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Modern Life Is War
Aug 17, 2006

I'm not just eye candy
When inflation dropped in the 90s the rumor was that the CPI was overstated. However, it's void anyway as the government has changed the way many indicators are determined multiple times over the last century.

And just to touch on the conspiracy theory stuff, here's your official resource for musing:
http://www.shadowstats.com/

It indicates price inflation, currency deflation, 'high' unemployment, and anemic GDP growth with the differences coming from the new way all of these are measured and massive amounts of credit/leverage.

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devilmouse
Mar 26, 2004

It's just like real life.
I'm not sure if this post should go here, but it's as good of a place as any, I imagine.

I'm a tremendous slacker when it comes to financial matters. As long as I was making enough money to do what I wanted, I didn't really pay my money any mind. I've never had a 401k, IRA, or really anything past the usual checking/savings account (which are at least with ING, so they're not totally worthless, interest rate wise). As I approach 31 years of age, I've been suddenly struck with this need to get my poo poo in order and before I jump whole hog into reading things in the OP, motley fool, and so forth, I was just curious to hear how hosed I am with regards to the long haul.

Facts:
* I'm living alone in Boston without any dependents. No kids, no wife.
* My monthly take home after taxes is ~$5100 and my monthly expenses are ~$2500 between rent, utilities, food, travel, entertainment and such (it used to be much less on both accounts, but the ratio's probably stayed around the same).
* I've got no loans or debts remaining, so from here on out, any money I don't spend, I can save.
* I keep expecting that I'm going to want to buy some property at some point, but doing that around Boston is a laughable prospect these days so this probably isn't even that important.
* I'm currently working at a startup where we don't have a 401k.
* I've managed to save a fairly large chunk of change at this point. Originally I thought I was going to use it as a down payment on a house, but since that's out, it's just sitting there, not doing a whole lot for, which is where this thread comes in.

I assume my first step is to open up an Roth IRA and toss $5k into it right off the bat, and then do that every year, going forward. But what's next?

Without access to a 401k, is there anything else I should be looking at? Open a CD or something? Do I just say gently caress it and go tell some nice financial planner type to deal with this for me? I'm pretty passive about money and not really into playing around with it, I'm just looking to not think much about it and at the same time, not be hosed in 30 years when I retire. I wish I started thinking like this 9 years ago, but can't change that now, so I can at least bring what I've earned up to this point to the table.

Any thoughts are more than welcome, even if they're to tell me that I'm boned and should make sure I get in good with my mother so she leaves me her house. Thanks!

Ravarek
Apr 25, 2004

Solid gold dipes:
E'ry day I'm hustlin'.

devilmouse posted:

stuff

You don't need to use a financial planner unless you have a great deal of wealth; a financial planner won't really be able to do anything for you besides take your money. Don't let some rear end in a top hat charge you a 1%+ fee for something you could easily do yourself.

I would say yes, opening a Roth IRA would be a good first step. Max it out every year. I (and probably everybody else on this forum) would recommend opening a Roth IRA through Vanguard and building a solid portfolio of index funds or a retirement fund. Vanguard's Target Retirement Funds are decent if you don't want to spend too much time learning about investing; the Target Retirement Funds aren't perfect but they get the job done if you just wanna put your retirement money on auto-pilot without worrying too much.

Ravarek
Apr 25, 2004

Solid gold dipes:
E'ry day I'm hustlin'.

Modern Life Is War posted:

http://www.shadowstats.com/

:psyduck: This website is confusing as gently caress.

LactoseO.D.'d
Jun 3, 2002

Ravarek posted:

You don't need to use a financial planner unless you have a great deal of wealth; a financial planner won't really be able to do anything for you besides take your money. Don't let some rear end in a top hat charge you a 1%+ fee for something you could easily do yourself.

Also adding, if you are a smaller client, the advisor is less likely to deliver anything resembling service to you. Its industry practice to rank your clients based on how much you like doing business with them and smaller accounts typically end up in the lower rankings. Lower rankings mean the advisor is less likely to do things like waive transaction fees, or give you access to better products (some of the better products, require a large buy-in anyways). If you call to ask the guy enough questions and take up enough of his time, he will even decide that cost > revenue, and fire you as a client (that goes for large clients as well). Other no-no's include second guessing the advisors recommendations and then holding him responsible when the portfolio tanks because you chose to ignore his advice.

I think 50k of investable assets is the bare minimum at which an advisor starts being effective.

That said, most people haven't got the wherewithal to set up, execute, and stick to a good portfolio allocation. For the guy with a small account, and not a lot of market knowledge, he can pay certain advisors flat rates to set up a portfolio for you, and evaluate financial products for that portfolio that you will buy through a 3rd party instead of through the advisor (meaning there are no commissions involved).

I'd rather see someone shell out $250 to a NAPFA guy for that service, than see them try to do it themselves, and absolutely butcher their account in the process. Its my experience that clients, if you leave them to their own devices, will blow their account and deviate from their allocations absolutely stupid-eyed over dollar signs.

LactoseO.D.'d fucked around with this message at 18:00 on Sep 28, 2008

Ravarek
Apr 25, 2004

Solid gold dipes:
E'ry day I'm hustlin'.
Hey 80k: What's your stance on having REIT exposure in one's retirement portfolio? Yay or nay?

Regnevelc
Jan 12, 2003

I'M A GROWN ASS MAN!
I am thinking of pulling out of some stocks in my 401K and investing more in mutuals. What do you all think about this? Right now I am about 80% in stocks and 20% in mutuals. I was thinking of moving to a 60/40 split due to the current market.

Edit: I just bumped my contributions to PreTax 8% from PreTax 6%.

Regnevelc fucked around with this message at 01:10 on Sep 30, 2008

NZAmoeba
Feb 14, 2005

It turns out it's MAN!
Hair Elf

Regnevelc posted:

I am thinking of pulling out of some stocks in my 401K and investing more in mutuals. What do you all think about this? Right now I am about 80% in stocks and 20% in mutuals. I was thinking of moving to a 60/40 split due to the current market.

Edit: I just bumped my contributions to PreTax 8% from PreTax 6%.

I'm hardly an expert, but selling off your shares while they're low, only to buy them back at some later date when they're high again isn't how you're supposed to do this.

Stocks are on sale right now, buy more of them for the eventual rebound (even if it takes years). If they never rebound, then we'll probably be living in a post apocalyptic hell-hole, in which case you will have bigger problems than your 401k.

Regnevelc
Jan 12, 2003

I'M A GROWN ASS MAN!
I did think about that and didn't make the change.

burmart
Sep 14, 2002

10,000 Cunts
I'm having a kid soon and want to start a passive investment in his name on a cheap basis. Essentially, I'm looking into a DRIP. What would be a good company to move this cash into? I'm looking at either JNJ or Disney. I'm open to other suggestions.

80k
Jul 3, 2004

careful!

NZAmoeba posted:

Stocks are on sale right now, buy more of them for the eventual rebound (even if it takes years). If they never rebound, then we'll probably be living in a post apocalyptic hell-hole, in which case you will have bigger problems than your 401k.

This type of thinking is dangerous, and fails to acknowledge the magnitude of the systemic risk that is possible and that we are actually facing right now. I'm not selling my stocks, and I'll continue to add to my position, but I'm not going to say that stocks are "on sale".

The Japanese are not living in an apocalyptic hell-hole, but many of their investments will never "rebound" in their lifetime. Twice in the USA (Great Depression and the late sixties-to-early-eighties), Americans went through approximately 20 years of disastrous results from their stock investments. Bad situations, yes, but not apocalyptic hell-holes.

The whole "you have bigger problems to worry about..." BS is a load of garbage. A world of miserable stock returns is possible, and still worth living. At a time like this, you should be acknowledging the risks that are out there, and reexamining your personal liquidity. Selling stocks low may need to be down out of necessity.

Regnevelc
Jan 12, 2003

I'M A GROWN ASS MAN!
I reallocated my portfolio based on some reading I did online at some websites. I invested more in the Global and International Funds and put money into the small companies. I have until tomorrow at 11:00PM to delete this reallocation and do something else. I had one guy comment that I should just shove all of my money into the 2050 (2045 in my case) fund and let it go. What do people think.

code:
   	   	Asset Allocation  	                        OLD     NEW
	    Target Retirement Fund Income 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2010 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2015 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2020 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2025 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2030 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2035 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2040 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2045 	100.00% 	15.00% 	10% 	 
	    Target Retirement Fund 2050 	100.00% 	0.00% 	0% 	 
	    Balanced Fund 	                100.00% 	0.00% 	0% 	 
  	Stocks 	                                        OLD     NEW
	    Enhanced Equity Index Fund 	100.00% 	0.00% 	0% 	 
	    Large Cap Core Plus Fund 	100.00% 	25.00% 	10% 	 
	    Large Cap Value Fund 	100.00% 	10.00% 	5% 	 
	    Large Cap Growth Fund 	100.00% 	15.00% 	5% 	 
	    Global Equity Fund 	        100.00% 	0.00% 	20% 	 
	    International Equity Fund 	100.00% 	10.00% 	25% 	 
	    Small Cap Core Fund 	100.00% 	5.00% 	5% 	 
	    Small Cap Value Fund 	100.00% 	5.00% 	5% 	 
	    Small Cap Growth Fund 	100.00% 	5.00% 	5% 	 
	    ITT Stock Fund 	         20.00% 	10.00% 	10% 	 
  	Total 	  	                                        100%

Regnevelc fucked around with this message at 02:40 on Oct 2, 2008

Modern Life Is War
Aug 17, 2006

I'm not just eye candy

burmart posted:

I'm having a kid soon and want to start a passive investment in his name on a cheap basis. Essentially, I'm looking into a DRIP. What would be a good company to move this cash into? I'm looking at either JNJ or Disney. I'm open to other suggestions.

My first investments as a teenager were in DRIPs--General Electric, IBM, and Home Depot. I cannot suggest a particular stock, but I can endorse the concept.

CellBlock
Oct 6, 2005

It just don't stop.



Regnevelc posted:

I reallocated my portfolio based on some reading I did online at some websites. I invested more in the Global and International Funds and put money into the small companies. I have until tomorrow at 11:00PM to delete this reallocation and do something else. I had one guy comment that I should just shove all of my money into the 2050 (2045 in my case) fund and let it go. What do people think.

code:
   	   	Asset Allocation  	                        OLD     NEW
	    Target Retirement Fund Income 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2010 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2015 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2020 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2025 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2030 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2035 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2040 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2045 	100.00% 	15.00% 	10% 	 
	    Target Retirement Fund 2050 	100.00% 	0.00% 	0% 	 
	    Balanced Fund 	                100.00% 	0.00% 	0% 	 
  	Stocks 	                                        OLD     NEW
	    Enhanced Equity Index Fund 	100.00% 	0.00% 	0% 	 
	    Large Cap Core Plus Fund 	100.00% 	25.00% 	10% 	 
	    Large Cap Value Fund 	100.00% 	10.00% 	5% 	 
	    Large Cap Growth Fund 	100.00% 	15.00% 	5% 	 
	    Global Equity Fund 	        100.00% 	0.00% 	20% 	 
	    International Equity Fund 	100.00% 	10.00% 	25% 	 
	    Small Cap Core Fund 	100.00% 	5.00% 	5% 	 
	    Small Cap Value Fund 	100.00% 	5.00% 	5% 	 
	    Small Cap Growth Fund 	100.00% 	5.00% 	5% 	 
	    ITT Stock Fund 	         20.00% 	10.00% 	10% 	 
  	Total 	  	                                        100%

If you're looking for something where you can just "set it and forget it," just use one of the Target Funds. There's no point at all in putting only a portion of the money in there, since it's just a collection of their other funds anyway.

If you want to actively manage it, though, go ahead and spread it around.

Regnevelc
Jan 12, 2003

I'M A GROWN ASS MAN!

CellBlock posted:

If you're looking for something where you can just "set it and forget it," just use one of the Target Funds. There's no point at all in putting only a portion of the money in there, since it's just a collection of their other funds anyway.

If you want to actively manage it, though, go ahead and spread it around.

I will actively manage it. I will remove money from that fund and spread it to other things. I am thinking small business, as when this bill gets signed, I think they will be the first to go back up.

frumpus
Nov 28, 2005

I'm pretty worried about my retirement plan allocations.

I have a 403b plan with TIAA-CREF. I'm 39yo and the account only has about 38k in it right now. My total plan assets as of the quarter that just ended 10/03/08 are down 5% from the previous quarter.

Current allocations:



This quarter, real estate was up a tiny bit and money markets actually did really well. Everything else tanked. So 20% of my investments are making money and 80% are losing it right back and then some.

If this matters: I do not own a home but am planning to buy one in the spring. This will likely involve borrowing from my 403b for the down payment.

Any advice to keep me from retiring homeless and destitute will be appreciated.

80k
Jul 3, 2004

careful!
frumpus, that doesn't add up. you say you 80% of your investments are losing money, but it shows you have 41.57% in guaranteed investments and 13.27% in money market. Seems like more than half of your investments should be stable, no?

frumpus
Nov 28, 2005

80k posted:

frumpus, that doesn't add up. you say you 80% of your investments are losing money, but it shows you have 41.57% in guaranteed investments and 13.27% in money market. Seems like more than half of your investments should be stable, no?

The "guaranteed" investments lost money last quarter. v:)v

80k
Jul 3, 2004

careful!

frumpus posted:

The "guaranteed" investments lost money last quarter. v:)v

you sure about that? usually bonds/TIPS (that have market risk and short-term volatility) are under "fixed income" category at TIAA-CREF. "Guaranteed" investments would be like TIAA-Traditional. You should not be losing any money on that.

What investment do you have that is under the "guaranteed" category?

frumpus
Nov 28, 2005

code:
Accounts            Quarter End Balance(06/30/2008) Current Balance( 10/03/2008 )

[b]Guaranteed             $16,295.16                      $15,449.80[/b]
   TIAA Traditional    $16,295.16 	               $15,449.80

quote:

TIAA Traditional Annuity
A guaranteed annuity backed by TIAA's claims-paying ability, TIAA Traditional (PDF) guarantees your principal and a minimum interest rate,1 plus it offers the opportunity for additional amounts in excess of the guaranteed rate.* These additional amounts, when declared by the TIAA Board of Trustees, remain in effect for the "declaration year" that begins each March 1. TIAA has credited additional amounts of interest every year since 1948.

It doesn't make sense to me either.

80k
Jul 3, 2004

careful!

frumpus posted:

code:
Accounts            Quarter End Balance(06/30/2008) Current Balance( 10/03/2008 )

[b]Guaranteed             $16,295.16                      $15,449.80[/b]
   TIAA Traditional    $16,295.16 	               $15,449.80
It doesn't make sense to me either.

something is wrong then. check your transaction history and make sure there is no money that left TIAA-Traditional (either by your actions or automatic rebalancing or whatnot). Call and ask if you can't figure it out.

TIAA Traditional has not been affected by this credit mess, other than a reduction in the interest rate. My father is invested in TIAA-Tradtional and principal and income have both been incredibly stable. TIAA-CREF has the highest possible credit rating. If TIAA-Traditional goes down, then we are all in big trouble (not that we already aren't).

frumpus
Nov 28, 2005

Ok that's part of it.

About 2 years ago I borrowed money from my plan to pay down some high interest credit card debt. Now it seems like every month when I make a payment to them on that loan, they transfer some money out of Traditional and into money market.

I have no idea why they do this and it only accounts for $440.37 of the money Tradional lost in the last quarter though so I'll give them a call and see if I can figure out what's what.

frumpus
Nov 28, 2005

Ok apparently it all has to do with the loans I took out previously.

All that aside, I still want to know if my allocations are ok or if I should be changing them around.

80k
Jul 3, 2004

careful!

frumpus posted:

Ok apparently it all has to do with the loans I took out previously.

All that aside, I still want to know if my allocations are ok or if I should be changing them around.

Impossible to know without evaluating your personal circumstances, and ability/need to take risk.

Also, if you intend to borrow from your retirement account, keep in mind that withdrawals from TIAA-Traditional may be restricted, depending on the type of account you have. My father's TIAA-Traditional account requires a 10-year payout period. Ask a customer representative about that.

By retirement account standards, and at your age, your portfolio is not risky. But the fact that you want to borrow from it to buy a house changes the scope.

TraderStav
May 19, 2006

It feels like I was standing my entire life and I just sat down
Was looking at the reading list in the OP and noticed that several links keep pointing to Random Walk. Was really surprised to see All About Asset Allocation. I used to work for the author at his investment company as a Portfolio Manager. That guy is ALL about proper long term investing and can be highly trusted. Everything he does/says is in the investors real interests and has absolutely ZERO snake oil to sell.

Gonna start skimming this thread since so many people are asking me for my suggestions and well, i'm a trader not an investor!

El Kabong
Apr 14, 2004
-$10
I'm thinking about investing about $15,000 in Vanguard's Total Market Index fund (vtsmx) and read somewhere that an ETF might be a better option because of the relatively low expense ratio, which about half of VTSMX's. My concern is that Vanguards Total Market Index ETF doesn't mirror the mutual fund so I wouldn't be buying into exactly what I want.

Now, I'm not sure if that's true but I spoke to a Vanguard broker on the phone who said that they were similar but that one was more capitalized than the other and some other stuff I didn't quite understand which explained why their prices were not identical. VTSMX is ~$22; ETF is ~$46.

Is there an ETF I can buy that will mirror VTSMX, or am I just confused and the ETF I mentioned does just that? Or... should I just pay the extra .075% and get the mutual fund?

El Kabong fucked around with this message at 21:35 on Oct 20, 2008

80k
Jul 3, 2004

careful!

El Kabong posted:

I'm thinking about investing about $15,000 in Vanguard's Total Market Index fund (vtsmx) and read somewhere that an ETF might be a better option because of the relatively low expense ratio, which about half of VTSMX's. My concern is that Vanguards Total Market Index ETF doesn't mirror the mutual fund so I wouldn't be buying into exactly what I want.

Now, I'm not sure if that's true but I spoke to a Vanguard broker on the phone who said that they were similar but that one was more capitalized than the other and some other stuff I didn't quite understand which explained why their prices were not identical. VTSMX is ~$22; ETF is ~$46.

Is there an ETF I can buy that will mirror VTSMX, or am I just confused and the ETF I mentioned does just that? Or... should I just pay the extra .075% and get the mutual fund?

Vanguard's Total Stock Market ETF (VTI) is just another share class of the corresponding index fund (VTSMX). Vanguard is unique in its way of managing their ETF shares this way.

So yes, you are buying into the exact same basket of stocks whether you buy VTI or VTSMX.

As far as what the Vanguard rep told you, perhaps he meant that the total share class net assets for VTSMX was much higher than the total share class net assets for VTI. But it doesn't matter, since all share classes contribute to the fund's total net assets. I'm not sure why he would have considered it worth pointing out to you.

ETF shares trade on the stock exchange and are subject to bid/ask spreads, brokerage commissions, and discounts/premiums to NAV. VTI is very liquid and should have very small bid/ask spreads. Discounts/premiums usually do not persist for very long as they would create arbitrage opportunities for institutional traders.

In short, if you want an ETF, have confidence that buying VTI allows you to buy into the same basket of stocks as VTSMX.

El Kabong
Apr 14, 2004
-$10
How would I go about figuring out the P/E average of the entire djia?

Dijkstra
May 21, 2002

El Kabong posted:

How would I go about figuring out the P/E average of the entire djia?

The most accurate way is to look here:

http://www.djindexes.com/mdsidx/index.cfm?event=showAvgStats

I believe this is updated monthly so look for it to update Monday or tomorrow afternoon.

Edit: It looks like yahoo quotes updates it monthly too. Eh.

Dijkstra fucked around with this message at 20:05 on Oct 30, 2008

El Kabong
Apr 14, 2004
-$10

Dijkstra posted:

The most accurate way is to look here:

http://www.djindexes.com/mdsidx/index.cfm?event=showAvgStats

I believe this is updated monthly so look for it to update Monday or tomorrow afternoon.

Edit: It looks like yahoo quotes updates it monthly too. Eh.

That's pretty barebones info, and why is it only updated monthly? I'll do some more digging and see if I can find a better source. Thanks for looking, tho.

kys
Dec 8, 2007

Let's run this shit down to sea level!
What would be the best investment when it comes to Buy and Hold? Currently, I have all my Roth IRA in the S&P Index fund and even though its fine now, I'll eventually have to diversify in order to not get hosed.

I've been hearing something about "Life-cycle" funds in the TSP. Basically, as you grow older your investments are taken out of equities and put into bonds, and other securities. Is there anything similiar out there for my Roth?

Ravarek
Apr 25, 2004

Solid gold dipes:
E'ry day I'm hustlin'.

kys posted:

What would be the best investment when it comes to Buy and Hold? Currently, I have all my Roth IRA in the S&P Index fund and even though its fine now, I'll eventually have to diversify in order to not get hosed.

I've been hearing something about "Life-cycle" funds in the TSP. Basically, as you grow older your investments are taken out of equities and put into bonds, and other securities. Is there anything similiar out there for my Roth?

A ton of mutual fund families/brokerages offer life cycle or target retirement funds. I think Vanguard's target retirement funds are probably the "best" because the expense ratios are extraordinarily low (I think 0.22% or something like that). The Target Retirement funds aren't perfect, but they are an excellent choice if you want to put your retirement money on autopilot.

Unormal
Nov 16, 2004

Mod sass? This evening?! But the cakes aren't ready! THE CAKES!
Fun Shoe
If anyone's interested (and has the 25k minimum), Vanguard International Explorer just opened again to non-flagship members. It's a nice mid-cap international fund that's been closed for quite awhile.

The John Bull
Sep 15, 2008

Fucking zombies.
I've been putting money into my 457(b) for about a year and a half now. I saw the bubble and knew it was going to come crashing down eventually (not an economist, just a cynic and a historian), so only allocated about 40% of my contribution to stocks (as opposed to the 70-80% most calculators suggested; I'm in my mid-twenties). As a result, my overall portfolio has only lost about 22% of it's value since everything started falling apart.

My question, I guess, will the portion of my investment in stocks remain a "loss" until the market climbs back up to where it was when I made the bulk of my contributions (12,000+)? I'm not aware of any mechanisms designed to specifically counteract or nullify those sorts of things, other than the fact that I (for example) only lost a tenth of a cent's worth of value when GM's value tanked.

Regardless, I don't plan on adjusting my stock allocation until the market hits mid 5-6000 range, since I think we're going to get there before it's all over.

Don Wrigley
Jun 8, 2006

King O Frod

The John Bull posted:

Regardless, I don't plan on adjusting my stock allocation until the market hits mid 5-6000 range, since I think we're going to get there before it's all over.

The whole idea behind allocation is leaving it the same, in good times and bad, depending on your risk, age, etc.

It makes sense in theory to have more (percentage) exposure to stocks when you think things will be good and less when things are bad, but this is market timing and usually doesn't work out in the investor's favor over the long haul. You could lose out on big returns if you're wrong over the next 2-3 years.

The whole point of allocation is that you ARE increasing your exposure to stocks when they are cheaper (in real terms, not percentage) and the same with other assets. You shouldn't change your asset allocation on a whim for long term investing.

mcpringles
Jan 26, 2004

I haven't maxed out my roth IRA yet. Do you think I should wait until closer to the cut off, or start investing money now?

Rekinom
Jan 26, 2006

~ shady midair gas hustler ~

~ good hair ~

~ colt 45 ~
Question for the esteemed assembly: What is the most effective source of additional income?

This is something that has always fascinated me...basically, getting income from an investment, perhaps from dividends from the market, investing in a small business, or renting out real estate, and letting the check come in every month.

So, as I asked, what would you say the most effective source is? And by effective I mean bang for your buck and ease of breaking into it. For example, renting out a former residence is nice if you can turn a profit, but it involves a rather lengthy start-up. On the flip side, making decent money from dividends involves having a rather large initial investment to get the ball rolling.

Thoughts?

80k
Jul 3, 2004

careful!

Rekinom posted:

Question for the esteemed assembly: What is the most effective source of additional income?

This is something that has always fascinated me...basically, getting income from an investment, perhaps from dividends from the market, investing in a small business, or renting out real estate, and letting the check come in every month.

So, as I asked, what would you say the most effective source is? And by effective I mean bang for your buck and ease of breaking into it. For example, renting out a former residence is nice if you can turn a profit, but it involves a rather lengthy start-up. On the flip side, making decent money from dividends involves having a rather large initial investment to get the ball rolling.

Thoughts?

This is kind of a funny question, because it is precisely the issue that every retiree has to face. And of course you need a large investment to get substantial income from a portfolio... that's why it takes decades to save for retirement.

Best bang for buck if you are of retirement age would be something like an inflation-indexed single life annuity, as it gives you the highest and most stable payout, as well as eliminating longevity risk. Drawback is that your heirs get nothing when you die. Also, you deal with issuer risk, in regards to the solvency of the insurance company. Think of it like purchasing social security benefits.

The most traditional approach is a diverse portfolio of stocks and bonds, with a focus on income producing asset classes like REIT's, dividend-paying blue chips, TIPS, and short-term bonds.

Higher risk and higher return is not desirable for someone that relies on income, as it requires someone to spend defensively. So contrary to many people's logic, a higher risk/return strategy during your drawdown years generally decreases your lifetime standard of living.

nnnotime
Sep 30, 2001

Hesitate, and you will be lost.

Regnevelc posted:

I reallocated my portfolio based on some reading I did online at some websites. I invested more in the Global and International Funds and put money into the small companies. I have until tomorrow at 11:00PM to delete this reallocation and do something else. I had one guy comment that I should just shove all of my money into the 2050 (2045 in my case) fund and let it go. What do people think.

code:
   	   	Asset Allocation  	                        OLD     NEW
	    Target Retirement Fund Income 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2010 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2015 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2020 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2025 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2030 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2035 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2040 	100.00% 	0.00% 	0% 	 
	    Target Retirement Fund 2045 	100.00% 	15.00% 	10% 	 
	    Target Retirement Fund 2050 	100.00% 	0.00% 	0% 	 
	    Balanced Fund 	                100.00% 	0.00% 	0% 	 
  	Stocks 	                                        OLD     NEW
	    Enhanced Equity Index Fund 	100.00% 	0.00% 	0% 	 
	    Large Cap Core Plus Fund 	100.00% 	25.00% 	10% 	 
	    Large Cap Value Fund 	100.00% 	10.00% 	5% 	 
	    Large Cap Growth Fund 	100.00% 	15.00% 	5% 	 
	    Global Equity Fund 	        100.00% 	0.00% 	20% 	 
	    International Equity Fund 	100.00% 	10.00% 	25% 	 
	    Small Cap Core Fund 	100.00% 	5.00% 	5% 	 
	    Small Cap Value Fund 	100.00% 	5.00% 	5% 	 
	    Small Cap Growth Fund 	100.00% 	5.00% 	5% 	 
	    ITT Stock Fund 	         20.00% 	10.00% 	10% 	 
  	Total 	  	                                        100%

Guess this comes a little late, but your allocation should depend on your appetite for risk and your holding period. If you are going long-term and this is a retirement fund then 80% equities/20% fixed income should be OK for now, but as you get older you want to reduce the equities portion to 60% or less, to finally perhaps 20% or no equities at all during retirement. The listing you show above is 90% equities and 10% fixed income I assume?

I don't think you need to spread the money into so many equities funds. If you are going to be that diversified then you are better off holding a few equity index funds if they are available in your 401K plan, since they will have lower tax costs and transaction costs than actively managed funds. Index funds also give you some global exposure, depending on how many of the index-member companies generate revenue from overseas sales. Plus the returns will be easier to track in one or two index funds rather than all the types you have listed.

I have also read that many mutual funds that focus on equities in non-USA markets (from the perspective of a US investor) have become more positively correlated with US equities markets over the years. Assuming that trend continues then you will not gain much diversity benefit from investing in foreign equity funds compared to just staying with funds that invest primarily in US-based companies (if you are a US-based investor), since the US and foreign market prices will move closely together.

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PIPBoy 2000
Oct 29, 2007
I'd be a lot more helpful if my clues button weren't broken.
I'm 23 and considering starting a Roth IRA for myself through Vangaurd. Considering going with a mix of VGSTX and a bond fund initially around 50-50 with this year's max IRA investment, and then dollar-cost averaging myself into more VGSTX and some VEXMX with next year's and ongoing investments. Does this sound like a sound strategy?

I'm seeing a lot of love here for VBMFX, but what about VUSTX, which is a long term treasury fund? could I really go wrong with either of them?

PIPBoy 2000 fucked around with this message at 01:36 on Dec 1, 2008

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