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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Wess on July 31, 2018, 05:48:33 PM

Title: What to do with $10K and a REIT Roth IRA
Post by: Wess on July 31, 2018, 05:48:33 PM
Hello, forum! I have two things I'm looking for advice on, if you're browsing and feeling generous...

Income: $29K currently (goes up to $35K as of Sept 2018)
Net Worth: $32K   ($20k Roth IRA, $12K cash)
Savings rate in 2018 so far: 65%

1) Right now I have a Roth IRA with Vanguard that is currently 100% REIT (because periodically I tend to make very big, very principled but only slightly educated decisions). It seems to be doing ok, I guess, but I'm wondering what I should look at to determine the health of this part of my stache? The balance is only like $20K, so I feel like it's not supposed to be growing super fast at this point... though I am maxing out contributions as of Jan 2018. Honestly when I open my Vanguard account online I just have NO idea what I'm looking at and I'm not sure if I should do something different with this money or leave it be. How much should this be growing (each month? each year?) for it to be a good investment?

2) I have (finally) saved up another $10K, which is just sitting in my regular savings account. Should I dump this in with that REIT Roth? Should I put it in a different fund? ugh or should I keep some in my savings account as an emergency fund, borrringgg but safe. What would you do?

(also posted on my journal here:'-mustache-journal/)
Title: Re: What to do with $10K and a REIT Roth IRA
Post by: Rob_bob on July 31, 2018, 07:36:21 PM
It's always goo to have an emergency fund first.  I like REITs but not 100%, more like 10% max.  You should have a total market fund as the largest % of your portfolio.
Title: Re: What to do with $10K and a REIT Roth IRA
Post by: Hargrove on July 31, 2018, 09:29:19 PM
Well, at least you put the REIT in your Roth! It's ordinary income anywhere else on those dividends.

"The average annualized total return for the S&P 500 index over the past 90 years is 9.8 percent."

THAT SAID, you can't cherry pick one year or two years that you're holding an investment and compare that to the S&P500's long-term average. Google how the market is doing in a given year and compare it to your REIT in the last (whatever period) and you'll notice a big difference, probably.

Part of that is that we have a very, very long-running bull market. REITs have not been the recent darlings because interest rates are going up, and people are hyperventilating about pricing that in (pushing the prices down). They're similarly panicked about the downtrend in retail, which many REITs are dependent on.

Over the long term, the REIT's large dividend and small capital appreciation are rarely as good as a total-market index return like you get from VTSAX, but an REIT CAN BE a nice (smaller!) piece of your portfolio.

My emergency fund is credit cards. I can cashflow any emergency. If I can't, credit card. If even that weren't enough? No idea. I've never badly needed 50k in under 2 days. The most obvious thing for an e-fund is the price of a somewhat major repair if you use a local mechanic, which is probably cheaper, and may not take credit cards. Other than that, it's not really something I worry about, but people have very different mileage on what an e-fund should have in it.
Title: Re: What to do with $10K and a REIT Roth IRA
Post by: Wess on August 01, 2018, 08:31:56 PM

One thing. What does the verb "to cashflow" mean?
Title: Re: What to do with $10K and a REIT Roth IRA
Post by: Hargrove on August 01, 2018, 10:20:11 PM
When I say "I cashflow a car repair," I mean I just take money from the surplus coming in from my regular monthly income sources and use it to cover the repair. I don't need to save a pile of money to sit around in case of such a repair, because my cashflow is greater than the cost of such repairs.

Once your cashflow reaches a certain point, things you once had an emergency fund for may seem like only minor nuisances, which is a nice position to be in! Some people upscale their emergency funds, others just invest the fund. The first is more conservative, the second more aggressive and potentially riskier.
Title: Re: What to do with $10K and a REIT Roth IRA
Post by: frugaliknowit on August 02, 2018, 09:24:34 AM
You have too large of a percentage of your assets in REITS.  What you do with the $10K depends on whether you want an EF, and if so, how large.   

If you want an excellent, sophisticated, complex system for long term, follow Paul Merrimen:  Since your amounts are what they are (minimums on Vanguard accounts are typically $3,000/$10,000 for Admiral), you might have to use "motif" to get that broad diversification:

If you don't want to follow that system, you might do something like:  75% Vanguard Total Market and 25% Vanguard Total International.  You could also do something like 70% Vanguard Total Market, 20% International, and 10% REITs.

Title: Re: What to do with $10K and a REIT Roth IRA
Post by: Wess on August 10, 2018, 12:51:46 PM

OK. I think I'm super stoked to have hit the $10K mark, and I want to invest it.

What I'm wondering is this: I don't want to put it into my Roth IRA, because I'm already maxing out my tax-exempt contributions there. Right? So I should start a separate account. A traditional IRA? Is there another type of investment account I should be using that I don't know about? I'm just fuzzy on what gets taxed and what doesn't and I don't want to do something that will make my taxes huge.
Title: Re: What to do with $10K and a REIT Roth IRA
Post by: Mother Fussbudget on August 10, 2018, 02:24:47 PM
Welcome to the  Investment Order (

Read that post (link is ABOVE - a sticky post from the 'Investor Alley' section), evaluate how it fits your situation, and act accordingly.

All the best!  MFB
Title: Re: What to do with $10K and a REIT Roth IRA
Post by: Wess on August 10, 2018, 06:18:37 PM

Thank you!!