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How to Invest for Retirement
- Thread starter Piecake
- Start date
The market will usually "price in" the most probable outcome. So if everyone is assuming Hillary will win, then stock prices are already reflecting that outcome to a large degree. If something crazy happens that the market wasn't anticipating, then you'll start to see fluctuations.
Sorry. The Efficient Market Hypothesis is based on the idea that information flows quickly and that people buy & sell rationally based on that information. Therefore, you should assume that the current stock prices already reflect all available information. The professional traders have automated systems and special technology to get information much faster than an individual can. By the time you get information, it's already too late to profit from it. What I'm getting at is that everyone knows there is an election coming, so it is priced into the market already.
The Efficient Market Hypothesis can break down in a few ways. One is when information doesn't actually spread. i.e. if you have insider knowledge, you can beat the market. Another is if you are dealing with an investment that it is hard for the broader market to access - for instance individual pieces of real estate or stakes in private companies. The third is when investors act on emotion rather than information - like overreacting to some event before coming to their senses. This tends to be short lived, though.
Whenever you think you can time the market, you need to justify why the situation breaks the Efficient Market Hypothesis - why you have some special information or special opportunity not available to other people. If you can't answer that, then it's probably bullshit.
My guess is that the market will react worse to a Trump victory than a Clinton victory, so I would only be confident that the market would tank if I had some secret information that made me think Trump has a better chance of winning than the polls say - like if I was Clinton's doctor and I knew she had cancer or something.
ZackieChan
Member
I wrote a paper on insider trading law and strong/weak efficient market hypotheses in law school. I just had a flashback.
ZackieChan
Member
I need a Schwab equivalent
ActStriker
Member
It looks like Vanguard automatically promoted me to Admiral Shares from Investor Shares for the Total Stock Market Index Fund once I crossed the threshold.
I didn't know they did that?
I didn't know they did that?
Yeah, it's automatic. Fidelity does the same thing for their equivalent class of shares. Even lower expenses is nice.
Darren870
Member
Just found out that when I leave Australia I need to take my pension with me. I will be taxed at a lovely 38%. How nice of them!!
Meh. Still have to figure out what to do with my Pension in the UK. I need to look into rolling it to the USA. Looks like they made it a bit easier the past year or so. Least I can leave it there though. Can't do that with the Australian one when I leave.
Meh. Still have to figure out what to do with my Pension in the UK. I need to look into rolling it to the USA. Looks like they made it a bit easier the past year or so. Least I can leave it there though. Can't do that with the Australian one when I leave.
ActStriker
Member
I didn't know that, so when I got an email saying "Your transaction and account change confirmations are ready" I predictably panicked
demosthenes
Member
I'm trying to figure out what to do with my Vanguard account. Way back when I bought a bunch of different funds and I'd like to consolidate but I just don't know what to get rid of or I'm indifferent about it but I'd really like to consolidate :|
I stared at my screen for like 45 minutes last night trying to figure out what I should move to what and ended up doing nothing.
I stared at my screen for like 45 minutes last night trying to figure out what I should move to what and ended up doing nothing.
Well, if the expense ratio for the funds are low it probably doesnt matter too much.
You can post your portfolio and your allocation, and I am sure you will get some advice.
Generally speaking the most common vanguard funds in this thread are VTSMX if your investment is under $10k and VTSAX if you're over $10k.
You can also choose the vanguard target date funds for a more managed approach (ie you'll get more and more bonds the closer you get to the target date).
I just went through this same process with my IRA and decided to go full VTSMX for now. Future contributions might get split into VTSMX and a bond fund (90/10 split).
1) Determine overlapping securities. Have MSFT, AAPL, GOOG, etc..? Identify a couple of these stocks you want to keep and sell the others.
2) Sell off low hanging fruit. Have a stock that's valued less than 1% of your portfolio? Sell it because it's taking up room doing nothing. Have a stock that's up 100% since you bought it? Cash in.
3) REMAIN DIVERSIFIED. This is a tangent of point 1- when selling and consolidating stocks, ensure that at the end of the day your portfolio is diversified. Don't sell all of your sector-x stocks, and if you do, invest in new ones in some way.
4) Look at funds that are costing you the most. Keep an eye out for high exp ratios and nominate them for termination.
I should note that I like the Warren Buffet buy and hold methodology, so if you're going to sell something, you should make thorough consideration. Staring at a screen for 45 minutes and doing nothing isn't a big deal.
fredrancour
Member
Hello. I'm just starting the process of saving up money for the future. I've been told that Vanguard, Schwab, and Fidelity are the three most trustworthy places to look into starting up retirement accounts. Does Money-gaf agree with that? What sorts of things do I look for to judge between them as someone who doesn't have a company shoving him into a specific brokerage?
For the kind of index fund investing most people in this thread advise, pretty much any discount brokerage will work just fine. So the three listed, plus TD Ameritrade, E-Trade, Scottrade, Sharebuilder, etc.
As for what to look for, fees are most important, but realize that just because transaction fees are listed at, say, $7.95 at fidelity and $4.95 at Tradeking, doesn't mean the latter has lower fees. Places like Fidelity and Vanguard offer their own mutual and index funds without transaction costs, while some of the smaller places that just do trading and don't sell their own funds can't do this.
The other thing to look for is minimum amount required to open an account, but again there are options here as well, usually there is an option to start an account with monthly deposits instead of a large initial deposit.
I'm with Fidelity, but I don't think you can go wrong between Fidelity and Vanguard. Vanguard is super popular in this thread is because they basically started the whole index fund thing. Fidelity offer really robust investment research, but it's really nothing you can't find via google and the prospectus, it's just nice to have all the data in one place.
Some people may be skeptical of the dicount brokerage arms of the 'bigger' players like Schwab and Merril Edge, because they also offer managed investment services and may try to upsell you, but as long as you can say 'No thanks, I know what I'm doing', those can be options as well.
Lastly, if you are planning on investing in mutual funds, you can look at the number of funds they offer, but again most of these brokerages will offer at least one option in each market segment, but places like TD Ameritrade and Fidelity will offer basically every mutual fund available.
Really the advantage of the type of investing people in this thread advise is that you can do it at basically any brokerage and the difference in fees will be tiny fractions of a percentage point, but just personally speaking, If I were deciding today, the main 3 options I'd look at are Fidelity, TD Ameritrade, and Vanguard.
demosthenes
Member
I'm full mututals/etf funds, I shy away from stocks. This is my current break down:
15% VFINX
9% VBINX
9% VIMSX
9% NAESX
16% VTSMX
13% VWNDX
7% BLV
7% VNQ
8% VOO
8% VBINX
The only thing that is negative loss/gain wise is VWNDX, which also has the highest expense ratio of .39%.
You can get something pretty similar with just 3 funds.
75% total stock market
15% total bond market
10% REIT.
demosthenes
Member
Yea I'd like to condense mostly to get into the admiral shares that cut expenses even more but I'm just indifferent about what to get rid of or possibly just convert mostly all of it :lol
PflargBlarg
Member
Finished paying for our wedding and the murphy bed we bought so I was in the clear to put another 30k into the RRSP. I'll be just short of 100k in investments after this goes through which is pretty exciting.
Now I just have to do this roughly 10 more times.
Now I just have to do this roughly 10 more times.
Randolph Freelander
Member
10 more weddings. Just think of the alimony.
The better question is where is he going to put all of these murphy beds?
fredrancour
Member
Thank you for the response!
Randolph Freelander
Member
PflargBlarg
Member
Going into sales.
This is crazy. Please consolidate. Keeping track of all that is just not necessary.
I made some notes because I couldn't remember what everything was as I buy mainly ETFs.
Right now you have around 21.5% US Stock Market, 23% S&P 500, 9% both mid and small cap? Are you trying for some really customized weighting? I'd sell your S&P and combine with VTSMX to see if you can get Admiral Shares. The S&P makes up about 75% of the Total Stock Market. If you want more mid and small cap exposure after that then buy that amount in ETFs until you have enough for the Admiral's shares.
So I'm looking into putting my additional savings (what I can't put into retirement accounts) into some index funds. I've been looking between Fidelity and Vanguard. But as I've been reading some comparisons between mutual funds and ETFs it seems I can really screw myself when it comes to taxes if I choose a mutual fund over an ETF, given that the mutual funds create more taxable events. Anyone have any experience with this? Should I just look for index funds I like and find their equivalent ETF rather than the mutual fund variant?
Randolph Freelander
Member
Some mutual funds will be better than others in a taxable account. Index funds create less frequent taxable distributions, but ETFs are apparently still better. Personally, I hold VTI (Vanguard's total stock market ETF) in a taxable account, though I have it with Merrill Lynch because of the banking convenience and rewards on my related accounts with Bank of America.
anonymous_abc
Member
So I'm starting to get my financial ducks in a row after moving to LA very recently.
Currently my understanding is and thusly my plan:
max out 401k (fidelity net benefits through my employer)
max out a traditional IRA (want to open a vanguard account for that)
And the rest?
Just a regular investment account through my (new) house bank (Charles Schwab)?
Currently my understanding is and thusly my plan:
max out 401k (fidelity net benefits through my employer)
max out a traditional IRA (want to open a vanguard account for that)
And the rest?
Just a regular investment account through my (new) house bank (Charles Schwab)?
If you are capable of maxing both your 401k and IRA, you can look into whether your 401k is eligible for (1) In-Plan Conversions / Rollovers and (2) after-tax contributions. If you have those two features, it unlocks the powerful "Mega Backdoor Roth IRA", which allows as much as $35K of additional tax-advantaged retirement savings..
anonymous_abc
Member
Not exactly.
- Roth conversion rules apply, which means that you will pay a penalty for any withdrawal within 5 years of the time of the conversion.
- Once the 5-year period is up, it follows the normal rules for a Roth IRA: Contributions can be withdrawn without penalty at any age, but withdrawing any of the appreciated value prior to age 59.5 incurs tax + penalty. However withdrawal ordering allows you to get the penalty-free money first.
One other thing to mention is that this method also forces you to convert any money in your Traditional IRA into Roth. So there are drawbacks if you already have a Traditional IRA with a lot of money in it.
If you think you want to go this route, I'd also advise opening your IRA with Fidelity rather than Vanguard; since the process involves a transfer between your 401K and IRA, it's easier when they are managed by the same company.
Also, expect it to be one of the first things on the chopping block if Democrats and Republicans ever manage a bipartisan tax reform bill.
quackamole
Member
I have some spare money sitting in my savings account that I want to park somewhere for maybe a year or two to beat inflation. What is better, CD or treasury bonds?
ZackieChan
Member
Feels so nice to finally be on track to have a retirement fund. Hell, it feels nice to have money in savings now. First couple years of my business were rough.
Randolph Freelander
Member
Short duration investing really isn't our topic, but neither CDs nor (short term) treasuries are beating inflation right now. If you want to outpace inflation, you'll need to be open to more risk. That could be bonds, that could be intermediate or long-term treasuries, or it could be stocks and other instruments or funds that blend these (such as a target date fund, Vanguard Target Retirement Income being one of them).
anonymous_abc
Member
Ok that is all good to know.
I'll look further into this.
But as it stands I am quite happy and want to plow in as much as I can. 18+5.5+35 is not entirely out of the realm of possibility.
Do you know if I can add to that directly i.e. not from my pay slip? Especially in 2016 I probably don't have enough time to max out everything.
I've already decided to max out the 401k and the IRA as soon as I get to work on September 1st. I hope my employer doesn't mind and matches. I'm sure they will look at me suspiciously if I say put all of my income into my retirement accounts please.
401K contributions must be deducted from your pay. The IRA contribution doesn't.
I set up my paycheck to go 100% into retirement until it's maxed out. Probably unusual, but I don't know if I would say "suspicious".
anonymous_abc
Member
terencecah
Member
1. i'm good on my 401k
2. i'm good on my roth ira
is there a no brainer index fund like the vanguard retirement funds?
2. i'm good on my roth ira
is there a no brainer index fund like the vanguard retirement funds?
Are you talking about keeping those in a regular taxable account?
If so, you can simply buy the same funds, but keep them in a taxable account. Those funds aren't limited to just retirement investing.
Randolph Freelander
Member
I can't tell if this a question or a malformed statement.
The Vanguard target date retirement funds are compositions of their various index funds, so it is the no brainer index fund if you're looking for a target date strategy.
terencecah
Member
oh i'm sorry.
I was asking what to do with my extra money that is simply sitting in a checking account, I've taken care of my 401k and my roth IRA for the year. what should I do with the extra money?
I was asking what to do with my extra money that is simply sitting in a checking account, I've taken care of my 401k and my roth IRA for the year. what should I do with the extra money?
PflargBlarg
Member
Well yeah, it's not like you stop saving for retirement just because you filled up the tax sheltered accounts. Do the same thing that we suggest in here in general, but in a taxable account. It's all good.
Liberty4all
Banned
Finance GAF how do you define net worth with Defined Benefit Pensions Plans? Asking as wife and I both have DBPP's.
Not sure what we should be saving on top.
Both plans are traditional ... 85 factor, 5 year best salaries. Mine is 1.4% on YMPE (in Canada about $54500) and 2% on everything made over that. Likely will retire with 90 - 100k 5 best years. 23 years in plan.
Wife will have 8 years in plan 72k 5 best years, same as above.
I read somewhere it takes 18k saved to make 100 monthly income. This was a rough calculation to help DBPP folks figure out the value of their pensions. I'm still having trouble though envisioning what I need to save on top.
Not sure what we should be saving on top.
Both plans are traditional ... 85 factor, 5 year best salaries. Mine is 1.4% on YMPE (in Canada about $54500) and 2% on everything made over that. Likely will retire with 90 - 100k 5 best years. 23 years in plan.
Wife will have 8 years in plan 72k 5 best years, same as above.
I read somewhere it takes 18k saved to make 100 monthly income. This was a rough calculation to help DBPP folks figure out the value of their pensions. I'm still having trouble though envisioning what I need to save on top.
ZackieChan
Member
I picked up Mike Piper's (The Oblivious Investor) book, Can I Retire? the other day. It's a quick read, only $5, and gives a nice overview of the strategy for actually using your money during retirement. Not too much on the "how much do I need?" front, though. So I was a little disappointed, but the book was cheap.
demosthenes
Member
How healthy are you, what are your ages right now, based on the prior 2 and age of relatives - how old do you think you'll live, what age do you think you want to cease working all together, how much do you have in retirement outsie of the above, how much do you think you'll need a year once you're retired - will you travel a lot? Do you have expensive hobbies?
These need to be answered to give advice.