Author Topic: How am I doing? What can I do better? Things to consider for near-medium term??  (Read 3350 times)

astvilla

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Hi everyone, thank you for your advice so far everyone, I've made some investments and am asking for an opinion, so far I have put...

10K into FSITX (Spartan US Bond index fund advantage) - taxable account
10K into FSTVX (Spartan total market index advantage) - taxable account
700 cash in same taxable account just sitting...
900 in Fidelity checking account just sitting...
I picked spartan fund b/c already had money in fidelity, didn't want to lose transfer to vanguard?

5500 in Vanguard Roth IRA money market now, not invested yet.

Maxing 401k contribution w/70% VINIX (Vanguard institutional index), 30% PTRAX (Pimco total return admin class)

A little over 17K in checking account (6 months emergency savings?) I'm moving 10K and eventually more to Vanguard taxable account.

My thinking on Fidelity funds were loosely based on boglehead forums and their picks for asset allocation. I'm wondering if fidelity is trustworthy? We keep talking ER on the forums but aren't there hidden fees to look out for as well? I'm not sure if Fidelity has more of these hidden fees than vanguard. I looked at prospectus for FSTVX but have no idea how to interpret it.

I'm also wondering how much to have emergency savings. Many MMM posters said they have 1-2K in checking account but 6 month emergency funds? Do you count taxable investment account as part of your emergency fund? How liquid is that money?  I'm probably looking to invest another 15K then into Vanguard taxable investment account

I think I'm not real diversified and I have some overlap w/VINIX and FSTVX tbh. VINIX i think is S&P and FSTVX is total stock so NASDAQ, DJIA, S&P, 3400 holdings (that's all the companies listed? I thought there'd be more companies with stock shares...)

I'm interested in dividend investing, there seem to be differing opinions on this, would dividend funds from vanguard be a safe option for roth IRA and vanguard taxable account? I feel pretty risk averse and would like some money coming in to reinvest, i'm not in a rush for aggressive growth. you can see i have a lot in bonds for a 24 year old. i'm looking for international stock index too on Vanguard, any suggestions?

I'm also confused as to what exactly the difference is between ETF and index fund. From what i understand, ETF is a more narrow selection of stocks focused on a sector that trades like stock? What does it mean trade like stock? Like how w/index fund price only updates at end of whole day and can only trade index fund at end of day and not in seconds? Boglehead said you can make portfolio similar w/index fund using ETF? So why not use ETF instead of index funds which we all recommend?

Also what would be the impact of a rise in interest rates? Supposedly that's going to hurt bonds somehow but there's so many different types of bonds, short, intermed, long, TIPS, not real sure what this interest rate hike is going to do? How will it affect stocks? I know this sounds like market timing but the rate hike sounds like it'll happen sooner or later. And what does cheap oil mean for economy? some argue it'll help stimulate, others say it hurts s&p oil stocks, is this temporary or something to ignore and just invest?

Sorry for all the questions and long post and thank you again for your advice!



MDM

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fewaopi, you are doing well for a 24 year old.  Some thoughts on your questions below.

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I picked spartan fund b/c already had money in fidelity, didn't want to lose transfer to vanguard?
Fidelity Spartan funds are about the same as Vanguard.  No problem here.

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A little over 17K in checking account (6 months emergency savings?) I'm moving 10K and eventually more to Vanguard taxable account.
I'm also wondering how much to have emergency savings. Many MMM posters said they have 1-2K in checking account but 6 month emergency funds? Do you count taxable investment account as part of your emergency fund? How liquid is that money?  I'm probably looking to invest another 15K then into Vanguard taxable investment account
Six months is more than I would keep, but this is very much a personal decision.  A lot depends on how safe (you think) your job is.  Either $17K or $7K is defensible.

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I'm wondering if fidelity is trustworthy?
Sure hope so 'cause we have a whole bunch with them.  They have been around a long time and there seems no reason to believe they are untrustworthy.

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We keep talking ER on the forums but aren't there hidden fees to look out for as well? I'm not sure if Fidelity has more of these hidden fees than vanguard. I looked at prospectus for FSTVX but have no idea how to interpret it.
There is such a thing as a "load fund" which can hit you for 5% or so, but that is not "hidden".  FSTVX is not a load fund.  See https://fundresearch.fidelity.com/mutual-funds/fees-and-prices/315911800

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I think I'm not real diversified and I have some overlap w/VINIX and FSTVX tbh. VINIX i think is S&P and FSTVX is total stock so NASDAQ, DJIA, S&P, 3400 holdings (that's all the companies listed? I thought there'd be more companies with stock shares...)
Actually you are well diversified compared to people holding a few individual stocks (worst of all, people invested 100% in their employer's stock).  Yes, there is overlap between S&P 500 and total US market but that's a secondary thing.  The primary thing is that you are investing in a diverse group of stocks - well done.

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I'm interested in dividend investing, there seem to be differing opinions on this, would dividend funds from vanguard be a safe option for roth IRA and vanguard taxable account?
No more nor less safe than many other options.  You could give it a try and learn by doing.

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I feel pretty risk averse and would like some money coming in to reinvest, i'm not in a rush for aggressive growth. you can see i have a lot in bonds for a 24 year old. i'm looking for international stock index too on Vanguard, any suggestions?
VGTSX would fit that description.

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I'm also confused as to what exactly the difference is between ETF and index fund. From what i understand, ETF is a more narrow selection of stocks focused on a sector that trades like stock? What does it mean trade like stock? Like how w/index fund price only updates at end of whole day and can only trade index fund at end of day and not in seconds? Boglehead said you can make portfolio similar w/index fund using ETF? So why not use ETF instead of index funds which we all recommend?
I'll save some typing and refer you to http://www.investopedia.com/articles/mutualfund/05/etfindexfund.asp and http://www.bogleheads.org/wiki/ETFs_vs_mutual_funds.

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Also what would be the impact of a rise in interest rates? Supposedly that's going to hurt bonds somehow but there's so many different types of bonds, short, intermed, long, TIPS, not real sure what this interest rate hike is going to do?
See http://beginnersinvest.about.com/lw/Business-Finance/Personal-finance/Understanding-Bond-Duration.htm

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How will it affect stocks? I know this sounds like market timing but the rate hike sounds like it'll happen sooner or later. And what does cheap oil mean for economy? some argue it'll help stimulate, others say it hurts s&p oil stocks, is this temporary or something to ignore and just invest?
All good questions.  If you ever figure out how to answer them, let us know - we'll be more than happy to share the great returns one could get if able to predict short term market moves. ;)

Good luck!

Dodge

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Please try to organize your questions better in the future, makes it easier to respond.  I'll pick some out:

Q: I'm wondering if fidelity is trustworthy? We keep talking ER on the forums but aren't there hidden fees to look out for as well? I'm not sure if Fidelity has more of these hidden fees than vanguard. I looked at prospectus for FSTVX but have no idea how to interpret it.

A:  Vanguard doesn't have any hidden fees, I don't expect Fidelity will either.  Just ask them, Fidelity is regulated, they won't lie to you.

Q:  I'm also wondering how much to have emergency savings.

A:  This is a personal decision.  I follow YNAB's recommendation to live on last month's money, so I have at least 1 month worth of expenses in my checking/savings account.

Q:  Do you count taxable investment account as part of your emergency fund? How liquid is that money?

A:  You can count that in my opinion.  The money is very liquid, and can be back in your bank account in 1-2 business days.  Put the emergency on your credit card and it will be in your account well before the credit card bill is due.

Q:  I'm interested in dividend investing

A:  Worst idea ever.  You will end up with higher risk, and lower returns, the opposite of what anyone should want.  When you receive a dividend, it is mathematically the same as selling a portion of your portfolio.  Why would you want that?  More specifically, why would you want a less diversified, and more higher fee portfolio in order to get it?

Q:  I'm also confused as to what exactly the difference is between ETF and index fund. From what i understand, ETF is a more narrow selection of stocks focused on a sector that trades like stock? What does it mean trade like stock? Like how w/index fund price only updates at end of whole day and can only trade index fund at end of day and not in seconds? Boglehead said you can make portfolio similar w/index fund using ETF? So why not use ETF instead of index funds which we all recommend?

A:  An ETF can be an index fund, here's an example:

https://personal.vanguard.com/us/funds/snapshot?FundId=0970&FundIntExt=INT

What you probably mean is ETF vs Mutual fund.  Here are some links on that, which you may have read already,

http://www.bogleheads.org/wiki/ETFs_vs_mutual_funds
https://investor.vanguard.com/etf/etf-vs-mutual-fund

In short, I choose mutual funds over ETFs, because they are better for automatic investments, I can buy in fractional shares, and I don't have to deal with the spread.

Q:  Also what would be the impact of a rise in interest rates? Supposedly that's going to hurt bonds somehow but there's so many different types of bonds, short, intermed, long, TIPS, not real sure what this interest rate hike is going to do? How will it affect stocks? I know this sounds like market timing but the rate hike sounds like it'll happen sooner or later. And what does cheap oil mean for economy? some argue it'll help stimulate, others say it hurts s&p oil stocks, is this temporary or something to ignore and just invest?

A:  Yes, this is market timing.  Don't worry about it, and you will end up way ahead of your friends who did.

Some comments, I recommend watching the Boglehead videos if you haven't already.  Yes the guy is over the top, but the information is spot-on:

https://www.bogleheads.org/wiki/Video:Bogleheads_investment_philosophy

Why do you have any money at all in PTRAX at 0.71% ER, when you have access to the amazing VINIX at a 0.04% ER?  I'd move that over ASAP.  You also have a bunch of money sitting around not invested, I'd get on that too :)  Since you're already familiar with Boglehead, you've probably seen this already, but this is my recommendation:

http://www.bogleheads.org/forum/viewtopic.php?f=10&t=88005

Good luck!

astvilla

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Thank you for the responses and the links. I'll list some further questions I have then.

1. How long does it take to set up a brokerage account (taxable investment) at Vanguard? I've set up account over a week ago and asked for money to be moved from checking to Vanguard. So far the account is there but nothing is showing? Vanguard seems kind of slow, the Roth IRA transfer also took a while.

2. Is it normal to have 2 brokerage accounts or is it better to have only 1? Or is this just personal preference?

3. I have money in PTRAX because that's the only bond fund I have in my 401k. Should I diversify my 401k or diversify my WHOLE portfolio (roth, 401k, taxable investment) and have something like 401k all VINIX, roth all VTSAX, taxable investment (stock & bond) as opposed to stock and bond in each account? There are limits in each and I don't want to risk losing all 401k or Roth?

4. Are there other investments besides stocks and bonds to diversify into or are available or is it just those 2 broad categories?

5. What makes US/domestic stocks so attractive for investing as opposed to other countries? We think long-term often in these forums but what makes US attractive long-term over other countries that are rising or are developed? What does America have that will be worth investing for the next 30 years that other countries do not have? There's a lot of emphasis on US/domestic stock but I don't see any compelling reason offered as to why, just wondering?
« Last Edit: December 08, 2014, 08:09:42 AM by fewaopi »

MDM

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Thank you for the responses and the links. I'll list some further questions I have then.

1. How long does it take to set up a brokerage account (taxable investment) at Vanguard? I've set up account over a week ago and asked for money to be moved from checking to Vanguard. So far the account is there but nothing is showing? Vanguard seems kind of slow, the Roth IRA transfer also took a while.

2. Is it normal to have 2 brokerage accounts or is it better to have only 1? Or is this just personal preference?

3. I have money in PTRAX because that's the only bond fund I have in my 401k. Should I diversify my 401k or diversify my WHOLE portfolio (roth, 401k, taxable investment) and have something like 401k all VINIX, roth all VTSAX, taxable investment (stock & bond) as opposed to stock and bond in each account? There are limits in each and I don't want to risk losing all 401k or Roth?

4. Are there other investments besides stocks and bonds to diversify into or are available or is it just those 2 broad categories?

5. What makes US/domestic stocks so attractive for investing as opposed to other countries? We think long-term often in these forums but what makes US attractive long-term over other countries that are rising or are developed? What does America have that will be worth investing for the next 30 years that other countries do not have? There's a lot of emphasis on US/domestic stock but I don't see any compelling reason offered as to why, just wondering?
1.  You've answered your own question on the "set up" part.  Some number of minutes online is what it took for us.  As for the money transfer, yes I would have expected that to go quickly.  Probably worth a call to Vanguard to check status.  Our experience with IRA transfers was good - if anything the delays came from the prior broker.

2. Personal preference.  You can sometimes get another perk or two by combining if that puts you over some threshold, and it might be marginally easier at tax time to get fewer 1099 forms, but otherwise it doesn't matter.

3. Minimizing annual taxes in taxable accounts is a good idea.  See http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement.

4. Real estate, commodities, money markets, your own business.... 

5. Theories differ on the reasons and even the premise.  See http://www.bogleheads.org/wiki/Domestic/International for one take.