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[Smiley90]

Canadian-GAF, again.

So I have set up my Questrade account (made it Margin/TFSA/RRSP, because the more options the better right?).

Now, before funding and going in, I was looking into the Vanguard ETFs, and I know there have been recommendations in the past in this thread (quite recently but I cannot seem to find the post again). So what are the best choices?

Did you look at this site?

https://www.vanguardcanada.ca/individual/etfs/etfs.htm

look at what they contain, annualized returns, etc.

e.g.

VUN - US stock market
VFV - S&P500
VDU - Stock market excluding US
VCN/VCE - Canada stock market

just as starting points

 

[PflargBlarg]

Which brings me to my question : with the ever dropping CAD, if I were to look into the TD e-fund Index line, should I still follow the CCP's template of 30/30/30, or curve it further into US/International? Will Canadian-owned stock, due to the ever-growing weakness of the CAD, basically handicap any index fund where they exist for the foreseeable future?

As I said, this is probably investing 101 so I apologize, but like Jon Snow, I know nothing. Pls halp.

EDIT 1 : Also, looking at TD's website, I am struggling to understand the difference between owning a standard TD account and having a TD Direct Investing account. What is the practical difference? You can buy the e-Series for a TFSA, right? Just started contributing to it this year, so I have quite a bit to catch up to in terms of contributions.

A wonderful 2.46 % for one, and 2.47 % for the other.

As I said, I sure wish I saw this thread before. Investing roughly 20k right into the market just before it all comes down.

6k of it is locked in for a 3-year TFSA which is, as I understood it, guaranteed not to drop below value, but I cannot touch it until then.
6k into a TFSA with a 30 Bonds / 70 Growth value
7k into a RSP with 40 / 60.
3k into a basic, standard TFSA to serve as an emergency fund if I ever need it.

I wish I would have invested in more stocks, but apparantly the quiz they had me answer kind of locked me into these moderate accounts, or something.

I don't really know what I'll do with these at the moment. I assume I'd have to pay some kind of penalty or something stupid for taking them out right now (so I could invest them into a low MER) and they have dipped below what I paid for them at the moment, so I'll just leave these where they are and look at them in the future as a test, ha ha.

I have looked into Questrade, ETF and Vanguard, but Wormdundee's and Canadian Couch Potato gave me the impression that A) You had to have a bit more money to invest than what I have atm (they mention 50k, I believe) and B) It's more of a hands-on approach at times. The TD e-Series blurb being described as more fire-and-forget seemed more up my alley.

I do still have Questrade bookmarked though, and it being wholly online does sound easier than setting up a new TD bank account and stuff. So long as it is intuitive and not as heavy as it looked, I guess I'd figure it out with this thread's help.

Canadian-GAF, again.

So I have set up my Questrade account (made it Margin/TFSA/RRSP, because the more options the better right?).

Now, before funding and going in, I was looking into the Vanguard ETFs, and I know there have been recommendations in the past in this thread (quite recently but I cannot seem to find the post again). So what are the best choices?

Now, you've had some questions answered but I think it would be a good idea to just review some terms as I wouldn't want you to confuse yourself.

A TFSA and an RRSP are both just kinds of accounts that can hold an assortment of assets (equities, mutual funds, cash, etc.).

Your description of a 3-year TFSA is probably actually a 3-year GIC. I imagine all the other stuff is just certain funds?
I have to say, it's a really bizarre portfolio if the purpose of your investing right now is to save for retirement, particularly the GIC. And yeah, it's really heavy on bonds in my opinion.

I'd just like to convey that the 50k mark is just a suggestion as to when it might be a good idea to switch to that kind of investing. If you're buying ETFs through questrade you can do it right away since they don't charge transaction fees for ETFs. I have my investments held in Scotiabank because that's where my mortgage happens to be and it costs me 10 dollars for every trade. If I was making many small trades a year it would be pretty bad.

Don't let the ETFs scare you away, if you can handle rebalancing your investments once a year or so, you can do this.
I just like to keep it as simple as possible and only use two ETFs, VCN for Canada and VXC for everything else.

Let me know if you have other questions. I probably need to look into updating my Canadian post.

 

[chaosblade]

Not retirement, but similar in principle. I opened an HSA and am planning to use it to invest. I figure it makes sense that it should be more conservative than my retirement accounts, since I'm under 30 and may need to dip into the HSA at some point (hopefully not, but you never know).

Have several Vanguard institutional funds as investment options, rest are all quite a bit more expensive, expense ratio-wise. What I'm looking at:

VIIIX (Large cap, .02)
VEMPX (Mid cap, .06)
VSMAX (Small cap, .09)
VTPSX (International, .10)
VBMPX (Total Bond Market, .05)
VIPIX (Inflation protected bonds, .07)

Also REIT (.10), natural resources (.12), and emerging markets (.12), but those don't seem like good ideas for something conservative.

Any thoughts on allocation? Probably little to no international, heavy on bonds, maybe follow the total market makeup on the small/mid/large cap funds? What are the advantages/disadvantages of inflation protected bonds versus a bond market fund?

 

[giga]

Don't panic.

https://twitter.com/juleshyman/status/688059814145060865

 

[TangoAlphaLima]

Don't panic.

https://twitter.com/juleshyman/status/688059814145060865

 

[giga]

I really need to rewatch batman begins.

 

[Chris R]

Don't panic.

https://twitter.com/juleshyman/status/688059814145060865

Not panicking, it just sucks seeing only red when I log in.

And not timing stuff, but I should probably wait a few more days before making my Roth contribution for 2016 right?

 

[Randolph Freelander]

Not panicking, it just sucks seeing only red when I log in.

And not timing stuff, but I should probably wait a few more days before making my Roth contribution for 2016 right?

What did you just get through saying about timing.

 

[TangoAlphaLima]

And not timing stuff, but I should probably wait a few more days before making my Roth contribution for 2016 right?

Nobody knows. This could be the bottom for 2016, or it may not. If we all knew which way the market will move, we'd be rich, and probably not posting in this thread.

If you want to wait a little, then wait. If you want to buy now, which is already a big discount from the end of last year, then there's nothing wrong with that either.

 

[Mr.Mike]

Nobody knows. This could be the bottom for 2016, or it may not. If we all knew which way the market will move, we'd be rich, and probably not posting in this thread.

If you want to wait a little, then wait. If you want to buy now, which is already a big discount from the end of last year, then there's nothing wrong with that either.

This way lies madness. IMO, just put in your contribution and forget about it.

Or maybe do some dollar cost averaging if you're having a hard time making the contribution all at once. Just make sure you set a strict schedule for the averaging in that you don't deviate from (because then you turn one hard choice into many only slightly less difficult choices).

 

[GhaleonEB]

Not panicking, it just sucks seeing only red when I log in.

And not timing stuff, but I should probably wait a few more days before making my Roth contribution for 2016 right?

Yesterday we were up a bunch. Today we're back down and then some. Who can say where things will be at by Wednesday?

Just invest when you have the money to invest. It won't matter if you're not going to be touching it for a long time.

 

[giga]

Not panicking, it just sucks seeing only red when I log in.

And not timing stuff, but I should probably wait a few more days before making my Roth contribution for 2016 right?

Stop logging in constantly.

 

[Chris R]

Well fine, submitted today, probably wont clear til Wednesday though because of MLK Jr. Day.

 

[Randolph Freelander]

Stop logging in constantly.

That's half the fun, though.

 

[TangoAlphaLima]

This way lies madness. IMO, just put in your contribution and forget about it.

Or maybe do some dollar cost averaging if you're having a hard time making the contribution all at once. Just make sure you set a strict schedule for the averaging in that you don't deviate from (because then you turn one hard choice into many only slightly less difficult choices).

I'd always recommend dollar cost averaging, at least to some extent. You don't need to break it up into 10 different purchases to get the benefit, a handful will be enough.

But I also don't think there's anything wrong with watching the market panic over the first few weeks of 2016 and wondering whether to let it panic a bit more before making contributions. There's really no right or wrong answer to that question, it all comes down to what each investor is personally comfortable with.

That's half the fun, though.

In good times, yes. In bad times, not as much. Even though I won't touch my retirement investments for another 30 years, I still like to have a rough estimate of my net worth, and bigger is always better.

 

[GhaleonEB]

That's half the fun, though.

It's certainly interesting, but boy do we have different definitions of "fun". :lol

I just take a snapshot at the end of every month, and update a graph that is now entering its 13th year of monthly tracking. That helps me keep things in perspective.

Though I'm kind of glad about the timing of the drop. Big hunks of my annual contributions hit between now and early February. If the market is going to tank this is a good time for it.

 

[giga]

It's certainly interesting, but boy do we have different definitions of "fun". :lol

I just take a snapshot at the end of every month, and update a graph that is now entering its 13th year of monthly tracking. That helps me keep things in perspective.

Though I'm kind of glad about the timing of the drop. Big hunks of my annual contributions hit between now and early February. If the market is going to tank this is a good time for it.

The last time you made contributions the market fell even further. 😑

 

[Bit-Bit]

Yesterday I put the 1K in. Today I put another $800.

I don't know what I'm doing. But eh.

 

[UpperCaseN]

A few months ago I took advice from this thread for my 401k. I moved money out of the "2045 retirement fund" and put it into Index funds like the OP suggests. I didn't (and still don't) know the difference between the different Index funds but followed suggestions from here. I decided to check today and it's doing well, so now I've fully moved everything out of that 2045 retirement fund into the Index funds. Just wanted to report in and say thanks

 

[tokkun]

A few months ago I took advice from this thread for my 401k. I moved money out of the "2045 retirement fund" and put it into Index funds like the OP suggests. I didn't (and still don't) know the difference between the different Index funds but followed suggestions from here. I decided to check today and it's doing well, so now I've fully moved everything out of that 2045 retirement fund into the Index funds. Just wanted to report in and say thanks

Those target date retirement funds are just groups of index funds that change your allocations automatically over time.

 

[Smiley90]

That's half the fun, though.

"fun"

Spoiler

I do the same thing lol

I'm down 8% since Dec29, ouch

Yesterday I put the 1K in. Today I put another $800.

I don't know what I'm doing. But eh.

you're doing good

 

[SyNapSe]

My paycheck and annual bonus I think will process through next week. Hopefully it stays down until that bonus amount clears

 

[thefil]

I have a big question that's been bothering me. In October, my partner and my joint income became 317% of what it was before. Obviously, we now have the ability to start saving, but we haven't yet outside of our savings account.

The problem is, we are both Canadian citizens living and working in the US (on visas, don't worry Mr Trump). In an ideal world, we'd like to go back to Canada in a few years and ultimately retire there, though obviously we will play things by ear with the economic situation right now.

Both of our employers offer 401Ks. My question is: can we safely invest in US tools like 401K and keep that money for our eventually retirement in Canada? Should we invest in index funds in USD, or be transferring our money to CAD and making investments back home? Are we better off keeping our USD in a savings for the 1-2 years we are here, then converting it afterward?

*edit* Every time I read about my cross-border tax and investment scenarios I just thinking moving here was a complete mistake... it's so stressful...

 

[GhaleonEB]

The last time you made contributions the market fell even further. 😑

Now I just need to find a way to use my powers for good and not evil. Or at least, personal gain.

 

[Mr.Mike]

Now I just need to find a way to use my powers for good and not evil. Or at least, personal gain.

What if you started shorting index funds?

 

[Smiley90]

What if you started shorting index funds?

he asked about personal gain, not personal loss

 

[UraMallas]

AAAHHAHHHHHHHHHHAAHHH I canna' take much more, captain!

I'm down close like 10% in a month.

 

[PeakPointMatrix]

Howdy financially sound ones;

(for context, I don't know anything about anything related to retirement/401k)

So I'm finally filling out my 401k form after putting it off for long enough, and I'm up to this part:

And I have no fucking clue what any of these choices mean. Which should I pick? Help.

 

[Piecake]

Howdy financially sound ones;

(for context, I don't know anything about anything related to retirement/401k)

So I'm finally filling out my 401k form after putting it off for long enough, and I'm up to this part:

And I have no fucking clue what any of these choices mean. Which should I pick? Help.

If you have no idea, then just dump all of it in a target date fund and forget it. When do you plan on retiring? Figure that out and pick the closest target date fund. If you want to become more knowledgeable about retirement investing, read the OP, ask questions here, and check other sources. You'll have more options after that (you have one now - target date fund), but even after that target date fund will be a good choice.

Target date = target retirement trust.

I would definitely check out the expense ratio for those Target Retirement Trusts though. If they are higher than like .4% I would start reading this thread because you would be getting screwed if you dont.

 

[Randolph Freelander]

Howdy financially sound ones;

(for context, I don't know anything about anything related to retirement/401k)

So I'm finally filling out my 401k form after putting it off for long enough, and I'm up to this part:

http://i.imgur.com/VfnVISE.png

And I have no clue what any of these choices mean. Which should I pick? Help.

You could listen to Piecake and do a Target Date fund and not worry about it as long as the expenses aren't ridiculous. For me, I think the target date funds unnecessarily ride the brakes for people that are far away from retirement by holding bonds, but that's just my opinion and plenty of people differ.

If you wanted to manage your allocation yourself, I have 3 strategies you could start with and adjust to your own liking. All will be based on a "total stock market" approach as the biggest piece of the pie, but then will add in international and bonds.

First: Pure domestic stock

This one is easy. Just follow the rough allocation of Vanguard's Total Stock Market fund and you would have the following:

Vanguard 500 - 73%
Vanguard Mid-Cap - 18%
Vanguard Small-Cap - 9%

Second: Total Stock - Domestic + International

This one introduces an international component at 20%, which limits domestic stock to 80%. I take the same ratio as above for the domestic split, just scale it down.

Vanguard 500 - 58%
Vanguard Mid-Cap - 15%
Vanguard Small-Cap - 7%
Vanguard Total International Stock - 20%

Third: Total Stock + Bonds

This one takes the second approach and adds bonds at 10%. I leave international at 20%, then scale down the domestic stock accordingly.

Vanguard 500 - 51%
Vanguard Mid-Cap - 13%
Vanguard Small-Cap - 6%
Vanguard Total International Stock - 20%
Vanguard Total Bond Market - 10%

This is just to give you an idea. With all of these, I'm sticking to index funds for the low expenses, as managed funds run higher expenses without the history of better returns. If this is too much for you to consider, you can always do the target fund to start with and shift to managing your own allocations as you learn more and if you think the target fund doesn't match your preferred strategy.

 

[PeakPointMatrix]

If you have no idea, then just dump all of it in a target date fund and forget it. When do you plan on retiring? Figure that out and pick the closest target date fund. If you want to become more knowledgeable about retirement investing, read the OP, ask questions here, and check other sources. You'll have more options after that (you have one now - target date fund), but even after that target date fund will be a good choice.

Target date = target retirement trust.

I would definitely check out the expense ratio for those Target Retirement Trusts though. If they are higher than like .4% I would start reading this thread because you would be getting screwed if you dont.

You could listen to Piecake and do a Target Date fund and not worry about it as long as the expenses aren't ridiculous. For me, I think the target date funds unnecessarily ride the brakes for people that are far away from retirement by holding bonds, but that's just my opinion and plenty of people differ.

If you wanted to manage your allocation yourself, I have 3 strategies you could start with and adjust to your own liking. All will be based on a "total stock market" approach as the biggest piece of the pie, but then will add in international and bonds.

First: Pure domestic stock

This one is easy. Just follow the rough allocation of Vanguard's Total Stock Market fund and you would have the following:

Vanguard 500 - 73%
Vanguard Mid-Cap - 18%
Vanguard Small-Cap - 9%

Second: Total Stock - Domestic + International

This one introduces an international component at 20%, which limits domestic stock to 80%. I take the same ratio as above for the domestic split, just scale it down.

Vanguard 500 - 58%
Vanguard Mid-Cap - 15%
Vanguard Small-Cap - 7%
Vanguard Total International Stock - 20%

Third: Total Stock + Bonds

This one takes the second approach and adds bonds at 10%. I leave international at 20%, then scale down the domestic stock accordingly.

Vanguard 500 - 51%
Vanguard Mid-Cap - 13%
Vanguard Small-Cap - 6%
Vanguard Total International Stock - 20%
Vanguard Total Bond Market - 10%

This is just to give you an idea. With all of these, I'm sticking to index funds for the low expenses, as managed funds run higher expenses without the history of better returns. If this is too much for you to consider, you can always do the target fund to start with and shift to managing your own allocations as you learn more and if you think the target fund doesn't match your preferred strategy.

Thanks so much for the info, it really helped clarify everything. I'll take this weekend to really comb over the additional info in the OP too.

 

[PflargBlarg]

AAAHHAHHHHHHHHHHAAHHH I canna' take much more, captain!

I'm down close like 10% in a month.

Chill bro, I'm down 13.4% overall in one of my accounts. My VCN is down like 22% in that account. Still not worrying.

 

[Wellington]

I have always thought about what I would do if we were to go through another 2008/2009, not that we are at that level but keeping a strategy in mind is always a smart move.

I am in construction and end of 2008/2009 was a strong reality check for me. My boss and many of my friends were laid off. I worked hard and the client we had at the time recognized it and wanted to keep me on for a side project, honestly that saved me. I am forever grateful there as I had just bought a house and would have been sunk if not for that small project.

My thoughts from there forward were that I needed to make myself as valuable as possible in my industry so that if I do get laid off another company would snap me up right away. I secured licenses and certifications and so far I think I have done my due diligence - I get 3-4 calls a week from head hunters.

Further, once that project came through, I pushed my chips to the middle of the table and upped my 401k contribution to the highest I could at the time, 10% from 6%. A good friend put it in my head "Now is the time to buy, everything is cheap!" I followed his advice and was very happy once 2011/2012 rolled around. I am currently maxing my yearly contribution, I am happy with where it is at now since I am somewhat front loaded.

A very good friend of mine who is about 5 years younger than I always wished for another 2008, her reason is that she lived at home and invested all of her money. Her portfolio ballooned up to $200k by the age of 25. She always told me to keep a strong cash position so that I am not caught unprepared when the next opportunity arrives.

Another coworker, Mike, who has since passed away due to cancer (Fuck cancer) at a young age used to always tell me to mind the companies that will never disappear. Your Cokes, GEs, and his favorite, Citibank. I was always nervous of it considering how toxic the banking industry was at the time. He used to always reassure me, dude don't worry, I am buying at a huge discount since I know C won't disappear. I am happy to buy while everyone is selling out of fear. I said hell no Mike. He bought C at I believe $0.98. 10k shares. Worked out well for him and his family.

My intent at the time at that age was to start a real estate empire but I quickly panicked and just started saving my money and not doing anything. I closed my eyes to what was going on around me, stupidly. I vowed to never let a good deal pass me if it made financial sense. Though what I wanted was to invest in cheap real estate I did not follow the numbers, I hoarded my cash whereas now I'd be in amazing shape.

So that is my list of things to keep in mind:

1) Make myself valuable within my industry - DONE
2) Have a strong cash position for the next opportunity
3) Buy during a downturn, everything is cheap
4) If you do individual stocks, buy fear on stalwart, staple corporations (tho keep in mind the lessons of Lehman Brothers, Bear Sterns, Merrill Lynch etc)
5) Never let a good deal pass, the market will always recover.

Prob not the right place to post these thoughts and I am def rambling but I laugh every time I see the panic from my friends and co workers on their negative returns. 2010-2012 were amazing for those that held on.

 

[otake]

I have always thought about what I would do if we were to go through another 2008/2009, not that we are at that level but keeping a strategy in mind is always a smart move.

I am in construction and end of 2008/2009 was a strong reality check for me. My boss and many of my friends were laid off. I worked hard and the client we had at the time recognized it and wanted to keep me on for a side project, honestly that saved me. I am forever grateful there as I had just bought a house and would have been sunk if not for that small project.

My thoughts from there forward were that I needed to make myself as valuable as possible in my industry so that if I do get laid off another company would snap me up right away. I secured licenses and certifications and so far I think I have done my due diligence - I get 3-4 calls a week from head hunters.

Further, once that project came through, I pushed my chips to the middle of the table and upped my 401k contribution to the highest I could at the time, 10% from 6%. A good friend put it in my head "Now is the time to buy, everything is cheap!" I followed his advice and was very happy once 2011/2012 rolled around. I am currently maxing my yearly contribution, I am happy with where it is at now since I am somewhat front loaded.

A very good friend of mine who is about 5 years younger than I always wished for another 2008, her reason is that she lived at home and invested all of her money. Her portfolio ballooned up to $200k by the age of 25. She always told me to keep a strong cash position so that I am not caught unprepared when the next opportunity arrives.

Another coworker, Mike, who has since passed away due to cancer (Fuck cancer) at a young age used to always tell me to mind the companies that will never disappear. Your Cokes, GEs, and his favorite, Citibank. I was always nervous of it considering how toxic the banking industry was at the time. He used to always reassure me, dude don't worry, I am buying at a huge discount since I know C won't disappear. I am happy to buy while everyone is selling out of fear. I said hell no Mike. He bought C at I believe $0.98. 10k shares. Worked out well for him and his family.

My intent at the time at that age was to start a real estate empire but I quickly panicked and just started saving my money and not doing anything. I closed my eyes to what was going on around me, stupidly. I vowed to never let a good deal pass me if it made financial sense. Though what I wanted was to invest in cheap real estate I did not follow the numbers, I hoarded my cash whereas now I'd be in amazing shape.

So that is my list of things to keep in mind:

1) Make myself valuable within my industry - DONE
2) Have a strong cash position for the next opportunity
3) Buy during a downturn, everything is cheap
4) If you do individual stocks, buy fear on stalwart, staple corporations (tho keep in mind the lessons of Lehman Brothers, Bear Sterns, Merrill Lynch etc)
5) Never let a good deal pass, the market will always recover.

Prob not the right place to post these thoughts and I am def rambling but I laugh every time I see the panic from my friends and co workers on their negative returns. 2010-2012 were amazing for those that held on.

I have a similar plan and re-acted the same way during the recession. I got 2 promotions since 2009, it's worked out to this point. I keep loads of cash and basically buy when there's big drops.

I am at a disadvantage in that my job doesn't really have certifications. I'm a PM.

 

[hollomat]

I have always thought about what I would do if we were to go through another 2008/2009, not that we are at that level but keeping a strategy in mind is always a smart move.

I am in construction and end of 2008/2009 was a strong reality check for me. My boss and many of my friends were laid off. I worked hard and the client we had at the time recognized it and wanted to keep me on for a side project, honestly that saved me. I am forever grateful there as I had just bought a house and would have been sunk if not for that small project.

My thoughts from there forward were that I needed to make myself as valuable as possible in my industry so that if I do get laid off another company would snap me up right away. I secured licenses and certifications and so far I think I have done my due diligence - I get 3-4 calls a week from head hunters.

Further, once that project came through, I pushed my chips to the middle of the table and upped my 401k contribution to the highest I could at the time, 10% from 6%. A good friend put it in my head "Now is the time to buy, everything is cheap!" I followed his advice and was very happy once 2011/2012 rolled around. I am currently maxing my yearly contribution, I am happy with where it is at now since I am somewhat front loaded.

A very good friend of mine who is about 5 years younger than I always wished for another 2008, her reason is that she lived at home and invested all of her money. Her portfolio ballooned up to $200k by the age of 25. She always told me to keep a strong cash position so that I am not caught unprepared when the next opportunity arrives.

Another coworker, Mike, who has since passed away due to cancer (Fuck cancer) at a young age used to always tell me to mind the companies that will never disappear. Your Cokes, GEs, and his favorite, Citibank. I was always nervous of it considering how toxic the banking industry was at the time. He used to always reassure me, dude don't worry, I am buying at a huge discount since I know C won't disappear. I am happy to buy while everyone is selling out of fear. I said hell no Mike. He bought C at I believe $0.98. 10k shares. Worked out well for him and his family.

My intent at the time at that age was to start a real estate empire but I quickly panicked and just started saving my money and not doing anything. I closed my eyes to what was going on around me, stupidly. I vowed to never let a good deal pass me if it made financial sense. Though what I wanted was to invest in cheap real estate I did not follow the numbers, I hoarded my cash whereas now I'd be in amazing shape.

So that is my list of things to keep in mind:

1) Make myself valuable within my industry - DONE
2) Have a strong cash position for the next opportunity
3) Buy during a downturn, everything is cheap
4) If you do individual stocks, buy fear on stalwart, staple corporations (tho keep in mind the lessons of Lehman Brothers, Bear Sterns, Merrill Lynch etc)
5) Never let a good deal pass, the market will always recover.

Prob not the right place to post these thoughts and I am def rambling but I laugh every time I see the panic from my friends and co workers on their negative returns. 2010-2012 were amazing for those that held on.

I completely disagree with the example of Citi. There's a reason it was at $0.98 and it was very close to bankruptcy like Lehman. Even now it's only recovered to 5 times that (which is still a lot obviously, but nowhere near what Apple or Netflix or Amazon have done since 2008) and it is nowhere near its pre 2008 levels.

 

[tokkun]

One bad week and we're talking about holding large cash positions, timing the market, and buying individual stocks.

 

[Clockblockers]

Those target date retirement funds are just groups of index funds that change your allocations automatically over time.

I do want to point out that even if there are target date retirement funds you should double check what your buying. I put up Fidelity's Freedom Fund as an easy example, these are Target date retirement funds with almost the exact same name but an expense ratio of .75 vs .24. If you're not careful, or didn't know any better, I think it'd be pretty easy to buy the actively managed fund vs the indexed fund

(FDEEX) https://fundresearch.fidelity.com/mutual-funds/summary/315793851
(FDEWX) https://fundresearch.fidelity.com/mutual-funds/summary/315793828

 

[Yaboosh]

Is 3 months living expenses enough to keep in a normal savings account if more is available in a brokerage account?

Wouldn't money in a Fidelity brokerage account be accessible within just a few days?

Is 3 months in a savings account more than necessary if say 12 months is available in the brokerage account?

 

[James Sawyer Ford]

So that is my list of things to keep in mind:

1) Make myself valuable within my industry - DONE
2) Have a strong cash position for the next opportunity
3) Buy during a downturn, everything is cheap
4) If you do individual stocks, buy fear on stalwart, staple corporations (tho keep in mind the lessons of Lehman Brothers, Bear Sterns, Merrill Lynch etc)
5) Never let a good deal pass, the market will always recover.

Good list, though I'd argue with a few of the points.

2. Holding large cash positions is likely to be a net drag on performance. The market tends upwards, and you want that capital working for you as quickly as possible on average.

4. It's very difficult to determine which stocks are going to be around for the long haul. Citi could have just as easily folded like Lehman.

 

[tokkun]

Is 3 months living expenses enough to keep in a normal savings account if more is available in a brokerage account?

Wouldn't money in a Fidelity brokerage account be accessible within just a few days?

Is 3 months in a savings account more than necessary if say 12 months is available in the brokerage account?

There is really very little need to keep much money in cash. Credit cards can be used to cover immediate unexpected expenses and as you say it only takes a few days to liquidate money from an after-tax brokerage account.

A lot of people advise keeping several months worth, but most will admit that it is just for "peace of mind" (a nice way of saying irrationality) than for actual practical reasons.

 

[Makai]

There is really very little need to keep much money in cash. Credit cards can be used to cover immediate unexpected expenses and as you say it only takes a few days to liquidate money from an after-tax brokerage account.

A lot of people advise keeping several months worth, but most will admit that it is just for "peace of mind" (a nice way of saying irrationality) than for actual practical reasons.

Yeah, I just sold part of my Roth and it didn't take long. I usually keep no cash at all if I can help it.

 

[johnny956]

I have a big question that's been bothering me. In October, my partner and my joint income became 317% of what it was before. Obviously, we now have the ability to start saving, but we haven't yet outside of our savings account.

The problem is, we are both Canadian citizens living and working in the US (on visas, don't worry Mr Trump). In an ideal world, we'd like to go back to Canada in a few years and ultimately retire there, though obviously we will play things by ear with the economic situation right now.

Both of our employers offer 401Ks. My question is: can we safely invest in US tools like 401K and keep that money for our eventually retirement in Canada? Should we invest in index funds in USD, or be transferring our money to CAD and making investments back home? Are we better off keeping our USD in a savings for the 1-2 years we are here, then converting it afterward?

*edit* Every time I read about my cross-border tax and investment scenarios I just thinking moving here was a complete mistake... it's so stressful...

Cross-border tax looks complicated but what it comes down to it you'll have to take a tax penalty in the U.S transferring your 401k (transfer to IRA first after leaving company) then transferring to Canadian RRSP. The thing is you can claim a foreign tax credit when your back in Canada. The only problem is you want to be working in Canada because the tax credit won't do you any good if you don't have any kind of income in Canada to use the tax credit for. Hopefully that makes sense. Personally I say keep your investments in the U.S. Canadian dollar is really struggling and the bottom keeps dropping while the U.S dollar keeps getting stronger.

 

[Yaboosh]

Did our first budget yesterday, assuming for a fairly aggressive savings rate of 40% of net take home pay.

I have been worried about spending like a sieve affecting what we could potentially be saving, but doing the budget it doesn't seem like we have much to change to be able to save 40% of our moneys.

This is the list of expenses we came up with, are there any obvious things we missed?

Rent
Phone
Cable/Internet
PG&E
Water
Media subscriptions
Car insurance
Renters insurance
Gym
Housekeeping
Personal training
Grocery
Gas
Tolls

So we subtracted our desired amount to save from our net pay, subtracted the above expenses, and came up with a number that we could spend on anything else that comes up. Video games, restaurants, bars electronics etc.

We also got a second credit card (Citi double cash) so that we can put the above expenses on one, and discretionary spending on the other. Hopefully this will simplify keeping track of what goes wrong if we miss the budget for the month.

Any money left over at the end of the month will either be sent into investments or marked as saving for a particular vacation or something.

My plan is to keep x amount in checking as a base, for emergencies ($3k). At the end of every month, the checking should be back down to $3k. If it is above, the rest gets put into savings. If it is below, we screwed up somewhere and need to figure out if we spent over budget or if the budget is wrong somewhere.

The main problem with the above is the non monthly charges we have like water, car insurance, renters insurance.

Are there any problems anyone sees with any of the above?

 

[Sydle]

Anybody have experience using the backdoor method for a Roth IRA on Vanguard? I emailed them for advice several days ago and didn't hear back. I will call them in a few days, but I'd like to close the loop mentally tonight if possible (i.e. I'll sleep better tonight knowing I have a plan).

I got a promotion a few days ago and I'm now over the income limit to contribute to the Roth. Do I just open a traditional IRA brokerage account (I have only a Roth IRA now), contribute $5500, and then convert it? How long should I leave it as a traditional IRA? How do I convert it? Should I contribute the maximum amount at once to simplify things, or is this easy enough a process to do it regularly (e.g., monthly)?

Additionally, I contributed $230 about a week ago (was going to do so bi-weekly for the year) to my Roth IRA before I knew I was getting the promotion. It was maxed out for 2015. Not sure what I should do with that. Any help is appreciated.

 

[tokkun]

Do I just open a traditional IRA brokerage account (I have only a Roth IRA now), contribute $5500, and then convert it?

Yes.

How long should I leave it as a traditional IRA?

You should do the conversion promptly because you will be required to pay taxes on any gains that are made while the money is in the traditional IRA account when you do the conversion.

How do I convert it?

Vanguard has instructions here:
https://investor.vanguard.com/ira/roth-conversion

Should I contribute the maximum amount at once to simplify things, or is this easy enough a process to do it regularly (e.g., monthly)?

The process is easy enough as long as you keep track of how much you've contributed.

Additionally, I contributed $230 about a week ago (was going to do so bi-weekly for the year) to my Roth IRA before I knew I was getting the promotion. It was maxed out for 2015. Not sure what I should do with that. Any help is appreciated.

There is a process where you recharacterize it as a non-deductible contribution to a traditional IRA.

 

[Randolph Freelander]

.

You can sanity check your list and expenses by going through a month or three of your bank account statements. Look at every transaction and how you actually go through money and see how it compares against how you think you go through money. There could be some miscellaneous transactions you're not considering, and those become things you have to decide if you're going to add into your budget or add to your list of things to be disciplined about.

As for your regular but non-monthly expenses, you might want to just amortize them. You know you pay $90 every three months for X, budget X for $30 per month, or perhaps your reverse the direction of transfer (this is what I do). Instead of putting the extra into savings, I put the necessary into checking. I've set up my direct deposit with my employer to put all but a token amount* into my savings account, and then set up recurring weekly transfers to put only what I need based on my budget into checking. For me, it's just a flat weekly amount that doesn't differ, and then when something unexpected comes up (a rare bill, such as property tax on my car), I move extra funds over to cover that expense. But this also brings about a degree of discipline. I hate transferring extra over from savings, so I strive to live within my self-imposed means. (I do give myself a little wiggle room, but not much.) Based on my weekly transfers and the token deposit amount into checking, I know what my basic annual expenses are, it's just a simple multiplication, and then I can add in the special transfers to get to my final sum of money spent for a given year.

-----
*My bank (BofA) requires at least one direct deposit per month (of $250) for checking to be free. There are other ways to qualify, such as minimum balances and/or certain linked accounts, but the deposit method is the easiest to follow.

 

[GatorBait]

There is really very little need to keep much money in cash. Credit cards can be used to cover immediate unexpected expenses and as you say it only takes a few days to liquidate money from an after-tax brokerage account.

A lot of people advise keeping several months worth, but most will admit that it is just for "peace of mind" (a nice way of saying irrationality) than for actual practical reasons.

I have been wondering about this recently. I tend to be pretty conservative with my general finances, though my investments tend on the more growth-centric end of the risk tolerance spectrum. I have been keeping about 6 months worth of immediately accessible cash on hand and then I'll periodically transfer money into the market as it accumulates over this 6-month balance. My job is very stable, and I also have very coveted/valuable professional experience that, in the extremely unlikely event that I ever lost my job, will enable to find new employment relatively quickly. My time horizon for any big purchases is maybe 3-10 years, depending on how life events shake out.

Am I being too conservative holding such a large cash balance on-hand when I could easily invest 33-66% of it in the market and still have a decent cash cushion?

 

[Piecake]

I have been wondering about this recently. I tend to be pretty conservative with my general finances, though my investments tend on the more growth-centric end of the risk tolerance spectrum. I have been keeping about 6 months worth of immediately accessible cash on hand and then I'll periodically transfer money into the market as it accumulates over this 6-month balance. My job is very stable, and I also have very coveted/valuable professional experience that, in the extremely unlikely event that I ever lost my job, will enable to find new employment relatively quickly. My time horizon for any big purchases is maybe 3-10 years, depending on how life events shake out.

Am I being too conservative holding such a large cash balance on-hand when I could easily invest 33-66% of it in the market and still have a decent cash cushion?

I personally think 3 months worth of expenses is more than enough, especially if you have credit cards. If you want to cut it any more than that, then I think you need access to sufficient credit to cover unnecessary expenses and hold a portion of your funds in bonds.

It seems like a pretty bad idea to have an unnecessary expense, lose your job, rack up your credit card bill, and then be forced to sell off your stocks in a huge market down turn to pay off your debt and survive. And while the unexpected expense is random, losing your job is more likely to happen in an economic downturn. If you are forced to sell off your bonds instead of your stocks then I don't think it would be too bad.

 

[tokkun]

I have been wondering about this recently. I tend to be pretty conservative with my general finances, though my investments tend on the more growth-centric end of the risk tolerance spectrum. I have been keeping about 6 months worth of immediately accessible cash on hand and then I'll periodically transfer money into the market as it accumulates over this 6-month balance. My job is very stable, and I also have very coveted/valuable professional experience that, in the extremely unlikely event that I ever lost my job, will enable to find new employment relatively quickly. My time horizon for any big purchases is maybe 3-10 years, depending on how life events shake out.

Am I being too conservative holding such a large cash balance on-hand when I could easily invest 33-66% of it in the market and still have a decent cash cushion?

Sounds like it would be a useful exercise for you to come up with a list of potential unexpected large expenses you might face. Then cross out any items that you could pay for with a credit card or which you could delay paying for a week to get money out of a brokerage account. Personally I really couldn't come up with much beyond ridiculous scenarios like needing to pay off a kidnapper.

Having said that, I think it's worth considering what your ultimate goal is with investing for retirement. If you want to retire as early as you possibly can, then you should reduce that cash holding to get every last bit of investment return you can. On the other hand, if your goal is to feel safe and secure about your future, it probably is not necessary to be constantly min-maxing everything, especially if it causes you stress.

 

[vehn]

Anybody have experience using the backdoor method for a Roth IRA on Vanguard? I emailed them for advice several days ago and didn't hear back. I will call them in a few days, but I'd like to close the loop mentally tonight if possible (i.e. I'll sleep better tonight knowing I have a plan).

I got a promotion a few days ago and I'm now over the income limit to contribute to the Roth. Do I just open a traditional IRA brokerage account (I have only a Roth IRA now), contribute $5500, and then convert it? How long should I leave it as a traditional IRA? How do I convert it? Should I contribute the maximum amount at once to simplify things, or is this easy enough a process to do it regularly (e.g., monthly)?

Additionally, I contributed $230 about a week ago (was going to do so bi-weekly for the year) to my Roth IRA before I knew I was getting the promotion. It was maxed out for 2015. Not sure what I should do with that. Any help is appreciated.

Just call them and they do everything for you. Takes 5 minutes