The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Beach_Stache on February 13, 2016, 10:47:46 AM
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Hi all,
So I've been a great saver for a while, and have pretty high exposure to stocks, but I've always been very passive and just picked a fund and let it ride. Really just looking at the 10 year and longer and looking at it all as long term investment. I've been saving for a while and built up a pretty decent nest egg, but w/the recent dip in the market I figure it's time to re-look at things. Don't worry, I'm not in fear of the market and am not looking to play it safer, but just wanted to get your advice. Between my wife and I here's what our investments are looking like:
TSP - $315k in the 2050 lifecycle (planning on retiring in 22 year max, but that is the lifestyle fund most based in stocks, so I chose that)
Wife's 401k - $120k in a 2040 or 2050 lifecycle fund
Roth IRA - $80k in Fidelity funds (~$4k FBIOX, ~15k FCNTX, ~36k FDCAX, ~2.5k in FFFFX)
Fidelity Investments - $~30k all FBIOX
The FBIOX has taken a big hit which we have around $450/month recurring investments in.
I want to keep my exposure to stocks nearly 100%, I am find w/riding out the storms and plan to keep 90-100% stocks through retirement as well. The hope is that w/maxing out 401k/TSP, my Roth IRA and contributing to post-tax investments that we won't have a problem if there is a dip in the market, but am I all over the place? The ~$30k FBIOX is what we may have to use in 20 years or so if we retire then, everything else I don't pan to take until well into retirement.
I personally think between my Wife and I and 3 young kids that the savings part we are doing well, but we could use some help on the right funds to pick that I can just let it ride and forget about it. I can take the highs and the low's, but want to sure our portfolio is the right one for the long term strategy.
Thanks!
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Why does your retirement have a mix of index funds (a Retirement 2050 plan), but your individual investing targets specific parts of the market like biotech?
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Very good questions that I don't have a great answer for. I started investing right out of college (well even before that) and really just looked at the 10 year or 10+ year returns as I knew the money would be in there for the long run. So I wasn't concerned with short high or low runs, but good returns on 10+ years and I would pick them. I'm passive with my investments and would rather keep putting money in them and look at it a few times/year, but I'm not one to go around and change them. With the TSP the options are limited, so I figured I would just put it in the 2050 and let them re-balance for me, and whenever they came out w/a new lifecycle fund (like 2060 or 2070) I would just move all my money in there to keep it the most aggressive.
So that's why I have 2050 in my TSP. For my Roth IRA I basically just would either add to a fund each year and put in the $5500, so either add to an existing one or put $5500 in a new fund. After reading MMM the last few years I realize that many are just putting their money in Vanguard index funds. I have all my non-TSP money in Fidelity b/c it's what I started with 15 years ago. With the FBIOX funds I recently started putting money in that for the last 2 years. It was very good up until the last few months when it's really tanked, but has good returns on the 10 year which is why I picked it initially.
So do I just move everything over into a Fidelity fund that is more like the Vanguard VFINX? I think Fidelity's equivalent is FUSEX maybe? The Roth and TSP I plan to leave in there for at least the next 25-30 years, and maybe forever if I don't need it (until RMD's start). The post tax investments we will need in 20-22 years when we decide to retire, so that's the only one that we may need to tap within the next few decades.
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Very good questions that I don't have a great answer for. I started investing right out of college (well even before that) and really just looked at the 10 year or 10+ year returns as I knew the money would be in there for the long run. So I wasn't concerned with short high or low runs, but good returns on 10+ years and I would pick them. I'm passive with my investments and would rather keep putting money in them and look at it a few times/year, but I'm not one to go around and change them. With the TSP the options are limited, so I figured I would just put it in the 2050 and let them re-balance for me, and whenever they came out w/a new lifecycle fund (like 2060 or 2070) I would just move all my money in there to keep it the most aggressive.
So that's why I have 2050 in my TSP. For my Roth IRA I basically just would either add to a fund each year and put in the $5500, so either add to an existing one or put $5500 in a new fund. After reading MMM the last few years I realize that many are just putting their money in Vanguard index funds. I have all my non-TSP money in Fidelity b/c it's what I started with 15 years ago. With the FBIOX funds I recently started putting money in that for the last 2 years. It was very good up until the last few months when it's really tanked, but has good returns on the 10 year which is why I picked it initially.
So do I just move everything over into a Fidelity fund that is more like the Vanguard VFINX? I think Fidelity's equivalent is FUSEX maybe? The Roth and TSP I plan to leave in there for at least the next 25-30 years, and maybe forever if I don't need it (until RMD's start). The post tax investments we will need in 20-22 years when we decide to retire, so that's the only one that we may need to tap within the next few decades.
Compare expenses at Fidelity with similar funds at Vanguard. When talking 4% SWR, remember that your fund expenses come out of that 4%.
To a first approximation, you can simply subtract: Vanguard at 0.05% fund expenses versus 1% expenses elsewhere. Say you have a $1,000,000 portfolio.
4% SWR = $40,000 per year.
With the 0.05% fund, you can spend $39,500
With the 1% fund, you can spend $30,000
And a 1% fund isn't the worst out there. You can find funds with 2.5% expenses. And tack on a 1% advisor fee. Suddenly your spendable cash is down to $5,000 per year. On a $1,000,000 portfolio.
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Easy way to figure out if you need to change funds is to look at the expense ratio. 0.4% and below should be a baseline. You should really be able to do better than 0.2% though.
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So do I just move everything over into a Fidelity fund that is more like the Vanguard VFINX? I think Fidelity's equivalent is FUSEX maybe? ...
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With the 0.05% fund, you can spend $39,500
With the 1% fund, you can spend $30,000
And a 1% fund isn't the worst out there. You can find funds with 2.5% expenses.
OP mentioned VFINX (0.05% fee) and FUSEX (0.10% fee), not 1% fee funds. It's some interesting calculations, but doesn't seem relevant to a poster trying to decide which S&P 500 fund to pick.
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So do I just move everything over into a Fidelity fund that is more like the Vanguard VFINX? I think Fidelity's equivalent is FUSEX maybe? ...
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With the 0.05% fund, you can spend $39,500
With the 1% fund, you can spend $30,000
And a 1% fund isn't the worst out there. You can find funds with 2.5% expenses.
OP mentioned VFINX (0.05% fee) and FUSEX (0.10% fee), not 1% fee funds. It's some interesting calculations, but doesn't seem relevant to a poster trying to decide which S&P 500 fund to pick.
Sure it's relevant. It's just a smaller difference than the example. That's why it's an example, not a rundown of the OP's exact situation.
I expect other people to read this thread, and the larger numbers for a 1% annual fee may be a wakeup as to how much money they're wasting.