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nelson posted:You're not going to find a guaranteed investment that will beat 4.875% right now. People keep saying stuff like this but I guess I don't understand because from what I can see there are dividend paying stocks like BKCC or JNK that seem to be paying out well above 5% and have been for years. I don't know, I don't buy stocks for dividends so maybe I'm missing something.
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Nov 16, 2010 20:05
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Murgos posted:People keep saying stuff like this but I guess I don't understand because from what I can see there are dividend paying stocks like BKCC or JNK that seem to be paying out well above 5% and have been for years. guaranteed investments mean default-free bonds (treasuries and certain agency bonds) or FDIC or NCUA insured savings accounts or CD's.
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Nov 16, 2010 20:13
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80k posted:EJ's business is rampant with conflicts of interest that are at the detriment of the clients. One of the reasons they were sued a few years ago was due to non-disclosure of revenue sharing payments, which added up to between 30% and 60% of their total net income per year. Your "friend" is also likely earning points towards trips to Caribbean resorts for steering you to preferred fund families. Oh I have the majority of my money in a 401k, and ETF's of my own choosing with some advice originally taken from someone I knew at Morgan Stanley. Speaking of 401k, here's what I have setup now if anyone would like to offer any opinions/thoughts: AGTHX - 40% AEPGX - 30% FSCTX - 20% GSSMX - 10% Here is a list of funds available in my company's 401k program, through Principal: Fixed Income PNIIX PIMCO Balanced/Asset Allocation PLSSX PTASX PTBSX PTCSX PTDSX PTESX Large U.S. Equity AAGPX AGTHX PLFIX Small/Mid U.S. Equity PPNSX FSCTX GSSMX MPSIX PSSIX PMPPX PPQSX International Equity AEPGX PIDIX
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Nov 16, 2010 20:14
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Murgos posted:People keep saying stuff like this but I guess I don't understand because from what I can see there are dividend paying stocks like BKCC or JNK that seem to be paying out well above 5% and have been for years. Dividends are paid at the discretion of the company and not guaranteed for any length of time. A company paying a 5% dividend today could easily pay 0% tomorrow. Also, you're not taking into account that the underlying stock could lose value. A stock with a 5% dividend that takes a 10% nosedive in share price isn't a great deal. Of course, the reverse is also true and the stock price may appreciate as well. Also, none of this takes into account the tax implications of receiving dividends versus paying off tax-advantaged debt will have on your calculations. This isn't to dissuade you necessarily from investing rather than prepaying your mortgage (I think over 15 years with a good mix of index funds and short term bonds you'd have a good chance of beating a 4.875% mortgage), but you can't just say "5% dividends versus 4.875% mortgage is a no brainer."
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Nov 16, 2010 20:22
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80k posted:You will be much better served with a DIY approach. And if you must hire a professional in the future, you can do a lot better than EJ. That's pretty interesting to hear. Definitely don't disagree with you but curious as to what are the perceptions of other similar but more insurance related firms, like Metlife, Northwestern Mutual, and New York Life?
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Nov 17, 2010 06:16
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Litch991 posted:That's pretty interesting to hear. Definitely don't disagree with you but curious as to what are the perceptions of other similar but more insurance related firms, like Metlife, Northwestern Mutual, and New York Life? My opinion is that more often than not, products from the above companies are inappropriately sold. Compared to EJ, be even more careful when dealing with insurance companies as the world of annuities and life insurance are rampant with lousy and misleading products, and can lead to some of the costliest mistakes that you can make in your financial planning. Remember, you are dealing with insurance agents and salesmen. Don't get me wrong. A good financial plan may and often does include life insurance and annuities. Fixed annuities (esp with inflation riders) are one of the more underutilized products that can help a lot of people. But tread carefully and do your own research. In regards to having higher standards for financial advice, you should be looking for professionals that are a CFP or CFA charterholder.
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Nov 17, 2010 06:57
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Litch991 posted:That's pretty interesting to hear. Definitely don't disagree with you but curious as to what are the perceptions of other similar but more insurance related firms, like Metlife, Northwestern Mutual, and New York Life?
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Nov 17, 2010 17:17
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Northwestern Mutual and New York Life are two of the top rated mutuals (along with MassMutual). I don't think anyone doubts their financial strength... certainly fine places to hold a policy with. Too bad so many people have been screwed by their agents. Life insurance and annuities should never be sold to you... don't put yourself in that position. Better to carefully analyze your need for insurance by educating yourself and discussing with well-informed people on some of the better financial forums like early-retirement.org or the bogleheads.
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Nov 17, 2010 18:29
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80k, what's your opinion on the rumblings of a "bond bubble"? I've read up on the issue and I just can't seem to shake out whether it's real or not. Is there a large risk to investing in something like Vanguard's Total Bond Market fund? It seemed like a pretty safe part of my portfolio but now I'm starting to question myself.
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Nov 18, 2010 22:48
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GOOCHY posted:80k, what's your opinion on the rumblings of a "bond bubble"? You are fine with Vanguard's Total Bond Market. Bubble talk in regards to short or intermediate bonds is ludicrous. Low returns going forward? Yes. Even the 5 yr TIPS has a negative real return and I Bonds yielding 0% real, which is a good estimate of the market's expectations for bonds... i.e. preserving wealth is the goal and we are far from the historical 2.5% real returns on bonds going forward. Stay short and take minimal credit risk (short term bond index or short term investment grade bonds), or better yet FDIC insured CD's and savings accounts and wait for better days if you want. But I would not try to outsmart the market on this one. The only major change I have done of late is elimination of TIPS from my portfolio (something I would not have done if i were retired).
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Nov 18, 2010 23:59
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Is there an easy way/website where I can compare similar funds? Kind of like that EJ guy, my bank (USAA) set me up with one of their own free 'financial advisors' who, of course, put me in all USAA funds. Right now I'm in their USAIX (.65%), USCGX (1.3%) and USCRX (1.42%). When I tried searching for like vanguard funds (ie Vanguard Capitol Growth v USAA Capitol Growth) their holding's were completely different, so it doesnt seem like they are similar funds.
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Nov 19, 2010 05:18
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I am currently saving for retirement by maxing out my 401k. I had also planned to open up a Roth IRA, but unfortunately I am over the income limit and cannot do so. A friend of mine suggested opening a life insurance fund and overfunding it, which he said would be the next best thing. Does this sound like a good idea? What other options do I have?
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Nov 19, 2010 12:32
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FateFree posted:I am currently saving for retirement by maxing out my 401k. I had also planned to open up a Roth IRA, but unfortunately I am over the income limit and cannot do so. A friend of mine suggested opening a life insurance fund and overfunding it, which he said would be the next best thing. Does this sound like a good idea? What other options do I have? Contribute to a non-deductible IRA and then roll it into a Roth. There will be some tax implications for the rollover, but you'll end up with your money in the Roth anyway. I know that you can do that this calendar year, but I'm not sure about future years.
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Nov 19, 2010 13:39
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FateFree posted:I am currently saving for retirement by maxing out my 401k. I had also planned to open up a Roth IRA, but unfortunately I am over the income limit and cannot do so. A friend of mine suggested opening a life insurance fund and overfunding it, which he said would be the next best thing. Does this sound like a good idea? What other options do I have? Are you investing outside your retirement accounts as well? If you're putting away $15k+/year for retirement and want to do more, odds are decent you'll want to at least partially retire before the minimum age for 401K/IRA disbursements. Not to mention any number of other reasons why you might need access to your savings well before retirement is even an issue.
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Nov 19, 2010 13:54
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FateFree posted:I am currently saving for retirement by maxing out my 401k. I had also planned to open up a Roth IRA, but unfortunately I am over the income limit and cannot do so. A friend of mine suggested opening a life insurance fund and overfunding it, which he said would be the next best thing. Does this sound like a good idea? What other options do I have? e: http://www.bogleheads.org/wiki/Principles_of_Tax-Efficient_Fund_Placement gvibes fucked around with this message at 18:23 on Nov 19, 2010 |
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Nov 19, 2010 18:21
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So, I spoke to a financial planner-type yesterday for a free consultation, and he suggested converting my 401(k) to a Roth when I leave my current job (today!). I have about 90k in my 401(k). What are the factors that go into deciding whether to do this? More info: If I converted, I would be paying taxes on this income at a 33% rate. I can cover the taxes.
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Nov 19, 2010 18:28
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gvibes posted:So, I spoke to a financial planner-type yesterday for a free consultation, and he suggested converting my 401(k) to a Roth when I leave my current job (today!). I have about 90k in my 401(k). Why did he recommend this? Doing the entire balance all at once and paying at a 33% rate is a bit crazy. Now 2010 has a special provision where you can spread out the conversion over (edit) 2 years. But even that (a 45k conversion per year for 2 years might make you still pay at a high marginal rate). I would only convert if i was in the 15% tax bracket and only to the amount that fills up that bracket. 80k fucked around with this message at 19:13 on Nov 19, 2010 |
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Nov 19, 2010 18:55
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80k posted:Why did he recommend this? Doing the entire balance all at once and paying at a 33% rate is a bit crazy. Now 2010 has a special provision where you can spread out the conversion over (edit) 2 years. But even that (a 45k conversion per year for 2 years might make you still pay at a high marginal rate). I would only convert if i was in the 15% tax bracket and only to the amount that fills up that bracket. Wife has a Roth 403(b) and we have some taxable accounts, so I think we will be pretty well tax-diversified, so I was not sure why he was recommending this.
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Nov 19, 2010 19:21
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gvibes posted:I think he's just a doom-and-gloomer about the deficit and thinks that taxes are going to be through the roof by the time I retire, meaning that the 33% I would pay to convert now will be less than whatever my rate to withdraw these funds on retirement will be. you know it's not all-or-nothing (do it now or get hosed in 40 years when you retire). you CAN manage your conversions over the next several years to optimize your tax situation. A financial planner should consider that, doom-and-glooming notwithstanding. But you should not take financial advice from doom-and-gloomers anyway.
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Nov 19, 2010 19:39
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Hi all, I was pointed to this thread awhile back from the newbie investing thread but am just now getting around to posting in it.  I've actually read through the thread, and I know there are situations similar to mine, but some of the jargon being thrown around is kind of bewildering to me (a total investment greenhorn) so I'm hoping you can help.Age: 27 Debt: None (I rent) Retirement accounts: I contribute up to the 5% company match in my 401K (balance is somewhere around $50K at this point), and I opened a Roth IRA this year with Vanguard ($5K in the 2050 target fund). My company also has a fairly rich cash balance plan that I'm fully vested in. Savings: $50K sitting in the bank, adding ~$750 / month I know it's dumb to have $50K sitting in a low yield savings account but I've never been sure where or how to invest. At this point I'd like to keep $12 - 15K in my savings as an emergency fund and open up additional fund(s) with Vanguard with the rest, as I don't have a ton of interest in studying up on and picking individual stocks or bonds and I like Vanguard. My time horizon is probably 5-10 years for needing money out, as I have no plans for a large purchase anytime soon. I know that this isn't really "long term" but it's long enough that I still hope you all can help (and they directed me here  ).My questions are: 1) Do I need to be doing anything else for retirement? I feel like I'm fairly well set up but would like to know if anyone disagrees. 2) If I do invest, what types of funds should I be looking at? I've read here about funds with Admiral Shares, and it sounds like I'd have the minimum money to look into those, but I'm not really sure how to locate them. I know I'd want a mix heavier into bonds because of my shorter horizon, but beyond that I'm kind of clueless. I've looked through the list of funds they have and the choices are kind of overwhelming. Thanks for any advice anyone can give me, I appreciate it! Sophia fucked around with this message at 03:34 on Nov 21, 2010 |
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Nov 21, 2010 03:12
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Sophia posted:My questions are: Answer 1) You need to plan out how much income you will need at retirement to live comfortably, so you can determine how much more you need to save. Once at retirement the financial game is to deplete the savings at the right pace to meet your living standards until death. You need to guess how much you may need to spend a month or year on medical insurance, taxes, living expenses, any household expenses, etc. Once you have those estimated figures you can determine how much monthly income you will need to meet those expenses. For example, if I guess I need about $4,000 a month at retirement age to pay expenses, insurance and taxes, assume my mortgage is paid off, and I think I can earn 2% a year at low risk on remaining savings, and I'll live an additional 20 years past retirement, then I'll need about $800,000 saved up by my retirement age. I'm not including social security in those estimates (don't know if SS will exist by then). There are lots of retirement calculators on the web, so give a search to use the calculators to help you in planning retirement savings. Answer 2) Since you are still young you can afford to allocate more of your assets to equities fund holdings over bond holdings. I believe Vanguard offers some long-term asset allocation funds that are for people who have long-term goals. Go to this Vanguard link and you'll find a selection criteria for long-term retirement funds based on your current age or planned retirement year: https://personal.vanguard.com/us/funds/vanguard/TargetRetirementList#targetAnchor If you are going to retire in 40 years then the Vanguard Target Retirement 2050 Fund (symbol VFIFX) is ideal since it invests about 90% in equities and 10% in bonds, with very little in cash. Vanguard has some of the lowest expense fees in the index fund industry, so they are probably the best company to go with.
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Nov 21, 2010 18:27
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For saving in the short-term (5-10 years), you could check out one of the core funds (https://personal.vanguard.com/us/funds/vanguard/core). A total bond index fund or their short term investment grade bond fund wouldn't be a bad choice for that timeline. If you want something REALLY safe, check out an online savings bank like SmartyPig or the like - a bit higher interest than checking accounts (1.75% atm) and 100% safe. nnnotime, I think your advice is good if she wants to continue investing for retirement, but for 5-10 years out (I'm assuming this is for a house down payment or something similar) she should stick to safer holdings than equities.
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Nov 21, 2010 21:35
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I'd like to ask about what moana was talking about. I'm 26, just finishing my undergrad after enlisting in the military (That new GI is amazing... more on that in a bit). I'm hoping to get into some kind of professional school (dentistry, medical pharmacy etc lots of options as a biochem major) I have no dependents and live pretty frugally, so i've saved $25000 and i'll probably net about 15 more by the time my GI bill benefits are up. I don't have any assets besides cash, but I also have no debt. However, seeing those dollars sitting in my savings account is making me kind of sad. I would open up a roth IRA or some similar retirement savings account if I had a job but the GI bill allows me to live comfortably without one for now... and while I expect i'll be able to take some kinds of loans for later schooling, i'd like to try and invest my money in a way that I could withdraw easily if there's hiccups on the way. Should I just stick to CDs, money markets and higher-interest savings accounts for now? I don't want to be too risky with my money until I start earning an actual wage again. baseness fucked around with this message at 10:15 on Nov 22, 2010 |
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Nov 22, 2010 00:56
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After reading 4 pillars, and this thread, I decided about 5 months ago to start investing in a Vanguard Roth IRA. My thinking is that tax rates will go up due to chronic deficits, and also I'm about 30 years old so my salary will go up later. I'm able to put $420/month in it (1/12th of the max contribution limit). Because of their $3k limits, I've currently got about $1700 in a savings account at my credit union. As the end of the year approaches, though, I'm beginning to second guess using a Roth, and am reconsidering a traditional IRA. My new reasons are that 1) I live in California, and so my taxes are huge, and 2) because of my field, my salary probably won't go up *that* much. Maybe 25% over my lifetime. Should I just stick it out and wait till spring to get into a Roth, or stick it into a Traditional IRA? In the latter case, I will likely have a somewhat unexpected tax refund that I can send to the student loan people.
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Dec 1, 2010 17:48
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Gibbon Hugs Cragen posted:Is there an easy way/website where I can compare similar funds? I use USAA as well. They let you compare similar funds right there. While Vanguard may have different holdings, both have very similar long-term historical results, so it's really down to personal choice from what I can see. I'm an investing noob and a USAA Fanboy though, so take that for what you will.
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Dec 5, 2010 07:35
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gp2k posted:After reading 4 pillars, and this thread, I decided about 5 months ago to start investing in a Vanguard Roth IRA. My thinking is that tax rates will go up due to chronic deficits, and also I'm about 30 years old so my salary will go up later. I'm able to put $420/month in it (1/12th of the max contribution limit). Because of their $3k limits, I've currently got about $1700 in a savings account at my credit union. If you are at border of income brackets looking into maxing out your Traditional IRA to get into the bracket below might be better (but most unlikely). It is highly recommended that you deposit to your Roth IRA first because qualifying Roth IRA distributions will not be taxed when withdrawing, and you have the opportunity to withdraw the principle amount after 5 years of opening without penalty.
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Dec 5, 2010 08:25
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With the new year I've set up a new long-term investment plan -- save 30k every year until 2018, starting with 2011. I am a very big picture hands-off investor. I like to set a plan in motion, let it run, evaluate the outcome every year, and make any necessary changes. I wanted to bounce this plan off of you guys to get a general outside impression. It's not all for retirement (I plan on having a pension eventually), but like any smart, pragmatic human being, I want to diversify my wealth. Here it is: Mutual Funds: Vanguard Wellington (VWELX): 10k + 3.6k/yr Vanguard 500 Index (VFINX) : 3.7k + 12k/yr Vanguard International Growth (VWIGX): 3.4k + 3.6k/yr Vanguard 2040 Fund Roth IRA (VFORX): 20.6k + 5k/yr Stocks: (+4.8k/yr) Aerovironment (AVAV) @ $350 Northrop Grumman (NOC) @ 2.6k L3 Communications (LLL) @ 1k Vanguard Energy ETF (VDE) @ $388 What I've laid out here is what I currently have, and the yearly contribution to each fund. I usually don't play around with stocks, but I obviously like to invest in defense, and will probably continue to just because I purposely set aside extra money to throw around. With the above, my current asset allocation turns out to be: 86% stocks, 14% bonds 80% domestic -- 77% large cap, 17% mid cap, 5% small cap 20% international -- 50% europe/23% pacific/1% canada with 26% emerging markets It's only 42k which I think is pretty good for age 26 considering how I've basically been paying my own way through life since age 18. But my main question is that pouring more money into the S&P500 is a good thing, right? I like to think that trying to beat the index is dumb, so I'm just hedging my bets by putting money into the international market with VWIGX (and VFORX to a lesser extent). Meanwhile, VWELX gives me some decent bond exposure.
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Dec 5, 2010 11:55
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Rekinom posted:But my main question is that pouring more money into the S&P500 is a good thing, right?
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Dec 5, 2010 16:40
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Rekinom, I am in a pretty similar situation as you but have a higher percentage (~40%) international over domestic - Why should I put so much of my money into the country that just happens to be the one I live in? I also prefer to have a more balance mix on market cap - I am around 40/20/40 (L/M/S). Just went with this after reading a lot here and on Bogle heads. I think that really as long as we stick with our savings goals the difference between our allocations will have minimal impact in the end.
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Dec 5, 2010 17:58
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nelson posted:Nobody knows. On the one hand, it's been considered "good advice" for a while now. On the other hand so was buying real estate before the bust.
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Dec 5, 2010 20:08
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Pram posted:I'm not really convinced going long is a sound strategy at the moment. I know this is an unpopular opinion in the long term investment thread but its looking increasingly likely that we're heading into 'lost decades' territory. Buy and Hold a Vanguard index was OK in 2006 I guess, just like buying the nasdaq was a great idea in 1999. If I was putting my money on auto-pilot the most important thing I'd be looking at right now isn't historical returns but probably dividends. VWELX doesn't even appear to pay any so I'd take that into consideration. What is the best option now then? Hard question to answer, I know.
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Dec 6, 2010 02:14
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alreadybeen posted:Rekinom, I am in a pretty similar situation as you but have a higher percentage (~40%) international over domestic - Why should I put so much of my money into the country that just happens to be the one I live in? Well, to answer your first question, I'm way more in tune with the American economy, than I am with international ones. If I kept up with international news as much, I would probably be more comfortable sending more investment dollars overseas. But in the end you're probably right, aynway. Pram posted:I'm not really convinced going long is a sound strategy at the moment. I know this is an unpopular opinion in the long term investment thread but its looking increasingly likely that we're heading into 'lost decades' territory. Buy and Hold a Vanguard index was OK in 2006 I guess, just like buying the nasdaq was a great idea in 1999. If I was putting my money on auto-pilot the most important thing I'd be looking at right now isn't historical returns but probably dividends. VWELX doesn't even appear to pay any so I'd take that into consideration. What do you mean by lost decades, and what do you think is pointing us there? I'm curious, because it seems that the recession is over and now we're in the era of the "new normal", and that ~9-10% unemployment will be the norm, not the exception, but the market will slowly but surely go up over time.
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Dec 6, 2010 02:32
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Rekinom posted:
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Dec 6, 2010 03:16
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Rekinom posted:What do you mean by lost decades, and what do you think is pointing us there? I'm curious, because it seems that the recession is over and now we're in the era of the "new normal", and that ~9-10% unemployment will be the norm, not the exception, but the market will slowly but surely go up over time. Pram posted:Well, by lost decade I mean, every dollar you put into the S&P 500 back in 2000 would be worth around 83 cents today based on returns and inflation. If thats your assessment of the shape the economy is in then I say go for it. You sure you are not talking about the post-bubble Japan economy? If the Fed came out tomorrow and increase rates by 0.01% then the market would take a sharp dive. Lost Decade on Wiki
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Dec 6, 2010 03:22
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Pram, what are you advising someone in that situation put their money in if not a broad fund?
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Dec 6, 2010 03:23
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Dr. Jackal posted:You sure you are not talking about the post-bubble Japan economy? If the Fed came out tomorrow and increase rates by 0.01% then the market would take a sharp dive. As I said if I was going to put my money on auto-pilot for the long term then I'd probably aim for an index fund that tracks high dividend companies.
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Dec 6, 2010 03:34
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There's always the option of market timing too, so that you're not invested when the market goes down for 6 or 12 months. A lot of people feel it's impossible to beat the market in this sense, but the company I work for does it. I do have a part of my retirement savings in a target retirement fund to be "safe", but it's consistently underperformed my account based around market timing.
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Dec 6, 2010 14:54
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Rekinom posted:With the new year I've set up a new long-term investment plan -- save 30k every year until 2018, starting with 2011. I am a very big picture hands-off investor. I like to set a plan in motion, let it run, evaluate the outcome every year, and make any necessary changes. I wanted to bounce this plan off of you guys to get a general outside impression. Putting money into the S&P500 is neither good nor bad. It's just a good vehicle for exposure to US stocks. You have plenty of US stocks through your target retirement fund. If anything, Vanguard target retirement funds are overweight US stocks. The last thing you need is to add an S&P500 fund. Get rid of it. Regarding the other replies to your question: - VWELX doesn't pay dividends? Yes it does. The stock portfolio of VWELX has a higher dividend yield than the broad market. It overweights income-focused industries. It's practically Wellington Management's bread and butter. - See my comments in a previous page on dividend-focused strategies. Go for it if you want, but evidence for or against dividend-focused strategies is inconclusive. - "Try market timing" is not advice. If it worked for someone else, good for them.
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Dec 6, 2010 19:58
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SolidKZ posted:I use USAA as well. They let you compare similar funds right there. While Vanguard may have different holdings, both have very similar long-term historical results, so it's really down to personal choice from what I can see. I'm an investing noob and a USAA Fanboy though, so take that for what you will. I take my hearty endorsement of USAA's advice back. I will continue to use their services because their prices and benefits are good, but I advise against taking their advice. Apparently the automated advisers on the website were changed in November. Previously they didn't recommend specific products, but rather types, ie: x% Large cap, x% small cap, x% this bond, x% that fund. Apparently this new calculator is only capable of selling USAA funds and recommends putting 100% of your money into those. Not impressed anymore.
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Dec 6, 2010 20:01
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SolidKZ posted:I take my hearty endorsement of USAA's advice back. I will continue to use their services because their prices and benefits are good, but I advise against taking their advice. Apparently the automated advisers on the website were changed in November. Previously they didn't recommend specific products, but rather types, ie: x% Large cap, x% small cap, x% this bond, x% that fund. Apparently this new calculator is only capable of selling USAA funds and recommends putting 100% of your money into those. Not impressed anymore. USAA is great for banking and insurance, but there is no reason to use their investment products. Their investing division exists out of necessity to offer something to their members, but if you know enough to be participating on a financial forum, then you might as well go with the best. Vanguard is miles ahead of the competition when it comes to great, low-cost offerings for every asset class that an ordinary investor needs.
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Dec 6, 2010 22:28
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