25 years old no debt portfolio - first timer!

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dmart
Posts: 1
Joined: Sun Dec 01, 2019 6:20 pm

25 years old no debt portfolio - first timer!

Post by dmart » Sun Dec 01, 2019 6:52 pm

I am trying to set and forget my portfolio. I would want to buy a house in 3+ years:

Emergency funds: 5K high yield savings account

Debt: zero debt (paid off 25K of student loans, no car payment)

Tax Filing Status: Single

Tax Rate: 25% Federal, 0% State

State of Residence: FL

Age: 25

Current retirement assets

Company 401K - $20,400 (7% company match)
80% - FID 500 index (.015%)
20% - JDMNX (Mid cap growth) (.66%)

Roth IRA - $24,300
100% - SMH (semiconductor ETF) (.35%)

Taxable Account - $45,000 + $8,000 CASH MONEY MARKET

10% -FREL (REIT) .084%
10% - FIGFX (INTERNATIONAL) .95%
25% - FUTY (UTILITIES ETF).084%
25% - IHI (MED DEVICE ETF).43%
30%- SOXX (SEMICONDUCTOR ETF) .46%


Questions:
1. Should i consolidate my US equities to just IHI and SOXX? what are your thoughts on 70% - US 10% international 10% REIT?

2. is having my ROTH IRA in 100% semiconductor too risky?

lotusflower
Posts: 255
Joined: Thu Oct 24, 2013 12:32 am

Re: 25 years old no debt portfolio - first timer!

Post by lotusflower » Sun Dec 01, 2019 8:24 pm

Hi dmart, welcome to the forum and congratulations for being free of debt at a young age, I hope you can stay that way.

Can you explain why you want to focus your investments in a particular market sector (semiconductors and medical devices)? I don't think you will find much support for that here though of course carry on if it makes you happy. This early in your investing career you can make mistakes and it won't be a big deal in the long run. I was long in semiconductors and fiber optics at one point but I managed to do okay in the long run in spite of severe losses there. If you work in either of those industries then I would change strategies immediately to avoid having all eggs in one basket.

The basic bogleheads idea is to take an even simpler approach than what you have done and try to index on the broad market. The way I see it you are adding risk by specializing but it's not clear your likelihood of extra reward compensates you for that risk. Presumably everything known about the short- and long-term prospects of those sectors is already priced into the stocks and by aggregation, priced into the ETFs as well. Again if you like those sectors, forge ahead, but you haven't presented a rational reason for doing that.

Generally investment strategies are for long-term investing so your desire to buy a house in the short- or medium-term has no bearing on your strategy. Save as much money as you can stand to, and keep it in conservative investments like CDs if you want to buy a house with it.

retired@50
Posts: 628
Joined: Tue Oct 01, 2019 2:36 pm

Re: 25 years old no debt portfolio - first timer!

Post by retired@50 » Sun Dec 01, 2019 8:30 pm

You seem to be picking and choosing certain parts of the market to invest in with specific ETFs. I wouldn't do this. I'd recommend using the total market approach, part U.S. Stock, part International stock, part Bonds. Consider VTI, VXUS, and BND. These would be the recommended ETFs for retirement money. Choose your asset allocation and use the 3 fund approach to enact your vision. If you're determined to use a REIT, then I'd suggest using VNQ since it's a REIT index ETF.

For housing down payment, use a money market fund or certificate of deposit (CD) or a very short term bond fund.

Regards,

HomeStretch
Posts: 2894
Joined: Thu Dec 27, 2018 3:06 pm

Re: 25 years old no debt portfolio - first timer!

Post by HomeStretch » Sun Dec 01, 2019 8:32 pm

Welcome! It’s great that you are saving and debt free.

What is the reason behind investing in sectors?

Your portfolio could be simpler, lower cost and more diversified if you used a US Total Stock Market Fund/ETF (which includes REITs), an International Total Stock Market Fund/ETF and, when you decide to add bonds to your asset allocation, a US Total Bond Fund.

Here is a link to the BH wiki page about 3-Fund Portfolios:
https://www.bogleheads.org/wiki/Three-fund_portfolio

Grt2bOutdoors
Posts: 21468
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: 25 years old no debt portfolio - first timer!

Post by Grt2bOutdoors » Sun Dec 01, 2019 8:37 pm

dmart wrote:
Sun Dec 01, 2019 6:52 pm
I am trying to set and forget my portfolio. I would want to buy a house in 3+ years:

Emergency funds: 5K high yield savings account

Debt: zero debt (paid off 25K of student loans, no car payment)

Tax Filing Status: Single

Tax Rate: 25% Federal, 0% State

State of Residence: FL

Age: 25

Current retirement assets

Company 401K - $20,400 (7% company match)
80% - FID 500 index (.015%)
20% - JDMNX (Mid cap growth) (.66%)

Roth IRA - $24,300
100% - SMH (semiconductor ETF) (.35%)

Taxable Account - $45,000 + $8,000 CASH MONEY MARKET

10% -FREL (REIT) .084%
10% - FIGFX (INTERNATIONAL) .95%
25% - FUTY (UTILITIES ETF).084%
25% - IHI (MED DEVICE ETF).43%
30%- SOXX (SEMICONDUCTOR ETF) .46%


Questions:
1. Should i consolidate my US equities to just IHI and SOXX? what are your thoughts on 70% - US 10% international 10% REIT?
No, you should liquidate your ETF bets and hold a 3 Fund portfolio. 42% of your total portfolio is concentrated in semiconductors.
That's not a diversified portfolio.

2. is having my ROTH IRA in 100% semiconductor too risky?
Yes, essentially you are gambling with the most valuable space - tax free bucket. You are looking for the quick score, you can also get burnt. IMO, I would liquidate that holding and invest it in a 3 Fund Portfolio - VTI, VXUS and a small bond holding (10 or 20%).
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

snailderby
Posts: 453
Joined: Thu Jul 26, 2018 11:30 am

Re: 25 years old no debt portfolio - first timer!

Post by snailderby » Mon Dec 02, 2019 10:35 am

Welcome to the forum, and congratulations on paying off your student loans! You're off to a great start.
dmart wrote:
Sun Dec 01, 2019 6:52 pm
Company 401K - $20,400 (7% company match) A 7% company match is great. Do you contribute enough to your 401(k) to get the full match every year?
80% - FID 500 index (.015%) This is a great, low-cost, broadly-diversified fund.
20% - JDMNX (Mid cap growth) (.66%) Do you have other options in your 401(k)?

Roth IRA - $24,300
100% - SMH (semiconductor ETF) (.35%) I would swap this for a broadly-diversified ETF rather than put all of your bets in one small subset of one specific sector. SMH has 65% of its value in just 10 companies, all of which are concentrated in one specific industry.

Taxable Account - $45,000 + $8,000 CASH MONEY MARKET

10% -FREL (REIT) .084% FREL is a fine choice for an REIT fund.
10% - FIGFX (INTERNATIONAL) .95% Why FIGFX instead of FTIHX or IXUS?
25% - FUTY (UTILITIES ETF).084% See above. Don't put all of your bets in one sector.
25% - IHI (MED DEVICE ETF).43% See above. Don't put all of your bets in one sector.
30%- SOXX (SEMICONDUCTOR ETF) .46% See above. Don't put all of your bets in one sector.


Questions:
1. Should i consolidate my US equities to just IHI and SOXX? No. See above. what are your thoughts on 70% - US 10% international 10% REIT? I would probably bump up the international allocation to 20%-33%, but this is a frequently debated topic on this forum. Also, did you make an intentional decision not to hold any bonds? A 100% stock allocation is probably fine at your age, but only if you are OK with your portfolio dropping in value by 50% or more at some point.

2. is having my ROTH IRA in 100% semiconductor too risky? Yes. See above.

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