Author Topic: Getting Smart About My Investments  (Read 1841 times)

goofiefoot

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Getting Smart About My Investments
« on: August 04, 2016, 03:37:53 PM »
I've recently joined the MMM community, and want to get aggressive with my investments.  I've started a journal HERE to try to keep myself on track.

I'm hoping to gain some advice on my current 401k, ESPP, and non-existent stock purchase strategy to help boost my portfolio and start down the FIRE path. I've been fairly hands-off on my investments, as I have little understanding of them.  I'm open to suggestions of books or resources to boost my knowledge.

I am currently contributing 10% to my 401k, 5% to traditional, 5% to a Roth 401k.  My company contributes $.050 to each dollar, up to 6% of my contribution.  The account has done fairly well since 2009, and I'm currently sitting at roughly $115k.  My 401k plan is through Schwab, and this is the mix they provided for my medium-to-high risk plan:

11% - Harbor Capital Appreciation Instl
23% - Vanguard Institutional Index I   
13%   - Vanguard Windsor II Admiral
5% - Artisan Mid Cap Value Investor   
4% - Morgan Stanley Inst Small Co Gr IS      
9% - Vanguard Small Cap Index Adm   
5% - American Funds Europacific Growth R6   
5% - Lazard Emerging Markets Equity Instl   
12% - Vanguard Total Intl Stock Index Admiral
5% - PIMCO Total Return Instl
8% - Vanguard Total Bond Market Index Adm

By asset class this works out to:
Large Company - 47%
Small/Mid Company - 18%
Itnl/Global - 22%
Bonds - 13%

I also contribute 6% of my salary to my company's employee stock purchase program (hosted through Etrade).  Our plan gives a 15% discount to quarterly stock allotments, pricing based on the lower of the first or last day of the quarter.  I have typically set my shares to sell once the stock gains me about 25-30% over the discounted rate, when it bumps up 2-3 times a year.  From my very basic understanding of things, after capital gains, this still nets me a decent return on my money.  Up until now, though, I've simply been moving that cash from the sell over into my savings account (last I looked it was at a whopping .05%). 

Planning my FIRE plan, I know I should be contributing as much as possible to my 401k.  While I have been searching for a new job with a higher salary, I am hoping for a pay bump in a few months at my current place, and I plan to move that directly toward my contribution.  My wife is also supposed to get a raise this year, and since she doesn't contribute to any investments, we may use that extra as well.  I'd love some feedback on the current plan and allotment.

I like the discount from the ESPP, and would like to use that money more wisely.  If I wanted to just begin using that money to purchase, say, shares in a nice Vanguard index, can I simply transfer the money within Etrade after my stock sell to purchase those shares, or is there there a technique or process to get into the index fund? 

Once I begin purchasing stocks, and get into sizable dividends, my understand is that rolling that income back into the purchase cycle is another good way to grow.  Is there a strategy to this, and what are the implications, good or bad?

I have a great CPA I've been using since we purchased our rentals, and I know he can provide guidance, but I'm open to any advice for avoiding tax pitfalls with diving further into the investment world.

I appreciate all the information I'm finding here, and hope to use your advice to learn and grow within this community.  Thanks!

ysette9

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Re: Getting Smart About My Investments
« Reply #1 on: August 04, 2016, 03:47:19 PM »
Yowza, there is a lot going on there. My first impression is that your portfolio is WAY too complicated. Once you figure out what your target asset allocation is based on your risk tolerance and timeline, then figure out something like a lazy portfolio https://www.bogleheads.org/wiki/Lazy_portfolios that achieves that goal.

Secondly, why are you contributing to both a traditional and roth 401(k)? What is your tax bracket? I recommend starting with the Bogleheads investing start-up kit https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit as a good place to start your education. Then work on drafting your investment plan so you have your goals and guiding principles clear. Once the big picture work is done then you can start worrying about the details of how to work your ESPP and whatnot.

goofiefoot

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Re: Getting Smart About My Investments
« Reply #2 on: August 06, 2016, 09:36:08 PM »
Yowza, there is a lot going on there. My first impression is that your portfolio is WAY too complicated. Once you figure out what your target asset allocation is based on your risk tolerance and timeline, then figure out something like a lazy portfolio https://www.bogleheads.org/wiki/Lazy_portfolios that achieves that goal.

Secondly, why are you contributing to both a traditional and roth 401(k)? What is your tax bracket? I recommend starting with the Bogleheads investing start-up kit https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit as a good place to start your education. Then work on drafting your investment plan so you have your goals and guiding principles clear. Once the big picture work is done then you can start worrying about the details of how to work your ESPP and whatnot.

...and this is why I ask questions!  If I'm going to jump in, I've got to get some understanding.

Thanks for the links.  From initial scanning, looks like a treasure trove of info.  I will dig in and get some education. 


MustacheAndaHalf

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Re: Getting Smart About My Investments
« Reply #3 on: August 06, 2016, 10:20:31 PM »
"the SEC requires funds to tell investors that a fund's past performance does not necessarily predict future results."
https://www.sec.gov/answers/mperf.htm

You might want to use that to drop funds that you picked based on past performance.  You can visit the government website to verify it, or open any prospectus for any mutual fund - they're required to tell you not to use past performance.

mathjak107

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Re: Getting Smart About My Investments
« Reply #4 on: August 07, 2016, 03:23:20 AM »
much to many funds