Author Topic: First year in VTSAX... Did I break something?  (Read 4660 times)

Swamp Chomp

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First year in VTSAX... Did I break something?
« on: March 24, 2019, 01:02:31 PM »
Hi and thank you for reading!

After reading a hearing a lot about VTSAX, we decided to make an initial investment in February 2018 with their initial purchase requirement at $10,000.  Throughout 2018, there was a lot of talk about how good a year it was for the stock market.  Shortly after investing, the account dropped below the $10,000 mark and spent most of 2018 under $10,000 and it wasn't until just in the last month or two that it went up to $10,273, not an impressive return for our first year. 

So, I'm wondering after all the hype from the community about this fund, what happened last year?  Did others have the same experience?  For an index fund tracking the overall progress of the market, why such an unimpressive year in the midst of an overall strong year for the general stock market?

Appreciate any insights!

Ben

Shane

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Re: First year in VTSAX... Did I break something?
« Reply #1 on: March 24, 2019, 01:19:23 PM »
Maybe taking a step back and looking at longer term results of investing in the US stock market would help?


dandarc

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Re: First year in VTSAX... Did I break something?
« Reply #2 on: March 24, 2019, 01:19:47 PM »
Are you serious? One look at a price chart will tell you that February 2018 turned out to be a pretty high price. You happened to catch a roughly flat time period overall, so the fund that tracks the market is more or less flat.

You're in this for the long-haul. One year's return is pretty much irrelevant.

nereo

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Re: First year in VTSAX... Did I break something?
« Reply #3 on: March 24, 2019, 05:38:55 PM »
This chart may be helpful to you:



Bottom line:  For one-year time periods the market will go up about 2/3rds of the time and down 1/3rd of the time.  If you can hold for 5 years you will make money 80% of the time.  Hold it for more than a couple of decades and you win 100% of the time.

If you are investing in a broad market index fund like the VTSAX you have to be ok with the occasional down year, and you have to be smart enough not to sell at a loss.  Buy and hold for the long term is the most surefire way of making money.

Travis

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Re: First year in VTSAX... Did I break something?
« Reply #4 on: March 24, 2019, 08:29:42 PM »
OCT-DEC 2018: the market saw a 20% drop which made the JAN-DEC time frame more or less flat.  Everybody experienced it.  The market has since recovered to where it was Sep 2018.  Keep investing and play the long game.

thesis

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Re: First year in VTSAX... Did I break something?
« Reply #5 on: March 25, 2019, 08:47:46 AM »
I understand where you're coming from, but I agree with the others in that I think you're missing the big picture. I had seriously finally started investing my HSA right before the big dip, and it still hasn't fully recovered. Similar with my Roth, except it has gone up and down and it depends on the day, largely because I finished maxing it out after the first big portion of the dip.

Yeah, it's not fun seeing a big slide so soon, but it will test your mettle. The long term is the long term for a reason. You could always have invested that money in individual stocks and watched some turn to 0. I'm still $40k more invested than I was last year, no regrets there :)

ericbonabike

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Re: First year in VTSAX... Did I break something?
« Reply #6 on: March 25, 2019, 10:55:22 AM »
also, Maybe do some web reading on "Tax Loss Harvesting". 
You're not gonna "make money" by "loosing money".  But it does take the sting away after you dump a bunch of money into the market, then the market dips for a bit.

MilesTeg

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Re: First year in VTSAX... Did I break something?
« Reply #7 on: March 25, 2019, 10:56:20 AM »
Investing in an index fund is a long term play. You started investing right as a major correction (20% drop) occurred.

I'm not sure what your news sources are, but the stock market has not been 'doing well' in the last 6 months. It started 2018 strong but ended 2018 poorly.

MustacheAndaHalf

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Re: First year in VTSAX... Did I break something?
« Reply #8 on: March 25, 2019, 11:09:50 AM »
It's true VTSAX, and the entire U.S. market, had a turbulent year.  Or really, 2018 Q4, when it lost -14%.  And here's an interesting comparison - despite a bad 12 months, the U.S. stock market still pretty much tied with 12-month CDs (2.75%).  So you can imagine how badly it beats CDs during a good year.

Saving in Austin

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Re: First year in VTSAX... Did I break something?
« Reply #9 on: March 27, 2019, 10:40:04 AM »
Decade by Decade Results for Large US Stocks:

typicalmillenial

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Re: First year in VTSAX... Did I break something?
« Reply #10 on: March 27, 2019, 12:40:05 PM »
Read "The Simple Path to Wealth" JL Collins, read his blog, read this blog, read anything about Index investing.

This is a long-term strategy, 1 year of flat returns will be hardly recognizable after whatever your investment horizon is. If you are looking for short term guaranteed returns, indexing is not the best place to park your money. Also, if you find such investment (short term w/ guaranteed returns) please let me know!

talltexan

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Re: First year in VTSAX... Did I break something?
« Reply #11 on: March 29, 2019, 02:28:44 PM »
We also just had a really nice 2019 quarter 1. You should have seen some appreciation if you stayed the course, and even more if you continued to put new money into your account.

fattest_foot

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Re: First year in VTSAX... Did I break something?
« Reply #12 on: March 29, 2019, 02:47:48 PM »
We also just had a really nice 2019 quarter 1. You should have seen some appreciation if you stayed the course, and even more if you continued to put new money into your account.

That would be the case if OP had been regularly investing, but they did a lump sum in February 2018.

It just so happens that they picked a terrible time to lump sum and see a 1 year return. The market had a phenomenal 2017 (30%+), and then a major correction right after OP bought in. There was a lot of volatility in 2018 where lots of us made money (had OP bought in March this thread wouldn't exist). And then another major correction to close out 2018.

S&P is slightly up from where it was in Feb 2018.

Remake this thread in 5 years, and if it was flat over that time period, then the OP has a legitimate complaint.

Swamp Chomp

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Re: First year in VTSAX... Did I break something?
« Reply #13 on: March 30, 2019, 10:39:40 AM »
Thank you all for the replies.  It has really helped me better understand this.  I am learning.

How much do you all watch the market?  I'm sure some of you check in on it weekly or even more, but where could I get better information about what is going on in the stock market and stay educated on more like a monthly basis?  That may help. 

Also, how religiously do you all dollar cost average your money in?  Obviously, we didn't have a choice with the initial purchase of the VTSAX but now have a chunk to work into it. 

nereo

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Re: First year in VTSAX... Did I break something?
« Reply #14 on: March 30, 2019, 11:07:20 AM »
Thank you all for the replies.  It has really helped me better understand this.  I am learning.

How much do you all watch the market?  I'm sure some of you check in on it weekly or even more, but where could I get better information about what is going on in the stock market and stay educated on more like a monthly basis?  That may help. 

Also, how religiously do you all dollar cost average your money in?  Obviously, we didn't have a choice with the initial purchase of the VTSAX but now have a chunk to work into it.

I recommend checking the market as infrequently as possible.  Seriously.  You are in this for the long term, and the daily/weekly up or down of the market means nothing to long-term investors such as us.
I check the market about twice a year when I rebalance.

By "dollar-cost-average" ... I put money in every paycheck, and most of it is set to auto-invest.  If I get a bonus or windfall that gets lump-sum invested as quickly as possible.  That JL Collins stock series I linked above has a good post about why he doesn't like DCAing a large windfall, but the short reason is that investing immediately beats out DCA roughly 80% of the time, and there are lots of studies to back that up.

Travis

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Re: First year in VTSAX... Did I break something?
« Reply #15 on: March 30, 2019, 11:55:33 AM »
Thank you all for the replies.  It has really helped me better understand this.  I am learning.

How much do you all watch the market?  I'm sure some of you check in on it weekly or even more, but where could I get better information about what is going on in the stock market and stay educated on more like a monthly basis?  That may help. 

Also, how religiously do you all dollar cost average your money in?  Obviously, we didn't have a choice with the initial purchase of the VTSAX but now have a chunk to work into it.

I take a careful look once a month just to update a spreadsheet.  I make actual decisions from that data maybe twice a year.  I still have monthly automatic contributions going in every month like clockwork. 

Radagast

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Re: First year in VTSAX... Did I break something?
« Reply #16 on: March 30, 2019, 04:53:59 PM »
Thank you all for the replies.  It has really helped me better understand this.  I am learning.

How much do you all watch the market?  I'm sure some of you check in on it weekly or even more, but where could I get better information about what is going on in the stock market and stay educated on more like a monthly basis?  That may help. 

Also, how religiously do you all dollar cost average your money in?  Obviously, we didn't have a choice with the initial purchase of the VTSAX but now have a chunk to work into it.
I check the S&P500 daily because of the Top Is In thread. But I do not invest directly in the S&P500, and I also try to stay diversified, so I know it doesn't reflect my actual money. I have been checking my net worth every three months as part of another thread. There is research that says losses are twice as painful as gains are fun (or something like that). Ideally you would examine the chart nereo posted above, and choose a look interval that results in more pleasure than pain for you. For example, if looking every 12 months has a 67% chance of being a gain and 33% chance of being a loss, then you will feel net pleasure as a result of your investments, thus you should choose this interval or longer. Other people follow the market vaguely, and don't look at the details if they suspect there is a big loss in progress.

I always invest money when it is available, though I only invest in taxable accounts at three month intervals to reduce paperwork. Regular periodic investing is a great way to lower risk and increase percentage return in choppy patches. Really it is so amazing that all the ways people try to beat the market, for example trend following or market timing, can only wish they were as effective at risk-adjusted returns as simple periodic investing is. The only reason people even try those in the accumulation stage is there are not many tools for backtesting regular periodic investing and easily comparing it against other methods, and those people are not very bright.

As an example, below is a result of investing $1,000 every month into VTSAX since it became available in December 2000. VTSAX returned 9.84% on your money over this period if you made equal inflation adjusted periodic investments. If you had done a single lump sum in December 2000 your annualized return would have been 6.95% since then. Beating the market by 3% annualized in a terrible period for stock returns? Sign me up PLEASE! Regular periodic investing is at its strongest when volatility is at its highest. Taleb would call it "antifragile." Later, when you periodically take money out, the reverse is true. Then is when you may actually benefit from clever strategies.
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1985&firstMonth=1&endYear=2019&lastMonth=12&calendarAligned=true&endDate=03%2F29%2F2019&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&symbol1=VTSAX&allocation1_1=100
« Last Edit: March 30, 2019, 04:59:16 PM by Radagast »

nereo

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Re: First year in VTSAX... Did I break something?
« Reply #17 on: March 30, 2019, 05:42:51 PM »

I check the S&P500 daily because of the Top Is In thread.
That's the funniest thing I've read all day.

I'm a red panda

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Re: First year in VTSAX... Did I break something?
« Reply #18 on: March 30, 2019, 05:58:31 PM »
Thank you all for the replies.  It has really helped me better understand this.  I am learning.

How much do you all watch the market?  I'm sure some of you check in on it weekly or even more, but where could I get better information about what is going on in the stock market and stay educated on more like a monthly basis?  That may help. 

Also, how religiously do you all dollar cost average your money in?  Obviously, we didn't have a choice with the initial purchase of the VTSAX but now have a chunk to work into it.

I rarely watch the market, but I might check the DOW if the news is talking about it crashing.

I check my own accounts monthly.

I DCA by buying into taxable and pre-tax accounts biweekly.
I also lump sum invest anytime I have a windfall. If you have a chunk, time in market nearly always beats DCA, just put it in. DCA is a technique to use to not time the market, invest on a regular basis, but don't hold back money if you have it.

Swamp Chomp

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Re: First year in VTSAX... Did I break something?
« Reply #19 on: March 30, 2019, 06:47:04 PM »
Thanks again.  This is all immensely helpful.

Telecaster

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Re: First year in VTSAX... Did I break something?
« Reply #20 on: March 30, 2019, 07:02:33 PM »
How much do you all watch the market?  I'm sure some of you check in on it weekly or even more, but where could I get better information about what is going on in the stock market and stay educated on more like a monthly basis?  That may help. 

Once a year or once every two years is plenty. 

Here's the thing:  Most people here have an investing horizon of 25, 30, or even 60 years or more.   The first year's investment returns barely matter, if at all, on time frames like that.  And since every year is the new first year in the series of your investing timeline, the current year doesn't really matter either.   So every two years is fine, or once a year if you can't help yourself. 

Quote
Also, how religiously do you all dollar cost average your money in?  Obviously, we didn't have a choice with the initial purchase of the VTSAX but now have a chunk to work into it.

Best time to invest is when you have available funds. 

Swamp Chomp

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Re: First year in VTSAX... Did I break something?
« Reply #21 on: March 30, 2019, 07:41:31 PM »
I check the market about twice a year when I rebalance.

What exactly do you mean here?

Travis

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Re: First year in VTSAX... Did I break something?
« Reply #22 on: March 30, 2019, 10:20:07 PM »
I check the market about twice a year when I rebalance.

What exactly do you mean here?

Let's say your personal asset allocation is 70% stocks and 30% bonds.  Stocks have a great year and after 8 months you're actually at 75% stocks.  If your intent was to stick to that 70/30 ratio you'd sell some stocks and buy more bonds.  That's rebalancing.

Swamp Chomp

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Re: First year in VTSAX... Did I break something?
« Reply #23 on: March 31, 2019, 10:30:30 AM »
And that ratio is something you determine for yourself based on your risk tolerance, number of years to retirement, etc. correct?  If you don't mind me asking, would you mind sharing what your ratio is and why you chose that? 

And is there an equivalent to VTSAX that Mustacians highly prefer for bonds?

Andy R

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Re: First year in VTSAX... Did I break something?
« Reply #24 on: March 31, 2019, 10:51:32 AM »
And that ratio is something you determine for yourself based on your risk tolerance, number of years to retirement, etc. correct?  If you don't mind me asking, would you mind sharing what your ratio is and why you chose that? 

I found this article useful.
Don't forget to click on the links for ability, willingness and need to take risk, which lead to articles on each of those.

Edit:Link fixed
« Last Edit: March 31, 2019, 06:50:41 PM by Andy R »

Swamp Chomp

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Re: First year in VTSAX... Did I break something?
« Reply #25 on: March 31, 2019, 11:09:26 AM »
Andy, would you mind trying that link again.  It seems it may be broken here...  Thanks

Telecaster

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Re: First year in VTSAX... Did I break something?
« Reply #26 on: March 31, 2019, 12:31:52 PM »
And that ratio is something you determine for yourself based on your risk tolerance, number of years to retirement, etc. correct?  If you don't mind me asking, would you mind sharing what your ratio is and why you chose that? 

And is there an equivalent to VTSAX that Mustacians highly prefer for bonds?

VBMFX

You are asking really good questions, but they are so general that each one could have its own thread.   I recommend starting here:

https://jlcollinsnh.com/stock-series/

And then circle back with specific questions if you need clarification on something. 

secondcor521

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Re: First year in VTSAX... Did I break something?
« Reply #27 on: March 31, 2019, 06:34:20 PM »
And that ratio is something you determine for yourself based on your risk tolerance, number of years to retirement, etc. correct?  If you don't mind me asking, would you mind sharing what your ratio is and why you chose that? 

And is there an equivalent to VTSAX that Mustacians highly prefer for bonds?

Not who you were asking, but:

A.  Right.  My AA is 95/5 but I have a very high risk tolerance personality, and a low net WR and lots of contingency plans.  Another reason I choose this AA is that it has the highest historical survivability rate for 40 year periods.  I also have 3 kids who will inherit my estate.

B.  VBTLX is what I use.  It's basically the VTSAX of bonds IMO.

Andy R

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Re: First year in VTSAX... Did I break something?
« Reply #28 on: March 31, 2019, 06:51:48 PM »
Andy, would you mind trying that link again.  It seems it may be broken here...  Thanks

Link fixed.

Travis

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Re: First year in VTSAX... Did I break something?
« Reply #29 on: March 31, 2019, 10:18:42 PM »
And that ratio is something you determine for yourself based on your risk tolerance, number of years to retirement, etc. correct?  If you don't mind me asking, would you mind sharing what your ratio is and why you chose that? 

And is there an equivalent to VTSAX that Mustacians highly prefer for bonds?

I'm at 90/10 because I'm almost guaranteed at this point in my career to qualify for an inflation-adjusted government pension that is going to take care of 90% of my FIRE needs.  That pension is the equivalent of a bond position from my perspective.  Other folks near retirement age will shift their bond positions to something much larger (40-50%) in order to preserve what they've built up; however, some people are so risk-tolerant that they'll continue with high stock allocations for many more years.  It's something you'll have to study and think long and hard about.  The good news is you're just getting started so it's not like you're stuck making one choice.

Shane

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Re: First year in VTSAX... Did I break something?
« Reply #30 on: April 01, 2019, 12:09:03 AM »
And is there an equivalent to VTSAX that Mustacians highly prefer for bonds?

VBTLX

lowroller4111

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Re: First year in VTSAX... Did I break something?
« Reply #31 on: April 01, 2019, 11:28:38 AM »
Another vote for JL Collins "Simple Path to Wealth", it's a fantastic read.  Also highly recommend his blog and podcasts as well as mentioned by another user here.


Exflyboy

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Re: First year in VTSAX... Did I break something?
« Reply #32 on: April 01, 2019, 03:08:47 PM »
I run currently at 75/25.

I'm FIRED but I currently have rental income and my pension will replace the rent in 2.5 years.

If I count my pensions as part of bonds this would put me at 60/40.

Note, if the market absolutely tanks I would happily roll to a 90/10 allocation. This is because we have roughly 2 to 2.5 times as much as we need to live a comfortable life, i.e we can afford the extra risk.

Also not that you do DO NOT want to keep bond funds in your after tax accounts. This is tax inefficient. Keep your bonds in your 401k and stocks in After tax.. You also keep stock funds in your 401k.

Overall the asset allocation will be what be whatever you're aiming for. Personally if you have more than 10 years to retirement you could keep a 100% stock portfolio.

aspiringnomad

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Re: First year in VTSAX... Did I break something?
« Reply #33 on: April 01, 2019, 10:02:34 PM »
And that ratio is something you determine for yourself based on your risk tolerance, number of years to retirement, etc. correct?  If you don't mind me asking, would you mind sharing what your ratio is and why you chose that? 

And is there an equivalent to VTSAX that Mustacians highly prefer for bonds?

That's the hardest question to answer concerning investing. How often to invest (as frequently as possible) and where (low cost index funds) is much easier to sort out. But as others have said, your AA is highly personal and dependent on your risk tolerance, financial situation outside of your portfolio, and perhaps your life goals and responsibilities. You have to be very self-aware to answer it appropriately. The impatience implied by your having started this thread may stem from a lack of experience, but it might also suggest a lower risk tolerance, and if so a more conservative AA would be appropriate. But only you can answer that.

John Galt incarnate!

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Re: First year in VTSAX... Did I break something?
« Reply #34 on: April 03, 2019, 05:43:28 PM »
Thank you all for the replies.  It has really helped me better understand this.  I am learning.

How much do you all watch the market?  I'm sure some of you check in on it weekly or even more, but where could I get better information about what is going on in the stock market and stay educated on more like a monthly basis?  That may help. 

Also, how religiously do you all dollar cost average your money in?  Obviously, we didn't have a choice with the initial purchase of the VTSAX but now have a chunk to work into it.
I check the S&P500 daily because of the Top Is In thread. But I do not invest directly in the S&P500, and I also try to stay diversified, so I know it doesn't reflect my actual money. I have been checking my net worth every three months as part of another thread. There is research that says losses are twice as painful as gains are fun (or something like that). Ideally you would examine the chart nereo posted above, and choose a look interval that results in more pleasure than pain for you. For example, if looking every 12 months has a 67% chance of being a gain and 33% chance of being a loss, then you will feel net pleasure as a result of your investments, thus you should choose this interval or longer. Other people follow the market vaguely, and don't look at the details if they suspect there is a big loss in progress.

I always invest money when it is available, though I only invest in taxable accounts at three month intervals to reduce paperwork. Regular periodic investing is a great way to lower risk and increase percentage return in choppy patches. Really it is so amazing that all the ways people try to beat the market, for example trend following or market timing, can only wish they were as effective at risk-adjusted returns as simple periodic investing is. The only reason people even try those in the accumulation stage is there are not many tools for backtesting regular periodic investing and easily comparing it against other methods, and those people are not very bright.

As an example, below is a result of investing $1,000 every month into VTSAX since it became available in December 2000. VTSAX returned 9.84% on your money over this period if you made equal inflation adjusted periodic investments. If you had done a single lump sum in December 2000 your annualized return would have been 6.95% since then. Beating the market by 3% annualized in a terrible period for stock returns? Sign me up PLEASE! Regular periodic investing is at its strongest when volatility is at its highest. Taleb would call it "antifragile." Later, when you periodically take money out, the reverse is true. Then is when you may actually benefit from clever strategies.
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1985&firstMonth=1&endYear=2019&lastMonth=12&calendarAligned=true&endDate=03%2F29%2F2019&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&symbol1=VTSAX&allocation1_1=100

Yes.

Researchers in the relatively new field of behavioral finance found that when the stock market declines sharply the intensity of investors' unhappy/worried feelings are 2.3X-2.5X  the intensity of their happy/satisfied feelings when the stock market rises sharply.
« Last Edit: May 04, 2019, 01:09:30 PM by John Galt incarnate! »

YttriumNitrate

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Re: First year in VTSAX... Did I break something?
« Reply #35 on: April 03, 2019, 05:52:33 PM »
So, I'm wondering after all the hype from the community about this fund, what happened last year?  Did others have the same experience?  For an index fund tracking the overall progress of the market, why such an unimpressive year in the midst of an overall strong year for the general stock market
Why did this happen? Well that's simple, you suck at timing the market. Don't worry, most everyone does ... Especially me.
« Last Edit: April 04, 2019, 06:09:48 AM by YttriumNitrate »

Swamp Chomp

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Re: First year in VTSAX... Did I break something?
« Reply #36 on: May 03, 2019, 07:09:09 PM »
Also not that you do DO NOT want to keep bond funds in your after tax accounts. This is tax inefficient. Keep your bonds in your 401k and stocks in After tax.. You also keep stock funds in your 401k.

Would you mind elaborating on this?  I do not have a 401K; currently have a Roth and stock brokerage account... so where do you recommend I keep bond funds?  Roth?  I have a simple IRA setup at a job held 7 years ago and Vanguard won't let me put into that... haven't figured that out yet.  I'm newly self-employed as of a couple years ago, so might be able to setup a 401K?  Thanks for your insight on keeping the bonds in a way that's tax-efficient, that is new news for this nubie.

nereo

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Re: First year in VTSAX... Did I break something?
« Reply #37 on: May 04, 2019, 05:10:14 AM »
Also not that you do DO NOT want to keep bond funds in your after tax accounts. This is tax inefficient. Keep your bonds in your 401k and stocks in After tax.. You also keep stock funds in your 401k.

Would you mind elaborating on this?  I do not have a 401K; currently have a Roth and stock brokerage account... so where do you recommend I keep bond funds?  Roth?  I have a simple IRA setup at a job held 7 years ago and Vanguard won't let me put into that... haven't figured that out yet.  I'm newly self-employed as of a couple years ago, so might be able to setup a 401K?  Thanks for your insight on keeping the bonds in a way that's tax-efficient, that is new news for this nubie.

Unlike stock gains, which are taxed as capitol gains (and for almost everyone will be taxed at either 0% or 15%), the yield on bonds is taxed as ordinary income and paid annually.  So if you are in the 22% tax bracket and your bonds are throwing off $3,000/year you will have to pay an additioanl $666 every year.  UNLESS you keep it in either your 401(k) or your ROTH ("tax advantaged accounts).  Either will work just fine - if you wanted to get very granular and decide which to put it in you'd have to consider how you were going to withdraw from each during retirement.   

TomTX

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Re: First year in VTSAX... Did I break something?
« Reply #38 on: May 04, 2019, 06:11:26 AM »

I check the S&P500 daily because of the Top Is In thread.
That's the funniest thing I've read all day.

But it's true! I successfully ignored market levels for months, even years until that thread.

I've gotten better again by ignoring the thread ;)

TomTX

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Re: First year in VTSAX... Did I break something?
« Reply #39 on: May 04, 2019, 06:12:36 AM »
And that ratio is something you determine for yourself based on your risk tolerance, number of years to retirement, etc. correct?  If you don't mind me asking, would you mind sharing what your ratio is and why you chose that? 

And is there an equivalent to VTSAX that Mustacians highly prefer for bonds?

100% VTI.


...which is the ETF equivalent of VTSAX.... ;)

Maenad

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Re: First year in VTSAX... Did I break something?
« Reply #40 on: May 06, 2019, 05:26:30 AM »
Another thing about asset allocation - you are almost certain to guess wrong on your risk tolerance at the beginning. Most people think they're more risk tolerant than they really are, and the first big drop teaches them more about themselves. This is OK - it doesn't mean you've "failed" at investing or whatever, it just means you're human. We're pretty bad at that sort of thing.

FWIW, I'm 44 years old, 85/15 VFIAX/VBTLX. DH and I work in Risk Analysis in our careers, so between that and investing through 2008/2009, we've gotten a good read on our own risk tolerance. We also optimized the success rate for our projected portfolio and withdrawal amounts on FIRECalc. We're about due to validate those assumptions again this summer when we (hopefully) hit FI.

Shane

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Re: First year in VTSAX... Did I break something?
« Reply #41 on: May 06, 2019, 01:19:53 PM »
Also not that you do DO NOT want to keep bond funds in your after tax accounts. This is tax inefficient. Keep your bonds in your 401k and stocks in After tax.. You also keep stock funds in your 401k.

Would you mind elaborating on this?  I do not have a 401K; currently have a Roth and stock brokerage account... so where do you recommend I keep bond funds?  Roth?  I have a simple IRA setup at a job held 7 years ago and Vanguard won't let me put into that... haven't figured that out yet.  I'm newly self-employed as of a couple years ago, so might be able to setup a 401K?  Thanks for your insight on keeping the bonds in a way that's tax-efficient, that is new news for this nubie.

Unlike stock gains, which are taxed as capitol gains (and for almost everyone will be taxed at either 0% or 15%), the yield on bonds is taxed as ordinary income and paid annually.  So if you are in the 22% tax bracket and your bonds are throwing off $3,000/year you will have to pay an additioanl $666 every year.  UNLESS you keep it in either your 401(k) or your ROTH ("tax advantaged accounts).  Either will work just fine - if you wanted to get very granular and decide which to put it in you'd have to consider how you were going to withdraw from each during retirement.
Which account you keep your bonds in depends on why you're holding them and how old you are. In the accumulation phase of FIRE, it makes sense to hold bonds in a tax advantaged account, but for someone who is already FIRE and is not yet old enough to withdraw $$ from retirement accounts without paying a penalty, it would make little sense to hold bonds in a retirement account where the money couldn't be accessed during equity market downturns without paying a big penalty + taxes.

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Re: First year in VTSAX... Did I break something?
« Reply #42 on: May 06, 2019, 02:23:30 PM »

Which account you keep your bonds in depends on why you're holding them and how old you are. In the accumulation phase of FIRE, it makes sense to hold bonds in a tax advantaged account, but for someone who is already FIRE and is not yet old enough to withdraw $$ from retirement accounts without paying a penalty, it would make little sense to hold bonds in a retirement account where the money couldn't be accessed during equity market downturns without paying a big penalty + taxes.

There are several methods available to withdraw funds from tax-advantaged accounts penalty free.
This post might help, and there's a sticky on it as well.

Shane

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Re: First year in VTSAX... Did I break something?
« Reply #43 on: May 07, 2019, 03:04:05 AM »

Which account you keep your bonds in depends on why you're holding them and how old you are. In the accumulation phase of FIRE, it makes sense to hold bonds in a tax advantaged account, but for someone who is already FIRE and is not yet old enough to withdraw $$ from retirement accounts without paying a penalty, it would make little sense to hold bonds in a retirement account where the money couldn't be accessed during equity market downturns without paying a big penalty + taxes.

There are several methods available to withdraw funds from tax-advantaged accounts penalty free.
This post might help, and there's a sticky on it as well.
Not saying people who want/need to can't withdraw from tax advantaged accounts before 59.5, just that for those of us with sufficient funds in taxable accounts, it makes more sense to spend that money first. While we could hold BND in a tax advantaged account, we don't want to. The interest BND pays out every month is a nice supplement to our FIRE income, and when the stock market tanks, we'll be able to easily sell shares of BND instead of VTI from out taxable account to supplement income from interest and dividends. Our tIRAs and Roths are 100% VTI, because we're not planning on touching them for at least twenty years, by which time we'll be more than old enough to access the money without any penalties. YMMV.

UnleashHell

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Re: First year in VTSAX... Did I break something?
« Reply #44 on: May 07, 2019, 03:09:48 AM »

Which account you keep your bonds in depends on why you're holding them and how old you are. In the accumulation phase of FIRE, it makes sense to hold bonds in a tax advantaged account, but for someone who is already FIRE and is not yet old enough to withdraw $$ from retirement accounts without paying a penalty, it would make little sense to hold bonds in a retirement account where the money couldn't be accessed during equity market downturns without paying a big penalty + taxes.

There are several methods available to withdraw funds from tax-advantaged accounts penalty free.
This post might help, and there's a sticky on it as well.
Not saying people who want/need to can't withdraw from tax advantaged accounts before 59.5, just that for those of us with sufficient funds in taxable accounts, it makes more sense to spend that money first. While we could hold BND in a tax advantaged account, we don't want to. The interest BND pays out every month is a nice supplement to our FIRE income, and when the stock market tanks, we'll be able to easily sell shares of BND instead of VTI from out taxable account to supplement income from interest and dividends. Our tIRAs and Roths are 100% VTI, because we're not planning on touching them for at least twenty years, by which time we'll be more than old enough to access the money without any penalties. YMMV.

you can also do a sepp(72) on your 401k's to take a few % out each year without penalty from them - if you need to / want to start using them. you are commited to that plan once you start though (with one change allowed before 59 1/2 I believe).
just another option for those that didn't know about it - not necessarily you.