57 pm
Dottie57 wrote:
Fri Nov 29, 2019 4:15 pm
I would bump up stocks to 25-30% so that you can make a bit above inflation.
But inflation since 1980s has been historically low. Even since 2009 inflation has been on average 2.5%. So I dont think that may be a factor.
My Mom is very sorry she doesn’t have stocks. My dad wouldn’t purchase MF equities. Watching their portfolio go down has really caused my mom a lot of anxiety. Her portfolio of bonds still has a few paying between 5 and 8 percent.

I really think having slightly more in stocks would be beneficial. Not suggesting more than 25-30% for you.

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Re: Whats the Best Investment in for My Needs?

Post by snailderby » Sun Dec 01, 2019 9:50 am

arca,

Like others have said, you should focus on the overall risk of your portfolio as a whole, not the risk of each individual component. Take a look at this chart. The blue line is 100% stock. The red line is 20% stock / 80% bonds. The yellow line is 100% bonds.Would you be OK with the risk profile of the red line? If not, what about the yellow line? (The green line is CASHX. If you check the "Inflation adjusted" box beneath the chart, you'll see that a 100% CASHX allocation actually lost money after adjusting for inflation. I wouldn't recommend that.)

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Re: Whats the Best Investment in for My Needs?

Post by pkcrafter » Sun Dec 01, 2019 12:21 pm

acra, just a few more comments. First one is I don't think you are looking at allocation and risk in quite the right way. Mutual fund risk is measured by how often they fall and by how much (volatility/standard deviation). Vanguard will show these features as risk numbers. For instance, total stock market is a 4 out of 5. When you create a portfolio it will contain stocks, bonds and cash, and it is the overall risk number that you should look at. Consider these allocations from Vanguard and notice the number of years with a loss and worst lost.

https://personal.vanguard.com/us/insigh ... ns?lang=en

Second comment is I doubt you can maintain spending power of assets using only 20% stocks. It isn't enough to beat inflation. 30% might do it, but 35-40% is much better.

Third, using a fund of funds or a balanced fund will mask the stock volatility and drawdown due to the stock portion. Target and lifestrategy funds are good, but have quite a bit of international. Wellesley might fit your needs. It is 38% stock with a risk rating of 3.

https://www.morningstar.com/funds/xnas/ ... erformance

If that is still too high, add some bonds/cash to get the overall portfolio risk down to where you want it. It is the risk of the overall portfolio that matters. VG lifestrategy income is 20% stock with a risk rating of 2.

Every investing decision involves some compromise. Low risk rating is safer, but may not provide adequate portfolio sustainability. Higher risk portfolios will provide better return but more discomfort.


Paul
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Re: Whats the Best Investment in for My Needs?

Post by k3vb0t » Sun Dec 01, 2019 8:27 pm

I’m sorry if this is harsh but none of the allocation talk matters because of your small income. $80,000 with $433 per month adding for 20 years earning 3% (which you would be lucky to get after inflation) turns into $284,000... not enough.

I understand you won’t go into details of why you’re earning so little, but your biggest financial gain would come from dramatically increasing your income and not from your portfolio. $300/week is $7.50/hour at 40 hours per week... and you’re saying you can save $70-100 per week of that. Many things don’t add up here, but a simple jump to a $30k base job would double your income and, all things the same, enable you to invest $1,000 or more per month.

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Re: Whats the Best Investment in for My Needs?

Post by arca » Mon Dec 02, 2019 11:21 pm

dru808 wrote:
Sun Dec 01, 2019 12:28 am
Here’s an easy way of doing it. If you’re placing your risk level at 3 or less and that’s all you are deciding on, go with Wellesley or go with m1, no international 3 risk or less? 20/80 vti/vgsh.
Appreciate that. Whats m1?

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Re: Whats the Best Investment in for My Needs?

Post by arca » Mon Dec 02, 2019 11:26 pm

Dottie57 wrote:
Sun Dec 01, 2019 8:33 am

My Mom is very sorry she doesn’t have stocks. Her portfolio of bonds still has a few paying between 5 and 8 percent.
5 - 8% all in bonds is not bad.
I really think having slightly more in stocks would be beneficial. Not suggesting more than 25-30% for you.
I'd be open to 30% stocks if my employment were consistent and guaranteed. Since my future for employment is a bit shot I have to go for 20%. Its a matter of my circumstances disallowing opportunities such as this to flourish.

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Re: Whats the Best Investment in for My Needs?

Post by arca » Mon Dec 02, 2019 11:36 pm

snailderby wrote:
Sun Dec 01, 2019 9:50 am
arca,

Like others have said, you should focus on the overall risk of your portfolio as a whole, not the risk of each individual component. Take a look at this chart. The blue line is 100% stock. The red line is 20% stock / 80% bonds. The yellow line is 100% bonds.Would you be OK with the risk profile of the red line? If not, what about the yellow line?
Yes I see your point. I believe 30/70 stocks mix would looks better. I'll tinker with your chart link a bit with investments I have in mind to gauge where theyre at in relation to single investment components. Appreciate this.

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Re: Whats the Best Investment in for My Needs?

Post by dru808 » Mon Dec 02, 2019 11:40 pm

arca wrote:
Mon Dec 02, 2019 11:21 pm
dru808 wrote:
Sun Dec 01, 2019 12:28 am
Here’s an easy way of doing it. If you’re placing your risk level at 3 or less and that’s all you are deciding on, go with Wellesley or go with m1, no international 3 risk or less? 20/80 vti/vgsh.
Appreciate that. Whats m1?
It’s a broker. You won’t have to rebalance regularly, it will automatically add your contributions to the underperforming security. If you choose 20/80, it’ll kept you near 20/80 without you having to make your own adjustments. M1 finance.

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Re: Whats the Best Investment in for My Needs?

Post by dru808 » Mon Dec 02, 2019 11:49 pm

arca wrote:
Sun Dec 01, 2019 12:04 am
rkhusky wrote:
Sat Nov 30, 2019 9:55 am
And if you decide you want a bit more stock, Vanguard's Target Retirement Income is 30% stock, 70% bonds.
Very good choice. The only thing I dont like about it is that 15% on the bond side is international. If it werent for that I'd invest in it in a heart beat.
If that’s all that’s holding you back, you can build this fund with vanguard etf’s at M1 finance minus the international. Same stock to bond percentage, also dynamic and one click rebalancing.

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Re: Whats the Best Investment in for My Needs?

Post by arca » Tue Dec 03, 2019 12:00 am

k3vb0t wrote:
Sun Dec 01, 2019 8:27 pm
I’m sorry if this is harsh but none of the allocation talk matters because of your small income. $80,000 with $433 per month adding for 20 years earning 3% (which you would be lucky to get after inflation) turns into $284,000... not enough.
I kinda feel insulted by that. I wont go into my personal life. I have my reasons. If you consider the little income a man who is suffering in life has with problems YOU are lucky in life that YOU dont have you can just ignore my thread from now on. Big time.

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Re: Whats the Best Investment in for My Needs?

Post by arca » Tue Dec 03, 2019 12:02 am

pkcrafter wrote:
Sun Dec 01, 2019 12:21 pm
First one is I don't think you are looking at allocation and risk in quite the right way. Mutual fund risk is measured by how often they fall and by how much (volatility/standard deviation). Vanguard will show these features as risk numbers. For instance, total stock market is a 4 out of 5. When you create a portfolio it will contain stocks, bonds and cash, and it is the overall risk number that you should look at. Consider these allocations from Vanguard and notice the number of years with a loss and worst lost.
Appreciate your input pkcrafter. Your comment is a bit confusing. Throughout my thread I’ve been judging overall balanced investments by vanguard’s risk rating. But youre saying I’m not. I don’t get it.

As for the allocation tables you linked, the best risk tolerance for me considering my circumstances is either 20/80 stock or 30/70 stock, no more! Anything more than that is beyond the threshold of what my circumstances can contain. I cant control my circumstances at the moment.
I doubt you can maintain spending power of assets using only 20% stocks. It isn't enough to beat inflation. 30% might do it, but 35-40% is much better.
40% is risky for me considering my circumstances which revolve around any opportunities for future employment. That’s the problem.
Third, using a fund of funds or a balanced fund will mask the stock volatility and drawdown due to the stock portion. Target and lifestrategy funds are good, but have quite a bit of international. Wellesley might fit your needs. It is 38% stock with a risk rating of 3.
I think the Wellesley is a great fund too. But it contains international and I’m averse to international. If it weren’t for that I’d strongly consider it.

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Re: Whats the Best Investment in for My Needs?

Post by dru808 » Tue Dec 03, 2019 12:09 am

arca wrote:
Tue Dec 03, 2019 12:02 am
pkcrafter wrote:
Sun Dec 01, 2019 12:21 pm
First one is I don't think you are looking at allocation and risk in quite the right way. Mutual fund risk is measured by how often they fall and by how much (volatility/standard deviation). Vanguard will show these features as risk numbers. For instance, total stock market is a 4 out of 5. When you create a portfolio it will contain stocks, bonds and cash, and it is the overall risk number that you should look at. Consider these allocations from Vanguard and notice the number of years with a loss and worst lost.
Appreciate your input pkcrafter. Your comment is a bit confusing. Throughout my thread I’ve been judging overall balanced investments by vanguard’s risk rating. But youre saying I’m not. I don’t get it.

As for the allocation tables you linked, the best risk tolerance for me considering my circumstances is either 20/80 stock or 30/70 stock, no more! Anything more than that is beyond the threshold of what my circumstances can contain. I cant control my circumstances at the moment.
I doubt you can maintain spending power of assets using only 20% stocks. It isn't enough to beat inflation. 30% might do it, but 35-40% is much better.
40% is risky for me considering my circumstances which revolve around any opportunities for future employment. That’s the problem.
Third, using a fund of funds or a balanced fund will mask the stock volatility and drawdown due to the stock portion. Target and lifestrategy funds are good, but have quite a bit of international. Wellesley might fit your needs. It is 38% stock with a risk rating of 3.
I think the Wellesley is a great fund too. But it contains international and I’m averse to international. If it weren’t for that I’d strongly consider it.
If you have a risk rating of 4 on one fund, a risk of 2 on the other, both at 50% or 50/50, than your new risk would be a 3. This is a very layman/basic way of explaining it, if you’re going off of vanguards risk ratings, averaging.

You seem to have many constraints as to what you’re willing to invest in. The only way to get what you want, is to build your own portfolio, not using balanced funds from vanguard. A portfolio with no international, a risk of 3 or less, under 30% in stocks. I gave you a portfolio that meets your requests above, built on m1.

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Re: Whats the Best Investment in for My Needs?

Post by snailderby » Tue Dec 03, 2019 11:17 am

arca wrote:
Mon Dec 02, 2019 11:36 pm
Yes I see your point. I believe 30/70 stocks mix would looks better. I'll tinker with your chart link a bit with investments I have in mind to gauge where theyre at in relation to single investment components. Appreciate this.
A 30/70 split between VTSAX and VBTLX sounds reasonable. I realized that my last chart link didn't include a comparison with cash. This chart compares 100% VTSAX (the blue line), 30% VTSAX / 70% VBTLX (the red line), and 100% cash (the yellow line). Like you said, you can tinker with the exact ratio of stocks to bonds to find an asset allocation that you would be comfortable with, no matter what the market does tomorrow.

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Re: Whats the Best Investment in for My Needs?

Post by arca » Thu Dec 05, 2019 12:31 am

snailderby wrote:
Tue Dec 03, 2019 11:17 am
A 30/70 split between VTSAX and VBTLX sounds reasonable. I realized that my last chart link didn't include a comparison with cash. This chart compares 100% VTSAX (the blue line), 30% VTSAX / 70% VBTLX (the red line), and 100% cash (the yellow line). Like you said, you can tinker with the exact ratio of stocks to bonds to find an asset allocation that you would be comfortable with, no matter what the market does tomorrow.
Hi snailderby,

If I go for a 30/70 in a passively managed fund, would I be able to reallocate holdings whenever and to whatever I want later on? Any rules against that at vanguard?

.

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Re: Whats the Best Investment in for My Needs?

Post by arca » Thu Dec 05, 2019 12:57 am

dru808 wrote:
Tue Dec 03, 2019 12:09 am

If you have a risk rating of 4 on one fund, a risk of 2 on the other, both at 50% or 50/50, than your new risk would be a 3. This is a very layman/basic way of explaining it, if you’re going off of vanguards risk ratings, averaging.

You seem to have many constraints as to what you’re willing to invest in. The only way to get what you want, is to build your own portfolio, not using balanced funds from vanguard. A portfolio with no international, a risk of 3 or less, under 30% in stocks. I gave you a portfolio that meets your requests above, built on m1.
Hi dru808,

I'm not trying to be a hardhead which I feel you think I am. I'm willing to do 30/70 stocks. I value your opinion. But you have to understand that I've never invested before in this grey area of risk and inexperience given my circumstances. Respectfully I would appreciate a good measure of understanding. I'm still interested in balanced funds and in your opinion.

Btw, whats m1? Is that an online investment tool?

.

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Re: Whats the Best Investment in for My Needs?

Post by Outer Marker » Thu Dec 05, 2019 6:17 am

Vanguard's model porfolio allocations may help you better understand:
https://personal.vanguard.com/us/insigh ... ns?lang=en

As pointed out, the equity side of the portfolio is always going to be high risk and have its ups and downs, but that is balanced out by the heavy allocation you are making to bonds.

If you can't bear to see the equity side bouncing up and down, you may be better off with something like LifeStrategy Income, which has this same thing going on internally but shields it from plain view on your monthly statements. My mom needed this to avoid panic selling of equities on market dips:

https://investor.vanguard.com/mutual-fu ... view/vasix

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Re: Whats the Best Investment in for My Needs?

Post by snailderby » Thu Dec 05, 2019 9:46 am

arca wrote:
Thu Dec 05, 2019 12:31 am
Hi snailderby,

If I go for a 30/70 in a passively managed fund, would I be able to reallocate holdings whenever and to whatever I want later on? Any rules against that at vanguard?
I should have been more clear in my last post. When I said you can tinker with the exact ratio of stocks to bonds to find an asset allocation that you're comfortable, I meant you can model several asset allocations on Portfolio Visualizer to see how they would have performed in the past, before you settle on an asset allocation to use in real life.

To answer your question, though, yes, if you hold VBTLX and VTSAX at Vanguard, you can always sell one fund to buy more of the other fund later on, if you want to change your asset allocation. However, there may be tax consequences if you buy and sell too frequently in a taxable account. Short-term capital gains will generally be taxed at your ordinary income tax rate while long-term capital gains will generally be taxed at the long-term capital gains rate. See https://www.investopedia.com/articles/p ... -rates.asp.

Alternatively, you could hold a two-fund portfolio at M1 Finance instead of Vanguard, like dru808 suggested. M1 Finance allows you to purchase ETFs Vanguard, iShares, SPDR, and many other companies, without an annual AUM fee. (Here are their fees.)

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