Randolph Freelander
Member
Some recovery this week for my fund. Hope it continues. Seeing stuff in the red for the whole first year is not that much fun
It's a blast. Think of all those discounted equities you're acquiring.
-
Hey, guest user. Hope you're enjoying NeoGAF! Have you considered registering for an account? Come join us and add your take to the daily discourse.
How to Invest for Retirement
- Thread starter Piecake
- Start date
It's a blast. Think of all those discounted equities you're acquiring.
Thanks. If I don't sell anything else though I won't have any gains to use to offset it though right? Everything else I just plan on keeping forever and adding to it. I haven't sold anything in a few years.
Darren870
Member
You can use it to offset your income too. Only $3000 a year I believe. That can carry over if you need it to for a few years.
Hmm, that is weird.
Had put in an order in Questrade with a sufficient amount of Buying Power (10x of VDU at Market Price, which would have been roughly 300 CAD and I have 315 in there), and I come in today and it says the order failed because unsufficient buying power. It was the only order I had put in for the day.
When you order market price, do Questrade force you to have a bigger buffer in case it would jump up 5$ suddendly overnight? If so, why even allow the order to go through?
I will be trying again with a Limit order I suppose...
Had put in an order in Questrade with a sufficient amount of Buying Power (10x of VDU at Market Price, which would have been roughly 300 CAD and I have 315 in there), and I come in today and it says the order failed because unsufficient buying power. It was the only order I had put in for the day.
When you order market price, do Questrade force you to have a bigger buffer in case it would jump up 5$ suddendly overnight? If so, why even allow the order to go through?
I will be trying again with a Limit order I suppose...
KeyboardThug
Member
Let me just find some change underneath the couch. I need to get in on this.
Excellent. This is exactly what I needed.
Perfect, this one is just tailored for me!
My first through was, this sounds like something aimed at institutional investors. Reading through, looks like that is the case.
Pension funds won't love this since they tend to be run like giant kickback machines for the fund managers, but that's another story.
It should be mentioned that they also lowered the fees for various other funds (the target date funds are mentioned specifically).
mercenar1e
Member
i lost around $700 due to the recent problems with VTSMX but that forced me into some day trading.. made a few moves with RDS B, AAPL, NFLX and F. I'm currently up.
no offense but day trading is just about the worst retirement savings strategy and belongs in the stocks thread
"my retirement funds are down so I should start speculating" is... probably the worst advice that could possibly be in this thread
Yeah, not really sure who's going to want this.
Does anyone know what happened to that lawsuit from that douchebag Vanguard whistle-blower who stated that Vanguard should have charged higher fees and now owes a lot in taxes (or something like that)?
If it is still pending, I guess that is a good indication that Vanguard is very confident that it will win.
$5 billion! I dunno, maybe Buffet loses faith in his successors.
chaosblade
Unconfirmed Member
At this point I'll just be happy when I hit Admiral shares on my international fund. That's a ways off though, and it keeps going down.
My 401k plan has some Vanguard Institutional Plus funds in it. The cost of my target fund recently went from 0.18 to 0.05, which is a pretty nice improvement.
mercenar1e
Member
no offense but day trading is just about the worst retirement savings strategy and belongs in the stocks thread
"my retirement funds are down so I should start speculating" is... probably the worst advice that could possibly be in this thread
i know but we dont have a day trading thread here lol im using extra funds i have outside of the retirement account.
nhlducks35
Member
I currently have $3,200 in my Vanguard Target 2060 funds
I was wondering I should switch it to VTSMX so I can get more stocks. Is this a good idea?
I'm 22 btw
I was wondering I should switch it to VTSMX so I can get more stocks. Is this a good idea?
I'm 22 btw
That fund is already 90% stocks at the moment. It's important to have some bonds for diversification, I definitely wouldn't go 100% stocks.
You'd probably be best off just sticking to what you have now.
chaosblade
Unconfirmed Member
Comes down to personal preference. Having 10% bonds isn't going to hurt, but if you don't want it then you don't want it.
For me, I don't like the look of that target date fund mostly because of the 36% International. My personal target allocation for International is about 20% right now (not there yet though). You might be fine with more International though.
Regardless of what you decide it's good that you are starting early. $3200 at 22 is great. My brother is about to turn 24 and doesn't have a cent put away for retirement, despite me nagging him occasionally about needing to set up his 401k contribution.
At 22? I don't think having bonds really matters.
Randolph Freelander
Member
If you ask me, 22 is way too young to think about bonds.
So is 32.
And 42.
But that's just me and I'm not you.
So is 32.
And 42.
Borderline 52.
But that's just me and I'm not you.
I recall reading somewhere that a 90/10 split would perform better than being 100% stocks (because bonds tend to rise when stocks crash, so in a crash you would rebalance by selling bonds which had just risen and buying a bunch of stocks while they're cheap), but that might have been debunked.
At the very least I feel confident in saying that 10% bonds will greatly reduce volatility while only slightly reducing returns. Hopefully someone chimes in with real stats.
Who really cares about volatility though at that age? He's got a long way to go.
mercenar1e
Member
oh damn didn't know.
chaosblade
Unconfirmed Member
https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-risk
This has a couple related interactive graphs.
A lot of people don't have the heart for it. Just look at some of the comments in this thread from the last few weeks. They freak out during periods of high volatility and end up selling low and buying high.
The data says that successful investing is dead simple: Just pick a target fund or a couple low cost broad indices and leave them alone. The problem is that people are their own worst enemies. Their natural intuition leads them to make the wrong moves most of the time, and greater volatility makes people more emotional. Half the point of choosing the right allocation is picking one that you can live with, without feeling the urge to tinker with it. This is why I advise most people to use target funds: the less you need to interact with the account, the better off you will be.
It's not really about the volatility though.
If you maintain a 90/10 ratio, you are going to naturally be buying stocks when they are cheap and bonds when they aren't. The small portion of bonds can provide you steady income that you can use to buy more stocks when they are cheap. Which can, if the market conditions are right, lead to better average return than a 100% stock investment would.
Randolph Freelander
Member
FOR GIGGLES...
I tracked down historical bond performance. Using the data found here for the Barclay's US Aggregate Bond Index, which is the benchmark many modern bond indices use, and then using the returns found here for the S&P 500 Index, I checked to see what would happen if you started with $10,000 in 1976 and invested 100% into stocks, 90/10 stocks/bonds with no rebalancing, and then 90/10 with rebalancing every year. This data goes through 2014.
Note: The S&P data provides values that assume dividend reinvestment. I make the assumption that the total return for the bond index also includes yields.
First, if you go total stock:
Next, the 90/10 split. no rebalancing. Columns are year, stock value, bond value, total value.
Finally, the 90/10 split with yearly rebalancing. The columns are year, stock value, bond value, total value, rebalanced stock value, rebalanced bond value. The next year will calculate new values in the left columns based on the rebalanced values from the prior year.
tl;dr: If you went total stock from 1976-2014, $10K would grow to 726,174.28. 90/10 stocks/bonds with no rebalancing would grow to 672,707.90, and 90/10 with rebalancing would grow to 667,038.22.
Again remember that this is just for giggles, and if I looked at a different slice of time then perhaps the outcome would show a different strategy to be preferred.
I tracked down historical bond performance. Using the data found here for the Barclay's US Aggregate Bond Index, which is the benchmark many modern bond indices use, and then using the returns found here for the S&P 500 Index, I checked to see what would happen if you started with $10,000 in 1976 and invested 100% into stocks, 90/10 stocks/bonds with no rebalancing, and then 90/10 with rebalancing every year. This data goes through 2014.
Note: The S&P data provides values that assume dividend reinvestment. I make the assumption that the total return for the bond index also includes yields.
First, if you go total stock:
Code:
Begin 10,000.00
1976 12,384.00
1977 11,494.83
1978 12,248.89
1979 14,507.58
1980 19,222.55
1981 18,276.80
1982 22,215.45
1983 27,227.26
1984 28,934.41
1985 38,115.29
1986 45,231.42
1987 47,606.07
1988 55,513.43
1989 73,105.64
1990 70,839.37
1991 92,424.12
1992 99,466.84
1993 109,493.10
1994 110,938.41
1995 152,629.06
1996 187,672.69
1997 250,280.30
1998 321,810.41
1999 389,519.33
2000 354,073.07
2001 311,973.78
2002 243,027.57
2003 312,727.88
2004 346,752.68
2005 363,778.23
2006 421,218.81
2007 444,343.73
2008 279,936.55
2009 354,007.76
2010 407,321.33
2011 415,915.81
2012 482,462.34
2013 638,731.89
2014 726,174.28Next, the 90/10 split. no rebalancing. Columns are year, stock value, bond value, total value.
Code:
Begin 9,000.00 1,000.00 10,000.00
1976 11,145.60 1,156.00 12,301.60
1977 10,345.35 1,190.68 11,536.03
1978 11,024.00 1,207.35 12,231.35
1979 13,056.83 1,230.29 14,287.12
1980 17,300.29 1,263.51 18,563.80
1981 16,449.12 1,343.11 17,792.23
1982 19,993.91 1,780.96 21,774.87
1983 24,504.53 1,930.56 26,435.09
1984 26,040.97 2,223.04 28,264.01
1985 34,303.76 2,714.56 37,018.32
1986 40,708.28 3,128.80 43,837.07
1987 42,845.46 3,215.15 46,060.61
1988 49,962.09 3,468.83 53,430.92
1989 65,795.08 3,972.85 69,767.93
1990 63,755.43 4,328.82 68,084.25
1991 83,181.71 5,021.43 88,203.14
1992 89,520.16 5,393.01 94,913.17
1993 98,543.79 5,918.83 104,462.62
1994 99,844.57 5,746.00 105,590.57
1995 137,366.15 6,807.29 144,173.44
1996 168,905.42 7,054.39 175,959.82
1997 225,252.27 7,735.14 232,987.41
1998 289,629.37 8,407.32 298,036.70
1999 350,567.39 8,338.38 358,905.78
2000 318,665.76 9,308.14 327,973.90
2001 280,776.40 10,093.75 290,870.15
2002 218,724.82 11,129.36 229,854.18
2003 281,455.09 11,585.67 293,040.76
2004 312,077.41 12,088.49 324,165.89
2005 327,400.41 12,382.24 339,782.64
2006 379,096.93 12,918.39 392,015.32
2007 399,909.35 13,818.80 413,728.15
2008 251,942.89 14,542.90 266,485.80
2009 318,606.98 15,405.30 334,012.28
2010 366,589.19 16,412.80 383,002.00
2011 374,324.23 17,699.57 392,023.80
2012 434,216.10 18,444.72 452,660.82
2013 574,858.70 18,072.14 592,930.84
2014 653,556.85 19,151.04 672,707.90Finally, the 90/10 split with yearly rebalancing. The columns are year, stock value, bond value, total value, rebalanced stock value, rebalanced bond value. The next year will calculate new values in the left columns based on the rebalanced values from the prior year.
Code:
Begin 9,000.00 1,000.00 10,000.00 9,000.00 1,000.00
1976 11,145.60 1,156.00 12,301.60 11,071.44 1,230.16
1977 10,276.51 1,267.06 11,543.58 10,389.22 1,154.36
1978 11,070.75 1,170.52 12,241.27 11,017.14 1,224.13
1979 13,048.70 1,247.39 14,296.09 12,866.48 1,429.61
1980 17,048.09 1,468.21 18,516.29 16,664.66 1,851.63
1981 15,844.76 1,968.28 17,813.05 16,031.74 1,781.30
1982 19,486.58 2,362.01 21,848.59 19,663.73 2,184.86
1983 24,099.87 2,368.39 26,468.26 23,821.43 2,646.83
1984 25,315.03 3,047.82 28,362.85 25,526.57 2,836.29
1985 33,626.15 3,463.39 37,089.54 33,380.58 3,708.95
1986 39,612.74 4,274.94 43,887.68 39,498.91 4,388.77
1987 41,572.60 4,509.90 46,082.50 41,474.25 4,608.25
1988 48,363.12 4,971.84 53,334.97 48,001.47 5,333.50
1989 63,213.13 6,108.45 69,321.59 62,389.43 6,932.16
1990 60,455.36 7,553.28 68,008.64 61,207.77 6,800.86
1991 79,857.78 7,889.00 87,746.78 78,972.11 8,774.68
1992 84,989.78 9,424.00 94,413.78 84,972.41 9,441.38
1993 93,537.62 10,361.91 103,899.54 93,509.58 10,389.95
1994 94,743.91 10,086.57 104,830.48 94,347.43 10,483.05
1995 129,803.19 12,419.27 142,222.46 128,000.21 14,222.25
1996 157,389.06 14,738.51 172,127.58 154,914.82 17,212.76
1997 206,594.40 18,873.79 225,468.19 202,921.37 22,546.82
1998 260,916.30 24,506.14 285,422.44 256,880.19 28,542.24
1999 310,927.79 28,308.20 339,235.98 305,312.39 33,923.60
2000 277,528.96 37,868.91 315,397.87 283,858.08 31,539.79
2001 250,107.36 34,201.75 284,309.10 255,878.19 28,430.91
2002 199,329.11 31,347.92 230,677.03 207,609.33 23,067.70
2003 267,151.69 24,013.48 291,165.17 262,048.65 29,116.52
2004 290,559.54 30,380.17 320,939.72 288,845.74 32,093.97
2005 303,028.07 32,873.86 335,901.92 302,311.73 33,590.19
2006 350,046.75 35,044.65 385,091.40 346,582.26 38,509.14
2007 365,609.63 41,193.23 406,802.86 366,122.57 40,680.29
2008 230,657.22 42,811.93 273,469.15 246,122.24 27,346.92
2009 311,246.18 28,968.59 340,214.77 306,193.29 34,021.48
2010 352,306.00 36,246.48 388,552.48 349,697.23 38,855.25
2011 357,075.85 41,901.50 398,977.34 359,079.61 39,897.73
2012 416,532.35 41,577.43 458,109.78 412,298.80 45,810.98
2013 545,842.38 44,885.60 590,727.98 531,655.18 59,072.80
2014 604,438.77 62,599.44 667,038.22 600,334.39 66,703.82tl;dr: If you went total stock from 1976-2014, $10K would grow to 726,174.28. 90/10 stocks/bonds with no rebalancing would grow to 672,707.90, and 90/10 with rebalancing would grow to 667,038.22.
Again remember that this is just for giggles, and if I looked at a different slice of time then perhaps the outcome would show a different strategy to be preferred.
Hmm, interesting the difference there. I use a Vanguard LifeStrategy 80% equity option in my SIPP (UK GAF) and the 100% equity fund in my ISA. Most advise I'd read seemed to suggest that I don't go all in on equities for my retirement fund, and I prefer not to look or touch that one at all. This chart shows how little difference the two have had between them for the past 5 years though.
The orange line is the 80% fund and the blue the 100%. Given my age (30), I don't really see the need to be in bonds personally, but the difference between the two seems as insubstantial at this point as to not really matter.
Thoughts?
The orange line is the 80% fund and the blue the 100%. Given my age (30), I don't really see the need to be in bonds personally, but the difference between the two seems as insubstantial at this point as to not really matter.
Thoughts?
EarsOfASnake
Member
Hmm, interesting the difference there. I use a Vanguard LifeStrategy 80% equity option in my SIPP (UK GAF) and the 100% equity fund in my ISA. Most advise I'd read seemed to suggest that I don't go all in on equities for my retirement fund, and I prefer not to look or touch that one at all. This chart shows how little difference the two have had between them for the past 5 years though.
The orange line is the 80% fund and the blue the 100%. Given my age (30), I don't really see the need to be in bonds personally, but the difference between the two seems as insubstantial at this point as to not really matter.
Thoughts?
I'm 28 and I started on the 80% equity fund too, I sided with that over the 100% just to take the sting off things but the difference looks negligible at this point in time. I think you've made the right decision though and I will most likely be hitting up a 100% equity on my next tax year because I have the time on my side and this year of experience (It's just been a slow decline and disheartening) has made me realise I am more risk tolerant than I thought.
PantherLotus
Professional Schmuck
If you're 8+ years away from retirement and you're feeling anything resembling a 'sting' you need to just stop looking.
Quoting a bit of an old post, but I am looking inject more money into Vanguard this week.
So far, I have the VDU ( Developed All Cap ex U.S.), VFV ( S&P 500 Index ) and VUN ( U.S. Total Market Index ETF ) in my portfolio.
Am I right in understanding that if I am looking to invest in the Asia and Europe-focused ETFs they offer, well, basically I don't need to because that is already included in the VDU? Only the % of each specific component would change?
So, with a US-centric VUN, the more global VDU, and the S&P one, should I even be looking for something more? (perhaps the Canada-centric VCN...though...idk it seems lackluster).
PflargBlarg
Member
I agree, what is this 'sting'? It's money sitting in an account somewhere that you won't be using for years. Who cares what it looks like now? Now this guy has let the current market situation influence long term retirement planning, it doesn't make any sense.
Yes, you're already double exposing yourself by having VUN and VFV in the first place. Anything in the S&P500 will by definition be in the Total Market one. Just having VUN and VDU would be perfectly fine since Canada would be included in VDU.
I really don't think the average person needs more than 2 or 3 funds in their retirement portfolio. (The third one would be some sort of bond fund once you reach the point that you want bonds)
RumblingRosco
Member
-
Okay so this is what I'm thinking. I'm fresh out of college, working a basic retail job with no knowledge in investments. Over the past few months, I've been working to eliminate my consumer debt, which looks to be completely paid off in the next month. I understand the need for emergency funds, so I'm working to build that up however I understand the earlier I save, the better. I can shell out about $1000 no problem to invest and set up my direct deposit to supplement the account if need be.
Hopefully all this means I am going in the right direction. For someone in my position, what type of investment should I start looking into? Also, is $1000 enough or do I need to save more?
RumblingRosco
Member
-
I may just hold off until April 16th if this is the case. I just filed my 2015 1040EZ last night so I don't want to risk getting into an auditing situation. Rather just start fresh at the beginning of new tax season.
My job does have a 401k plan, however there are unions involved and there is a lengthy probation period before I even qualify (something like 18 months which is ridiculous). I may find a different job or even move by then.
Also, does the target date fund qualify as a ROTH IRA? Just want to be clear on that as I'd rather pay taxes on my money upfront than down the line.
Thanks for the insight!
EarsOfASnake
Member
I think you're reading something in to my comment that isn't actually there. I am not talking about an emotional 'sting' whilst looking at my account, I was talking about having a little stability in the form of bonds compared to all out equity. As my first venture into investing I thought it would be better to go 80% rather than the full 100% but after a year of reading more about the subject I think it wasn't necessary.
A IRA is a type of investment account that can hold many different investments.
So you would open up a Roth IRA account with Vanguard, and then you'd be able to fund it and buy all sorts of funds in that account, including the Target Date funds. Later on when you have more money you would also be able to sell your Target Date funds and hold Admiral class funds to lower your fees, if you'd like. ( I don't actually have a Vanguard account, but from what I understand once you have $5k you can get some funds with lower management fees than you could get otherwise).
That said, the Target Date funds are pretty great and will save you a lot of time worrying about and trying to figure asset allocations ( how much of your portfolio to keep in bonds vs stocks etc), and are probably what I'd do if we had decent Target Date funds in Canada.
RumblingRosco
Member
-
Adding on to the whole Traditional vs. Roth discussion (401K and IRA), is there a generally accepted income point where it would be preferable to have one over the other?
For example, when I first got into the 'real' world, I started with Roth 401K, but about 2yrs later when I got my income adjusted for relocation and cost of living, I switched all of it over to traditional (was this the right move?). Somewhere in the last 20pgs, I vaguely recall that if you make more than ~100k/yr (and if your income will keep increasing), the Traditional variants would be the better option to maximize take-home income upon retirement?
I have been doing a backdoor Roth conversion for the past few years, but I'm wondering if it would be advantageous to just leave the annual $5500 in the Traditional bucket without transferring it over. I am aware that you can use a Roth IRA to pull $10k after 5yrs tax-free for home purchasing, and that contributions can be pulled at any time.
For example, when I first got into the 'real' world, I started with Roth 401K, but about 2yrs later when I got my income adjusted for relocation and cost of living, I switched all of it over to traditional (was this the right move?). Somewhere in the last 20pgs, I vaguely recall that if you make more than ~100k/yr (and if your income will keep increasing), the Traditional variants would be the better option to maximize take-home income upon retirement?
I have been doing a backdoor Roth conversion for the past few years, but I'm wondering if it would be advantageous to just leave the annual $5500 in the Traditional bucket without transferring it over. I am aware that you can use a Roth IRA to pull $10k after 5yrs tax-free for home purchasing, and that contributions can be pulled at any time.
kutthoat5150
Member
So I know the Roth has a $5500 limit, and I plan on getting the Stock market and international stocks fund for $3000 each once I have enough in. My question is if I pull the $3k from my maxed out IRA, and that leaves me with $2.5k, can I keep adding and pulling from my IRA into my investments or is there a limit to the amount of transactions you can do per year? Or is the better way to fund this is just pulling from your bank account? Hope that makes sense.
chaosblade
Unconfirmed Member
I'm not sure what you mean by "adding" and "pulling." You shouldn't be "pulling" (selling???) anything.
If you didn't contribute for 2015, you can still do that for now, and you can contribute for 2016. So you could put $11k in right now. So you could get $3000 in each fund that way.
Edit: Actually, I get the impression you think the mutual funds are separate from the Roth. That's not the case. The Roth is an investment vehicle, and you choose what to invest the money in. So the funds you buy are part of your Roth, you don't "pull" the money from it to put into the funds.
Randolph Freelander
Member
Additionally, I can't tell if you were talking about taking funds out of one IRA to fund another. I'll just say that the $5500 is the limit across all IRAs for the year -- traditional or Roth. If you want to convert traditional IRA funds to a Roth, you can do that, but you would need to pay taxes on any gains when you do so.
If you're just starting out and worried about hitting the minimums, I'd say just go ahead and do the full amount into the domestic fund this year, and then start diversifying into international to your level of satisfaction in future years. Or you could skip the mutual funds and buy into ETFs in your IRA at whatever allocation you like, since there are no minimums in play. I like using mutual funds because I can put all my dollars to work, whereas ETFs will leave a small amount unallocated (which should be less than the value of 1 share of the ETF, in reality), but in the grand scheme it's not that big of a deal.
Anyone here invest in dividend stocks as a majority of your portfolio? IMHO I think now is the time to double down in energy stocks and I keep eyeing Exxon to get into the 60s. XEL, SO, are buys for me and I'm watching PSX and XOM. I think in three-four months when the price of oil has had a chance to really filter through and push down Exxon and Phillips 66. I also really like HCP.
To me dividend stocks are a great way to mitigate risk while still having solid returns.
To me dividend stocks are a great way to mitigate risk while still having solid returns.