What kind of fund does that?
It's been becoming a pretty big gift in recent years. We're starting to see the rise of the exponential curve on our dividends, which is pretty neat.
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How to Invest for Retirement
- Thread starter Piecake
- Start date
What kind of fund does that?
It's been becoming a pretty big gift in recent years. We're starting to see the rise of the exponential curve on our dividends, which is pretty neat.
Once I put together a budget for once, I'm going to invest the $100,000 I've saved over the last 5 years into Vanguard US/Foreign total stock market funds in a regular account. No debt left besides a $130k mortgage. Hopefully, assuming 7% interest and regular, significantly less generous contributions (in case I can't find much work in the next few years, which is possible), I could retire by 40-50.
There's a definite fear that I'm going to screw myself over somehow by dumping all this money in at once, but it's my own fault for thinking that unless I was an expert with a lot of time on my hands I would just be gambling by investing in the stock market. I'm just lucky to have a fairly high paying job on average and be frugal by nature. A lot of my colleagues who are far better paid than I am are finding themselves poor and nervous after all the new cars, big houses, and all sorts of expensive toys.
I've skimmed through the vast majority of this thread now. Shout outs to piecake, randolph, ghaleon, tokkun, iamblades, cyan, and everyone else who has stuck around to teach and answer questions throughout the thread. Y'all deserve a round of high fives.
There's a definite fear that I'm going to screw myself over somehow by dumping all this money in at once, but it's my own fault for thinking that unless I was an expert with a lot of time on my hands I would just be gambling by investing in the stock market. I'm just lucky to have a fairly high paying job on average and be frugal by nature. A lot of my colleagues who are far better paid than I am are finding themselves poor and nervous after all the new cars, big houses, and all sorts of expensive toys.
I've skimmed through the vast majority of this thread now. Shout outs to piecake, randolph, ghaleon, tokkun, iamblades, cyan, and everyone else who has stuck around to teach and answer questions throughout the thread. Y'all deserve a round of high fives.
Darren870
Member
I do both. Retirement always comes first though. However, I don't max out everything.
I do both.
I max out my retirement accounts before I do non-tax advantaged stuff though.
Randolph Freelander
Member
Describe what you mean by "gains," as I could be missing your meaning.
Regular market gains aren't anything to reinvest as long as you still hold the asset, as they are (along with losses) part of the asset. You have 1 share at 50.00, and if goes up by 5 cents, you still have just 1 share, but now at 50.05.
My friend raves about Lending Club.
I am hoping for this within 4-5 years when my deferred comp account starts approaching 6 figures.
I use Lending Club too and recommend it. I joined in 2013 or so, after Mr. Money Mustache wrote some useful blog posts about it on his site. It has a very 'set it and forget' approach and it only goes up.
Rebalancing has two purposes:
1. It allows you to maintain whatever degree of volatility / risk you are comfortable with in your investments. Let's say you are a conservative person, so you want a 50/50 stock/bond split. Because stocks historically outperform bonds over the long periods, if you leave that account alone, it will become more and more stock-weighted over the years, which will expose you more to the volatility of stocks.
2. It can provide some protection against bubbles and allow you to take advantage of value pricing. Since rebalancing keeps a steady ratio between the amount of different types of stock you own, as one type increases in value (say US stocks) it will sell some of that type to buy another type that hasn't risen as fast (say International or Emerging Markets). If you believe in the idea of 'reversion to the mean', this automatically shifts your money away from overpriced assets and toward underpriced ones.
As for why you should prefer auto-rebalancing versus manual rebalancing, it's because either you will forget to do it, or because humans have been repeatedly shown to do the opposite of proper rebalancing (that is, concentrating positions in overvalued stocks) when they do. Your goal should be to set up your investments in such a way as to require as little human interaction as possible.
By the way, there is one disadvantage to rebalancing that I should call out: if you rebalance in a taxable account by selling an asset, it may trigger capital gains tax.
shadowsdarknes
Member
How much longer til maturity?
AstroNut325
Member
Is there a reason Vanguard is so highly recommended? I'm thinking of opening an IRA with Schwab and using their S&P500 Index Fund and their Total Stock Market Fund over Vanguards.
Schwab Total Stock Market Index Fund compared to Vanguard equivalent:
https://www.google.com/finance?chdn...dms=0&q=MUTF:SWTSX&&ei=Xk-AVuHZK4G9iwKZioyICQ
Schwab S&P 500 Index Fund compared to Vanguard equivalent:
https://www.google.com/finance?chdn...ptdms=0&q=MUTF:SWPPX&&ei=FlGAVoDMOuuvigL597J4
Schwab Total Stock Market Index Fund compared to Vanguard equivalent:
https://www.google.com/finance?chdn...dms=0&q=MUTF:SWTSX&&ei=Xk-AVuHZK4G9iwKZioyICQ
Schwab S&P 500 Index Fund compared to Vanguard equivalent:
https://www.google.com/finance?chdn...ptdms=0&q=MUTF:SWPPX&&ei=FlGAVoDMOuuvigL597J4
The only real difference is if you want to support their business model
I do, so that is who I have my investments with. Everything else is really the same. The customer service is also great at Vanguard, though other places also might have great customer service as well.
For now. I've used lending club since 2012, however for the past year I've been cashing out all my money. My biggest fear is that another event like 2008 will happen and these loans will begin to go bad at an extremely high rate since they are made to people using them to pay off other debt. If you keep reinvesting the money received from the loans and a high rate of them go bad all at once, even if you've averaged 7 or 8% a year til then, your investment will tank.
AstroNut325
Member
What does that get me at the end of the day? Is the concern that Schwab might go belly up or get bought out?
I already have a Vanguard investment account already. Just not an IRA.
Nothing and nope. All you get is the satisfaction that you are not enriching some absurdly wealthy Wall St CEO, though I am sure that the leaders and Vanguard get paid very well.
If you already have a Vanguard account, why move? Seems like a lot more hassle when there is really zero financial game from it.
Walter White Walker
Member
I have a Roth IRA and a brokerage account with Schwab. Their customer service is good, at least the few time I've needed to call them. I have the ETF equivalent of SWTSX - SCHB which with .03% in fees is close to about as good as it gets.
2033, so a while
I told myself I would never do this, but I've commited the cardinal sin. I've sold half of my retirement funds and I will sell the other half if need be. I've lived in the South for most of my life but I've wanted to live in a metropolis forever. My lease ends at the end of the year and I've decided I need to gtfo. I'm moving to NYC and looking for work when I get there. My retirement funds will tide me over for a few months and I'm sure I'll find work by then. There are way more software jobs in New York (my previous employer might qualify as a monopsony) and wages are $20-30k higher. My new apartment is the same price as my current one, so it seems like a no-brainer. Everything else is a static cost (student loan, car loan) or in the same ballpark according to stats and anecdotes from friends (food). I don't think this will damage my longterm retirement goals because I'm only 24 and started contributing this year.
Daaaaaang, that sounds terrifying. Do you have any backup plans in case you don't find a good enough job after several months? I'm sure thousands of other people are going to be looking for the same jobs you're looking for.
You're young, so this is the time to do crazy ass stuff like this. Congrats on making the change, and I hope it all works out!
I can move to Research Triangle Park, which is an inexpensive area with software jobs.
It would be weird if I didn't find work, though. There aren't many places with a higher concentration of software companies. Economy has reached full employment. Rhetoric from major tech companies is that there's a shortage of like a million programmers.
Randolph Freelander
Member
I can understand the draw to NYC, but Charlotte also isn't a bad place to be for a programmer if you want city life (though obviously smaller) and affordable southern living.
Wellington
BAAAALLLINNN'
Wow. Pushing your chips to the middle of the table.
I've lived in New York my whole life, PM me if you have any questions.
What software are y'all going for your taxes this year? TurboTax has always worked well for me so I have no reason to switch to something like taxact, which seemed less user friendly when I tried it last year.
http://thewirecutter.com/reviews/best-tax-software/
http://thewirecutter.com/reviews/best-tax-software/
Randolph Freelander
Member
I'll keep using TurboTax Online until I find reason to change.
Walter White Walker
Member
I've used TurboTax for years but last year switched to TaxAct as it was less expensive for me to file. I'm undecided this year - I think TaxAct will again be cheaper but I like TurboTax better as it feels more intuitive.
FYI if you make less than $100K and only claim the standard deduction, TurboTax federal and state is free: http://blog.turbotax.intuit.com/tur...urbotax-absolutely-no-strings-attached-18720/
Earthstrike
Member
I was reading this post like "damn" but then I read that you are only 24. Still very young, it honestly isn't a biggie, and honestly, depending on the ratio of what you can save in both locations, you may end up even or slightly better.
Good info here. Thank you. One more question. Is there a such thing as rebalancing too often? I'm debating on doing a quarterly or yearly rebalance for my 401k.
I was 100% stock in my 20s. Now that I'm in my 30s I'm 90/10 stock/bond and plan on slowly moving those ratios closer to 50/50 as I get closer to retirement age.
The only reason not to rebalance as frequently as possible is if it costs you money to do so - for instance if it is a taxable account or if you are using ETFs and have to pay a trading fee.
You might want to consider putting your money in a Target Date fund. They do all that stuff you want to do automatically.
Walter White Walker
Member
Nice - welcome back into my life TurboTax. Ever since I sold my last house & started renting I haven't itemized. I like free.
Interesting, I wonder if they upped the cost to e-file
I don't often mess around with my long-term investments, but I've been watching VTIAX and it has been tanking ever since I picked it up. I'm wondering if I should move my funds in that account to another Admiral Shares fund. I wanted the diversity of having some of my money in an international fund, but I've been very unhappy with picking it up.
Anyone care to help me decide whether to hang on to it and hope for improvement or to drop it and pick something else up? Any advice or opinion would be greatly appreciated!
Anyone care to help me decide whether to hang on to it and hope for improvement or to drop it and pick something else up? Any advice or opinion would be greatly appreciated!
Randolph Freelander
Member
How long have you held it? Don't fret over short duration movement.
That said, in looking at that one, it does seem to trail well behind the international fund I have in my blend (which is a 401K fund). The fund you have seems to have a sizable exposure to emerging markets (~14%), and those have been doing badly, which could help explain your lack of performance. A different international fund from Vanguard (and better rated) only includes developed markets, and it has done better over the recent years (though it also hasn't performed great this year, but that's life). The lack of emerging markets in that fund reduces your risk and volatility, but it could also potentially reduce rewards if emerging markets start showing higher growth, so just keep that in mind.
Here's a snapshot 5 year view to show how they've fared, with yours (VTIAX) in blue and VTMGX in green:
Edit: I also agree with what GhaleonEB says below. You're getting international exposure in your domestic holdings, particularly your large cap. I still include international in my blend, but it's in the low teens as a percentage, not something approaching 20, 30, or even 40%, as is sometimes recommended. But that's me and I'm not you.
There's been a fair amount of dueling opinions on international diversification. I'm in international funds as well and have been for a long time, but I'm starting to come around to the view that it's not necessary for a well balanced portfolio. Not only have they lagged US indexes over the medium term, but it's in some ways duplicitous, since US corporations make a very large proportion of their earnings from overseas. When you hold the S&P500 you get a lot of international exposure.
Thanks for the info. I think that I wanted the emerging markets exposure when I bought it, which is why I chose that fund. I think I'm going to drop it for something else, possibly VTMGX. I'm still young, so I thought that the volatility would be okay, but all it has done is lost money. I've had it for about a year or so, I think. Maybe I'll take the money in this fund and find a different international fund and lower the percentage of my portfolio devoted to international. Maybe lower it to 10-15%. I'll have to research some funds to see what I think might be the best choice. This is all money in my IRA, so it's all long-term. I have a fund through T. Rowe Price that I love, maybe I'll invest some of this money in a similar fund with Vanguard, if one exists. The TRP fund is PRHSX. It's more volatile, but has been very good to me for a few years.
Yeah, those are very good points. Like I said in my last post, I think I may drop it and find something else. Now it's a matter of where to put that money!
Randolph Freelander
Member
With today's drop, the S&P 500 finished the year down < 1%, though with dividends, most people probably saw ~1% of growth. (The average dividend yield for S&P 500 is ~2%.)
You get exposure to the health of foreign economies, but you don't get exposure to foreign equity prices. Meaning you are vulnerable to a bubble in US equity prices relative to the rest of the world.
There is quite a bit of variation in valuations, and US equities are toward the high end at present:
http://www.starcapital.de/research/stockmarketvaluation
This and..
Turbo tax deluxe is normally around $50 dollars or some within the next month or so. It allows you to do more than one persons taxes on it. And if you have used it previously, and you saved the old TurboTax file data from the previous year (on separate USB flash drive) you can load it, transfer your info and save yourself some time if there were t many changes to your incone and etc.
This. Through my deferred at work can't touch w/o heavy penalties till 59.5yrs old, I have money invested in:
VWENX admiral-balanced (stock/bonds)
VMCPX mid cap
VPMAX admiral-large cap
VIIIX large cap
The reinvested dividends/cap gains have kept me positive for the year.
AND a Stable fund through my work (actually has done pretty well considering the market for this year 1.41%)
This is true, but given the long term nature of retirement savings I'm far more interested in long term trends rather than valuations in the moment. For that reason I'm not concerned with the US equity prices ATM.
It's not really arbitrary, just recognizing that you do get exposure to foreign economies through US companies. Regardless of how you go with international investments it's a good element to keep in mind.
As an aside, a couple years ago I read John Bogle's updated edition of Common Sense on Mutual Funds. He had a big section on international diversification, and the preponderance of the data demonstrated US diversification was more than sufficient for exposure. He argued it was a needless complication for US investors to also hold international indexes, and the data seemed to back that argument up.. That said, I still hold them, though as a smaller proportion of my portfolio than I used to, in part because of the way US markets overlap with them. I didn't really take that into account previously.
Its a new year! Woo!!
Perhaps there are a few people out there that are reading this who haven't started investing for the future, and a good new year's resolution would be to start doing that. Love your future self and don't consign him/her into a life of miserable poverty!
Procrastination is bad for your health!. I should know, I am definitely a procrastinator (thankfully not in this area), and doesnt that feeling that you know you should do something but you just can't force yourself to do it, and feel bad not doing it suck? I know that feeling too well.
Well, the best way to get around that is not to tell yourself that you will get it done tomorrow, but set a specific time, a specific location, and a specific task (that task would be to look over and take some first steps towards retirement investing). When you make it specific, and not just say you will get it done tomorrow or some time in the future, you are far more likely to actually do it. And eventually (hopefully) it will become a habit (Sadly, I have yet to cure my procrastination for everything).
Perhaps there are a few people out there that are reading this who haven't started investing for the future, and a good new year's resolution would be to start doing that. Love your future self and don't consign him/her into a life of miserable poverty!
Procrastination is bad for your health!. I should know, I am definitely a procrastinator (thankfully not in this area), and doesnt that feeling that you know you should do something but you just can't force yourself to do it, and feel bad not doing it suck? I know that feeling too well.
Well, the best way to get around that is not to tell yourself that you will get it done tomorrow, but set a specific time, a specific location, and a specific task (that task would be to look over and take some first steps towards retirement investing). When you make it specific, and not just say you will get it done tomorrow or some time in the future, you are far more likely to actually do it. And eventually (hopefully) it will become a habit (Sadly, I have yet to cure my procrastination for everything).
Easystride
Member
Is it a good idea to max out on the first of the year? I thought January is a historically bad month for the market. I always try to max out by the quarter one dividends (at the end of March).