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gently caress. I'm so tempted to cash out the equities in my long term accounts (Roth IRA/401(k) and just go into straight asset protection right now. I think Monday is going to be pretty bloody. My plan right now is to wait for a rally to sell into and then park my money someplace safe for the next year. Intellectually I know that after being down 20% from the peak I should sit things through and not realize my losses, but drat I don't see things improving anytime soon
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Jul 13, 2008 21:17
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Here's my situation: By October I'll have around $135k sitting around. Broken down as follows: Taxable accounts: -$40k in a 4.25% CD that matures in October. New rate on offer is around 1.5% -$10k in a CD-type account that will mature in October as well. -$25k in a Vanguard Life Strategy Growth Fund (VASGX) -$6k Vanguard Prime Money Market Fund ~$20-25k from salary and other pay that will come in by October. Tax-advantaged accounts: -$25k in a Roth IRA that is entirely in the Vanguard S&P 500 index -$15k in a 401(k) - entirely stocks - 50% S&P index, 30% broad based US market index, 20% international index As you can see there is no coherent strategy going on here and I'm fairly exposed to the market. By Spring 2011 I should have around $200-230k saved. This current trend of bringing in bucket loads of cash isn't going to continue (hopefully) past 2011. Both of my large pots of money, the $135k I have now and the $200k I expect by 2011, are tied to a heavy deployment cycle that I'm in. So I'm currently cashing in on having no expenses and no taxes to pay. After this I expect to settle in the 25-28% tax bracket. I'm confident in both of my projected savings and for the purposes here am taking them as givens. The only near-mid term expense that I can see is purchasing a home for myself. However this won't happen until Spring 2011 at the earliest. I'm single, not in a long term relationship, and likely won't be anytime soon with the 1-2 deployments ahead of me over the next 2-3 years. A home purchase for me is probably in the 4-7 year window - however it's hard to pin an exact timeframe on this. In the area that I live I would need about $100k on hand for a downpayment and other misc costs associated with purchasing a home. As you can see I don't have a coherent financial strategy right now. My current plan is to hold off on any decisions until I return back to the US in a few months. At this point I'll consolidate what I have into Vanguard and spend the $250 for a financial review and get some professional advice on what my allocations should be. Question 1) What I would appreciate having is someone's initial thoughts of how my money should be allocated - both the $135k now and the projected $200-230k when I get there. That would at least get me started on what I need to look at so that I don't go in blind with the Vanguard advisor. I'm initial thought is to keep it in a target retirement fund, however that just seems too easy. Question 2) I'd also like some advice on what to do with my money now before I get a chance to see an advisor. I have $50k split between the Vanguard Growth Fund and Market Index, plus $6k sitting in the Vanguard Prime Money Market account. I'm tempted to just keep everything in place for now.
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Jul 15, 2009 21:12
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Ok, still working out my long term asset allocation. Right now I'm bullish on stocks over the long term - thinking only 10% total in bonds. Will probably re-balance after the market returns to its previous high. However for now I intend to go big on equities given that they are at historic sale prices. -65% Vanguard Total Stock Market Index Fund -25% Vanguard Total International Stock Index Fund -10% Vanguard Total Bond Market Index Fund I'm tempted to split it off to get exposure to energy and commodities: -60% Total stock market index -20% international stock index -10% bond index -5-10% split between Precious metals/mining + energy. But I'm probably going to stick with having the three core vanguard funds (total US, total international, total bond) being the core of my portfolio. Might portion off 5-10% of my portfolio for misc activity - either individual stocks or a specific sector. Is this too simplistic? Should I try to specifically diversify with small and mid-cap indexes? Maybe further diversify with an REIT? Happydayz fucked around with this message at 23:32 on Aug 3, 2009 |
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Aug 3, 2009 23:16
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Unormal posted:I wouldn't "rebalance" by changing my allocation at any given market point. Instead (and what 'rebalancing' "really" means) go ahead pick a less agressive allocation NOW, and stick with it for the long haul (like, say, 60/40, 50/50 or whatever), and invest that way. If the market goes back to it's previous highs you'll be 70/30 or 80/20, or whatever, but if you keep automatically rebalancing, you've accomplished your goal stated above, but without the emotional component of market timing. Magic of rebalancing. If I have a desired allocation I don't see why I should wait for to get there over a 5-8 year time period as opposed to moving toward it now. Assuming the decision is made as to the desired allocation, waiting 5-8 years would simply mean putting off 15-23% of my years to compound interest in a suboptimal allocation. At this point the only costs I would incur with getting to my desired allocation over the short term is about $2-3k worth of capital gains. Largely irrelevant, especially with most of this tax year having been spent in Iraq and therefore tax free. Still working on my desired allocation though. Right now I'm considering how many asset classes I want in the portfolio. Here's my current working model: In taxable accounts: 45% in US domestic equities index (Vanguard Total Stock Market Index) 20% in Int'l Index (FSTE All World Market Minus US) 5% in Precious Metals + Mining Tax Advantaged: 10% in REIT 20% in Bond Index (Total Bond Fund modeled after Barclay's Aggregate Bond Index) I'm still iffy on whether I want to add a small commodities stake in my portfolio and if a REIT in this point in time is a good idea. I'm sympathetic toward a buy + hold, index fund oriented investment strategy. However I really do think that our current real estate meltdown, and the coming commercial real estate implosion, will be events outside a standard deviation or two over historic US norms. I'd rather sit this one out and try to time the market, even given by overal buy+hold strategy. My other question is what to do with my access to the TSP G fund. http://www.tsp.gov/rates/fundsheet-gfund.pdf Basically it provides monthly returns based on medium to long term Treasury securities. In other words I get long term bond yields with short-term accessibility. The yields are slightly less than a total bond index, however the government also guarantees the principle. Also wondering if I should add some TIPS to further diversify and add a hedge against inflation. Thinking of swapping the 5% in precious metals + mining with the G fund or TIPS. Would change my asset allocation with respect to equities:fixed income, however I'd at least be holding assets that appreciate and should not be too correlated to the rest of my portfolio Happydayz fucked around with this message at 22:50 on Aug 6, 2009 |
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Aug 6, 2009 22:45
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80k posted:Happydayz, I'm trying to work out this rationale in my head A broad bond index has historically outperformed the G fund. Granted, only by a percentage or so, but logically an aggregate bond index with exposure to commercial debt should offer higher yields than long-term treasury securities. I understand the point of minimizing the risk - is it worth trading a guaranteed principle and long term treasury rates for just one percent? Especially now with interest rates being so low. However this is a long term portfolio with a 35 year horizon, so over the long run an aggregate bond index should outperform the G fund. Again, the question is whether the increased return is worth the risk. However with only 20% of my portfolio in fixed income I already have a demonstrated appetite for risk taking. edit: I'm also having trouble understanding why the split between TIPS and G fund. Why is that kind of inflation hedge necessary? Since the G fund's return is calculated anew every month there should already be an inflation hedge in the G fund. Or am I on crack? Happydayz fucked around with this message at 23:10 on Aug 6, 2009 |
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Aug 6, 2009 23:08
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how do people feel about REIT's in a long term portfolio? Right now I'm thinking of having my asset allocation be 70% equities. I'm split between two choices for the remaining 30%. Having the last 30% be entirely fixed income (total bond index + TSP G fund), or 20% fixed income and 10% REITS. My problem with REITS is that I feel that they are still overvalued right now. There was a shakeout with residential real estate, but I suspect that commercial is still inflated. Also think that we have yet to reach bottom. So even though I'd like a 10% REITS for my portfolio eventually, I'm still hesitant to buy into REITS at this point. I'm especially hesitant because of the recent run-up in the price of REITS. If they were still at their low point I'd make the purchase, but I have a hard time shaking the belief that they are overvalued right now
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Aug 13, 2009 21:52
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Unormal posted:One thing to note about REITs is that they are incredibly tax-inefficent, similar to high-yield bonds. I wouldn't consider investing in them unless I had a sizable amount to allocate to them in a tax-sheltered account (IRA/401k). I could stash my desired 10% REIT allocation into a tax sheltered account and be fine. I'll have a large amount of my allocation in a taxable account that I'll keep in a tax efficient stock index. So the tax issues aren't a worry. Definitely tracking the exposure to real estate that comes with home ownership. But that doesn't capture commercial real estate or even residential real estate in other markets. What I'm really attracted to with REITS is how uncorrelated they've historically been with the stock market. For whatever reason I feel like I should try get some more diversification above and beyond just equities and fixed income - even if I already have built-in diversification there caused by keeping the money in total stock market indexes and an aggregate bond index.
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Aug 13, 2009 23:16
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concerned parent of three posted:Can someone critique my investment elections in my 401k? I am 22 years old, currently putting in 6% of salary in to 401k(company matches 50% up to 6% of salary.) I will be upping the contribution to 10% starting next pay period. you're missing one extremely important thing - the expense ratios of each of those funds. You might have a broad-based index there mixed in with a lot of actively managed funds. In that case I'd take the index rather than eating a 1% fee or so on the other funds quote:Keep in mind that Vanguard going bankrupt/out-of-business actually isn't a risk, because the fund is essentially separate. The only thing that would change in that event is that management of the fund would likely go to another company. Of course, this doesn't apply if you're using ETNs, which are subject to the risk of default of the issuing company. each fund is a separate entity. There is no specific systemic risk tied to individual funds being under the vanguard framework. Happydayz fucked around with this message at 06:49 on Sep 13, 2009 |
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Sep 13, 2009 06:45
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Tortilla Maker posted:The governments L2040 fund is broken down as: That's not a bad breakdown. Personally if I was holding equities I would want it to reflect the total global equities market - so it would be around 70% US domestic stocks and 30% international. My problem with the TSP is that it isn't as broad based as I would like. The int'l index only really tracks developed countries - I have no exposure to the developing world. The C fund (S&P 500) is great, but I would prefer an index for the entire US market. You can do this by purchasing the small cap TSP fund and use it to complete the S&P500, but this is a pain in the rear end. The real star of the TSP is the G fund. Like you mentioned it is only available to TSP participants and some government entities (the social security trust fund is in the G fund). The G fund is basically free money for its participants. It is essentially a short-term bond that provides long term yields. It's yield is tied to the average of outstanding US treasuries which works out to a 9 year maturity. However the G fund resets itself every day I think (or if not every day than incredibly often). So it is basically a short term bond that guarantees long term yields. Again, free money. If you want to have any fixed income exposure and have access to the G fund you would almost be better off ignoring commercial fixed income and putting it all into the G fund. You will lose out on some possible future growth as the US Treasury can borrow far more cheaply than a US company. However there will be zero default risk and reducing your portfolio's risk is one of the main reasons that people hold bonds
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Oct 12, 2009 08:58
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Could use a hand on I-bonds, still a little fuzzy despite reading through the IRS website So the interest rate consists of 2 parts, a fixed rate and a rate tied to inflation. If I purchase an I-bond then I will always get that fixed rate until I decide to cash it in. And the variable rate will match the CPI so I won't lose out on inflation. Right now the fixed rate for I bonds is 0.30% So purchasing an I-bond means that I will only get .3% growth above inflation for the amount that I put in. This sounds incredibly loving lovely. Granted, it is a great inflation hedge and a safe investment, but drat that is low. I was thinking of I-bonds for 2 reasons: 1) looked like a decent place to stash some portion of my emergency reserves. It is highly liquid and the early withdrawal penalties aren't stiff. However unlike putting it in a CD or high interest savings account, the I-bond is tax efficient 2) for my parents who are retiring and are interested in income preservation. The yield on the I-bond seems low compared to the current TIPS yield. Tax considerations won't be a big deal for them in retirement so the tax inefficiency with TIPS is less of a concern.
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Dec 30, 2009 07:04
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That confirms my suspicion of the low I-bond rate. The Vanguard Limited Term Tax Exempt bonds do look appealing. Right now my emergency fund is in an ING account. I can deal with the low rate given the market, but my main concern was paying taxes on it. I'm set for some serious overtime in 2010 that will bump me up one, possibly even two, tax brackets. My only concern with bonds right now are the expected increases in the Fed interest rates. Am I correct in thinking that since these are short-term bonds that this will not be much of an issue?
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Dec 30, 2009 08:27
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80k posted:That fund has, if I recall correctly, a 2-2.5 yr duration. So there will be some sensitivity to interest rate hikes. For an immediate emergency fund, I'd stick with shorter term CD's or savings account. If this is an extended emergency fund or possible future downpayment for a home, then the muni fund is good. For a 1-3 yr holding period, I am not very worried about putting money in that fund, and is in fact, what I am doing right now. Yeah the money is a mix of emergency fund / home downpayment. I'll probably keep 3 months expenses in the online savings account and shift the rest to the muni fund. Thanks for the tip. Another question: my parents are planning for their retirement right now. They have a chunk of their nest egg that they know they won't need until around 10 years down the road. The exception might be for catastrophic medical coverage. Their tax rate will be low so tax concerns are not a big concern. Right now this money is in CD's and they are setting up a CD ladder. However my other thought was to put it into a mix of 5 and 10 year TIPs. The main concern for this money is preservation and inflation protection. Appreciation is nice, but not necessary. Wondering if TIPs is the optimal strategy or to stick with CD's. I-Bonds are another alternative for a short hold, with the added bonus that they seem more liquid then the alternatives once you pass the 1 and 5 year marks.
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Dec 30, 2009 19:12
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Ravarek posted:Hey 80k, I've been going back and forth on this myself. I would like some REIT exposure, however if you hold the Vanguard Total Stock Market Index you already have around 2.5% of that in REITs. So anything over that is tilting your exposure toward REIT's above and beyond what their market share is
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Jan 1, 2010 21:22
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Worked out what my long term retirement asset allocation is. Out of 100% quote:Taxable Account Roughly works out to 70% equities (60-40 US-Int'l split), and 30% fixed income Elsewhere I have 3 months income in emergency reserves, and another pot of money in the Vanguard Limited-Term Tax Exempt Bond Fund for a possible future home down payment. Future contributions will come from TSP / 401(k) contributions and annual Roth IRA contributions. These contributions will reflect my desired allocation. Things are kind of screwy right now because I had to jigger things around to maximize tax efficiency as well as tap into the G fund. Don't predict putting anything else into a taxable long-term account. Only two uncertain things on my end; the bond allocation and the equity split. For bonds - I really like the G fund. Principal is guaranteed, interest rate adjusts on a monthly basis, and it yields about what a 9-10 year Treasury gives. The 10% in the Total Bond index is because I wanted a 30% bond allocation but only had enough room in my TSP for 20%. Not sure what to do with this 10% TBM stake for the long term. Future bond contributions will likely all be in the G fund. But I have this gut feeling that I should still hold some corporate issued bonds instead of just Treasuries, even if I am getting a great deal. If I decide for all G fund I am not sure if I should keep the TBM holding and let it shrink as a percentage of my portfolio, or actively swap it out for G fund holdings as my TSP portfolio grows (could make this swap happen with 6 additional months of TSP contributions). As for equity stake - I am tilted toward the US domestic market. Since the global equity split is 40% US / 60% international, I should hold a 40-60 split instead of 60-40 if I wanted to reflect the market. Still undecided about whether I want to tilt toward the US or not, or perhaps split difference with a 50-50 allocation. If I do change to a 50-50 or 40-60 allocation I would probably do a gradual change through TSP contributions rather then sell domestic stocks for international ones. This is mainly to avoid paying capital gains as this exchange would have to occur from within my taxable account. I'm tempted to diversify further with some REITs or a commodity fund, but I already have market-weighted exposure due to my holding the Total Stock Market Index. For what it's worth - I'm going to pay the money and get CFP assistance through Vanguard before I make this move. But I wanted to sound it out here first
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Jan 2, 2010 02:11
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80k posted:I would prioritize FTSE All World Ex-US Stock Index in taxable so you can fully claim the foreign tax credit. Move a portion of domestic stocks into your Roth instead. I thought of that. My concern is having to pay capital gains. Most of the shares were purchased when the Dow was around 8500. Capital gains would be about 3.5% of the total value. I wasn't sure how valuable the foreign tax credit was, and whether ~35 years of slightly increased tax efficiency outweighed taking a 3.5% haircut today.
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Jan 2, 2010 07:42
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I just found out that my income for the 2010 tax year is going to increase by around 250% due to the need to work considerable overtime. I'm working through the tax consequences of this and trying to mitigate some of the ill effects. The two steps that I've identified are to max out my 401(k) contribution for the year and considering putting my IRA contribution into a regular IRA vs Roth IRA. Still undecided on this because I'm worried about long term income tax rates. Are there any other tax mitigation strategies that I can easily employ for someone who normally takes the standard deduction?
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Jan 23, 2010 16:42
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I just signed up for a High Deductible Health Plan with a linked Health Savings Account. The insurer puts $750/yr into my HSA and I plan on maxing out my individual contribution for a total of around $3k a year. I'm expecting few if any out of pocket health care costs for the forseeable future and would probably take care of any unexpected health expenses by tapping my taxable savings account instead of my tax-advantaged HSA. So the moral of the story is that this money is basically for the long haul. My question is how should I treat the HSA as an investment. Since it's also a long time horizon should I just treat it as another 401(k) or IRA equivalent and use my current asset allocation of 70% equities / 30% fixed income? Or since it is really supposedly money to be set aside for health expenses should I do a more conservative allocation? I'm leaning towards a conservative approach with many 20-30% fixed income and the rest in equities. But I am open to suggestions.
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Mar 28, 2010 06:33
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TSP is incredible and you can borrow against it. It's the same as any 401(k) with regards to restrictions - you can for example withdraw from it to fund education or a downpayment. Additionally it is also tax advantaged and comes off the top from your marginal rate. This in and of itself is free money vice trying to save by yourself into a straight taxable account. Finally - the expense ratios are substantially lower, this is no small thing, and it has access to the G fund which is in essence free money; a medium/long term bond fund with 1-day duration.
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May 8, 2011 00:32
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Ugh. All this talk of a softening market reminded me that I hadn't rebalanced my portfolio in while. My planned asset allocation is 70% stocks, 30% bonds. Just checked in and saw that my stock allocation had crept up to 81% stocks, 19% bonds. Probably hadn't rebalanced since the Dow was around 9,000. Wish I would have done this last week - but I'm glad I at least caught my asset allocation being that out of whack and did something before the market corrected it for me.
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Jun 3, 2011 19:30
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Our Gay Apparel posted:Over the next few years, I'm going to be working overseas and putting about ~$100k/year into savings for retirement (or buying a house cash when the market finally bottoms). I'm 23, just getting out of the military, and haven't started any retirement planning yet. What's the best way to go about this, and how do I minimize tax exposure? I'm pretty well-versed in arcane structured finance, but I know nothing else at all. does all the money need to be reachable? Or is some truly destined for retirement? Some ways to limit tax exposure are maxing out your 401(k), maxing out a traditional IRA, and contributing to a HSA. Right there you can shelter $16,5000 + $5,000 + $2,000 from Uncle Sam for a grand total of $23,500. So that's almost a quarter of that protected with some protection from taxes The rest depends on your timeframe and what sort of risk/reward timeframe you are looking at. If you are trying to get some appreciation and ok with risk - you can put the money into a taxable account that is relatively tax efficient. In other words, put it in a broad based index fund like the S&P 500 that incurs relatively little in the way of tax inefficiencies (although you will still pay capital gains). Or, if your risk appetite is low, you can put it into a tax-exempt bond fund for whatever duration you are looking at. Here is a good run down on tax efficiency. http://www.bogleheads.org/wiki/Principles_of_Tax-Efficient_Fund_Placement edit: one good thing about a Health Savings Account is that it is a super investment vehicle that combines the benefits of both a traditional and a Roth IRA. In other words - you can contribute pre-tax income into it and you do not have to pay any capital gains. The downside is that you have to use the money for health related expenditures. But if it is truly for retirement purposes you can leave that $2,000 for decades and then start tapping it when you are older and KNOW that you will have recurring medical expenses. So as a savings vehicle a HSA is incredible. Happydayz fucked around with this message at 05:46 on Jun 4, 2011 |
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Jun 4, 2011 05:40
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Ulf posted:If you are in your 20s and have money to invest then I don't think I can express what a lucky thing this recession is for you and how much you stand to benefit from it. assuming you, your family, and anyone else you are financially linked to, has a job and can keep it long enough for this to ride out.
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Aug 8, 2011 21:10
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Secret Sweater posted:How old are you ulf? That's a rather large portion to be in bonds if you're the average age of an SA user. As an aside - I'm 30 and have about a 30% allocation in bonds. There is pretty solid evidence out there that holding at least a 20% bond allocation does little to cap your potential equities upside, BUT does a significant amount to reduce your volatility. I forgot the exact number and breakdown so don't take these numbers at heart, but the logic is something akin to holding a small portion of bonds will reduce potential gains by X%, but reduce volatility by 2X. Again, I'll have to recheck to get the exact numbers, but at small allocations (between 10-30%) holding that bond allocation does very little to alter your long-term potential gains, but has a huge outsized influence on reducing your portfolio's volatility. So yes, while going 100% equities has greater potential upside, it essentially leaves money on the table by not trading a small portion of potential upside for significantly reduced risk Happydayz fucked around with this message at 23:29 on Oct 1, 2011 |
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Oct 1, 2011 03:26
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