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I really like Target Date funds for 401ks, not so much for IRAs unless it's your sole retirement vehicle. However, at 24, I'd just open a brokerage account and go long on some blue chips. You've got pretty much infinite risk tolerance.
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Oct 5, 2012 03:12
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All the target date funds in my work 401(k) have very short history. Am I really supposed to invest in something without a lifetime/10-year/5-year track record?
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Oct 5, 2012 03:23
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Hate to break it to you buddy, but 401ks haven't really been around long enough/popular enough for them to have that great of a track record either. Hell, I think it took like 3 years for people to even realize there's a tax advantage to it.
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Oct 5, 2012 03:29
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MrKatharsis posted:All the target date funds in my work 401(k) have very short history. Am I really supposed to invest in something without a lifetime/10-year/5-year track record? All funds are the same, except those with higher expense ratios. Those are worse. Their performance is based almost entirely on their underlying allocation to stocks vs bonds. Unless they're ridiculously focused on single stocks, bond issues, tiny markets, etc. In that case, the uncompensated risk is through the roof and they're worse than indexes. You should be looking primarily at expenses and cost, not past performance. When your return is 5% a year, 1% expenses is 20% of your returns. Unormal fucked around with this message at 03:53 on Oct 5, 2012 |
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Oct 5, 2012 03:49
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MrKatharsis posted:All the target date funds in my work 401(k) have very short history. Am I really supposed to invest in something without a lifetime/10-year/5-year track record? Target Date Funds are revolving, so something like a Target Date 2055 has only been around for a few years at most. Look at the inception date on them. It wouldn't make any sense to have a target date fund for the year 2055 that started 10 years ago. Target Date Funds are just mutual funds which change their asset allocation over time to better reflect changing portfolio needs as you get closer to retirement (IE, get more conservative). Something like PIMCO Total Return (PTTRX) is fantastic when you're 10 years from retirement, but it's way too conservative for a 20-something. Target Date Funds are usually have a higher expense ratio, but for just putting away some % of your income to get an employer match is fine. It's not like that's the sole form of retirement investing you do. I put 5% into my 401K on a target date (+match), 20% into a brokerage, and N into a Trad IRA (blended) if I need a writeoff. PRADA SLUT fucked around with this message at 05:01 on Oct 5, 2012 |
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Oct 5, 2012 04:53
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Is there a way to rollover a standard mutual fund account without incurring any taxes? I've got a non-retirement investment fund account with Janus I'd like to move to Vanguard because of $fees/costs$ but I can't find anything about direct transfers like you can with Retirement accounts. Don't want to sell it and have to pay taxes on it just to drop it right back in to another account.
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Oct 5, 2012 06:09
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Unormal posted:All funds are the same, except those with higher expense ratios. Those are worse. Their performance is based almost entirely on their underlying allocation to stocks vs bonds. Unless they're ridiculously focused on single stocks, bond issues, tiny markets, etc. In that case, the uncompensated risk is through the roof and they're worse than indexes. This is not helpful advice. If you don't think the market is generally going to move up in the next few years (and there is good reason to think this), you don't want something that tracks the index. Either doing the work yourself or finding a manager who you can trust who can more actively manage your portfolio is worth the fee. There's nothing wrong with passive investing in normal times (and if you're doing passive stuff you absolutely want a fee that's as close to zero as possible), but like I said earlier I think you can make a case that our times are anything but normal and that other approaches might turn out to be more appropriate.
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Oct 5, 2012 07:15
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Fraternite posted:Either doing the work yourself or finding a manager who you can trust who can more actively manage your portfolio is worth the fee. Prove it.
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Oct 5, 2012 13:31
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MrKatharsis posted:All the target date funds in my work 401(k) have very short history. Am I really supposed to invest in something without a lifetime/10-year/5-year track record? You don’t have to worry about long term track records for the Target Maturity date funds. They are not regular mutual funds that go out and buy individual stocks. They are funds of funds that go out and buy mutual funds. In Vanguards case, their Target funds are buying a set proportion of Vanguard stock and bond index funds that do have long track records. They are a great way to get instant diversification without having to think too hard about it. If you had a few thousand dollars to invest, they are a no brainer way to have your money work while you read up more.
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Oct 5, 2012 13:59
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Unormal posted:All funds are the same, except those with higher expense ratios. Those are worse. Their performance is based almost entirely on their underlying allocation to stocks vs bonds. Unless they're ridiculously focused on single stocks, bond issues, tiny markets, etc. In that case, the uncompensated risk is through the roof and they're worse than indexes. The variance in fund performance over the long and short term for similar asset allocations is significant, even in my employer's limited offerings. Way more than the .5% fee one might charge over another. I don't see the point in handing money to the manager off my Target Date 2055 fund if he can't get the lifetime performance of the fund above 5.35% in its youngest, fastest growing phase. This it's a good year for the market, he should be killing it. Edit: fund started Jan 1st 2011.
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Oct 5, 2012 14:19
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MrKatharsis posted:The variance in fund performance over the long and short term for similar asset allocations is significant. Yes, but it has 0 predictive value. There will be underlying differences between funds that invest in anything more focused than completely broad indices, of course, but they're completely unknowable based on past performance. Therefore they're completely equivalent. The more they diverge from the broad index, the more variance they'll have over time, but it's equally likely that it's upside vs downside. If your TR fund isn't a cheap broad index, it's probably bad. If it's only up 5% since 2011, it's probably not a broad index. Unormal fucked around with this message at 15:12 on Oct 5, 2012 |
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Oct 5, 2012 15:09
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MrKatharsis posted:I don't see the point in handing money to the manager off my Target Date 2055 fund if he can't get the lifetime performance of the fund above 5.35% in its youngest, fastest growing phase. This it's a good year for the market, he should be killing it. Edit: fund started Jan 1st 2011. I'm pretty sure it's not that it's not possible or that the fund manager doesn't know how to get a high return, but when you're dealing with retirements you want a lot more security and diversification in your vesting. It's not a hedge fund. If suddenly my Target Date shot up 14% (independent of the market) I'd be a little worried because that's a pretty high return for something that's supposed to be vested in a way to prevent (or at least soften) catastrophic losses. Your Target Date shouldn't be your only vehicle for retirement, but it's probably the best hands-off option available. If you want the high-risk-high-return, open an additional brokerage account to trade on the open market. My Target Date hits something like 7% annually, but my stocks hit around 12%.
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Oct 5, 2012 16:05
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MrKatharsis posted:The variance in fund performance over the long and short term for similar asset allocations is significant, even in my employer's limited offerings. Way more than the .5% fee one might charge over another. The target retirement date funds are not actively managed. Generally, they buy a certain percentage of index funds and bond funds, with the mix gradually moving to bonds and cash as the target date gets closer. The manager is not picking stocks - they are just ensuring that the balance of the fund mix sticks to the definitions in the prospectus. For example, the Vanguard 2050 fund is as follows: 63.1% Vanguard Total Stock Market Index (this fund just buys every stock on the market) 26.8% Vanguard International Stock Market Index (same idea as above, but exposure to international stocks) 10.1% Vanguard Total Bond Market II (this fund buys a broad selection of bonds) Over time, the mix switches to more bonds and less stocks, and that's really all you're paying for. However, if you don't want to rebalance and reallocate the funds yourself over the years, this is a good option. Again, with these funds, you are not paying someone to try to beat the market - you are BUYING the market. The 5% or so return that this fund has achieved just represents how the market as a whole (based on the asset mix) has done since the fund's inception. Edit: The reason this fund is lagging the US markets is probably the exposure to international stocks (due to Europe going to poo poo). NJ Deac fucked around with this message at 17:08 on Oct 5, 2012 |
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Oct 5, 2012 17:05
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slap me silly posted:Prove it. I'm very happy with my personal rate of return since I decided to manage my own money in the fall of 2010, and I certainly have beat the crap out of the TSX index (the Canadian market) over that time. I obviously don't have some magical system which prints me money, but I have been richly rewarded by buying reasonably valued dividend-paying stocks when I'm scared shitless to do so and selling when everyone starts to think things are looking up. Anybody can do this, and I daresay I know a few professionals who do a similar thing for clients with a lot more money than me. If you think the market has a nice bull run in the future, by all means buy the index funds and buy the market. My issue isn't with passive management in what can reasonably be expected to be a bull market (that works out great), it's with passive management in a volatile situation with high valuations, and that's exactly where we're at now.
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Oct 6, 2012 03:24
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The majority of people don't have the desire to learn the ins and outs of trading, technical analysis, portfolio diversity, risk assessment, and market prediction. Most people want to throw some money into a fund and pull it out in 40 years when they retire.
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Oct 6, 2012 03:37
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Hey guys, I have a quick question. I recently inherited $10,000 and have absolutely NO idea what to do with it. I have no debt or living expenses, and I have a decently paying job. My friends keep telling me to invest the money and that "I need my money working for me" but I really don't want to risk losing it. Is there any way I can increase this money (even by a small amount) without the chance of it going away? If it helps, I have no intent on spending any of it anytime soon, so I'm open to any options. Thanks dudes.
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Oct 6, 2012 05:52
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The "guaranteed" risk-free option is to throw it in a savings account at like ING and get a .8% return. This would net you $80 in interest over one year. Basically, the higher you want your return, the more risk you have to take on. PRADA SLUT fucked around with this message at 06:03 on Oct 6, 2012 |
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Oct 6, 2012 06:01
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PRADA SLUT posted:The "guaranteed" risk-free option is to throw it in a savings account at like ING and get a .8% return. This would net you $80 in interest over one year. Right now I have it in a TD Bank high yield savings at 0.45% APY (which is different then APR I hear. Worse? Better?) I've also been reading up on CD's but still don't understand entirely, nor know if that would be good for me.
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Oct 6, 2012 06:10
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A CD is basically like a "locked" savings account. You put money into a CD for a set amount of time ("term"), and you can't touch the money for any reason. After the term is up ("maturity"), you can withdraw the money back again. The advantage of a CD is that the interest rate is higher than a savings account, however you are sacrificing your ability to withdraw the money at will. Technically you can withdraw the money from the CD early but you suffer early redemption penalties by doing so.
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Oct 6, 2012 07:28
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This may be over already but all y'all arguing about target retirement funds should go talk about it in the long term savings/investment thread instead. CDs are worthless right now because interest rates are so low. I have my money in an ING account and in a brokerage account with Vanguard, in which there are some bonds but mostly the total stock market fund. I am pretty pleased with how they are doing. Whatever you do, keep an emergency fund available in case you need liquid cash and/or the market crashes again and your holdings tank.
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Oct 6, 2012 16:17
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Even with CD rates being so bad you'll be lucky to beat inflation, they're still pretty much the only "no-risk" investment option. Some people are just mentally adverse to any sort of loss whatsoever, even if it means having no net gain. I've seen people put $500,000 into a .5% CD because they're terrified of "the market" as if it's some crazy Wall Street roulette table.
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Oct 6, 2012 21:09
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Also I am pretty sure that online savings accounts have twice to thrice the rates of CDs unless you're looking at a 5 year CD. Which you shouldn't.
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Oct 6, 2012 21:31
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Not too hard to find CDs around 1% for 12 months. I don't know why people talk about fees so much if you withdraw. It's usually like 30-60 days interest which is pretty much nothing.
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Oct 6, 2012 22:11
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I think I posted in this thread about 10 months ago about the really bad financial situation I was in. I just got my free annual credit report. Things are slightly improved (well I have a stable income and almost 1 year experience at my job). I was making $10.50, now making $11.35. Though 1 year experience should qualify me for a much higher paying job, I get paid so little because I work for a temp agency right now. Direct-hire jobs pay more around $15-20/hour, and there is a good chance I may be hired on as a supplemental at my current job too if I try to quit. I got my $3200 card paid off and against the advice of this thread, been making (minimum) payments on the other $8000 card. Though the big issue is still my medical debt, which has all been sent to collections in Open-Collection status. There are 6 accounts in my report now (all related to a single hospitalization actually), adding up to about $4000 in the report. About $3000 in other debt has not been sent to collections yet (ambulance bill. 2 miles against my will with no treatments cost me 3 grand. Bless our health care system). I really do want to repair my credit rating. But is there any reasonable thing I can do to actually raise it? I mean if paying off the thousands so it goes to "Closed-Paid: Was in collections" instead would have no meaningful impact on my rating, then I don't see the point and feel I might as well just wait it out and at the most, negotiate payments with the ones that have not been sent to collections yet. So I guess I am wondering which is the best option to start rebuilding my rating: 1. Call up the credit agencies, work out a payment plan, make payments for a couple years to get them paid off so the report says "Paid (was in collections)" instead of Open-Collecting. 2. Negotiate plan with the debt not yet sent to collections, pay them instead. Let the ones already in collections just slowly get removed after the 7 years (2018) 3. Negotiate with both--see if they can remove the negative mark altogether in my report in exchange for payment in full, and work out payments with the others. Though I'd have to put this debt right back on my credit card I just paid off to do this! I'd have to skip school another year to pick up another job to pay for this too. Would only consider this if it can really repair my rating within a year. 4. Ignore the gently caress out of all of it, just save money and realize my credit is hosed no matter what I do until 2018. Get to school this spring instead of worrying about my credit rating that is probably impossible to repair myself anyway.
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Oct 6, 2012 22:12
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Meta Ridley posted:I think I posted in this thread about 10 months ago about the really bad financial situation I was in. I just got my free annual credit report. I feel like there's a decent chance you just saw the recent change to the thread title and decided to troll us all, but I'll respond in good faith anyway. I'm not sure why you care about your credit in your situation. You have thousands of dollars of oppressive debt. Why are you concerned about optimizing the result of an abstract mathematical formula that will only matter if you're going to try to take out more debt? Your top financial concern, to the absolute exclusion of any worries about your credit score, should be digging yourself out of debt as quickly as possible. I would suggest that you do this by living the most spartan lifestyle you can tolerate and shoveling as much money as possible into your highest-interest debt, and maximizing that amount by making the smallest payments possible on the other debts. While you are grinding away at your debt, continue to pursue opportunities to increase your income.
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Oct 6, 2012 23:38
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Secret Asian Man posted:I feel like there's a decent chance you just saw the recent change to the thread title and decided to troll us all, but I'll respond in good faith anyway. I think you misread his questions. He's not asking what time of the month to pay his credit card to increase his score, he's trying to salvage whatever credit he still has with items in collections and large debts with hard payment dates. Meta Ridley, I would suggest heading over to the Debt Collection thread to at least help you out with the stuff already in collections. Anything sent to collections you should be able to negotiate for pennies on the dollar. As far as the debts not yet sent to collections, you need to go to the hospital in-person (if possible) and sit down with a social worker and explain "I make $x an hour and I can't pay this debt. What can you help me with?" If you can scrounge up enough cash for a lump sum, they may be able to cut a deal with them. If you can't pay those hospital bills then you simply cannot pay them. If they have to go to collections then so be it. Your credit will be wrecked for a while but eventually it will heal itself. You don't have any car or home purchases in your future anyways, so don't worry too much about it.
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Oct 7, 2012 00:00
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I'd say go for the bankruptcy, unless that blackballs you from getting a better job. Your credit score is probably already at post-bankruptcy levels with all those delinquent accounts, no reason to worry about it.
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Oct 7, 2012 00:43
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Thanks I'll head over to the debt collection thread. The main reason I want to repair my credit report is for finding better employment, I don't plan on taking on a new major purchase (car/house) until I make at least double what I do now. One question though, does the impact of open collection accounts fade with time through the 7 years, or do they basically have full impact until they get removed?
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Oct 7, 2012 01:53
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Meta Ridley posted:Thanks I'll head over to the debt collection thread. The main reason I want to repair my credit report is for finding better employment, I don't plan on taking on a new major purchase (car/house) until I make at least double what I do now. Your credit history is heavily weighted to stuff that happened recently. A paid collection account barely has an effect after a couple years.
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Oct 7, 2012 03:25
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Since we're talking about credit history / scores... I'm in the process of repairing my credit score. Well, repairing sounds too pro-active. I'm in the process of not doing anything stupid and waiting to for it to fix itself, really. In fact, this year is when my last Bad Decision falls off my report. This month I thought I would check my credit score and hi-five myself for not screwing anything up for 7 years. I checked Credit Karma, and was not really pleased with the results. (Yes, I know it is approximated.) Derogatory Marks: 0 Grade: A Yes! Finally! My estimated score: 672. Boo. Total Accounts: 5 Grade: F I was going to link the chart they have but imgur is being a poo poo. Basically, 1-5 accounts is an F rating, an A rating is 20+. What the hell that seems like a lot of open accounts to me. No, I'm not going to go open a new card or anything, I am just curious if this is really true. I don't think I know anyone with 20+ credit trade lines open and I don't know why you would even want that. Credit Utilization: 0% Grade: C Since I pay off my bills immediately, but do so every month, is my score seriously going to fluctuate based on what time of the month someone does a credit check? They rate this as credit score weight: Heigh, and depending on what bills have posted, my utilization could be 0% or 30%. I want to re-iterate that I'm not trying to game the system like some people have said, and I am not really putting that much stock in CK's approximated credit score, but I am very curious about how credit utilization is calculated and if the numbers they give for number of active accounts are at all correct.
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Oct 9, 2012 21:45
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Good info here It's odd that you have a credit utilization of 0%. Could be that CreditKarma is stupid. I pay off my cards in full each month and don't see that. For example, my statement period is from the 16th to the 15th, and the bill is actually due on the 12th. I set up billpay to pay it on the second to last possible day (time value of money, yo), so the previous month's balance carries interest free for ~25 days. If you're zapping the payment over ASAP, utilization COULD appear lower when the bureaus pull your data.
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Oct 9, 2012 22:48
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canyoneer posted:Good info here If you don't float the payment (wait for your statement to cut and use some of the grace period), you will appear to have zero utilization if your credit card is only reporting statement balances.
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Oct 9, 2012 23:56
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Giant Isopod posted:Total Accounts: 5 Yea, I like Credit Karma for a number of reasons, but some of their grades seem loopy to me. For what it's worth, I only have 5 credit accounts listed and they grade me at an 'F' as well. But my overall score is 774, which is good enough for pretty much anything I need it to do. Incidentally, if I use their 'credit simulator' and open additional accounts to try and 'fix' this F rating, it drops my overall score! So it's pretty much a catch 22. I was fussing about this ages ago and Zeta (I think) gave what I think has been really good advice: don't worry about your score. Don't try to fiddle with it. Just make good financial decisions and your score will shape up to match on its own. You've apparently turned around from making bad choices and had seven years of making good ones. Great job!
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Oct 11, 2012 17:08
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edit- found the right thread
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Oct 11, 2012 18:59
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I'm 25, I have no debt, and I have $20k I want to invest because I'm not earning anything on it and I'm not going to spend it anytime soon. I already have a 401(k) through work and I contribute the maximum matched amount. I'm on the Vanguard site right now. Should I do a Roth IRA or a 'General Savings' account for an individual? Is an IRA only useful if I'm saving it for retirement? I might buy a home in a few years so I don't want to pay huge penalties if I pull my cash before then. Thanks.
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Oct 13, 2012 23:42
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I'd keep 3-6 months cash on hand as an emergency fund first off. The idea behind the IRA is that it's a retirement fund. However, Roths can be liquidated with no penalty in certain conditions, like a first-time homebuyer downpayment. If you want emergency cash on hand, do a savings. If you want to invest it for 40 years, put it on an IRA (or open a brokerage account).
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Oct 15, 2012 01:18
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PRADA SLUT posted:The idea behind the IRA is that it's a retirement fund. However, Roths can be liquidated with no penalty in certain conditions, like a first-time homebuyer downpayment. I was interested to see what the responses were to the question. Does the 5 year rule with Roth IRAs not apply here?
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Oct 15, 2012 05:43
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PRADA SLUT posted:I'd keep 3-6 months cash on hand as an emergency fund first off. Pretty close. With a Roth IRA, you can take out your contributions anytime for any reason without penalty or taxes. For certain items like the first time purchase of a house, you are allowed to take out up to $10,000 of the gains your investment earned without penalty. However the account must be open for 5 years before you can take advantage of the $10,000 early withdrawal provision. Before you do this though, due to the amounts involved, you might want to talk to a tax advisor to make sure you are not screwing anything up. Or here http://forums.somethingawful.com/showthread.php?threadid=3394641 Even though I wrote most of the OP, it's been a few years and I am sort of rusty 
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Oct 15, 2012 14:27
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Has anyone read this book? I really need a good starting point to get myself unstupid about investing. A Beginner's Guide to Investing: How to Grow Your Money the Smart and Easy Way
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Oct 15, 2012 21:12
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Lysandus posted:Has anyone read this book? I really need a good starting point to get myself unstupid about investing. There's a bunch of good beginner books in this OP: http://forums.somethingawful.com/showthread.php?threadid=2892928 I like Four Pillars of Investing for an intro book: http://www.amazon.com/Four-Pillars-...rs+of+investing
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Oct 15, 2012 21:34
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