3 Vanguard funds and 10k sitting in a money market fund, what to do?

[hrbngr]

hello,

This is my 1st post. So, straight to it, I am a 44yr old investor with $24k in my Roth IRA split in VFIAX and VEXAX. In my Rollover IRA, I have about 20k with half in VTSAX and 10k left in the money market account. I just finished reading multiple MMM posts as well as JLCollins Stock series and I am having a difficult time deciding on what to do w/the remaining cash.  JLCollins originally was investing in VBTLX but has now moved to VFIDX for his bond option. Any Mustachians out there with some feedback or advice?

[matchewed]

Come up with an Investment Policy Statement and Asset Allocation which reflects your timeline and risk tolerance. Then invest accordingly.

[hrbngr]

matchewed,

thanks for the reply. I have some of the info on bogleheads.org, but right now, I don't think I could come up a solid Asset Allocation strategy.  If I were to invest in 100% stocks, then in market downturns, I would not have anything to sell to increase my stock position, that was why I was looking at a bond option. Anyways, some add'l research on VFIDX reveals that you need a minimum 50k to invest in the admiral class and the investor class has double the expense ration, so I will have to find an alternate investment, or just buy the VBTLX fund for now. Appreciate any add'l feedback.

[matchewed]

An AA isn't about having a position and waiting for that position to shift so you can take advantage. It is about having a desired mix of equities and fixed income assets at a desired level that give you the return you're looking for with an acceptable risk. Then you rebalance annually or whatever. You could arrange something along the lines of a shift of >X% in any particular asset category can trigger a rebalance but that is much more of a rule that you follow rather than a gut reaction to a financial event.

[hrbngr]

At this point, I can't see myself being like some Mustachians and being able to retire in 10 years, I'm looking to retire around 70--if things go well.  I would prefer to go 100% equities but I was wondering if going 75% stocks, 25% bonds would be optimal so that I can rebalance more easily, rather that only being able to use my maximum contribution for the year to buy stocks when the market is down. I could always rebalance at regular intervals. I was simply wondering if some members here keep bonds simply to have more buying leverage when stocks go down.

[hokiegb]

If you're planning on timing the market (buying when stocks are "down") then I wish you luck. Otherwise you need to decide what your level of risk tolerance is to the ups and downs of the stock market. For myself, I have no real need to pull money out of the stock market, so my portfolio is probably 95% stocks and 5% bonds. Unless you need quick access to the money I don't see any advantage in keeping money in a money-market fund, the returns are much lower than either stock or bond funds.
And seriously, don't try to time the market.

[matchewed]

At this point, I can't see myself being like some Mustachians and being able to retire in 10 years, I'm looking to retire around 70--if things go well.  I would prefer to go 100% equities but I was wondering if going 75% stocks, 25% bonds would be optimal so that I can rebalance more easily, rather that only being able to use my maximum contribution for the year to buy stocks when the market is down. I could always rebalance at regular intervals. I was simply wondering if some members here keep bonds simply to have more buying leverage when stocks go down.

The advice above isn't about Mustachianism, it's just good investing for beginners. It is the foundation of investing.

[hrbngr]

hokiegb,
thanks for the reply. I am not trying keep my extra cash in a money market account, I just could not decide if any of the bond options were a good choice. If I had 75% stock/index and 25% bond/index, and the market dropped a lot, but not as much as say in 2009, I could sell the bond fund and buy more stock at a point i felt comfortable (not perfect timing, just lower) and then once the market recovers, sell some of the stock and then re-purchase the bond fund. That was more my plan--not to keep it in the money market fund.

[gimp]

hrbngr: That's called rebalancing. It's not a bad strategy. However, the key point of rebalancing isn't to make more money in downturns, but to keep a stable portfolio for your needs. It's about risk management.

If you want to rebalance just for the money... I believe you'd be better served by investing in 100% equities and letting it ride for several decades. Not just because it's a pretty sure way of having more at the end of the day, but also for mental health: you don't have to worry about whether right now is the right time to rebalance to get the most money, but what if the stock goes down, let me keep track of this and refresh every day, blah blah blah, blah...

Do you see what I'm saying?

With that said, your plan is certainly workable if you're willing to lose a little bit of sleep. It may or may not be more profitable. If you think it's a good idea, go for it -- just remember not to panic. If you can avoid panicking, you'll be ok in the end.