Author Topic: Help with Vanguard Stock Fund  (Read 5207 times)

newton

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Help with Vanguard Stock Fund
« on: May 30, 2015, 05:03:55 PM »
Hello

Based on the advice I received on this forum, I recently switched my IRA and ROTH to Vanguard funds.  It was quick and easy and no regrets.  I am now planning on moving some money into their stock funds.  I have about $25,000 to invest.  I have no plans to need the money over the next 10 years.  I have been advised to put 30% in VGTSX and 70% in VTSAX.

Any thoughts or opinions??

MDM

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Re: Help with Vanguard Stock Fund
« Reply #1 on: May 30, 2015, 05:22:59 PM »
That is a perfectly reasonable allocation.  There are also other perfectly reasonable allocations.  E.g., see http://www.bogleheads.org/wiki/Three-fund_portfolio and http://www.bogleheads.org/wiki/Asset_allocation.

If you wanted to go 60/40 instead of 70/30 you could get admiral class for the international fund.  But don't agonize over 10% here or there - pick what looks good to you, document that in an Investment Policy Statement (see http://www.bogleheads.org/wiki/Investment_policy_statement) and good luck!

forummm

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Re: Help with Vanguard Stock Fund
« Reply #2 on: May 30, 2015, 06:12:55 PM »
Agree with MDM. Your plan is a good one, but not the only good one. I'm personally close to 55/45. I don't think the difference in the ratio matters all that much either. Whatever you're comfortable with and will stick with.

humblefi

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Re: Help with Vanguard Stock Fund
« Reply #3 on: May 30, 2015, 06:49:24 PM »
You have already got great opinions. I will add a tiny one to this list....apologies if this is a bit off topic.

+ In my personal experience, I have found that saving $25000 for saving sake, without a precise reason attached to it, puts me in a lot temptation...both in good times and in bad. I used to have a unnamed "savings fund" but somehow I always ended up selling it at the bad time and moving it some "more urgent" goal. Having a FI plan with items needed for FI and dollars associated with each item has given me "blinders" to ride through the ups and downs.

+ So, I prefer having a FI plan with different items needed for me to FI and a dollar cost attached to each item in the FI plan. Ex: http://humblefi.com/category/financial-independence/financial-independence-to-me/.

+ Once you have a dollar cost attached to your FI plan items, pick one item and associate the $25000 investment to it. Note that depending on the item, the investment decision (stock funds, bond funds, cash, stock/bond percentages, us/international percentages, etc) can be automatically derived out of it.

Hope that helps. Best wishes for your FI journey.

TomTX

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Re: Help with Vanguard Stock Fund
« Reply #4 on: May 31, 2015, 05:55:23 AM »
Personally, I would put 100% into VTSAX until you hit at least $50k. Staying there until $250k is perfectly fine.

Yes, eventually you should have diversification. However - there are a lot of potential pitfalls to diversification and multiple funds (mostly emotional.)

I like SIMPLE. Put it all in a low-cost stock index. Keep adding to it.  Ignore the market valuation. Accept that you will see multiple 50% market crashes and ignore them too.

In the $50k-$250k range, develop that asset allocation plan.

newton

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Re: Help with Vanguard Stock Fund
« Reply #5 on: May 31, 2015, 10:19:57 AM »
Thanks for the comments and suggestions. Good to hear I am on somewhat of the right track.  I agree, I like simple and thought these 2 would be simple, didn't think about just one but that is definitely something to consider.  Great thoughts everyone.

a1smith

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Re: Help with Vanguard Stock Fund
« Reply #6 on: May 31, 2015, 12:55:51 PM »
Hello

Based on the advice I received on this forum, I recently switched my IRA and ROTH to Vanguard funds.  It was quick and easy and no regrets.  I am now planning on moving some money into their stock funds.  I have about $25,000 to invest.  I have no plans to need the money over the next 10 years.  I have been advised to put 30% in VGTSX and 70% in VTSAX.

Any thoughts or opinions??

You can use Vanguard's asset allocator and see what they recommend for bonds.  Just one more input for you to consider; it's your decision in the end.  At most, Vanguard will recommend four funds: US/Intl stock funds; US/Intl bond funds.  I guessed your answers based on your post and this was the recommendation:

$25,000 Vanguard LifeStrategy Growth Fund (VASGX), 0.17% ER.  This fund is comprised of:

Rank   Fund name   Percentage
1        Vanguard Total Stock Market Index Fund Investor Shares   55.1%
2   Vanguard Total International Stock Index Fund Investor Shares   24.8%
3   Vanguard Total Bond Market II Index Fund Investor Shares*   16.0%
4   Vanguard Total International Bond Index Fund Investor Shares   4.1%

So 80/20 stock/bond; 69/31 US/Intl for stock; 80/20 US/Intl for bonds.  This fund is basically the four funds they usually recommend but since you need this allocation it fits one of the Lifestrategy funds they use.

You could save a little in fees by purchasing the funds individually and using VTSAX instead of VTSMX but for the others you are below $10,000 so you need the Investor Shares.  Also, Vanguard Total Bond Market II Index Fund Investor Shares is institutional class; you would have to use Vanguard Total Bond Market Index Fund Investor Shares.

However, make sure you answer the questions in thier asset allocator to get your own recommendation.  I put in answers that I knew would result in 100% stock allocation and got this:

60%    $15,000.00    Vanguard Total Stock Market Index Fund Investor Shares  (VTSMX)
40%    $10,000.00    Vanguard Total International Stock Index Fund Investor Shares  (VGTSX)

Edit: Yes, dividend paying funds (bond, REIT, etc) are better in tax-deferred accounts.  Saw Roth, IRA in your post and latched onto that.  So, maybe last config is best for your after tax account.  VTSMX and VGTSX are very tax efficient because of Vanguard's patented process of pairing funds, ETFs.
« Last Edit: May 31, 2015, 10:22:38 PM by a1smith »

KC1983

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Re: Help with Vanguard Stock Fund
« Reply #7 on: May 31, 2015, 01:46:32 PM »
Hello

Based on the advice I received on this forum, I recently switched my IRA and ROTH to Vanguard funds.  It was quick and easy and no regrets.  I am now planning on moving some money into their stock funds.  I have about $25,000 to invest.  I have no plans to need the money over the next 10 years.  I have been advised to put 30% in VGTSX and 70% in VTSAX.

Any thoughts or opinions??

I assume you're talking about what to do in a taxable account. I agree with your choice. I've been 70% in VTSAX and 30% in the Small Value Index, with no international. It's worked great, but for the next year or two all of my taxable Vanguard investment is going to go into VGTSX. It won't get me to 30%, but it will give me more diversification. All these accounts are relatively tax efficient.

Sounds like you may already know this, but be sure to keep your bond fund money in your IRAs. Look at the big picture for your total asset allocation. Bond funds and REITs are the least tax efficient, and belong in tax-advantaged accounts.

Greenroller

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Re: Help with Vanguard Stock Fund
« Reply #8 on: May 31, 2015, 09:22:37 PM »
Subbing

modulus

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Re: Help with Vanguard Stock Fund
« Reply #9 on: June 08, 2015, 08:47:27 AM »
Everyone here keeps mentioning VGTSX for international.  Is there any major difference I am missing between VGTSX and VFWAX?  The Jim Collins series mentions VFWAX for international stocks, but they look almost identical to me.

MDM

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Re: Help with Vanguard Stock Fund
« Reply #10 on: June 08, 2015, 10:25:17 AM »
Everyone here keeps mentioning VGTSX for international.  Is there any major difference I am missing between VGTSX and VFWAX?  The Jim Collins series mentions VFWAX for international stocks, but they look almost identical to me.
Good question.  Google
  VGTSX and VFWAX site:bogleheads.org
for some detailed analysis.

Indexer

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Re: Help with Vanguard Stock Fund
« Reply #11 on: June 08, 2015, 06:16:58 PM »
Everyone here keeps mentioning VGTSX for international.  Is there any major difference I am missing between VGTSX and VFWAX?  The Jim Collins series mentions VFWAX for international stocks, but they look almost identical to me.

The only real difference I know of is the index they track.  VGTSX  uses a broader index and it is therefore more diversified. 

modulus

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Re: Help with Vanguard Stock Fund
« Reply #12 on: June 08, 2015, 06:47:30 PM »
Everyone here keeps mentioning VGTSX for international.  Is there any major difference I am missing between VGTSX and VFWAX?  The Jim Collins series mentions VFWAX for international stocks, but they look almost identical to me.

The only real difference I know of is the index they track.  VGTSX  uses a broader index and it is therefore more diversified.

Thanks!  Based on my quick search, it appears that VGTSX also includes some international small cap that the other does not.  This thread on Bogleheads has a nice little graphical representation of where the various Vanguard international funds fit in relative to each other.

https://www.bogleheads.org/forum/viewtopic.php?f=1&t=153841