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slap me silly posted:IRSIX is the Adv class of the Russell Small Cap Index, the one you originally mentioned. ISIVX is the Adv class of the US Stock Index Portfolio. That info is from Voya's web site. I don't usually see NAV given to the third decimal place, are you sure you didn't buy 19.989 shares or something? Otherwise maybe these are some kind of annuity or subfund specific to your 401k? Check out the 401k info you got from your employer. No, I'm very sure that the price is $19.989 shares (it actually goes to 6 digits). The quantity I have bought is also nowhere near what IRSIX is at. I did get things a bit mixed up though, so yeah, I'm probably out of luck. Here's what I have: Voya Russell (TM) Small Cap Index Portfolio - Adviser Class Voya U.S. Stock Index Portfolio - Adviser Class The Adv is what threw me off, I wrongly assumed it was Advantage, sorry. I think I'm just going to stop contributing anyway, the expense ratios are ridiculous. I didn't do that originally since I had to get authorization for any new accounts and didn't realize how high the ratios were.
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Aug 9, 2014 02:31
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I learned a lot about what companies mean by "A" and "ADV" when I was looking up your funds, apparently consistency is not part of the program... Do you not have any match? If there's a match it usually more than makes up for the lovely expense ratios.
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Aug 9, 2014 02:36
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No match, although there is talk of one soon. I'm at a relatively new company, and the 401k plan is even newer (this year). They mentioned that expenses would likely drop as the amount we had in the plan as a company grew. Does that mesh with what you know? It seems like that depends on the fund, not on my company. Our restrictions on our personal accounts is a big annoyance for me.
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Aug 9, 2014 02:58
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The company makes a deal with the 401k provider, and the 401k provider expects to make money. I'm not up on the details (aka I don't know poo poo) but I expect companies with less leverage (less money invested) get shittier deals. So yeah, it makes sense to me. What do you mean by restrictions on personal accounts?
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Aug 9, 2014 03:05
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Prior approval for new accounts, transactions, etc. minimum holding periods, restrictions on asset classes, lots of fun stuff. It's pretty common in my industry, but the annoyance of dealing with it is why I just went with the 401k. Thanks for your help!
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Aug 9, 2014 03:18
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Here I am a few months away from my 30th birthday and just have a measly pre-tax retirement savings of $2200. I went to college later than some people and graduated at 26. I managed to save up a little between personal and employer contributions before a medical emergency sidetracked me, and I have spent the last couple of years paying through the nose for medical bills. But things are more settled now, and I have a new gig that pays enough to put money in an emergency fund, retirement savings, and even a little towards debt repayment. Reading this thread gives me a huge sinking feeling in my stomach, because I have no where near as much saved for retirement as some younger goons. Based on what I have gleaned here my current plan is as follows: - Open and max out Roth IRA with Vanguard yearly. I am in the process of opening a TR 2060 account with them and gather it would be a good idea to look into buying into other funds to increase my international exposure once I have enough in the account to do so. - Put $300/mo in emergency savings fund until six months of income is built up - Use the remaining $150+change/mo to tackle my personal debt, which consists of a car note and some student loans (one has a shamefully high interest rate that I am trying to refinance) - I am eligible to contribute to my employer's 401k in a year with a 3% match (and intend to do so unless I break down and manage to get a federal job in the next year that can promise a pension...) Is there anything I am missing? Besides slitting my wrists, that is.
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Aug 10, 2014 02:27
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Stitch Lich posted:Reading this thread gives me a huge sinking feeling in my stomach, because I have no where near as much saved for retirement as some younger goons.  How much debt do you have?Do the match 401k before your Roth, otherwise that's free money you're giving away. Let us know if you need help picking funds!
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Aug 10, 2014 03:33
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I just started my first big boy job and I'd like some feedback on my 401k investment allocation. I'm 26 and have a significant appetite for risk and a pretty solid understanding of portfolio theory/finance, but I'm always open to good advice. Allocation: 10% INTERNATIONAL STOCKS EUROPEAN STOCK IDX ER(.08%) 10% INTERNATIONAL STOCKS PACIFIC STOCK IDX ER (.08%) 15% INTERNATIONAL STOCKS EMERGING MKT STK IDX ER (.12%) 40% LARGE-CAP STOCKS LARGE COMPANY IDX ER (.03%) 10% MID-CAP STOCKS SMALL/MID-CAP IDX ER (.04%) 15% SMALL-CAP STOCKS SMALL-CAP GROWTH IDX ER (.05%) These index funds are all through MSCI/Fidelity. My plan also has a lot of vanguard funds, but they were all a few basis points more for what appears to be essentially the same thing. I realize this is 100% equity and is likely to take a beating when the market inevitably dips in the next cycle, but I believe I can stomach it. I was contemplating adding 5-10% in bonds or real estate to bring down the risk a bit, but considering the 30+ year time frame and lovely bond yields I didn't. Is this a bad decision? (I have every intention of gradually shifting into bonds as I get older). Do you guys have any suggestions? My plan is quite good and offers me pretty much anything I want. Thanks
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Aug 10, 2014 04:48
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No bonds? Also, you might be foreign-heavy, but maybe that's just me...
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Aug 10, 2014 05:05
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Seems fine to me. You've got the big picture stuff in gear and you're just fiddling around at the edges at this point. Couple of things I would say along those lines - first, do you have some reason for the specific tilts or are you just shooting in the dark? If the latter, you're just making your portfolio more complicated for no good reason. There are a lot of good 1- or 2-fund portfolios with reasonable domestic/foreign and small/value tilts. Second, basing a decision on current bond yields is equivalent to market timing. If you want 10% bonds in your portfolio, get them and don't look back. As far as whether to do it now, well, anyway it's not too soon.
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Aug 10, 2014 05:14
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A 100% equity allocation comes down to whether you can stomach the volatility associated with it. And consider coming up with a timeline for when you'll introduce bonds/other assets as you grow older. Are you going to be saving/investing a material amount outside of your 401k? If that's the case, it's not really a 100% equity allocation. A lot of people forget to do this but you should look at your financial assets in totality rather than in isolation.
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Aug 10, 2014 05:19
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As you approach a 100% equity portfolio, the marginal increase of variation in your returns gets disproportionately larger than the marginal increase of the average return. A 100% equity portfolio is still doable if you have high risk tolerance, but the reason goons say 10% bonds minimum is because the reduction in risk is so relatively cheap. That allocation in emerging markets looks really high too. If you do move 10% to bonds, that's what I'd take it out from.
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Aug 10, 2014 06:10
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slap me silly posted:Seems fine to me. You've got the big picture stuff in gear and you're just fiddling around at the edges at this point. Couple of things I would say along those lines - first, do you have some reason for the specific tilts or are you just shooting in the dark? If the latter, you're just making your portfolio more complicated for no good reason. There are a lot of good 1- or 2-fund portfolios with reasonable domestic/foreign and small/value tilts. I like the flexibility that being in 6 funds offers me. I don't always agree with the total market funds I see and would like a little flexibility to make "tactical decisions" when it comes time to rebalance. I guess the mid-cap index is probably a little overkill though. It's not purely a yield decision. If I was 36 instead of 26 I would definitely add in 10-15% bonds without any regard to the yield. I may add 5% to it just to bring down the standard deviation a bit.
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Aug 10, 2014 19:38
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shrike82 posted:A 100% equity allocation comes down to whether you can stomach the volatility associated with it. And consider coming up with a timeline for when you'll introduce bonds/other assets as you grow older. I also have a Roth IRA which is all equities minus a small reserve of cash I'm looking at investing. On top of this I have a taxable account that is 80% equities and 20% in a short term bond fund. I have every intention of adding more bonds as I get older. Right now I have a healthy emergency fund, no debt, a well paying job, and long time frame for investing, so I feel it's to my benefit to be aggressive. I have no intention of selling anything outside of yearly rebalancing.
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Aug 10, 2014 19:46
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moana posted:Check out the student loan thread for info about how to do that. But first and foremost, don't worry about comparing yourself to people here. These are people who love discussing personal finance for FUN. It's okay if you're just starting out as long as you get yourself in financial shape starting now I have five federal student loans totalling just over 14k with interest rates ranging from 4% to 6.5% (I've done some reconsolidation and taken advantage of things like auto debit to get the rates down from where they were.) The car note is at 11k right now with a 1.9% interest rate. I'm not eligible to contribute to the 401k for another 11 months, so I will put money in the Roth in the meantime to take advantage of compounding. I will definitely tap the thread for fund ideas once I get the account set up. From what I've read, TR funds are good if I don't want to think about my money, a lazy portfolio is slightly better, but nothing is better than educating my drat self and being more aware about where exactly I can put my money. (I'd also like to get to the point where I can follow this thread without having to Google a new concept every five posts.)
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Aug 10, 2014 20:17
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SnarkyHipster posted:I also have a Roth IRA which is all equities minus a small reserve of cash I'm looking at investing. On top of this I have a taxable account that is 80% equities and 20% in a short term bond fund. I have every intention of adding more bonds as I get older. Right now I have a healthy emergency fund, no debt, a well paying job, and long time frame for investing, so I feel it's to my benefit to be aggressive. I have no intention of selling anything outside of yearly rebalancing. Looks like you have a good handle on your finances. The only other thing I'd suggest is to consider whether you'll have any major expenses (e.g., house purchase) in the short to mid term and to consider how you'd fund that, whether through your cash holdings or through liquidating a portion of your investments. If it's the latter, that should be reflected in your investment mix.
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Aug 11, 2014 01:06
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shrike82 posted:Looks like you have a good handle on your finances. The only other thing I'd suggest is to consider whether you'll have any major expenses (e.g., house purchase) in the short to mid term and to consider how you'd fund that, whether through your cash holdings or through liquidating a portion of your investments. If it's the latter, that should be reflected in your investment mix. Agreed, the other "major expenses" are still up in the air. I do plan to allocate a few hundred a month into a bond fund for such eventualities. I did modify my 401k allocation a bit by adding 5% to bonds. Thanks for the insight.
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Aug 11, 2014 01:58
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So I've been investing passively over the past couple of years or so and decided a couple of months ago to get more serious about saving for the future. I'm 28 years old and make $35k/year. At the moment, I have $16k in my 401k (no employer match), $1000 in my recently-opened Roth IRA (Vanguard's Target 2050 Fund), and an additional $12k in EE series bonds that will carry a 4% interest rate until their final maturation date, which varies. The last ones will completely mature in 2033. I'm paid weekly, so each pay period I put aside $200 (recently doubled from $100 a week) to my 401k. My goal for this year is to max out my Roth IRA, and have enough to max out for 2015 on January 1, 2015. Thankfully I have the opportunity to earn extra money through overtime, so I just put my overtime money into my Roth in $1000 increments as my bank account fills. I'm fortunate enough to have no debts, but I worry that I'm still not doing enough to create a comfortable retirement for myself. As it stands now, I can contribute $10,500 each year to my 401k and max out the IRA. I don't want to touch the bonds since they're relatively liquid and can be redeemed at any time for their current value. Besides, 4% beats the yield of any savings account. The online calculators I'm using suggest that at an 8% average return rate, I'll have roughly 2.5 million in my 401k at age 65, which seems like a livable sum, and nearly 1 million in the Roth. Basically, I just want to know if I'm on the right track here. Obviously there are things about my situation that I'd like to improve, like increasing my salary and moving to a less expensive part of the country, but if things remain exactly as they are, I'd like to at least see whether or not my current saving habits will be able to support me at retirement age.
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Aug 11, 2014 02:21
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TwoSheds posted:The online calculators I'm using suggest that at an 8% average return rate, I'll have roughly 2.5 million in my 401k at age 65, which seems like a livable sum, and nearly 1 million in the Roth. Basically, I just want to know if I'm on the right track here. Obviously there are things about my situation that I'd like to improve, like increasing my salary and moving to a less expensive part of the country, but if things remain exactly as they are, I'd like to at least see whether or not my current saving habits will be able to support me at retirement age. I would not assume an 8% average average return. Even with a 5%, you are in a good place and seem to be doing all the right things. The biggest issue and you already acknowledge it is you need to find a job that pays better. With that much in savings you should be fine in retirement.
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Aug 11, 2014 03:27
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TwoSheds posted:So I've been investing passively over the past couple of years or so and decided a couple of months ago to get more serious about saving for the future. I'm 28 years old and make $35k/year. At the moment, I have $16k in my 401k (no employer match), $1000 in my recently-opened Roth IRA (Vanguard's Target 2050 Fund), and an additional $12k in EE series bonds that will carry a 4% interest rate until their final maturation date, which varies. The last ones will completely mature in 2033. I'm floored at your ability save that much at your income level. Keep it up and you will be rich for sure I just want to point this out to you in case you weren't aware of it: http://www.irs.gov/Retirement-Plans...%80%99s-Credit) I don't know anything about it beyond that this exists, but I'm thinking you should be eligible. Free money if it works out!
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Aug 11, 2014 05:11
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Is this the right place to ask for advice about taking out a loan against my 401k? Sorry if it's not, please feel free to mock me ruthlessly I'm only 23 but I've managed to cram almost $10,000 into my Roth 401k in the few years I've been working by just setting contributions to 15% of my income and forgetting it. However, I still have about $9,000 in student loan debt (that I'm paying back ahead of schedule, but that still won't all be paid back for some time). Would it be a good idea to take out a loan against the 401k to pay off the student loan and therefore save some interest charges? Can I even do that? The way I'm imagining it working based on what I understand is that as I pay back the 401k I'm effectively paying myself the interest, is this right?
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Aug 11, 2014 05:22
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What is the interest rate on your student loans? What is the interest rate on the 401k loan? Are there also fees? What funds are in your 401k? Can you get enough out of the 401k to cover all the student loans, or will you end up with two loans? Can you trust yourself to pay back a 401k loan as fast as you are paying back the student loans? Can you pay back the 401k loan in full if you lose your job? Overall, it's probably a bad idea. Instead, fund your 401k only enough to get the match (if there is one) and use the rest to pay off the student loans faster. But the details matter.
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Aug 11, 2014 05:41
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Sorry, I didn't realize that stuff would be important for this kind of question  Anyway there's no employer matching, so I guess I should be paying down loans instead? The student loans (I have two, both with $4,500 on them) are 6.8% and the 401k loan would be 4.5%. Apparently I can only get half the money I have as a loan and the rest has to go in escrow, so I would wind up with $4500 to pay off one of the loans with. The only fee involved seems to be a $60 one-time processing fee, though they would hold the other half of my money in escrow that I couldn't use in any funds until I paid it back, apparently. I feel I could pay back both at once, since I already am basically doing that. If I lost my job and didn't get another one for several months I'd probably be hosed, but I have around 3 months worth of emergency fund to float me right now, and that account is also growing by me just assigning a fixed amount to it from my paycheck and ignoring it, I just started it later than the 401k. Here's the funds I've currently got, they're through VALIC and I've signed up for their probably-a-scam GPS program that automatically checks and "optimally" rearranges these funds periodically, so I didn't pick them myself: MID CAP INDEX FUND SOCIALLY RESPONSIBLE FUND STOCK INDEX INTL EQUITIES Intl Opportunities EMERGING ECONOMIES FUND FIXED ACCOUNT PLUS VNGRD WINDSOR II MID CAP VALUE SMALL CAP VALUE FOREIGN VALUE INVESCO BALANCED-RISK GLOBAL REAL ESTATE FUND CORE BOND BLUE CHIP GROWTH SMALL CAP INDEX INFLATION PROTECTED DIVIDEND VALUE A spreadsheet of these, the amount I have and their value can be found here: http://files.nodrives.org/401k%20Funds.xlsx I guess an additional question would be "Am I a sucker for putting money into the 401k instead of a Roth IRA?" now that I'm thinking about it. Thanks for the help!
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Aug 11, 2014 06:45
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Parallel Paraplegic posted:I guess an additional question would be "Am I a sucker for putting money into the 401k instead of a Roth IRA?" now that I'm thinking about it. Thanks for the help! Yes, also you are 99% likely to be getting hosed over by your 401k plan with the allocation they have you in. What are the expense ratios on those funds? Going back to your original question, you're talking about a 2.3% interest advantage with a $60 processing fee. That processing fee eats over half of your spread advantage for the first year, so your savings for this venture are going to be roughly $50 the first year. It's small potatoes, and then you have the hassle and risk of the 401k loan sitting there over your head. I think your best course of action is as follows: 1. Consciously track expenses, and then cut expenses to try and get these student loans off your back ASAP 2. Open a Roth IRA with Vanguard and max it out with VTSAX 3. If 1 and 2 prevent you from contributing to your 401k, that's OK for right now. You'll make it up as your income increases. 4. Re-balance your 401k into one or two funds, probably something like 90% STOCK INDEX and 10% CORE BOND, but this will depend on the expense ratios. Edit: Just realized that with a 401k loan, your interest in paid back into the account, so the loan isn't as bad as I made it out to be, but still not a great idea. baquerd fucked around with this message at 15:07 on Aug 11, 2014 |
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Aug 11, 2014 14:00
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Parallel Paraplegic posted:If I lost my job and didn't get another one for several months I'd probably be hosed That's enough reason not to do it, in my opinion. baquerd is right, $4500 is pretty small potatoes and it's not worth going to a lot of hassle or risk to save a little on interest. Don't forget that you're losing gains in some amount while the money's out of the 401k - impossible to predict what that's worth but it could be worth more or less than 6.8%. Regarding the 401k, that autobalancing thing is apparently a bunch of poo poo. There is little or no point in using more than one or two of those, maybe "Stock Index" and "Core Bond". Look up the expense ratios, especially for those two - that'll be helpful in deciding whether to use the 401k.
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Aug 11, 2014 15:29
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Fancy_Lad posted:I'm floored at your ability save that much at your income level. Keep it up and you will be rich for sure I think that'd apply to me, at least at the lower brackets, but I'd need to check to see if my AGI dips low enough after my overtime is factored in. Hopefully my family's accountant (who I will not be using moving forward) had caught that credit. Thanks for the tip. I'm not trained at all in finance and would definitely never have caught that myself. Regarding average rates of returns on retirement accounts, what's a conservative-to-pessimistic estimate I can use to guesstimate for the future? I was thinking 8% was a little optimistic, but I figured it was at least within the ballpark. TwoSheds fucked around with this message at 18:54 on Aug 11, 2014 |
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Aug 11, 2014 18:51
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To be glib, pessimistic is negative infinity %: World War 3 breaks out and Why Didn't You Spend Money On A Bomb Shelter. My pessimist 30 year outlook is 4% returns and optimistic would be 9%. DNK fucked around with this message at 20:05 on Aug 11, 2014 |
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Aug 11, 2014 19:59
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TwoSheds posted:I think that'd apply to me, at least at the lower brackets, but I'd need to check to see if my AGI dips low enough after my overtime is factored in. Hopefully my family's accountant (who I will not be using moving forward) had caught that credit. Thanks for the tip. I'm not trained at all in finance and would definitely never have caught that myself. 8% optimistic, the long time investment return for large cap US stocks is 5.8% and small cap stocks being 6.3%(More volatility though) The US inflation rate varies from 1 to 3 percent, so equities are pretty much the only way to beat inflation over time.
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Aug 12, 2014 02:01
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etalian posted:8% optimistic, the long time investment return for large cap US stocks is 5.8% and small cap stocks being 6.3%(More volatility though)
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Aug 12, 2014 02:06
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I'm pretty sure Bernstein highlights real gains at a realistic 2 to 3 percent all inclusive of dividends and inflation. Better to prepare as a pessimist and be pleasantly surprised than vice versa.
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Aug 12, 2014 02:50
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DNK posted:To be glib, pessimistic is negative infinity %: World War 3 breaks out and Why Didn't You Spend Money On A Bomb Shelter. You can't lose more than 100% in the market! Negative 101% return is impossible not counting leverage, obviously!
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Aug 12, 2014 04:07
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Serious effortpost: I don't generally like to challenge the opinions of someone like Bernstein, but a 3% real return expectation is inconsistent with his own investment philosophy. Expected inflation (as per TIPs yields) is about 2% - under the no-market-timing philosophy you must assume this is the most accurate estimate of future inflation there is, or else you should be trading TIPs markets instead of holding equities. So that means Bernstein's nominal return pick is 5%. Since the current dividend + share repurchase yield is also 5%, the interpretation is that Bernstein predicts that market caps will experience 0% nominal growth. That more or less implies deflation which is a contradiction. It works well as a pessimistic view, but as an actual pick for expected return across zillions of parallel universes 3% is ridiculous. I don't have his book where he makes these, so I'm not sure if he explicitly words them as being conservative minimums (and not expectations). I can only comment on the way I see his picks being used by others, which is as expectations. Theoretically, long-term average real returns for equities should approximate Real GDP Growth + Dividend Yield + Share Repurchases. Current figures would suggest 2-3% real gdp + 2% dividend + 3% buyback = 7-8% annual real return. I'd pick 7.5%. Arguments about population growth or low-hanging-fruit resource extraction or whatever are qualitative and you can't do any actual decision making with them. Anything regarding comparing current PE to historical is suspect; accounting practices now are materially different than in the past, so unless you honestly believe 2008's insanely low earnings were an anomalous 1-in-250 year event you simply can't use this as an indicator. The 7.5% is an arithmetic 1-year return, so it doesn't help with TwoSheds' question which was about expectations of account balance at age 65. For that, we have to use geometric mean return to include the "drag" on returns that results from reduced compounding due to years with losses. The magnitude of this effect depends on your pick for standard deviation and chosen statistical distribution since annual stock returns are random in the passive investing framework. There's no convincing theory as to what to pick for volatility, so I'd pick 18.5% stddev based on the past century. The best fit (that I know of) for equities returns is the student-t distribution with parameter DOF=3. Under those assumptions the long-term (n=infinity) geometric yield works out to about 5.6% per year. For comparison, the averages for real returns since 1915 were 8.25% arithmetic, 6.66% geometric. I ran a quick and dirty Monte Carlo sim in excel to plot this against some percentiles:   Bernstein's pick, if assumed to be a 30-year geometric average, lies on the 22nd percentile of my simulation, which is why I say it's good as a pessimistic view - it's about as low as I would go for planning purposes. There is an implicit tradeoff where being too pessimistic will result in you throwing your life away (either by being too frugal or working too many years in order to get a "safe" account balance), and being too optimistic results in you running out of money at the end of your life and wasting those years living in a shack in Fixed-Income-Nowheresville, AZ. TwoSheds' savings rate is phenomenal and will likely result in early retirement or a huge estate, but even with savings as strong as that you can see from the 10th percentile that bonds inevitably become a necessity for everyone as they get older.
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Aug 12, 2014 05:29
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I agree with you broadly about people potentially being too conservative about long-term returns expectations but a couple quibbles about your simulations. If you want to get into the weeds, I'm not a big fan of using arithmetic/geometric mean for examining simulated portfolio returns especially for a retail investor who's going to be making variable contributions over time. Some form of money weighted metric (i.e., IRR) makes more sense for the personal investor. Also, your account balance simulation is meaningless given that it assumes a constant 100% equity allocation for the investment horizon.
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Aug 12, 2014 06:35
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Eyes Only posted:Serious effortpost: Is this based on a spreadsheet? If so care to share it?
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Aug 12, 2014 06:36
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Awhile back I posted the 401k options that my company gives. The available target funds that were available (specifically the T. Rowe Price Retire 2050) had a high ER of 0.78. Someone suggested making my own allocation using the vanguard funds that were available which have a much better ER (~0.09). I also have a Roth IRA with Vanguard which is using the Vanguard target fund for 2050. I figured since I'm not particularly good at all of this, that I'd just copy the allocation from the vanguard target fund and just do that. However as I look the vanguard variants that are offered by my 401k plans seems to be of a different "variant", specifically they seem to be "signals". I'm not sure what that means or if it matters. Bio: I'm 26 years old, making 140 salary with ~21k bonus depending on our performance. I'm maxing my 401k and Roth IRA. I'm married with one child. Probably someday I want to retire and I'm willing to be fairly risky. The vanguard funds offered by my 401k are:
The 2050 allocation is:
My question is, what significance is the "signal" part of what my 401k offers? Is it reasonable to try and correlate the Vanguard funds over and do something like:
For reference, the other things I have available through my 401k are:
It seems to me that the best choices are either just stick with the T. Rowe Price 2050 and eat the 0.78 ER, or try and use the vanguard funds and the other funds are more or less useless to me.
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Aug 12, 2014 22:23
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Steampunk Hitler posted:My question is, what significance is the "signal" part of what my 401k offers? Is it reasonable to try and correlate the Vanguard funds over and do something like: Signal is being phased out, but it is essentially a class for 401k funds that has a lower ER than the standard investor class. IIRC all signal funds are being replaced by admiral before the end of the year, although that may just be our funds. Steampunk Hitler posted:It seems to me that the best choices are either just stick with the T. Rowe Price 2050 and eat the 0.78 ER, or try and use the vanguard funds and the other funds are more or less useless to me. I'd personally come up with an allocation using the Vanguard funds you have available and go with that. Something like: 55% Total Stock Market 40% Total International 10% Bond 5% Reit might make sense. Then just rebalance every year or so to your target allocation. In 5 years or after a major life change (where life change != market is doing interesting things) reevaluate your allocation.
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Aug 12, 2014 22:32
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Signal shares are the old name for Admiral shares, it's a good thing. At your income level, I would strongly suggest opening up a taxable brokerage account with Vanguard and get your foreign allocation there as there are some nice tax savings. Just go 100% VXUS for starters. I would do 100% VTSSX in your 401k if it were me, but you really need to get a free Personal Capital account so you can see your true asset allocation across all accounts. Figure out what you want your allocation to be, and adjust from there. Yes, you need to do a lot of reading, but you're a software engineer so you should be used to it.
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Aug 12, 2014 22:34
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Vilgan posted:Signal is being phased out, but it is essentially a class for 401k funds that has a lower ER than the standard investor class. IIRC all signal funds are being replaced by admiral before the end of the year, although that may just be our funds. baquerd posted:Signal shares are the old name for Admiral shares, it's a good thing. Ok awesome, I had no idea that signal was just a share class and wasn't some sort of special financial mumbo jumbo. And yea, a taxable brokerage account is on the horizon too. I'm trying not to go too drastic too fast so that the psychological effects aren't as bad. Prior to January of this year I had basically zero savings and some debt and was living pay check to pay check. Prior to June I was doing 6% to my 401k (default from my company which I started in Jan) and living pay check to pay check. In June I realized that I was making way too much money to have nothing to show for it so I started trying to do something about it. At this point I'm on track to max out my Roth IRA and 401k this year, as well as started saving some in a savings account for a emergency fund (I have ~2k there right now). My family has expensive hobbies and a history of not really thinking about money and just spending whatever. I'm doing better though! I'm using YNAB and such. I just don't want to go from basically spending ~8k a month to trying to go completely spartan as I think the shock would make it hard to actually stick with it. And yea, I have a stack of books to read too, I've been working on the four pillars but time is a shortage, I'm already severely overextended between the things I've committed too, so trying to make the time to actually read them Thanks a lot y'all!
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Aug 12, 2014 23:02
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shrike82 posted:I agree with you broadly about people potentially being too conservative about long-term returns expectations but a couple quibbles about your simulations. Well, I'm punting on modeling the retirement phase for now, and in accumulation phase I'm not sure I see the benefit to using IRR; incoming cash flows are assumed periodic and substantially equal and there is full reinvestment (thus no outflows), so geometric mean is a fully complete return description. You have a point that modeling something like variable contributions could potentially be useful, but the problem with a complication like that is that it's hard to quantify exactly how to vary the contributions. Am I going to have kids sometime soon and start contributing less? Save for a house? Get a huge raise? When? You get into a situation where you'll have to account for fundamentally unquantifiable elements. I can't disagree about asset allocation, but that's a bigger question requiring a bigger tool. There is still meaning in the lower percentiles of the pure equity distribution: a properly allocated portfolio can't be any worse than this so you get some idea of the lower bounds. Isurion posted:Is this based on a spreadsheet? If so care to share it?
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Aug 12, 2014 23:30
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I'm not sure if I agree with your statement that geometric mean is a fully complete return description. It doesn't consider path dependency (i.e., sequence of returns risk) which is an issue even with fixed contributions. This applies to both the retirement and the accumulation phases. Eyes Only is probably familiar with this but for the benefit of others, generate a 30-year set (random or historical) of portfolio returns and compute the ending portfolio value of annual contributions of x dollars. Sort the returns so that the highest returns are chronologically earlier and compute the end result. Now, sort the results so that the lowest returns are earlier and compute the end result. This is an extreme example but it illustrates sequence of returns risk.
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Aug 13, 2014 01:46
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