Hi everybody!
Recently discovered MMM and the site is very exciting! Nonetheless, I still feel a bit lost when it comes to investing.
Some quick background: I'm 22 years old, earning (as of December) somewhere between 50-57k a year, before taxes. I also have about 20k in cash. My living expenses are fairly low, probably around 9-10k a year (I have started tracking them, but won't have a realistic number till 2015).
Since I make significantly more money than I can spend, it seems like I should max out my 401k, but I'm not sure where to allocate these funds. My fidelity account offers me 32 options.
The first 12 are Target Date Funds, ranging from 2005 (for those hoping to retire nine years ago?) through 2055. They carry an Exp Ratio of 1.07%. This number seems high, from what I've read (which, admittedly, is not much). My other options are as follows, which the number in parenthesis being the exp ratio:
Stock Investments Company Stock INTEL STOCK FUND (.02)
Stock Investments Large Cap Growth FID GROWTH COMPANY (.9)
Stock Investments Large Cap Blend LARGE CAP US STOCK (.27)
Stock Investments Large Cap Blend VANG INST INDEX PLUS (.02)
Stock Investments Large Cap Value DODGE & COX STOCK (.52)
Stock Investments Mid-Cap Blend FID LOW PRICED STK (.8)
Stock Investments Small Cap Blend SMALL CAP US STOCK (.52)
Stock Investments Small Cap Blend BTC RUSSELL 2500 (.03)
Stock Investments Foreign INTERNATIONAL STOCK (.55)
Stock Investments Foreign AF EUROPAC GROWTH R5 (.55)
Stock Investments Foreign BTC ACWI EX US IMI (.1)
Stock Investments Diversfd Emerging Mkts LAZARD EMERG MKTS EQ (.83)
Stock Investments Diversfd Emerging Mkts BTC EMERGING MKTS (.1)
Bond Investments Intermediate-Term GLOBAL BOND FUND (.59)
Bond Investments Intermediate-Term PIM TOTAL RT INST (.46)
Bond Investments Intermediate-Term BTC US DEBT (.025)
Bond Investments Stable Value STABLE VALUE FUND (.32)
Short Term Investments Short Government INV GOVT & AGCY PRT (.14)
My research has led me to the conclusion that index funds are the way to go, and ideally through vanguard and ideally covering close to 100% of all companies (at least in the US). I was thinking about something like
Stock Investments Large Cap Blend VANG INST INDEX PLUS (.02) - 30%
Stock Investments Mid-Cap Blend FID LOW PRICED STK (.8) - 30%
Stock Investments Small Cap Blend BTC RUSSELL 2500 (.03) - 30%
Bond Investments Intermediate-Term BTC US DEBT (.025) - 10%
as my 401k allocations. Does this seem reasonable? Or am I way off track?
My other question (sorry this is getting long) is what I should do with the rest of my money. Even after maxing the 401k, I expect to make about 20k more than I can spend this year; should I max out a Roth IRA and invest the rest through vanguard a la Mr. Collins? (
http://jlcollinsnh.com/2011/06/14/what-we-own-and-why-we-own-it/).
Thank you very much for taking the time to read this - I really appreciate it. This whole thing is very exciting!
Cheers,
Griffin