Need investment advice

[bhamerica]

If you’ve got the time and motivation to learn about investing, the recommended reading list is great.

However, for the vast majority of people that don’t, a Target Date index retirement fund is a good default solution and is far better than what you’re doing.

I will second this comment of target date funds. Has been a month since I looked at returns in my accounts. However we are roughly the same age. I did not know a ton about investing other than target date funds are a good option until 3 years ago or so. Used target date funds except in my wife’s 401k where the only fund had an ER of >1. Personal annnualized rate of return in 4 different accounts using target date funds (and approximation in 1) was I believe 12.7%, 14.2%, 11.?% and 9.?% nominal. Only difference was the random timing of when funds were available and went into the account (and in the case of the lowest account that I forgot to actually purchase the mutual fund after doing the Backdoor Roth for > 1year two years in a row. Oops- but demonstrates time in the market is key factor)

Also as others have said, don’t try to pick the winners. Your list of picks is very narrow and if I looked them up correctly had a lot of precious metals which i don think evidence supports as a good long term investment. Hope that helps. Don’t look for the needle. Buy the haystack.

So you have had good luck in the target date funds? I think I had invested in Fidelity's target date funds, and I didn't do too well, although this was many years ago. Maybe I should invest in those again. Which ones are you using currently? Those are some really good rates of returns.

[bhamerica]

(I've edited this post so there is nothing controversial in it.)

I woke up today, and found that I was 42. I have a problem.

I saved for quite awhile, but the whole compounding interest thing didn't work for me.

It works great if you actually make 10% on your investment. However, I realized after saving for however many years, the investments that a firm told me to invest in didn't make anywhere near 10% returns. In fact, most of the investments lost money over time. I was young and naive at the time, and I thought if I followed the financial institutions advice, I would magically have a million dollars by the point that I retired. It didn't work out the way they said that it would.

At that point, I said screw it. I'm not saving my hard earned money to lose it, so I stopped my 401k altogether.

I didn't see the point in losing my hard earned money.

So now I'm 42, and I only have 100k saved for retirement.

I'm supposed to have 600k saved for retirement by the time I'm 50. That's 8 years away. There's really no conceivable way I can make 1/2 a million with my current job. I probably take home 80k after taxes.

But, in any case, I'm thinking that I should start saving for retirement again. I just need to make sure that I'm at least making 10% on my investment per year.

I have no clue what to invest in that would yield 10%. To be perfectly honest, I'm scared to invest the money that I do have in my 401k because I fear that I may lose it. I have been burnt on this stock market stove so many times, it's difficult to touch it again.

I can google how to save for retirement until my fingertips go numb, but I find that most of the information available on the subject does not pan out in the real world.

I need some real world advice from people who have had success in saving for retirement. I've lost all trust in financial institutions. They wasted 10 years of my life by losing hard earned money, and gave me a tremendous set-back. Not sure how to make up the time and savings at this point in the game.

At a 10% investment growth rate and starting with $100k you would need to contribute $35,000 per year in new money to achieve a $600,000 balance by age 50. These numbers help frame the goal.

Suggestions:
- save the max possible in the 401k (you knew this already)
- increase your salary (promotion, change companies, change occupations) so that you can increase the 401k contribution

Holy smokes! I would need to invest 35k per year to reach 600k? Jeez. That's not going to happen. Thanks for calculating that out for me. It really puts it into perspective.

My current company uses Voya. They said I should be contributing 12%. They said people in my circumstance who make between 160k and 500k are contributing 12%.

I don't know what people are doing to make 500k a year. Clearly I'm not in the correct profession.

Unfortunately, I'm so old at this point, it would probably be hard to change professions. Not to mention, I don't know what profession would pay 500k per year. If I knew that, maybe I'd look into it.

If I'm going to be perfectly honest, I'm a bit nervous about the future of the dollar, and society as a whole. I'm not sure where this boat is headed. When I read things about the BRICS nations teaming up against the dollar, and destroying the petrodollar status, it makes me wonder how much time and energy I should invest in saving dollars. Is it too late to get into this game? Is the world going to change so drastically that it doesn't make sense to pursue a different line of work at this point? These are the contradictory voices arguing in my head. I've been confused since day 1. I think if this was the 1950s and society was stable, it would be much easier to make a plan and go with it, but society is very chaotic in this day-in-age. But, even with that said, if you don't have a plan, you should plan to fail.

[bhamerica]

You are getting lots of very good advice here.

How much 'hands on' do you want to be with your investing? Would you rather we simply tell you what to do (based on our own biases; Taylor Livermore gave you the best advice in that venue) or are you willing to spend some time learning the 'why' we do what we do so you can formulate your own plan?

If you want everything to be pretty much be on autopilot, then the suggestions of a target date fund or life strategy fund are your best bet; they are set-and-forget. If you are willing to twiddle the knobs then individually chosen stock mutual funds or ETFs and individually chosen bond mutual funds or ETFs are better. Notice I did not mention 'individual stocks' or 'individual bonds'. We lowly investors are better served by funds.

There are lots of fine-tuning nuances that can be applied to investing but aren't necessary to a very adequate success. Savings rate trumps detailed specificity.

So how much of a deep dive interests you?

@BolderBoy - That's a good question. I guess the answer to the question can only be answered if I knew where each road would take me to. If I would be significantly better off tweaking my own plan, then it would be worth the time and energy to put forth the effort. If it doesn't really make sense, and it's better to go on autopilot, and I'd pretty much end up in the same situation as the tweaking strategy, then I suppose autopilot is the better option.

In some ways, I feel like I already chose the autopilot option, and it flew me into the side of a mountain. So maybe it's better to take a more hands-on approach. I didn't even realize that financial institutions were charging those maintenance fees. If I was making 10% or even 5%, (and not losing money year over year) then I wouldn't even bother digging into this material. The problem is that the story that I was fed, did not pan out to be the reality. So now I'm feeling like I need to take a more hands-on approach in order to be able to retire at some point in my life.

My dad was telling me a story about this guy he worked with at Digital Equipment Corporation. The guy had a good job, similar to my dad, but he never saved for retirement. He worked at Digital for 40 years, and eventually got laid off. Once that happened, he couldn't find another job. He had to sell his house in the suburbs and buy an apartment in the city and now he works for a grocery store at age 80. I don't want to be that guy. I feel like I'm heading down that road though. I need to get myself back on the right track. I'm just trying to figure out what the best way to get back on track is. I know that I'm old at this point. 42 is not a spring chicken. I'm not sure how a 42 year old guy gets back on track for retirement. There's probably a right way to do this and a wrong way to do this. Just trying to figure out which path is the best. .... And what my options are at this point.

[evelynmanley]

Highly recommended:

PBS Frontline "The Retirement Gamble"

https://www.pbs.org/wgbh/frontline/docu ... nt-gamble/

It's an older Frontline episode, but just as pertinent today as ever.

[bhamerica]

Did not read all the posts. You cannot 'make 10% every year.'

at 40 I had not saved a dime, got a job with a 401k with a match, put in enough first year to get the match, then got to 15% in the second year, stayed at 15%, invested in all stocks (did not have a stock index fund in my 401k choices then), went to stock index funds later. Some years the market went up, some years flat or down, i stayed the course. The dollars i put in in the first year are now worth 25x (10.38% compound annual growth rate). More than 30 years later I have a very nice nest egg, will not ever run out of money.

There were bad years (think dot com crash, 2009, 2020, ...), there is no guarantee that the market will continue to return 10% cagr, there was no guarantee when i started investing 30+ years ago. I do not necessarily advise to be 100% stocks but i was more aggressive than most.

@niagara_guy - Wow. That's very encouraging. So you started investing at age 40 with 0, and you were able to retire with a nest egg? I am only contributing 7% through Voya right now. Maybe I should scoot this savings rate up.

[bhamerica]

I think you need to slow down and educate yourself through your own reading. Don't make any changes until you understand why you are making them and if you are willing to commit to a strategy.
I do fear you may miss the good advice provided here without the base of knowledge of personal finance. Once you understand Stocks, Bonds, Risk/Reward, Asset Allocation, Fees/Costs, Behavioral Finance, and what long term success looks like-etc-- THEN the advice will make much more sense.

I would read --
"The Little Book on Common Sense Investing"- Bogle
"A Simple Path to Wealth" - Collins

Then come back and reread the advice.

Best Wishes

@soccerrules - I picked up A Simple Path to Wealth on Amazon.

I'll give that a read.

I really appreciated all of the advice that everyone is offering to me. Thanks for taking the time!

[bhamerica]

I think you need to slow down and educate yourself through your own reading. Don't make any changes until you understand why you are making them and if you are willing to commit to a strategy.
I do fear you may miss the good advice provided here without the base of knowledge of personal finance. Once you understand Stocks, Bonds, Risk/Reward, Asset Allocation, Fees/Costs, Behavioral Finance, and what long term success looks like-etc-- THEN the advice will make much more sense.

I would read --
"The Little Book on Common Sense Investing"- Bogle
"A Simple Path to Wealth" - Collins

Then come back and reread the advice.
Best Wishes

I think this is a fitting conclusion to the excellent advice on this thread and a good reason to advise that the OP now "slow down and educate" by reading these great books and then, with that educated viewpoint, go over that advice and decide what is right for his own unique needs.

Yes. I agree. I appreciate all of this advice.

I like a "simple" path to wealth. I find a simple plan is more likely to succeed than a complex plan.

[bhamerica]

Your time frame is not long enough to see the impact of compounding.

Start with 100k and add 1k per month for 20 years and you’ll likely have a million if you stick with the simple BH portfolio and don’t outsmart yourself.

https://www.portfoliovisualizer.com/mon ... unt=100000

Is there specific stocks that you invest in through the BH Portfolio? Looks like 70% stocks and 30% bonds. Not sure which ones to select though. I guess that's up to me to decide.

[FIRWYW]

If you’ve got the time and motivation to learn about investing, the recommended reading list is great.

However, for the vast majority of people that don’t, a Target Date index retirement fund is a good default solution and is far better than what you’re doing.

I will second this comment of target date funds. Has been a month since I looked at returns in my accounts. However we are roughly the same age. I did not know a ton about investing other than target date funds are a good option until 3 years ago or so. Used target date funds except in my wife’s 401k where the only fund had an ER of >1. Personal annnualized rate of return in 4 different accounts using target date funds (and approximation in 1) was I believe 12.7%, 14.2%, 11.?% and 9.?% nominal. Only difference was the random timing of when funds were available and went into the account (and in the case of the lowest account that I forgot to actually purchase the mutual fund after doing the Backdoor Roth for > 1year two years in a row. Oops- but demonstrates time in the market is key factor)

Also as others have said, don’t try to pick the winners. Your list of picks is very narrow and if I looked them up correctly had a lot of precious metals which i don think evidence supports as a good long term investment. Hope that helps. Don’t look for the needle. Buy the haystack.

So you have had good luck in the target date funds? I think I had invested in Fidelity's target date funds, and I didn't do too well, although this was many years ago. Maybe I should invest in those again. Which ones are you using currently? Those are some really good rates of returns.

Actually- looks like I listed wrong. Just looked this morning to confirm and not sure what I was looking at before (may have been last year or 3 years). Annualized rate of return from purchase is actually 7.7 to 10.9 depending on the account. Sorry for leading you astray but still good returns for “brainless investing.”


Vanguard 2045 and 2050 depending on the account The higher initially was initially all AOA, the. S&P 500. since those were the only “decent” chooses in that 401k (AOA I don’t understand front loading so lost some there). And yes some of that IRR is just luck of timing (not intentional timing) of contributions. In addition I got really lucky (and I emphasize lucky) that for one account I had all midcap index for 2 really good years.

[bhamerica]

I have no clue what to invest in that would yield 10%.

Neither does anyone else.

I've had success, but it doesn't come without some painful market downturns from time to time. The idea you're going to have to get used to is that you can't control the stock market. You have to resign yourself to accepting the returns that stock and bond markets provide. It's an uncertain proposition that typically works if you hold on for long enough. What you can control is your savings rate, your asset allocation, and, hopefully, your behavior. Bad behavior by investors is the biggest problem for most people. It's really hard to keep your cool, but that's what successful investing requires.

Consider doing some reading. Head down to your nearest public library and look for any of these books in the link below.
https://www.bogleheads.org/wiki/Book_re ... nd_reviews

Regards,

I'm not going to lie. I have bad behavior when it comes to the stock market. I buy high and sell low. I have had a couple instances where I've made money, but I've probably lost more money than I've made. I view the stock market like playing craps in Vegas. To me it seems like gambling.

This group is (generally) about methods of investing that are very unlike gambling. I have one simple belief: the stock market will be higher when I retire than it is now. There’s a lot of history to support that belief. However, the past is the past, so there is still a little leap of faith.

Given that simple belief, I invest a couple times a month in a low cost Total Stock Index fund (VTSAX to be exact). I pay no attention to anything with it, it’s all automatic. I do check my account quite often, but I have been at for a couple decades, and I have experienced major downs and some really nice ups, so I can be trusted to ignore that and just let the system churn along.

Good luck, still plenty of time for you. Get a plan together you will stick to. This group will help. These folks are incredible.

Thanks Silverado - I'll take a look at VTSAX.

[Doctor Rhythm]

Is there specific stocks that you invest in through the BH Portfolio? Looks like 70% stocks and 30% bonds. Not sure which ones to select though. I guess that's up to me to decide.

The forum thinks you should buy all the stocks. I have around 10,000 companies in my portfolio, which is excess of 95% of the investable market.

Are you familiar with the concept of mutual funds or exchange traded funds (ETF) and index (also called “passive”) investing? That’s a pretty basic core principle of Boglehead philosophy.

[arcticpineapplecorp.]

Wow! That's crazy. Thanks for providing that chart. So these financial institutions are actually stealing people's retirement savings. No wonder I never made any gains keeping money in Fidelity.

Is there a way to "decouple" your 401k from a financial institution so you don't have to pay these fees? Can it exist independent from a financial firm?

(And I apologize if someone already answered this question, because I haven't read to the end of this thread.)

I'm going to purchase John Bogle's book now off of amazon and give it a read. Thanks for the advice!!!

you're welcome. And welcome to the group.

let me speak to a few things you wrote here and elsewhere:

1. It has generally been true that stocks have gotten higher returns than bonds. This should be expected because you're taking greater risk with stocks than bonds (or perhaps I should say stocks are more volatile than bonds). Regardless, the reason that stocks have higher expected returns than bonds is to compensate you for taking the extra risk. That being said, there have been times, and long stretches where bonds beat stocks. So you should understand that. Might not happen again in our lifetime. This happened during the period when interest rates were double digit in the 80s and came down to 0% during the Great Recession and thereafter. So a couple decades of falling rates means rising profits for bond holders.

Also along these lines there can be shorter time periods where bonds might do better than stocks and you still might lose faith because many people tend not to be all that patient. You have to understand that investing is a marathon, not a sprint. And you have to accept that the markets will give you what they will. You have no control over that. So focus on what you can (your savings rate, working longer, keeping household and investment expenses low, increasing your income, etc) and don't worry about what's outside your control because you can't do anything about that anyway. And understand that if you have a mix of stocks and bonds you'll be holding some asset that is likely to do well even when other assets might not. That's the beauty (but also the difficulty) of diversification, which means always having to say you're sorry (generally things don't always go down at the same time, but they don't always go up together either).

Also, luck plays a big part in how well or poorly you do. You can see by the chart below that the returns you get depend a lot on when you start and stop investing. The results can vary a lot just by starting/ending one year earlier or later:



source: https://archive.nytimes.com/www.nytimes ... pe=PAYWALL

2. Regarding financial institutions "stealing" people's retirement money, well that's one way to look at it. I'm sure they think they're working hard to provide services, keep you on course, do the work you might not be willing to do yourself, etc. But yes, financial institutions are a little like sharks. They'll take whatever you give them. William Bernstein said it best in his short 16 page "booklet", If You Can: How Millenials Can Get Rich Slowly warning his readers to:

Act as if every broker, insurance salesman, mutual fund salesman and financial advisor you encounter is a hardened criminal.

3. Now I'm a little confused as to where your investments are held. You mention Fidelity which, while they may have managed accounts that will cost you more, Fidelity tends to be one of the trusted institutions. But you also say you're with LPL. So I'm not sure what/where your money is invested and what you're getting for that. You'd have to be a little more clear about that.

Again, one of the reasons you may not have made money is if you had a lot of your money sitting in cash and/or if the stocks you own didn't do well (or as well as the market). You have to dig into the details to see why you didn't make money which could be because of a variety of factors (in life the answer isn't usually just one thing). If you have an advisor you're paying for, why wouldn't you ask/complain to them about why you didn't make the money you thought you should and what can be done about that?

4. With regards to "de-coupling" your 401k from a financial institution so you don't have to "pay these fees" first off:

a. find out if you're in some kind of managed account and whether you can opt out of that. My plan gives me the option of managed account for a fee which I naturally decline. Perhaps you inadvertantly signed up for that?

b. a 401k's fees aside from a managed account are set by the employer and the 401k administrator. Here's an example of how my fees changed a couple years ago:



notice how the administrative fees are separate from the expense ratio (highlighted area). There's nothing you can do about the fees, except to pick the lowest expense ratio funds you can. And if you have an option to do any kind of in service rollover to an outside plan (like a IRA), you could look into that. Or just move your money to a Rollover IRA at a cheaper company like Vanguard when you separate from employment. That's what I did with my last 2 employers years ago.

make sense? questions?

[placeholder]

The whole point of the mega backdoor Roth is that an employee makes significant after-tax contributions and then immediately pulls them out as a non-hardship in-service withdrawal into a traditional IRA where they are converted to a Roth IRA.

After tax contributions are not elective deferrals.

[bhamerica]

https://www.pbs.org/wgbh/frontline/docu ... nt-gamble/

Great video. At 21:00 minute in, he hits my problem. Why isn't my 401k going up?

[evelynmanley]

https://www.pbs.org/wgbh/frontline/docu ... nt-gamble/

Great video. At 21:00 minute in, he hits my problem. Why isn't my 401k going up?

It's disheartening that that documentary was made in 2015 and it still applies today.

[bhamerica]

https://www.pbs.org/wgbh/frontline/docu ... nt-gamble/

Great video. At 21:00 minute in, he hits my problem. Why isn't my 401k going up?

It's disheartening that that documentary was made in 2015 and it still applies today.

Yes. I was shocked to see the year that it was published. I am also shocked that I have never seen it, and it has not been more widely distributed.

EVERY American should watch that video. It's insane.

It actually makes me extremely angry. First companies get rid of pension plans because (1) they are greedy (2) they find it too complicated to figure out how to pay pensions. So they figure they'll keep the profits and avoid the headache, and let busy workers figure out retirement for themselves, because they can't figure it out for them. What chance does Joe Schmo have to figure out his own retirement planning, while he's busy working at a 9-5 job, while the company has full-time, paid employees who should be figuring this out for the benefit of all employees at the company.

So, in any case, they do away with pensions.

Then they say to workers --- here, you do it. Figure out your own retirement with this 401k thing that you don't really understand.

That worked well for a decade or two while the market was in a constant, steady bull market. However, when the bubbles started to pop (when politicians started shipping our manufacturing jobs to China), the stock market crashed, and it wiped out people's savings overnight.

So people save whatever pennies they can, after paying for car insurance, taxes, mortgage, student loans, groceries, heat, electric, ect. They take those pennies and are willing to not spend it on something they need or want, but instead take it to invest in their future. Then these sneaky banks steal the small profit margin that they're supposed to be making on their pennies, and lie and deceive them while they're doing it. So 10 or 20 years go by, and they haven't made the profit that they were promised, because the banksters stole it from them through fees hidden in fine print in a 10000 page document.

Frankly.... It's EVIL. It's a very evil thing to do to hard working people.

Then these poor people can never retire.

I hope people share this video link far and wide. People need to be informed about what's going on.

[vnatale]

I think you need to slow down and educate yourself through your own reading. Don't make any changes until you understand why you are making them and if you are willing to commit to a strategy.
I do fear you may miss the good advice provided here without the base of knowledge of personal finance. Once you understand Stocks, Bonds, Risk/Reward, Asset Allocation, Fees/Costs, Behavioral Finance, and what long term success looks like-etc-- THEN the advice will make much more sense.

I would read --
"The Little Book on Common Sense Investing"- Bogle
"A Simple Path to Wealth" - Collins

Then come back and reread the advice.

Best Wishes

@soccerrules - I picked up A Simple Path to Wealth on Amazon.

I'll give that a read.

I really appreciated all of the advice that everyone is offering to me. Thanks for taking the time!

Since you have here
revealed yourself to be a book reader I cannot Recommend any more strongly that you also acquire William Bernstein's second edition of the 4 pillars of investing.

[Doctor Rhythm]

It actually makes me extremely angry… (rant truncated for brevity and forum rules)

While I understand your frustration, I think it places too much blame on outside factors and uncontrollable factors like market swings, and therefore leads to an overly pessimistic outlook.

To make this actionable, I would emphasize that steep declines are completely expected and not a reason to avoid putting money into retirement accounts. Those of us who have been in the market since the 1990s or longer have seen big changes in industry and labor, weathered through multiple recessions and bear markets, watched our portfolios rise and fall, and we are basically doing more than fine. Averaged out, we’ve had close to 8% annual growth in stocks this century - despite the 2000 .com meltdown, 2008 global financial collapse, 2020 pandemic crash, and whatever we’re calling 2022.

I would also emphasize that very little knowledge is needed to invest wisely; it isn’t something just for the cognoscenti. This is one of the often repeated points on this forum. For those with the time and ability to learn about it, those relatively short books discussed on this thread are adequate. For others without the ability or inclination to DIY, a target date fund in their 401k is perfectly cromulent.

The expectation for retirement savers should be financial security and success, not failure or poverty.

[Outer Marker]

So you have had good luck in the target date funds? I think I had invested in Fidelity's target date funds, and I didn't do too well, although this was many years ago. Maybe I should invest in those again. Which ones are you using currently? Those are some really good rates of returns.

Fidelity has two types of Target Date funds - one is made up of active funds and is much more expensive. The other is a target date index fund. You want the index variety. All of Vanguard's target date funds are index, as are their Lifestrategy funds, which are set to a given risk and don't change over time, which could be something to consider.

It doesn't really matter which brand you use. The "good" or "bad" rate of returns produced by index funds are simply a reflection of what the markets as a whole were doing at the time. This board is made up mostly of die hard indexers who don't try to pick "good" stocks or "good" funds - but own the haystack by buying funds that represent the entire market.

[ReadyOrNot]

Learn enough to avoid making big mistakes.
But you really don't need to do much to retire. You seem to be earning enough to be paying the maximum into Social Security. If you get near the maximum Social Security benefit, you can probably retire just on that.

I think most 401k plans now are supposed to put participants by default into decent choices -- enough to get the company match and into an appropriate low-cost target date fund. When you learn enough, you probably should try to save the maximum allowed in your 401k, including the extra catch-up amount when you are 50 or older -- in low-cost broad market index funds. If you deal only with low-cost institutions, there should not be any outrageous maintenance fees. But be careful not to sign up for optional plans which may charge high fees.

The majority of Americans may retire just on Social Security and modest retirement savings -- they make it. You can easily have higher-than-average Social Security and savings.

[bhamerica]

4. With regards to "de-coupling" your 401k from a financial institution so you don't have to "pay these fees" first off:

a. find out if you're in some kind of managed account and whether you can opt out of that. My plan gives me the option of managed account for a fee which I naturally decline. Perhaps you inadvertantly signed up for that?

b. a 401k's fees aside from a managed account are set by the employer and the 401k administrator. Here's an example of how my fees changed a couple years ago:



notice how the administrative fees are separate from the expense ratio (highlighted area). There's nothing you can do about the fees, except to pick the lowest expense ratio funds you can. And if you have an option to do any kind of in service rollover to an outside plan (like a IRA), you could look into that. Or just move your money to a Rollover IRA at a cheaper company like Vanguard when you separate from employment. That's what I did with my last 2 employers years ago.

make sense? questions?

Thank you for this explanation.

Yes, I have 2 questions.

I have received Bogle's book, and I've been reading through it. I'm about half way through. So far he has just been hammering home the need to invest in Index Funds and the need to reduce fees as much as possible. He may get into other topics later, or he may answer my questions later.

But, I guess the two biggest questions that I have are:

1. Which index funds should I purchase (that don't have fees)? (I had looked at VOOG awhile ago. I'm not sure if this is an index fund. I think it's suppose to represent the S&P as a whole. But I'm not sure if this qualifies as an index fund.)

2. Which financial institution should I use to keep fees low or null? Is Fidelity a good financial institution as far as fees are concerned? Honestly, I don't even know where to dig into the fine print to figure out what fees they're charging. Maybe it's on a statement somewhere.

I want to implement Bogle's strategy to the letter, but so far he has not explained the steps to do this. Maybe he will as I read further along.

Thanks again for all your help!!

[mdigital]

Okay, you've outlined the problem. We need more info to tailor our recommendations to your situation.

Please post using this as your guide: viewtopic.php?t=6212

And welcome to the forum.

Thanks @bolderBoy

Here is my current retirement situation:

Emergency funds: I currently have maybe 10k in emergency funds.

Debt: No Debt

Tax Filing Status: Single

Tax Rate: xx% Federal, xx% State <-- Hmm. Not sure. I make 130k at my current job

State of Residence: Massachusetts

Age: 42

Desired Asset allocation: Not sure

Roth IRA: 42,403.62 (17k in cash not invested)
DVN - 100 shares
HBM - 100 shares
OR - 100 shares
REK - 60 shares
TMQ - 2000 shares
VOOG - 21 shares

Rollover IRA: 27,244.53 (22k in cash not invested)
DRV: 4,878 (100 shares)

Roth in another account: 45,103.49 (30k in cash not invested)

Assuming 20 more years of work, you have no debt and dont plan on acquiring any, no kids, and assumably low expenses, then max out 401k @22k a year in S&P 500, max out HSA if you are eligible (same fund), max out Roth each year, and open brokerage and add extra cash to another low cost broad market stock mutual fund. 10 years from now you will be sitting on a big pile of cash. Just dont sell!!

[arcticpineapplecorp.]

4. With regards to "de-coupling" your 401k from a financial institution so you don't have to "pay these fees" first off:

a. find out if you're in some kind of managed account and whether you can opt out of that. My plan gives me the option of managed account for a fee which I naturally decline. Perhaps you inadvertantly signed up for that?

b. a 401k's fees aside from a managed account are set by the employer and the 401k administrator. Here's an example of how my fees changed a couple years ago:



notice how the administrative fees are separate from the expense ratio (highlighted area). There's nothing you can do about the fees, except to pick the lowest expense ratio funds you can. And if you have an option to do any kind of in service rollover to an outside plan (like a IRA), you could look into that. Or just move your money to a Rollover IRA at a cheaper company like Vanguard when you separate from employment. That's what I did with my last 2 employers years ago.

make sense? questions?

Thank you for this explanation.

Yes, I have 2 questions.

I have received Bogle's book, and I've been reading through it. I'm about half way through. So far he has just been hammering home the need to invest in Index Funds and the need to reduce fees as much as possible. He may get into other topics later, or he may answer my questions later.

But, I guess the two biggest questions that I have are:

1. Which index funds should I purchase (that don't have fees)? (I had looked at VOOG awhile ago. I'm not sure if this is an index fund. I think it's suppose to represent the S&P as a whole. But I'm not sure if this qualifies as an index fund.)

2. Which financial institution should I use to keep fees low or null? Is Fidelity a good financial institution as far as fees are concerned? Honestly, I don't even know where to dig into the fine print to figure out what fees they're charging. Maybe it's on a statement somewhere.

I want to implement Bogle's strategy to the letter, but so far he has not explained the steps to do this. Maybe he will as I read further along.

Thanks again for all your help!!

1a. the only index fund that doesn't have fees to my knowledge is Fidelity's Zero funds. But I believe you can only buy that in a Fidelity Brokerage and it's not portable to a different broker. If you're asking about what to buy in your 401k you'd have to list all the funds if you want our recommendations. See asking portfolio questions for how to do that.

1b. VOOG is an index fund because it's name is "Vanguard S&P 500 Growth Index Fund ETF". It's actually NOT "supposed to represent the S&P as a whole" because the S&P500 is:
a. the whole S&P,
b. 507 stocks,
c. contains value AND growth stocks (you can see it's a blend of value and growth, right side of page at this link: https://investor.vanguard.com/investmen ... omposition)

Whereas the S&P500 GROWTH Index fund only contains growth stocks (no value). As such it:
a. is not the whole S&P
b. 235 stocks
c. is only growth, not value (you can see it's a large cap growth, right side of page at this link: https://investor.vanguard.com/investmen ... omposition)

2. Fidelity is fine provided you're:
a. going to self manage, don't want SMA (separately managed account)
b. pick low cost index funds (as opposed to more expensive actively managed funds
c. understand that their target date funds (called Freedom Funds) come in the cheaper index variety (known as Fidelity Freedom Index funds) and the more expensive actively managed variety (known as Fidelity Freedom funds). Know the difference.

you should take the time to understand what something costs before you buy it and how it's invested. Otherwise you could wind up buying a growth fund with fewer stocks when you had intended to buy a more comprehensive fund or you buy an actively managed fund instead of index.

To accompish this, you should read the prospectus of the fund before investing in it. If you don't, you didn't do your due diligence and have no one to blame but yourself. Everything is right there in the prosectus: the types of risk, expenses/management fees, strategy, index or active, etc. If you don't understand the prospectus, you shouldn't buy that fund. You also can ask for help understanding the prospectus if you can't make heads or tails of it. Vanguard's prospectuses are written in plain talk to make it about as easy as can be.

Total market Index funds are often recommended here because they're total. You don't have to own 10 or more funds. You can get everything you need between 1 and 3 funds:

Target Date retirement index fund
Total World Stock Market Index fund + Total Bond market index fund (or total world bond market index fund)
Total US stock Market index fund + Total international stock market index fund + Total bond market index fund (US only or World)

what could be simpler? It contains ALL stocks and bonds (thousands of each), both value and growth stocks, small cap, large cap, mid cap stocks, all sectors of the market, all countries with publicly traded companies and no manager to screw things up/underperform (see: https://www.spglobal.com/spdji/en/resea ... hts/spiva/)

what could be better than that?

[bhamerica]

Thanks so much for your help!

1a. - OK, I'll look into Fidelity's Zero funds. That sounds interesting.

I do not currently own any index funds, so I don't have anything to report (except a small amount of VOOG). A quick Google search brought up this, which recommends low cost index funds:

https://money.usnews.com/investing/fund ... ndex-funds


1b. - Is it good to have both growth and value stocks? Is VOOG a good choice? If not, I can drop it.
(Looks like I have VFIFX as well.)

2 - OK, I'll have to look into these things that you mentioned regarding Fidelity. That will take some digging. Thanks!

SPIVA sounds great. I like total market, and I like simple.

Looking at the website now. Is there a ticker symbol for SPIVA? Or maybe SPIVA is the ticker symbol?

[Outer Marker]

Is it good to have both growth and value stocks? Is VOOG a good choice? If not, I can drop it.
(Looks like I have VFIFX as well.)

It is good to own both growth and value stocks, but most of us consider it is not necessary or good to own growth and value separately.

Rather than holding an S&P Growth fund and and S&P Value fund, just own the S&P 500 or Total Stock market and you own them all. i.e. VOO not VOOG.

[bhamerica]

OK. I didn't realize the difference between VOOG and VOO. I'll sell my VOOG and pick up VOO. Thanks for the advice.

I was looking up Fidelity Index Freedom. I think the ticker symbol is this: FXAIX

[Outer Marker]

OK. I didn't realize the difference between VOOG and VOO. I'll sell my VOOG and pick up VOO. Thanks for the advice.

I was looking up Fidelity Index Freedom. I think the ticker symbol is this: FXAIX

VOOG is not a bad fund - and if you hold it in taxable, it may not be worth selling and incurring capital gains tax. Just don't add to it if you want a total market approach. FXIAX is the S&P 500 index, and that's a fine fund, as is the Fidelity Total Stock Market Index if you want to include small and mid cap stocks in addition to just large cap, which is the S&P 500. Before you start making changes, I'd highly recommend you post your full situation in the "asking portfolio questions" format. viewtopic.php?t=6212

You might want to consider an "all in one" fund such as Fidelity Freedom Index 2035 for retirement about 10 years out. It contains all the basic food groups pre-mixed in a low cost index form. https://fundresearch.fidelity.com/mutua ... /315793802

[Taylor Larimore]

bhamerica:

You wrote:

I did read The Little Blue Book that Beat the Market. I tried very hard to keep with that system, but in the end I gave up, after seeing my hard earned money lose year after year. It was very difficult. I'm not sure if I would have seen gains if I kept up with it. Maybe.

Most Bogleheads know that any book promising to "Beat the Market" is not worth reading.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "In my view, owning the market and holding it forever is the ultimate strategy for winners."

[one_speed]

...
I also wonder if this "mistruth" that is touted by financial institutions was a way for companies to skirt the issue of having to pay pensions to employees.

Exactly. The 401k and its cousins are a way for a company to offload the responsibility of providing for retirement from them, to you. They no longer have to be concerned with the consequences of pension commitments playing out over decades. Simply provide 401k option and maybe a match, one year at a time.

The good news is you know this is the deal.

So now your eyes are open to the situation, you can calmly assess your savings rate vs your goals.

As others have stated, be cautious of seeking a high rate of return, at added risk, in order to catchup to some arbitrary amount. You can't go back in time, and that is fine.

[arcticpineapplecorp.]

Thanks so much for your help!

1a. - OK, I'll look into Fidelity's Zero funds. That sounds interesting.

I do not currently own any index funds, so I don't have anything to report (except a small amount of VOOG). A quick Google search brought up this, which recommends low cost index funds:

https://money.usnews.com/investing/fund ... ndex-funds

1b. - Is it good to have both growth and value stocks? Is VOOG a good choice? If not, I can drop it.
(Looks like I have VFIFX as well.)

2 - OK, I'll have to look into these things that you mentioned regarding Fidelity. That will take some digging. Thanks!

SPIVA sounds great. I like total market, and I like simple.

Looking at the website now. Is there a ticker symbol for SPIVA? Or maybe SPIVA is the ticker symbol?

1. just be aware that just because something charges 0% e.r. doesn't mean it's going to outperform. That article you linked has BNY Mellon Core Bond ETF (BKAG) which charges 0%. I hadn't seen that before except with fidelity's zero funds. For fun I wanted to see how it performed against total bond market index (thinking it might outperform because it's charging 0% and vanguard's total bond index fund charges 0.05%), but lo and behold Vanguard's edged out over BNY Mellons (source: https://www.portfoliovisualizer.com/bac ... ion2_2=100). Of course they're very close and the opposite could happen in the future, but I just thought it was interesting that that edge of no costs didn't translate into 0.05% higher annual returns, did it? So zero funds too are a bit of a marketing ploy. You don't necessarily need to fall for it. 30% of those recommended funds at the US News and world report were vanguard funds. There's a reason why.

1a. If you have total stock market index fund or even S&P500 index fund, you don't need VOOG because those stocks are contained in the formerly mentioned 2 funds. Don't replicate and overcomplicate.

2. There is no ticker for SPIVA because it's not an ETF or mutual fund. It's a company that stands for
S&
P
Index
Vs.
Active

They do research to report/compare how actively managed funds do compared to their respective benchmark/index funds. So you can compare a large cap active fund's performance with a large cap index fund's performance.

They show that the winning long term strategy is index funds over active.

John “Jack” Bogle wrote his Princeton senior thesis in 1951, arguing that mutual funds may make no claim to superiority over the market.

source: https://www.bloomberg.com/features/2016 ... interview/

[Taylor Larimore]

Bogleheads:

Bonds are primarily for safety.

Bond funds with the highest past returns are usually the bond funds with the biggest decline when stocks are down.

Increase stock allocations for higher expected returns.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: “Why would an intelligent investor hold any bonds at all? Because the long-run is a series of short-runs, and during many short periods, bonds have provided higher returns than stocks. -- And perhaps more important, reducing the volatility of your portfolio can give you downside protection during large market declines."

[sailaway]

I have no clue what to invest in that would yield 10%.

Neither does anyone else.

I've had success, but it doesn't come without some painful market downturns from time to time. The idea you're going to have to get used to is that you can't control the stock market. You have to resign yourself to accepting the returns that stock and bond markets provide. It's an uncertain proposition that typically works if you hold on for long enough. What you can control is your savings rate, your asset allocation, and, hopefully, your behavior. Bad behavior by investors is the biggest problem for most people. It's really hard to keep your cool, but that's what successful investing requires.

Consider doing some reading. Head down to your nearest public library and look for any of these books in the link below.
https://www.bogleheads.org/wiki/Book_re ... nd_reviews

Regards,

I'm not going to lie. I have bad behavior when it comes to the stock market. I buy high and sell low. I have had a couple instances where I've made money, but I've probably lost more money than I've made. I view the stock market like playing craps in Vegas. To me it seems like gambling.

Not sure why you are trying to blame financial institutions in one post and then admitting the problem is your own behavior in another.

This is exactly the reason bogleheads is dedicated to buy and hold index funds. Set up a system that minimizes your own behavioral errors.

Nobody can guarantee you a 10% annual return. But we can tell you that regularly investing in index funds with an AA that you can comfortably maintain has given the most consistent results, even over the vast majority of expert money managers.

[DonIce]

It actually makes me extremely angry. First companies get rid of pension plans because (1) they are greedy (2) they find it too complicated to figure out how to pay pensions. So they figure they'll keep the profits and avoid the headache, and let busy workers figure out retirement for themselves, because they can't figure it out for them. What chance does Joe Schmo have to figure out his own retirement planning, while he's busy working at a 9-5 job, while the company has full-time, paid employees who should be figuring this out for the benefit of all employees at the company.

So, in any case, they do away with pensions.

Then they say to workers --- here, you do it. Figure out your own retirement with this 401k thing that you don't really understand.

While you may feel overwhelmed now and feel like you haven't made much headway yet, it's actually really not that hard to figure out the basic principles of investing (around which the boglehead approach is based) and to implement them. You as an individual care more than anyone else about your own future and your own retirement, and so most definitely can do the best planning for it. Remember the old maxim of "if you wan't something done right, you have to do it yourself". Given the general incompetence so often exhibited by many professionals in the financial industry, I am EXTREMELY glad that whatever employer I work at isn't in charge of my retirement beyond facilitating a 401k plan.

In addition, getting an employer pension, even when they were common, involved staying at an employer for a long time, which may have worked well for some people in previous generations but today it is much more advantageous not to be locked in to a single employer. Not relying on a pension, but instead a 401k account which is portable and with which you don't lose anything (besides maybe a portion of a match that hasn't vested yet) facilitates switching jobs, moving from state to state, and generally being much more free.

Be wary of documentaries that are set up to make you angry or otherwise play on your emotions, and try to consider alternative ways of thinking about the situation.