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kaishek posted:Just wanted to double-check my understanding from reading the earlier part of this thread: Any thoughts on this?
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Jan 21, 2011 16:02
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Chin Strap posted:ER isn't additive After calculating the weighted averages and allocations, I come up with these 2 portfolios (Allocation | ER): 1)Total Stock Market Index Fund: 37% | 0.58% VBMFX: 25% | 0.25% VGTSX: 38% | 0.32% Weighted Average: 0.3987% 2)International Equity Index Fund: 38% | 0.63% VBMFX: 25% | 0.25% VTSMX: 37% | 0.18% Weighted Average: 0.3685% So it appears that Using the 401k's International Equity Index would still be better because of the overall lower expense ratio. Does this sound like a decently allocated portfolio that I should proceed with? Edit: Actually, technically that would be 100% of my 401k into International Equity Index Fund, so that messes up the distribution and math. Now I am not sure what the percentages break down to; I am bad at this  Edit 2: 10% deferred allocation into my 401k ~$5k a year, which equals the annual Roth IRA contribution, so my accounts are essentially split 50/50 in terms of total contributions, with $10k in each by year's end. So really the breakdown should be: 1)Total Stock Market Index Fund: 50% | 0.58% VBMFX: 25% | 0.25% VGTSX: 25% | 0.32% Weighted Average: 0.4325% 2)International Equity Index Fund: 50% | 0.63% VBMFX: 25% | 0.25% VTSMX: 25% | 0.18% Weighted Average: 0.4225% So the 2nd Portfolio still has a lower ER, and gives more exposure to International vs US. Although having such a large percentage in one index seems over-exposed. Comments/Corrections? Thank you! Heisenator fucked around with this message at 17:51 on Jan 21, 2011 |
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Jan 21, 2011 17:30
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Those expense ratios are hardly different, and anyway you can't compare them when the portfolios aren't the same. Do this in a different order. First, decide your portfolio. If you need a place to start, any of the three you already suggested should be fine to hold you for the next year while you do some reading. Second, it's just a little math problem then to figure out how to arrange contributions among the 5 funds. Example: 401k: $3800 Total Stock Mkt (38% overall, 76% of the 401k) $1200 Int'l Equity (12% overall, 24% of the 401k) Roth IRA: $2500 VGTSX Int'l (25% overall, 50% of the Roth) $2500 VBMFX Bond (25% overall, 50% of the Roth) Now overall you have 25% bonds, 37% intl stock, 38% US stock.
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Jan 21, 2011 18:15
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slap me silly posted:Those expense ratios are hardly different, and anyway you can't compare them when the portfolios aren't the same. Do this in a different order. First, decide your portfolio. If you need a place to start, any of the three you already suggested should be fine to hold you for the next year while you do some reading. Second, it's just a little math problem then to figure out how to arrange contributions among the 5 funds. Example: slap me silly is on the case. Any way you chose it for now, the ER is far reduced from that Lifecycle fund.
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Jan 21, 2011 18:54
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slap me silly posted:Those expense ratios are hardly different, and anyway you can't compare them when the portfolios aren't the same. Do this in a different order. First, decide your portfolio. If you need a place to start, any of the three you already suggested should be fine to hold you for the next year while you do some reading. Second, it's just a little math problem then to figure out how to arrange contributions among the 5 funds. Example: Oh! I forgot that you could also allocate funds within the 401k and split them, so that makes sense. Thank you all for the assistance.
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Jan 21, 2011 18:56
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Couple of questions in no particular order: -Is there a rule of thumb for what a certain turnover percentage costs you every year as a % of assets? For example if the bid ask spread is $.05 on a $100 average stock in the portfolio and turnover is 100%, you're paying $.05 for every $100 in the portfolio, or .05% . -As a long term investor buying ETFs, does it make sense to always wait for them be selling at a discount to NAV? -Are there any brokerages known for especially good/bad execution? When I put in a market order what prevents them from just giving it to me at the daily high price? -What are the real costs, if any, of index tracking error? If an ETF is well diversified with hundreds of holdings, should I care as a long run investor if it's a few percentage points off? If an ETF consistently tracks above/below the index, isn't it just an indication of higher/lower risk than the index?
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Jan 22, 2011 06:07
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I posted this in the stock trading thread and they mentioned this thread might be a better place for it so here goes: I've got some cash in the bank and I'm looking for a little guidance. I've got about $20k sitting in a .9% savings account, and I'm ready to put $10k of that into some sort of longer-term investment. I'm growing my own business that currently generates about $20k/year, enough for me to live on, but not to save much (better to assume saving nothing for the near-mid future). Past experience has taught me that with my attention span and intelligence, taking my cash to a casino would make more sense than picking individual stocks, so I'm leaning towards mutual/index funds. The caveat is that since I'm running my own business I don't have health insurance, so this 10k must have some sort of reasonable liquidity in case I need to dip into it for super emergency situations. A knowledgeable family member of mine mentioned municipal-bond-based mutual funds. He said that there's been a big dip lately in these types of funds that is likely to continue for at least a few months, which makes it a good time to buy. Many are tax-free on the dividends (probably not a big issue with the limited principal I have). Many award consistent, if not spectacular, dividends with relatively little fluctuation in share price. To my uneducated mind, this seems like a good place to park my money for a few years: 1) Little fluctuation in share price gives me the liquidity I need should I need to sell NOW NOW NOW; 2) Stable, if small, dividends ensure I at least beat my crappy savings account returns, maybe inflation, and at best make a small profit--basically monthly cash in the bank; 3) Low share price means low barrier to entry; 4) Tax-free for some of these funds is a bonus. Specifically he mentioned MITFX, KSM, and GABUX, though he personally invests in more than those. I'm not sure how to include the expense ratios in these calculations... if I only end up making something ridiculous like $20/year after expenses I'd rather not even take the risk and keep the cash in savings. Is there something I'm missing in this simple plan? Does anyone have any thoughts on municipal bonds in a 1-3 year window? Should I forget this idea and head in a different direction? Sorry if this has already been asked or this is too newbie-ish 
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Jan 22, 2011 08:26
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sliceoftoast posted:A knowledgeable family member of mine mentioned municipal-bond-based mutual funds. He said that there's been a big dip lately in these types of funds that is likely to continue for at least a few months, which makes it a good time to buy. I'll let others who are more knowledgeable chime in on this, but one risk you didn't mention is that cities can default on their bonds, meaning that you'd be out of luck in terms of getting your money back. Now in reality, they are generally pretty safe, and even if the city declares bankruptcy, you would likely not lose all of your principle. However, the economy is in pretty terrible shape and who knows what could happen? From http://www.publicbonds.org/public_fin/default.htm: "The largest default in the history of the municipal bond market was the Washington Public Power Supply System's (WPPSS) default on $2.25 billion in bonds. WPPSS launched a risky program to build five nuclear power plants in the 1970s to supply electricity to the Pacific Northwest. Only one of the five planned nuclear plants was ever completed. The WPPSS fiasco gave a lot more credibility to concerns that tax-exempt bonds were not a completely safe bet."
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Jan 23, 2011 07:11
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sliceoftoast posted:To my uneducated mind, this seems like a good place to park my money for a few years: MITFX looks good, yield about 3.5%. Note it has a 2% redemption fee if you sell any portion earlier than 30 days of holding. The Oct. 2010 report below gives the net expense ratio as 0.55%, which is the one that mainly impacts shareholders. The price has fluxuated between $9.40 and $10.80 the last 5 years, so expect a little adjustment in the value of your position if you intend to hold for a few years. The price currently seems a little higher than 5-year average but not overpriced. http://www.marshallfunds.com/media/inttaxfreey.pdf Morningstar had no real complaints about MITFX on their website. KSM is a closed-end debt fund. From digging around the management fee appears to be 0.6%. The yield is _really_ high at 7.92%. But the share price can be volatile, as it dropped from $10 to $7 back in 2008. Before the financial crisis it was trading around $12. This fund invests in both low-risk and tax free securities, but also up to 50% in high-yield/junk securities. Seems OK but expect more price movement than with MITFX. GABUX is a Gabelli fund that specializes in utility equities. The net expense ratio is 1.47%, and the price fluxuates as much as the stock market does. It has paid a steady $0.84/year dividend (.07 paid monthly) for the past 8 years, for a yield between 9% and 12%, but the share price moves quite a bit. Also has a 2% redemption fee, but not sure of the minimum holding period. GABUX is the most riskiest play, and not tax-free at all. KSM is a little riskier and MITFX has the least risk. Note for the fixed-income funds you could see slight declines in price in upcoming years if interest rates start to rise. But perhaps the yields will make up for the difference. KSM and MITFX have fairly diversified holdings, so I don't see much price impact if one municipality goes bankrupt. However if we have another crisis and several states go into default, well... perhaps keep half your funds in a CD you can adjust the rate on mid-term.
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Jan 23, 2011 08:03
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kaishek posted:Any thoughts on this? What is social choice?
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Jan 24, 2011 00:02
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ZeroAX posted:What is social choice? Hah, it's their "mixed fund" where they take an index fund and eliminate stuff like oil companies, child-murder factories, etc. So it's "green" or "hippy" choices which seem to be giving good investment returns so far.
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Jan 24, 2011 00:07
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Hi All, Obviously much of what we're interested in here is saving for retirement by trying to index the market at low low low cost (see "Four Pillars" and books by Vanguard's Bogle). Two friends of mine and a family friend use UBS, and have a "guy" that calls them once a month with various recommendations and generally reallocates their stuff for them. How do companies like this work in terms of making a profit? Also specifically how does UBS work? Do they just skim off the top, or do they steer you into terrible funds? For someone who is super busy working all the time (me) this sounds like a better option initially, but I suspect that in the long run the do-it-yourself mode is likely the way to go. For reference I have all my money (401K) in a target retirement fund at Vanguard and am saving up for a Roth IRA at Vanguard (drat $3k minimum purchase). I'm 32.
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Jan 24, 2011 02:56
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gp2k posted:Hi All, Most managers like that either A) get a commission from sending money to high fee funds, or B) charge the customer a percentage of the account yearly for their service. Either way, it is a ripoff for most people. If he is simply doing things like rebalancing, then that is something so simple a monkey can do it. If he is actively managing funds, then as you must already know they are more likely than not to underperform the index after fees, and it is impossible to know which ones will beat it. quote:For reference I have all my money (401K) in a target retirement fund at Vanguard and am saving up for a Roth IRA at Vanguard (drat $3k minimum purchase). I'm 32. That's a far better way to not have to manage your accounts. The ER on a vanguard TR is low, and they will do all the rebalancing and asset allocation adjustment for you.
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Jan 24, 2011 15:06
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Very informative thread, thanks a bunch to everyone who is contributing. Here's a little bit about my situation. Recently started a good job with the federal government, paying $90,000 before tax. Graduated last year from school with my Pharm.D. and about $60,000 in debt. About $14,000 was GradPlus loans which have been consolidated at 8.25% interest (seriously, where does everyone get these low interest student loans!?) The rest is Stafford loans at 7.25%. I'm contributing 5% to the government TSP (401k equivalent) for the match, and I think I can save $5,000 by April to get a Roth IRA started this year. My question is, does this $5,000 do more good going toward the loans? There have been discussions about investing vs. paying debt, but I'm not sure at what interest rate the debt takes priority. I intend to pay off quickly, and I separated the two types of loan to take advantage of 2 different interest rate reductions, so I'm paying both loans at the same time (minimum on the lower interest, whatever extra I can afford toward the higher interest). Also, I intend to sign on with the Public Health Service, which currently offers a $30,000 sign on bonus for pharmacists. I expect this to go entirely toward my loan balance. I feel like I'm in a great situation, and I feel very fortunate, but I'd like to get a solid foundation started to start building wealth as soon as I'm able. Any advice would be awesome.
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Jan 25, 2011 04:11
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Very informative thread, thanks a bunch to everyone who is contributing. Here's a little bit about my situation. Recently started a good job with the federal government, paying $90,000 before tax. Graduated last year from school with my Pharm.D. and about $60,000 in debt. About $14,000 was GradPlus loans which have been consolidated at 8.25% interest (seriously, where does everyone get these low interest student loans!?) The rest is Stafford loans at 7.25%. I'm contributing 5% to the government TSP (401k equivalent) for the match, and I think I can save $5,000 by April to get a Roth IRA started this year. My question is, does this $5,000 do more good going toward the loans? There have been discussions about investing vs. paying debt, but I'm not sure at what interest rate the debt takes priority. I intend to pay off quickly, and I separated the two types of loan to take advantage of 2 different interest rate reductions, so I'm paying both loans at the same time (minimum on the lower interest, whatever extra I can afford over the minimum toward the higher interest). Also, I intend to sign on with the Public Health Service, which currently offers a $30,000 sign on bonus for pharmacists. I expect this to go entirely toward my loan balance. I feel like I'm in a great situation, and I feel very fortunate, but I'd like to get a solid foundation started to start building wealth as soon as I'm able. Any advice would be awesome.
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Jan 25, 2011 04:12
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Those are huge interest rates. Pay them off before everything.
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Jan 25, 2011 05:05
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some_weird_kid posted:Student Loan Questions Here's one key question to ask before we recommend anything: do you have any intention of returning to school any time before the loans would be paid off? If you do for at least part time enrollment then the loans would kick back into deferment and any subsidized loans would be an effective 0%. If you plan on picking up an MBA or something along those lines, something to consider. Apart from that, student loans are one step shy of being the worst debt you can have (in terms of "can't pay it - what now?" options [worst is back taxes]), so paying them off is never a bad idea, and at those interest rates you'll be hard pressed to get a guaranteed ROR that'll do better.
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Jan 25, 2011 08:26
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cowofwar posted:Those are huge interest rates. Pay them off before everything.
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Jan 25, 2011 08:31
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Thanks for the advice. I assumed that cowofwar meant to pay off the loans after the company match on the TSP, since that return on that is obviously so high. I don't intend to go back to school any time in the near future, though it's not off the table entirely. I'd like to pay off the loans within 3 years if I am able to get a signing bonus, since I don't have any dependents and a well-paying job. We'll see if this works out, but I appreciate the suggestions.
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Jan 25, 2011 14:28
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Simple question: I want to open a Roth IRA with Vanguard pretty quick here, before the April 15th deadline. I know all I have to do basically is communicate to them that I intend this contribution to be for the 2010 tax year and that should be fine. My question is, do I need to wait until AFTER I've filed my taxes, or do I need to file my taxes first, or does it not matter one way or the other? I figure it shouldn't matter, as I'm not making any immediate earnings. I guess I'm just completely confused at how I'd claim any interest from here till April 15, 2011 on my taxes for 2011 when that time comes around. Can anyone clarify what my tax situation would be in this case? After my initial 5K contribution, I'll want to start making bimonthly payments to it after April.
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Jan 25, 2011 19:45
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Roth IRAs use after tax money, so filing or not does not matter. You do no annual accounting on them unless you make a withdrawal.
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Jan 25, 2011 19:49
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var1ety posted:Roth IRAs use after tax money, so filing or not does not matter. You do no annual accounting on them unless you make a withdrawal. On this note, what prevents people above the income limit from contributing or people contributing more than they are allowed?
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Jan 25, 2011 20:01
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alreadybeen posted:On this note, what prevents people above the income limit from contributing or people contributing more than they are allowed? Custodians send form 5498 directly to the IRS.
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Jan 25, 2011 20:48
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Brian Fellows posted:Simple question: You can make 2011 Roth IRA contributions prior to April 15th. I'm not 100% sure, but you can also probably make 2011 contributions before you even make any 2010 contributions as long as you classify each appropriately when you send the money. Also, if you want, you can actually have your tax refund deposited directly into your Roth IRA account if you supply the applicable account info on the return.
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Jan 25, 2011 21:43
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some_weird_kid posted:Thanks for the advice. I assumed that cowofwar meant to pay off the loans after the company match on the TSP, since that return on that is obviously so high. I don't intend to go back to school any time in the near future, though it's not off the table entirely. I'd like to pay off the loans within 3 years if I am able to get a signing bonus, since I don't have any dependents and a well-paying job. We'll see if this works out, but I appreciate the suggestions. I would ask around, I'm sure you can find a willing bank or a smaller credit union willing to put up the money now at a lower rate in order to secure your business in the future as a high earner.
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Jan 26, 2011 00:11
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Munis have been discussed recently, here is a disconcerting article from the WSJ: http://online.wsj.com/article/SB10001424052748704013604576104490177188326.html?mod=WSJ_hps_sections_personalfinance quote:Bondholders Left in the Dark - Concern Grows Over Lack of Financial Disclosure by State, Local Governments
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Jan 26, 2011 20:43
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Sorry for the late reply, thanks for the insight everyone. I still need to do a lot of research before I decide to park my money somewhere, and now I've got a lot of food for thought
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Jan 30, 2011 08:45
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I'm 31, have a small amount (around $1k I believe) in a 401k from many years ago when I worked corporate, and now have the option to join into a retirement plan through TIAA-CREF at work with a 3% match. I must admit, this stuff bores me to tears. Everytime I open the packet they gave me, which I have no had for over 2 months, to figure this all out my eyes just glaze over. I am just looking for something in general that I should be putting money into for this plan. My info: 31 years old, been at this current position for just over a year. I have $55k in government school loans to pay off, but am hoping a good part of that will be taken care of after a decade through an income based repayment plan. I currently work at a hon-profit, and will probably still be at one 10 years later when it kicks in considering the nature of my work. This past year I have saved 15% of my take home pay. I had $0 to my name when I finished grad school in the end of 2009, and have paid back the debt I owed my sister from helping me move for my job. The money saved over the past year is now large enough to serve as 6 months worth of emergency funds, so time to start investing. My options are: Equities: CREF Equity Index Account, CREW Global Equities Account, CREF Growth Account, CREF stock account. Real Estate: TIAA Real Estate Account Fixed Income: CREF bond market account, CREF inflation-linked bond account Money market: CREF money market Guaranteed: TIAA traditional account multi-asset: CREF social choice. Putting in at least 3% for the match is a no-brainer, though I do plan to go higher than the 3%. But how should I distribute everything? This is not something I will tinker with. Once its set, I doubt I will touch it again unless I have to.
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Feb 1, 2011 00:31
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nesbit37 posted:MI have $55k in government school loans to pay off, but am hoping a good part of that will be taken care of after a decade through an income based repayment plan. whats the % on the loan? Unless it's 0%, you should be paying that loan after you get the 3% match. Depending on your appetite for risk, you should spread your money around the Equities with a less in fixed-income (bond) accounts. (Say 90-10?) You might also want to look at the brokerage/etf option, which should allow you to expand your portfolio. Just off the top of my head you should spread out between CREW Global Equities Account, CREF Growth Account, CREF stock account. and a maybe a little on CREF bond market account or TIAA Real Estate Account
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Feb 1, 2011 05:07
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The loan is either 6.8% or 8%, I can't remember which, however. Thing is, why should I rush to pay it off if it will be taken care of for me in another 8.5 years? I know there is no guarantee I will be working in non-profits or qualifying public sector jobs that entire time, but if I am, then paying off anything beyond the minimum payments is a waste on my end because of the IBR plan. Thanks on the suggestions for the spread. I remember a few years ago being told that long term, low risk and high risk investments tend to equalize. Its the short term where they vary greatly. I don't mind risk, and am just more concerned with low maintenance, set it and forget, financial management.
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Feb 1, 2011 13:58
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I'm not understanding...is your employer paying your loan for you? If not, whatever investment you decide will need to make over 6.8-8% to be more worthwhile than paying off the debt. Also, look into Roth IRA's for retirement investments.
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Feb 1, 2011 16:32
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|Ziggy| posted:I'm not understanding...is your employer paying your loan for you? If not, whatever investment you decide will need to make over 6.8-8% to be more worthwhile than paying off the debt. Also, look into Roth IRA's for retirement investments.
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Feb 1, 2011 16:47
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gvibes posted:IBR is a (e: federal) loan forgiveness program. I'm not sure exactly how it works though. Like, if you work for the government for ten years while making minimum payments, they will forgive the remainder of the principal or something. Thats exactly it. Certain jobs, such as working for non-profits, public education, public libraries, and a few others qualify.
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Feb 1, 2011 17:07
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nesbit37 posted:But how should I distribute everything? This is not something I will tinker with. Once its set, I doubt I will touch it again unless I have to. I would do some reading. Boglehead's Guide to Investing is the one I constantly recommend. As far as I know, the TIAA funds are a bit different than any sort of normal offering but as I understand they tend to be considered very good. You can post on bogleheads.org and there would be more people familiar with how these funds work.
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Feb 1, 2011 19:13
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nesbit37 posted:My options are: For stocks, the only two you need to concern yourself is the CREF Global Equities which is global cap weighted (around 45% US and 55% international) and the Stock account which is 100% domestic. If you want an aggressive portfolio, you can do something like 60% global, 20% stock, 10% CREF inflation-linked, and 10% bond market. more moderate and go 45% global, 15% stock, 20% inflation linked, 20% bond. Instead of bond market fund consider TIAA Traditional. This is a decent guaranteed income fund that may have better risk adjusted returns than the bond market fund. However there are trading restrictions on it which makes it harder to sell shares of it for rebalancing.
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Feb 1, 2011 19:32
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How easy is it roll over a retirement savings account, like a Roth IRA, from a bank to a investment firm? Is it possible? I'm starting the process of saving to open one, but in the mean time my bank has no minimum to start one. I'd like to start putting away money in to that account, and then switch it over when it becomes large enough (in hopefully a year or so) to some place like Vanguard.
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Feb 2, 2011 04:02
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Thanks for the advice, I'll fill out the paperwork just to get things started and check out that book when I have time in the near future. In some ways I am very glad finances do not interest me, but on the other hand I realize how important it can be and wish I had at least a little bit of a taste for this stuff.
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Feb 2, 2011 12:20
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My fiance wants to get into the Vanguard target retirement Roth, but she doesn't have $3k to open an account... I already have a Schwab Roth account and I heard on here that you can get vanguard target funds through Schwab. Is it a big deal, $ wise, to go through Schwab vs. Vanguard?
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Feb 5, 2011 19:59
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Is there a downside to holding VBMFX as an ETF?
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Feb 12, 2011 00:59
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I'm currently in a PhD program with another 3-4 years to go, but thanks to generous and guaranteed funding package combined with a relatively low cost of living (and no debt from undergrad), I am able to start putting a bit away towards retirement. I have a few questions about the process with which I hope someone can help me out! First, I heard in passing once that there might be a special tax write-off for contributions to a retirement account like a Roth IRA for low income individuals? Even though my total income is ~$34,000, because much of it is classified as "scholarship money" and is spent on expenses directly related to my education, I legitimately only pay taxes on ~$18,000. Second, is there a minimum investment for Vanguard and other good index funds? I'm looking at putting ~1,500 into a Roth IRA through ING this year and another 1,000 annually after that. I know there is a minimum to open an account with Vanguard, but can I still buy $1500 bucks worth of their index funds through ING? Third, I gather from a post earlier on this page that it is not too late to open a Roth IRA for *last* year and contribute to it for the last tax year. Is there anything special one needs to do for that? striking-wolf fucked around with this message at 15:49 on Feb 12, 2011 |
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Feb 12, 2011 15:46
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