46, lower income, portfolio situation. More info as recommended

[Becks]

I have gotten some amazing feedback, so I'd love some additional feedback if anyone has any thoughts as I feel a little more comfortable adding more. The gist of my questions were what if you were starting today with very little time in a market that seems to be headed down. After the past couple of weeks I have now decided I'm an apprehensive investor.

I would consider myself a lower income earner. However, my home is fully paid for as is my car. I keep a spreadsheet with every penny I spend I don't carry much debt. My goal is to save at the very least $1k per month cash for emergencies.

My 403b plan is with Lincoln and my employer has told me I cannot move anything from it.

My money breakdown:

50k in Lincoln. I panicked last week and dumped $25k of the $50k from the stock market fund it was all in, into a generic plan they offer which adds 2%.
$32k Vanguard money market fund
$22k VTSAX
$34k Vanguard traditional IRA - 29k of that VTSAX - $4600 VFIX
$1k in Roth IRA

These are my only work options offered through Lincoln, it's a 403b, and their expense ratios.

AIADX Am Cntry Infl Adj Bond Taxable Bond 0.29
RLBGX Am Fds Amer Balnc Allocation 0.25
RMFGX Am Fds Amer Mutl U.s. Equity 0.27
RWIGX Am Fds Cptl Wrld Gr Inc International Equity 0.41
RWMGX Am Fds Wash Mutl Invst U.s. Equity 0.26
ARAIX Ariel U.s. Equity 0.69
BMGKX Blkrk Midcp Grwth Eqty U.s. Equity 0.71
GOBSX Brndywnglb Glbl Opp Bond Taxable Bond 0.54
COFYX Clmba Cntrn Core U.s. Equity 0.62
LMOIX Clrbrdge Smcp Grwth U.s. Equity 0.78
SKRRX Dws Enhcd Cmmdty Strtgy Commodities 1.02
GIBIX Gugnhm Ttl Rtrn Bond Taxable Bond 0.60
OIDIX Invsc Intl Dvrsfd International Equity 0.92
OIGIX Invsc Oppnhmr Intl Grwth International Equity 0.73
BDBKX Ishrs Rssll 2000 Smcp Indx U.s. Equity 0.07
BRMKX Ishrs Rssll Midcp Indx U.s. Equity 0.04
WFSPX Ishrs S P 500 Indx U.s. Equity 0.03
WFBIX Ishrs Us Agrgt Bond Indx Taxable Bond 0.05
DVZRX Mcqrie Smcp Value U.s. Equity 0.71
MSEQX Mg Stnly Grwth U.s. Equity 0.56
TILIX Nuvn Lrgcp Grwth Indx U.s. Equity 0.05
TILVX Nuvn Lrgcp Value Indx U.s. Equity 0.05
PHYQX Pgim High Yld Taxable Bond 0.38
PGRSX Princpl Glbl Real Estat Secrt Sector Equity 0.89
FTFGX Tmpltn Frgn International Equity 0.78

I welcome all thoughts!

[bonesly]

I have gotten some amazing feedback, so I'd love some additional feedback if anyone has any thoughts as I feel a little more comfortable adding more. The gist of my questions were what if you were starting today with very little time in a market that seems to be headed down. After the past couple of weeks I have now decided I'm an apprehensive investor.

For someone that is just starting, I would likely suggest that they read the five introductory topics in Wiki Main Page (left side) under "Getting Started for US Investors":
1) Getting started - Start here.
2) Investment philosophy - Our investment principles.
3) Investing start-up kit - A top-down approach to start investing.
4) Investment policy statement - Identify your investment objectives and how you plan to meet them.
5) Prioritizing investments - Choosing where to save your investing money, such as an employer's retirement plan or a savings account.

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You need to establish an emergency fund (EF) to cover however many months of expenses (not gross income) it would take to find a replacement job (e.g., if it would take 6 months to get another job at comparable salary, then your EF should be sized to cover 6 months of expenses).

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You also need to come up with a desired asset allocation (AA) and decide on an international stock exposure level (typically we suggest 20-40% of stocks in int'l -OR- 0%). Your AA is your blueprint for what funds you'll hold and how your assets should be split among those funds, which is why it's a top priority to figure out based on your time-frame (remaining life expectancy for your retirement portfolio) and your risk-tolerance.

Control Your Risk
1) Read the Wiki article for Assessing Risk Tolerance, take the Vanguard Investor Questionnaire, then tailor the asset allocation (AA) that was recommended by the quiz based on your knowledge of your personal risk tolerance having read the Wiki article.

2) Alternatively (or in addition to), ask "How much of a drop in portfolio value as a % of total value can I handle?" cut that % in half to get standard deviation, then lookup that std. dev. on the X-Axis of the chart below, and finally scan up to see what AA that corresponds to. As an example, if you can only stomach a -24% drop in portfolio value, that's a ±12% std. dev, which corresponds to an AA of 60/40. The return you get is an average and you'll get what you get with your unique sequence of returns (there's a lot of variance in outcomes due to the associated volatility of stocks so it probably will NOT be the average, but something more or less).

a. For a long time-frame (>10 years) AAs below 20% stock are dominated (red dots) by another AA with similar risk but higher reward (blue dots).
b. The dotted line represents a hypothetical linear risk-reward from 100% stocks down to 100% bonds; the historical risk-reward curve has an improvement for risk-adjusted return due to the lack of correlation between stocks & bonds.

On the int'l exposure level...

There's essentially two camps among Bogleheads: a) Those that are on board with the global market cap weighting, which is about 60% US stock and 40% ex-US stock; and b) those that have a home bias (US will usually outperform), which is about 80% US stock and 20% ex-US stock (some even omit Int'l altogether). I'm in camp a) based on the chart below from WisdomTree, the white paper from Vanguard, and the more recent article from Vanguard.


Vanguard White Paper: International Equity - Considerations and Recommendations
Vanguard Web Article: Making the case for international equity allocations

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Once you've settled on a desired/target AA for your retirement portfolio, we typically recommend a 3-Fund Portfolio, which is simple, yet effective, and can meet any desired AA and int'l exposure. For your 403b choices, the three funds I'd likely use to construct a 3-Fund portfolio would be:
US Stocks - WFSPX Ishrs S P 500 Indx U.s. Equity 0.03
Int'l Stocks - <Your choices are all too expensive, if you need int'l stock pick something in your Roth IRA or just use 0% int'l for now>
US Bonds - WFBIX Ishrs Us Agrgt Bond Indx Taxable Bond 0.05

My money breakdown:
50k in Lincoln. I panicked last week and dumped $25k of the $50k from the stock market fund it was all in, into a generic plan they offer which adds 2%.
$32k Vanguard money market fund
$22k VTSAX
$34k Vanguard traditional IRA - 29k of that VTSAX - $4600 VFIX
$1k in Roth IRA

I'm going to defer any specific suggestions on this until you have a little more basic investment knowledge from having read those Wiki topics. For now feel free to move any assets in a Taxable brokerage account into cash instruments (Money Market Fund, High Yield Savings Acct, CDs) to establish a properly sized EF, but I'd hold off any big changes to stock/bond holdings until you read some more and establish a desired AA to share with us.

[mhadden1]

50k in Lincoln. I panicked last week and dumped $25k of the $50k from the stock market fund it was all in

First you have to do some thinking about the proper percentage of very risky assets, like stocks, for you to hold. That is, you have to think about the asset allocation (AA) that you can stick with, without FOMO in good market times, and without panic in bad market times.

In my opinion it would be a sound decision to decide to hold some stock assets in your AA. If you do, I would use this fund
WFSPX Ishrs S P 500 Indx U.s. Equity 0.03
for the core stock holding in the Lincoln 403b.

[Beensabu]

If this is in your taxable account, then you have a pretty sizeable emergency fund already (the money market fund), and I would just leave this alone (and direct new taxable contributions to money market for awhile if you need to build that EF up some more):

$32k Vanguard money market fund
$22k VTSAX

If you meant VFIAX instead of VFIX, then I would move that to VTSAX (because they're pretty much the same thing):

$34k Vanguard traditional IRA - 29k of that VTSAX - $4600 VFIX

I would put this in an international stock index fund and keep Roth IRA contributions going that way:

$1k in Roth IRA

If by "generic plan which adds 2%" you mean that you put half of your 403b funds in some kind of plan advisor thing that charges a 2% AUM fee (on top of expense ratios), then get out of that.

As others have said, these are the two funds you want to use in your 403b, because they are low-cost broad market index funds:

WFSPX Ishrs S P 500 Indx U.s. Equity 0.03
WFBIX Ishrs Us Agrgt Bond Indx Taxable Bond 0.05

How much you put in either of those ^ two funds in your 403b is going to depend on which stock:bond asset allocation you are most comfortable with (i.e. whichever asset allocation you can hold without panic selling like you just did last week).

If you're not sure about your AA yet (but you know 100% stocks isn't it), you can move that 25k you panicked with into WFBIX - doing that will get rid of the 2% AUM fee and put your overall AA (not including EF) at 77% stocks and 23% bonds - that is the higher end of moderately aggressive. If you include your EF, it would be 59% stocks, 18% bonds, and 23% cash - that is the higher end of moderately conservative.

[Duckie]

My 403b plan is with Lincoln and my employer has told me I cannot move anything from it.

My money breakdown:

50k in Lincoln. I panicked last week and dumped $25k of the $50k from the stock market fund it was all in, into a generic plan they offer which adds 2%.

Bad move, At least it is a tax-sheltered plan and you can buy and sell without taxes.
What exactly do you mean "adds 2%"? Is it some kind of cash fund where they pay you higher interest? Or do they want to manage your money and have you pay them to do so?

$32k Vanguard money market fund
$22k VTSAX
$34k Vanguard traditional IRA - 29k of that VTSAX - $4600 VFIX
$1k in Roth IRA

Is the money market fund for investing or part of your emergency fund?

These are my only work options offered through Lincoln, it's a 403b, and their expense ratios.

The best options are:

• WFSPX Ishrs S P 500 Indx U.s. Equity 0.03 -- Large caps ~85% of US stocks
• WFBIX Ishrs Us Agrgt Bond Indx Taxable Bond 0.05 -- US bonds

You don't have a low-cost international option in the 403b. If you want international stocks put them in your Vanguard IRA.

You don't mention a desired Asset allocation so I'm going with a vanilla 75% stocks, 25% bonds, with 20% of stocks in international. That breaks down to 60% US stocks, 15% international stocks, and 25% bonds. Here are two options:

Portfolio #1 -- $32K money market IS for investing and is included in portfolio

Taxable at Vanguard -- $54K -- 39%
39% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

403b at Lincoln -- $50K -- 36%
11% (WFSPX) iShares S&P 500 Index Fund Class K (0.03%)
25% (WFBIX) iShares U.S. Aggregate Bond Index Fund Class K (0.05%)

Traditional IRA at Vanguard -- $34K -- 24%
9% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)
15% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.09%)

Roth IRA at Vanguard -- $1K -- 1%
1% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)

or

Portfolio #2 -- $32K money market is NOT for investing and is removed from portfolio

Taxable at Vanguard -- $22K -- 20%
20% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

403b at Lincoln -- $50K -- 47%
22% (WFSPX) iShares S&P 500 Index Fund Class K (0.03%)
25% (WFBIX) iShares U.S. Aggregate Bond Index Fund Class K (0.05%)

Traditional IRA at Vanguard -- $34K -- 32%
17% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)
15% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.09%)

Roth IRA at Vanguard -- $1K -- 1%
1% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)

Just some possibilities.

[Becks]

My 403b plan is with Lincoln and my employer has told me I cannot move anything from it.

My money breakdown:

50k in Lincoln. I panicked last week and dumped $25k of the $50k from the stock market fund it was all in, into a generic plan they offer which adds 2%.

Bad move, At least it is a tax-sheltered plan and you can buy and sell without taxes.
What exactly do you mean "adds 2%"? Is it some kind of cash fund where they pay you higher interest? Or do they want to manage your money and have you pay them to do so?

$32k Vanguard money market fund
$22k VTSAX
$34k Vanguard traditional IRA - 29k of that VTSAX - $4600 VFIX
$1k in Roth IRA

Is the money market fund for investing or part of your emergency fund?

These are my only work options offered through Lincoln, it's a 403b, and their expense ratios.

The best options are:

• WFSPX Ishrs S P 500 Indx U.s. Equity 0.03 -- Large caps ~85% of US stocks
• WFBIX Ishrs Us Agrgt Bond Indx Taxable Bond 0.05 -- US bonds

You don't have a low-cost international option in the 403b. If you want international stocks put them in your Vanguard IRA.

You don't mention a desired Asset allocation so I'm going with a vanilla 75% stocks, 25% bonds, with 20% of stocks in international. That breaks down to 60% US stocks, 15% international stocks, and 25% bonds. Here are two options:

Portfolio #1 -- $32K money market IS for investing and is included in portfolio

Taxable at Vanguard -- $54K -- 39%
39% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

403b at Lincoln -- $50K -- 36%
11% (WFSPX) iShares S&P 500 Index Fund Class K (0.03%)
25% (WFBIX) iShares U.S. Aggregate Bond Index Fund Class K (0.05%)

Traditional IRA at Vanguard -- $34K -- 24%
9% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)
15% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.09%)

Roth IRA at Vanguard -- $1K -- 1%
1% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)

or

Portfolio #2 -- $32K money market is NOT for investing and is removed from portfolio

Taxable at Vanguard -- $22K -- 20%
20% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

403b at Lincoln -- $50K -- 47%
22% (WFSPX) iShares S&P 500 Index Fund Class K (0.03%)
25% (WFBIX) iShares U.S. Aggregate Bond Index Fund Class K (0.05%)

Traditional IRA at Vanguard -- $34K -- 32%
17% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)
15% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.09%)

Roth IRA at Vanguard -- $1K -- 1%
1% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)

Just some possibilities.

Yes, it's my emergency fund and as you can see without a lot of assets, I'm more focused than ever on building it up.

[Becks]

My 403b plan is with Lincoln and my employer has told me I cannot move anything from it.

My money breakdown:

50k in Lincoln. I panicked last week and dumped $25k of the $50k from the stock market fund it was all in, into a generic plan they offer which adds 2%.

Bad move, At least it is a tax-sheltered plan and you can buy and sell without taxes.
What exactly do you mean "adds 2%"? Is it some kind of cash fund where they pay you higher interest? Or do they want to manage your money and have you pay them to do so?

$32k Vanguard money market fund
$22k VTSAX
$34k Vanguard traditional IRA - 29k of that VTSAX - $4600 VFIX
$1k in Roth IRA

Is the money market fund for investing or part of your emergency fund?

These are my only work options offered through Lincoln, it's a 403b, and their expense ratios.

The best options are:

• WFSPX Ishrs S P 500 Indx U.s. Equity 0.03 -- Large caps ~85% of US stocks
• WFBIX Ishrs Us Agrgt Bond Indx Taxable Bond 0.05 -- US bonds

You don't have a low-cost international option in the 403b. If you want international stocks put them in your Vanguard IRA.

You don't mention a desired Asset allocation so I'm going with a vanilla 75% stocks, 25% bonds, with 20% of stocks in international. That breaks down to 60% US stocks, 15% international stocks, and 25% bonds. Here are two options:

Portfolio #1 -- $32K money market IS for investing and is included in portfolio

Taxable at Vanguard -- $54K -- 39%
39% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

403b at Lincoln -- $50K -- 36%
11% (WFSPX) iShares S&P 500 Index Fund Class K (0.03%)
25% (WFBIX) iShares U.S. Aggregate Bond Index Fund Class K (0.05%)

Traditional IRA at Vanguard -- $34K -- 24%
9% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)
15% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.09%)

Roth IRA at Vanguard -- $1K -- 1%
1% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)

or

Portfolio #2 -- $32K money market is NOT for investing and is removed from portfolio

Taxable at Vanguard -- $22K -- 20%
20% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

403b at Lincoln -- $50K -- 47%
22% (WFSPX) iShares S&P 500 Index Fund Class K (0.03%)
25% (WFBIX) iShares U.S. Aggregate Bond Index Fund Class K (0.05%)

Traditional IRA at Vanguard -- $34K -- 32%
17% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)
15% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.09%)

Roth IRA at Vanguard -- $1K -- 1%
1% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)

Just some possibilities.

I have a question about these percentages, can you see my replies to you?

[DocH]

Becks I feel there has been good advice on funds but I wanted to make some suggestions on where you put your dollars. I don’t see if you get company match but first would save money in 403b up to company match. Next would save for emergency fund but I would consider vanguard money market fund in taxable account as part of emergency fund and depending on your monthly expenses with the 32k you may have your 6 months covered. With high interest debts paid the next place I would put money is funding Roth IRA. I would max that out (7k) yearly but specifically now I would contribute to 2024 tax year while you have about a month left. After putting money in Roth IRA would then work on maxing out 403b and then taxable account after that. Good luck

[Becks]

Yes, I get a 10% match and my MMF is at Vanguard. Every year, I wind up owing Federal taxes so I only ever put money in traditional for a refund, and I'm at my $7k limit for 2024. I know that I need to convert this, I'm just afraid of creating an additional tax headache at this point. I don't have any children so I only qualify for the standard deduction. After I get the what to invest where piece figured out, I'll research converting the traditional to a Roth. I know nothing about that. I welcome all suggestions!

While you're here, would cash in a MMF ever be a substitute for bonds for a nervous investor?

[bonesly]

I'll research converting the traditional to a Roth. I know nothing about that.

You might already be aware, but just in case there's a Wiki topic on Roth Conversion, that's probably a good place to start your research.

would cash in a MMF ever be a substitute for bonds for a nervous investor?

Both cash and bonds count as "not stocks" (both are uncorrelated with stocks, but bonds and cash have a higher correlation with each other), so they're both on the "fixed income" side of a stock & bond portfolio. However, cash is typically lower risk (volatility ±3.0% for cash vs ±7.7% for 10y T-Notes) and lower reward (total return 3.4% for cash vs 5.2% for bonds). Cash is less likely to keep pace with inflation over the long-run compared to bonds (so using cash trades lower volatility risk for high risk of losing purchasing power to inflation).

The "nervous investor" comment speaks more to having an appropriate AA that's matched to your risk-tolerance; that's primarily about the stock exposure percentage (with the remaining percentage being bonds). Bonds do have some volatility but it pales in comparison with stocks at ±19.5%, so if you're going to be nervous, it's typically about whether or not you have too much stock in your AA (more than you can handle if a -50% crash comes along). Swapping bonds into cash as a substitute doesn't lower your stock exposure risk and that's the biggest risk in your portfolio.

[Retired@58]

I panicked last week and dumped $25k of the $50k from the stock market fund it was all in, into a generic plan they offer which adds 2%.

Hi Becks, welcome to the forum.

Why "panic" you are likely 15-25 years from needing to sell funds for retirement.

Selling low and buying high is not the road to long term success in investing.

When will you buy back in? After the market has gone back up? Trying to time the market is often the road to Underperformance.

You seem to be lacking some knowledge of the market movements, correct asset allocation for you.....

The good news is at age 46 you likely have plenty of time before you will lean on your savings to support your life. I hope your learning will allow you to build a portfolio that you will be able to stick to through market movements.

When markets go down and you are in the accumulation phase of savings you should be cheering about market declines, the things you will buy are on sale. This is when you buy, not sell.

Check back if the market goes down another 20-30% or more (S&P is only down about 9-10% in the last few weeks, shrug).

I will be glad to cheer for you, just think about how many more shares you will be able to buy during the downturn. I will be ok, my asset allocation is set up to weather market movements since I am in the withdrawal stage of life.

Another 30% down I am hiring somebody to cheer for me, I will be doing Roth conversions at one hell of a discount. In other words, I will be able to convert more shares for the same cost in taxes.

I hope by spending some time on bogleheads, you will learn some of the most important lessons for successful investing without having to make them yourself. There is several hundred lifetimes of wisdom here for the taking for free. Welcome again.

Best,

Retired@58

[Duckie]

I have a question about these percentages, can you see my replies to you?

What is your question?

[DocH]

Becks I would consider just contributing to Roth instead of traditional IRA starting in 2025 to increase Roth dollars as you are researching Roth conversions. As far as considering MMF a bonds substitute yes you can do that

[InvestSage]

It's great that you're actively managing your finances and have minimal debt.

With market uncertainties, it's important to focus on diversification and long term goals.

Consider spreading your investments across diffrent asset classes to reduce risk, and ensure you have a solid emergency fund.

A balanced approach with a mix of equitis and bonds can provide stability while aiming for growth...