Author Topic: Questions: Investment allocation and plan  (Read 2411 times)

multi-vitamin

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Questions: Investment allocation and plan
« on: September 15, 2015, 09:24:19 PM »
Hey all,

I'm looking for some advice on an investment plan. I currently have the following accounts. I just opened the two betterment accounts last week.

Vanguard $2500.00 spread across 4 accounts -- Midcap, large cap, international, and target retirement fund. These were setup through a previous employer that was matching me 3%.
Betterment: Roth Ira $550
Betterment: Emergency Fund: $1500 -- it is 60% stock, 40% bond allocated by Betterment. They recommend keeping 130% of your emergency fund in this account, so it doesn't lose value to inflation-- like it would sitting in a saving account with no interest.

Bank/cash: $4,500
Car loan: $4,500 (im making $400/month payments, so paid off in a year)

Currently I have $500 a month that I can invest. Once the car is paid off, then I could increase that to $800 a month.

Anyway, Question: Should I move the $2500 from the 4 vanguard funds to the betterment accounts? Which one(s)? Should I move the vanguard accounts to the Vanguard Total stock market index fund? How much of the $500/month should go to the betterment emergency fund and how much to the betterment Roth Ira, or should I keep putting some of that in vanguard?

Should I turn on tax loss harvesting on my betterment accounts?

I'm 28, so I have many years of investing ahead of me.

seattlecyclone

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Re: Questions: Investment allocation and plan
« Reply #1 on: September 15, 2015, 09:56:12 PM »
If it were me, I would:

1) Pay off the car loan with the $4,500 cash. Why keep paying interest for another year when you don't have to?
2) Liquidate the $1,500 taxable Betterment account. Having a bit of cash on hand is a good idea.
3) Keep saving cash until I'm satisfied I have a "big enough" emergency fund. How big is "big enough"? That's for you to decide.
4) Roll the Betterment IRA into your Vanguard IRA.

You're just starting out with investing, so just invest in a total stock market fund for now. Once your balance is big enough to meet Vanguard's minimums for two or three different funds, add some bonds into the mix, and then international stocks. While you add to your investments, learn a bit more about how the markets work and how capital gains taxes work and other things of this nature. This way you will know enough to manage your own investments and won't have to pay Betterment 0.15%-0.25% per year to do it for you. Doing it yourself really doesn't need to be that complicated! And while your balance is low right now, there really isn't much you can do to mess things up. Just keep saving and watch your number of shares grow.

GGNoob

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Re: Questions: Investment allocation and plan
« Reply #2 on: September 16, 2015, 06:56:17 AM »
Is the Vanguard account a 401k or has it been moved into an IRA? I assume it's traditional (tax-deferred) and not Roth?

I would suggest either putting all of your funds from Vanguard into the Target Retirement Fund or rolling the account to Betterment. The target retirement funds are an all-in one solution so you do not need the other funds. If you plan to continue using Betterment, this would also allow you to enable tax loss harvesting.

Keep contributing to the emergency fund until you have everything in there that you need. I also wanted to ask...is your portfolio actually 60% stock or is it 60% bond? I know Betterment's default recommendation is 40% stock and 60% bond. With the more aggressive 60% stock, your account will probably fluctuate more than you want.


multi-vitamin

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Re: Questions: Investment allocation and plan
« Reply #3 on: September 16, 2015, 08:01:04 PM »
@GGNoob
The vanguard accounts are from a simple IRA. My old company was matching me at 3%.

Are the fees I'm paying for betterment offset by the gains of tax-loss harvesting and re-balancing?
If I just put all my investments in my vanguard target retirement fund, am I am missing out on gains by not going with betterment?
What about my roth IRA through betterment?How much to invest in that account?

By the way, interesting blog! I just switched careers into the IT field. I'm working support at a datacenter right now, however I get to work with a wide array of technologies. How do you like the Networking side of things? I was thinking of pursuing some certifications in networking. Thoughts?
Thanks for the help!

seattlecyclone

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Re: Questions: Investment allocation and plan
« Reply #4 on: September 16, 2015, 09:34:59 PM »
Are the fees I'm paying for betterment offset by the gains of tax-loss harvesting and re-balancing?

Not really. Tax-loss harvesting is most likely to pay off for money you have invested recently (since any shares you buy now are less likely to be in the red as time goes on). Therefore as your account ages, the fraction of your money that could benefit from tax-loss harvesting will decline. Besides that, you can harvest losses almost as well yourself. It really isn't that hard. Just check in once in a while to see if any shares have declined in value since you bought them and sell them. Also, tax-loss harvesting only matters for taxable accounts. If you plan to put most of your money in retirement accounts, the whole thing is moot.

Quote
If I just put all my investments in my vanguard target retirement fund, am I am missing out on gains by not going with betterment?

Betterment will invest your money in slightly different things than the Vanguard Target Retirement Fund. It might perform better, it might perform worse. Who knows? The one thing you can control is your fees. Don't pay more than you need to.

Scandium

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Re: Questions: Investment allocation and plan
« Reply #5 on: September 17, 2015, 08:57:32 PM »
I assume this is after maxing out your 401k? (if you have one).

Then if also say emergency cash, then Roth at vanguard