Support NeoGAF

[PflargBlarg]

Getting ready to make some large moves as I sold my property and now have an additional 60,000+ in liquid cash ready to go. Pretty excited to finally get rid of that property and get back into the flow of regular investments.

I should be able to save 1500/month now which doesn't seem like quite enough but I think I'm overly aggressive. I'm planning for 1.2 million in mid-2037 (age 48) which I probably don't actually need as my wife will also have (significantly smaller) retirement savings and a roughly 60k/year pension starting around 2041. I also suspect I'll be doing stuff for side income even when I'm retired, just as a hobby.

It's really difficult to plan this far out.

 

[Pakkidis]

I wrote a, too large, post way back here http://www.neogaf.com/forum/showpost.php?p=136790344&postcount=1519 on Canadian investing if you're interested in that. I'll actually probably go review it sometime soon and update it now that you've reminded me.

1. I haven't looked but there shouldn't be any transaction fees for buying mutual funds. Everywhere I've used has $0 commissions on mutual fund transactions. If you're talking about actual fund management fees then yeah, they're the same no matter how you buy them as they are intrinsic to the fund, not the place where you bought them.

2. I mention it in my post, but the 'gold standard' for easy DIY investing is Canadian Couch Potato model portfolios http://canadiancouchpotato.com/model-portfolios-2/
Read through that page and make your decision based on that information.

Thank you so much for the info.

I already bought a low risk ETF from quest trade so I seem to be on the right track already

 

[anonymous_abc]

It's really difficult to plan this far out.

I agree, nevertheless though piling on early can only get you out ahead.

 

[Keyouta]

I just opened up a TFSA and RRSP account, and ready to start investing. I'm Canadian if it matters. Is it wise, in my RRSP, to be putting 100% of it into the index? I was looking at vanguard's etf (VTI) and it's at it's highest point right now. I understand for my retirement I won't be withdrawing this money for 30 years probably, as I keep adding to it, but I still am hesitant to drop everything in it right now. I'm hoping for it to drop but I know in the long run it doesn't matter too much.

My TFSA I'm planning to also invest it in the index, but only about 70% or 60% of what I've got in there. I want about 30% of that to play around with. Is it smart here to be investing that 70% into one etf (the vanguard one again) or should I be investing in multiple indexes? This question also applies to my RRSP account.

Thanks in advance, I've been saving my money for a couple years in a savings account and making nothing from it while knowing to do this. First time really getting into trading/investing.

 

[iamblades]

What's the best way to start investing from basically scratch? Should I put some money away for a year/2 years in an ISA and then invest that? Or can I start investing using small monthly amounts?

There are plenty of options for doing the small monthly amounts thing these days.

You can open an IRA at Fidelity for free, and I'd imagine the same for most discount brokers these days. Then you buy whatever no transaction cost total stock market mutual fund or ETF they have and you are basically 90% of the way there.

Set up automatic contributions so you don't tempt yourself and set it and forget about it for as long as you possibly can.

I just opened up a TFSA and RRSP account, and ready to start investing. I'm Canadian if it matters. Is it wise, in my RRSP, to be putting 100% of it into the index? I was looking at vanguard's etf (VTI) and it's at it's highest point right now. I understand for my retirement I won't be withdrawing this money for 30 years probably, as I keep adding to it, but I still am hesitant to drop everything in it right now. I'm hoping for it to drop but I know in the long run it doesn't matter too much.

My TFSA I'm planning to also invest it in the index, but only about 70% or 60% of what I've got in there. I want about 30% of that to play around with. Is it smart here to be investing that 70% into one etf (the vanguard one again) or should I be investing in multiple indexes? This question also applies to my RRSP account.

Thanks in advance, I've been saving my money for a couple years in a savings account and making nothing from it while knowing to do this. First time really getting into trading/investing.

In terms of expected return, 100% in stocks is the way to go if you aren't going to be needing that money for the next 30 years. You just have to be willing to accept that it is almost certainly going to drop after you buy. If not this time, then the next time. On the other hand, you don't want to be one of those 'I'm going to wait till it drops' guys who missed the first 60% of every market upturn.

As for the second bit, all else being equal, there is no reason to have 2 funds when you could have one that covers the same thing. That said, there are times when things aren't all equal, ie the all in one fund has higher expenses than the two component funds, or in the case of Canada, you may want the same fund in USD and CAD to mitigate currency risks. One thing you want to watch out for though, is investing in two different funds where one is a subset of the other. ie. investing in the S&P total stock market index and the S&P dividend achievers. If you aren't careful you can substantially reduce your diversification, which is the whole point of index fund investing. I say this, even though I am guilty of this exact thing.

 

[chaosblade]

I just opened up a TFSA and RRSP account, and ready to start investing. I'm Canadian if it matters. Is it wise, in my RRSP, to be putting 100% of it into the index? I was looking at vanguard's etf (VTI) and it's at it's highest point right now. I understand for my retirement I won't be withdrawing this money for 30 years probably, as I keep adding to it, but I still am hesitant to drop everything in it right now. I'm hoping for it to drop but I know in the long run it doesn't matter too much.

My TFSA I'm planning to also invest it in the index, but only about 70% or 60% of what I've got in there. I want about 30% of that to play around with. Is it smart here to be investing that 70% into one etf (the vanguard one again) or should I be investing in multiple indexes? This question also applies to my RRSP account.

Thanks in advance, I've been saving my money for a couple years in a savings account and making nothing from it while knowing to do this. First time really getting into trading/investing.

Diversity is a good thing, but the total market index is already extremely diverse. The price right now is basically irrelevant, even though it's at an all-time high. Someone (probably Randolph) posted a while back about how the market is very frequently at or near its "all time high" due to the fact the market's overall trend is upward.

Pretty much the only things you should be considering alongside VTI are international indexes and bond indexes, neither of which you would want in very large amounts. International has sucked for a while, but should eventually bounce back. You probably don't want to put a ton into it, but it depends on your risk tolerance.

Since you are 30 years from retirement you probably also don't want to put a whole lot into bonds either, but again it's ultimately up to you. You want more bonds when you are closer to retirement since they have lower risk, but will also grow more slowly.

For what it's worth (read: not much) I am 30+ years from retirement and have a target 80/20 split for US/international stock and zero bonds. Some would say that's too much or too little international, some would say I should have some bonds despite being a long way from retirement. *shrug*

 

[Keyouta]

Okay I did it. I left myself some money to play with but 100% of my rrsp is in the index anyway. Ordered shares in VFV.TO, it looks good and since they started in 2012 the value has doubled. It tracks the S&P 500.

 

[tokkun]

I'm Canadian if it matters.

...

Okay I did it. I left myself some money to play with but 100% of my rrsp is in the index anyway. Ordered shares in VFV.TO, it looks good and since they started in 2012 the value has doubled. It tracks the S&P 500.

I don't think it's a good idea to put most of your retirement money in VFV, because it is not currency hedged. I'll skip the technical details unless you want them, but it means VFV is very high risk. If you want to put your money in the S&P 500, consider VSP instead.

https://www.vanguardcanada.ca/advis...-information/vfv-and-vsp-invest-us-stocks.htm

 

[Keyouta]

I don't think it's a good idea to put most of your retirement money in VFV, because it is not currency hedged. I'll skip the technical details unless you want them, but it means VFV is very high risk. If you want to put your money in the S&P 500, consider VSP instead.

https://www.vanguardcanada.ca/advis...-information/vfv-and-vsp-invest-us-stocks.htm

Okay that makes sense. On a rising Canadian dollar I'm going to be losing money if I'm not hedged. If I put my investments all into VSP, would that be the way to go?
I want to make smart decisions with my money and have been reading constantly and learning more about the market.

 

[tokkun]

Okay that makes sense. On a rising Canadian dollar I'm going to be losing money if I'm not hedged. If I put my investments all into VSP, would that be the way to go?
I want to make smart decisions with my money and have been reading constantly and learning more about the market.

Yeah, that's the idea. I would be especially wary about the currency risk because the CAD is unusually weak vs the USD right now:
http://www.xe.com/currencycharts/?from=CAD&to=USD&view=10Y

If there is a return to the mean, un-hedged funds will lose a lot of value.

You can go ahead and put your money in VSP. You'll probably end up diversifying a little more if you stay interested in learning, but it's a good starting point.

 

[Clay Davis]

Hi gaf.

I apologise if this is the wrong thread but I couldn't find another investment thread. I wanted to know what anyone with shares in ARM Holdings is doing today? Are you selling now or waiting to see if the price will go up?

My dad sold some of his earlier and he got a very nice return from what he's told me (almost £50.000), I have roughly the same amount of shares as him but I don't know if I should sell them too. I don't need the money, but I don't want to end up in a situation where I get much less for my shares.

Is it short termist to sell now or is this as good as it will get?

 

[Randolph Freelander]

Hi gaf.

I apologise if this is the wrong thread but I couldn't find another investment thread. I wanted to know what anyone with shares in ARM Holdings is doing today? Are you selling now or waiting to see if the price will go up?

My dad sold some of his earlier and he got a very nice return from what he's told me (almost £50.000), I have roughly the same amount of shares as him but I don't know if I should sell them too. I don't need the money, but I don't want to end up in a situation where I get much less for my shares.

Is it short termist to sell now or is this as good as it will get?

Stock thread: http://www.neogaf.com/forum/showthread.php?t=176332

 

[Clay Davis]

Stock thread: http://www.neogaf.com/forum/showthread.php?t=176332

Thank you. I'll repost it there.

Sorry for using the wrong thread.

 

[ZackieChan]

Did some quick calculations to see what I could realistically save by the time I'm in my early 50's (38 now), and whether living off the interest would be enough to live the conservative nomadic lifestyle I currently live. Assume no savings now, but putting $1,500 a month away this year (business is just starting to be steady). Calculating a monthly savings that increases each year by $100 (which assumes that my business would increase by that modest amount on an annual basis) with an assumed 7% interest rate (seems like that's what an index fund gets me on average) - that gets me to a point where I have $500,000 saved by 51 years old.

Apparently, going by other calculators, that's enough for me to live on interest of around $2,800 a month. I live in various countries where this is about twice as much as I need to live on. So that's a comfortable living for me, and I plan to keep that up in retirement.

The questions are:

1) is that an insane plan?
2) What vehicles does the money need to be in for me to be able to cash out interest like that? I assume if it's in Roth IRA or other retirement vehicles, I can't touch it without penalties until 59 or 60 years old, right?
3) What if part of it is in Roth IRA (which I'm funding now)? What should everything beyond the $5500 a year be in? I'm self employed, so no 401(k). I may set up a self-employed 401(k), but not sure if that's what I want to be doing.

Any advice would be appreciated. For the record, I'd still be doing some work beyond that age. I just don't want to HAVE to work. I love teaching and would love to be doing online courses and have other online businesses that run themselves at that point. I'd also like to be in game development, as well, but on the business side of things.

 

[tokkun]

Did some quick calculations to see what I could realistically save by the time I'm in my early 50's (38 now), and whether living off the interest would be enough to live the conservative nomadic lifestyle I currently live. Assume no savings now, but putting $1,500 a month away this year (business is just starting to be steady). Calculating a monthly savings that increases each year by $100 (which assumes that my business would increase by that modest amount on an annual basis) with an assumed 7% interest rate (seems like that's what an index fund gets me on average) - that gets me to a point where I have $500,000 saved by 51 years old.

Apparently, going by other calculators, that's enough for me to live on interest of around $2,800 a month. I live in various countries where this is about twice as much as I need to live on. So that's a comfortable living for me, and I plan to keep that up in retirement.

The questions are:

1) is that an insane plan?

It's probably pretty aggressive to assume 7% real growth over the next 10-15 years. Take a look at this distribution of annualized real returns over different time windows:

You really need to get out closer to a 30-year horizon to feel confident of those sort of returns. This is why it makes sense for most people to start shifting money into bonds closer to retirement; it lowers the mean but tightens the distribution. A lot of people also feel like near-term returns will probably be lower than 7%. Jack Bogle, the founder of Vanguard, thinks 4% for instance. The reason for this is that US stocks currently have pretty high trailing price/earnings ratios, and historically that has predicted lower growth rates.

Now it's possible the market may still hit the 7% rate or even do better, but I just wouldn't put yourself in the position where you are counting on that happening.

2) What vehicles does the money need to be in for me to be able to cash out interest like that? I assume if it's in Roth IRA or other retirement vehicles, I can't touch it without penalties until 59 or 60 years old, right?

You can withdraw Roth contributions without penalty and conversions without penalty 5 years after you did the conversion. The age limit is only on the amount the money grows while in the account.

3) What if part of it is in Roth IRA (which I'm funding now)? What should everything beyond the $5500 a year be in? I'm self employed, so no 401(k). I may set up a self-employed 401(k), but not sure if that's what I want to be doing.

Any advice would be appreciated. For the record, I'd still be doing some work beyond that age. I just don't want to HAVE to work. I love teaching and would love to be doing online courses and have other online businesses that run themselves at that point. I'd also like to be in game development, as well, but on the business side of things.

Solo 401k probably makes sense. You may also want to look at putting some fraction of your money into an HSA, although there are a lot of different factors involved in that decision. Otherwise you can just use a normal after-tax brokerage account.

 

[ZackieChan]

It's probably pretty aggressive to assume 7% real growth over the next 10-15 years. Take a look at this distribution of annualized real returns over different time windows:

You really need to get out closer to a 30-year horizon to feel confident of those sort of returns. This is why it makes sense for most people to start shifting money into bonds closer to retirement; it lowers the mean but tightens the distribution. A lot of people also feel like near-term returns will probably be lower than 7%. Jack Bogle, the founder of Vanguard, thinks 4% for instance. The reason for this is that US stocks currently have pretty high trailing price/earnings ratios, and historically that has predicted lower growth rates.

Now it's possible the market may still hit the 7% rate or even do better, but I just wouldn't put yourself in the position where you are counting on that happening.



You can withdraw Roth contributions without penalty and conversions without penalty 5 years after you did the conversion. The age limit is only on the amount the money grows while in the account.



Solo 401k probably makes sense. You may also want to look at putting some fraction of your money into an HSA, although there are a lot of different factors involved in that decision. Otherwise you can just use a normal after-tax brokerage account.

Thanks for the info. I was just spitballing future plans and the possibility of not needing to work at that age (which would be awesome). As I said, though, I'll probably be working far beyond that point - I'm lucky enough to actually enjoy my work, and hope to expand into other business ventures over the next decade.

So realistically, I could go with a longer timeline, and just decrease the amount of work I do when I hit my 50s. Thanks again!

 

[johnsmith]

So I need help with my 401k. Can anybody tell me which of these I should be putting my money into?

Invesco Stable Value Retirement Fund - Class CL5
PIMCO Total Return Fund - Class A
Ivy High Income Fund - Class Y
PIMCO Real Return Fund - Class A
Templeton Global Bond Fund - Class A
Manning & Napier Target Income Fund - Class K
Manning & Napier Target 2020 Series - Class K
Manning & Napier Target 2030 Series - Class K
Manning & Napier Target 2040 Series - Class K
Manning & Napier Target 2050 Series - Class K
BlackRock Global Allocation Fund, Inc. - Investor A Class
Franklin Income Fund - Class A
Invesco Equity and Income Fund - Class A
Nuveen Dividend Value Fund - Class A
BlackRock S&P 500 Index Fund - Institutional Class
American Funds The Growth Fund of America - Class R3
John Hancock Disciplined Value Mid Cap Fund - Class R2
Nuveen Mid Cap Growth Opportunities Fund - Class A
Victory Integrity Small-Cap Value Fund - Class A
ClearBridge Small Cap Growth Fund - Class A
MFS International Value Fund - Class A
Oppenheimer International Growth Fund - Class A
Aberdeen Emerging Markets Fund - Class A
Prudential Financial Services Fund - Class A
Delaware Healthcare Fund - Class A
Voya Real Estate Fund - Class A
Ivy Science and Technology Fund - Class Y

 

[tokkun]

So I need help with my 401k. Can anybody tell me which of these I should be putting my money into?

Invesco Stable Value Retirement Fund - Class CL5
PIMCO Total Return Fund - Class A
Ivy High Income Fund - Class Y
PIMCO Real Return Fund - Class A
Templeton Global Bond Fund - Class A
Manning & Napier Target Income Fund - Class K
Manning & Napier Target 2020 Series - Class K
Manning & Napier Target 2030 Series - Class K
Manning & Napier Target 2040 Series - Class K
Manning & Napier Target 2050 Series - Class K
BlackRock Global Allocation Fund, Inc. - Investor A Class
Franklin Income Fund - Class A
Invesco Equity and Income Fund - Class A
Nuveen Dividend Value Fund - Class A
BlackRock S&P 500 Index Fund - Institutional Class
American Funds The Growth Fund of America - Class R3
John Hancock Disciplined Value Mid Cap Fund - Class R2
Nuveen Mid Cap Growth Opportunities Fund - Class A
Victory Integrity Small-Cap Value Fund - Class A
ClearBridge Small Cap Growth Fund - Class A
MFS International Value Fund - Class A
Oppenheimer International Growth Fund - Class A
Aberdeen Emerging Markets Fund - Class A
Prudential Financial Services Fund - Class A
Delaware Healthcare Fund - Class A
Voya Real Estate Fund - Class A
Ivy Science and Technology Fund - Class Y

With that list I'd probably do 100% in the BlackRock S&P 500

 

[johnsmith]

With that list I'd probably do 100% in the BlackRock S&P 500

That's what I was thinking. Thanks.

 

[PflargBlarg]

It's a couple years old and I think I've actually seen it in here before, but a good case study in why diversification is good http://www.joshuakennon.com/gt-advanced-technologies-bankruptcy/

Admittedly this is full of people who went full undiversified but still.

 

[AntoneM]

Saving money is always advisable, but $13000 doesn't go a long way now and it surely won't go a long way in 2045. Any way you could kick in $50 a month?

This would just be on the side with "free" money. Already have a good start to my retirement account.

 

[Mrbob]

It's a couple years old and I think I've actually seen it in here before, but a good case study in why diversification is good http://www.joshuakennon.com/gt-advanced-technologies-bankruptcy/

Admittedly this is full of people who went full undiversified but still.

Sad story. This is why you don't want to put all your retirement money in one stock. Still, GTAT was a speculative stock. To put so much money into a speculative stock without a quick time horizon to move it out is almost like gambling. Speculative stocks are for trading. Not to buy and hold. Heck, even the SEC gave shareholders warning ahead of time. That is the signal to bail out. Unfortunately I'm guessing most didn't see the SEC message. Truly heartbreaking because people lost their entire life savings. You never want to see this happen.

There should almost be a law that at least 50% of your retirement money has to be within an index fund. I know some people like to hand pick 5 to 10 stocks for diversification but at this point might as well just buy an index fund which tracks the market.

I like to play around with selecting some speculative stocks with extra money (keeps things from getting boring), but for retirement? No thank you. Retirement money going into high quality index funds.

This is also an education issue. If you really think about it we go through high school and college to prepare ourselves for our future. However there really isn't any quality education on managing your money for the future. Investing for retirement should be a required college course.

 

[jdavid459]

I know this isn't retirement per say but still investment/finance related.

Does anyone have experience using credit unions for reward/high interest checking accounts? I just came across Consumer Credit Union that pays up to 4.59% interest depending on how much you have in you're account. It seems to good to be true? 4.59% beats what I've made on Index Funds in past years and would have no risk.

I must be missing something...what's the catch?

 

[ascii42]

I know this isn't retirement per say but still investment/finance related.

Does anyone have experience using credit unions for reward/high interest checking accounts? I just came across Consumer Credit Union that pays up to 4.59% interest depending on how much you have in you're account. It seems to good to be true? 4.59% beats what I've made on Index Funds in past years and would have no risk.

I must be missing something...what's the catch?

I guess the catch would be you have to hit all those bullet points every month. If you don't, you get .01% instead.

 

[PflargBlarg]

I guess the catch would be you have to hit all those bullet points every month. If you don't, you get .01% instead.

Yeah, being 'forced' to spend $1000 a month, specifically using THEIR credit card, and the 12 debit transactions a month is not super great. I haven't made a debit purchase in years that I can remember and I rarely spend $1000 on my credit card in a month.

In the end with all of that it still only applies up to 20,000 dollars so you're going to have to invest anyway.

 

[Calderc]

So I now you guys champion Index funds, and I'm looking to open one shortly when I have around £500 saved, but no where can I see mention of any minimum investments. Will I be able to open an index fund with £500 or will it need to be more than that?

I'm just getting to grips with this sort of thing just now so I apologise if that was dumb question haha.

 

[RumblingRosco]

-

 

[Calderc]

It depends where you invest into them -- you can't just buy an index fund on your own (as far as I know, anyway), but have to buy one through a broker. For example, I use Vanguard.com (in the US only I think) and they list the minimums for index funds on their website. Since you're talking in £, I assume you're in Europe, so you'll need to find a company that you can invest through to buy index funds. Maybe some of our European investors can chime in regarding this?

It was actually Vanguard's website (UK version) I was looking at and maybe I just wasn't looking in the right place but I couldn't see any mention of minimums.

And yeah, buy into one is what I meant. Don't really have the time to go visit a broker so would rather something where I could do it all online.

 

[RumblingRosco]

-

 

[ZackieChan]

I put $1000 to start on Schwab's index fund, $100 minimum. I think those funds basically work themselves, so they're cheap to administer.

Edit: I don't actually know what I'm talking about

 

[tokkun]

You might want to buy the ETF version of the index fund instead. The minimum investment will be the cost of one share; for VTI that's $110. The ETF also has the same expense ratio as the Admiral Shares version of the mutual fund, which has a $10K minimum.

The main downside of the ETF route is that they're not as simple to buy and sell as mutual funds.

 

[BearFoo]

It was actually Vanguard's website (UK version) I was looking at and maybe I just wasn't looking in the right place but I couldn't see any mention of minimums.

And yeah, buy into one is what I meant. Don't really have the time to go visit a broker so would rather something where I could do it all online.

(Not sure your starting knowledge, so I've try to give a quick brief, other might be able to point anything I've missed that you should consider).

Investing in funds in the uk can usually be done via a stocks and shares platform (sometimes called a supermarket) online. Most have either standard investing accounts or 'Stocks & Shares ISA' accounts that count as part of your ISA tax-free savings subscription for the year, and means can be money can be transferred between existing ISAs without being classed as part of your current yearly tax-free subscription.

(in the uk atleast) investment platforms usually charge a monthly or fixed admin fee for holding your accounts. This usually within the region of 0.25%-0.40% of your current account balance and is a separate charge. i.e. not taken from your current savings amount. So the more you have in the higher the fees, some providers cap their fees at set amounts per year/month, so it's could be worth while when you eventually have a large amount saved up.

This site gives a good run down and comparison of the popular fund platforms and things to consider when picking.
http://www.thisismoney.co.uk/money/...ck-best-cheapest-investment-Isa-platform.html

People find they might prefer one over another due to the help services and advice that a platform gives, Some might only specialise in Funds, or shares & ETFs so it's worth looking into what you would be wanting to trade in the future. Your bank might often provide a funds platform account, however they usually charge slightly higher monthly percentage Admin fee, and might not have access to the range of funds that independent platform might have.

The minimum order amount is usually £100 when buying a into individual fund, although some offer lower minimums if you set up your investment as a regular monthly plan.

Personally I'm with Charles Stanley Direct for my (index & active) investments as I liked their platform, they've been friendly with any queries I've had and fees were small compared with others for the amount I currently have saved. I might move once the monthly fees eventually overtake the capped fees of some of the others, personally any fees paid is small compared with (ideally) how much your investments are growing.

Overall, spend a bit of time researching and having a look what you'll have access to before plunging in, you'll feel more confident when you do.

 

[PflargBlarg]

Feels good. Was able to put 30,000 from my condo sale into VXC and VCN today. Although the markets were already closed so it will actually go through tomorrow.

A couple more months til after my wedding and I should be able to put another 20k into my RRSP. The 30k brings me pretty close to maxing out my TFSA completely and the 20k will be a good drop into the available RRSP space.

Now the trick will be keeping up with the new available space every year. I have roughly 17k of new contribution room available every year and I have to hope that I can put in more like 20k every year so I can eventually completely fill up the tax-sheltered accounts and move on to the unregistered ones.

Finally feel like my finances are in a good place to move forward at a regular pace.

 

[Mrbob]

Any HSA recommendations? I'm considering to start one as another retirement vehicle/ tax free money for medical expense if needed.

 

[tokkun]

Any HSA recommendations? I'm considering to start one as another retirement vehicle/ tax free money for medical expense if needed.

I have HealthEquity (via work). They mostly offer expensive active funds if you want to put your money in stocks. They recentaly started to offer some passive Vanguard funds, but they charge me an extra 0.4% / year to use them, LOL...

Still VIIIX for 0.42% a year is not the worst. I should probably start maxing the contribution.

 

[Cirekiller]

Gaf, I'm looking for some advise on my current IRA situation. I've invested for a couple of years in a Roth at Fidelity splitting the money between biotech and REIT. Obviously biotech got ravaged and I took a loss on that, but REIT has been doing better for me.

Now I'm trying to decide if I should cut my losses with biotech and move my money to another fund. The problem is that everything worth putting into is a bit inflated at the moment in my opinion, so that stops me from making the move. Any words of advise for my situation?

 

[James Sawyer Ford]

HSA's are possibly the best tax sheltered vehicle available. After getting the 401K match, it makes the most sense to max out your HSA.

Few reasons:

1. It's pre-tax, like a 401K, but has additional tax savings for payroll taxes. If you're in the 25% marginal tax bracket, then combined with saving taxes on social security and medicare you are looking at 33% tax savings or more.

2. Use the fund as a retirement vehicle and pay for medical expenses out of pocket and retain the receipts. In the future, when you withdraw the money you can reimburse yourself later, tax free. So it can be tax free going in, and tax free going out.

3. If you don't use it for medical expenses, it acts identically to a 401k at retirement age.

 

[PflargBlarg]

Gaf, I'm looking for some advise on my current IRA situation. I've invested for a couple of years in a Roth at Fidelity splitting the money between biotech and REIT. Obviously biotech got ravaged and I took a loss on that, but REIT has been doing better for me.

Now I'm trying to decide if I should cut my losses with biotech and move my money to another fund. The problem is that everything worth putting into is a bit inflated at the moment in my opinion, so that stops me from making the move. Any words of advise for my situation?

Well we don't know how underwater you are on that biotech fund but this is probably one of the situations where everyone here is going to say something about "why aren't you in index funds?". REITs are probably somewhat less objectionable but it's still a heavy risk to have money in just two sectors. Is this actually retirement funds? If this is just speculative side investments then it's probably not a big deal, but otherwise I would suggest getting out and into more 'retirement friendly' funds.
I think even for REITs most people here would suggest that it should be a very small portion of your portfolio unless you have some reason to highly tilt into real estate.

 

[tokkun]

Gaf, I'm looking for some advise on my current IRA situation. I've invested for a couple of years in a Roth at Fidelity splitting the money between biotech and REIT. Obviously biotech got ravaged and I took a loss on that, but REIT has been doing better for me.

Now I'm trying to decide if I should cut my losses with biotech and move my money to another fund. The problem is that everything worth putting into is a bit inflated at the moment in my opinion, so that stops me from making the move. Any words of advise for my situation?

The predictive power of valuations is mostly useful for forecasting growth in the intermediate term - like ~10 years. In the long term (~30 years) present day valuations don't matter all that much because average returns tend to converge on the historical mean. They also don't do that good at predicting things in the short term (~3 years); the market is just not that reactive to P/E ratios so corrections can take a while. The upshot of that is that it's not worth it sitting out just because valuations are high, because you might miss several years of good returns.

tldr; there is no reason for people who are a few decades from retirement to worry about valuations.

As for where to put the money, listen to what Wormdundee said, but ignore how far underwater you are on the biotech stocks; that's a sunk cost.

 

[Cirekiller]

Thanks for the replies. I think I'll look into getting into a more varied fund. Any suggestions besides the standard total market fund?

 

[Mrbob]

Cool I'll definitely check out HSAs.

Thanks for the replies. I think I'll look into getting into a more varied fund. Any suggestions besides the standard total market fund?

Curious what your biotech holdings are. Are they individual stocks or an ETF? If it is an ETF that is a total market fund for biotech stocks. I'm not arguing against getting out of Biotech and going to a more diversified fund but it does seem like Biotech might be poised on the verge of a big breakout. One could argue the sector already bottomed (IBB basically dropped 38% from its all time high and double bounced off of resistance at $240 which is a strong positive indicator, moved up 15% since then). Biotech basically had that big pullback a sector needs before making the next leg up. The only caveat right now is politics. Democrats will probably talk about drug pricing which may keep the sector from moving as high as it could, but many times this is a just small blip on a bigger horizon.

The SP500 and Nasdaq have risen in the past month off the back of Biotech, and will need to continue to do so in the second half of the year to make new highs.

If you want a total USA market fund just buy VTI:


https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0970#tab=2

If you go to portfolio and management tab it shows you the top holdings and how much of each sector the ETF comprises.

Otherwise I don't really understand the question of a more varied fund. Do you mean sector fund or total market fund. Plenty of different sector funds to own but many of them haven't had the big pullback you want. Except for Biotech, so it arguably may be in your best interest to keep that ETF.

Do you have any overseas exposure? I think it would be a good idea to have some. If you don't want to manage things yourself get a Lifestrategy Fund from Vanguard:

https://investor.vanguard.com/mutual-funds/lifestrategy/

The 80/20 fund is 48% Total USA Stock Market, 32% Total International Stock Market, and 20% bonds. Personally I find this a better option than just owning VTI itself. I don't believe being overweight in 100% USA equities right now is a good thing. Get overseas equities while they are still cheap.

 

[Comalv]

Hey, I've found your post very interesting, especially because of how different our views are.

I would surely recommend your strategy for people keen on having a "safe" retirement, but I've taken a very different approach with my whole life.

I am currently 30, I've started having a steady income 1 year ago and I live and work in Italy.

As per Italian laws my employer automatically pays funds to the state instead of added to my paycheck for when I will retire and there is absolutely no way around that. I assume every state that has public retirement funds has similar mechanism.
If my salary grows at an expected rate, I would end up retiring in 2050 and I would get between 30k and 40k Eur yearly for retirement (unsure if that's already taxed or before taxes, I assume it's the later).

I have a really hard time saving additional money. I spend around 600 Eur a month for fixed expenses (rent/food/bills and trains to visit parents a couple of times a month).

The remaining amount of money is spent mainly on hobbies (photography, video games), weekends with friends (who live 3-5 hours away from where I am) and some medical expenses. I have some form of wishlist that I update on a regular basis and as soon and I try to keep it as empty as I can without spending more than I can earn.

At the end of the month I usually have a net gain (total earnings - total expenses) of 200-400 Eur.

My approach is that I'm already not that young anymore, and now that I finally have the money I want to spend it for stuff that is good for me and for the people I care about, will I be less rich when I retire? Who cares. Will I run into problems if I get serious medical conditions that are not entirely covered by the National Health Care System (SSN)? Sure but that would probably be the case even if I started saving up, so why bother?

I seriously think that, for the kind of person I am (very introvert and shy), hindering my "here and now" would be seriously worse than thinking about a brighter future (also because there is serious evidence that by 2050 mankind will have bigger problems than having more retirement money). I'd happily spend even 500 Eur a month to visit my friends every weekend if it was feasible. I'd spend even more if I actually got a girlfriend (up to closing the month with negligible net gains).

That said I am planning on locking down about 2k Eur for a new computer (in case I need to replace it entirely due to unexpected events) and then around 500 Eur for last-minute travels with friends.

After that it would be time to buy a car. I haven't bought one yet because the only pro would be to be more independent especially when going to other cities (friends, family, vacations in Italy), but the cons outweigh that greatly: non-trivial fixed expenses (insurance, fuel, maintenance), fairly big up-front cost (even for used ones), don't really need it on an everyday basis (work is 150m from home, grocery stores are 10-15min on foot), it takes more time and is more stressful to reach friends by car than by train (3.5 hours of train with 1 commute equal to about 4-5 hours of highway in Friday's evening traffic).

I do not plan to buy a house anytime soon. It's too early to say if I will be changing jobs or not (also working as a consultant I might be deployed in another city for extensive periods of time) and I wouldn't buy one without any form of relationship.


If you do have any advice, question or remark for me, I would be glad to read other views on my current position



EDIT: There is also evidence that the national social security entity (?) that in Italy is called INPS might not have money to pay off retirements by 2050 and that does not change my view in the slightest (but I'll add it because it might be relevant that while the 30-40k a year sound good, they might be not guaranteed if the government doesn't do something about it)

 

[Cirekiller]

Cool I'll definitely check out HSAs.



Curious what your biotech holdings are. Are they individual stocks or an ETF?

The SP500 and Nasdaq have risen in the past month off the back of Biotech, and will need to continue to do so in the second half of the year to make new highs.

If you want a total USA market fund just buy VTI:


https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0970#tab=2

If you go to portfolio and management tab it shows you the top holdings and how much of each sector the ETF comprises.

Otherwise I don't really understand the question of a more varied fund. Do you mean sector fund or total market fund. Plenty of different sector funds to own but many of them haven't had the big pullback you want. Except for Biotech, so it arguably may be in your best interest to keep that ETF.

Do you have any overseas exposure? I think it would be a good idea to have some. If you don't want to manage things yourself get a Lifestrategy Fund from Vanguard:

https://investor.vanguard.com/mutual-funds/lifestrategy/

The 80/20 fund is 48% Total USA Stock Market, 32% Total International Stock Market, and 20% bonds. Personally I find this a better option than just owning VTI itself. I don't believe being overweight in 100% USA equities right now is a good thing. Get overseas equities while they are still cheap.

Thanks for the reply! Yeah it's Fidelity's Biotech advisor fund. I was planning to hold it a bit longer since I think there may it can go a bit higher, but I am definitely planning on getting a more diversified portfolio eventually. As tokkun already made an excellent point about not trying to time the market I plan on doing it sooner than later, but I definitely want to see if Biotech can come back a little before I do.

The move I am now thinking of making is to convert 30% of my REIT fund to Fidelity's International Growth Advisor fund.

 

[Randolph Freelander]

Thanks for the reply! Yeah it's Fidelity's Biotech advisor fund. I was planning to hold it a bit longer since I think there may it can go a bit higher, but I am definitely planning on getting a more diversified portfolio eventually. As tokkun already made an excellent point about not trying to time the market I plan on doing it sooner than later, but I definitely want to see if Biotech can come back a little before I do.

The move I am now thinking of making is to convert 30% of my REIT fund to Fidelity's International Growth Advisor fund.

Given that this is a retirement thread, and given that most of us are proponents of passive investing, we're going to strongly advise against sector bets, particularly significant ones. One only needs to look to Wormdundee's post earlier on this page and see the danger of putting your eggs all in one basket and how dangerous that can be. While a sector isn't nearly as risky as a single company in terms of going completely up in smoke, it can still tank at precisely the wrong time.

If you're going to invest with Fidelity, there's little reason to not have the significant portion of your domestic dollars in FSTVX (or FSTMX, if you can't meet the former's minimum). If you want to make a sector bet on top of it, I'd say do it with a small percentage of your overall balance. Off the top of my head, I'd say 5 or 10% at most, and this article seems to agree with that approach (it also has more to say on sector bets and if they're appropriate for you, so please read it). When added to FSTVX, that would basically amount to a total market strategy with a tilt towards whatever sector you believe in, but not one so big that it will break you.

 

[tokkun]

Another alternative to doing a sector tilt would be a tilt toward small-cap value; not exactly the same, but maybe it can scratch that itch of wanting higher risk / reward and feeling the market as a whole is over-valued.

There is at least historical evidence recommending that tilt (as opposed to gut feeling for sector tilts), though there is some debate as to whether the value premium still exists.

 

[Akira]

Cool I'll definitely check out HSAs.



Curious what your biotech holdings are. Are they individual stocks or an ETF? If it is an ETF that is a total market fund for biotech stocks. I'm not arguing against getting out of Biotech and going to a more diversified fund but it does seem like Biotech might be poised on the verge of a big breakout. One could argue the sector already bottomed (IBB basically dropped 38% from its all time high and double bounced off of resistance at $240 which is a strong positive indicator, moved up 15% since then). Biotech basically had that big pullback a sector needs before making the next leg up. The only caveat right now is politics. Democrats will probably talk about drug pricing which may keep the sector from moving as high as it could, but many times this is a just small blip on a bigger horizon.

The SP500 and Nasdaq have risen in the past month off the back of Biotech, and will need to continue to do so in the second half of the year to make new highs.

If you want a total USA market fund just buy VTI:


https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0970#tab=2

If you go to portfolio and management tab it shows you the top holdings and how much of each sector the ETF comprises.

Otherwise I don't really understand the question of a more varied fund. Do you mean sector fund or total market fund. Plenty of different sector funds to own but many of them haven't had the big pullback you want. Except for Biotech, so it arguably may be in your best interest to keep that ETF.

Do you have any overseas exposure? I think it would be a good idea to have some. If you don't want to manage things yourself get a Lifestrategy Fund from Vanguard:

https://investor.vanguard.com/mutual-funds/lifestrategy/

The 80/20 fund is 48% Total USA Stock Market, 32% Total International Stock Market, and 20% bonds. Personally I find this a better option than just owning VTI itself. I don't believe being overweight in 100% USA equities right now is a good thing. Get overseas equities while they are still cheap.

My Vanguard account is entirely in VTSAX right now. From what I've been reading (including your post) it's at an all time high right now and I should rebalance to grab more International stocks. I'm looking at VGTSX right now. I feel like rebalancing from VTSAX into a little bit of the LifeStrategy Fund doesn't make sense right now since it would have some duplicate coverage. I would like to keep my portfolio fairly simple and easy to rebalance.

 

[Calderc]

(Not sure your starting knowledge, so I've try to give a quick brief, other might be able to point anything I've missed that you should consider).

Investing in funds in the uk can usually be done via a stocks and shares platform (sometimes called a supermarket) online. Most have either standard investing accounts or 'Stocks & Shares ISA' accounts that count as part of your ISA tax-free savings subscription for the year, and means can be money can be transferred between existing ISAs without being classed as part of your current yearly tax-free subscription.

(in the uk atleast) investment platforms usually charge a monthly or fixed admin fee for holding your accounts. This usually within the region of 0.25%-0.40% of your current account balance and is a separate charge. i.e. not taken from your current savings amount. So the more you have in the higher the fees, some providers cap their fees at set amounts per year/month, so it's could be worth while when you eventually have a large amount saved up.

This site gives a good run down and comparison of the popular fund platforms and things to consider when picking.
http://www.thisismoney.co.uk/money/...ck-best-cheapest-investment-Isa-platform.html

People find they might prefer one over another due to the help services and advice that a platform gives, Some might only specialise in Funds, or shares & ETFs so it's worth looking into what you would be wanting to trade in the future. Your bank might often provide a funds platform account, however they usually charge slightly higher monthly percentage Admin fee, and might not have access to the range of funds that independent platform might have.

The minimum order amount is usually £100 when buying a into individual fund, although some offer lower minimums if you set up your investment as a regular monthly plan.

Personally I'm with Charles Stanley Direct for my (index & active) investments as I liked their platform, they've been friendly with any queries I've had and fees were small compared with others for the amount I currently have saved. I might move once the monthly fees eventually overtake the capped fees of some of the others, personally any fees paid is small compared with (ideally) how much your investments are growing.

Overall, spend a bit of time researching and having a look what you'll have access to before plunging in, you'll feel more confident when you do.

Thanks very much for this, I'm gonna do a bit of digging.

 

[Mrbob]

My Vanguard account is entirely in VTSAX right now. From what I've been reading (including your post) it's at an all time high right now and I should rebalance to grab more International stocks. I'm looking at VGTSX right now. I feel like rebalancing from VTSAX into a little bit of the LifeStrategy Fund doesn't make sense right now since it would have some duplicate coverage. I would like to keep my portfolio fairly simple and easy to rebalance.

Yeah, you don't have to use the Lifestrategy fund as you can build your own portfolio with the same mutual funds. Just a useful way to show how Vanguard splits up the percentages. The Lifestrategy funds are nice for people like me who don't want to do any maintenance (though I'm in Betterment instead). Right now it is actually better to be overweight in USA equities since the USA stock has performed better, but it is tough to guarantee this will be the case 10 or 20 years from now. Perhaps what you are doing is the right path, perhaps not. Adding international exposure helps to add more diversification to your portfolio.

This is the international fund they use:

https://personal.vanguard.com/us/funds/snapshot?FundId=0113&FundIntExt=INT

You can set up whatever percentage you want between USA/International equities.

Thanks for the reply! Yeah it's Fidelity's Biotech advisor fund. I was planning to hold it a bit longer since I think there may it can go a bit higher, but I am definitely planning on getting a more diversified portfolio eventually. As tokkun already made an excellent point about not trying to time the market I plan on doing it sooner than later, but I definitely want to see if Biotech can come back a little before I do.

The move I am now thinking of making is to convert 30% of my REIT fund to Fidelity's International Growth Advisor fund.

When you move out of Biotech I would definitely look at what Randolph suggested. Having Biotech/International is way too risky. FSTVX with your International is fine.

 

[tokkun]

My Vanguard account is entirely in VTSAX right now. From what I've been reading (including your post) it's at an all time high right now and I should rebalance to grab more International stocks. I'm looking at VGTSX right now. I feel like rebalancing from VTSAX into a little bit of the LifeStrategy Fund doesn't make sense right now since it would have some duplicate coverage. I would like to keep my portfolio fairly simple and easy to rebalance.

It's not a unanimous conclusion. Some people argue that VTSAX has adequate exposure to the health of international economies because it's cap-weighted and the largest companies all do a lot of overseas business. Moreover the fees for US indices are cheaper than international and you don't have a currency risk.

But I'm playing devil's advocate here. I think an actual international allocation makes sense to hedge against a bubble in US equity valuations since PE ratios are quite high right now relative to most other countries. I'm also not too worried about the currency risk since the USD is similarly relatively strong.

If we are talking about a tax sheltered account, you always have the option of completely converting to LifeStrategy / Target Retirement to keep balancing ultra simple. Vanguard does have a pretty high international allocation in the equity component, though (~35% IIRC) and you have to be OK with taking on a small amount of bonds too.

In the recent past it was actually better to be overweight in USA equities since the USA stock has performed better, but no one knows how long this will continue, if at all.

I modified your statement slightly.

 

[giga]

http://www.bloomberg.com/politics/a...from-market-boosted-by-artificially-low-rates

Donald Trump on Tuesday said interest rates set by the Federal Reserve are inflating the stock market and recommended 401(k)-holders to get out of equities, just like he did.

“I did invest and I got out, and it was actually very good timing,” the Republican presidential nominee said in a phone interview with Fox Business. “But I’ve never been a big investor in the stock market.”

“Interest rates are artificially low,” Trump said. “The only reason the stock market is where it is is because you get free money.”

Trump said the market would “go great” if he were elected.

You heard the man. Putting in a big sell order as I type.