I moved an old 401K in April so I don't have year long numbers. US fund did good at just over 11% but my bond fund was only 1.6%. My international fund never did well this year but really came down as gas prices did. Right now it's at -6%. Most of my money is in a US index fund so it's a healthy positive year overall.
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How to Invest for Retirement
- Thread starter Piecake
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Well buying bars is risky I know, just something to supplement my portfolio. I mean if good drops down below 1000 again I'll be buying. I mean how high was gold a few years ago like 3000? I mean if I bought a bunch at lets say 800 an ounce and it goes back up like that it would be quite a return on investment.
Right. And if it doesn't, it wouldn't. That's why these things are speculation.
Right, but I'm Not talking about hoping it goes up in a year and I sell it. I'm talking about holding on to it for a long time.
I don't see it as to much different as sinking all your money in stocks. I mean to me that's even riskier.
I only recently got serious about my retirement. I have 8% of each check going into my 401k, with my companies 6% match. I have it set to go up 1% a year for my contribution.
Outside of that I want to have some liquid assets to have on hand. I just think having physical assets is a good compliment to your traditional 401k or Ira.
Well, what criteria are you using to decide that? Commodities can generally be expected to hedge inflation (well, depending on the commodity), but there's nothing inherent in gold or silver that would make them less risky or more likely to go up than stocks. Stocks go up because they represent production, work, actual things happening in the real world to increase their value. Gold and silver go up or down without necessarily having any real-world correlate.
Physical assets are illiquid. Highly illiquid.
^^
The difference between investments and speculation is that investments create money via profit, while speculative assets can only go up(or down) in value.
An ounce of gold is always going to be an ounce of gold, but a share of stock becomes 2 shares, becomes 4 shares, becomes 8 shares, etc. Likewise with bonds, a $1000 bond today becomes $1020 next year, and so on.
Which is not to say precious metals do not have their place in financial planning, they are useful in times of high inflation but low economic growth 'stagflation'. They are not investment though, and should not be though of as such.
People think that they will be able to get market value for gold easily, but in the real world commissions and fees(and margin for the gold dealer) will eat a substantial percentage of that away if you really want to sell right away. Which is the basic definition of liquidity, how close to the market value can you get if you must sell right this minute.
They're not really comparable, though, other than they are both things you can invest in, and which have prices that change over time.
Stocks are part of businesses that (hopefully) generate cash returns over time. Those returns make the companies more valuable, which drives the appreciation of the stock price. That is the driver for a couple centuries of growth. You can hold dividend paying stocks and make a decent return never selling them.
Silver has little intrinsic value, and does not generate a return on its own. It's a lump of metal. The price changes are driven by speculation. At the end of holding it for a long period of time, you still just have a lump of metal.
Investing in the aggregate business market (indexing) will generate a return over time, though as history has shown it will be swingy. But over any appreciably long period of time, the direction will be up. If the market as a whole is not growing, then we're all screwed and have much larger problems to worry about.
Edit: dammit, iamblades. Curse my slow fingers.
If you invest in gold and silver, I would honestly treat it as a speculative, short term investment because there is no 'guarantee', unlike stocks that the price will increase in the long run (beyond inflation, of course).
Well, like I said, the foundation of stocks are businesses. On average, businesses grow in appreciable value. This is why the stock market grows in value over the long term.
Gold and silver do not. Their price increases and decreases depending on what people are willing to pay for them. It is pure supply and demand, that is mostly ruled by psychology since gold and silver don't have much actual usefulness beyond the luxury trade. It is entirely possible that buying gold and silver as hedge against uncertainty and recession looses its appeal, which would likely result in gold and silver price decrease and stagnation. I think that is a lot riskier than stocks.
vpance
Member
Anything that can be traded can be considered an investment.
The attraction behind investing in precious metals is that it's a tangible asset, and not a bunch of 1s and 0s sitting on some hard drive. In essence it's a hedge against the continued devaluation of paper currency, general SHTF scenarios, and/or the belief that the whole monetary system as we know it will collapse. But as we saw in the 2008 crash, nearly everything dropped including PMs. Of course, it went much higher after that, thanks to quantitative easing. In the long term though, as long as currency printing and government stimulus exists gold will rise in the face of that. Just see the chart from 2000 onwards.
Because it's traded in USD, when the dollar rises the price of PMs will drop and vice versa, but they are not always correlated and both can trend in the same direction sometimes. And because of USD strength lately gold has sucked as an investment. I would not invest in PM outside of a short term play, if that money could be put in stocks instead. More money is being made playing the general market now. However, as a long term play (decades), I see no major issues buying physical from time to time when the price is relatively low, as it is now.
Personally I stopped thinking so much about the fundamental reasons of why prices trend up or down and trade the technical setups, taking the emotion out of investing. But when both elements align those can give the best chances at gains.
I stick to the traditional idea that an investment is something that pays you. This is chapter one of The Intelligent Investor.
Gold doesn't pay me shit to own it, all it does is cost me.
vpance
Member
From the POV of a traditional investor I can see your point. Gold seems volatile and useless compared to a blue chip company that pays dividends; you want to invest in safe and stable stocks that go up in value in the long term. I think it's mostly a psychological difference though. At the end of the day, if the value of something has continued to increase over a long time I can see that as being a good long term investment, whatever it is.
But this increase in value is largely illusory, as it roughly tracks with inflation over a longer time scale. A couple of spikes caused by speculatory bubbles does not provide evidence that the value of gold has historically increased over time, on the contrary, outside of those bubble periods, the market value of gold in inflation adjusted dollars has remained remarkably stable as far back as we can go.
http://www.forbes.com/sites/rickferri/2013/04/22/gold-bugs-swatted-again/
Even without adjusting for inflation, just put a historical chart of gold prices next to a historical chart of the S&P 500 or the DJIA. They don't look anything close to the same:
One of these things is not like the other.
I'm a little champagny right now so pls forgive but I have always understood commodity purchases as ppl looking for longer term bonds than those on offer (usually 30 years). Popularity of gold in portfolios for average people (and not like glen beck BUY GOLD!!!1 nut jobbery) was people looking for long-dated assets that should theoretically return inflation + some small fixed percentage over the long (like, really long, 30-50 years) haul.
Surprisingly many popular yokel financial advisors like Suze Orman recommend everyone hold some gold in their portfolio. As a hedge I imagine its not bad.
I don't hold any myself.
I realized I have >10k in Vanguard Total Stock Market international and I am getting the SHIT kicked out of me. THANKS OB..germany
Surprisingly many popular yokel financial advisors like Suze Orman recommend everyone hold some gold in their portfolio. As a hedge I imagine its not bad.
I don't hold any myself.
I realized I have >10k in Vanguard Total Stock Market international and I am getting the SHIT kicked out of me. THANKS OB..germany
But it's pretty terrible at doing that, given the volatility in gold prices, and more importantly the costs of owning gold, ie. storage, security, insurance, etc.
While I mentioned above that commodity prices 'track' with inflation, that does not mean they correlate to inflation. It is entirely likely for gold prices to dramatically underperform inflation rates given the historical record.
If you want inflation protection, buy TIPS or I series bonds, hedging with commodities is not worth it.
Just ran our month (year) end numbers. I hold > $30k in Fidelity's international index, between retirement and college funds. I win, I think. Actually, lose.
I had decided a few months ago that in 2015 I'll tilt more heavily toward US, probably getting to a 75/25 split. I plan to do that by just shifting investments for this year into all US equities, and I'll be at about that mark in a year or two.
Unless international continues to tank, that will sure help the re-balance out.
Still a great year overall. Retirement accounts hit some fun milestones.
Wow everyone thanks for the responses. I guess maybe I need to read up a bit more before dump some money into buying some bars. Like I said the silver or gold I buy would be like probably less than 10% of what I out into retirement, but was just something I was thinking about.
So, the intelligent investor is a good book to read?
So, the intelligent investor is a good book to read?
anonymous_abc
Member
The average TER in my portfolio is 0.31%. Here I consider everything below 0.5% somewhat decent.
Yes, a lot of the examples in it are outdated(even in the revised edition), but the basic ideas of value investing that got their start with that book are still relevant today.
This site does a sort of book club thing, basically going over the broad points of the books chapter by chapter, to help you better understand some of the nuance and out of date references:
http://www.thesimpledollar.com/the-intelligent-investor-investment-versus-speculation/
I'm also not going to try and discourage you from buying a couple ounces of gold and tossing them in your safe if you want to do that, but think of it as a worst case scenario savings account, not an investment.
I don't know much about inner family politics in the US, but I plan to hand my mother and father a card to my account so that they don't have to worry and ask when the have financial needs. Where I am from it is expected that you take care of your parents, though the degrees vary.
What is expected of a son in the average American household?
What is expected of a son in the average American household?
chaosblade
Unconfirmed Member
Most people in the US can't afford to do something like that, and those that can likely don't need to since they probably have parents that saved for retirement. So it's not very common here, to my knowledge.
More often than not people either save for retirement or work until they can't work anymore.
RumblingRosco
Member
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Yea, no way would I do that either. Luckily my parents are financially secure, but if they needed money, and I actually had some to spare, and write them a check and give it as a gift. Too many horror stories about giving friends/relatives access to bank accounts and trouble getting 'loans' paid back.
lastflowers
Banned
My parents pay a decent check monthly to our grandparents and my mothers great aunt to help take care of anything. My parents deal for my brother and I was they pay for college (at least tuition) with the expectation that we help them (if we can afford it) if they need that sort of help. My parent don't actually need it, since they're looking at retiring or half-retiring five years early. There are a lot of families where the son helps take care of their parents, but it depends family by family.
If someone's parents are absolute assholes, I don't expect their kids to take care of them.
vpance
Member
Open_Speed
Neo Member
I am looking for a bit of advice right now on my retirement accounts. I am 32 right now and these are rough stats(% are my pretax income):
I am debt free, outside of my house, which I make double payments on right now. So most of my financial growth is focused on retirement. Employer gives 10% if I put in 5% into the 401k, so I have done that my entire working career there. I also have put in another 10% into the 401k. Last year, I started putting another 3% of into a roth IRA. So right now it is 25% into a 401k and 3% into a roth IRA. All 28% is going into the Vanguard 500(VOO).
Obviously, the VOO has done really well the past 4 years and has paid off really well. However, I am realistic and understand that will not continue until retirement and some "hedging" would be great. I am not ready to purchase bonds yet. I am a firm believer in not chasing mutual funds that try to beat the market, that is why I choose the S&P500 stock. Do I need to re-balance, or is this an acceptable strategy considering how far out I am from retirement? I have never considered international indexes before.
Lastly, I am considering maxing out my roth IRA and then what is remaining will stay in the 401k? This seems like a smart idea.
Any advice would be great. I did read through the original post, but it is hard to change considering how well S&P500 has done for me. As I said, I just want broad market returns without paying much in fees. In other words, talk me/convince me into what I should do.
I am debt free, outside of my house, which I make double payments on right now. So most of my financial growth is focused on retirement. Employer gives 10% if I put in 5% into the 401k, so I have done that my entire working career there. I also have put in another 10% into the 401k. Last year, I started putting another 3% of into a roth IRA. So right now it is 25% into a 401k and 3% into a roth IRA. All 28% is going into the Vanguard 500(VOO).
Obviously, the VOO has done really well the past 4 years and has paid off really well. However, I am realistic and understand that will not continue until retirement and some "hedging" would be great. I am not ready to purchase bonds yet. I am a firm believer in not chasing mutual funds that try to beat the market, that is why I choose the S&P500 stock. Do I need to re-balance, or is this an acceptable strategy considering how far out I am from retirement? I have never considered international indexes before.
Lastly, I am considering maxing out my roth IRA and then what is remaining will stay in the 401k? This seems like a smart idea.
Any advice would be great. I did read through the original post, but it is hard to change considering how well S&P500 has done for me. As I said, I just want broad market returns without paying much in fees. In other words, talk me/convince me into what I should do.
Yes, it is always good to max out your Roth after hitting your employer match for the tax free gains, then go back and fully max out your 401(k) if applicable.
As for portfolio suggestions, I would highly suggest you put about 20% into an ex-us index fund similar to the S&P one. Something like Vanguard FTSE All-World ex-US Index Fund (VFWIX) since you are already with Vanguard. The US may be the best performing market currently, but it's always good to cover your bases. I actually need to buy more ex-US funds as well because my portfolio balance is out of whack given how the US market has done compared to the international market as of late.
If you are set on avoiding bonds period, I would consider some sort of income generating asset like a REIT index fund, especially in your Roth where the dividends are tax free. Other options are preferred stock or dividend achievers index funds. I also hold junk bond indexes, but wouldn't recommend that in most cases.
I double dip on the dividend paying stocks by buying the total market index in my taxed brokerage account as well as the S&P dividend aristocrats index(SDY) in my Roth, but I will caution that this leads to a substantial overweighting of financials, but I likes my dividends.
This isn't as safe as bonds obviously, but I find focusing a little extra on dividends does moderate the bear markets a little.
I also like a total market index over just the 500, but that's personal preference and given how the weighting is down, they correlate almost 100% anyway.
Easystride
Member
I just started a new job in December and the 401k fund selection is incredible (Fidelity). Thanks to whoever suggested opening a 401k with my old job for rollover purposes earlier in this thread because I rolled over all of it! The fund selection at my previous job was terrible. These are the three funds I have now:
Spartan® 500 Index Fund - Fidelity Advantage Class FUSVX (.07% expense ration)
Vanguard Total Bond Market Index Fund Institutional Shares VBTIX (.07% ratio)
American Funds Capital World Growth and Income Fund® Class R-6 RWIGX (.45% ratio)
Apparently we can open a brokerage account and link it to our 401K. I was thinking of doing that for the international fund since the ratio is a bit high on that fund. Does anyone know if I can keep my funds in FUSVX and VBTIX, and get the ETF version of the international stock fund?
Spartan® 500 Index Fund - Fidelity Advantage Class FUSVX (.07% expense ration)
Vanguard Total Bond Market Index Fund Institutional Shares VBTIX (.07% ratio)
American Funds Capital World Growth and Income Fund® Class R-6 RWIGX (.45% ratio)
Apparently we can open a brokerage account and link it to our 401K. I was thinking of doing that for the international fund since the ratio is a bit high on that fund. Does anyone know if I can keep my funds in FUSVX and VBTIX, and get the ETF version of the international stock fund?
I can't see why not, considering you can buy those funds with a regular fidelity brokerage account (albeit with the required minimum investment). The only difference should be when you buy something that isn't part of the core 401(k) plan, in which case you will have to pay the full amount of fees and meet the minimum investment. Otherwise nothing should change.
Linking it to your 401k won't get you the 401k tax advantage. I think you would be better off getting your international exposure through your IRA and picking a much better international fund. Of course, I am assuming you can link that as well to your 401k. I don't have fidelity or a fidelity sponsored 401k, so someone can correct me if I am wrong, but I think the purpose of the link is that so you can see all of your investments on one site.
Easystride
Member
Good idea. I might do that since I have my Roth through Vanguard. It looks like the brokerage link would remain tax-deferred though. This is what it said on the website:
"Fidelity BrokerageLink® is a self-directed brokerage account that lets you expand the investment opportunities within your workplace savings plan. All BrokerageLink investments will remain tax-deferred, giving you new options for your retirement money."
Interesting. I didnt know that was possible.
Another option would be to invest in ETFs. They have no minimums. The only minimum is the stock price, which should be around 100 bucks. You could set up an IRA and buy a share or two of the etfs you want every month or so.
I always found it better to get things going, even if that going is slow at first than put it off.
As promised, I was able to shift our company retirement funds out of the global diversified fund (>1% expense ratio, with a lot of bonds and hedge funds in the mix) to the Vanguard S&P 500 index (.02% expense ratio). January's investment will go there.
Feels good. Feels very good.
It also doomed the US markets for 2015. Sorry, guys.
Feels good. Feels very good.
It also doomed the US markets for 2015. Sorry, guys.
I appreciate the advice, I'll look into that to read and read up a little more about hold and silver before I drop money on it
HOMEBOY OVER HERE
Banned
What are a couple good books on this stuff? For someone who knows absolutely nothing about any of this?
As we were talking about earlier, a good place to start is The Intelligent Investor by Benjamin Graham. It is an old book so many of his examples are out of date, it was written before index funds were a thing, and some of his recommendations about portfolio allocations are too conservative given the weak performance of the modern bond market. The basic ideas are still sound and relevant today though, and all the stuff about how to think about investing is actually more important than what you invest in, IMO. Warren Buffett says it best: https://www.youtube.com/watch?v=9j-Q58EHC3o
The second book would be the Little Book of Common Sense Investing by John C. Bogle.
ibitegirls
Member
Intelligent-Investor-Definitive-Investing-Essentials
If you don't know anything at all, watch some YouTube videos on investing tips, or go to Finance websites that offer tips for beginners. One good website for beginners is www.fool.com
http://www.bogleheads.org/wiki/Video:Bogleheads®_investment_philosophy
A good place to start is these videos. And also the OP!
I honestly have never read a book on investing and don't really feel the need to since index investing is a VERY simple concept. You'll be able to grasp it by watching those vids, poking around the internet and asking questions in this thread.
Of course, if you feel like you want some more info, then I would definitely check out some books. I couldnt recommend you one though.
Open_Speed
Neo Member
I really like dividends, as well. I have noticed the great benefit of dividends in my investing outside of retirement, so I have been interested in chasing that a bit. I did a little googling on SDY, but did not find enough information on this, is what follows correct? Basically, this is just selecting the stocks out of S&P 500 that usually pay higher dividends. So if I select this for my Roth IRA then even the dividends that get reinvested are tax free, as well? That's a pretty savvy strategy to push. Seems like in my preference for US indexes, this seems like a good strategy. Any downsides or risks I should be aware of? What a good mix be versus the rest of my investments? As you will see below, I am considering the international index.
Fidelity makes it more difficult to select funds outside of its preferred list of 20 funds, any issue with going with Vang Total STK MKT IS, VITSX instead of the VFWIX?
The SDY is an index of stocks in the S&P 500 that have paid out steadily increasing dividends over the past 25 years. If you cut your dividends you get taken out of the index.
Because of the nature of dividend paying companies this causes it to be weighted pretty heavily towards financials and utilities(as they are businesses that operate over a longer time span, they are less likely to be forced to cut dividends because of a bad year or two).
And yes, your dividends will compound tax free if held in a Roth.
VITSX is a good fund, but it is a domestic fund, not ex-US like VFWIX.
If you can't buy VFWIX through fidelity, you can look for the ETF version(VEU) . The ETF version actually has the same expense ratio as the admiral shares version, so I dunno why you'd ever want to buy the investor shares version anyway.
Other ETFs that are roughly similar:
ISHARES CORE MSCI EAFE(IEFA)
ISHARES CORE MSCI TOTAL INTERNATIONAL STOCK ETF(IXUS)
VANGUARD TOTAL INTERNATIONAL STOCK ETF(VXUS)
IEFA has the lowest expense ratio and since it is one of ishares main etfs, you can trade it commission free on fidelity, so I might look closely into that one.
I'm sure there are plenty of other nice options to give you some exposure to international equities that I missed, but look around until you find something you like and feel comfortable with.
The basic principles are 100% relevant no matter where you live.
The assets we are talking about may not be what you want to own given possible tax issues or currency risk or regulations in your home country, but the idea of owning profitable businesses over a long period of time works anywhere.
I'd try to find a brokerage house that does business in Paraguay and do a little bit of research on what is available to you.
ibitegirls
Member
Is anyone playing the Oilfield Services sector? Lots of bargains to be had, but not quite sure how to play it safely since I don't typically invest in oil companies.
Randolph Freelander
Member
New year, new allocation.
I took a second and third look, realized I was under-allocated to mid caps (as compared to Vanguard's total market fund), contrary to my earlier belief. So I essentially moved 4 points from my large caps to mid, resulting in a new split of 63/16/12, large to small, domestically, with the remaining 9 in international. This represents (and maintains) a slight tilt to small caps, which I was doing already. A scaled split that followed Vanguard would be more like 66.2/16.5/8.3
I took a second and third look, realized I was under-allocated to mid caps (as compared to Vanguard's total market fund), contrary to my earlier belief. So I essentially moved 4 points from my large caps to mid, resulting in a new split of 63/16/12, large to small, domestically, with the remaining 9 in international. This represents (and maintains) a slight tilt to small caps, which I was doing already. A scaled split that followed Vanguard would be more like 66.2/16.5/8.3
RumblingRosco
Member
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Any particular reason you have such low exposure to international markets?
They need to raise IRA limits
You 1%'ers. I can't even hit the IRA limit cap.