The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: College Stash on November 09, 2014, 11:45:29 PM
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Hi, I'm a college student looking to max a roth ira with my earned income from my summer internship. Given my young age, what would you recommend? I am currently looking into a few specific sector etfs like VDC (consumer defensive - it has been stable with solid appreciation and dividends). Would this or another sector be the way to go, or should I stick with something simple like the total stock market index?
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I would recommend Vanguard's Total World Stock Index (VTWSX/VT) which is easily the lowest cost, most diversified fund on the market (full disclosure: this is the only fund I own).
Sector investing is, in my opinion, not recommended simply as it is not diversified enough to be one's portfolio. Once your portfolio is larger you may consider a 5% speculative bet on a specific sector but not with your main retirement money.
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I would recommend Vanguard's Total World Stock Index (VTWSX/VT) which is easily the lowest cost, most diversified fund on the market (full disclosure: this is the only fund I own).
For some reason, it's actually cheaper, and even more diversified, to invest in a combination of VTSAX (Vanguard Total U.S. Stock Market) and VTIAX (Vanguard Total International). I'd also prefer those two as you can pick your own domestic/foreign stock allocation.
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I wouldn't recommend sector investing. Invest in total market and take the market weight of each sector.
If you plan on buying ETFs and maxing your Roth IRA, you should be able to have a fully diversified asset allocation.
For example, my ETF portfolio is:
35% VTI
35% VXF
15% VEU
15% VSS
I'm 100% stock with a tilt towards small and mid-cap.
So in my opinion, develop a plan and pick the asset allocation you want for long term. Then go ahead and buy ETFs according to that plan.
A simple 3-fund portfolio might be a good place to start: http://www.bogleheads.org/wiki/Three-fund_portfolio
63% VTI (total US stock)
27% VXUS (total international stock)
20% BND (total US bond)
Sent from my iPhone using Tapatalk
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When paying an expense ratio gives you better returns
BlackRock Health Sciences Opps Inv A SHSAX
10 Year return 15%
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When paying an expense ratio gives you better returns
BlackRock Health Sciences Opps Inv A SHSAX
10 Year return 15%
Can you pick the fund that will outperform the index in next 10 years? Please let us know and we'd be highly obliged. :-/
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IMO i do believe this will outperform SP 500 over next 10-20 years.
Therefore, this is the only stock that is in my Roth IRA.
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IMO i do believe this will outperform SP 500 over next 10-20 years.
Therefore, this is the only stock that is in my Roth IRA.
I always bet on black personally ;)
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SHSAX
Fees & Expenses
Front load 5.25%
Total expense ratio 1.21%
12 b-1 0.25%
Turnover 94.00%
I concede the 10 yr performance of 15.22% is impressive, but the fees and turnover make it not a candidate for my investment $$.
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Thanks for the advice. My only rebuttal would be that historically, and recently even, consumer defensive has been by far the best peforming sector. People don't give these things up, even in recessions.
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SHSAX
Fees & Expenses
Front load 5.25%
Total expense ratio 1.21%
12 b-1 0.25%
Turnover 94.00%
I concede the 10 yr performance of 15.22% is impressive, but the fees and turnover make it not a candidate for my investment $$.
VHT
It of course has lower fees, the holdings are similar, and the performance is slightly better.
http://finance.yahoo.com/q/pm?s=VHT
http://finance.yahoo.com/echarts?s=VHT+Interactive#{%22range%22%3A%2210y%22%2C%22scale%22%3A%22linear%22%2C%22comparisons%22%3A{%22SHSAX%22%3A{%22color%22%3A%22%23cc0000%22%2C%22weight%22%3A1}}}
Sector weighting is fun but the majority should be in broad index funds.
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I wouldn't recommend sector investing. Invest in total market and take the market weight of each sector.
If you plan on buying ETFs and maxing your Roth IRA, you should be able to have a fully diversified asset allocation.
For example, my ETF portfolio is:
35% VTI
35% VXF
15% VEU
15% VSS
I'm 100% stock with a tilt towards small and mid-cap.
So in my opinion, develop a plan and pick the asset allocation you want for long term. Then go ahead and buy ETFs according to that plan.
A simple 3-fund portfolio might be a good place to start: http://www.bogleheads.org/wiki/Three-fund_portfolio
63% VTI (total US stock)
27% VXUS (total international stock)
20% BND (total US bond)
Sent from my iPhone using Tapatalk
Pardon my ignorance, but isn't it a bad idea to buy ETFs because of the buy-sell spread? Whenever your dividends reinvest, you are buying them at "buy price" which is most likely a notch higher than if it was an index fund?
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IMO i do believe this will outperform SP 500 over next 10-20 years.
Therefore, this is the only stock that is in my Roth IRA.
Since you've been kind enough to suggest a mutual fund, why don't you take it a step further and make specific stock recommendations? I'm sure if you could pick a successfull fund, you could very well nail the stocks. Please let us know what will replace Apple and Exxon in 10 years so we can buy just that. :-)
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When paying an expense ratio gives you better returns
BlackRock Health Sciences Opps Inv A SHSAX
10 Year return 15%
(http://i.imgur.com/7hx1GkN.png)
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Bacchi beat me to it, but the recommendation of SHSAX is quite silly compared to an index like VHT.
As for going with a total world index vs domestic and foreign indexes in separate funds, I prefer the simplicity of a single fund to having two as well as avoiding a home market bias.