Author Topic: Anyone Familiar With Vanguard IRA Account?  (Read 6120 times)

shade13

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Anyone Familiar With Vanguard IRA Account?
« on: August 27, 2014, 03:31:07 PM »
So I took your advice and opened an IRA account with Vanguard.  I'm still very new to it and I have stumbled across something that has left me puzzled.

I know it's probably a really stupid question with a simple answer but I'm not sure so I was hoping someone here could help me out.

I opened up a Vanguard LifeStrategy Moderate Growth Fund which is 60% stock and 40% bonds.

I'm wanting it changed to 69% stock and 31% bonds.  And it has the option to change it to that. 

But when I do it, it still has my "Current allocation at 60/40" and has a separate section that says "Target Allocation 69/31"

Now my question is, will this change over in time to 69/31?  Or do I need to change my selection to something else?

Sorry if this is a stupid or confusing question, but I'm still very new to this.

Sorry if this was meant for another board as well.

Shor

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #1 on: August 27, 2014, 04:11:55 PM »
Right, I think what you did there is the target allocation is for any new money depositing in to the account. It doesn't affect your existing holdings.

To fix it the way you want, please try the following:
From the top -> My Accounts -> Balance and Holdings
This should take you to a screen listing all of your current holdings at the 60 stock / 40 bond mix.
To the right of each item in this list you should have a Buy | Sell | Exch link
You will want to Exchange the Bonds fund for your selected Stock fund. This should let you sell a percentage of the bonds, whatever 9 / 40 comes out to, and purchase with it the desired stock fund.

Let us know if that does it for you.

shade13

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #2 on: August 27, 2014, 04:53:04 PM »
Ok, I tried that.  But it doesn't come up as an option to pick bonds or stocks.  It just has the lump sum.

okashira

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #3 on: August 27, 2014, 05:58:12 PM »
So I took your advice and opened an IRA account with Vanguard.  I'm still very new to it and I have stumbled across something that has left me puzzled.

I know it's probably a really stupid question with a simple answer but I'm not sure so I was hoping someone here could help me out.

I opened up a Vanguard LifeStrategy Moderate Growth Fund which is 60% stock and 40% bonds.

I'm wanting it changed to 69% stock and 31% bonds.  And it has the option to change it to that. 

But when I do it, it still has my "Current allocation at 60/40" and has a separate section that says "Target Allocation 69/31"

Now my question is, will this change over in time to 69/31?  Or do I need to change my selection to something else?

Sorry if this is a stupid or confusing question, but I'm still very new to this.

Sorry if this was meant for another board as well.

Hello, The fund you have chosen will always be 60%/40%. You cannot change this or customize it.
If you wish to achieve a different ratio, you can buy another fund to mix it up. You could buy a small amount in Vanguard US Total Stock Market, which is 100% stock, 0% bond. Use a calculator to determine how much you would need to buy to get to 69% stocks in your whole portfolio.

For example, if you had $20,000 total in your account and had:

$10,000 in Vanguard LifeStrategy Moderate Growth Fund 
and
$10,000 in Vanguard Total US Stock Market

You would have $10,000*60% + $10,000*100% = $16,000 in stock.

That would be 16,000/20,000 = 80% stock and 20% bond.
« Last Edit: August 27, 2014, 06:00:39 PM by okashira »

Shor

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #4 on: August 27, 2014, 06:02:43 PM »
You could do the above, or you could just move away from yoru curent fund completely:
So, that particular fund is split 60 40 into stocks and bond. Think of your current fund as a 'recommended' template mix of other funds.
If we take a look at the fund itself we have: https://personal.vanguard.com/us/funds/snapshot?FundId=0914&FundIntExt=INT
down at the bottom under Portfolio composition you'll see that this fund is actually just made up of several other Vanguard funds:
Vanguard Total Stock Market Index Fund Investor Shares 41.6%  VTSMX / VTSAX
Vanguard Total Bond Market II Index Fund Investor Shares 32.4% VTBIX
Vanguard Total International Stock Index Fund Investor Shares 17.9%     VGTSX / VTIAX
Vanguard Total International Bond Index Fund 8.1%. VTIBX / VTIAX

You could set up your money to be split in to these same 4 funds, and simply have more in the stock funds and a bit less in the bond funds.
You might even save just a bit more for any of those assets exceeding $10k being upgraded to Admiral shares which is a slightly less operating cost.

bearkat

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #5 on: August 27, 2014, 06:11:04 PM »
Like Shor and Okashira said, you need to get out of LifeStrategy fund if you want a different allocation. Here's how you would do it:

From your second screenshot, you were almost there, just clicking through the prompts. The steps would be this:
1.   Check the box that says “sell all shares”
a.   When you click that the right side of the page will appear
2.   Check the box on the right that says “buy a new fund”
3.   Select hyperlink “Choose from a list of our funds”
4.   Select a 100% stock market fund such as “VTSMX”
5.   Select a 100% bond market fund such as “VBMFX”
6.   Select “continue”
7.   Put in 69% next to the stock fund
8.   Put in 31% next to the bond fund
9.   Select “continue”
10.   Etc.
Hope this helps. If you want more specifics, I would recommend giving them a call, they’re usually pretty helpful.

lpep

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #6 on: August 27, 2014, 06:13:05 PM »
Since you're new to this, I'll ask - why do you want to have so much in bonds? Sure, they're safe, but if you're young, you can take on the risk of 100% stocks.

Jim Collins's stock series can tell you more: http://jlcollinsnh.com/stock-series/

shade13

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #7 on: August 27, 2014, 06:25:51 PM »
Hey guys, thanks for the input.

So I guess, the best route would be to exchange what I got now for the same thing?  Only I would buy them as individual selections and set up percentages of how much I want in each thing?  Is that right?

And what happens when I sell them?

What are admiral shares?

Bearkat, are you suggesting I just get two selections?

Also, will I get any fees for selling it for another fund?

lpep, the reason I have so much in bonds is I read (and advice from here) that you should invest in the percentage of bonds as your age.  Hence I'm 31 years old...

BooksAreNerdy

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #8 on: August 27, 2014, 07:23:43 PM »
That 'target allocation' graph is just to give you a view of where you are. It does not change your actual allocation. If you have several funds ( I can see mine, my husband's, and my daughters 529 all on my logon page) it how's you the allocation balance among them all.

The drawback to a balanced fund like you chose is that you can't change the allocation within that fund. You could invest in a separate stock fund, like VTSMX to increase your holding of stocks. Or you could sell all of what you have and buy separate stocks and bonds to get your own changeable, unique balance.

Admiral shares are the lower cost option offered when you hold $10k or more in a single fund.

Personally, we use VBMFX for bonds and VTSMX for stocks. These are very low cost index funds.

*edit*
We have 5% bonds, 5% REIT (real estate), and 90% stocks. We are not risk averse and want/need to be aggressive in order to reach our retirement goals. We will only increase our bond % once we need to start drawing on the cash.
« Last Edit: August 27, 2014, 07:26:30 PM by BooksAreNerdy »

BooksAreNerdy

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #9 on: August 27, 2014, 07:29:37 PM »
No fees for buying and selling.

Follow the directions above for the exchange.

Read the stock series linked above. It is gold.

nereo

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #10 on: August 28, 2014, 09:06:56 AM »

lpep, the reason I have so much in bonds is I read (and advice from here) that you should invest in the percentage of bonds as your age.  Hence I'm 31 years old...

Hi Shade

The "bonds equal to your age" advice is simply a rule of thumb largely designed to be quite conservative and (IMO) for people who can't stand market volatility and/or are a lot older than we are.  This strategy is good at smoothing the bumps of market volatility, but historically the returns of such a portfolio are much less than a portfolio with more equities the vast majority of the time.

If you want to make an informed decision you'll need to ask yourself a few more questions.  How long is my investment timeline?  how likely is it that I will need to pull money out in the near future to cover an emergency or large expense (like a downpayment on a house)?  how well can I handle drops in the market (or put another way: "when the market drops can I sleep at night without pulling all of my money out?")
As suggested earlier, read the jhcollins stock series - it's a great introduction to all of this.

Personally, my investment timeline is decades, and I have no intention of pulling anything out for 10+ years (I have an emergency fund to cover the unexpected).  My allocation is 95/5.  What's more, I plan on having at least 80 of my portfolio in equities even after I reach retirement, because historically I have a much better chance of my portfolio surviving than if I follow the "age as a % of bonds" rule.
Now to be clear I'm not saying holding your age in bonds is a bad strategy.  It certainly will be a less bumpy ride than having almost everything in broad market index funds like I do.  For many people, that piece of mind is worth the likelihood that they will trail the market by a few percentage points.  Everyone needs to come up with their own strategy.

Check out www.firecalc.com if you want to run the historical simulations yourself.

GoldenStache

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #11 on: August 28, 2014, 11:28:27 AM »
I'm 32 and will be 100% stocks in my IRA forever.

GGNoob

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #12 on: August 28, 2014, 11:51:55 AM »
I'm 32 and will be 100% stocks in my IRA forever.

+1

shade13

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #13 on: August 28, 2014, 02:57:45 PM »

lpep, the reason I have so much in bonds is I read (and advice from here) that you should invest in the percentage of bonds as your age.  Hence I'm 31 years old...

Hi Shade

The "bonds equal to your age" advice is simply a rule of thumb largely designed to be quite conservative and (IMO) for people who can't stand market volatility and/or are a lot older than we are.  This strategy is good at smoothing the bumps of market volatility, but historically the returns of such a portfolio are much less than a portfolio with more equities the vast majority of the time.

If you want to make an informed decision you'll need to ask yourself a few more questions.  How long is my investment timeline?  how likely is it that I will need to pull money out in the near future to cover an emergency or large expense (like a downpayment on a house)?  how well can I handle drops in the market (or put another way: "when the market drops can I sleep at night without pulling all of my money out?")
As suggested earlier, read the jhcollins stock series - it's a great introduction to all of this.

Personally, my investment timeline is decades, and I have no intention of pulling anything out for 10+ years (I have an emergency fund to cover the unexpected).  My allocation is 95/5.  What's more, I plan on having at least 80 of my portfolio in equities even after I reach retirement, because historically I have a much better chance of my portfolio surviving than if I follow the "age as a % of bonds" rule.
Now to be clear I'm not saying holding your age in bonds is a bad strategy.  It certainly will be a less bumpy ride than having almost everything in broad market index funds like I do.  For many people, that piece of mind is worth the likelihood that they will trail the market by a few percentage points.  Everyone needs to come up with their own strategy.

Check out www.firecalc.com if you want to run the historical simulations yourself.




Thanks for all the info.  You got me 2nd guessing everything now lol.

I guess I'm afraid of the stock game because I don't really know much about it and I'm afraid of losing my life savings.  I guess I need to read up and maybe take a bigger gamble.

I like the bonds option because I have been recommended that by other sites as being something you should do.  But I now see other posters here seem to be not even using bonds at all.

I'm more confused than when I made the original post lol

shade13

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #14 on: August 28, 2014, 02:58:39 PM »
I'm 32 and will be 100% stocks in my IRA forever.

+1

Do you change your selections often?  Or just leave them be?

Also, don't I have to open a brokerage account to get involved in stocks?  Or can I just select Vanguard stock options and do it without opening one?
« Last Edit: August 28, 2014, 03:00:30 PM by shade13 »

BooksAreNerdy

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #15 on: August 28, 2014, 04:19:12 PM »
We are recommending a stock INDEX fund. It is a fund that holds hundreds of stocks.

Did you read the jlcollins stock series yet?
http://jlcollinsnh.com/stock-series/

You can hold a stock index fund or a bond index fund in your Current IRA. Most people here have VTSMX and buy and hold it. No trading or selling in the short term.

G-dog

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #16 on: August 28, 2014, 05:00:16 PM »

lpep, the reason I have so much in bonds is I read (and advice from here) that you should invest in the percentage of bonds as your age.  Hence I'm 31 years old...

Hi Shade

The "bonds equal to your age" advice is simply a rule of thumb largely designed to be quite conservative and (IMO) for people who can't stand market volatility and/or are a lot older than we are.  This strategy is good at smoothing the bumps of market volatility, but historically the returns of such a portfolio are much less than a portfolio with more equities the vast majority of the time.

If you want to make an informed decision you'll need to ask yourself a few more questions.  How long is my investment timeline?  how likely is it that I will need to pull money out in the near future to cover an emergency or large expense (like a downpayment on a house)?  how well can I handle drops in the market (or put another way: "when the market drops can I sleep at night without pulling all of my money out?")
As suggested earlier, read the jhcollins stock series - it's a great introduction to all of this.

Personally, my investment timeline is decades, and I have no intention of pulling anything out for 10+ years (I have an emergency fund to cover the unexpected).  My allocation is 95/5.  What's more, I plan on having at least 80 of my portfolio in equities even after I reach retirement, because historically I have a much better chance of my portfolio surviving than if I follow the "age as a % of bonds" rule.
Now to be clear I'm not saying holding your age in bonds is a bad strategy.  It certainly will be a less bumpy ride than having almost everything in broad market index funds like I do.  For many people, that piece of mind is worth the likelihood that they will trail the market by a few percentage points.  Everyone needs to come up with their own strategy.

Check out www.firecalc.com if you want to run the historical simulations yourself.




Thanks for all the info.  You got me 2nd guessing everything now lol.

I guess I'm afraid of the stock game because I don't really know much about it and I'm afraid of losing my life savings.  I guess I need to read up and maybe take a bigger gamble.

I like the bonds option because I have been recommended that by other sites as being something you should do.  But I now see other posters here seem to be not even using bonds at all.

I'm more confused than when I made the original post lol

Don't feel bad about feeling more confused, for lots of us that is just part of the process of learning more about our own finances and investing. There are great charts in the jlcollins stock series that will help you feel more comfortable with a higher % allocation in a sock index fund.  Hint, hint - have you checked the jlcollins stock series yet? 
I think he also has a good chart re: impact of high(er) expense ratios over time (I think that is where I saw it....)

Good news - you are aaving and investing, you are already ahead of the pack. Now you are just learning more and moving forward!

boognish

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #17 on: August 28, 2014, 05:22:58 PM »
How to you folks rate Vanguard's Target Retirement Funds for newbs? I'm sure many here prefer to fine-tune it but the autopilot feature is appealing and it's relatively aggressive (90% stocks, 10% bonds)

https://personal.vanguard.com/us/funds/snapshot?FundId=1487&FundIntExt=INT

Allocation to underlying funds as of 07/31/2014
Ranking by
Percentage    Fund    Percentage
1   Vanguard Total Stock Market Index Fund Investor Shares   62.8%
2   Vanguard Total International Stock Index Fund Investor Shares   27.1%
3   Vanguard Total Bond Market II Index Fund Investor Shares†   8.1%
4   Vanguard Total International Bond Index Fund   2.0%
Total   —   100.0%
 Characteristics as of 07/31/2014

shade13

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #18 on: August 28, 2014, 05:32:14 PM »
I've started on the series but I have not finished it.  It looks kinda long, so I'll have to get it done on a slow evening when I'm not busy.

I will look into changing everything after I get a good deep read.  What I'll probably do is keep the selections of my current plan since it already has the VTSMX and just change the percentages around to heavy stock and small bond.

bearkat

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #19 on: August 28, 2014, 06:51:23 PM »
Hey shade, looks like you're getting some good information.

To your question,

Quote
Bearkat, are you suggesting I just get two selections?

I just listed two options to keep it simple, you could buy all four funds within your LifeStrategy MG fund, just in different portions to meet your 69 / 31 allocation goal, or you could invest in any number of near INFINITE combinations of funds.

Honestly though, after read through the rest of this thread, I would recommend leaving your money in you current fund ... until you figure out how you want to invest. It's a lot better than just leaving parked in a savings account, and if it takes you 3 weeks or 3 months to figure it out, that's not really a long time in the grand scheme of things.

Hope you get less confused :)

GoldenStache

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #20 on: September 02, 2014, 09:46:02 AM »
100% VTSAX... Let it ride. 

shade13

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Re: Anyone Familiar With Vanguard IRA Account?
« Reply #21 on: September 05, 2014, 03:13:47 PM »
100% VTSAX... Let it ride.

So you think bonds aren't worth it?