What to do with a $100k windfall?

[lightaFIRE]

[deleted]

[Laura33]

How much experience do you have with investing, and what's your risk tolerance?   What are your 401(k) and IRA invested in?  How interested are you in actively managing your investments to maintain a target asset allocation? 

The first key here is don't overthink it.  Your ability to FIRE will be driven much more by your expenses than it will by the distinction between 0.14 and 0.15 expense ratios.  You have already avoided many of the serious traps -- high expense ratios, letting money sit in cash for years, etc. -- and are down to a small list of perfectly good options.  So don't let the perfect be the enemy of the good; make a decision and execute it. 

I would also try to dissuade you from thinking that you need your asset allocation to become more conservative over the next decade.  The reality is that even if you plan to FIRE at 40, you still need those investments to last another 40+ years.  So if you like an 80/20 asset allocation now, why change it?  Or, if you feel the need to modify it 10 years from now, why couldn't you shift the changes to within your 401(k)/IRA so you don't trigger massive capital gains taxes (remember that your asset allocation applies to your entire portfolio, not just a single investment)?  Or just divert new money to the more conservative investments vs. selling and buying your existing stuff?  You can think of it as buckets, i.e., right now you are filling your long-term-needs bucket; once that is sufficiently filled, you can divert your new investments to your more conservative short-term needs bucket.  There are many, many options in front of you; you don't have to predict the future perfectly right now. 

IMO the most important thing is to pick a fund that you will be able to stick with through all the drops.  Were you invested in 2008?  If so, what did you do then?  If you weathered those drops, then I'd put the money into VTSAX and just be prepared to ignore it for decades.  If you panicked, or if you weren't invested then, then a more conservative fund might be right for you.  Or if you're just lazy and don't want to think about it, then pick a target-date fund and forget about it. 

All of your choices can get you there.  Pick the one that suits your concerns and risk tolerance.

[Rob_bob]

I would agree with Laura 33 about not being too conservative over the next few years.  You hoefully will live many years beyond your retirement date.  If you were to go with a target date fund instead of a 2045 fund maybe a 2065 fund.

ETFs are a basket of stocks or bonds just like mutual funds, they may be actively managed or a passive index.  One of the most notable differences is that when you buy or sell a mutual fund it will trade at the days closing price, which may be much different than what you think it might be depending on market volatility.

An ETF trades all day long like a stock and you can see what the current price is and you can set a limit order so you know what you will be buying or selling it for.  Of course the price you get could be higher or lower than the end of day price too, over the long haul it will even out.

Mutual funds let you buy/sell shares based on a dollar amount, i.e. buy/sell $1000.00 of xyz fund and use fractional shares to round it out.  With ETFs you need to buy whole shares so you might need to buy $958.00 or $1050.00 to get a full amount of shares.

Personally I use ETFs.

[Laura33]

Why do you recommend VTSAX solely instead of a a handmade mix that includes international?

Because it's a great US-based fund with very low expenses that is great for beginners or people who don't want to think about it -- most advisors recommend a S&P 500 index fund, I prefer the greater coverage of the total market fund.  This is where all my post-tax investments go.

But you're right, you can and should offset that with some version of international if you're knowledgeable and interested in moving beyond the one simple core fund.  Personally, I have a larger percentage of my 401(k) in international funds, because international funds tend to have higher expense ratios, and my 401(k) international options are more competitive on expenses than the US-based 401(k) options are.  Again, point is to make an overall balanced portfolio.

You have a lot more irons in the fire than your initial post suggested, so why not sit down with all your current investments and figure out what your actual asset allocation is, what your best (i.e., lowest-fee) options are within each investing vehicle you have, and then make a decision how to re-allocate as necessary once you have all the information together?  There are a ton of people here who are into that kind of thing if you wanted to lay out all the various funds and alternative options (most particularly your other 401(k) options).  Not me, mind you -- I'm the big-picture guy who is far too lazy to do more than VTSAX.  ;-)  But other people.

[Rob_bob]

@Rob_bob Do you use ETFs so that you can made trades during the day? I am more likely a set and forget it (balance once a year) and trying to figure out if someone like me might want to use ETFs. Sounds like not?

I would agree with Laura 33 about not being too conservative over the next few years.  You hoefully will live many years beyond your retirement date.  If you were to go with a target date fund instead of a 2045 fund maybe a 2065 fund.

ETFs are a basket of stocks or bonds just like mutual funds, they may be actively managed or a passive index.  One of the most notable differences is that when you buy or sell a mutual fund it will trade at the days closing price, which may be much different than what you think it might be depending on market volatility.

An ETF trades all day long like a stock and you can see what the current price is and you can set a limit order so you know what you will be buying or selling it for.  Of course the price you get could be higher or lower than the end of day price too, over the long haul it will even out.

Mutual funds let you buy/sell shares based on a dollar amount, i.e. buy/sell $1000.00 of xyz fund and use fractional shares to round it out.  With ETFs you need to buy whole shares so you might need to buy $958.00 or $1050.00 to get a full amount of shares.

Personally I use ETFs.

I use TD Ameritrade as my broker and I just find it easy to use ETFs, I can buy anytime during the day and know that I'm not getting an end of the day price that potentially could be much different than I was expecting, even if it wouldn't matter much over the long term.  Also if I want to re-balance I can do it in a short amount of time because the trades go through instantly, I don't need to wait for the trades to take place at the end of the day and see how much cash I have available.

Also I believe at my broker I would have to pay a trading fee for mutual funds.  ETFs have no trading fee and I can use them from different fund providers.

Now if I just wanted to add some even amount of dollars each month to one or two funds then a mutual fund would be fine, I do have one TRowe Price fund in a TRowe Price Roth account, I never touch it.