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Celot posted:Why would you go with ETFs over mutual funds? Lower fees for the exact same product typically. Passive indexed mutual funds are fine if they have very low fees.
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Nov 29, 2012 02:44
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On the topic of municipal bonds, a lot of people think munis = government = safe. In reality the creditworthiness of the municipalities issuing debt can often be hilariously bad, certainly not even close to the federal government's creditworthiness. Moreover many municipal issues are tied to a specific revenue source/project. I.E.: Super safe cash-rich city X wants to build a subway. City X is rated AAA. City X issues municipal bonds to pay for this subway and the bonds specify that only the subway revenues are responsible for/can repay these bonds. The subway system ends up costing way more than expected and people use it way less than expected. The town says "gently caress it" and puts the subway into default rather than using its own coffers to bail it out, leaving the muni investors likely with pennies on the dollar while the city does not default and maintains its pristine credit rating and the subway to boot.
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Nov 29, 2012 02:51
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Bonds are only as good as the issuer. You can get reasonable audits on governments but when it comes to municipalities and smaller companies you're taking on a lot of risk.
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Nov 29, 2012 02:54
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I have a question about Roth IRAs and mutual funds: I had to sell off the majority of stocks in my IRA because of my job (independence stuff) so I was looking to reinvest the Roth balance to mutual funds or something else. I want something that's relatively conservative and moderate maintenance & have a few Fidelity funds picked out. Is this a good way to go or should I check out options other than mutual funds?
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Nov 29, 2012 03:23
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Hello, I started a new job a couple of months ago and I'm now able to start putting money into the 401k plan and would like some advice based on the options they have given me. The 401k is managed through Fidelity but they also offer funds from Vanguard (which I have personal IRA's in), and some other funds. I'm also planning on rolling my previous 401k into this one. I'm turning 31 in a couple of months. Here are the choices: Target Retirement Funds: - Fidelity Freedom K Passive Index Funds: - Disney Stock ESOP Fund (77239) - Disney Stock Non-ESOP Fund (77238) - Federated US Treasury Cash Reserves - Institutional Class (UTIXX) - Vanguard Total Bond Market Index - Institutional Shares (VBTIX) - Vanguard Institutional Index - Institutional Plus Shares (VIIIX) - Vanguard Total Stock Market Index - Institutional Shares (VITSX) - Vanguard Mid-Cap Index - Institutional Plus Shares (VMCPX) - Vanguard Small-Cap Index - Institutional Shares (VSCIX) - Spartan International Index - Institutional Class (FSPNX) Actively Managed Funds: - Fidelity Institutional Money Market (FNSXX) - PIMCO Total Return - Institutional Class (PTTRX) - Fidelity Capital Appreciation - Class K (FCAKX) - Sequoia Fund (SEQUX) - Calamos Growth - Class I (CGRIX) - Baron Growth - Institutional Class (BGRIX) - Royce Low-Priced Stock - Institutional Class (RLPIX) - Fidelty Diversified International - Class K (FDIKX) Since I have my personal IRA's with Vanguard I'm partial to picking those funds, but I'm not very good at this, perhaps there are better funds I can choose. Also, what would people recommend for allocations? Also, I'm not sure what the difference is between the Disney funds. If anyone could explain. Any help would be appreciated. xgalaxy fucked around with this message at 04:15 on Nov 29, 2012 |
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Nov 29, 2012 04:08
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UncleGuito posted:I have a question about Roth IRAs and mutual funds: Mutual funds in IRAs are a fine idea. xgalaxy posted:Hello, Starting with the last question, I assume the ESOP fund is a fund to purchase Disney stock that is a part of an ESOP program that presumably provides some sort of discount. This is typically a good deal for you (basically, you can flip the stock for an immediate gain equal to the discount) but it's impossible to know without knowing the details. I assume the non-ESOP fund is just if you want to buy Disney stock outside the ESOP program (presumably the ESOP program has some upper limit for how much you can buy). Those look like some very good options for a 401k, and you can create a good portfolio with those options (the Fidelity freedom funds are a bit pricey IIRC, so you should probably construct your own portfolio). Your particular allocation depends on your risk tolerance and a lot of other things, but I think a three-fund portfolio consisting of total stock market, total bond market, and spartan international would be a great starting point - see http://www.bogleheads.org/wiki/Three-fund_portfolio Assuming you are a youngin, 50% TSM, 30% international, and 20% TBM would work, but a lot of people would lower the bond % or raise the international %.
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Nov 29, 2012 07:21
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gvibes posted:Who is your roth IRA with? Thanks for the awesome link and advice. This gives me a good jumping off point. I get fear locked when presented with a bunch of options like this, especially regarding finances. Yea. I started at a Disney subsidiary a couple of months ago. They won't let you start putting into a 401k until after 90 days of employment and I finally got the plan in the mail this week. Thanks for your help.
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Nov 29, 2012 08:03
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gvibes posted:Who is your roth IRA with? It's with Fidelity. I've had it open for about a year now so my total contributions are around $5,000. I was recommended their index funds since they're low expense but since the minimum to invest is $10,000, I suppose I'll have to wait another year for that. Also, I have around $1,500-2000 just sitting in my checking account at most times. I'm 24 and have a work 401k, work pension, personal roth 401k- would it be advisable to start a personal 401k or should I look to some other kind of account? UncleGuito fucked around with this message at 15:47 on Nov 29, 2012 |
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Nov 29, 2012 15:35
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Orange_Lazarus posted:Yeah, I'm reading Four Pillars right now and right now the author is going on about how the people who are paid to managed funds are really no better than monkeys who have been trained to throw darts at the Wall Street Journal and buy the stocks they hit. Actie posted:Just curious: often do you retirement-planning mavens look at your 401(k) or IRA accounts? I've heard that it's unnecessary (and can even be detrimental, at least psychologically) to frequently check in on the value, even if it's advisable to examine the allocations every once in a while. (Personally, I see my 401(k) balance every time I log into Mint, which is almost every day.) I'm a big Vanguard slut. When explaining to my daughter who I'm starting to work with on some training-wheels investment ("How'd you like to make some money on all that money sitting in your savings account?"), I realized that an 0.11% expense ratio was 11 freaking cents on every $100 your investment earns -- I knew that intellectually but developing an actual number was eye-opening and really, really uplifting. I go to their website and for each portion of my portfolio (cash, bonds, and different equities groups), I look at the characteristics of the different options and weigh their expense ratio, risk level, turnover (if taxable), and so on. Avoid looking at returns for YTD (unless you see a decent fund in the gutter). If you need further convincing on that approach, make sure you have appropriate risk diversification and then look at the thread title. gvibes posted:I assume you work for Disney? Celot posted:Why would you go with ETFs over mutual funds?
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Nov 29, 2012 17:05
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I was hoping I could run my plan for opening an retirement account by this thread to make sure I'm understanding everything correctly. Currently I'm a graduate student making around ~$30k a year. However, I will be starting a job around August 2013 that will put my income pretty much exactly at the Roth IRA reduced contribution limit for single filers after capital gains and everything else is factored in. So my current plan is to open a Roth IRA right now and contribute the max for 2012 and 2013 out of my savings. Then once I start work I would either do a reduced Roth contribution with the rest going into a traditional IRA, potentially switching completely to a traditional IRA if I pass the Roth reduced contribution limit completely? Is this the best plan? My future employer doesn't do 401k matching...
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Nov 29, 2012 17:09
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thepedestrian posted:I was hoping I could run my plan for opening an retirement account by this thread to make sure I'm understanding everything correctly. In 2014 you're likely going to want a traditional IRA anyway, as your marginal tax rate will be pretty high. A Roth is most beneficial when you are not in the highest tax bracket you'll be in your life. Now, if you expect to be filing singly in the $180k+ bracket in a few years the reduced Roth option might not be terrible, but most people in the 28% and above brackets are looking to reduce their taxable income right now through retirement vessels. As taxes are likely to increase in 2013 and 14 at least slightly, a Roth may just not be for you. Even if your employer match is terrible or doesn't exist, their might have good enough 401k options that it would be worth maxing the 401k. My employer has Vanguard Target Retirement options, which is pretty nice.
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Nov 29, 2012 17:19
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Yeah my wife's 401k is through T-Rowe Price or something (higher fees, less options) and that's why I'm considering rolling over her 401k on an annual basis to a Vanguard IRA. Also considering opening a traditional for myself since my employer doesn't offer 401k at all. Currently my wife and I have two ROTHS we max every year as well as her 401k which we contribute about 6% (for the matching) of her income to. Edit: I have about $10k cash setup in an emergency fund, anything wrong with just putting my emergency fund in I bonds? I think my job will be fairly secure for at least a year. Sephiroth_IRA fucked around with this message at 17:33 on Nov 29, 2012 |
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Nov 29, 2012 17:23
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Is this the right place to ask for UK savings-planning advice or is there a separate thread for that?
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Nov 29, 2012 17:56
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Nonvalueadded User posted:[...]
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Nov 29, 2012 18:01
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JimTheSarcastic posted:Not to pick nits, but don't expense ratios apply the the investment value, as opposed to its returns? That is, it costs you $0.11 for every $100 of value (applied yearly??), not every $100 earned--right? Yes, that is why expense fees are so killer (and why ETFs are an appealing alternative to mutual funds). Whether your fund gains or loses, you still get dinged for the fee on your total investment value in the fund annually. Over the course of 20 or 30 years, losing even 0.5% of your total investment in the fund every year adds up significantly.
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Nov 29, 2012 18:34
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Weinertron posted:In 2014 you're likely going to want a traditional IRA anyway, as your marginal tax rate will be pretty high. A Roth is most beneficial when you are not in the highest tax bracket you'll be in your life. That is strictly true when your considering putting $1000 of pretax income in a traditional vs $1000 of taxed income in a Roth, but if your looking at maxing out one or the other there is more too it: Consider someone at a 25% marginal level now and at retirement in 40 years. lets also say a 5% yearly return on average over that period. Take $6667 of their income. They can either: A) Tax it, and put $5000 into a Roth IRA B) Put $5000 into a traditional IRA, tax the remaining $1667 down to $1250, and invest that in a taxable investment account. In option A, they end up with 35.2k and there is no more taxing to be done. In option B, the account value is the same 35.2k, but needs to be taxed down and ends up at 26.4k. Meanwhile, their taxable account has been making the equivalent 5% less 15% for capital gains a year, and now is worth 6.6k. In this case the Roth made 2.2k more than the traditional despite having equal marginal tax rates. The breakeven point is somewhere around future tax rates being 5% lower than current, but the exact level varies based on your other assumptions. Here is a spreadsheet I just made up that you can test different cases on: https://docs.google.com/spreadsheet/ccc?key=0Av95DXwVaseRdEJGTHJNcHAwVnd5b19ZU2FiNnYwcnc
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Nov 29, 2012 18:46
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Guinness posted:Yes, that is why expense fees are so killer (and why ETFs are an appealing alternative to mutual funds) Don't ETFs have expense fees as well?
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Nov 29, 2012 19:01
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tentish klown posted:Is this the right place to ask for UK savings-planning advice or is there a separate thread for that?
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Nov 29, 2012 21:08
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Guinness posted:Yes, that is why expense fees are so killer (and why ETFs are an appealing alternative to mutual funds). Whether your fund gains or loses, you still get dinged for the fee on your total investment value in the fund annually. Over the course of 20 or 30 years, losing even 0.5% of your total investment in the fund every year adds up significantly. Thanks, I knew that, but somehow had a disconnect in the middle of my wall of words. On a related note, we just got a new option in our 401(k) selections today, trumpeted as yet another winning option. It has a 0.9% expense ratio for what is a fund-of-funds, mostly index funds if I remember correctly. So (for example) I'm basically getting a 7% return on an investment that returns 8% yearly? Ugh, my 401(k) options are terrible. Initio posted:Don't ETFs have expense fees as well?
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Nov 29, 2012 23:28
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401k expense fees are almost never going to be good because the main benefit of them is the match so don't freak out about them. If you're funding a 401k without a match before you're doing IRA or any other retirement vehicle first then you're doing it wrong. Also, keep in mind that unless you stay with your company for forever that your 401k is probably going to be rolled over into an IRA in 4-5 years.
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Nov 30, 2012 00:00
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Nonvalueadded User posted:
Beware that often times ETFs have very high bid-ask spreads which act effectively as a one-time fee every time you buy or sell it. If you're buying a very thinly traded ETF you can get burned pretty bad on this without even realizing it.
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Nov 30, 2012 00:16
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Swingline posted:Beware that often times ETFs have very high bid-ask spreads which act effectively as a one-time fee every time you buy or sell it. If you're buying a very thinly traded ETF you can get burned pretty bad on this without even realizing it. Also Vanguard admiral shares ($10k minimum for index funds) are the same ER as the equivalent ETF's, making them probably the best choice for most investors. Start with investor shares and plan to convert to admiral when you reach $10k. That said, bid-ask spreads for most broad market ETF's are usually tiny.
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Nov 30, 2012 01:39
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I just want to make sure I am not missing a piece of the puzzle that is staring me right in the face. If I'm in a position to throw some money at my 401k, and I'm already at employer match (6%), I am better off a) just raising my desired election past 6% anyway to put the money in pretax b) using the website's make a contribution option to deposit directly from my bank account I mean, it's A, right? It can't not be A. Just want to make sure I'm not missing something here. e: Oh, I'd like to ask this question for two scenarios. 1) On a long term basis, simply contributing more because I have the means to. 2) As an end of the year top off the 401k thing. I realize I'd possibly have to make the contribution like 30% in order to get to max contribution for the year, but I do still wonder if that's the right way to do it. MC Fruit Stripe fucked around with this message at 08:40 on Dec 1, 2012 |
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Dec 1, 2012 08:29
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MC Fruit Stripe posted:1) On a long term basis, simply contributing more because I have the means to.
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Dec 1, 2012 08:48
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Ahh yeah, I blanked on the Roth IRA, and need to set that up. It's 401k to match, Roth IRA to cap, THEN 401k cap. Need to do that. More to the original point though, contributing to my 401k on the website through a simple "enter debit card here", that's just gonna get me taxed twice and is stupid, no?
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Dec 1, 2012 09:07
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MC Fruit Stripe posted:Ahh yeah, I blanked on the Roth IRA, and need to set that up. It's 401k to match, Roth IRA to cap, THEN 401k cap. Need to do that. I believe you can put it down as an elective deferral on your tax forms, and it's not considered a catch-up contribution unless you meet the requirements. It's not much different from contributing to a traditional ira with a debit card, just account for the contribution on your tax forms. xgalaxy fucked around with this message at 15:11 on Dec 1, 2012 |
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Dec 1, 2012 15:06
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I recommend just going with the Roth. If you want to put more in the 401k do it from your payroll contributions.
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Dec 1, 2012 17:36
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nelson posted:I recommend just going with the Roth. If you want to put more in the 401k do it from your payroll contributions.
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Dec 1, 2012 18:13
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I have a very modest retirement account from my previous employer. I can rollover into the 403(b) offered my by new employer, but how much of a pain in the butt is this process? I assume I need to have TRP send all the stuff directly to my new planner. Anyone get any headaches from this process?
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Dec 3, 2012 22:14
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ServoMST3K posted:I have a very modest retirement account from my previous employer. I can rollover into the 403(b) offered my by new employer, but how much of a pain in the butt is this process? I assume I need to have TRP send all the stuff directly to my new planner. Anyone get any headaches from this process? you can roll over into a personal IRA account. I have done this several times and it is fairly simple. The process: - Initiate the new account at new custodian, say, Vanguard. You will have a traditional IRA with zero balance ready to recieve. - Send instruction to 401k or 403b custodian to do a DIRECT TRANSFER (trustee-to-trustee). The check should be made out like: Vanguard FTC FBO ServoMST3K. It is important that the check is made out to the new custodian and not to you directly. Instruct to have the check sent to Vanguard referencing your account number. - One week later, your money is in your IRA.
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Dec 3, 2012 22:55
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I'm in a situation where I have no outstanding debt, and I've managed to build up an emergency fund for about six months worth of expenses by setting aside a percentage of my check every month. My goal for the coming year is to take the money that I had been setting aside each month for the emergency fund and use it to save for the down payment on a small house instead. I'm hoping to buy a home in a year to a year and a half down the road. What should I be doing with the emergency fund I've saved and the money I'm planning on saving over the next year for the down payment? I've just been keeping the cash in a savings account at the bank, but I was wondering if there were better options.
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Dec 4, 2012 02:46
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Giant Squid posted:What should I be doing with the emergency fund I've saved and the money I'm planning on saving over the next year for the down payment? I've just been keeping the cash in a savings account at the bank, but I was wondering if there were better options. nelson fucked around with this message at 02:59 on Dec 4, 2012 |
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Dec 4, 2012 02:55
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Giant Squid posted:I'm in a situation where I have no outstanding debt, and I've managed to build up an emergency fund for about six months worth of expenses by setting aside a percentage of my check every month. My goal for the coming year is to take the money that I had been setting aside each month for the emergency fund and use it to save for the down payment on a small house instead. I'm hoping to buy a home in a year to a year and a half down the road.
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Dec 4, 2012 03:06
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cowofwar posted:Just a note that if you buy a house you will need three funds. (1) Emergency fund, (2) down payment fund, (3) house expense fund. You'll want all three funds fully funded before you make the purchase. It will make things so much smoother over those first few months of surprise house-associated expenses. How can I estimate how big the house expense fund will need to be?
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Dec 4, 2012 03:10
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A bond fund wouldn't be horrible if you aren't 100% deadset on moving into a house in a year. Really though, what kind of house are you looking at where you can get any decent down payment in just a year?
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Dec 4, 2012 03:11
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Harry posted:A bond fund wouldn't be horrible if you aren't 100% deadset on moving into a house in a year. Really though, what kind of house are you looking at where you can get any decent down payment in just a year? I'd like to buy a house in a year or so, but I'm not 100% dead set on it. What's generally considered a decent down payment?
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Dec 4, 2012 03:13
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Giant Squid posted:What's generally considered a decent down payment? Well, no PMI is 20% generally and FHA requires like 5% (maybe none?).
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Dec 4, 2012 03:13
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Harry posted:Well, no PMI is 20% generally and FHA requires like 5% (maybe none?). I live in an area where you can get decent two bedroom for $120,000, so 5% would be doable for me. Sounds like it might be smarter to wait longer, though.
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Dec 4, 2012 03:15
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nelson posted:Certificate of Deposit or Money Market Savings Account. The problem with a CD is that it is non-liquid and the purpose of an emergency savings account above all else is liquidity. You can cash out a CD prior to maturiy if you absolutely must, but you will pay a penalty larger than any potential gain. On top of that, CD rates are not really significantly higher than those found in "high-yield" online savings or MMAs and they make a poor choice for a basic emergency fund, IMO.
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Dec 4, 2012 03:20
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Guinness posted:The problem with a CD is that it is non-liquid and the purpose of an emergency savings account above all else is liquidity.
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Dec 4, 2012 03:24
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