Portfolio Review for Millenial

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bigtex
Posts: 34
Joined: Fri Jan 26, 2018 10:34 am

Portfolio Review for Millenial

Post by bigtex » Thu Jun 14, 2018 10:45 pm

I would like y’all to suggest what I should be doing different and what I am doing right with my overall portfolio/ finances.


Age: 28 married no kids
Emergency Fund: 12k
Income: 98k
Annual Expenses: 36k

I contribute 11k per year to 401k and 1.2k per year to Fidelity Roth. I also contribute 30k per year towards mortgage principal for early payoff.

Accounts:

78k Total of all Investment Accounts

401k- 20k
All funds have very minimal expenses within 401k— 0.05% or less
14.65% - Total US Stock Markeg Index Fund
7.69% - International Equity Index Fund
3.59% - Investment Grade Bond Index Fund

Roth IRA Fidelity - 18k
23.08%- 20 single stocks US companies mid to large cap buy and hold and reinvest dividends.

Trad Ira Fidelity- 22k
4.85% FSSPX - Fidelity Small Cap Index
6.90% FSCLX - Fidelity Mid Cap Index
14.81% FLCHX - Fidelity Large Cap Value Index Premium Class
1.25% SHYG - iShares 0-5 year short term bond

Roth IRA Vanguard- 8k
10.36% VIGRX - Vanguard Growth Index Fund Investor Shares


Pension- 10k
-12.82% Grows at 4% per year compounded until I take out money early or begin receiving benefit payments in retirement.

User avatar
nedsaid
Posts: 9899
Joined: Fri Nov 23, 2012 12:33 pm

Re: Portfolio Review for Millenial

Post by nedsaid » Thu Jun 14, 2018 11:27 pm

bigtex wrote:
Thu Jun 14, 2018 10:45 pm
I would like y’all to suggest what I should be doing different and what I am doing right with my overall portfolio/ finances.


Age: 28 married no kids
Emergency Fund: 12k
Income: 98k
Annual Expenses: 36k

I contribute 11k per year to 401k and 1.2k per year to Fidelity Roth. I also contribute 30k per year towards mortgage principal for early payoff.

Accounts:

78k Total of all Investment Accounts

401k- 20k
All funds have very minimal expenses within 401k— 0.05% or less
14.65% - Total US Stock Markeg Index Fund
7.69% - International Equity Index Fund
3.59% - Investment Grade Bond Index Fund

Roth IRA Fidelity - 18k
23.08%- 20 single stocks US companies mid to large cap buy and hold and reinvest dividends.

Trad Ira Fidelity- 22k
4.85% FSSPX - Fidelity Small Cap Index
6.90% FSCLX - Fidelity Mid Cap Index
14.81% FLCHX - Fidelity Large Cap Value Index Premium Class
1.25% SHYG - iShares 0-5 year short term bond

Roth IRA Vanguard- 8k
10.36% VIGRX - Vanguard Growth Index Fund Investor Shares


Pension- 10k
-12.82% Grows at 4% per year compounded until I take out money early or begin receiving benefit payments in retirement.
Do you have an Investment Policy Statement? What are your goals for this money? My guess is that you are primarily saving for retirement. One of your big financial goals is to pay off your mortgage. What is your desired asset allocation? How secure is your job?

What I am trying to say is that you need to look at the big picture first. As the late Yogi Berra said, "If you don't know where you are going, how do you know when you get there?" So get some thoughts on paper. Sketch out a money and investment plan. An Investment Policy Statement is a good place to start. Morningstar has a good worksheet on its website. Get a plan, Stan.

Once you have the big picture figured out, the questions of asset allocation and choice of investments are much easier.

It appears your choice of investments is pretty good. Your portfolio of 20 individual stocks in your ROTH will give a lot of Bogleheads a case of heartburn. I am a big one to talk as I own individual stocks myself and have posted on this extensively. My conclusion is that if you are conscientious and do most things right, you might just about track the market. If you are like most individuals that stock pick, you will trail the market return by 4% a year. Performance chasing, lack of patience, too much trading, buying poor quality stocks, paying too much for stocks are among the biggest culprits. Your fund choices look okay to me.

But again, do you have a strategy behind all of this? You have good stuff except we don't know what stocks you have. Most all Bogleheads (except maybe a few of us who still like owning individual stocks) will tell you not to bother with stock picking.

Not bad. You have good choices in there and have made a good start. Good things here.
Last edited by nedsaid on Thu Jun 14, 2018 11:50 pm, edited 1 time in total.
A fool and his money are good for business.

pindevil
Posts: 60
Joined: Thu Apr 03, 2014 11:04 am

Re: Portfolio Review for Millenial

Post by pindevil » Thu Jun 14, 2018 11:48 pm

What is your mortgage rate? Fixed 30yr? When do you plan to retire?

You could be maxing out 401k and both Roths and still have plenty to throw at mortgage principal.

pindevil
Posts: 60
Joined: Thu Apr 03, 2014 11:04 am

Re: Portfolio Review for Millenial

Post by pindevil » Thu Jun 14, 2018 11:48 pm

Double post

pindevil
Posts: 60
Joined: Thu Apr 03, 2014 11:04 am

Re: Portfolio Review for Millenial

Post by pindevil » Thu Jun 14, 2018 11:59 pm

Double post

fujiters
Posts: 97
Joined: Tue Mar 06, 2018 2:17 pm

Re: Portfolio Review for Millenial

Post by fujiters » Fri Jun 15, 2018 12:54 am

For mortgage interest rates in recent years, most people would be best served not paying their mortgages off any earlier than required. Personally, I have a 2.375% mortgage from early 2013 and I'm hitting myself for not taking a larger mortgage than we did. It would be insane to pay it off any earlier given the higher rate of return on stocks, bonds, and even CDs. YMMV.

I also want to echo the advice to think about your desired asset allocation. You'll probably be fine doing what you're doing, but it's helpful to have a plan for how much you want to keep in bonds/international/etc so that you can easily check that your holdings are aligned with your goals (and easily see what needs rebalanced).
“The purpose of the margin of safety is to render the forecast unnecessary.” -Benjamin Graham

bigtex
Posts: 34
Joined: Fri Jan 26, 2018 10:34 am

Re: Portfolio Review for Millenial

Post by bigtex » Fri Jun 15, 2018 1:49 am

pindevil wrote:
Thu Jun 14, 2018 11:48 pm
What is your mortgage rate? Fixed 30yr? When do you plan to retire?

You could be maxing out 401k and both Roths and still have plenty to throw at mortgage principal.
My mortgage rate is a fixed 15 yr at 3.65%. I would like to retire in my 40s from W2 job and begin consulting/part time work to supplement.

TwstdSista
Posts: 917
Joined: Thu Nov 16, 2017 4:03 am

Re: Portfolio Review for Millenial

Post by TwstdSista » Fri Jun 15, 2018 3:30 am

I would consider maxing both your 401k and your Roth IRA contribution before making extra mortgage contributions.

As for your investments -- the individual stocks are not bogle-ish, you seem light on international exposure, intermediate term bond is usually preferred on this site, and what's the point of both a large growth fund a large value fund?

Glockenspiel
Posts: 485
Joined: Thu Feb 08, 2018 1:20 pm

Re: Portfolio Review for Millenial

Post by Glockenspiel » Fri Jun 15, 2018 6:32 am

I would also prioritize maxing out your tax-advantaged accounts before putting extra towards mortgage principal. $30k per year EXTRA to your mortgage is a lot and with your interest rate, you’re probably only saving yourself an effective 2.75-3.0%. What is the remaining balance on your mortgage?

bigtex
Posts: 34
Joined: Fri Jan 26, 2018 10:34 am

Re: Portfolio Review for Millenial

Post by bigtex » Fri Jun 15, 2018 7:20 am

Glockenspiel wrote:
Fri Jun 15, 2018 6:32 am
I would also prioritize maxing out your tax-advantaged accounts before putting extra towards mortgage principal. $30k per year EXTRA to your mortgage is a lot and with your interest rate, you’re probably only saving yourself an effective 2.75-3.0%. What is the remaining balance on your mortgage?
120k remaining, home value $250k

bigtex
Posts: 34
Joined: Fri Jan 26, 2018 10:34 am

Re: Portfolio Review for Millenial

Post by bigtex » Fri Jun 15, 2018 7:23 am

nedsaid wrote:
Thu Jun 14, 2018 11:27 pm
bigtex wrote:
Thu Jun 14, 2018 10:45 pm
I would like y’all to suggest what I should be doing different and what I am doing right with my overall portfolio/ finances.


Age: 28 married no kids
Emergency Fund: 12k
Income: 98k
Annual Expenses: 36k

I contribute 11k per year to 401k and 1.2k per year to Fidelity Roth. I also contribute 30k per year towards mortgage principal for early payoff.

Accounts:

78k Total of all Investment Accounts

401k- 20k
All funds have very minimal expenses within 401k— 0.05% or less
14.65% - Total US Stock Markeg Index Fund
7.69% - International Equity Index Fund
3.59% - Investment Grade Bond Index Fund

Roth IRA Fidelity - 18k
23.08%- 20 single stocks US companies mid to large cap buy and hold and reinvest dividends.

Trad Ira Fidelity- 22k
4.85% FSSPX - Fidelity Small Cap Index
6.90% FSCLX - Fidelity Mid Cap Index
14.81% FLCHX - Fidelity Large Cap Value Index Premium Class
1.25% SHYG - iShares 0-5 year short term bond

Roth IRA Vanguard- 8k
10.36% VIGRX - Vanguard Growth Index Fund Investor Shares


Pension- 10k
-12.82% Grows at 4% per year compounded until I take out money early or begin receiving benefit payments in retirement.
Do you have an Investment Policy Statement? What are your goals for this money? My guess is that you are primarily saving for retirement. One of your big financial goals is to pay off your mortgage. What is your desired asset allocation? How secure is your job?

What I am trying to say is that you need to look at the big picture first. As the late Yogi Berra said, "If you don't know where you are going, how do you know when you get there?" So get some thoughts on paper. Sketch out a money and investment plan. An Investment Policy Statement is a good place to start. Morningstar has a good worksheet on its website. Get a plan, Stan.

Once you have the big picture figured out, the questions of asset allocation and choice of investments are much easier.

It appears your choice of investments is pretty good. Your portfolio of 20 individual stocks in your ROTH will give a lot of Bogleheads a case of heartburn. I am a big one to talk as I own individual stocks myself and have posted on this extensively. My conclusion is that if you are conscientious and do most things right, you might just about track the market. If you are like most individuals that stock pick, you will trail the market return by 4% a year. Performance chasing, lack of patience, too much trading, buying poor quality stocks, paying too much for stocks are among the biggest culprits. Your fund choices look okay to me.

But again, do you have a strategy behind all of this? You have good stuff except we don't know what stocks you have. Most all Bogleheads (except maybe a few of us who still like owning individual stocks) will tell you not to bother with stock picking.

Not bad. You have good choices in there and have made a good start. Good things here.
All new retirement money is going in at the proportion of 55% domestic stock, 30% international stock, and 15% bonds. I figured over time my allocations will get closer to these percentages since I’m not adding much money to those other investments I hold.

FOGU
Posts: 112
Joined: Tue Apr 24, 2018 9:41 pm

Re: Portfolio Review for Millenial

Post by FOGU » Fri Jun 15, 2018 7:44 am

Houses come and go. Yes, you will be mortgage debt free quickly. But as an asset your house is highly unlikely to appreciate nearly as much as other investments. There is no compound yield with a house.

If you bank the extra money in the investment accounts (and $30k a year is a lot of extra money to invest) you get the permanent benefit of compounding over the long stretch of decades you have before you. The $150k extra you are able to bank in investments over the next five years instead of putting it toward the mortgage will make a huge difference in the size of your nest egg 30 years from now. This is the time in your life when investing makes the most difference in your future net worth.

At 5% return:

$78k current investments
+ $30k per year for five years ($2,500 per month)
= $273,607

$273,607 earning 5% compounded over 30 years = $1,182,513
over 20 years = $725,960 (since you say you want to retire in your 40s)

So without counting anything else, and without another dime of investment in the future, your current investments and the extra $30k you are throwing at your mortgage could easily be $1.2 million or more at "normal" retirement age, and perhaps $750k at early retirement age. Your house is not going to do that for you. Not even close.

Continue with your awesome savings rate and you are golden.

Great start.
~ Don't just do something. Sit there. ~

bigtex
Posts: 34
Joined: Fri Jan 26, 2018 10:34 am

Re: Portfolio Review for Millenial

Post by bigtex » Fri Jun 15, 2018 8:08 am

FOGU wrote:
Fri Jun 15, 2018 7:44 am
Houses come and go. Yes, you will be mortgage debt free quickly. But as an asset your house is highly unlikely to appreciate nearly as much as other investments. There is no compound yield with a house.

If you bank the extra money in the investment accounts (and $30k a year is a lot of extra money to invest) you get the permanent benefit of compounding over the long stretch of decades you have before you. The $150k extra you are able to bank in investments over the next five years instead of putting it toward the mortgage will make a huge difference in the size of your nest egg 30 years from now. This is the time in your life when investing makes the most difference in your future net worth.

At 5% return:

$78k current investments
+ $30k per year for five years ($2,500 per month)
= $273,607

$273,607 earning 5% compounded over 30 years = $1,182,513
over 20 years = $725,960 (since you say you want to retire in your 40s)

So without counting anything else, and without another dime of investment in the future, your current investments and the extra $30k you are throwing at your mortgage could easily be $1.2 million or more at "normal" retirement age, and perhaps $750k at early retirement age. Your house is not going to do that for you. Not even close.

Continue with your awesome savings rate and you are golden.

Great start.
The one problem is that my wife intends to become a stay at home mom in the next three years or so, so there goes the $30k extra in investments. My thought process was if I could get the house paid off before she quits, then my own income has been freed up by what the mortgage used to be ($13k per year) that can then be used to max the rest of my 401k and then Roths.

FOGU
Posts: 112
Joined: Tue Apr 24, 2018 9:41 pm

Re: Portfolio Review for Millenial

Post by FOGU » Fri Jun 15, 2018 8:29 am

bigtex wrote:
Fri Jun 15, 2018 8:08 am
FOGU wrote:
Fri Jun 15, 2018 7:44 am
Houses come and go. Yes, you will be mortgage debt free quickly. But as an asset your house is highly unlikely to appreciate nearly as much as other investments. There is no compound yield with a house.

If you bank the extra money in the investment accounts (and $30k a year is a lot of extra money to invest) you get the permanent benefit of compounding over the long stretch of decades you have before you. The $150k extra you are able to bank in investments over the next five years instead of putting it toward the mortgage will make a huge difference in the size of your nest egg 30 years from now. This is the time in your life when investing makes the most difference in your future net worth.

At 5% return:

$78k current investments
+ $30k per year for five years ($2,500 per month)
= $273,607

$273,607 earning 5% compounded over 30 years = $1,182,513
over 20 years = $725,960 (since you say you want to retire in your 40s)

So without counting anything else, and without another dime of investment in the future, your current investments and the extra $30k you are throwing at your mortgage could easily be $1.2 million or more at "normal" retirement age, and perhaps $750k at early retirement age. Your house is not going to do that for you. Not even close.

Continue with your awesome savings rate and you are golden.

Great start.
The one problem is that my wife intends to become a stay at home mom in the next three years or so, so there goes the $30k extra in investments. My thought process was if I could get the house paid off before she quits, then my own income has been freed up by what the mortgage used to be ($13k per year) that can then be used to max the rest of my 401k and then Roths.
I understand your thought process. You can run the numbers and consider all your other factors, but I think $30k is overdoing it.

All the best.
~ Don't just do something. Sit there. ~

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nedsaid
Posts: 9899
Joined: Fri Nov 23, 2012 12:33 pm

Re: Portfolio Review for Millenial

Post by nedsaid » Fri Jun 15, 2018 8:36 am

bigtex wrote:
Fri Jun 15, 2018 7:23 am


All new retirement money is going in at the proportion of 55% domestic stock, 30% international stock, and 15% bonds. I figured over time my allocations will get closer to these percentages since I’m not adding much money to those other investments I hold.
Okay, that is the beginnings of an Investment Policy Statement. It is a good start to have a preferred asset allocation.
A fool and his money are good for business.

bigtex
Posts: 34
Joined: Fri Jan 26, 2018 10:34 am

Re: Portfolio Review for Millenial

Post by bigtex » Fri Jun 15, 2018 8:40 am

nedsaid wrote:
Fri Jun 15, 2018 8:36 am
bigtex wrote:
Fri Jun 15, 2018 7:23 am


All new retirement money is going in at the proportion of 55% domestic stock, 30% international stock, and 15% bonds. I figured over time my allocations will get closer to these percentages since I’m not adding much money to those other investments I hold.
Okay, that is the beginnings of an Investment Policy Statement. It is a good start to have a preferred asset allocation.
It is extremely easy to re-balance my 401k each year if I choose. Do y'all recommend me re-balancing to my 55/30/15 proportions each year? For instance, my 15% bonds new money going in is already down to like 12% because bond funds are under-performing stocks this year.

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nedsaid
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Re: Portfolio Review for Millenial

Post by nedsaid » Fri Jun 15, 2018 8:46 am

bigtex wrote:
Fri Jun 15, 2018 8:40 am
nedsaid wrote:
Fri Jun 15, 2018 8:36 am
bigtex wrote:
Fri Jun 15, 2018 7:23 am


All new retirement money is going in at the proportion of 55% domestic stock, 30% international stock, and 15% bonds. I figured over time my allocations will get closer to these percentages since I’m not adding much money to those other investments I hold.
Okay, that is the beginnings of an Investment Policy Statement. It is a good start to have a preferred asset allocation.
It is extremely easy to re-balance my 401k each year if I choose. Do y'all recommend me re-balancing to my 55/30/15 proportions each year? For instance, my 15% bonds new money going in is already down to like 12% because bond funds are under-performing stocks this year.
Yet another thing to put in your Investment Policy Statement. That is how should I rebalance? Rebalance every so often no matter what? Quarterly? Yearly? Or should I set rebalancing bands? That is rebalance when there is a 5% deviation from my asset allocation? For example, if you want 85% stocks, you rebalance when stocks hit 90% on the upside or 80% on the downside. This is a topic where reasonable people disagree. Either a time based or a rebalancing band based method of rebalancing would work just fine. Some people never rebalance.

This is what I mean that you have to develop some strong convictions and then get them down on paper. The Wiki has an excellent article on Investment Policy Statements.
A fool and his money are good for business.

Flyer24
Posts: 137
Joined: Sun Apr 08, 2018 4:21 pm

Re: Portfolio Review for Millenial

Post by Flyer24 » Fri Jun 15, 2018 8:55 am

I would not be in a hurry to pay off a 15 year mortgage. I would be investing that extra money. You are in the share accumulation phase. By investing more in your 20’s, it could end up changing your retirement account by hundreds of thousands. The effects of compounding can really have a large effect on your wealth more so than a paid off house. Personally, I would max out your tax advantaged accounts and put the rest in a taxable account. Let it grow. You really are doing quite well either way and I applaud you and your wife.

soccerrules
Posts: 772
Joined: Mon Nov 14, 2016 4:01 pm

Re: Portfolio Review for Millenial

Post by soccerrules » Fri Jun 15, 2018 9:08 am

Flyer24 wrote:
Fri Jun 15, 2018 8:55 am
I would not be in a hurry to pay off a 15 year mortgage. I would be investing that extra money. You are in the share accumulation phase. By investing more in your 20’s, it could end up changing your retirement account by hundreds of thousands. The effects of compounding can really have a large effect on your wealth more so than a paid off house. Personally, I would max out your tax advantaged accounts and put the rest in a taxable account. Let it grow. You really are doing quite well either way and I applaud you and your wife.
+1
Don't let your outflow exceed your income or your upkeep will be your downfall.

bigtex
Posts: 34
Joined: Fri Jan 26, 2018 10:34 am

Re: Portfolio Review for Millenial

Post by bigtex » Fri Jun 15, 2018 9:54 am

Flyer24 wrote:
Fri Jun 15, 2018 8:55 am
I would not be in a hurry to pay off a 15 year mortgage. I would be investing that extra money. You are in the share accumulation phase. By investing more in your 20’s, it could end up changing your retirement account by hundreds of thousands. The effects of compounding can really have a large effect on your wealth more so than a paid off house. Personally, I would max out your tax advantaged accounts and put the rest in a taxable account. Let it grow. You really are doing quite well either way and I applaud you and your wife.
My plan would be to have the house paid off in 3 years. I guess another part of my thought process was that by paying it off early and quickly, I would be earning a return equal to my mortgage interest rate. Also, since the mortgage will be gone at 31, I still have plenty of time to get back fully into investing in the market. For the next three years, I feel more confident in earning 3.65% guaranteed than hoping for decent returns in this long bull market we've had.

FOGU
Posts: 112
Joined: Tue Apr 24, 2018 9:41 pm

Re: Portfolio Review for Millenial

Post by FOGU » Fri Jun 15, 2018 10:22 am

bigtex wrote:
Fri Jun 15, 2018 9:54 am
Flyer24 wrote:
Fri Jun 15, 2018 8:55 am
I would not be in a hurry to pay off a 15 year mortgage. I would be investing that extra money. You are in the share accumulation phase. By investing more in your 20’s, it could end up changing your retirement account by hundreds of thousands. The effects of compounding can really have a large effect on your wealth more so than a paid off house. Personally, I would max out your tax advantaged accounts and put the rest in a taxable account. Let it grow. You really are doing quite well either way and I applaud you and your wife.
My plan would be to have the house paid off in 3 years. I guess another part of my thought process was that by paying it off early and quickly, I would be earning a return equal to my mortgage interest rate. Also, since the mortgage will be gone at 31, I still have plenty of time to get back fully into investing in the market. For the next three years, I feel more confident in earning 3.65% guaranteed than hoping for decent returns in this long bull market we've had.
So you are ignoring the power of compounding and trying to time the market at the same time. I wish you well.
~ Don't just do something. Sit there. ~

Texanbybirth
Posts: 833
Joined: Tue Apr 14, 2015 12:07 pm

Re: Portfolio Review for Millenial

Post by Texanbybirth » Fri Jun 15, 2018 10:28 am

bigtex wrote:
Fri Jun 15, 2018 9:54 am
Flyer24 wrote:
Fri Jun 15, 2018 8:55 am
I would not be in a hurry to pay off a 15 year mortgage. I would be investing that extra money. You are in the share accumulation phase. By investing more in your 20’s, it could end up changing your retirement account by hundreds of thousands. The effects of compounding can really have a large effect on your wealth more so than a paid off house. Personally, I would max out your tax advantaged accounts and put the rest in a taxable account. Let it grow. You really are doing quite well either way and I applaud you and your wife.
My plan would be to have the house paid off in 3 years. I guess another part of my thought process was that by paying it off early and quickly, I would be earning a return equal to my mortgage interest rate. Also, since the mortgage will be gone at 31, I still have plenty of time to get back fully into investing in the market. For the next three years, I feel more confident in earning 3.65% guaranteed than hoping for decent returns in this long bull market we've had.
Bigtex, I'm a big fan of your plan. If you weren't investing anything, it'd be a different story. Keep your emergency fund nice and fat for when your wife leaves the work force, even if you have to steadily contribute to it over the years. Also, set aside money for doctor's and hospital bills. Basically what I'm saying is, if that $30k is gratis on top of your other savings/expenses then keep putting it toward the house. But don't scrimp on more short-term plans (like having kids and building up your savings for that) just so you can write an exact $30,000.00 check each year.

Having a paid off home at 31? Get outta here, that's fantastic. :beer

Flyer24
Posts: 137
Joined: Sun Apr 08, 2018 4:21 pm

Re: Portfolio Review for Millenial

Post by Flyer24 » Fri Jun 15, 2018 10:36 am

bigtex wrote:
Fri Jun 15, 2018 9:54 am
Flyer24 wrote:
Fri Jun 15, 2018 8:55 am
I would not be in a hurry to pay off a 15 year mortgage. I would be investing that extra money. You are in the share accumulation phase. By investing more in your 20’s, it could end up changing your retirement account by hundreds of thousands. The effects of compounding can really have a large effect on your wealth more so than a paid off house. Personally, I would max out your tax advantaged accounts and put the rest in a taxable account. Let it grow. You really are doing quite well either way and I applaud you and your wife.
My plan would be to have the house paid off in 3 years. I guess another part of my thought process was that by paying it off early and quickly, I would be earning a return equal to my mortgage interest rate. Also, since the mortgage will be gone at 31, I still have plenty of time to get back fully into investing in the market. For the next three years, I feel more confident in earning 3.65% guaranteed than hoping for decent returns in this long bull market we've had.
It is not about getting 3-4 percent return. You should be focused on accumulating shares with dollar cost averaging. It is not about chasing a return. You are in the growth phase and should lean towards more aggressive while you are young. Your 50 year old self is probably going to wish you had an extra million in retirement. I would really do some reading about compounding. You are missing out and thinking too short term. If you had invested that $150K when you are in your 20’s, then it could have meant probably an extra $700k-$800k in your retirement portfolio. Which sounds better, a paid off 250k house or an extra $800K in retirement?

FOGU
Posts: 112
Joined: Tue Apr 24, 2018 9:41 pm

Re: Portfolio Review for Millenial

Post by FOGU » Fri Jun 15, 2018 11:03 am

Texanbybirth wrote:
Fri Jun 15, 2018 10:28 am
bigtex wrote:
Fri Jun 15, 2018 9:54 am
Flyer24 wrote:
Fri Jun 15, 2018 8:55 am
I would not be in a hurry to pay off a 15 year mortgage. I would be investing that extra money. You are in the share accumulation phase. By investing more in your 20’s, it could end up changing your retirement account by hundreds of thousands. The effects of compounding can really have a large effect on your wealth more so than a paid off house. Personally, I would max out your tax advantaged accounts and put the rest in a taxable account. Let it grow. You really are doing quite well either way and I applaud you and your wife.
My plan would be to have the house paid off in 3 years. I guess another part of my thought process was that by paying it off early and quickly, I would be earning a return equal to my mortgage interest rate. Also, since the mortgage will be gone at 31, I still have plenty of time to get back fully into investing in the market. For the next three years, I feel more confident in earning 3.65% guaranteed than hoping for decent returns in this long bull market we've had.
Bigtex, I'm a big fan of your plan. If you weren't investing anything, it'd be a different story. Keep your emergency fund nice and fat for when your wife leaves the work force, even if you have to steadily contribute to it over the years. Also, set aside money for doctor's and hospital bills. Basically what I'm saying is, if that $30k is gratis on top of your other savings/expenses then keep putting it toward the house. But don't scrimp on more short-term plans (like having kids and building up your savings for that) just so you can write an exact $30,000.00 check each year.

Having a paid off home at 31? Get outta here, that's fantastic. :beer
Fantastic. Agreed. But it must be compared to the other possibilities.
~ Don't just do something. Sit there. ~

youngpleb
Posts: 208
Joined: Mon Oct 16, 2017 7:06 pm
Location: VA, USA

Re: Portfolio Review for Millenial

Post by youngpleb » Fri Jun 15, 2018 12:03 pm

If it were me, I'd max out the 401k and at least 1 if not both Roth IRAs (also dropping the individual stock selections), then contribute any extra towards either paying down the mortgage or taxable investing (or mega-backdoor Roth, if possible would be priority). From an extremely long-term view, you are probably better off investing extra funds rather than paying down the mortgage, but that is awesome as well and will be a great feeling when you are done. Your 3-month E-fund is a great start, but I'd probably buff that up to 6 months worth. And as others have said, you are light on international exposure, so I'd recommend exploring increasing that to 20-30% of your AA.

Given that you have essentially saved 68k at 28 years old on a 98k salary, I'd probably lean towards investing rather than paying down the mortgage at this point. A common metric is having 1 year's worth of salary in investments by age 30, and that is for people who plan to retire in their 60s. If you want to change jobs in your 40s, wouldn't it be great to do that knowing you have a ton of investments behind you just in case things don't go as planned?
27. Always learning.

CnC
Posts: 533
Joined: Thu May 11, 2017 12:41 pm

Re: Portfolio Review for Millenial

Post by CnC » Fri Jun 15, 2018 2:08 pm

I to am young 32 (I despise being called a millennial)

My suggestion is make sure you max that Roth out I am planning on early retirement and I want to make sure I fund my Roth very well because that helps out greatly for early retirement.

Roth contributions can always be withdrawn tax free.

Although this is a case of do as I say not as I do. I bought a house at 22 and paid it off at 28 I didn't start actually investing till 30.


But now at 32 I am on track 9x yearly expenses invested and a paid off house and 100% debt free.

I wish I paid the house off a bit slower and focused a bit more on investing when I was young. If I would have invested since I first could I would be closer to 13x yearly expenses and debt free by now.

bigtex
Posts: 34
Joined: Fri Jan 26, 2018 10:34 am

Re: Portfolio Review for Millenial

Post by bigtex » Fri Jun 15, 2018 2:32 pm

FOGU wrote:
Fri Jun 15, 2018 10:22 am
bigtex wrote:
Fri Jun 15, 2018 9:54 am
Flyer24 wrote:
Fri Jun 15, 2018 8:55 am
I would not be in a hurry to pay off a 15 year mortgage. I would be investing that extra money. You are in the share accumulation phase. By investing more in your 20’s, it could end up changing your retirement account by hundreds of thousands. The effects of compounding can really have a large effect on your wealth more so than a paid off house. Personally, I would max out your tax advantaged accounts and put the rest in a taxable account. Let it grow. You really are doing quite well either way and I applaud you and your wife.
My plan would be to have the house paid off in 3 years. I guess another part of my thought process was that by paying it off early and quickly, I would be earning a return equal to my mortgage interest rate. Also, since the mortgage will be gone at 31, I still have plenty of time to get back fully into investing in the market. For the next three years, I feel more confident in earning 3.65% guaranteed than hoping for decent returns in this long bull market we've had.
So you are ignoring the power of compounding and trying to time the market at the same time. I wish you well.
Well when you put it like that, my plan sounds pretty lousy. Thanks for helping me reconsider.

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