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Hello, The situation is that I max out my contributions for my Roth IRA and my 401k and want to invest more of my money. I have tens of thousands of dollars sitting around in my bank account. I don't like to spend money on much but maybe there is something in the longer term that I want to get. So it looks like the next step is a taxable account if I've maxed out my 401k and Roth IRA contributions. I read the Four Pillars and think I understand but the book is also 13 years old and there have been some changes. The author points this out as much at the end of the book. So my question: 1) http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement For the diagram "Approximate Tax Efficiency Ranking for Major Asset Classes", is this diagram still valid? So in other words, if I want to have a taxable account, I should look into the more tax efficient types of assets. 2) For my Roth IRA, I have the money in the Vanguard 2045 retirement fund. In light of the above, is it still a good idea to have those types of funds instead of more tax-inefficient assets? I have no idea what is in my 401k, which is something I will be resolving in the next few days. 3) If I were to go with taxable accounts, is Vanguard the best bet? The author of the Four Pillars seemed to speak of them highly for their low fees. Plus I already have an account with them. 4) Bogleheads also discussed the multi-tiered emergency funds. I figured out how much I'd need for three years. Just in case it takes a little more time than usual to get another job. Does anyone else do this? Some of the interest rates on these things that the page discusses (like CDs) are so low that it seems better to put it in an online savings account like Ally. I obviously have more reading to do but any direction is helpful. Thank you The Experiment fucked around with this message at 01:01 on Nov 24, 2014 |
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Nov 24, 2014 00:57
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The Experiment posted:Hello, 1) Yes it's another important part of portfolio creation, basically for taxable account focus on low yield equities, low yield bond or tax free muni bonds. For retirement accounts it's okay to use higher yield investments like REITs or emerging world bonds since the account is shielded from taxes 2) Tax efficiency mainly applies to deciding which assets work best for taxable or non-taxable accounts. Vanguard target funds are really good option for a retirement account if you want a easy investment. 3) There are lots of options out there from robo-advisors(Betterment/Wealthfront), for low expense ratio Vanguard is best right now overall IMO. For lazy investing go for the 3 fund options, A US total stock market ETF(VTI), rest of world fund ETF(VXUS) and bond ETF(BND) 4) For real liquid savings accounts like CDs the best you can do right now is around 1%, some people go for other options like I-bonds.
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Nov 24, 2014 04:14
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I have had a sizable investment in a Natural Gas/Coal mining and exploration company for ~20 years, and it has done quite well for me long term. However, I do not believe that it is a market that is sustainable long term, nor something I can continue to invest in morally. My basic goal is to slowly divest from it over the course of a number of years, and possibly reinvest in a 'Green' Mutual Fund of some sort. Is there any way I can do this that will minimize my capital gains?
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Nov 24, 2014 15:20
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ScaerCroe posted:I have had a sizable investment in a Natural Gas/Coal mining and exploration company for ~20 years, and it has done quite well for me long term. However, I do not believe that it is a market that is sustainable long term, nor something I can continue to invest in morally. My basic goal is to slowly divest from it over the course of a number of years, and possibly reinvest in a 'Green' Mutual Fund of some sort. Vanguard has the VSTFX fund if you agree enough with their screening criteria. You could also think about just a straight index fund, which is going to give you some exposure to these companies but only as a fraction of the total market. Either case is going to be more diversified than your holdings in a single company, which is going to be a win for your financial security.
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Nov 24, 2014 15:45
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It's a tax problem and it depends on a lot of other details about your finances. Some approaches: attend to the cost basis of specific shares and be strategic about which you sell; offset gains with losses. Regarding the "green" mutual funds, in my opinion they are all bullshit. The most likely outcome of using them is that you will pay higher fees while not actually succeeding in addressing whatever your "green" goals are. At least look carefully at what such a fund is actually doing before you buy it.
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Nov 24, 2014 16:02
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etalian posted:On a side the importance of picking ETFs below: This is a joke right? You know you fudged the dates to get this data right? I could easily flip this. On a flat past 10 years the S&P beats it.
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Nov 24, 2014 21:18
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The point of that should be that you would expect to earn a higher return over time if your investments contain small and mid cap equities, which makes sense because they are riskier than large cap.
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Nov 24, 2014 22:29
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Dustoph posted:This is a joke right? You know you fudged the dates to get this data right? I could easily flip this. On a flat past 10 years the S&P beats it. IVV - 1/1/14-1/1/14 = $20,310 IWV - 1/1/14-1/1/14 = $21,067 On my phone so no pretty pictures. You can check it out on Morningstar tho. I am going to change my non-401k 500 holdings to either a Russell 3k or VTI index when I rebalance.
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Nov 24, 2014 23:03
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ScaerCroe posted:I have had a sizable investment in a Natural Gas/Coal mining and exploration company for ~20 years, and it has done quite well for me long term. However, I do not believe that it is a market that is sustainable long term, nor something I can continue to invest in morally. My basic goal is to slowly divest from it over the course of a number of years, and possibly reinvest in a 'Green' Mutual Fund of some sort. The most common option is to sell some loser stocks so your net capital gain is kept small. Since you held the energy stocks for some time you will get the long term flat capital tax rate of 15%. SiGmA_X posted:While he didn't pick the same start dates, you're incorrect. The Russell 3k index (IWV) outperformed the S&P500 (IVV). Yes there's a good reason why robo-advisors tend to pick total stock market funds like VTI or ITOT. Since they include more possible equity they have a slightly better long term return than a simple S&P 500 fund. It's mainly due to how smaller cap companies have a better return over time, albeit with more risk and volatility.  You could always pick a mix of additional small/mids but once again it's easier to just use a comprehensive total stock market index that effectively grabs all possible caps. etalian fucked around with this message at 00:58 on Nov 25, 2014 |
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Nov 25, 2014 00:28
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ScaerCroe posted:I have had a sizable investment in a Natural Gas/Coal mining and exploration company for ~20 years, and it has done quite well for me long term. However, I do not believe that it is a market that is sustainable long term, nor something I can continue to invest in morally. My basic goal is to slowly divest from it over the course of a number of years, and possibly reinvest in a 'Green' Mutual Fund of some sort. Well, you can die and the beneficiaries of your estate will get a basis increase. I'm sure you can find someone to help make it look like an accident. On a serious note, given that we are nearly in December, there are great opportunities to spread the gain over two years by selling half in December and half in January. Spreading over more years opens up to diminishing marginal returns from the longer spread and increased risk that the company's stock price may tank before you can diversify your position.
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Nov 25, 2014 01:10
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You can also donate stock to charity for a deduction at market value. Of course I would just eat the tax and focus on diversifying the net profit.
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Nov 25, 2014 01:17
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Is the oil/gas company an MLP or a common stock? If it's an MLP, be careful of the reduction in cost basis over the years. You might be on the hook for tax on a lot more "gain" than you thought.
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Nov 25, 2014 01:17
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Anybody have issues with Vanguard accounts not updating in Mint? For the last 4 days, both my account and my wife's account have been unable to sync, despite being able to log into Vanguard directly with the same info.
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Nov 25, 2014 04:27
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Peanut3141 posted:Anybody have issues with Vanguard accounts not updating in Mint? For the last 4 days, both my account and my wife's account have been unable to sync, despite being able to log into Vanguard directly with the same info. Same here. Mint has issues like this occasionally. A month or two ago they had the same problem with USAA and it took like 1.5 weeks before they fixed it.
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Nov 25, 2014 05:37
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Deep 13 posted:Vanguard has the VSTFX fund if you agree enough with their screening criteria. You could also think about just a straight index fund, which is going to give you some exposure to these companies but only as a fraction of the total market. Thanks for the tip. I really do want to diversify. slap me silly posted:It's a tax problem and it depends on a lot of other details about your finances. Some approaches: attend to the cost basis of specific shares and be strategic about which you sell; offset gains with losses. I will be sure to do some homework on that, thanks for the tip. Fortunately or Unfortunately, I haven't had any losses this year, but I will keep this in mind for future investments Missing Donut posted:On a serious note, given that we are nearly in December, there are great opportunities to spread the gain over two years by selling half in December and half in January. Spreading over more years opens up to diminishing marginal returns from the longer spread and increased risk that the company's stock price may tank before you can diversify your position. Another interesting idea. Thanks for the help!
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Nov 25, 2014 15:16
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Peanut3141 posted:Anybody have issues with Vanguard accounts not updating in Mint? For the last 4 days, both my account and my wife's account have been unable to sync, despite being able to log into Vanguard directly with the same info. Mint is pulling vanguard for me just fine now, but it was basically broken between september and the beginning of this month. It used to pull but say my portfolio value was like $0.02, though the mobile app would display the correct values for some reason 
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Nov 25, 2014 19:56
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In less than a month, I will receive a promotion and a very substantial raise at work. Though I've been with the company for over a year, I will now qualify for benefits. My new benefits package includes several things I've never had before in my life: -401K with contribution matching -Bonuses, twice a year -RSUs -Stock purchasing discounts All of that together, the extra money I'm about to make could total up to $15-20,000 over the course of the next year. As I'm already living within my means, this is surplus dough. One long-term goal of mine is to own a house under my name—and only my name. I want to own this house so hard that nobody can ever take it from me. Sorry, future wife.  Questions 1. Does the contribution matching on my 401K count toward the maximum yearly contribution? Or does that $17,500 come from my pocket? 2. Does it make more sense to first pay off my very low-interest car loan (will take three months to finish), or to instead take a chunk out of my high-interest Federal student loan (will take 5-8 years to finish)? 3. Besides a 401K, where else can I put money where it will grow? CDs? Particular stocks? Nigerian princes? Raimundus fucked around with this message at 23:58 on Nov 25, 2014 |
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Nov 25, 2014 23:49
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Raimundus posted:
1. Employer contribution does not count toward the $17.5k limit. You can contribute $17.5k and your employer match is on top of that. FYI, this limit is $18k in 2015. 2. If paying off the car loan makes you feel better and will only take 3 months, then it is not a terrible idea to do so. However, generally it is recommended to pay off higher interest loans first as that will save you interest paid in the long term. 3. Read the OP. A Roth IRA and HSA (if applicable) are additional tax advantaged accounts that are good ideas.
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Nov 26, 2014 00:04
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Raimundus posted:Questions 1. The $17,500 is your max, employer matching does not count against it. 2. It depends on a bunch of things. In general, paying off higher interest debt is the smarter move, but "getting out from under" a debt like your car loan has warm fuzzy feelings. 3. I'm going to be "that guy" and tell you to read the thread, most of those things have been discussed, but I'll get you started: It depends greatly on your risk tolerance, and how soon you plan to need your money.
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Nov 26, 2014 00:05
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Why do you want to buy a house? Home ownership is terrible
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Nov 26, 2014 00:07
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Raimundus posted:In less than a month, I will receive a promotion and a very substantial raise at work. Though I've been with the company for over a year, I will now qualify for benefits. My new benefits package includes several things I've never had before in my life: 0. I would strongly recommend against buying real estate if you are not married. Also your future wife will have a claim to the place no matter what you do since you'll be paying property taxes on it from your marital income. And living in it. 1. The 17.5k limit is for your own contributions only. The total limit for you + employer match is 52k. 2. Mathematically its best to pay off the high interest debt first, but if you will get some satisfaction from knocking down the tiny debt then go for it. Finance is really only half math, psychology is the other half. 3. If you're asking where you can invest money without locking it away until retirement, the answer is nowhere, there is no such thing as short-term investing. That being said CDs can be gotten for 2-2.25% right now and that will almost prevent your savings from dying to inflation after taxes, if you want to save up for a future down payment or something. Alternatively, paying down your debt is an investment that is going to be impossible to beat from a risk-reward perspective. Individual stocks are for suckers.
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Nov 26, 2014 00:09
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I don't plan on buying a house while single. I just don't want to risk losing it to some godawful, life-related shitstorm, since I didn't have the luxury of growing up in a single-family house. Then again, of course it's hard to trust a woman I haven't met yet. Eyes Only posted:2. Mathematically its best to pay off the high interest debt first, but if you will get some satisfaction from knocking down the tiny debt then go for it. Finance is really only half math, psychology is the other half. I'll keep that in mind this coming year, then. The car loan is about $3,500 at 0.75%, and I was wondering if I should just get it done. El_Elegante posted:Why do you want to buy a house? Home ownership is terrible I hate apartments.
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Nov 26, 2014 00:23
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I think having a loan at 0.75% is sweet. Free credit history of on-time payments while you spend your money on far more worthwhile things. If I could, I'd take a 0.75%/5yrs loan for $50,000, blow up all my student loans and live off of the loaned money while I crank my IRA/401k.
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Nov 26, 2014 00:28
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Vanguard folks: Your stuff may not be updating because Vanguard has a lot of documents you need to sign. That's what my issue was. Try logging directly into Vanguard's website and see if they have stuff for you.
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Nov 26, 2014 00:38
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Raimundus posted:I hate apartments.
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Nov 26, 2014 00:40
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El_Elegante posted:Why do you want to buy a house? Home ownership is terrible People get fixed on owning real estate as some of sort of arbitrary life goal milestone and also a good "investment". It only makes sense now for certain areas of the USA like Florida where homes are cheap compared to rental costs. Also you don't own the home, just the debt associated with the loan, the bank actually owns the house until you are free and clear on the mortgage. etalian fucked around with this message at 01:04 on Nov 26, 2014 |
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Nov 26, 2014 01:01
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moana posted:Look into renting houses before you commit to buying anything. Yeah this. There is no kind of home that you can't rent instead of buy, so the decision to buy should basically never be based on what kind of structure you want to live in. If you're still set on home ownership, read the home buying thread. In terms of saving for it: you need to save cash, and that cash needs to be completely secure, so you cannot invest it in anything that entails significant additional risk to the money (over the extremely low risk represented by a FDIC-insured savings account). That limits you to stuff like CDs (which are also insured) and the like. You won't get more than maybe 1.5% on that kind of thing. The key takeaway from the homebuying thread is that as an investment, a single home is absolutely horrible compared to almost any other investment class you could consider. Home ownership is, and should be properly thought of, as a lifestyle choice, an expensive one, but it can be rewarding if it's the right lifestyle for you. Similarly to how a luxury automobile is a lifestyle choice and not an investment. The folks in the home buying thread can help you figure out if it's the right lifestyle choice for you, and also help you understand why buying a home is very often much worse than renting. e. etalian posted:Also you don't own the home, just the debt associated with the loan, the bank actually owns the house until you are free and clear on the mortgage. This is a common misconception. You do in fact own the home, in that your name is on the deed, and you have the right and privilege to make decisions about the property. The bank owns a lien against the property, with a right to collect the outstanding amount in full if you default, and the right to take possession of the property if you cannot pay the amount of the loan in full on demand after a default. While this is an onerous situation for some folks, a lien is not "ownership." The bank cannot, for example, sell or repossess a home if the loan is not in default, nor can it do things like decide to paint your home to preserve its on-paper value, or decide whether or not you can sell it, and if you sell it for a profit, that profit belongs to you and not the bank. Leperflesh fucked around with this message at 01:09 on Nov 26, 2014 |
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Nov 26, 2014 01:05
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People also tend to go financially hog wild when then go from temp/contractor position to full-time with all the extra benefits.
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Nov 26, 2014 01:35
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Leperflesh posted:The key takeaway from the homebuying thread is that as an investment, a single home is absolutely horrible compared to almost any other investment class you could consider. Home ownership is, and should be properly thought of, as a lifestyle choice, an expensive one, but it can be rewarding if it's the right lifestyle for you. Similarly to how a luxury automobile is a lifestyle choice and not an investment. e: That said, I rent a house.
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Nov 26, 2014 01:38
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It can be but its an incredibly risky proposition. Mortgage may be less than rent but you are then stuck with an illiquid asset where you are completely on the hook for all maintenance and upkeep. You'll probably have to deal with a crappy HOA. Your economic mobility and job choices are now anchored around a plot of real estate. You're poo poo out of luck if there's a regional downturn, your neighbors ruin the neighborhood, etc.
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Nov 26, 2014 02:19
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Drewski posted:Vanguard folks: Your stuff may not be updating because Vanguard has a lot of documents you need to sign. That's what my issue was. Try logging directly into Vanguard's website and see if they have stuff for you. I've tried that and there are no notifications or actions that I can see. Can you tell me what in particular you had pending?
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Nov 26, 2014 03:21
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etalian posted:arbitrary life goal milestone Uh, no. I have my reasons. etalian posted:Also you don't own the home, just the debt associated with the loan, the bank actually owns the house until you are free and clear on the mortgage. Also no. etalian posted:People also tend to go financially hog wild when then go from temp/contractor position to full-time with all the extra benefits. At what point did I say I'm going to blow my money away? I came here to learn how to save. I don't see a house in my future for another 5-10 years at least. El_Elegante posted:You'll probably have to deal with a crappy HOA. Nope. Most neighborhoods in my neck of the woods are old as hell and have no HOA. Y'all are so negative. I want to learn the safest way to pull this off effectively, not umpteen reasons why I shouldn't dare. Raimundus fucked around with this message at 03:49 on Nov 26, 2014 |
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Nov 26, 2014 03:41
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You asked for advice, if you want cheerleaders call your mother.
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Nov 26, 2014 04:51
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That would be great, if only I had ever asked for pros and cons of home ownership in a patronizing tone. To the rest of you, thanks for the tips. I checked out the home-buying thread. I'll look into CDs and IRAs in a few months, and I'll compare renting to buying a house sometime soon.
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Nov 26, 2014 05:11
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Raimundus posted:That would be great, if only I had ever asked for pros and cons of home ownership in a patronizing tone. NY Times has a decent calculator: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html One related note finished reading the Boglehead's investing book listed in the OP, pretty great summary of low cost no gimmick investing strategy. My favorite out of all the books is the Four Pillars mainly for high it ties historical events into the narrative of the book for things like the chapter on risk vs reward.
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Nov 26, 2014 05:17
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Raimundus posted:That would be great, if only I had ever asked for pros and cons of home ownership in a patronizing tone. I have bought three homes and have had no regrets. I am sure there are places where I wouldn't but so far purchasing has been a better option for us.
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Nov 26, 2014 05:29
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Ropes4u posted:I have bought three homes and have had no regrets. I am sure there are places where I wouldn't but so far purchasing has been a better option for us. I'm happy with the home I've bought but I did hold off for a long time. The transition from crappy small apartment living to having a house, home office, deck and back yard/garden has been great. That suits me rather than going out to clubs and gigs when I was younger.
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Nov 26, 2014 05:45
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Rent vs. buy is nearly impossible to quantify because there are so many unknowns and non-financial factors. The main thing is to be sure you aren't making the choice based on misguided optimism about the long-term return of owning a house (which is poo poo).
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Nov 26, 2014 05:49
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To get back on topic, if your auto loan has a fixed rate of 0.75% (which is pretty much unbelievable to me), I see no benefit to paying that off first, even for psychological reasons. You'll be much better off putting that 3500 toward your student loans. Student loans are one of the nastiest forms of debt to have (and, unlike the auto loan, you're not helping your credit by keeping it around and making payments on time) so you should focus on paying those off as soon as humanly possible.
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Nov 26, 2014 15:36
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My student loan interest rate is 6.55%. Does interest on a loan accumulate based on the current principal, or the original principal? If I start throwing gobs of money at this student loan, will the interest accumulate more slowly? Raimundus fucked around with this message at 18:44 on Nov 26, 2014 |
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Nov 26, 2014 18:42
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