|
I just checked the expense ratios offered by my company's Roth 401(k), holy hell, they're apparently quite low:code:
|
#
?
Jan 15, 2011 10:25
|
|
|
|
| # ? May 11, 2024 06:23 |
|
|
Could use some opinions on my asset split for my retirement savings - I started working in September and chose a near-random spattering of funds, but have been reading up and tried to construct something more sensible. UK-based hence weighting towards UK stocks. I work for a pension company so get discounts on fund charges, 0% charges except where noted. Age 22 and aiming to retire in ~40 years.code:I'm maybe a little heavy in UK small cap, our fund there has performed really well under the same manager over the last 10+ years, is it okay to keep a chunk of my savings there with plans to pull it out once performance peters off or should I just allocate less from the get-go? I'm only 10% bonds; is this too low? Should I have any preference for fixed-rate vs index-linked bonds given that I have ~40 years to retirement? Finally the 5% in emerging markets - feels so expensive at 1% compared to everything else, but it's just a small chunk and should still have a decent chance to grow in the long term so it's acceptable, right? Sorry I've so many questions! Would appreciate any advice you guys could give. k3nn fucked around with this message at 00:44 on Jan 16, 2011 |
|
#
?
Jan 16, 2011 00:39
|
|
|
I'm 23 and I have a Roth IRA through Fidelity, but it only has about 1k in it. Their minimum investment for a mutual fund is 2500$, and I make around 100-200 a month in disposable income. Should I keep contributing to the IRA until I can afford a mutual fund, or should II look into other options like ETFs, or even other companies to trade with?
|
|
#
?
Jan 16, 2011 00:48
|
|
|
Zero The Hero posted:I'm 23 and I have a Roth IRA through Fidelity, but it only has about 1k in it. Their minimum investment for a mutual fund is 2500$, and I make around 100-200 a month in disposable income. Should I keep contributing to the IRA until I can afford a mutual fund, or should II look into other options like ETFs, or even other companies to trade with? Are you sure you need to hit the $2.5k minimum if you're saving monthly? The site says "Fidelity minimum to open $2,500 or $200/month (waived for rollovers & transfers)" so it looks like you might be able to set up a $200/month payment and still get invested in funds..I encountered this in my ISA (UK equivalent to Roth IRA) and they had a £3k minimum but a £50 minimum for monthly contributions so I could hit the £3k minimum while invested in 16 funds! Worth checking to be absolutely sure what their rules are! k3nn fucked around with this message at 02:35 on Jan 16, 2011 |
|
#
?
Jan 16, 2011 02:17
|
|
|
k3nn posted:Could use some opinions on my asset split for my retirement savings - I started working in September and chose a near-random spattering of funds, but have been reading up and tried to construct something more sensible. UK-based hence weighting towards UK stocks. I work for a pension company so get discounts on fund charges, 0% charges except where noted. Age 22 and aiming to retire in ~40 years. You're probably overweight in UK stocks. The country makes up less than 4% of the world market, but you hold 10 times that. Your financial dependency is already linked to the nation's economy by your job, which at an early age has a much bigger impact on your ultimate retirement amounts than your savings. If anything, most people might be better off investing much more internationally than they do. Planning to pull out of a fund when returns drop off is something a lot of people have planned to do often throughout history, with usually poor results. Market timing generally doesn't work. You're probably best off just adjusting to the allocation you want now and rebalancing if anything gets too off target. Especially since you have 0% expense ratios on so many funds, there's not much problem with holding a lot of different funds. 5% in emerging markets seems about right; they're a small part of the market, and volatile, but some years they can provide outsized returns.
|
|
#
?
Jan 16, 2011 04:18
|
|
|
Hey guys. Just chiming in to say thanks for getting my motivated to save. I already have about 12.5 grand in savings, with 3000-4000 in super. I am almost 23, and have put all that money into a term deposit, and have increased my super payments by adding $50 per week from my pay. By years end, I aim to have around 20 grand in my savings by the end of the year. Also aim to put at LEAST ten grand in each year. This time, I'm not going to gently caress around with it, and it is going to form my savings for retirement / buying a house. Krakened fucked around with this message at 14:38 on Jan 16, 2011 |
|
#
?
Jan 16, 2011 14:36
|
|
|
Krakened posted:This time, I'm not going to gently caress around with it, and it is going to form my savings for retirement / buying a house. Please don't use your retirement savings to buy a house.
|
|
#
?
Jan 16, 2011 21:00
|
|
|
I understood that to mean part of the savings was for retirement, part was for a house. But if not, then yeah, don't do that. Just because the IRS will let you...
|
|
#
?
Jan 16, 2011 21:31
|
|
|
Is it better to invest and take out a loan for a house than to pay for a house in cash?
|
|
#
?
Jan 16, 2011 21:47
|
|
|
Zero The Hero posted:Is it better to invest and take out a loan for a house than to pay for a house in cash? Depends on your interest rate on the loan and the time horizon of the investment. Given today's rates and a time horizon of significant size, yes.
|
|
#
?
Jan 16, 2011 21:51
|
|
|
The important thing is that your retirement savings is the money you'll live on when you retire. A house is a great thing to have, and if you own it outright you won't have to pay rent while you're retired... but the house you're living in won't generate income for you. It will still cost maintenance and taxes and the only way to convert it back into income is to rent it out or sell it... in either case, eliminating its use as reducing your fixed expenditures while retired. Moreover, historically, houses are lovely investments. They are extremely illiquid, have big transactional costs, a big tax burden, require maintenance costs just to keep their value, and with the exception of a couple of big bubble-periods, do not actually appreciate in value very much (something like 3 or 4%/year return over the last 100 years). There's lots of good reasons to buy a house but you should not cut into your retirement savings to do it.
|
|
#
?
Jan 16, 2011 22:34
|
|
|
Advice needed: I'm very new to all this. I've just finished reading a bunch of material about investing in general, the majority of which came from the Motley Fool's Guide To Investing. If I could summarize their book in a few sentences, it would be: - Mutual funds like those offered by Vanguard are a relatively safe bet and good for people who don't like to think about their investments... - ...but studies show 80% of them consistently underperform the S&P500, after all costs are taken into account. - Index Funds are better over the long term, since they will come very close to matching the S&P500 and have next to no costs... - ...but you'll only be matching the market, and could do much better. - If you're willing to do significantly better and have the time, patience, and wisdom, then you can make significantly more by doing it yourself. (Which is what the bulk of the book is about) Now this book was written in the late 90's and was only last revised in 2001. So is this advice still correct (assuming it was ever correct)? My situation is that I have a significant amount of cash sitting in bank accounts, and it's been simple procrastination and ignorance that's kept me from sticking it somewhere it could actually be growing. Now that I've awakened, my inclination is to stick it all in an index fund since I don't feel confident enough yet to dive headfirst into researching and buying stocks by myself. Would doing so be a Dumb Thing? Is there a fatal flaw to this plan, or could I be missing out on something that's equally little effort but has a much better return? If it helps, the rest of my situation is that I'm in my mid-30's, have no debt, I'm already saving to the hilt in a 401(k), and I have no plans to buy a house.
|
|
#
?
Jan 17, 2011 09:50
|
|
|
What's the consensus on putting your emergency fund and other cash savings in a tax-advantaged account? Something along the lines of what's recommended here: http://www.bogleheads.org/wiki/Placing_Cash_Needs_in_a_Tax-Advantaged_Account On one hand it seems like a win, on the other we're still not talking about a really huge amount of income from savings + bonds in this climate so it might not be worth the complexity. My net worth is about 50/50 between tax-advantaged and taxable accounts right now. Also, a question about brokerages: if I only care about ETFs and not mutual funds, is there any reason to open an account with Vanguard over TD Ameritrade? Right now I'm with Fidelity and mostly happy but Vanguard's ETFs are better and I could be saving $8 per transaction which adds up. TD waives commission for all the Vanguard ETFs I'd care about (plus some non-Vanguard ETFs). They also have a promotion offering 25k air miles in exchange for funding a new account with $50k+ which sounds good to me. laffa fucked around with this message at 11:19 on Jan 17, 2011 |
|
#
?
Jan 17, 2011 11:15
|
|
|
minato posted:My situation is that I have a significant amount of cash sitting in bank accounts, and it's been simple procrastination and ignorance that's kept me from sticking it somewhere it could actually be growing. Now that I've awakened, my inclination is to stick it all in an index fund since I don't feel confident enough yet to dive headfirst into researching and buying stocks by myself. Sounds like you analyzed this very well. Most people on this forum feel very strongly that putting all your retirement money into a low expense ratio index fund is the way to go. For the most part, I agree, and have the majority of my money in such an account. It's easy, and there's something that feels safe about it. The rest of my money though I do have invested in individual stocks, either through my company's profit sharing plan or in a Roth IRA. I use a stock advisory service, because I certainly don't have the time to thoroughly research stocks myself. For what it's worth, both accounts have outperformed the index funds for the past 10 years and 2 years, respectively. It wasn't very hard to outperform the market in the past ten years of course, considering the fact that (excluding dividends) the market lost all of its gains. But that's part of the point of trying to beat the market - you can (hopefully) do better during times like that.
|
|
#
?
Jan 17, 2011 14:22
|
|
|
Agreed. No reason you should avoid individual stocks or whatnot - just be aware that while the expected return might be higher, so is the risk. And the risk is disproportionately higher when you don't know what you're doing. So park it in stock and bond index funds for now while you read some more (and not from the Motley Fool). Personally I have been using the index fund strategy for quite some years because I don't feel like studying up enough to start in with individual companies. Three funds at Vanguard will get you a really cheap, versatile, diverse portfolio. Needless to say this is only for money that you're going to hang on to for the long term - I would say 15 years or more. Also note that people who do worse than the market don't tend to brag about it (or even necessarily realize it), so you're likely to get a very over-optimistic picture about stock picking if you just listen to people's stories. There was a thread about this and I ended up concluding from a couple of studies that were posted that the real experts might have the potential for returns 1-3% higher than the market over time. Of course that is the average, so some would do better - but which?
|
|
#
?
Jan 17, 2011 15:56
|
|
|
mister itchy posted:What's the consensus on putting your emergency fund and other cash savings in a tax-advantaged account? Something along the lines of what's recommended here: http://www.bogleheads.org/wiki/Placing_Cash_Needs_in_a_Tax-Advantaged_Account The circumstances outlined in the link do make a good case, but you would need to have a substantially larger set of investment accounts vs. emergency cash to be able to ride out market swings. The link says at least double, and I'd personally say higher than that (though it's just my opinion). It's not like you need to go all-or-nothing, though, so if you wanted to do it with a portion that would likely be fine. Also you would have to choose the accounts carefully to make sure you had access to instruments that you liked well enough to "act" as the cash, and had access to similar markets/instruments/whatever in both the 401(k) and your investment account. They need to be close but not the same to take advantage of the tax side of this, so depending on what your retirement account offered that might or might not work for you. One area that they didn't discuss is the Roth IRA benefit: in a RIRA you can contribute a fixed amount per year, but you can always draw out your contributions later if you need to. Therefore, if you aren't maxing out your RIRA and have a cash emergency fund, you're missing out. Move the cash into a money market fund in the RIRA while you can still contribute for the tax year. If you never need it, great - you got the money in while you could. If you do need it you can always take it back out again.
|
|
#
?
Jan 17, 2011 16:12
|
|
|
slap me silly posted:Agreed. No reason you should avoid individual stocks or whatnot - just be aware that while the expected return might be higher, so is the risk. You gain access to higher return (with higher risk) by accessing riskier asset classes (small cap, value, emerging markets, etc) or adding leverage. The risk/reward spectrum only applies to systematic risk. unsystematic risk does not raise the expected return of your portfolio. The market does not care about how concentrated your portfolio so it will not reward you with a higher risk premium. So individual stocks do not have higher expected return. It has the exact same expected return as a basket of similar stocks, but you add non-systematic risk. This is a bad tradeoff, all things being equal. An active stock picker is trying to use skill to achieve better risk-adjusted return. A successful stockpicker achieves higher returns with lower risk through smart selection. If he wanted to get higher returns with higher risk, what is the point? Of course, very few stockpickers succeed in this endeavor, which is why indexing is recommended.
|
|
#
?
Jan 17, 2011 19:37
|
|
|
Just wanted to double-check my understanding from reading the earlier part of this thread: I currently work for a non-profit and have a salary of 40,000 before taxes, insurance, etc. I wind up with about $28,000 after subtracting all the taxes and other stuff. My employer automatically contributes about 6% of my salary into a 403(b), which I understand is like a 401(k) but for non-profits. I have that money divided in a few annuity accounts with TIAA-CREF. Getting married soon, babies on the horizon, and want to start socking away what I can after I finish paying down my student loans (which I'm close to). Is my understanding correct that I should be focusing on maxing out a Roth IRA for myself (and my wife-to-be should do the same for herself) (because I don't need to add anything for my 403(b) to get the max contribution from my employer), along with perhaps putting money into an Education IRA for future spawn? And to check my distribution, I can choose between equities (Index, Global Equities, Growth, or Stock), Real Estate, fixed income (bond, inflation-linked bond), money market, "Guaranteed annuity", or what they call the "social choice account" which is 60% equity and 40% debt. I currently have: 15% real estate 10% stock (equities) 10% fixed income (bond) 65% social choice (mixed) Should I tweak this to maximize my returns, and if so in what direction?
|
|
#
?
Jan 17, 2011 23:16
|
|
|
I don't see a lot of time given to investments in property management groups for a portfolio oriented towards income generation. Does anyone have some good suggested starting points for reading?
|
|
#
?
Jan 18, 2011 00:27
|
|
|
Thinking about starting a targeted Vanguard account, but I'm having trouble understanding the employer "match" part of the 401k. This thread seems to indicate contributing to the top match level of employee contributions in a 401K is important before investing elsewhere. My employer matches $10 for the first $20 contributed by me every pay check. As long as I contribute that $20 (It's currently set at $40), does this satisfy the "maximum match" this thread refers to on occasion? As a side note my contributions go in to a 457, and their match goes in to a 401k if that makes any difference. Because of this thread I've diversified my account holdings away from bonds (was more of an automatic initial selection) and more in to funds related to long term growth, but pickings are slim as the account is run by ING for the employer. Does anyone know what funds are best within the ING portfolio? This past six months has only provided a 1.76% return. Unless this is just indicative of growth in long term funds.
|
|
#
?
Jan 19, 2011 04:29
|
|
|
Untagged posted:Thinking about starting a targeted Vanguard account, but I'm having trouble understanding the employer "match" part of the 401k. This thread seems to indicate contributing to the top match level of employee contributions in a 401K is important before investing elsewhere. Yes it just refers to getting all the "free money" from your employer you can, you don't want to leave any on the table. Is the 401K only through ING or are both accounts through them? If your 457 is through ICMA-RC like mine was I'm sorry, their funds kinda suck. Not really familiar with ING's retirement options, sorry, but 1.76% over the past 6 months is not good unless there's very little risk, that's barely above a CD level of return. It could make sense if you were invested fully in bonds - when did you diversify?
|
|
#
?
Jan 19, 2011 14:45
|
|
|
cowofwar posted:I don't see a lot of time given to investments in property management groups for a portfolio oriented towards income generation. Does anyone have some good suggested starting points for reading?
|
|
#
?
Jan 19, 2011 16:18
|
|
|
Untagged posted:My employer matches $10 for the first $20 contributed by me every pay check. As long as I contribute that $20 (It's currently set at $40), does this satisfy the "maximum match" this thread refers to on occasion? That is seriously $10 on $20 per pay check matching, max? How often is your pay check? Generously assuming weekly that is still 520 a year max. That really stinks. But still it is a guaranteed 50% return on investment so you should take it. And yes that is what they mean by maximum match.
|
|
#
?
Jan 19, 2011 18:57
|
|
|
Chin Strap posted:That is seriously $10 on $20 per pay check matching, max? How often is your pay check? Generously assuming weekly that is still 520 a year max. That really stinks. But still it is a guaranteed 50% return on investment so you should take it. And yes that is what they mean by maximum match. Paid twice a month. It was at one time $20, but a few months ago they changed the whole system. Tyro posted:Yes it just refers to getting all the "free money" from your employer you can, you don't want to leave any on the table. Is the 401K only through ING or are both accounts through them? If your 457 is through ICMA-RC like mine was I'm sorry, their funds kinda suck. Not really familiar with ING's retirement options, sorry, but 1.76% over the past 6 months is not good unless there's very little risk, that's barely above a CD level of return. It could make sense if you were invested fully in bonds - when did you diversify? The 401k and the 457 are both in ING. I'm in a state government plan, so whatever system they have worked out with ING is what we get. Allegedly before I was hired there was a different provider that had more options, I guess ING gave better rates for the state to pay for. When I was first hired I made a quick look at the pamphlet and put 50% in "Long Term Growth" and 50% in Inflation Protect Bonds and went about my business. This was about two years ago when things were really bleak, so I wanted to make sure I didn't loose all of it. Fast forward to recently, I'd forgotten about it. I re-diversified three months ago and now I'm 75% in Long Term Growth and 25% in another type of bond fund that has had decent returns. Another question: We (I) also contribute 4-5% to a pension plan, is this typically added in to the calculation that "you should save at least 10% of your income for retirement"? I know I've got plenty of time (hopefully), but I'd like to get this stuff straight and pointed in the right direction so I can "set it and forget it" for the next little while. And hopefully have things on the right track.
|
|
#
?
Jan 19, 2011 22:51
|
|
|
Untagged posted:Another question: We (I) also contribute 4-5% to a pension plan, is this typically added in to the calculation that "you should save at least 10% of your income for retirement"? Unfortunately, no. The "save 10% for retirement" idea came about when nearly everyone had pensions and was supposed to be in addition to the pension amount. The going wisdom now is 15% saved amongst all vehicles.
|
|
#
?
Jan 20, 2011 03:38
|
|
|
T0MSERV0 posted:Unfortunately, no. The "save 10% for retirement" idea came about when nearly everyone had pensions and was supposed to be in addition to the pension amount. The going wisdom now is 15% saved amongst all vehicles. Ok, well for someone like me - what is a good option for additional savings? A Roth IRA or one of those Targeted Retirement accounts mentioned in this thread? Or something different... contribute more to my current state retirement plan?
|
|
#
?
Jan 20, 2011 03:46
|
|
|
Untagged posted:Ok, well for someone like me - what is a good option for additional savings? A Roth IRA or one of those Targeted Retirement accounts mentioned in this thread? Or something different... contribute more to my current state retirement plan? Best bet would be to contribute the requisite $20/pay period to get the employee match, do a Roth IRA up to the max, and then continue to invest in your 401(k). You can have nearly anything in a RIRA depending on where you open it, so if you want to do a target retirement account, specific stocks, whatever, that's up to you. All the RIRA does is say "this is money that I've already paid income taxes on once and I'll never have to again*, so I can plan my tax strategy in retirement more effectively when the time comes." You can put the money in darn near anything. Most (all?) brokerages fund minimums if you do want to go the target retirement route, but others will forgo the minimum if you agree to contribute a fix amount on a monthly basis to help get you started. Doing a Roth would be a good idea so you can spread your allocation between pre- and post-tax investments, not to mention the fact that personal retirement accounts give you the most options to work with (vs. taking whatever your employer offers). Since you're also getting a pension, if you want to keep more money away from income taxes, you can also setup a straight up investment account, though I probably wouldn't do that until a large chunk of money was going into the 401(k), and certainly not before maxing the Roth. *unless of course we do.
|
|
#
?
Jan 20, 2011 04:14
|
|
|
I need advice on how to grow my money while keeping future life expenses in mind down the line. I am 26 with no debt and future plans are possibly a house in 4-5 years (Los Angeles County/Inland Empire), probably buying a car 5-8 years from now, and marriage most likely around 3-4 years as well. Currently I make approximately $48-50k annually, placing 4% (max employer match) into the company 401(k) and have approximately $36k sitting in an online savings account and $18k sitting in a checking account. After reading this thread late last year, I decided to open up a Vanguard Roth IRA in October, putting the $5k max into a Target 2050 Retirement Fund, as well as opening a Scottrade account and investing $4k into stocks with another $2k sitting in the account for future use. Note that I do not really know much about individual stocks (mostly going by friends' advice who heavily research stocks and the market) and am mostly using that money as "disposable" in the case of making poor stock choices, although I currently have a 12.5% return on it. I am not sure what to do with the money sitting in my savings/checking accounts to make it grow while keeping in mind that I will probably have to spend a large portion of it on future down payments/car/marriage down the line. And since I live in the LA area houses are still expensive, even for smaller ones. Should I place the money into some index fund with Vanguard, as a non-retirement account? I figure I could increase my 401(k) to 10% no sweat, but what else can I do? Also, seeing as I opened it in October, when can I add another $5k into my 2050 Fund? People seem to say that when you have more than $5k into the Vanguard IRA, you should drop the Target Retirement Fund and place it into some more diversified index I believe. Specific fund suggestions would be great. Thank you all!
|
|
#
?
Jan 20, 2011 17:21
|
|
|
Heisenator posted:I need advice on how to grow my money while keeping future life expenses in mind down the line. -Target retirement accounts are fine for tax-advantaged accounts like a 401k or IRA. They kind of stink in taxable accounts because of taxes you have to pay on the bond distributions. So if all your retirement savings is just in IRA and 401k, then keeping TR is fine. If you have to start investing long term retirement savings in a taxable account (like after maxing your 16,500 in a 401k and 5000 in an IRA) then start to worry about it. But for your income that would be a lot of savings. -Don't buy individual stocks with anything but, as you put it, "gambling money". -For anything you are planning to use in ~5 years, you shouldn't invest in stocks or bonds, you should be keeping it liquid in a savings account or some CDs. -You can contribute to your IRA 5000 for every tax year. Since you did it for 2010 already, you can do so for 2011 anytime now up until April 15, 2012. So I would drop in another 5k now. -4% 401k contribution + 5000 in a roth every year is about 14% savings for retirement every year. Not too shabby, but if you can do that 401k increase to 10% you'll really be cashing in on all the early advantages of compound interest. Main question: what sorts of funds are in your 401k? If you could post what funds are available and their expense ratios, that would be best. You need to look at that + your Roth as a whole to figure out what you should be holding in each.
|
|
#
?
Jan 20, 2011 18:11
|
|
|
Thank you for the reply. Here are scans of the available John Hancock Funds from my 401(k) handout. Right now I am invested in the Growth Lifestyle Fund. I figured since I do not know much about investment/funds I would let them handle it, much like the 2050 Target Retirement fund with Vanguard. It still feels weird to me that I have basically $43k sitting in savings/checking accounts for 5 years or so only earning 1%. Is there really no other moderately safe option for the next 5 years? And it's good news I can put another $5k into the 2050 Fund, I'll get right on that!  Click here for the full 1264x1636 image.  Click here for the full 1257x972 image.  Click here for the full 1246x963 image.
|
|
#
?
Jan 20, 2011 20:15
|
|
|
Heisenator posted:Thank you for the reply. Those expense ratios make me sad  Still better than a taxable account, but every time someone else posts their 401k it makes me thankful for mine.Expense ratios are the fees you wind up paying every year. Fees are the biggest (inverse) prediction of your total returns over anything else, all things considered. See here to play around with how even a .25 percent reduction in fees could help your returns. For easiness, I would stick with something like the 3 fund portfolio here: http://www.bogleheads.org/wiki/Lazy_Portfolios Use the Total Stock Market Index Fund from your 401k as the US Stock portion, and use the vanguard funds listed on the boglehead link in your IRA as the other portions. If that is too much US Stock, the International Equity Index Fund in your 401k isn't too bad... But compare those ratios to what you get from Vanguard and it is a no brainer as far as fees goes. And fees are the name of the game for long term passive investing.
|
|
#
?
Jan 20, 2011 20:42
|
|
|
Heisenator posted:It still feels weird to me that I have basically $43k sitting in savings/checking accounts for 5 years or so only earning 1%. Is there really no other moderately safe option for the next 5 years?
|
|
#
?
Jan 20, 2011 21:11
|
|
|
Chin Strap posted:Those expense ratios make me sad If I understand what you are saying, I should essentially split my investments 33% in TIPS, US, and International Funds, using all of the cash in my 401k (~4k right now) towards either the Total Stock Market Index Fund, or the International Equity Index Fund. And the reasoning behind those 2 is essentially they have the lowest expense ratios out of the other funds. If I choose my 401k's Total Stock Market Fund, that counts as the US Fund, so I split my $10k 50/50 into Vanguard's VIPSX and VGTSX Funds? And if I choose my 401k's International Equity Index Fund, counting as the International portion, then I split the 50/50 into VIPSX and VTSMX? Looking at the performance of the 401k's US Fund, it seems to be performing poorly since inception (0.61%) in comparison to its International (6.25%). Vanguard's VGTSX is 5.15% and VTSMX is 8.47% with an even lower expense ratio, so I am more tempted to choose International Index with my 401k and grab the VIPSX and VTSMX - Does that sound like a good choice? Reading the thread's OP again, it seems like I am too heavily invested into the Bond market, and I should re-allocate maybe an additional 18% of it into the International market to get more growth over the long-run, maybe through an additional fund. I understand the reasoning behind your Lazy Portfolio suggestion was so that I do not need to monitor it as much, but would it be much more hazardous to get more into international? Any suggestions on how to tweak the portfolio more? Thank you for the help so far Chin Strap, I am learning a good deal from this. cowofwar posted:I have my short term money rolled into laddered 5 yr GICs, I opened my latest one Jan 1 at 3.30%. I looked up GICs, and I assume you mean Canadian Guaranteed Investment Certificates and not Guaranteed Investment Contracts? That sounds like a nice, diversified way to nab optimal interest rates. Where specifically would I go to search for investing in those?
|
|
#
?
Jan 21, 2011 00:13
|
|
|
Heisenator posted:Looking at the performance of the 401k's US Fund, it seems to be performing poorly since inception (0.61%) in comparison to its International (6.25%). Vanguard's VGTSX is 5.15% and VTSMX is 8.47% with an even lower expense ratio, so I am more tempted to choose International Index with my 401k and grab the VIPSX and VTSMX - Does that sound like a good choice? Performance since Inception is meaningless unless you consider its inception date. Your 401k US fund has an inception date at the top of the tech/dot-com bubble.
|
|
#
?
Jan 21, 2011 00:22
|
|
|
Heisenator posted:If I understand what you are saying, I should essentially split my investments 33% in TIPS, US, and International Funds, using all of the cash in my 401k (~4k right now) towards either the Total Stock Market Index Fund, or the International Equity Index Fund. And the reasoning behind those 2 is essentially they have the lowest expense ratios out of the other funds. Yes. Well not necessarily TIPs, but bonds of some sort. The principles that I, and alot of people in this thread and on Bogleheads, are looking at is the following: 1. In any given year 80% of actively managed mutual funds do worse than the index fund they are competing with. 2. It is impossible at the start of any year to guess at the end of the year what 20% will do better (after fees). Take the top winners of any previous 5-10 year timespan, and invariably they do not continue to be the top winners in the future. There are many reasons as to why. 3. Given then the option between any funds in the same market sector, the only real predictor you know in advance for performance is fees. The lower the fee the better the chance of a good return is. The funds that track the indices have the lowest fees of any, sometimes by as much as 1% (play with that calculator I linked and you see the massive difference between a 1.2% and .2% expense ratio). quote:If I choose my 401k's Total Stock Market Fund, that counts as the US Fund, so I split my $10k 50/50 into Vanguard's VIPSX and VGTSX Funds? And if I choose my 401k's International Equity Index Fund, counting as the International portion, then I split the 50/50 into VIPSX and VTSMX? Again, not necessarily TIPS but some sort of bond fund yes. The idea is that bonds and stocks are complementary, and having a mix of both helps to reduce risk in a portfolio. The extreme charicature is that the higher percentage of bonds, the less risky it is, but also the less likely it is to return higher gains in the long (20+ years) term. quote:Looking at the performance of the 401k's US Fund, it seems to be performing poorly since inception (0.61%) in comparison to its International (6.25%). Vanguard's VGTSX is 5.15% and VTSMX is 8.47% with an even lower expense ratio, so I am more tempted to choose International Index with my 401k and grab the VIPSX and VTSMX - Does that sound like a good choice? If they are truly index funds, they are tracking the same thing, and therefore for any dollar contributed at the same point in time will have the same return (ignoring fees, which can really change return). It depends on when the inception date of the fund was, it could be older/newer than the vanguard one and therefore has seen more or less bear or bull markets. Indices are indices. The option of US vs international in each is probably a small optimization as compared to the massive shift from 1% ER to something much less on average when you are done. quote:Reading the thread's OP again, it seems like I am too heavily invested into the Bond market, and I should re-allocate maybe an additional 18% of it into the International market to get more growth over the long-run, maybe through an additional fund. I understand the reasoning behind your Lazy Portfolio suggestion was so that I do not need to monitor it as much, but would it be much more hazardous to get more into international? Any suggestions on how to tweak the portfolio more? Rules of thumb for bonds vary: 1. John Bogle (pioneer of the passive index strategy and founder of Vanguard) says that your age in bonds is a good rule of thumb. 2. Benjamin Graham (great author about this sort of thing) says there is no real reason to go less than 25% bonds or more than 75% bonds ever. 3. Lots of other ways. I personally am at 25%. That happens to match up with both 1 and 2 for me. I really suggest picking up Boglehead's Guide To Investing. It is the best $13 you could spend for some intro reading to all this. I only started understanding any of this about 6 months ago myself, and that really has things summed up in a nice way. There are more complex books with more evidence for this approach, but that is a practical introduction to it all. quote:I looked up GICs, and I assume you mean Canadian Guaranteed Investment Certificates and not Guaranteed Investment Contracts? That sounds like a nice, diversified way to nab optimal interest rates. Where specifically would I go to search for investing in those? Sounds like the canadian version of CDs to me. There are still some CDs around paying about 3% for 5 years. It is getting harder lately to find that though.
|
|
#
?
Jan 21, 2011 00:39
|
|
|
80k posted:Performance since Inception is meaningless unless you consider its inception date. Your 401k US fund has an inception date at the top of the tech/dot-com bubble. That is very true, haha. Although looking at the expense ratios, If my setup is: 1) Total Stock Market Index Fund: 0.58% VIPSX: 0.25% VGTSX: 0.32% Total: 1.15% 2) International Equity Index Fund: 0.63% VIPSX: 0.25% VTSMX: 0.18% Total: 1.06% Or am I approaching the choice in funds the wrong way? 
|
|
#
?
Jan 21, 2011 00:43
|
|
|
Heisenator posted:That is very true, haha. Although looking at the expense ratios, If my setup is: ER isn't additive  Take the weighted average of the 3 expense ratios and that is your average expense ratio.
|
|
#
?
Jan 21, 2011 00:44
|
|
|
Chin Strap posted:Yes. Well not necessarily TIPs, but bonds of some sort. The principles that I, and alot of people in this thread and on Bogleheads, are looking at is the following: From a quick glance of reading, it seems TIPS are used if you believe inflation will rise, and the rate on the bonds rises with it? But at the same time, if there is deflation, the rates on the bonds go down? Should I just invest in a regular Bond Index (VBMFX) with 25% allocation instead? Chin Strap posted:ER isn't additive Take the weighted average of the 3 expense ratios and that is your average expense ratio. Ohhh, ok that makes a difference Chin Strap posted:I really suggest picking up Boglehead's Guide To Investing. It is the best $13 you could spend for some intro reading to all this. I only started understanding any of this about 6 months ago myself, and that really has things summed up in a nice way. There are more complex books with more evidence for this approach, but that is a practical introduction to it all. I will try to get ahold of some investing books such as this and what is listed in the OP eventually. Chin Strap posted:Sounds like the canadian version of CDs to me. There are still some CDs around paying about 3% for 5 years. It is getting harder lately to find that though. Yeah, I cannot seem to find many banks with CDs over 1% unfortunately. And I'm guessing living in the US disallows getting GICs in Canadian banks?
|
|
#
?
Jan 21, 2011 01:05
|
|
|
Heisenator posted:From a quick glance of reading, it seems TIPS are used if you believe inflation will rise, and the rate on the bonds rises with it? But at the same time, if there is deflation, the rates on the bonds go down? That's all I do. Its fine for now. quote:I will try to get ahold of some investing books such as this and what is listed in the OP eventually. Really, just get that now. It is an easy read. If you want to do more investment reading later, great! But you should really just invest that few hours into some great overview like that. quote:Yeah, I cannot seem to find many banks with CDs over 1% unfortunately. And I'm guessing living in the US disallows getting GICs in Canadian banks? http://www.depositaccounts.com/cd/5-year-cd-rates.html Its pretty dismal right now. Welcome to this economy!
|
|
#
?
Jan 21, 2011 01:12
|
|
|
|
| # ? May 11, 2024 06:23 |
|
|
I want to make sure I'm not overlooking something with regards to my Roth IRA that I'm going to be taking money out of to finance a house. I contribute enough to my 401k to be comfortable with my annual retirement savings without a Roth IRA, however I decided 3 years ago that since I was going to be buying a house in 2-3 years I would open the Roth with the intention of withdrawing the contributions in 2-3 years and hopefully have some tax free income from investing left over in the account (and begin contributing with the intention of leaving it until retirement at that point). So that day has come, and I've been pretty lucky with the returns I've seen. I know I can't utilize the $10k penalty free withdrawal for first time home buyers because I don't meet the 5 year rule, but I just wanted to make sure that I can withdraw the original contributions with no penalty and no extra paperwork. I can't find any reference to forms that needs to be submitted for withdrawing contributions- are there any? greasyhands fucked around with this message at 10:17 on Jan 21, 2011 |
|
#
?
Jan 21, 2011 09:35
|
|
