Author Topic: Vanguard Fund - just starting - advice please...  (Read 5371 times)

Jess2014

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Vanguard Fund - just starting - advice please...
« on: January 01, 2014, 12:07:43 PM »
Hi Everyone,

I'm fairly new here and thought I ask the experts out there...

I'm about to switch my current (small) Roth IRA from current bank over to Vanguard.  I hear/read the VTSMX is much recommended.  However, when I did the risk profile questionnaire on their website it recommended 30% bonds and 70% stocks.  I'm a little clueless at this point on all this so any advice please?

FYI, I'm 50 and will have small UK pension when I retire.  I hope to work (still looking) because I 'want' to (don't need to).  I'll then max out the IRA.  Hubby will have 4-5k pension in 2 years time.  I'm told this is a nice pension to have.  We don't have debt.  We have some savings/mutuals.  We've yet to buy a house.  Hubby is active duty. 

In anticipation, big fat thank you! 

Jess :)

MilStachian

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Re: Vanguard Fund - just starting - advice please...
« Reply #1 on: January 01, 2014, 12:19:11 PM »
Jess,
Glad you're posting on the forums.

When you say your husband is active duty, do you mean US Military active duty?  Or UK?  If he's USMIL, that means the vast majority of your healthcare costs are covered, which is a significant advantage.

What's your investing horizon?  Do you intend on buying a home, and if so, how much will you put down and how much would you like to spend?

The questions may not seem related, but it will help people better understanding your investing/saving goals and timelines.


Jess2014

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Re: Vanguard Fund - just starting - advice please...
« Reply #2 on: January 01, 2014, 12:41:48 PM »
Hi Bristles,

Sorry, yes, hubby is US military active duty - and I agree, it's huge that we get health cover over here.  I don't take that lightly when it's so expensive for most other folk.  I'm very grateful for that.

We plan on using the VA loan - maybe later this year.  I'd like us not to pay more than 250k.  I know we 'can' get a much higher mortgage but I don't see that we need a huge house for 2 of us.  And we'd like to pay it off in a timely fashion.  Like 'not' 30 years since I'm 50 and he's 48. 

We'll pay for closing costs.  We weren't planning on putting a deposit down - want to keep money for updating the property (décor/floors/kitchen/bathrooms etc).  We 'can' pull from the mutuals if needed (which I think is taxed if we do that) for the property.

I wouldn't plan on touching anything I put into a Roth IRA for at least 10 years - hopefully longer since I'm already 50.  Hope this helps, and thank you very much :)

For the record, I'd be 'very' happy to stay in our home on base - it's very nice and everything is done for us.  To get the equivalent off base would cost us a whole lot more (for size and quality in a decent area).  But I do understand hubby's desire to buy a home (after travelling around for 28 years he wants to put down roots).  Since he's the main bread winner and he fully intends to work on past his 30 year mark, he wants the security of a property 'before' he retires.

He won't need to do that (work) but I guess it will give him more security.  I think his pension is more than sufficient for us to live on but he wants a bigger financial cushion.

In addition to his pension we have about 120k in mutuals.  Sorry I rambled, I'm trying to think of relevant info and I feel just a teeny bit intimated with all the wise folk out there (blushing face 'cause I don't know how to make the icon!!!) 

OperaAdam

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Re: Vanguard Fund - just starting - advice please...
« Reply #3 on: January 01, 2014, 03:24:32 PM »
If you don't want to think about it too much, you might want to consider investing in one of the LifeStrategy funds. You can get some bond exposure, but the rebalancing is taken care of automatically. The fees are only a tiny bit higher than getting comparable funds and rebalancing yourself. At the very least, they're a reasonable place to park your money while you decide if a different asset allocation would be better for you.

You could try VASGX or VSMGX.

I like these better than the target retirement date funds because they don't change the asset allocation on you.

CrochetStache

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Re: Vanguard Fund - just starting - advice please...
« Reply #4 on: January 01, 2014, 06:08:58 PM »
Jess2014 - I would take the numbers from your risk profile and apply it to ALL of yours & hubby's retirement funds, not just the funds at Vanguard. So taking into account the 120k in mutual funds already owned; What percentage of that is Bonds? What percentage of that is Stocks?

That may help you determine what to invest in at Vanguard. Lifestyle funds can be helpful but if you can create the mix yourself it does save a few pennies now, eventually save a few dollars for later.

Between my husband and I we have a good mix for our mutual funds as a whole, cherry picking which funds are less expensive(expense ratio) for him to be invested in and which ones are less expensive for me to carry.

Are the mutual funds in the TSP?

dude

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Re: Vanguard Fund - just starting - advice please...
« Reply #5 on: January 02, 2014, 10:40:42 AM »
Re: the VA loan -- it can be a great deal, but just be aware (I wasn't when I refinanced my private mortgage to a VA mortgage) that it is not free.  One would think that a benefit earned by virtue of having served your country in remote, hostile parts of the world would be one that didn't require having to fork over thousands of dollars for -- in which case, one would be mistaken.  Thanks to former President Reagan, the VA is required to charge the servicemember/veteran a "funding fee."  Depending on the value of the loan, this can be a lot of money -- mine was $9K.  Oh but the good folks who do the lending are happy to wrap it into the loan (i.e., your $X loan becomes $X + funding fee).  Do the math and make sure you check commercial and other loan programs (HUD, etc.) before committing.  If you don't have the downpayment to avoid paying PMI, then the VA loan can be a deal because there are no PMI payments with VA loans.  Also be aware that the VA loan process can be time-consuming and frustrating (our property was not a VA listed property, so I had to pursue listing, and doing so entailed having certain parts of our condominium trust documents changed).  I used USAA, and despite their good reputation for other banking services, their mortgage department is a colossal clusterf*** (do a Google search, you'll find plenty of stuff out there about others' experiences as well).  In the end, I got it done, and it saved me a boatload of money, but the process was not at all what I expected going into it.  Of course, YMMV.

Jess2014

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Re: Vanguard Fund - just starting - advice please...
« Reply #6 on: January 02, 2014, 05:28:20 PM »
Very many thanks to everyone who responded here, I'm very grateful.

First off, Milstachian - sorry I called you Bristles (blonde moment extraordinaire!  okay, now I know how the names work...)

OperaAdam (great name!) VTSMX is the one I was looking at (just because I'd heard and read about this one) - what do you think of this one?  I'm not familiar with LifeStrategy funds so later on tonight/tomorrow, I'll do a bit of homework, thanks!

CrochetStache - no, hubby's mutuals are not TSP.  I did mention your post to him and it got him to thinking - he needs to do a bit of moving around (with his mutuals)- so that's good.  And good point you make, I will definitely take that on board, thank you!

Dude - hi there, yes - I was aware the VA loan is not free by any stretch and that one has to pay a handsome fee to use it.  Also the potential difficulties and limitations as well but big thanks for mentioning them here, it's good for people to be aware of.  And I take your point entirely about looking around when it comes to actually doing the mortgage application.  As you say, USAA are really a great bank for the most part, but like most other things in life, there will always be one or two areas that aren't quite so fab!

Once again folks, thank you very much for taking the time to post to my question - I really appreciate it. 

Okay, I'll end it there because (1) my keyboard is playing up (ugh) and (2) my dog is whining for walkies!!!  And somewhere I read that pets are not cheap - whoever wrote that is bloody right!!!

But I do love her :)

OperaAdam

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Re: Vanguard Fund - just starting - advice please...
« Reply #7 on: January 04, 2014, 06:00:56 AM »
Hey Jess2014,

I didn't do a great job explaining the Lifestrategy funds. Bascially they're what's called a "fund of funds," so it an index fund that holds four other index funds in specific ratios. It basically lets you have a portfolio in a specific composition of stocks and bonds without having to manage anything yourself. CrochetStache is right that you can do exactly the same thing on your own for a little cheaper, but I like these funds people will a little less experience in managing investments because they're totally on autopilot to rebalance your asset allocation.

You asked specifically about VTSMX. It's a great fund to invest in, and in fact is the largest holding of the Lifestrategy funds I mentioned.

Take the Lifestrategy Growth fund (VASGX). Their stated goal is to have 80% stocks, 20% bonds in the fund, so right now they have:

VTSMX (Total Stock Market) - 56.4%
VGTSX (Total International Stock Market) - 23.7%
VTBIX (Total Bond Market) - 15.9%
VTIBX (Total International Bond Market) - 4.0%

They'll keep those percentages relatively constant so you don't have to rebalance by yourself. But again, CrochetStache is right that you could do exactly the same thing on your own and save a little bit of money.

Here's a link to the growth fund I mentioned https://personal.vanguard.com/us/funds/snapshot?FundId=0122&FundIntExt=INT

Jess2014

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Re: Vanguard Fund - just starting - advice please...
« Reply #8 on: January 07, 2014, 09:40:42 AM »
Cheers OperaAdam for that info on Vanguard index funds - very helpful :)

Deleted my vent about Vanguard! 

OperaAdam

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Re: Vanguard Fund - just starting - advice please...
« Reply #9 on: January 07, 2014, 08:58:43 PM »
I actually caught your post about the problems transferring earlier, but I didn't have a chance to reply. Have you gotten it all sorted out yet?

 

Wow, a phone plan for fifteen bucks!