azucena
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Post by azucena on Feb 3, 2017 12:39:11 GMT -5
I'm a newbie at investing so I only tend to look at my 401k once a year. I'm 38, married with 2 kids, maxed 401k for the first time last year and should be able to continue doing so, existing 401k balance is $200k. Combined income is $140k. My parents and in-laws are relying on SS for retirement so I have no guidance from my family of origin. There's no one I really feel comfortable asking so I'm trying to learn the best that I can. I understand that I'll get the advice that I pay for here, and I intend to see a fee based financial planner at some point but haven't made it a priority.
First, I'm looking for feedback on what I should be invested in. Last year, I punted the decision by putting 10% allocations in 10 different funds chosen based on past returns and low fees. This year, I'd like to be a bit more strategic.
Note that I have some non-Vanguard funds available but I'm ignoring them because the fees are higher.
I'm somewhat risk averse so I'll probably keep 10% in bonds. Choices: - Vang Infl Protected Securities (VAIPX) 0.10% fee, 10 yr rtn 4.22% - Vang Total Bond Mkt Index (VBTLX) 0.06% fee, 10 yr rtn 4.29% Basic difference between the two? Pros and cons?
Growth and Income will probably be 80%. Choices: - Vang Equity Income (VEIRX) 0.17% fee, 10 yr rtn 7.53% - Vang Instit Index (VINIX) 0.04% fee, 10 yr rtn 6.95% - Vang REIT Index (VGSLX) 0.12% fee, 10 yr rtn 5.23% What is the difference between the first two? Am I correct in thinking that VINIX is basically SP500? What would be the thought behind investing in VGSLX? Diversification? Honestly, putting 80% in one place makes me nervous, but I guess I need to think about it as a broad investment across the index.
Growth - Vang mid-cap index (VIMAX) 0.08% fee, 10 yr rtn 7.66% - Vang small cap index (VSCIX) 0.07% fee, 10 yr rtn 8.21% What's the difference between these and VINIX? Why would I consider these?
International - Vang Total International Index (VTSNX) 0.10% fee, 5 yr rtn 3.02% I was thinking put the remaining 10% here for some diversification. Thoughts?
And if you're still reading, thank you, and here are some general questions for you. What's the difference between Admiral shares, institutional shares, and institutional class?
I've heard people say that you should only invest in your 401k up to the company match (6% with 3% match in my case, and I'm putting in 15%) and then invest the rest on your own because 401k fees are high. Is this really true with the Vanguard options that I have available within my 401k? Can I invest directly with Vanguard for less? I'd rather set and it and forget it from my paycheck.
When I decide on my new investments, should I rebalance my existing portfolio? Why or why not? Are there fees?
I'll be getting a $10k bonus in March. We will be moving this spring and have saved up a 20% down payment. I'm debating about whether to kick down my 401k contribution to 6% for that paycheck so I still get the company match but net more money right before we list our house. At the same time I will be getting a 2% raise which I would use to bump my 401k to 17% for the remainder of the year to still max it out. I'll lose the 'tax shelter' on the 15% - 6% so I won't net the whole thing but it will help me have more cash on hand. Am I thinking correctly? Will I still pay the same total tax for 2017?
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Deleted
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Post by Deleted on Feb 3, 2017 18:30:54 GMT -5
I invest in essentially the three fund portfolio, for even more information google "bogleheads", it is a great investing message board based on low cost index fund total market investing.
If those were my options I personally (not a financial adviser so not saying you should) would go with the following:
49% - Vang Instit Index (VINIX) 0.04% fee
33% - Vang Total International Index (VTSNX) 0.10% fee
18% - Vang Total Bond Mkt Index (VBTLX) 0.06% fee
I go by 120 minus age in stock with the stock balanced between US/International.
"What's the difference between Admiral shares, institutional shares, and institutional"
If it invests in the same index it's really just the cost to invest.
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justme
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Post by justme on Feb 3, 2017 19:44:09 GMT -5
There's small mid and large cap companies. They're delineated by size...I think revenue size. Small and mid have higher returns because it's often newer companies that are on the rise and growing. But there's also more risk of them failing.
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Value Buy
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Post by Value Buy on Feb 4, 2017 11:42:34 GMT -5
I invest in essentially the three fund portfolio, for even more information google "bogleheads", it is a great investing message board based on low cost index fund total market investing. If those were my options I personally (not a financial adviser so not saying you should) would go with the following: 49% - Vang Instit Index (VINIX) 0.04% fee 33% - Vang Total International Index (VTSNX) 0.10% fee 18% - Vang Total Bond Mkt Index (VBTLX) 0.06% fee I go by 120 minus age in stock with the stock balanced between US/International. "What's the difference between Admiral shares, institutional shares, and institutional" If it invests in the same index it's really just the cost to invest. I was in Vanguard Windsor II fund for a few years, and when I hit a certain fund value, Vanguard contacted me and asked if I wanted to switch into the Admiral Windsor II fund. I asked why and was told basically the same fund, as the original, but less trading within the fund on the portfolio, which usually made for a slight percentage increase in returns to the investor, due to less trading fees and I think you have fewer options of selling your shares per number of times per year. In other words you do not trade in and out on a regular basis. I do track both funds and notice the increase or decrease in both funds pretty much follows both of them up or down. The annual return usually favors the Admiral fund just slightly, so there is a difference between them.
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azucena
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Post by azucena on Feb 7, 2017 16:25:04 GMT -5
Thanks for the responses so far. Keep them coming.
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The Virginian
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Post by The Virginian on Feb 8, 2017 9:40:03 GMT -5
60% - S&P Index 10% - Small 10% - Mid 20% - REIT ( Probably will give you about a thousand companies - all the diversity you could ever need!) --------------------- 0% Bonds ! 0% International !
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Anything over Employers Match - Open an IRA and buy individual Stocks.
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myrrh
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Post by myrrh on Feb 8, 2017 16:41:54 GMT -5
Hi Azucena, aj's recommendation is reasonable, I might add some small cap and possibly midcap to capture the total US stock market. Unless you have way more time and money to spare than I think you do and a working crystal ball, please don't buy individual stocks, in an IRA or not. The point of using index funds is to capture the entire market (ie, buying every single stock in proportion to its market share) and holding individual stocks will skew your results. I'm copying your other questions and my answers will be in italics. What would be the thought behind investing in VGSLX (REITS)? Diversification? -Yep, I have about 10% of my stocks in REITS because I don't want to be a landlord and I feel like this kind of makes up for it. You can feel free to not use them, REITS can add a lot of volatility to your holdings.- Vang Infl Protected Securities (VAIPX) 0.10% fee, 10 yr rtn 4.22% - Vang Total Bond Mkt Index (VBTLX) 0.06% fee, 10 yr rtn 4.29% Basic difference between the two? Pros and cons? -TIPS (Treasury Inflation-Protected Securities) are US government bonds that provide a specific after-inflation return (i.e., “real return”) as compared to traditional “nominal” bonds which provide a specific before-inflation return. Basically bonds are for working stiffs like you and me and retired folks can use a combination of bonds and TIPS. This might help: www.obliviousinvestor.com/tips-vs-nominal-treasury-bonds/What's the difference between Admiral shares, institutional shares, and institutional class? -Vanguard uses different share classes as a way to lower expenses for those with more money invested in a particular fund. Their classes are Investor (minimum $1000 or $3000 invested), Admiral (minimum of $10,000), and Institutional (minimum of $500,000, usually only businesses get these in 401k plans and such.) For example, there are three Vanguard S&P 500 indexes: Vanguard 500 Index Fund Investor Shares (VFINX), fee of 0.16% Vanguard 500 Index Fund Admiral Shares (VFIAX), fee of 0.05% Vanguard Institutional Index Fund Institutional Shares (VINIX), fee of 0.04%I've heard people say that you should only invest in your 401k up to the company match (6% with 3% match in my case, and I'm putting in 15%) and then invest the rest on your own because 401k fees are high. Is this really true with the Vanguard options that I have available within my 401k? Can I invest directly with Vanguard for less? I'd rather set and it and forget it from my paycheck. - You appear to have some great funds with low fees in your 401k so you don't need to invest in a tIRA unless you are already maxing your 401k. As stated above, institutional shares have higher minimums and lower costs so it would be hard to get a similar portfolio with similar fees in a tIRA until you have a LOT more than $5500 in it.When I decide on my new investments, should I rebalance my existing portfolio? Why or why not? Are there fees? -Do you have investments outside your 401k? If so you should consider rebalancing those so that all your money is in line with what your investment strategy is. There shouldn't be fees for changing your funds inside the 401k, and there are no tax ramifications for rebalancing in a 401k or IRA.I'll be getting a $10k bonus in March. We will be moving this spring and have saved up a 20% down payment. I'm debating about whether to kick down my 401k contribution to 6% for that paycheck so I still get the company match but net more money right before we list our house. At the same time I will be getting a 2% raise which I would use to bump my 401k to 17% for the remainder of the year to still max it out. I'll lose the 'tax shelter' on the 15% - 6% so I won't net the whole thing but it will help me have more cash on hand. Am I thinking correctly? Will I still pay the same total tax for 2017? - This seems reasonable to me but without knowing your numbers I can't check your math.
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azucena
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Post by azucena on Feb 13, 2017 8:45:07 GMT -5
Anyone else want to weigh in? I'm going to make the changes before payday on Friday. So far I'm thinking
Vang Total Bond Mkt Index (VBTLX) 10%
Vang Instit Index (VINIX) 60%
Vang mid-cap index (VIMAX) 10%
Vang small cap index (VSCIX) 10%
Vang Total International Index (VTSNX) 10%
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resolution
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Post by resolution on Feb 13, 2017 9:27:44 GMT -5
I think your allocation looks solid as long as you are ok with the higher risk of having more in stocks and less in bonds. Based on your age, the standard rule of thumb would be to have a higher allocation in the bonds.
The old rule of thumb used to be 100 minus your age in stocks. But with people living longer now they are saying 110 or 120 minus your age.
I am doing the same thing as you are, with a small percentage in bonds because i have other assets that I am considering as the stable portion of my portfolio. It just comes down to being willing and able to ride out a large hit to your investments in a bad year.
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azucena
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Post by azucena on Feb 14, 2017 8:35:39 GMT -5
Interesting to see two different opinions back to back. I'm a little risk averse so I'll keep the 10% in bonds. I'm not planning to time the market or move in and out - this money will stay invested for at least 30 yrs and hopefully I can continue to add my $18k while my employer adds about $7k. @wxyz I'm curious why you advise against international? Is it because of the lower returns? I'm viewing it as diversification, is that the wrong way to think about it?
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azucena
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Post by azucena on Feb 14, 2017 9:00:35 GMT -5
Excellent points to consider. Thanks for responding.
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Post by Deleted on Feb 14, 2017 10:21:06 GMT -5
Actually no WXYZ, just because we all don't agree with you doesn't mean we are sheep to invest globally. When financial shit does hit the fan, I don't want all of my money to be in one country, I want the risk spread out as much as possible. Many reasons to invest globally: 1. Past performance is no guarantee of future results. 2. See #1. 3. Diversification, if the US is hit by a natural, political or some other disaster it would be much more prudent to have some skin in the game elsewhere. 4. My investing began in 2001, International was the only thing that made me much money in the "lost decade". 5. The US is almost 20 trillion in debt, someday the check will come due and it will likely strangle domestic returns. 6. i have worked for two fortune 500's and other multi-national corporations. Many of the components and outsourced manufacturing go to overseas companies, I want a share of their profits as well. Here is a pretty good article on some of the reasons: www.google.com/amp/www.marketwatch.com/amp/story/guid/A8B96AE0-6A8A-4843-8339-2D93F13DADD6?client=safari
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