Technically for performance calculation purposes, you would want to record those as of the ex dividend date, not the actual delivery date. Which I assume is end of year 2013 rather than beginning of year 2014.
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How to Invest for Retirement
- Thread starter Piecake
- Start date
Technically for performance calculation purposes, you would want to record those as of the ex dividend date, not the actual delivery date. Which I assume is end of year 2013 rather than beginning of year 2014.
True enough, good point.
VTI is total stock market, if that's what you're looking for.
I'm still trying to come up with a good portfolio distribution.
Since I'm still young, I'll keep a minimal portion in bonds (~5% in VAB.TO, the Canadian Vanguard aggregate bond fund), but a decently large chunk for rainy day in my 1.2% interest savings account (~20%)
I'll probably only put around 5% in stocks, 10% in industry/sector index funds (healthcare & technology) and the rest in Canada/US/International index funds.
mhmmm.
Ignoring the large cash-percentage.... does that look reasonable? -scratches head- Or what would you put some of the cash in if I were to rebalance? I don't wanna go lower than 10% cash for sure though.
I don't think having a percentage of cash makes a lot of sense. I think having 3-6 months worth of expenses makes a lot more sense. Are you doing a 10-20% cash to leave some on the sidelines for a market crash? If so, that is a bad idea. I guarantee that you will lose returns that way. The best way to get returns is to have it all in the stock market.
If you want to buy stocks on market lows, put that cash into bonds. That way when the market tanks your asset allocation screws up so badly that to get back to your asset allocation you will have to sell bonds and buy stocks.
I'd also caution you against having too large of a stake in Canadian equities. Everyone likes to overweight their own country. Americans are the only ones who can safely get away with this though since the US economy is just so freakin huge and diverse. The Canadian economy is not. So I would only invest about 5-10% of your funds into the Canadian fund. That is about the market share of Canada if I am not mistaken.
I don't have a job lined up for September so I want to have some money on the outside of the system in case things go south in the market AND I don't find a job. I could probably always sell my ETF's, but I just wanna make sure to be in a good spot haha. I'm 23 so it's not like I have a TON of savings lined up, which makes the percentage value a bit large. I can probably cut the cash percentage down to like 10% and assign those 10% to the index fund percentage.
Yeah I don't plan on having much money in it, most of my money is gonna go into VUN.TO (Total US Stock Market), VFV.TO (S&P 500) and then I still have to decide on an international one. Probably large part developed ex-NA and small part emerging. I'm not gonna put a large part into stocks AT ALL, I'm always talking index funds here. And even then, yeah, Canada is not gonna be a large part. Stocks I'll mostly dabble in with super disposable money that I'm okay with losing entirely. Though NDN.TO has been great so far.
This part I didn't get at all.
EDIT: I'm very new to all this and am most likely going in all naive, so I appreciate any feedback!
Well, that makes sense. You definitely want more cash around in that situation
Bonds are a lot less volatile than stocks, right? So if the market tanks, suddenly your 80/20 stock/bond allocation becomes a 70/30 stock bond allocation simply because the market tanked and stocks are worth a whole lot less now. To get that back into your preferred asset allocation you either sell the bonds to get it to 80/20 or simply buy more stocks until you get it back to 80/20.
Basically, its a way to always ensure that you buy low and sell high. You'll likely get better returns if you just dumped it all into stocks, but this is basically the strategy you use if you hold bonds as well. I said this because I thought you were holding such a large cash reserve because you wanted to jump in at a market low. I was just trying to provide you with a better option
Naw I'm mostly gonna hold onto it until I'm sure I have a new job lined up. Once I have guaranteed income there's no reason for me to hold unto such a large percentage of cash anymore, for obvious reasons.
Also what's wrong with selling bonds to reinvest them in stocks if the market indeed crashes? I can always sell the stocks when they're higher to e.g. go back from 90/10 to 80/20.
The 9% return rate is over all known data. Over 200+ years. Yes I know it isn't guaranteed. But it's pretty damn consistent. And you're talking about the fall of the middle class. This time span includes slavery, the fall of slavery, the great depression, WW2, etc.
I'm not a finance major, but I think this has to do with a combination of innate progress of society, and what the market perceives as a fair return on forfeiting purchasing power with higher risk than bonds.
I think you misunderstood me. I said that is the strategy that you use if you hold bonds. I simply think you would get better returns if you hold all stocks, but that is a personal preference.
If its a taxable account, it is preferable to buy when your asset allocation is out of whack though because of tax implications.
Thats a pretty terrible way to save for retirement if all you are doing is putting your money into savings accounts and bonds. God, you'd have to save an absurd amount to retire decently and you are throwing away the one advantage that you have as a retirement investor, time.
Aaaah I thought you were criticizing that strategy and I was confused as for why, because that's what I was going to do. If I find a job I'll use the cash I hVe saved up to balance it out, and after that I'll use the bond money to balance. I'm only planning on holding like 10% tops in bonds, so it shouldn't be a big deal.
What's your guys's opinion on total US market/total international market/sector index diversification? I'm not sure how much I wanna put into each. Definitely wanna have at least SOME in sector funds. Call me stupid but I wanna have money invested in my own field of work haha.
Well, I have 60% US and 40% International. I linked a study by Vanguard suggesting that 30-40% international was the ideal, but I don't think you can go wrong with anything from 25-60%.
These funds will include all of the sectors, so the only reason why you would invest in a sector fund is if you want to overweight it. There is some strategy behind that since I know some index investors like to invest more in poorly correlated assets or have a small value tilt. If you have another rationale for investing in a sector index fund it will simply be a sector bet. Your total index fund already properly weights its market value. If you think that sector is going to do better than the market in the future, then you would overweight it. I don't buy into that rationale so I don't do it. I don't do the poorly correlated assets or value tilts because the data seems pretty inconclusive to me and I don't want to bother and would rather keep things simple.
If you assume that on average there is a inversely proportional relationship between stock and bond performance, which is a reasonably accurate statement, then if you target 20% bond allocation and you buy stock everytime your bond allocation reaches 30% you will on average have lower buy prices than someone randomly buying stock whenever.
Chances are it won't be enough of a difference to outweigh the lost gains from holding a larger percentage of you funds in a conservative bond fund though.
that makes sense. When you say International, are you talking just International total stocks, non-US total stocks, or developed/emerging stocks?
And yeah really my reason for wanting to invest in sector ETF's is that a) I want to invest in what I work in and b) I think my field of work is the future. I work in Biotech/Biochem/Medical Research.
That's really the only reason for it. I'm not gonna go crazy and do something like 50% sector though, don't worrry, I'm not insane.
For international I am talking about Total World minus US stocks, so basically everything except the US. Not really sure how that would work in Canada
Works the same way. Vanguard Canada has a Total World minus US index fund.
(and others might too, but I like Vanguard best, like many others probably.)So you wouldn't even bother with developed/emerging, unless you were betting one one overperforming the other?
Works the same way. Vanguard Canada has a Total World minus US index fund.
So you wouldn't even bother with developed/emerging, unless you were betting one one overperforming the other?
Pretty much. International includes everything at its market weight. The only reason to include a developing index fund is if you think its going to do better than market. Since I don't think predicting the future is possible, I simply go with the market weight and invest only in two funds, Total US and Total International.
Sounds reasonable then, thanks a lot!
Generally speaking this is a bad idea.
Since we are still talking index funds, it is less of a bad idea than the old school blue chip industrial pension funds which were largely composed of company stock so when the company ran into difficulties the employees lost their jobs as well as a large chunk of their retirement, but I still wouldn't advise anyone to rely on the same industry for their income as well as their retirement. If anything I would hedge against the possibility of a downturn in my industry. Not the biotech industry seems big and stable and likely to grow, so I probably wouldn't hedge it, but I also wouldn't double dip into it. It's always possible that something will come along that negates the need for that whole industry, and while that may be a good thing (medical technology singularity), you don't want it to take all your retirement savings with it.
Like I said, I'm not insane, it's not gonna be a big part haha. It's the same reason I have some money in FSZ. It's my home, I have some money invested in it regardless of how it performs (for now. And it's actually performing well.) Call me stupid, call me naive, I'm doing it. Not with my entire retirement money, but with a small chunk I'll call my "guts" money. And I wouldn't invest in my own company, but it's a sector index fund, and I feel confident enough in this sector not to go to shits.
Trust me, I more or less discovered this haha. Thanks though man! I appreciate this. It's good to be learning about what to do with my money in the long term before I'm thrown out into the world, lol.
Dr. Feel Good
Banned
So does my 401k qualify as this? I match my company which is 6% and have no fees. I'm 25. Am I fucked?
It doesn't sound like it. You are young, saving, and get an employer match. I'd suggest saving more if you can, especially if you are just saving 6% of your income. But by saving at all right now you're doing well at this point. Time is on your side.
My order of priorities with your saving income
1) 401k match- that's free money
2) pay off high-interest loans like credit cards and student loans even if low-interest- 10% interest rates exceed returns, and that's now money. Student loans aren't dischargable in bankruptcy, so they are the absolute worst debt
3) split between putting more in and building up an emergency fund in case you lose your job (I think 1 yr minimum)
That said, enjoy things a little bit if you can.
One last question: Hedged or Unhedged? From how I gather hedged funds are just considered more "safe", with the downside that they're probably also gonna go up less when the market is going up?
EDIT: This is probably more of a question for CanadaGAF, since you USA'ers won't have to worry about currency hedging.
EDIT2: Seems like the consensus is to not care about hedging until you get closer to retirement age, which is when you wanna start protecting your currency. Before that, it'll fluctuate so much over the next 40 years or so anyway that it doesn't matter much and isn't worth potential extra fees and losses.
EDIT: This is probably more of a question for CanadaGAF, since you USA'ers won't have to worry about currency hedging.
EDIT2: Seems like the consensus is to not care about hedging until you get closer to retirement age, which is when you wanna start protecting your currency. Before that, it'll fluctuate so much over the next 40 years or so anyway that it doesn't matter much and isn't worth potential extra fees and losses.
Dr. Feel Good
Banned
I'd like to bump my 401k up more but I'll reevaluate when I get my raise this year. For debt I never carry credit card balances and have zero student loans. All I have is $13k outstanding on my car at 3.9% I pay about 30% more than the minimum each month but I can't budget for more than that. Outside of that is there other stuff I should be putting my money towards??
Advocatus Diaboli
Member
So, quick question -- I did a Roth IRA rebalance because it's not a taxable event. But my brokerage firm (USAA) doesn't let me buy into non-USAA funds. I balanced into 33% USNQX (Nasdaq-100 Index; 0.71%, below avg fees, 10% turnover) and 66% USSPX (S&P 500 Index; 0.75%, low fees; 4% turnover).
How do these compare to other firms' offerings, e.g. Vanguard, T. Rowe Price, and so forth? In other words, are index funds created equally, or are there subtle variations that actually matter?
EDIT: The S&P Index fund has an ER of 0.25%.
How do these compare to other firms' offerings, e.g. Vanguard, T. Rowe Price, and so forth? In other words, are index funds created equally, or are there subtle variations that actually matter?
EDIT: The S&P Index fund has an ER of 0.25%.
Those fees are high for a passive index fund. Performance-wise, they'll probably be very similar.
Here is an example of a commission-free S&P500 ETF that Fidelity offers (you can search for iShares Fidelity ETFs to see all available). 0.07% fee.
https://screener.fidelity.com/ftgw/etf/goto/snapshot/snapshot.jhtml?symbols=IVV
edit: Oops, I thought that 0.75% in your post was the fee.
nekroseven
Member
Vanguard VTSMX .17% expense ratio vs. FSTMX .10% at Fidelity. Assuming performance is the same, is there any reason to choose Vanguard over Fidelity?
If you put in $10,000 or more at Vanguard for some index funds like total stock market and S&P 500, you qualify for admiral shares, which the expense ratio drops to 0.05%.
turrible
general rule is not to open a mutual fund or brokerage account at banks.
Heisenberg
Member
Someone earlier said to post my current holdings and some of you might offer me some tips. This is for my rollover IRA from the 401k for my last job. Am I in too many funds? Am I really screwing up?
Heisenberg
Member
Removed that image since it has what looks like an account number. Recommend reposting it without the account number.
Yikes, can't believe I missed that. I'll go ahead and blame it on the flu and medication.
Thanks for helping me out!
This doesn't really have to do with how to invest for retirement but it seems like the best thread to bitch in...
My employer switched from putting their match into my account every other week to doing it all at 6 month intervals. They give us their match plus an extra 4% of salary during that period (the extra 4% used to be given quarterly).
Kinda sucks since I'll lose out on the earnings I would have gotten from their match throughout that time period. Might not be a huge effect, but I'm sure it will make a difference over time.
Still a good deal I guess, especially that extra 4% (which you'd get even if you didn't contribute anything). They match up to 7% depending on how long you've been there, I'm at 3% now (which comes to 10% after their contributions).
My employer switched from putting their match into my account every other week to doing it all at 6 month intervals. They give us their match plus an extra 4% of salary during that period (the extra 4% used to be given quarterly).
Kinda sucks since I'll lose out on the earnings I would have gotten from their match throughout that time period. Might not be a huge effect, but I'm sure it will make a difference over time.
Still a good deal I guess, especially that extra 4% (which you'd get even if you didn't contribute anything). They match up to 7% depending on how long you've been there, I'm at 3% now (which comes to 10% after their contributions).
Pretty much. Time is the only hedge you need. When I get closer to retirement I will put a lot more into bonds since Time is not a very good hedge when you don't have a lot of it
I think the most important thing is to get rid of debt. 4% debt definitely qualifies as that. Still, in that situation I would meet the company match on your 401k to get free money, but put the rest into paying off that loan asap.
Besides putting money into a 401k and maybe an IRA for retirement there is really nothing that you 'need' to invest towards. You personally may need to invest if you want to pay for your kids college or buy a house, etc, but those are all 'optional'
a .75% expense ratio is very high for an index fund. .25% is quite high for a sp 500 fund as well. You can get a lot lower expense ratio if you go to vanguard/fidelity or buy ishare funds, etc.
If an index follows the same index then its the same. so the sp500 index is the same all over. You are just paying more for it. the Nasdaq 100 is just stupid because its way too expensive for a top 100 company fund. You could get a large cap at vanguard for a lot cheaper if you want to go that route.
Someone earlier said to post my current holdings and some of you might offer me some tips. This is for my rollover IRA from the 401k for my last job. Am I in too many funds? Am I really screwing up?
I don't think you are really screwing up, and I don't think a lot of funds are necessarily wrong, I just don't see any strategy you are employing that requires all of those funds. You could slim that down to two funds, Total US and Total International, cover everything, and do all of that for a far cheaper price. Personally, I think that should be the core of any investment strategy. If you want to add 'flavor' to your portfolio like value tilts, poorly correlated assets or sector bets then you add a fund that does that at a small percentage of your total portfolio.
Yea, ive heard companies are doing that. Its basically a way for them to cut down on 401k contribution costs because if you don't have to pay the person if he quits or gets fired before that date.
My current employer provides 401k through JP Morgan. I had no idea how to allocate everything at the time so it's nice to get some info from this thread. My question is, the only option I see that resembles anything related to an index fund is "US SmartIndex"... would it be wise to move everything over to that along with future investments in this 401k? Or should I split it up between a couple of the others as well?
Man, these last 10 posts are making me feel awesome about the Thrift Savings Plan (sorry non-federal workers) 0.027% expense ratio, but only up to 5% matching. Still, DAT EXPENSE RATIO!
It's made of 5 main funds with 3 main funds meant to reflect the S&P 500 index, Dow Jones TSM index, and Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index. 2 funds for Government securities specially issued to the TSP and government, corporate, and mortgage backed bonds.
It's made of 5 main funds with 3 main funds meant to reflect the S&P 500 index, Dow Jones TSM index, and Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index. 2 funds for Government securities specially issued to the TSP and government, corporate, and mortgage backed bonds.
That US smartindex makes me somewhat nervous since smart sounds expensive and might not be that diverse. If I were you, I would invest in that fund up to your company match. After that, I would open up an IRA, select the index funds you want (id probably go with total international since you have a US index in your 401k). If you can invest more, then I would invest more into that smartindex fund.
So yea, just two funds. That smart index and another fund in an IRA
oldschoolpinball
Member
Cash value life insurance
Youre in luck! You don't need to know anything about either subject to be an amazing index investor. Why? Because basically all indexers invest the same way, they passively follow the entire market, and will get the same return. Really, very little thinking is required. All it takes is a little knowledge of how 401ks, IRAs, and index funds work to gain the confidence to actually take action.
It would also be a good idea to understand the basic theory and strategy of index investing so you don't do something stupid by panicking and selling low. Still, even that takes very little brainpower to grasp and no knowledge of math or economics besides like the extreme basics.
Seriously, read through the OP and if you have any questions, I or someone else will definitely try to answer them. You do not want to be stuck relying on social security when you retire. Thats poverty.
Fidelity has something similar, with the Advantage Class shares, at $10,000. For that fund the expense ratio drops to 0.07%.
Advocatus Diaboli
Member
I typoed: the S&P index fund has an ER of 0.25%. Better, I guess.
But with what claviertekky says... well, it's easy to see that now.
The issues I'm seeing are twofold: (1) my Roth is essentially locked in because it's all prior year contributions, right? And, also, (2) if I wanted to move my funds over to another brokerage account, it'd entail realizing some short-term capital gains. That's the problem, and I haven't figured out how to adjust yet.
EDIT: Well, apparently it's easier than I thought to move investments between brokerage firms. Once I figure it out, I'll post something here, because I doubt I'm the only one wanting to explore this option.
When you put it like that it sounds simple enough.
What would be the best route for a self employed person like myself though? I dont have 401K or any of that
I read that there is a lot of paperwork in between.
Just give the brokerage/mutual fund companies a call, and they will most likely eat all the fees just to have the account with them. Talk to them about your situation.
For the novice/set it and forget it investor, stick with index funds.
Open an IRA with Vanguard or Fidelity. Both are free, have no fees and offer index funds. All equal I'd suggest Vanguard, but check their minimum investment requirements; some funds require a few thousand dollars to start with. Fidelity lets you in with as little as $200.
Vanguard has a good primer on Roth vs. traditional IRA's. I'd suggest a Roth, but do a bit of reading on the subject first.
gooderthanu
Member
I have fidelity 401 k at my work and partake in a lot of high growth high risk blended stocks with less than 1% mgmnt...I can get the exact numbers.
Most in ffkhx
And spread around to
Fgckx
Oakbx
Prgfx
Aadex
Question is should I just move it all to an index fund? I'm 30 years old.
Most in ffkhx
And spread around to
Fgckx
Oakbx
Prgfx
Aadex
Question is should I just move it all to an index fund? I'm 30 years old.
Given your age, I'd suggest yes. Do you know what the return on your portfolio is? I used to have several actively managed funds as well, which make tracking their performance as a whole more difficult. Once I looked at their performance compared to the market I migrated to index funds quickly, as they lagged the market returns consistently. One strategy is to use index funds are the core of your portfolio, and augment it with another fund or few - sector indexes or other funds such as the ones you are in - if you want to put an emphasis in one area or another.
You forgot your sarcasm tag.