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[Panzon]

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.

Will check. Gonna sit down with my wife tonight and go over all these things together.
Thanks a bunch guys

 

[suffah]

So I've been maxing out my 401k at 17k/yr (employee does the standard 6% match).

Coworker told me I was better off depositing only 6% and investing the remaining amount by myself since there would be more options.

Thoughts on this?

 

[Piecake]

So I've been maxing out my 401k at 17k/yr (employee does the standard 6% match).

Coworker told me I was better off depositing only 6% and investing the remaining amount by myself since there would be more options.

Thoughts on this?

He is partially right. You would be better off investing up to the match, but then invest your other funds into a Roth IRA. You have complete freedom to invest in whatever fund (or stock if you want) and zero to very little fees tied to that account. You also get tax diversification. Once you max that out I would invest the rest into your 401k unless the funds and fees in your 401k are absolutely hideous.

 

[gooderthanu]

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.

So far this year its -1.9%

Last year was 23.7% (personal rate of return)

 

[suffah]

He is partially right. You would be better off investing up to the match, but then invest your other funds into a Roth IRA. You have complete freedom to invest in whatever fund (or stock if you want) and zero to very little fees tied to that account. You also get tax diversification. Once you max that out I would invest the rest into your 401k unless the funds and fees in your 401k are absolutely hideous.

I don't qualify for a Roth IRA...only a traditional. With 401k maxed out I also have some other retirement funds going. I am just curious if I should cap at 6% and divert everything to my other accounts or not.

 

[Cyan]

So far this year its -1.9%

Last year was 23.7% (personal rate of return)

From a quick calculation, S&P is -2.78% YTD. And was 29.6% for 2013. From memory, the Total US Market was actually above 30% for 2013.

Your funds substantially underperformed in 2013, I would consider indexing.

 

[Randolph Freelander]

I don't qualify for a Roth IRA...only a traditional. With 401k maxed out I also have some other retirement funds going. I am just curious if I should cap at 6% and divert everything to my other accounts or not.

My take is I'd keep maxing your pre-tax accounts first. If your 401K has good options, keep it there. It's just easier to manage. Then direct any surplus you have to ETFs.

 

[Piecake]

I don't qualify for a Roth IRA...only a traditional. With 401k maxed out I also have some other retirement funds going. I am just curious if I should cap at 6% and divert everything to my other accounts or not.

If these investments are for retirement then I would try to stick all of it in retirement accounts. It doesnt make much sense to not take advantage of avoiding the capital gains tax if you don't have to. Personally, I prefer IRAs to 401ks so thats why I suggested the IRA after the 401k match then start funding your 401k again. So yea, if you don't qualify for a Roth then go with a traditional instead. Traditional is basically the same as a 401k, but with freedom to invest in what you want and with no to less fees than a 401k.

 

[Randolph Freelander]

If these investments are for retirement then I would try to stick all of it in retirement accounts. It doesnt make much sense to not take advantage of avoiding the capital gains tax if you don't have to. Personally, I prefer IRAs to 401ks so thats why I suggested the IRA after the 401k match then start funding your 401k again. So yea, if you don't qualify for a Roth then go with a traditional instead. Traditional is basically the same as a 401k, but with freedom to invest in what you want and with no to less fees than a 401k.

He makes too much for a traditional IRA to have any benefit, too.

Edit: I had to get a bit of a re-education on IRAs in the past hour or so, because prior to suffah's post, I was ignorant to income limits, and I had a simply wrong idea of how interchangeable 401Ks were with traditional IRAs. They simply aren't. I had thought that the current year limit of $17,500 towards a 401K (for those under age 50, not inclusive of employer contributions) was also applicable to a traditional IRA, but that's not the case. For 2013, you're limited to $5500, and the tax deduction completely phases out for single filers at $69,000 MAGI. That simply does not compare favorably to a 401K for those of us fortunate enough to earn more than that.

 

[Piecake]

He makes too much for a traditional IRA to have any benefit, too.

Hrmm, forgot that you can't deduct contributions from a traditional IRA if your income is too high. Still, there is a benefit. His funds will grow tax free and avoid the capital gains tax.

Its likely that his 401k is better for him then, but to get an accurate assessment he will need to do some math to see if the fees and the fees of the offered funds in the 401k exceed the tax hit he gets from not meeting the tax deduction requirements of a traditional IRA. If it exceeds, then the traditional IRA is better. If it doesnt, the 401k is better. Probably just easier to go with the 401k though and avoid all of that calculation

 

[Y2Kev]

If you've got 10k in a fund or more at Vanguard, does it autoconvert to Admiral Shares? Is there an option for that?

 

[Piecake]

If you've got 10k in a fund or more at Vanguard, does it autoconvert to Admiral Shares? Is there an option for that?

No, you have to manually convert it. You should see the option on the fund that you can convert to admiral on your balance and holdings screen.

 

[Y2Kev]

I don't qualify for a Roth IRA...only a traditional. With 401k maxed out I also have some other retirement funds going. I am just curious if I should cap at 6% and divert everything to my other accounts or not.

Do you have tax deductible IRAs? If no, you should consider a Backdoor Roth. I use them every year in January to fund a Roth IRA for the full year.

Basically, take 5,500 and contribute it to a nondeductible traditional IRA (you will need to file a special form with your taxes). After the funds settle, immediately convert the IRA to a Roth IRA (there are no income limits on conversions). You will only pay tax on any appreciation at the time of conversion.

Do not do this if you have other tIRAs from before you crossed the Roth income limit. The pro-rate rule will screw you over.

 

[gooderthanu]

From a quick calculation, S&P is -2.78% YTD. And was 29.6% for 2013. From memory, the Total US Market was actually above 30% for 2013.

Your funds substantially underperformed in 2013, I would consider indexing.

Well looking at what seems to be the two funds available for indexing...it says about 22% YTD last year. But the expense is crazy low .04 and .02.

Fxsix is .04

The other has no symbol since it probably is truly an index fund? It just described as
Fidelity® U.S. Equity Index Commingled Pool Class 2

.02 expense. But the funds I'm in will say 30% YTD as of last year but I guess if you account for the expenses it kills it? Little confused

 

[Piecake]

Well looking at what seems to be the two funds available for indexing...it says about 22% YTD last year. But the expense is crazy low .04 and .02.

Fxsix is .04

The other has no symbol since it probably is truly an index fund? It just described as
Fidelity® U.S. Equity Index Commingled Pool Class 2

.02 expense. But the funds I'm in will say 30% YTD as of last year but I guess if you account for the expenses it kills it? Little confused

FXSIX is their SP 500 institutional fund. I have honestly no idea what commingled US equity is, so you might need to ask your HR department. I googled it and didnt really come up with a satisfactory answer.

The SP 500 gained 30% last year, so I am not sure why its saying 22%. Still, past performance is meaningless because they do not predict future returns. I think the only absolute predictor of future returns is the fees. If your fund has an expense ratio of 1%, that fund will need to beat the SP 500 by .96% to make the investment make sense. Considering that a minority of funds beat their index after fees and that barely any funds consistently beat their index I would not want to make that bet.

 

[gooderthanu]

FXSIX is their SP 500 institutional fund. I have honestly no idea what commingled US equity is, so you might need to ask your HR department. I googled it and didnt really come up with a satisfactory answer.

The SP 500 gained 30% last year, so I am not sure why its saying 22%. Still, past performance is meaningless because they do not predict future returns. I think the only absolute predictor of future returns is the fees. If your fund has an expense ratio of 1%, that fund will need to beat the SP 500 by .96% to make the investment make sense. Considering that a minority of funds beat their index after fees and that barely any funds consistently beat their index I would not want to make that bet.

So fxsix sounds like my best bet?

 

[Piecake]

So fxsix sounds like my best bet?

If your whatever fund is a Total US stock market fund then I would invest in that. Since I have no idea, I would go with the SP 500. The difference between the two is that Total US means the total stock market. SP 500 consists of the US' 500 biggest companies, so you are missing out on some mid and small cap stocks that way.

If you can't find out, I would probably go with the SP 500 since its kinda foolish to invest in something that don't understand. I would open up an IRA though so that you can invest in a Total International Index fund as well (and a bond index fund if you want to invest in bonds).

 

[Ether_Snake]

I find that investing in various broad ETFs tends to just increase transaction costs. There's so little that the US market itself isn't representative of due to its diversity and size. I'd think investing in US, developed world excluding-US, and a smaller chunk in emerging markets would be enough. I don't see a point in investing in industrials, energy, etc., not if you are investing on a long term basis.

For shorter term investments, it can be good if you evaluate if some sectors, especially relatively cyclical ones, are undervalued. But for long term, I don't see the point.

 

[gooderthanu]

If your whatever fund is a Total US stock market fund then I would invest in that. Since I have no idea, I would go with the SP 500. The difference between the two is that Total US means the total stock market. SP 500 consists of the US' 500 biggest companies, so you are missing out on some mid and small cap stocks that way.

If you can't find out, I would probably go with the SP 500 since its kinda foolish to invest in something that don't understand. I would open up an IRA though so that you can invest in a Total International Index fund as well (and a bond index fund if you want to invest in bonds).

I'm not sure what information you are missing? This is all 401k. I have no other funds such as an IRA. I do have a pension plan though so that works itself out. There is an international index fund too for .06. I'm thinking 90/10 for us/ international.

 

[gooderthanu]

Oh and I'm not interested in messing much with moving funds around to squeeze out more money. I'm thinking when I get closer to retirement I move most to bonds to secure.? Still got 30 or so years.

 

[suffah]

Thanks everyone for responding.

If these investments are for retirement then I would try to stick all of it in retirement accounts. It doesnt make much sense to not take advantage of avoiding the capital gains tax if you don't have to. Personally, I prefer IRAs to 401ks so thats why I suggested the IRA after the 401k match then start funding your 401k again. So yea, if you don't qualify for a Roth then go with a traditional instead. Traditional is basically the same as a 401k, but with freedom to invest in what you want and with no to less fees than a 401k.

My concern is the $5500 limit with a traditional IRA. I definitely need to educate myself more though.

He makes too much for a traditional IRA to have any benefit, too.

Edit: I had to get a bit of a re-education on IRAs in the past hour or so, because prior to suffah's post, I was ignorant to income limits, and I had a simply wrong idea of how interchangeable 401Ks were with traditional IRAs. They simply aren't. I had thought that the current year limit of $17,500 towards a 401K (for those under age 50, not inclusive of employer contributions) was also applicable to a traditional IRA, but that's not the case. For 2013, you're limited to $5500, and the tax deduction completely phases out for single filers at $69,000 MAGI. That simply does not compare favorably to a 401K for those of us fortunate enough to earn more than that.

Yep I think I'm going to stick with maxing out the 401k for now. I think the better question for me is if I should be putting $5500 into a traditional IRA or continue putting all my extra savings into ETF/Mutual funds.

Do you have tax deductible IRAs? If no, you should consider a Backdoor Roth. I use them every year in January to fund a Roth IRA for the full year.

Basically, take 5,500 and contribute it to a nondeductible traditional IRA (you will need to file a special form with your taxes). After the funds settle, immediately convert the IRA to a Roth IRA (there are no income limits on conversions). You will only pay tax on any appreciation at the time of conversion.

Do not do this if you have other tIRAs from before you crossed the Roth income limit. The pro-rate rule will screw you over.

Never heard of a backdoor roth before - will definitely look into this. Edit: Looks like this is perfect for me since I have no other IRA accounts.

Thanks all - I realize I don't know shit about retirement funds but this thread has motivated me to learn.

 

[Piecake]

I'm not sure what information you are missing? This is all 401k. I have no other funds such as an IRA. I do have a pension plan though so that works itself out. There is an international index fund too for .06. I'm thinking 90/10 for us/ international.

The information that I was talking about was that I have no idea what the commingled fund is, and that affects the choices. If you find out its a Total US stock Fund I would invest in that since I think that is a better fund than the SP 500. I also wasn't aware that your 401k had an international fund. So yea, investing in the SP 500 and international would be a very good idea.

As for an IRA, its something that you open yourself. You just need to go Vanguard, fidelity, or some other online brokers website and set one up. So you can get one if you want. Personally, I like them better since there are no restrictions and no account maintenance fees if you meet some requirements. But if you want to keep things simple and just invest in your 401k with those two funds then that is totally fine considering the expense ratio of your two index funds is ridiculously low.

As for bonds, yea, I think they are only necessary when you get closer to retirement. Many disagree with me though. However, it is vitally important that you do what you are comfortable with. IF you think you will panic when the market crashes then you probably need to invest in bonds now. There is nothing worse than pancking and selling low.

 

[gooderthanu]

The information that I was talking about was that I have no idea what the commingled fund is, and that affects the choices. If you find out its a Total US stock Fund I would invest in that since I think that is a better fund than the SP 500. I also wasn't aware that your 401k had an international fund. So yea, investing in the SP 500 and international would be a very good idea.

As for an IRA, its something that you open yourself. You just need to go Vanguard, fidelity, or some other online brokers website and set one up. So you can get one if you want. Personally, I like them better since there are no restrictions and no account maintenance fees if you meet some requirements. But if you want to keep things simple and just invest in your 401k with those two funds then that is totally fine considering the expense ratio of your two index funds is ridiculously low.

As for bonds, yea, I think they are only necessary when you get closer to retirement. Many disagree with me though. However, it is vitally important that you do what you are comfortable with. IF you think you will panic when the market crashes then you probably need to invest in bonds now. There is nothing worse than pancking and selling low.

Oh yes I know about IRA but I don't have the money for that right now. Bills first..

Also it looks like the commingled fund is THE fun at 0.02

Fund Overview
Objective
The Pool seeks to provide investment results that correspond to the total return performance of common stock publicly traded in the United States.
Strategy
Normally, at least 90% of the assets will be invested in common stocks included in the S&P 500 Index, which broadly represents the performance of common stocks publicly traded in the United States. The Pool may also invest in futures, index options, and exchange traded funds. Unit price and return will vary.

Fidelity threw me off cause at the bottom it shows the year return as of 12/31/13 and it was 32% as you guesstimated. So i'll switch it up!

 

[gooderthanu]

Awesome I've reallocated. Everything I've read seems to say this is the way to go. To me it seems like a scam and that they are trying to take your money slowly.

So I was on my wife's acct and I've sent an email about this but when I try to change contributions and the sort she has no index funds. The best available seems to be a .6 fee fund that pretty much mimics sp500 (aadex).

But the weirdest thing... I can look at a stocks page and it shows a vanguard index fund (vinix). But I can't choose it. Same with a 2050 fund that shes already in...its selected but in the change contributions page you can't elect it.

 

[Munin]

I guess this thread is really "Invest for retirement (as an American)". As an European I have no idea how I can invest into something like Vanguard or if it is even possible, and what it means for my tax situation and all that.

 

[Piecake]

Awesome I've reallocated. Everything I've read seems to say this is the way to go. To me it seems like a scam and that they are trying to take your money slowly.

So I was on my wife's acct and I've sent an email about this but when I try to change contributions and the sort she has no index funds. The best available seems to be a .6 fee fund that pretty much mimics sp500 (aadex).

But the weirdest thing... I can look at a stocks page and it shows a vanguard index fund (vinix). But I can't choose it. Same with a 2050 fund that shes already in...its selected but in the change contributions page you can't elect it.

Thats very weird. That is something she might need to talk about with her HR department. If you get it figured out, I'd probably dump it all in the 2050 fund.

I guess this thread is really "Invest for retirement (as an American)". As an European I have no idea how I can invest into something like Vanguard or if it is even possible, and what it means for my tax situation and all that.

Hah, sorry. I have no idea what investment retirement situation is in Europe. I guess my advice would be to look for a brokerage that sells Index funds and put that investment in a tax advantaged retirement vehicle (if you guys have those). That is basically what this investment strategy boils down to. I just pimp Vanguard because I am familiar with it and I like it

 

[NetMapel]

Questions as a noob here:

Now I'm a Canadian so I don't know worrying about currency exchange would be worth it for me to get American ETF such as Vanguard. Fortunately, Canada has the iShares which seems to operate very similarly to the Vanguards. Here is an example of their index fund of the Toronto Stock Exchange (TSX): XIU

I'm pretty happy about its very low commissions and fees and have brought these data up with my bank investment advisor. The advisor has all sorts of charts and graphics that seem to show how dividend funds have higher rate of return. Here are some fund examples they recommended me for a balanced return:

https://www.google.ca/finance?q=MUTF_CA:RBF264&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF591&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF590&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF559&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF496&ei=nAb4UqCDM6eniAKYxAE

What do you guys think ? I don't find the return to be exceptionally high and it has higher MER. However, these funds do provide plenty of dividends throughout so I guess maybe that makes a difference ?

Also, what is a good online brokerage for Canadians to use to buy iShares stocks if, indeed, the iShares are much better and I should get those instead ? RBC Direct Investment is costly and I hope to find a cheaper place.

 

[Smiley90]

Questions as a noob here:

Now I'm a Canadian so I don't know worrying about currency exchange would be worth it for me to get American ETF such as Vanguard. Fortunately, Canada has the iShares which seems to operate very similarly to the Vanguards. Here is an example of their index fund of the Toronto Stock Exchange (TSX): XIU

I'm pretty happy about its very low commissions and fees and have brought these data up with my bank investment advisor. The advisor has all sorts of charts and graphics that seem to show how dividend funds have higher rate of return. Here are some fund examples they recommended me for a balanced return:

https://www.google.ca/finance?q=MUTF_CA:RBF264&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF591&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF590&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF559&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF496&ei=nAb4UqCDM6eniAKYxAE

What do you guys think ? I don't find the return to be exceptionally high and it has higher MER. However, these funds do provide plenty of dividends throughout so I guess maybe that makes a difference ?

Also, what is a good online brokerage for Canadians to use to buy iShares stocks if, indeed, the iShares are much better and I should get those instead ? RBC Direct Investment is costly and I hope to find a cheaper place.

Vanguard also has Canadian ETF's, do you realize that?

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

They're also very low-fee. Obviously less diversity than the US equivalent, but they have the important ones (Total US market, emerging, developing, bonds)

I started using Questrade and it's pretty awesome. Commission-free for ALL ETF's.

 

[NetMapel]

Vanguard also has Canadian ETF's, do you realize that?

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

They're also very low-fee. Obviously less diversity than the US equivalent, but they have the important ones (Total US market, emerging, developing, bonds)

I started using Questrade and it's pretty awesome. Commission-free for ALL ETF's.

Hmmm very interesting. I should bring these up to Scotiabank for their "second opinion" thing and ask. I still have doubt whether those dividend funds can beat index funds with these low fees, even if those funds do pay me dividends routinely.

 

[Smiley90]

Hmmm very interesting. I should bring these up to Scotiabank for their "second opinion" thing and ask. I still have doubt whether those dividend funds can beat index funds with these low fees, even if those funds do pay me dividends routinely.

I wouldn't worry about dividend funds unless you NEED the income. Check out e.g. VUN.TO, which will HEAVILY outperform any dividend fund, especially in the long term.

EDIT: Also your tag is so much funnier now having met you in person and knowing you're not a white male. :lol

 

[Learn2read]

Questions as a noob here:

Now I'm a Canadian so I don't know worrying about currency exchange would be worth it for me to get American ETF such as Vanguard. Fortunately, Canada has the iShares which seems to operate very similarly to the Vanguards. Here is an example of their index fund of the Toronto Stock Exchange (TSX): XIU

I'm pretty happy about its very low commissions and fees and have brought these data up with my bank investment advisor. The advisor has all sorts of charts and graphics that seem to show how dividend funds have higher rate of return. Here are some fund examples they recommended me for a balanced return:

https://www.google.ca/finance?q=MUTF_CA:RBF264&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF591&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF590&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF559&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF496&ei=nAb4UqCDM6eniAKYxAE

What do you guys think ? I don't find the return to be exceptionally high and it has higher MER. However, these funds do provide plenty of dividends throughout so I guess maybe that makes a difference ?

Also, what is a good online brokerage for Canadians to use to buy iShares stocks if, indeed, the iShares are much better and I should get those instead ? RBC Direct Investment is costly and I hope to find a cheaper place.

Both Questtrade and Virtual Brokers offer free purchasing of ETFs.

on phone so can't comment on their funds except to say that I personally invest in index ETFs.

 

[Cyan]

I'm pretty happy about its very low commissions and fees and have brought these data up with my bank investment advisor. The advisor has all sorts of charts and graphics that seem to show how dividend funds have higher rate of return.

Than what? A savings account?

Also, I bet they didn't show you the chart about how the funds they recommend give them higher kickbacks.

Here are some fund examples they recommended me for a balanced return:

"Balanced return" doesn't really mean anything. If you're reinvesting dividends--and you should be--there's absolutely no difference in outcome between funds that give dividends and funds that don't.

What do you guys think ? I don't find the return to be exceptionally high and it has higher MER. However, these funds do provide plenty of dividends throughout so I guess maybe that makes a difference ?

Ignore the advisor, look for index funds with low expense ratios. Check out Vanguard's Canadian site.

 

[Learn2read]

Also, check out the Canadian Couch Potato site

http://canadiancouchpotato.com/model-portfolios/

Although you might want to lower your fixed income %

 

[Piecake]

Questions as a noob here:

Now I'm a Canadian so I don't know worrying about currency exchange would be worth it for me to get American ETF such as Vanguard. Fortunately, Canada has the iShares which seems to operate very similarly to the Vanguards. Here is an example of their index fund of the Toronto Stock Exchange (TSX): XIU

I'm pretty happy about its very low commissions and fees and have brought these data up with my bank investment advisor. The advisor has all sorts of charts and graphics that seem to show how dividend funds have higher rate of return. Here are some fund examples they recommended me for a balanced return:

https://www.google.ca/finance?q=MUTF_CA:RBF264&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF591&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF590&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF559&ei=nAb4UqCDM6eniAKYxAE
https://www.google.ca/finance?q=MUTF_CA:RBF496&ei=nAb4UqCDM6eniAKYxAE

What do you guys think ? I don't find the return to be exceptionally high and it has higher MER. However, these funds do provide plenty of dividends throughout so I guess maybe that makes a difference ?

Also, what is a good online brokerage for Canadians to use to buy iShares stocks if, indeed, the iShares are much better and I should get those instead ? RBC Direct Investment is costly and I hope to find a cheaper place.

DO NOT FOLLOW THAT GUYS ADVICE. Holy crap that is bad. An actively managed global bond fund and an international currency fund? What?

Also, past performance does not guarantee future returns. And a high dividend fund does not mean that it will get you higher return. It just means that you will get higher dividends. We don't know what those future holds so high dividend stocks could definitely under-perform the market.

Also, why would you care about dividends if you are sticking it in a retirement account? All you would be doing is reinvesting them, so whats the point besides stupidly high fees? Remember past performance doesnt mean future returns. If that was the case, we would all be filthy rich.

The best predictor for future returns is the fees. The lower the fee the better chance of YOU seeing better returns. The fees on those fees are ATROCIOUS. Thats an average MER of 1.58%. I mean, my god. That would easily cost you hundreds of thousands of dollars in fees over a 40 year period. You would be literally pissing away money. I am not even including the likely high turnover rate fees of those funds. Urghh....

Like the above poster said, Vanguard is in Canada. Ishares are fine too, but man. Don't listen to that idiot. He is either trying to milk you with fees and kickbacks from RBC or is just an idiot.

 

[NetMapel]

I wouldn't worry about dividend funds unless you NEED the income. Check out e.g. VUN.TO, which will HEAVILY outperform any dividend fund, especially in the long term.

EDIT: Also your tag is so much funnier now having met you in person and knowing you're not a white male. :lol

Questrade sounds pretty excellent. They have an office in Metrotown so I'll pay them a visit tomorrow to talk about it. I was very skeptical of the bank investment advisor because I know they make money through MER%. I talked to RBC first because it was just convenient for me to speak to an investment advisor within my own bank.

That reminds me, if you want to do regular monthly contribution into places like Questrade, did you set up a fund transfer thing between your bank and Questrade ? Does it costs money to do the fund transfer ? I'm going to look into Vanguard Canada and iShares investment so I can start taking advantage of it tomorrow when I go talk to Questrade !

PS: lol yeah I'm pretty sure I got my tag because I once told some mod that I'm an Asian girl or something. The mod wouldn't believe me and gave me that tag instead. Nothing quite as epic is Smiley Cyrus

 

[Smiley90]

Questrade sounds pretty excellent. They have an office in Metrotown so I'll pay them a visit tomorrow to talk about it. I was very skeptical of the bank investment advisor because I know they make money through MER%. I talked to RBC first because it was just convenient for me to speak to an investment advisor within my own bank.

That reminds me, if you want to do regular monthly contribution into places like Questrade, did you set up a fund transfer thing between your bank and Questrade ? Does it costs money to do the fund transfer ? I'm going to look into Vanguard Canada and iShares investment so I can start taking advantage of it tomorrow when I go talk to Questrade !

PS: lol yeah I'm pretty sure I got my tag because I once told some mod that I'm an Asian girl or something. The mod wouldn't believe me and gave me that tag instead. Nothing quite as epic is Smiley Cyrus

You can just pay them money like a regular bill from your online banking account? So I'm sure you can set it up as a regular bill. There's no transfer-in fee by Questrade and no account-holder fee, so as long as you only deal with ETF's, you're basically paying 0 fees at all to use the service. It'll cost 5-10 dollars to sell the ETF and then there's a one-time transfer-out fee when you retire, that but that shouldn't matter in the long run.

 

[Learn2read]

The best predictor for future returns is the fees. The lower the fee the better chance of YOU seeing better returns. The fees on those fees are ATROCIOUS. Thats an average MER of 1.58%. I mean, my god. That would easily cost you hundreds of thousands of dollars in fees over a 40 year period. You would be literally pissing away money. I am not even including the likely high turnover rate fees of those funds. Urghh....

and it's still below average in Canada. I think the average MF fee is well over 2%

:canadacry

 

[NetMapel]

and it's still below average in Canada. I think the average MF fee is well over 2%

:canadacry

Pretty much all the Canadian banks are fee-crazy that's why you gotta search around and ask for good advises like here on GAF

 

[GhaleonEB]

Pretty much all the Canadian banks are fee-crazy that's why you gotta search around and ask for good advises like here on GAF

Definitely check out Vanguard's Canada site Cyan linked. The fees in the funds you listed will cost you literally hundreds of thousands of dollars by the time you retire. (One scenario I ran was on my retirement funds. Starting with what I have now I did a 7% vs. 8% rate of return over 30 years. The difference was nearly a million bucks.)

Get out of those funds asap.

 

[gooderthanu]

Thats very weird. That is something she might need to talk about with her HR department. If you get it figured out, I'd probably dump it all in the 2050 fund.



Hah, sorry. I have no idea what investment retirement situation is in Europe. I guess my advice would be to look for a brokerage that sells Index funds and put that investment in a tax advantaged retirement vehicle (if you guys have those). That is basically what this investment strategy boils down to. I just pimp Vanguard because I am familiar with it and I like it

Why would I do the 2050 fund if she could do an index fund? Also if she only can do a 2050 fund and not an indezX fund shouldn't we do the fund with .6 fee that seems to mimic an index fund?

 

[Piecake]

Why would I do the 2050 fund if she could do an index fund? Also if she only can do a 2050 fund and not an indezX fund shouldn't we do the fund with .6 fee that seems to mimic an index fund?

Well, the 2050 fund should be a compilation of a bunch of index funds into one fund. SO youd have Total US total INternational, Total US bond, and Total International Bond. Its basically an all-in-one index fund, all of the indexes that you should be investing in all in one fund with very low fees as well

If the 2050 fund is not what I described then you should do the index.

 

[iamblades]

I find that investing in various broad ETFs tends to just increase transaction costs. There's so little that the US market itself isn't representative of due to its diversity and size. I'd think investing in US, developed world excluding-US, and a smaller chunk in emerging markets would be enough. I don't see a point in investing in industrials, energy, etc., not if you are investing on a long term basis.

For shorter term investments, it can be good if you evaluate if some sectors, especially relatively cyclical ones, are undervalued. But for long term, I don't see the point.

As far as sector ETFs go, I agree. Buying one stock fund that covers everything is generally the most efficient way to go about things.

There are reasons to buy other indexes depending on what your goal is though, I have a total US fund and the S&P dividend achievers fund (SDY). But I wouldn't buy sector funds for long term investing, and I definitely wouldn't double up on indexes that cover the same area. There is no real reason to own the S&P or the dow if you already own the total market, you would just be biasing your allocation towards large caps, which is not what we want.

 

[gooderthanu]

Well, the 2050 fund should be a compilation of a bunch of index funds into one fund. SO youd have Total US total INternational, Total US bond, and Total International Bond. Its basically an all-in-one index fund, all of the indexes that you should be investing in all in one fund with very low fees as well

If the 2050 fund is not what I described then you should do the index.

Yes but thought the idea here is to save on fees.

 

[Smidget]

Hey guys, read this thread from front to back over the past couple days and wanted to get a second opinion on my situation before moving forward.

Background: Married, both 28, no kids or plans for them, have a new car with 0.49% interest 48 months, and a new house with 3.5% interest 30 year mortgage no PMI. No student loans, no credit card or other debt.

Current retirement balances:
American Funds Wife IRA - $47K (researched funds they are in and horrible expense ratios, from my wife's previous employment)
Chase My ROTH IRA - $32K (Fidelity retirement funds with not great expense ratio)
Chase Wife ROTH IRA - $27K (same as above)
Chase My IRA (401K rollover from previous job) - $57K (managed retirement fund, tons of different vehicles with high expense ratios aplenty)
Both of our jobs 401K - not vested yet, but we both receive 10% of our salary (5-6K each) annually with no contribution. No matching available. 0.19% expense for large cap stock index and 0.23% expense for international.

Current cash balances:
$4K in checking for normal monthly expenses
$50K in checking that provides American Airline miles. It costs $13/mo to maintain but I get 10K miles a month or 120K a year for approximately 5 round trip US flights (or a couple of European ones). Our emergency fund would only be $24K, but we like to travel and if we estimate flights at $500-600 each, we do get "interest" of 4.7%-5.7%.

My plan is to open up a Vanguard account for myself and one for my wife. Transfer my ROTH and IRA into Vanguard accounts using a 60/40 split of VTSAX and VTIAX for both vehicles. (Are those the right ones to use?). Transfer her ROTH and IRA and do the same as well.

As far as investing and going forward priorities:
1) Fully fund ROTH IRAs yearly.
2) ?? 401K contributions or IRAs? Not sure which to go to...

I know the $50K isn't the smartest to be sitting in checking, but we do like to get "free" flights

I guess that's it. Thanks in advance and great thread.

 

[Anoregon]

I am glad I bothered finding this thread. I have been looking for somewhere to move a chunk of money other than wasting away in my checking account, and now that I know about the Vanguard total stock index, I think I have a pretty good option.

 

[Imperial Hot]

Here's my financials. I am a college student and a lot of my expenses are fortunately covered by my parents until I graduate (this December). I'll be on my own from there, but without student loans so that's pretty great.

I don't have any credit card debt and I've got about $8500 to my name. I've got $2,200 in a ING savings account which earns me next to nothing and the rest is in my checking ($6,300). Now, I'm trying to figure out the best way to invest my money for my future, but my main concern is that I don't want it to be locked away from me in case of an emergency and I need access to all of it. I'm not working at an employer that has a 401(k) program because I am a server for right now.

So GAF, tell me how to manage my dough.

 

[Piecake]

Yes but thought the idea here is to save on fees.

Oh, it definitely is, but diversification is important as well. Maybe I simply missed what the expense ratio of the 2050 fund was, but those lifetime retirement funds should be quite cheap, like .20 expense ratio cheap. I am really not quite sure why your other index fund costs .6 though, so you might just have a bad 401k that hikes up the ER of funds.

Hey guys, read this thread from front to back over the past couple days and wanted to get a second opinion on my situation before moving forward.

Background: Married, both 28, no kids or plans for them, have a new car with 0.49% interest 48 months, and a new house with 3.5% interest 30 year mortgage no PMI. No student loans, no credit card or other debt.

Current retirement balances:
American Funds Wife IRA - $47K (researched funds they are in and horrible expense ratios, from my wife's previous employment)
Chase My ROTH IRA - $32K (Fidelity retirement funds with not great expense ratio)
Chase Wife ROTH IRA - $27K (same as above)
Chase My IRA (401K rollover from previous job) - $57K (managed retirement fund, tons of different vehicles with high expense ratios aplenty)
Both of our jobs 401K - not vested yet, but we both receive 10% of our salary (5-6K each) annually with no contribution. No matching available. 0.19% expense for large cap stock index and 0.23% expense for international.

Current cash balances:
$4K in checking for normal monthly expenses
$50K in checking that provides American Airline miles. It costs $13/mo to maintain but I get 10K miles a month or 120K a year for approximately 5 round trip US flights (or a couple of European ones). Our emergency fund would only be $24K, but we like to travel and if we estimate flights at $500-600 each, we do get "interest" of 4.7%-5.7%.

My plan is to open up a Vanguard account for myself and one for my wife. Transfer my ROTH and IRA into Vanguard accounts using a 60/40 split of VTSAX and VTIAX for both vehicles. (Are those the right ones to use?). Transfer her ROTH and IRA and do the same as well.

As far as investing and going forward priorities:
1) Fully fund ROTH IRAs yearly.
2) ?? 401K contributions or IRAs? Not sure which to go to...

I know the $50K isn't the smartest to be sitting in checking, but we do like to get "free" flights

I guess that's it. Thanks in advance and great thread.

Sounds like a good plan. And yea, those are the two funds that I think are the best and the ratio that I like. Just be sure that YOU are comfortable doing that. There is nothing worse than panicking because of a huge market crash and selling all of your funds. If you can't handle a steep market crash then invest in something like Total Bond.

Now, I am not trying to convince you to invest in bonds since i htink those are pretty pointless until you get into your 50s, but I just want you to really reflect on how you would react during a 2008 crash.

As for your IRA and 401k question, since there is no 401k employer match I would fully fund both of your IRAs first. If you want to save more after that, then fund the 401k

Here's my financials. I am a college student and a lot of my expenses are fortunately covered by my parents until I graduate (this December). I'll be on my own from there, but without student loans so that's pretty great.

I don't have any credit card debt and I've got about $8500 to my name. I've got $2,200 in a ING savings account which earns me next to nothing and the rest is in my checking ($6,300). Now, I'm trying to figure out the best way to invest my money for my future, but my main concern is that I don't want it to be locked away from me in case of an emergency and I need access to all of it. I'm not working at an employer that has a 401(k) program because I am a server for right now.

So GAF, tell me how to manage my dough.

Well, until you get a more stable career, I would probably hold off on investing it. The reason for that is that your costs are covered by your parents so you really have no idea how much you need to budget for your monthly expenses when you are on your own, or if you need to make some significant purchases like furniture for a new place.

So yea, hold off on that until you know your monthly expenses and those are consistent. After that, get 6 months expenses if you are still at your sever job. If you find a career I think you could get away with 3 months.

After that, if your employer doesnt offer a 401k, I would open up a Roth IRA at Vanguard or Fidelity, follow the advice about Index funds that I have in the OP, and you should be fine. Just to be clear, this is for retirement. If you want to invest for a house then you would have to use a different strategy. You can still use index funds, definitely, but you might need to go a lot more conservative depending on your time frame, or be very flexible with that time frame.

 

[Smidget]

Thanks Piecake for the response. I'll get the ball rolling shortly as for panicking... I know I will but won't touch it. Have a lot of years ahead of me until retirement. Although 55 instead of 65 would be nice

 

[Imperial Hot]

Thanks Piecake. I just know that leaving a lot of money in a checking account is kind of a waste, but I totally understand what you are saying.

 

[RustyNails]

Today was a good day.