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mcsuede
Dec 30, 2003

Anyone who has a continuous smile on his face conceals a toughness that is almost frightening.
-Greta Garbo

filo posted:

I have a bunch of money sitting in my fidelity cash reserves right now. When do I throw it into mutual funds? I see the market is down substantially today and although I won't need to retire anytime soon, I'd rather not loose a large chunk of my principle by jumping on the rollercoaster when it seems there might be a lot more ups and downs coming soon. I know this is a ridiculously open-ended question and no one can predict the future but I'd be happy to hear your thoughts.

What you're basically saying here is that you have no concept of unrealized vs. realized gains/loss, risk management (specifically as you approach retirement), and the magic of compound interest.

Get that money in, asap! You've already missed out on major gains since early March this year alone! unrealized*




*I am not a financial advisor. But seriously dude, what are you waiting for, a letter from the government telling you everything will be okay?

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Ravarek
Apr 24, 2004

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


filo posted:

I have a bunch of money sitting in my fidelity cash reserves right now. When do I throw it into mutual funds? I see the market is down substantially today and although I won't need to retire anytime soon, I'd rather not loose a large chunk of my principle by jumping on the rollercoaster when it seems there might be a lot more ups and downs coming soon. I know this is a ridiculously open-ended question and no one can predict the future but I'd be happy to hear your thoughts.

Don't try to time the market. As already stated by Unormal, there will always be volatility in the market. There will always be something on the horizon that may cause "a lot more ups and downs." Don't worry about it. Besides, the worst time to invest is when everybody thinks the market is completely safe.

GamingHyena
Jul 25, 2003

Devil's Advocate

I just opened up a Roth IRA, and while I'm waiting for my money to clear (a 7 calendar day hold on deposits? Really?) I figured I'd put together a good portfolio. I've done some research for what retirement portfolios should look like for people my age and have done some market research for these ETFs. However, I don't have tons of experience picking stocks so any suggestions would be helpful.

I went with all ETFs for their low expense ratios and ease of buying/selling versus mutual funds. Plus, since there are tons of ETFs out there I can get exposure to pretty much whatever I want.

Roth IRA:
-Amount: $5,000
-Expected Retirement Date: 2039
-No transaction costs - 25 free trades for the next two months.

quote:

Portfolio
Equities: 60%
35% - Vanguard Total Stock Market - VTI
20% - Vanguard FTSE All-World ex-US ETF - VEU
5% - iShares Dow Jones US Medical Device - IHI

Bonds: 35%
25% - Vanguard Total Bond Market ETF - BND
10% - iShares Barclays TIPS Bond - TIP

Commodities: 5%
5% - United States Oil - USO

Rationale:
Stocks - VTI / VEU are fairly self explanatory. They give me good exposure to a wide variety of national and international companies and both have a low expense ratio. I picked IHI because I think that health care has long term growth potential (especially considering the aging baby boomer demographic) and medical devices are less likely to be subject to regulatory pressures than other areas of the health care sector like managed health care.

Bonds - BND seems like a decent ETF for bonds and I put 10% into TIPS as a hedge against rising inflation that I believe will occur within the next 3-5 years. Plus, in our current deflationary environment the ETF seems relatively cheap.

Commodities - I put 5% into oil in the expectation that oil prices will continue to rise as world economy continues to recover. I picked this over OIL because USO seemed to have better performance over the past few years. Also, for what its worth, Morningstar analysts seemed to agree.

Does anyone have any thoughts on this portfolio? Is my rationale completely off base? Is 60% stocks too conservative for my time frame? I've read the rule of thumb is your bond holding percentage age + 10, in which case I'm actually more aggressive than the rule. I've thought about going as high as 65/30 split for more growth, or switching out oil for a gold or other precious metal ETF. However, from what I've read about how gold historically performs relative to the economy I'm not sure now is a good time to buy.

The Noble Nobbler
Jul 14, 2003

d6 rounds of silence for my homie who passed

Personally, I feel that the idea that you should own more stocks at an early age is a byproduct of the 1980-2008 bull market making everyone gush about equity. I keep a 50/50 split in my retirement accounts between VT/BND and then forget about it.

DuckConference
May 27, 2004



GamingHyena posted:

Commodities - I put 5% into oil in the expectation that oil prices will continue to rise as world economy continues to recover. I picked this over OIL because USO seemed to have better performance over the past few years. Also, for what its worth, Morningstar analysts seemed to agree.

Well oil inventory levels are way up so who the gently caress knows what will be happening short-term, but yes, betting on increasing oil prices over the long term makes a lot of sense. I tried plugging it into google, but I couldn't figure out a way to compare it to the price of WTI, so I'd suggest doing some research to make sure it tracks its index well.

ad infinitum
Oct 10, 2001
All things shining.

GamingHyena posted:

Does anyone have any thoughts on this portfolio? Is my rationale completely off base? Is 60% stocks too conservative for my time frame? I've read the rule of thumb is your bond holding percentage age + 10, in which case I'm actually more aggressive than the rule. I've thought about going as high as 65/30 split for more growth, or switching out oil for a gold or other precious metal ETF. However, from what I've read about how gold historically performs relative to the economy I'm not sure now is a good time to buy.

That looks pretty good for the most part, although I have a couple comments/suggestions.

A 60% equity allocation with a 30 year time horizon does seem on the conservative side, but without knowing anything of your personal situation, and without knowing what your ability, willingness, and need to take risk are, 60% could very well be appropriate.

A 2-to-1 allocation of US to international stocks is fairly high when the US only makes up about 45-50% of the global economy. Personally I would probably go with an allocation with a more even distribution between US/international.

I'm not really a fan of just holding USO for a commodity allocation. Individual commodities can be extremely volatile; you're much better off holding a basket of diversified commodities. There's different funds that do this, but personally I use DBC. DBC still has a sizable allocation to oil, but it also has allocations for aluminum, corn, gold, and wheat.

Finally, this is up to you, but I would probably switch the medical ETF out for a small value ETF. Small value has been shown to outperform the rest of the market over time, and having a small to moderate allocation can improve your risk-adjusted performance over a timespan of 30 years.

SurgicalOntologist
Jun 17, 2004



Does the $3000 minimum at Vanguard apply to the entire account, or to the individual funds? If it's the latter, does that mean I need $20k+ to have a properly diversified portfolio? I have ~ $2k (split about 50/50 between PREIX and PEXMX - not at all diversified, I know) in a T Rowe Price account, and I plan to contribute enough per month, starting in August, to max out a Roth IRA this year (including the $2k). I'd like to open it with Vanguard, but is that feasible? Should I just open it with T Rowe Price and transfer it to Vanguard in a few years?

var1ety
Jul 26, 2004


theDoubleH posted:

Does the $3000 minimum at Vanguard apply to the entire account, or to the individual funds? If it's the latter, does that mean I need $20k+ to have a properly diversified portfolio? I have ~ $2k (split about 50/50 between PREIX and PEXMX - not at all diversified, I know) in a T Rowe Price account, and I plan to contribute enough per month, starting in August, to max out a Roth IRA this year (including the $2k). I'd like to open it with Vanguard, but is that feasible? Should I just open it with T Rowe Price and transfer it to Vanguard in a few years?

The minimum is per fund, so you need a decent chunk of cash to diversify. For a lot of people Vanguard's Target Retirement funds are a good fit as they provide a blend of international/domestic equity and bonds in a single fund. Recently they also opened Vanguard Total World Stock Index (VTWSX) which might be appropriate for a simple bond/equity mix - you'll still need $6,000 to do a 50/50 split, however.

Diseased Yak
Jun 23, 2006

It's only a mild infection...

So the place I've worked for the last 10+ years is facing hard times, and instead of firing people they've given across-the-board pay cuts, and also completely killed off 401k employer matching.

Previously it was matched 50 cents on the dollar up to 6%, all with company stock. Now, there is no matching, but I can freely contribute up to 30% of my pay, all pre-tax.

My question is, would I be better served by reducing my 401k contribution and instead using it to invest in other things, or do the tax benefits of the 401k outweigh anything I could otherwise do with the money?

Note: I'm currently contributing 10% per paycheck, my wife is doing 30%. We are already maximizing Roth IRA contributions.

2nd Note: My company 401k plan doesn't allow for a ton of diversity. It is through T. Rowe Price and features their targeted retirement funds plus about a dozen others, from small cap to bonds. As for our IRA accounts, we have started them out in Vanguard's VTI for now (we maxed contrib last year for the first time)

The Noble Nobbler
Jul 14, 2003

d6 rounds of silence for my homie who passed

Diseased Yak posted:

So the place I've worked for the last 10+ years is facing hard times, and instead of firing people they've given across-the-board pay cuts, and also completely killed off 401k employer matching.

Previously it was matched 50 cents on the dollar up to 6%, all with company stock. Now, there is no matching, but I can freely contribute up to 30% of my pay, all pre-tax.

My question is, would I be better served by reducing my 401k contribution and instead using it to invest in other things, or do the tax benefits of the 401k outweigh anything I could otherwise do with the money?

Note: I'm currently contributing 10% per paycheck, my wife is doing 30%. We are already maximizing Roth IRA contributions.

2nd Note: My company 401k plan doesn't allow for a ton of diversity. It is through T. Rowe Price and features their targeted retirement funds plus about a dozen others, from small cap to bonds. As for our IRA accounts, we have started them out in Vanguard's VTI for now (we maxed contrib last year for the first time)

You're limited in nominal 09 dollars to 15.5k a year, so your wife would need to gross around 50k a year to be able to use that contribution without going over. I'm guessing that's the case, but I just want to make sure you guys didn't make a mistake there.

Is your company publicly traded? If not, can you easily get a price on it's stock? Company stock is risk-laden and a poor investment without a form of hedge that is beyond most people's interest in money. Does your company allow the sale of the stock at any time? Is there any vested interest system? If you can sell the stock and buy another vehicle, I would immediately do it (as in, like now-now)

Are you and your wife's contributions nominally equal in dollar size? If not, considering spreading the burden out equally to avoid any hardship that may result in the case of an unfortunate circumstance (*cough* divorce)

On your IRA choice: VTI is a US domestic equity index, so you're exposing yourself to some non-systemic risk by not diversifying beyond the United States. I do this with VT, but it's somewhat thinly traded and a relatively new vehicle.

The Noble Nobbler fucked around with this message at Jun 28, 2009 around 16:29

mcpringles
Jan 26, 2004



theDoubleH posted:

Does the $3000 minimum at Vanguard apply to the entire account, or to the individual funds? If it's the latter, does that mean I need $20k+ to have a properly diversified portfolio? I have ~ $2k (split about 50/50 between PREIX and PEXMX - not at all diversified, I know) in a T Rowe Price account, and I plan to contribute enough per month, starting in August, to max out a Roth IRA this year (including the $2k). I'd like to open it with Vanguard, but is that feasible? Should I just open it with T Rowe Price and transfer it to Vanguard in a few years?

Last year when I moved to Vanguard I already had $3K with Schwab. I put that plus $5K into one of the target retirement funds. This year I put 3K into international stocks, and 2K into a bond fund (plus transferred 1K from the target retirement). Next year I will probably transfer everything out of my retirement fund and into stock funds.

So yes you can have a diversified portfolio with Vanguard, but it will take a year or two to get it set up with a few funds. Like var1ety said, a target retirement fund is a decent starting place, especially if you aren't yet sure what to do with your money. I think the 2050 fund is 10% Bonds/ 15% International/ 75% US stocks, which isn't my ideal allocation, but with only a few thousand dollars invested, it probably wont make much difference.

Diseased Yak
Jun 23, 2006

It's only a mild infection...

The Noble Nobbler posted:

You're limited in nominal 09 dollars to 15.5k a year, so your wife would need to gross around 50k a year to be able to use that contribution without going over. I'm guessing that's the case, but I just want to make sure you guys didn't make a mistake there.

Is your company publicly traded? If not, can you easily get a price on it's stock? Company stock is risk-laden and a poor investment without a form of hedge that is beyond most people's interest in money. Does your company allow the sale of the stock at any time? Is there any vested interest system? If you can sell the stock and buy another vehicle, I would immediately do it (as in, like now-now)

Are you and your wife's contributions nominally equal in dollar size? If not, considering spreading the burden out equally to avoid any hardship that may result in the case of an unfortunate circumstance (*cough* divorce)

On your IRA choice: VTI is a US domestic equity index, so you're exposing yourself to some non-systemic risk by not diversifying beyond the United States. I do this with VT, but it's somewhat thinly traded and a relatively new vehicle.

Yes, wife does not gross over 50k a year, she's just under, so we are good on the contribution percentage. The company automatically turns off contributions anyway, if you reach your limit.

Company is indeed publicly traded, and I can get rid of the stock at anytime without penalty as long as it's kept inside the 401k and not withdrawn. We have been keeping check on it each month and not letting our exposure to company stock go above 10% of our total 401k. Do you think it would be a wise decision to dump all of that, seeing as how we aren't getting any more via matching?

As for VTI, yeah I know it's not diversified at all, and what you say is indeed great advice that I was already planning on doing myself, i.e. investing in something outside the US. We have just not gotten around to it yet because 2008 was the first year that we've contributed to a Roth IRA account at all. Perhaps when we fully fund 2009 later this year we'll use part or all of it to start doing just that.

EDIT: After reading through this entire thread, I see now what I need to do. Since we just started with VTI last year, this year's IRA funding will go to bonds, probably BND, and perhaps a little in TIPS. I'm too heavy on pure stock. Same goes for my 401k. I don't think I'm comfortable leaving it in TRowe's 2040 TR fund, and instead I'm going to divide mine up between US stocks, Internation stocks (both via TRowe mutual funds, as that's all I have access to) and bonds. The highest expense ratio in that bunch is 0.77, most are .50-.65 or so.

Diseased Yak fucked around with this message at Jun 30, 2009 around 19:07

Insane Totoro
Dec 5, 2005

Take cover!!!
That Totoro has an AR-15!


Alright, I've been told that I should invest in some basic life insurance while I'm still young to "lock in my status as healthy." The reason being that if I don't get a policy now I would have to pay a lot more after a physical if my health deteriorated when I am older?

What are my relatives talking about? So... if I get a physical for the policy now... my health will be locked in as eternally "good?"

Sancho
Jul 18, 2003



The Noble Nobbler posted:

Personally, I feel that the idea that you should own more stocks at an early age is a byproduct of the 1980-2008 bull market making everyone gush about equity. I keep a 50/50 split in my retirement accounts between VT/BND and then forget about it.

I would have to disagree. Asset allocation research goes back to the early 20th century and the average annual return for stocks has been higher than bonds even well before the 80's.

Don Wrigley
Jun 8, 2006

King O Frod

Sancho posted:

I would have to disagree. Asset allocation research goes back to the early 20th century and the average annual return for stocks has been higher than bonds even well before the 80's.

Likewise, I feel that the idea you shouldn't own more stocks at an early age is a byproduct of the 1998 - 2009 bear market making everyone gush about safety.

See how anything can be spinned?

Sid Meier Jr.
Aug 8, 2003



Can't wait until it's time to move all my equity funds to bonds and short-term reserves so I can live in peace. Go outside into the forest and flowers and catch a little bird on my finger and have a squirrel run around my foot.

The Noble Nobbler
Jul 14, 2003

d6 rounds of silence for my homie who passed

Don Wrigley posted:

Likewise, I feel that the idea you shouldn't own more stocks at an early age is a byproduct of the 1998 - 2009 bear market making everyone gush about safety.

See how anything can be spinned?

I can't tell if you disagree with me or not! I'm just challenging the conventional wisdom of stock returns. A book called "Unexpected Returns" contains a nice equity matrix heat map that shows the reality of the past returns given a realistic (ie. human) timeframe for investing.

I'm guessing the 0% real return of equity for as much as 30 years at points would be enough to consider diversification beyond any one asset class. The same probably goes for intermediate bonds, I'm sure.

I don't see asset allocation as a useful thing beyond it's use to build up reasonably reliable correlations (and that's actually an amazingly powerful thing if you make sure you're not extrapolating too much from the data).

My personal portfolio is Gold (GLD), a broad, worldwide, developed and "emerging" equity index (vt), an aggregate of the total bond market (BND), a broader commodity index with tax advantages (DJP), and the real estate market (VNQ) in a ratio of 10%, 30%, 30%, 15%, 15%

DuckConference
May 27, 2004



Here's an asset allocation I was thinking of. I'm canadian, so obviously that changes things a bit.

Equity - 55%
iShares CDN Composite Index Fund (XIC) - 20%
Vanguard Total Stock Market (VTI) - 35%
iShares CDN MSCI EAFE 100% Hedged to CAD Dollars Index Fund (XIN) - 35%
iShares CDN MSCI Emerging Markets Index Fund (XEM) - 10%

Fixed Income - 40%
iShares CDN Real Return Bond Index Fund (XRB) - 30%
iShares CDN Short Bond Index Fund (XSB) - 50%
iShares CDN Corporate Bond Index Fund (XCB) - 20%

Other - 5%
United States Oil Fund LP (USO)

Any thoughts? I'm relatively young, but it also possible that a significant portion of this money could end up as a down payment on property in the next 5-10 years, so I wanted to avoid too much volatility.

TE!
Nov 25, 2003


I LOVE THE LITTLE BOYS OF CATHOLIC!! LOLZ!


LactoseO.D.'d posted:

If you are actually looking for protection, Prudential has a line of particularly attractive variable annuities. You can throw a rider on (highest daily living benefit), that will value the portfolio off its highest historical value. So say you were holding the Nasdaq pre-2000, it'd be valued at the top of the bubble. There is an additional rider that will also guarantee a yearly return of 5%, I think it was 5%.

Completely destroys the downside risk for the layman.

Prudential is able to pay everything out because its payouts are annuitized, and they know that if you hold your money long enough, the 5% return guarantee is essentially meaningless in the face of market performance. There are some costs, namely liquidity. The money is locked up, and the minimum buy in is 25k.

80k and Ravarek, I highly recommend you check this line out (I believe its Apex and something else). We love these things so much we are using them in some qualified accounts.

Jackson National offers a 7%.

var1ety
Jul 26, 2004


SecretFire posted:

Here's an asset allocation I was thinking of. I'm canadian, so obviously that changes things a bit.

Equity - 55%
iShares CDN Composite Index Fund (XIC) - 20%
Vanguard Total Stock Market (VTI) - 35%
iShares CDN MSCI EAFE 100% Hedged to CAD Dollars Index Fund (XIN) - 35%
iShares CDN MSCI Emerging Markets Index Fund (XEM) - 10%

Fixed Income - 40%
iShares CDN Real Return Bond Index Fund (XRB) - 30%
iShares CDN Short Bond Index Fund (XSB) - 50%
iShares CDN Corporate Bond Index Fund (XCB) - 20%

Other - 5%
United States Oil Fund LP (USO)

Any thoughts? I'm relatively young, but it also possible that a significant portion of this money could end up as a down payment on property in the next 5-10 years, so I wanted to avoid too much volatility.

You might want to consider paring your portfolio down to 2-4 tickers if you can, unless you have a decent sized starting portfolio or free trades. Otherwise it will be very hard to rebalance or contribute new money without spending a lot of money on transaction fees.

I do not personally hold any ETFs in my portfolio, so maybe a person that does can add some advice.

DuckConference
May 27, 2004



var1ety posted:

You might want to consider paring your portfolio down to 2-4 tickers if you can, unless you have a decent sized starting portfolio or free trades. Otherwise it will be very hard to rebalance or contribute new money without spending a lot of money on transaction fees.

I do not personally hold any ETFs in my portfolio, so maybe a person that does can add some advice.

Hmm, I had that thought after looking at it. It's not that I'm nuts about ETFs, it's that aside from a couple of TD canada funds, there really isn't a lot of low-cost stuff available that isn't exchange-traded.

Captain von Trapp
Jan 22, 2006

I don't like it, and I'm sorry I ever had anything to do with it.

Quick question: how did corporate bond funds do in the high-inflation period of the 70s? I'm a little worried about stagflation and am looking into bonds as a lower-risk way to keep up with (and hopefully do a little better than) inflation even if stocks decide to tank again.

Hobologist
May 3, 2007


Captain von Trapp posted:

Quick question: how did corporate bond funds do in the high-inflation period of the 70s? I'm a little worried about stagflation and am looking into bonds as a lower-risk way to keep up with (and hopefully do a little better than) inflation even if stocks decide to tank again.

Rising inflation kills most bonds. TIPS pay a fixed percentage above the CPI, so you might start with those.

var1ety
Jul 26, 2004


SecretFire posted:

Hmm, I had that thought after looking at it. It's not that I'm nuts about ETFs, it's that aside from a couple of TD canada funds, there really isn't a lot of low-cost stuff available that isn't exchange-traded.

Bogleheads (a community focused on portfolio management via low-cost index investing) have a sister wiki focusing on Canada called Finiki. Here's a link to its Portfolio Design and Construction page:

http://www.finiki.org/index.php?tit...nd_Construction

The portfolios both on that page and on linked pages are really similar to the one you constructed, except they do not hold USO or Emerging Markets as a separate asset class, and they hold only one Bond fund. You can also consider that VTI is made up of 12.3% Energy companies already, so you may not need or want to have additional exposure to US Oil.

The Canadian Business designed Couch Potato Portfolio (linked on that page) recommends using ETFs if you are going to invest one time per year, otherwise they recommend TD eFunds for traditional mutual fund equivalents.

The Noble Nobbler
Jul 14, 2003

d6 rounds of silence for my homie who passed

Captain von Trapp posted:

Quick question: how did corporate bond funds do in the high-inflation period of the 70s? I'm a little worried about stagflation and am looking into bonds as a lower-risk way to keep up with (and hopefully do a little better than) inflation even if stocks decide to tank again.

Hobologist is right about what he said, but to elaborate a bit more, your longer term bonds will be the most affected by the scenario you're describing, so what you really want is something that is more coincident (in a good way) with inflationary conditions.

variety is also correct in that you have too many funds. I'd personally ditch USO and get a broader commodity index that represents a larger portion of your portfolio. 5% in OIL is just a novelty and won't have any real affect on performance besides frustrating you during rebalancing

Unormal
Nov 16, 2004

Mod sass? This evening?! But the cakes aren't ready! THE CAKES!

The Noble Nobbler posted:

Hobologist is right about what he said, but to elaborate a bit more, your longer term bonds will be the most affected by the scenario you're describing, so what you really want is something that is more coincident (in a good way) with inflationary conditions.

variety is also correct in that you have too many funds. I'd personally ditch USO and get a broader commodity index that represents a larger portion of your portfolio. 5% in OIL is just a novelty and won't have any real affect on performance besides frustrating you during rebalancing

In my opinion, I'd suggest looking into short-term bonds rather than commodities to hedge against inflation. They at least have some sort of return, and track inflation rather well, historically speaking.

DuckConference
May 27, 2004



Thanks for the help, I think I'll probably remove the emerging markets and go down to 2 bond funds. The MERs of TD's e-series are pretty good, but their brokerage is a little bit more expensive ($100/year to stick a little R next to my account? gently caress you TD) than iTrade.

And USO wasn't just from a desire to have commodities exposure, I was specifically looking to invest in oil. It's definitely pretty aggressive for an otherwise passive portfolio, but I'm planning on holding it for the long term (at least 10 years or so). I might change the allocation to 50-40-10, though.

The finiki looks like a good resource, which is good, because a lot of financial sites and blogs tend to be written by Cramer wannabes.

Happydayz
Jan 6, 2001



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.

The Noble Nobbler
Jul 14, 2003

d6 rounds of silence for my homie who passed

Happydayz posted:

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.

OK, so we have around 105k here, 25% cash, 55% money market, and 20% equity. This is a really good conservative savings allocation, honestly, and I can see nothing wrong with it other than a lack of a very mild commodity exposure. I always advocate a little exposure to commodities, but it won't make or break you. Some people disagree with even touching commodities. It can be contentious.

Happydayz posted:

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.

This equity allocation is essentially 40k split into 92% U.S. and 8% international which, to be honest, is pretty bad and exposes you to some unnecessary sovereign risk. I may love this country that I live in, but I don't want to have my retirement resting solely on it's business' performance during the next 30 years. You also don't have any sort of asset allocation in your advantaged accounts, so you're relying on your savings accounts to offset the risk you're taking on here.

Because you plan on using that savings for a large purchase in the future, I wouldn't consider it part of your retirement, so I can only suggest you start blending in fixed income to your IRA's and 401k. You'll get various suggestions on mix, risk, and whatnot. My recommendation is at least 25% in fixed income and at most 75%. Personally, I'm 50/50. If I could (ie. if Vanguard would actually offer good commodity exposure), I'd be 40/40/20.

Maxed out your IRA contributions yet? You have a lot in savings in proportion to your tax advantaged savings. Something to consider.

I hope you found some of this advice useful

SurgicalOntologist
Jun 17, 2004



oops nevermind

SurgicalOntologist fucked around with this message at Jul 17, 2009 around 02:37

dancehall
Sep 28, 2001

You say you want a revolution


Quick question. I have about $15k worth of outstanding student loans at 1.625% interest. Apart from my Roth IRA I have about $20k in savings kicking around. Having just redeemed a CD I'm looking at my options. The interest rate for my loans is low but then so is the rate for most savings options right now. I have no other debt. Should I pay off the loans?

baquerd
Jul 2, 2007

Oh God! to hear the Insect on the leaf pronouncing on the too much life among his hungry brothers in the dust!

dancehall posted:

Quick question. I have about $15k worth of outstanding student loans at 1.625% interest. Apart from my Roth IRA I have about $20k in savings kicking around. Having just redeemed a CD I'm looking at my options. The interest rate for my loans is low but then so is the rate for most savings options right now. I have no other debt. Should I pay off the loans?

Suppose you can find a guaranteed rate for your $20k above 1.625%. This won't be that hard to do even in today's economy. Then, assuming no penalties for delaying payment on the loans, you would be a fool to not invest and pocket the difference.

Tesla Insanely Coil
Jul 23, 2006

Ask me why I'm not squatting.

I am thinking about opening a Roth IRA and need confirmation that my plan is correct.

Work 401k: 8% of my yearly income is work's contribution. This amount doesn't change, so it's not a typical "matching" senario. Also, the money isn't vested until I've worked here 3 years, and I'll probably be quitting after working two years. (I may not be using the terminology correctly)

Since contributing to the 401k isn't a good option, I'm not doing that.

My current income is $1100 pre tax per month. I'll contribute $100 a month to a Roth IRA.

So does that sound okay?

Edit:

I make $1100 every two weeks pre tax. My bad. Thanks to VVVV because it didn't even occur to me that there would be a minimum starting balance.

Tesla Insanely Coil fucked around with this message at Jul 30, 2009 around 15:05

T0MSERV0
Jul 24, 2007

You shouldn't expect to defeat him, he is designed to be a war machine.


Tesla Insanely Coil posted:

I am thinking about opening a Roth IRA and need confirmation that my plan is correct.

Work 401k: 8% of my yearly income is work's contribution. This amount doesn't change, so it's not a typical "matching" senario. Also, the money isn't vested until I've worked here 3 years, and I'll probably be quitting after working two years. (I may not be using the terminology correctly)

Since contributing to the 401k isn't a good option, I'm not doing that.

My current income is $1100 pre tax per month. I'll contribute $100 a month to a Roth IRA.

So does that sound okay?

Since your company isn't matching so much as gifting, this plan sounds great. 3 things to watch out for:

1. With that salary, you shouldn't owe any federal taxes, so make sure you fill out your tax forms appropriately to pay as little taxes as possible.

2. Do you become partially vested as the years go on? If so, you may be able to keep some of the 401(k) money when you leave, so I'd look into it. You'll likely be forced into a roll over situation when you do leave the company, but other than that no worries.

3. Your options will be somewhat limited in terms of Roth IRAs that will take investments that small. Of the big 3 Brokerages, T. Rowe Price would be the place to start. Their accounts have a $1000 minimum, BUT if you sign up for their "automatic asset builder" (which is a minimum contribution of $50/month), they'll let you in for whatever you want to give them to start. Price has a $10/year fee on IRA accounts with balances less than $5000.

There are places other than T. Rowe, but at the least that'll get you going.

Rekinom
Jan 26, 2006

~ shady midair gas hustler ~

~ good hair ~

~ colt 45 ~


Okay, here's the short story -- here's the asset allocation I'm trying to achieve by next year:

40% VFORX (Roth IRA)
25% VWELX
19% VTSMX
9% NAESX
7% 401(k) (50% int'l, 25% small cap, 25% index)

Basically it's built around VFORX with VWELX providing the more conservative side, NAESX and TSP providing the more aggressive side. Basically, I max out the IRA contributions, and put the rest into the bottom 3 at varying percentages. And yes this is assuming a static 10k in emergency fundage.

What say you, finance wizards, is this a decent plan?

Leviathan
Oct 8, 2001

I hear the jury's
still out.. on science.


I have about $20k that I'd like to invest for at least 10 years in a mutual fund/money market fund/some other long-term investment vehicle I don't know about. Can someone tell me about some funds that are appropriate for what I want to do? Preferably I'd like to be able to open it by just doing an online wire transfer.

il serpente cosmico
May 15, 2003

Best five bucks I've ever spend.

Right now I'm investing 10% of my salary into my 401k. I have all of my money in a Bond fund simply because it's earned a pretty stable 5% in the last 10 years. I've looked at all of the equity funds available, and while they've had excellent rates of return in the last 3 months, they've actually lost money over the past 10 years. It's unlikely that I'm going to be at my current place of employment for more than 5 years as I want to advance my education (there's very little room to grow where I'm currently at). Should I put any of my money into the market, or should I just go with a stable return? My 401k has pretty limited options, and none of the market-based funds have done particularly well. I plan on rolling my money into a Roth IRA after I leave. Should I risk putting my money into equities for a few years?

il serpente cosmico fucked around with this message at Aug 3, 2009 around 20:34

80k
Jul 3, 2004

careful!

il serpente cosmico posted:

Right now I'm investing 10% of my salary into my 401k. I have all of my money in a Bond fund simply because it's earned a pretty stable 5% in the last 10 years. I've looked at all of the equity funds available, and while they've had excellent rates of return in the last 3 months, they've actually lost money over the past 10 years. It's unlikely that I'm going to be at my current place of employment for more than 5 years as I want to advance my education (there's very little room to grow where I'm currently at). Should I put any of my money into the market, or should I just go with a stable return? My 401k has pretty limited options, and none of the market-based funds have done particularly well. I plan on rolling my money into a Roth IRA after I leave. Should I risk putting my money into equities for a few years?

When you roll over to an IRA, you can invest in similar equity funds. Unless the transfer of assets gets botched up, it should be a smooth transition with minimal time out of the market. So just because you don't plan to stay at the company long, doesn't affect your intended investing timeframe. .

Check your fund options and look at their expense ratios. If you don't see anything good, re-evaluate (based on company matching, if any) whether you should be contributing to the 401k or in an IRA (assuming you haven't already maxed out your IRA).

Determine your asset allocation (stock/bond ratio) first. Then see how your 401k/IRA/taxable account options work best in terms of cost and tax considerations. Example: my 401k equity options suck, so I put everything into stable value (the least bad option in my plan). But I make up for it by taking mostly equity risk in my Roth IRA.

Happydayz
Jan 6, 2001



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 Aug 3, 2009 around 22:32

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Unormal
Nov 16, 2004

Mod sass? This evening?! But the cakes aren't ready! THE CAKES!

Happydayz posted:

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.

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.

Unormal fucked around with this message at Aug 4, 2009 around 02:51

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