Long Term Investing & Retirement: The second best time is now

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CornHolio: May 20, 2001; Toilet Rascal

80k posted:

Cornholio,
The earlier snapshot you posted with the International fund showed "Expense Ratio: 2.86%"). Why can't you find the same page for the other funds?

Oh hey. I didn't even realize that's what that was. I saw the % and knew it was a ratio but it didn't click in my head. I'll go through them all tonight or tomorrow night and post back with the results.

# ? Jan 8, 2010 01:02

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# ? May 10, 2024 06:12

GamingHyena: Jul 25, 2003; Devil's Advocate

Triple Tech posted:

I'm with Fidelity for my 401k and I'm throwing 100% of my contributions at this one fund they have that targets a retirement date. Managed aggressively early on and then more conservatively as retirement approaches.

Auto pilot. I wish every one had an option like this.

Edit: For the curious as of today's date:

Domestic: 64%
Foreign: 25%
Bonds: 9%
Short term: 2%
(percents rounded)

Just be aware that not all target date retirement funds are created equal. My 2040 retirement fund for my 401k is 90% equities. Talk about aggressive! :monocle:

I balanced my 401k out with a bond fund, but if I have to do that myself then what the hell are my fees going towards?

Just for kicks I recently looked at the plan's 2010 retirement fund (as in, for people who are retiring this year). How do they invest recent retiree's money in one of the most uncertain economic times since the Great Depression? The fund has over 40% equities, 5% REITs, and a 5% "high yield bond fund" (junk bonds?). Why don't I just go to Vegas and bet it all on black?

# ? Jan 8, 2010 02:14

Leperflesh: May 17, 2007

This is a great thread, and I'll be coming back asking for more thorough advice, but for the moment I wanted to ask about a specific thing I have been investing in via my 401k that has not been mentioned in this thread yet: a "completion fund".

Specifically, in my main (currently contributing to) 401k (through Fidelity) I have ~25% in VINIX, "Vanguard Institutional Index Fund Institutional Shares", which is an index fund that tracks the S&P 500 and has an expense ratio of just 0.05%.

I also have ~20% in VIEIX, "Vanguard Extended Market Index Fund Institutional Shares", which is also an index fund:

quote:

...designed to track the performance of the Standard & Poor's Completion Index, a broadly diversified index of stocks of small and medium-size U.S. companies. The Standard & Poor's Completion Index contains all of the U.S. common stocks regularly traded on the New York and American Stock Exchanges, and the Nasdaq over-the-counter market, except those stocks included in the Standard & Poor's 500 Index

So the idea I guess is that it 'completes' the total US Market, if you also hold S&P 500. VIEIX has an expense ratio of 0.09% so it costs a tiny bit more than VINIX.

Without going into my asset allocation (having just read this thread I conclude I am in too many funds (8 in my main 401k and another 6 in an old 401k to which I no longer contribute), I'm interested in opinions on VIEIX specifically, and funds that track the S&P "completion" index more generally.

E.g. why wouldn't someone just get a total market index that tracks all of the US exchanges? Presumably to overweight or underweight the S&P500... but why do that?

# ? Jan 8, 2010 03:40

CornHolio: May 20, 2001; Toilet Rascal

80k posted:

Cornholio,
The earlier snapshot you posted with the International fund showed "Expense Ratio: 2.86%"). Why can't you find the same page for the other funds?

Okay, here are the expense ratios for all my options. I'm eyeing the S&P500 right now. Thoughts?

# ? Jan 8, 2010 15:47

abagofcheetos: Oct 29, 2003; by FactsAreUseless

Those ratios make me so happy my 401k is through Fidelity.

# ? Jan 8, 2010 15:53

Don Wrigley: Jun 8, 2006; King O Frod

Giraffe posted:

Cornholio's thread got me thinking about my own 401(k) investment lineup, which I chose a bit randomly. I'm 36, with a medium risk tolerance -- I'm all in stocks, but would like a fair amount of diversification, as I value consistent long-term return over trying to catch the big jumps.

Current allocations:

20% Fidelity Large-cap Growth (FDGRX), expense ratio 0.94%
20% Spartan 500 Index (FSMKX), expense ratio 0.10%
20% Old Mutual TS&W Mid-cap Value (OTMIX), expense ratio 1.19%
20% Baron Small-cap (BSCFX), expense ratio 1.32%
20% Fidelity Diversified Intl (FDIVX), expense ratio 0.99%

I have a few other stock fund choices:

American Beacon Large-cap Value (AAGPX), expense ratio 0.97%
Fidelity Large-cap Contrafund (FCNTX), expense ratio 1.05%
William Blair Mid-Cap Growth (WCGIX), expense ratio 1.23%
Wells Fargo Small Cap Value (SSMVX), expense ratio 1.56%
SSgA Global Equity ex-US Index Fund Institutional II, expense ratio 0.17%

Then there's a bunch of Vanguard targeted retirement funds, three bond funds, and something I hadn't seen before called Brokerage Link, which looks like it will let me transfer the money into a brokerage account (not set up) and invest it in whatever.

So, is this totally retarded? Any obvious ways to get a better and/or safer long-term return? Any advice would be appreciated.

First of all, you say you profile as medium-risk, but 100% stock funds is very high risk. At your age and risk profile, you should probably have at least 30-40% in bond funds.

Second, I'd make a few changes to your current allocation. I don't see why you'd hold both the large-cap growth fund and the S&P 500 fund, there's bigtime overlap (S&P 500 = Large cap growth + Large cap value). If I were you, I'd just get rid of the growth and stick with the index; lower fees and higher diversification. Finally, you're very heavy in US as opposed to international exposure--I would shift that a bit.

# ? Jan 8, 2010 16:16

CornHolio: May 20, 2001; Toilet Rascal

Alright, does this look better?

I haven't actually made the change yet, in case I have made some horrible mistake.

Also, should I transfer any of my existing over? I think I can only do so many transfers in a period of time, but I'm thinking of transferring something like 50% to the S&P 500. Thoughts?

# ? Jan 8, 2010 16:28

flowinprose: Sep 11, 2001; Where were you? .... when they built that ladder to heaven...

Cornholio, if I were you with those horrible expense ratios, I would put 100% of the 401k in the cheapest fund (the 500index @ 1.66% expense ratio :cry:

). Then I would open a Roth IRA and diversify the rest of it there.

Keep in mind that you shouldn't worry about trying to diversify each account separately. You just need to diversify your portfolio as a whole, which includes other IRAs, taxable accounts, etc. Otherwise you're just going to be getting raped in expenses inside that 401k.

Now obviously if you don't have enough extra income to invest outside of your 401k, then you'll have problems. But you said that you're only contributing 4% of your income (I assume that gets you the maximum matching? if not you should do more there before opening a Roth). If thats the case and thats the max match they will do, then hopefully you have quite a bit of income headroom to invest outside of your 401k.

flowinprose fucked around with this message at 16:57 on Jan 8, 2010

# ? Jan 8, 2010 16:55

80k: Jul 3, 2004; careful!

Cornholio, I am at a loss for words. That could be the worst 401k plan I have ever seen. The expense ratios are criminal. I really do suggest you talk to the plan fiduciary. Tell him/her/them that:
- The S&P500 index is TEN TIMES higher cost than Vanguard. And in fact, compared to the Thrift Savings Plan C fund (an equivalent fund), it is 87 times more expensive. TSP C Fund is 0.019% expense. And yours is 1.66%. WTF?!?!?!?
- Your High Qual Intermediate Term Bond fund is 9 times more expensive than Vanguard. And more than 2 times higher than the industry average intermediate bond fund.

All of those expense ratios are more than 2 times higher than industry average, and close to ten times higher than Vanguard. This is COMPLETE bullshit.

# ? Jan 8, 2010 17:15

var1ety: Jul 26, 2004

Leperflesh posted:

Without going into my asset allocation (having just read this thread I conclude I am in too many funds (8 in my main 401k and another 6 in an old 401k to which I no longer contribute), I'm interested in opinions on VIEIX specifically, and funds that track the S&P "completion" index more generally.

E.g. why wouldn't someone just get a total market index that tracks all of the US exchanges? Presumably to overweight or underweight the S&P500... but why do that?

Well, a naive look at VFINX (S&P 500) compared to VEXMX (Extended market) has VEXMX returning 49% compared to 23% for VFINX for the past year, so over-weighting during that time period would have yielded extra returns.

I personally try and approximate the total US market by holding a weighted amount of VEXMX in a Roth IRA to complement my 401k's S&P 500 fund.

# ? Jan 8, 2010 17:18

CornHolio: May 20, 2001; Toilet Rascal

flowinprose posted:

Cornholio, if I were you with those horrible expense ratios, I would put 100% of the 401k in the cheapest fund (the 500index @ 1.66% expense ratio ). Then I would open a Roth IRA and diversify the rest of it there.

Keep in mind that you shouldn't worry about trying to diversify each account separately. You just need to diversify your portfolio as a whole, which includes other IRAs, taxable accounts, etc. Otherwise you're just going to be getting raped in expenses inside that 401k.

Now obviously if you don't have enough extra income to invest outside of your 401k, then you'll have problems. But you said that you're only contributing 4% of your income (I assume that gets you the maximum matching? if not you should do more there before opening a Roth). If thats the case and thats the max match they will do, then hopefully you have quite a bit of income headroom to invest outside of your 401k.

I've maxed out my company matching. I contribute 4% while they contribute 2%. I'd lose this with a Roth IRA. Would it still be worth it?

Is it possible to get a 401(k) set up independandly of my employer?

I did send that article to our HR person (and a few other people), I'll see what happens with that.

# ? Jan 8, 2010 17:19

flowinprose: Sep 11, 2001; Where were you? .... when they built that ladder to heaven...

CornHolio posted:

I've maxed out my company matching. I contribute 4% while they contribute 2%. I'd lose this with a Roth IRA. Would it still be worth it?

Is it possible to get a 401(k) set up independandly of my employer?

I did send that article to our HR person (and a few other people), I'll see what happens with that.

I'm not suggesting you contribute any less to your 401k, but is 4% of your income all you're contributing to your retirement at all? If so, you are probably going to be hard-pressed to be able to retire with anywhere near enough money to sustain the same standard of living that you have now (especially with those lovely-rear end expense ratios).

# ? Jan 8, 2010 17:25

CornHolio: May 20, 2001; Toilet Rascal

flowinprose posted:

I'm not suggesting you contribute any less to your 401k, but is 4% of your income all you're contributing to your retirement at all? If so, you are probably going to be hard-pressed to be able to retire with anywhere near enough money to sustain the same standard of living that you have now (especially with those lovely-rear end expense ratios).

I might increase it if I can, but I've got plenty of other financial issues at the moment and I want to make sure we can pay for the baby coming up and get our debt reduced first. I lose $32 per paycheck and the company adds another $16.

Our budget's tight at the moment, in another year it should be much better and I can contribute more. I know, I know, compounding interest etc... but I'd be very hard-pressed to pull much else out of my budget at the moment.

edit: also $110/week for health insurance, up $8/week. yikes.

CornHolio fucked around with this message at 17:46 on Jan 8, 2010

# ? Jan 8, 2010 17:31

80k: Jul 3, 2004; careful!

Well, don't even think about contributing more to that 401k (beyond the match). Additional retirement savings should go to a Roth. But yea it seems you have more pressing financial issues than retirement savings.

# ? Jan 8, 2010 17:34

CornHolio: May 20, 2001; Toilet Rascal

80k posted:

Well, don't even think about contributing more to that 401k (beyond the match). Additional retirement savings should go to a Roth. But yea it seems you have more pressing financial issues than retirement savings.

If I put an additional 2% of my income into a Roth starting next year (assuming no pay increases, that'd be $16/week I think) would that make a noticeable difference when it comes to retirement time, all other things being the same?

If not, what percentage would?

also, seriously, does my above split look reasonable?

CornHolio fucked around with this message at 18:00 on Jan 8, 2010

# ? Jan 8, 2010 17:53

flowinprose: Sep 11, 2001; Where were you? .... when they built that ladder to heaven...

80k posted:

Cornholio, I am at a loss for words. That could be the worst 401k plan I have ever seen. The expense ratios are criminal. I really do suggest you talk to the plan fiduciary. Tell him/her/them that:
- The S&P500 index is TEN TIMES higher cost than Vanguard. And in fact, compared to the Thrift Savings Plan C fund (an equivalent fund), it is 87 times more expensive. TSP C Fund is 0.019% expense. And yours is 1.66%. WTF?!?!?!?
- Your High Qual Intermediate Term Bond fund is 9 times more expensive than Vanguard. And more than 2 times higher than the industry average intermediate bond fund.

All of those expense ratios are more than 2 times higher than industry average, and close to ten times higher than Vanguard. This is COMPLETE bullshit.

It will probably be tough to change the minds of the company to switch the 401k plan to something less expensive. Unfortunately, the fact that they went with a plan that charges such high expense ratios probably means the employer is getting charged less. That combined with the meager 2% max matching tells me that Cornholio works for a company that is pretty stingy with their benefits.

I think the only way you could probably change their minds would be if you got a large segment of the workforce to wake up and realize how lovely their benefits are and petition to get it changed. If you have a union they might be able to help? The only other way would be to educate other employees about how badly they're getting screwed and get them to all start bitching about it collectively (which will put you in an akward position if the company bigwigs find out you're trying to cause an uprising).

# ? Jan 8, 2010 17:54

80k: Jul 3, 2004; careful!

CornHolio posted:

If I put an additional 2% of my income into a Roth starting next year (assuming no pay increases, that'd be $16/week I think) would that make a noticeable difference when it comes to retirement time, all other things being the same?

If not, what percentage would?

Of course it would make a difference. Whether it is enough depends on many factors (how much you think you need to retire, what rate of return you expect). Any specific answer (like save 10%) is useless without better analyzing your situation.

My hunch is that you are going to be teetering on the low end of retirement savings for awhile as you deal with your children and education savings for the next decade or longer. So saving too much for retirement is unlikely to happen. Anything you can put away (and not use for future PS4's and PS5's) will be good.

# ? Jan 8, 2010 18:06

80k: Jul 3, 2004; careful!

CornHolio posted:

also, seriously, does my above split look reasonable?

Sorry I was still traumatized by seeing so many ER's above 2%.

The split is ok but with the hope of minimizing expense ratios, I would up the S%P to at least 50% or higher, and then remove the midcap. Maybe 50% S&P, 20% Fidelity International, 30% High Qual Bond.

Ugh. 1.91% for Bond fund when high quality bonds are barely yielding that much? I agree with flowinprose that complaining is unlikely to do much but it is worth bringing up to your coworkers and raise the issue with HR.

# ? Jan 8, 2010 18:11

Maggot Monster: Nov 27, 2003

I really have no clue about this kind of thing so I'm here asking for advice.

Here's my current allocations:

Here's my choices:

I only recently moved to America (2007) and so I have no idea what the hell I'm doing. I can't increase my contributions or anything currently so I just have to work with what the company kicks in. I got three kids and a single income, so I just need help with reorganizing my choices.

Obviously the above choices aren't super helpful to just list as it depends on how they are performing. Until I know better should I just spread it around a few of the equities choices above? (It's that or 100% in real estate, I heard that always goes up up up!)

I'm 28, so I have quite some time until I retire so I can handle risk just fine I assume.

# ? Jan 8, 2010 18:29

CornHolio: May 20, 2001; Toilet Rascal

80k posted:

Sorry I was still traumatized by seeing so many ER's above 2%.

The split is ok but with the hope of minimizing expense ratios, I would up the S%P to at least 50% or higher, and then remove the midcap. Maybe 50% S&P, 20% Fidelity International, 30% High Qual Bond.

Ugh. 1.91% for Bond fund when high quality bonds are barely yielding that much? I agree with flowinprose that complaining is unlikely to do much but it is worth bringing up to your coworkers and raise the issue with HR.

Gotcha. After thinking about it, I think I'll up the S&P to 55%, then have 20% Fidelity International and 25% High Qual Bond. I don't have that much in there anyway so I don't think I need as much in bonds as I originally thought.

# ? Jan 8, 2010 18:31

Phil Moscowitz: Feb 19, 2007; If blood be the price of admiralty,
Lord God, we ha' paid in full!

Seeing Cornholio's mindblowing expense ratios has made me examine my own. Admittedly I've basically ignored most of my 401k details, but I contribute the maximum each year with $5000 to the IRA as well and so does my wife.

My 401k is with the ABA's retirement plan. The plan just reorganized its funds and so last year's allocations were melted in to fit into their new funds, and the fee listings online are outdated. For those plans that didn't change, they've jacked up the rates around 0.15% or so, though.

Here's what I ended up with:

36.67% - Stable asset return fund (73% bonds and 27% cash) - 0.69%
15.51% - Int'l all cap equity fund - 1.25%
22.03% - Large cap equity fund - based on the old large cap funds, probably around 0.95%
25.72% - Small/mid cap equity fund - based on the old small and mid cap funds, probably around 0.95%

Other funds have expense ratios from 0.75% to 0.95%. Since there is nothing I can do about the choice of plan (other than changing jobs, right?), is it prudent to try and find the lowest expenses while staying diversified for a retirement target of about 30 years from now, or is a 0.95% fee reasonable?

Also, I have a financial advisor who is a family friend. My understanding is that he doesn't do anything with or earn anything from my 401k, he just gives me his opinion on how to allocate. He makes his money when reinvesting my IRA every year, as well as trying to sell me life insurance.

I'm meeting with him in a few weeks because my wife has recently changed jobs. I'd like to get some details from him about his fee structure. What sort of questions should I be asking him? Am I correct that he is not sapping anything from my 401k? I'm certain he does not charge an hourly fee, but I'm not sure what his fee is--what is a reasonable commission or percentage for reinvesting the IRA? I think last year, I paid a $100 fee on the $5000 IRA, which is 2% and seems high--if that's his fee I'd rather manage it myself.

# ? Jan 8, 2010 18:47

80k: Jul 3, 2004; careful!

Phil Moscowitz posted:

I'm meeting with him in a few weeks because my wife has recently changed jobs. I'd like to get some details from him about his fee structure. What sort of questions should I be asking him? Am I correct that he is not sapping anything from my 401k? I'm certain he does not charge an hourly fee, but I'm not sure what his fee is--what is a reasonable commission or percentage for reinvesting the IRA? I think last year, I paid a $100 fee on the $5000 IRA, which is 2% and seems high--if that's his fee I'd rather manage it myself.

Fees are important. Another one is his qualifications. Unless he is a CFP or CFA Charterholder, it is unlikely he has the fiduciary standards and competency that warrants ANY fee. More likely (if he is trying to sell you life insurance), he is a broker that has loose "suitability" guidelines, that does not do much in the way of preventing conflicts of interest. In that case, don't even ask questions. Just leave him, read a few books, and manage your money yourself.

# ? Jan 8, 2010 18:56

CornHolio: May 20, 2001; Toilet Rascal

CornHolio posted:

Gotcha. After thinking about it, I think I'll up the S&P to 55%, then have 20% Fidelity International and 25% High Qual Bond. I don't have that much in there anyway so I don't think I need as much in bonds as I originally thought.

What should I do with the $6,700 I have in there? Initial thought is to split it the same (transfer 25% to bonds, 55% to S&P500 and 20% to the other international option).

# ? Jan 8, 2010 19:15

80k: Jul 3, 2004; careful!

CornHolio posted:

What should I do with the $6,700 I have in there? Initial thought is to split it the same (transfer 25% to bonds, 55% to S&P500 and 20% to the other international option).

Yes that is what you should do. Do it right now, so you can get today's closing prices.

# ? Jan 8, 2010 19:29

Giraffe: Dec 12, 2005; Soiled Meat

Don Wrigley posted:

First of all, you say you profile as medium-risk, but 100% stock funds is very high risk. At your age and risk profile, you should probably have at least 30-40% in bond funds.

Second, I'd make a few changes to your current allocation. I don't see why you'd hold both the large-cap growth fund and the S&P 500 fund, there's bigtime overlap (S&P 500 = Large cap growth + Large cap value). If I were you, I'd just get rid of the growth and stick with the index; lower fees and higher diversification. Finally, you're very heavy in US as opposed to international exposure--I would shift that a bit.

Thank you for the advice. I won't bother explaining the logic behind my 100% stock and large cap growth choices, as it was mostly a mix of hearsay and randomly mashing buttons when I set up the plan.

Based on what you said, I'm thinking of shifting my allocations to:

25% bond funds
25% international (FDIVX)
20% S&P 500 index
15% mid-cap (OTMIX)
15% small-cap (BSCFX)

That moves me from 100% stocks down to 75%, a third of which will be in international instead of a fifth. The US stocks are now more balanced between the S&P 500 and mid- and small-cap. Too much so?

Feel free to suggest additional changes if I'm misinterpreting your advice or over-reacting to it. Thanks again.

# ? Jan 8, 2010 19:40

Triple Tech: Jul 28, 2006; So what, are you quitting to join Homo Explosion?

Ugh, I find so much of this confusing... I wish there was an algorithmic way of going about investing. It's especially difficult since it seems to be a function of your age and portfolios need to be re-balanced every once in a while.

I opened up a Roth IRA with ShareBuilder hoping they would have a Fidelity-esque solution (i.e. a mutual fund targeted toward a retirement date) but they do not.

_{(they do have a portfolio suggester but I want it even easier than that)}

Maybe that should be my new business venture. Set it and forget it investing, even easier than ShareBuilder.

Edit: Oo I may have lied. They have a selection of no-fees mutual funds that you can select by aggressiveness or retirement date. Good enough for me, I guess.

# ? Jan 8, 2010 19:56

Don Wrigley: Jun 8, 2006; King O Frod

Giraffe posted:

That moves me from 100% stocks down to 75%, a third of which will be in international instead of a fifth. The US stocks are now more balanced between the S&P 500 and mid- and small-cap. Too much so?

Feel free to suggest additional changes if I'm misinterpreting your advice or over-reacting to it. Thanks again.

I might tip your US holdings more in favor of S&P 500 than mid and small cap, as the S&P 500 makes up something like 75% of the US market; for perfect diversification, your portfolio should mimic this type of discrepancy (try your best to model it after the vanguard total stock market index holdings, it's unfortunate that 401k plans tend to give s&p index rather than total stock market index as a choice in general). This will give you better diversity and lower risk.

# ? Jan 8, 2010 20:05

80k: Jul 3, 2004; careful!

Triple Tech posted:

Ugh, I find so much of this confusing... I wish there was an algorithmic way of going about investing. It's especially difficult since it seems to be a function of your age and portfolios need to be re-balanced every once in a while.

I opened up a Roth IRA with ShareBuilder hoping they would have a Fidelity-esque solution (i.e. a mutual fund targeted toward a retirement date) but they do not.

_{(they do have a portfolio suggester but I want it even easier than that)}

Maybe that should be my new business venture. Set it and forget it investing, even easier than ShareBuilder.

Edit: Oo I may have lied. They have a selection of no-fees mutual funds that you can select by aggressiveness or retirement date. Good enough for me, I guess.

Ishares target date ETF.

Example: Target Date 2030 ETF

Compare the expense ratios of these ETF's (around 0.30%) to the ones you found on Sharebuilder. Note, these ETF's are purchased just like a stock on Sharebuilder, so you will have trading commissions.

# ? Jan 8, 2010 20:09

CornHolio: May 20, 2001; Toilet Rascal

80k posted:

Yes that is what you should do. Do it right now, so you can get today's closing prices.

done. friggin' fantastic.

# ? Jan 8, 2010 20:28

Leperflesh: May 17, 2007

var1ety posted:

Well, a naive look at VFINX (S&P 500) compared to VEXMX (Extended market) has VEXMX returning 49% compared to 23% for VFINX for the past year, so over-weighting during that time period would have yielded extra returns.

I personally try and approximate the total US market by holding a weighted amount of VEXMX in a Roth IRA to complement my 401k's S&P 500 fund.

I don't, and won't, try to do this kind of market timing; I'll lose in the long run. That said: what weighting ratio are you going with, between your S&P 500 fund and VEXMX?

# ? Jan 8, 2010 20:48

AreWeDrunkYet: Jul 8, 2006

80k, we got mired in the cash discussion last time (if you're curious, I went half VIPSX and half VFSTX, which seems to have worked out if only because VIPSX allows sales every couple months, so VFSTX can be the account I use if I need to draw short term cash or something before replacing it). I was hoping to get some more input on portfolio allocation. Here's the prior post, updated for 12/31/09:

quote:

As far as general portfolio advice, this is how I have things broken down now. I'm excluding a chunk of shares held in the small-cap I work for the numbers below, that accounts for 15.2% of total assets but I'd rather not share enough detail to get worthwhile feedback on that.
code:
(all percentages are of total assets, numbers don't add up to 100% because of the above noted exclusion)

50.1% domestic equities
	12.2% VISVX (Roth IRA)
	10.7% FUSEX (401K)
	7.5% AIVSX
	7.4% ARCC (2)
	7.1% GE (1)
	5.3% CAIBX

24.8% international equities
	12.2% VEIEX (Roth IRA)
	7.4% FDIVX (401K)
	3.3% VEA
	1.9% VWO

9.9% short-term bonds ("cash")
	5.1% VFSTX
	4.8% VIPSX

(1) I think the risk of their investment arm is overstated given their usual senior position, 
and I like the prospects of their energy division. Most of this was picked up $12-14 range.
(2) This one was a speculative purchase and mostly picked up at about half the current price, 
but it's still a very attractive yield and in my opinion being dragged down by a lovely set of comps. 
It also serves as a decent proxy to investing in long-term debt.
401K contributions (6% to get a max match of 3%, doing it for about 2.5 years now) are currently 60% FUSEX and 40% FDIVX, and since I started my Roth 3-4 years ago, I've been maxing that out in some mix of VISVX and VEIEX. The AIVSX and CAIBX purchases were poor decisions (front-end load) from a long time ago, but I haven't liquidated them since the maintenance fee isn't unreasonable. Everything else is just erratic savings, nothing's been done with any systematic plan in mind. I'm fairly risk tolerant - month to month expenses are at about 60% of take-home pay excluding bonus (medical benefits are withheld from pay), no dependents, no house, no debt, negligible fixed expenses outside of an apartment I can get out of in a month's notice. I should also have a bonus coming after 2009 earnings are announced, so I'd like to streamline things before that money comes in and gets mostly invested.

Basically, everything is all over the place and I would like to clean it up some. While I'm at it, I figure I should go over allocations, planning, etc. So,
-Which funds should I get rid of, and which ones should I consolidate that money into?
-How should I adjust my overall allocation, and do I need to bother with fixed income beyond where I park my cash at this age? (keep in mind ARCC and the unnamed 15.2% are heavily weighted towards debt/convertible debt)
-Are there additional asset classes I would benefit from entering into for diversification/hedging?
-Anything else, I'm more than open to advice and would appreciate the input.

AreWeDrunkYet fucked around with this message at 21:14 on Jan 8, 2010

# ? Jan 8, 2010 21:06

var1ety: Jul 26, 2004

Leperflesh posted:

I don't, and won't, try to do this kind of market timing; I'll lose in the long run. That said: what weighting ratio are you going with, between your S&P 500 fund and VEXMX?

For my domestic equity I am holding 80% S&P 500, 20% VEXMX.

The URL that follows lists S&P 500 as 79.90% and Wilshire 4500 as 20.1%, so that should be pretty close.

https://personal.vanguard.com/us/FundsWorldMarket

# ? Jan 8, 2010 21:32

80k: Jul 3, 2004; careful!

AreWeDrunkYet posted:

80k, we got mired in the cash discussion last time (if you're curious, I went half VIPSX and half VFSTX, which seems to have worked out if only because VIPSX allows sales every couple months, so VFSTX can be the account I use if I need to draw short term cash or something before replacing it). I was hoping to get some more input on portfolio allocation. Here's the prior post, updated for 12/31/09:

I think you are mostly fine, if you want a value-tilted and EM-tilted portfolio. American Funds is a fine fund family. If you paid the load, stay in it. You are heavily weighted towards EM, moreso than I am comfortable with, but I also have a higher international allocation than you (50% of equities)... I don't see a need for a tiny VWO component along with VEIEX. Better to start building a position in VSS for diversification.

# ? Jan 8, 2010 21:48

Leperflesh: May 17, 2007

var1ety posted:

For my domestic equity I am holding 80% S&P 500, 20% VEXMX.

The URL that follows lists S&P 500 as 79.90% and Wilshire 4500 as 20.1%, so that should be pretty close.

https://personal.vanguard.com/us/FundsWorldMarket

Great, OK. Thanks: I think I am still overweight VEXMX then, although not outrageously so.

# ? Jan 8, 2010 22:19

AreWeDrunkYet: Jul 8, 2006

80k posted:

I think you are mostly fine, if you want a value-tilted and EM-tilted portfolio. American Funds is a fine fund family. If you paid the load, stay in it. You are heavily weighted towards EM, moreso than I am comfortable with, but I also have a higher international allocation than you (50% of equities)... I don't see a need for a tiny VWO component along with VEIEX. Better to start building a position in VSS for diversification.

I know I'm overweighted domestically, I've been working on moving the portfolio towards a more international allocation over time (buying more VEIEX than VISVX, etc), but with cash limited by income and equity sales I'd rather not make, it's a process more than anything. Effectively, after maxing out on mostly VEIEX in my Roth in 2008, I was trying to purchase a combination of VEA and VWO that was more heavily tilted towards emerging markets than VEU alone (you hit that nail on the head) to move towards a more international stance with exposure to developed markets. The recession hit right as I was starting though, and I decided to take what I thought were opportunistic purchases in GE, ARCC, and my employer's stock over the international ETFs. Since the market recovery, I've been hoarding cash as mentioned, but I hope to get back to purchasing more international ETFs if/when we get another major dip in the markets (I know this isn't the the thread for market timing, just describing my strategy).

When I start purchasing again, I'll dollar cost average into maxing out my Roth 50/50 VISVX/VEIEX (I'm relying on the 401k to balance that out with FUSEX and FDIVX - not to give away too much income info, but my 401k contributions up to max match are just a bit larger than the Roth max, (then again, at this age, events are likely to prevent fully vesting the match)), but after the Roth max, I would want to go back to the international ETFs to tilt away from my current allocation of domestic equities.

VEU is too focused on developed markets for me as mentioned above, but what would be a good allocation of VWO, VEA, and VSS (hadn't seen that one, thanks)? When I was making the ETF purchases before, I was going for about
66% VEA
34% VWO

but if I'm going to include VSS, I was considering
50% VEA
25% VWO
25% VSU

Is this workable?

Then there's fixed income. As mentioned in the previous post, ARCC holds quite a bit of sub and convertible debt, GE is well invested in senior debt, and my company has a good mix of current paying senior and sub debt with its equity positions. From a diversification perspective, does this cover me from the fixed income end at my risk tolerance, or do I need to take the plunge and buy into bonds?

If there's another major shake-up in the real estate markets (I'm thinking commercial RE debt getting refinanced is going to cause a minor panic, sorry again for bringing speculation into this thread) that spreads to bond markets overall, it should be possible to pick up some underpriced debt, right? If that's the case (and I would expect risk spreads to drop after said events settled out), am I correct in thinking that some combination of medium to long term junk and investment grade bonds would be a good addition to my portfolio at a good price? Or are interest rates generally too low right now to approach fixed income this way?

AreWeDrunkYet fucked around with this message at 22:44 on Jan 8, 2010

# ? Jan 8, 2010 22:35

CornHolio: May 20, 2001; Toilet Rascal

Holy crap, I just got my 6-month statement for my 401(k) (where I had everything in high-risk) and my 12-month return was 69%!

:monocle:

Now if only I hadn't lost it all first...

# ? Jan 8, 2010 22:42

Leperflesh: May 17, 2007

Does that 69% include your contributions you made during this year? If you just compare year-over-year balances, it does, so that would make the number very deceptive.

And yes, stock market classes that plunged in late '08 are the ones that recovered the most in '09; for many of us, this simply means we had a year or two of extra-cheap shares to buy with our constant, steady additions to our retirement accounts, so it's quite nice.

# ? Jan 8, 2010 23:04

80k: Jul 3, 2004; careful!

AreWeDrunkYet posted:

but if I'm going to include VSS, I was considering
50% VEA
25% VWO
25% VSS

Is this workable?

This is my international allocation in a nutshell, so yes, it is workable.

AreWeDrunkYet posted:

Then there's fixed income. As mentioned in the previous post, ARCC holds quite a bit of sub and convertible debt, GE is well invested in senior debt, and my company has a good mix of current paying senior and sub debt with its equity positions. From a diversification perspective, does this cover me from the fixed income end at my risk tolerance, or do I need to take the plunge and buy into bonds?

Well, common stocks are never a proxy for fixed income, regardless of the company's balance sheet. You can invest in their debt and analyze how well secured you are by current assets. But equity ownership is an entirely different animal and I find this question rather puzzling, at least from an asset allocation/diversification perspective.

AreWeDrunkYet posted:

If there's another major shake-up in the real estate markets (I'm thinking commercial RE debt getting refinanced is going to cause a minor panic, sorry again for bringing speculation into this thread) that spreads to bond markets overall, it should be possible to pick up some underpriced debt, right? If that's the case (and I would expect risk spreads to drop after said events settled out), am I correct in thinking that some combination of medium to long term junk and investment grade bonds would be a good addition to my portfolio at a good price? Or are interest rates generally too low right now to approach fixed income this way?

I have the same feeling as you regarding Commercial RE.

I believe the credit markets are going to continue to offer amazing opportunities (possibly better than equities). Not sure if you will capture the premium with bond funds this time around though. My thinking is you will have to do some fishing.

I am against junk for longterm asset allocation purposes. But when spreads are attractive, and on fallen angels rather than OI debt, junk can be a great opportunity. Going out in maturity with corporate bonds (investment grade or junk) is seldom worth the risk though. I'd continue to stay short with corporates and ignore the noise. Unless you want to do some fundamental analysis and start picking securities.

# ? Jan 8, 2010 23:49

80k: Jul 3, 2004; careful!

Leperflesh posted:

Does that 69% include your contributions you made during this year? If you just compare year-over-year balances, it does, so that would make the number very deceptive.

Considering Emerging Markets returned around 70% in '09, I think it is a legitimate rate of return.

# ? Jan 8, 2010 23:49

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# ? May 10, 2024 06:12

AreWeDrunkYet: Jul 8, 2006

80k posted:

This is my international allocation in a nutshell, so yes, it is workable.

Thanks. Then again, that's on top of the VEIEX investment, but you said yourself you weren't comfortable with that level of emerging markets exposure.

80k posted:

Well, common stocks are never a proxy for fixed income, regardless of the company's balance sheet. You can invest in their debt and analyze how well secured you are by current assets. But equity ownership is an entirely different animal and I find this question rather puzzling, at least from an asset allocation/diversification perspective.

Doesn't that depend on the company structure? ARCC, for example, is a BDC that is mostly in debt, and is legally obligated to distribute income. Further, BDCs often put assets in SPVs, secured by the same assets as the debt above. In a lot of ways, it's like buying into a PE fund that tends to target further up the capitalization ladder. Leverage is pretty minimal, ultimately, the returns to the equity holders should be effectively the returns on the debt instruments the BDC invests in. I know that there are differences in calculating risk when investing in the equity of company that functions as a debt fund than simply investing in debt, but shouldn't the company offer diversification from typical equity investments anyway?

80k posted:

I have the same feeling as you regarding Commercial RE.

I believe the credit markets are going to continue to offer amazing opportunities (possibly better than equities). Not sure if you will capture the premium with bond funds this time around though. My thinking is you will have to do some fishing.

I am against junk for longterm asset allocation purposes. But when spreads are attractive, and on fallen angels rather than OI debt, junk can be a great opportunity. Going out in maturity with corporate bonds (investment grade or junk) is seldom worth the risk though. I'd continue to stay short with corporates and ignore the noise. Unless you want to do some fundamental analysis and start picking securities.

Thanks, that's useful information.

AreWeDrunkYet fucked around with this message at 00:16 on Jan 9, 2010

# ? Jan 9, 2010 00:13

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