Author Topic: HSA investments  (Read 3108 times)

FiguringItOut

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HSA investments
« on: March 26, 2016, 09:40:54 PM »
I have about $5K in my HSA that I can invest.

Looked through their investment option and everything else except 3 vanguard funds below are at expense ratio of .4% or above.  Some are as high as .8 and .9.  Who would pay that? 

Anyway, what do you think I should do with choices below?  How to allocate?

Me: 40 y.o.  net worth approx. $128K, $40k of it in cash, $6.5K in HSA not invested the moment, the rest is split between tIRA, Roth IRS, Rollover IRA, and my current 401K.  All IRA and 401K are allocated between Total US Stock/Total International Stock/Total Bond 65/20/15, I expect about $65K added to my Rollover IRA sometime within next 9-12 months, plus my regular savings for the year. (maxing out 401k (no match), IRA, and HSA for 2016).

HSA investment choices with expense ratios:

.20% Vanguard Dividend Appreciation Index Investor   VDAIX
.14% Vanguard LifeStrategy Moderate Growth Investor   VSMGX
.13% Vanguard LIfeStrategy Conservative Growth Investor   VSCGX

Heckler

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Re: HSA investments
« Reply #1 on: March 26, 2016, 09:45:52 PM »
What is your risk tolerance level?

If it's low, pick one of these two - moderate or conservative, but don't expect stellar returns with 39% or 58% bonds in either.


http://www.morningstar.com/funds/XNAS/VSMGX/quote.html

http://www.morningstar.com/funds/XNAS/VSCGX/quote.html

Or pick this one, which is all stocks.  You might lose your shirt unless you buy and hold forever for the dividends. 

http://www.morningstar.com/funds/XNAS/VDAIX/quote.html
« Last Edit: March 26, 2016, 09:57:05 PM by Heckler »

JR

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Re: HSA investments
« Reply #2 on: March 27, 2016, 08:56:51 AM »
Can you switch to a different custodian? I use HSA Bank and as long as you keep $5,000 in the cash account they waive the investment fee. HSA Bank allows you to open a SDBA at TD Ameritrade where you can invest in 100+ commission free ETFS (all of my HSA money is invested in VTI).

FiguringItOut

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Re: HSA investments
« Reply #3 on: March 28, 2016, 09:07:44 AM »
Can you switch to a different custodian? I use HSA Bank and as long as you keep $5,000 in the cash account they waive the investment fee. HSA Bank allows you to open a SDBA at TD Ameritrade where you can invest in 100+ commission free ETFS (all of my HSA money is invested in VTI).

I don't have enough in my HSA to maintain HSA bank account and invest.  I only about $5K total available to transfer or invest.  I may as well keep where it is for the time being.

What is your risk tolerance level?

If it's low, pick one of these two - moderate or conservative, but don't expect stellar returns with 39% or 58% bonds in either.


http://www.morningstar.com/funds/XNAS/VSMGX/quote.html

http://www.morningstar.com/funds/XNAS/VSCGX/quote.html

Or pick this one, which is all stocks.  You might lose your shirt unless you buy and hold forever for the dividends. 

http://www.morningstar.com/funds/XNAS/VDAIX/quote.html

Almost feels like should just leave it alone in cash. 

Nothlit

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Re: HSA investments
« Reply #4 on: March 28, 2016, 09:51:48 AM »
My HSA offers similar fund options and I happily chose Vanguard LifeStrategy Moderate Growth. While it would not be my first choice in an account with more options, it's absolutely a fine choice when the options are limited. There's something to be said for simplicity. I'd rather keep things simple and invest in VSMGX in my employer-provided HSA than have to go through the hassle of an annual rollover or transfer to someplace else just so can I use VTSAX instead.

My overall target asset allocation is 80/20 stocks/bonds. Since VSMGX is 60/40, I compensate by having slightly more stocks in some other account (I have a spreadsheet that tells me what to do to keep everything balanced).

Heckler

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Re: HSA investments
« Reply #5 on: March 28, 2016, 10:30:29 AM »


Almost feels like should just leave it alone in cash.

Absolutely not, unless you're risk tolerance level is zero. The point is to understand the risk and allocation you are buying into. 

https://www.bogleheads.org/wiki/Risk_and_return

Nobody but you can answer your question of which to buy.  I was just pointing out the different risk levels of each fund you listed, although "lose your shirt" was probably on the extreme end only if you end up selling in an equities crash. 

MustacheAndaHalf

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Re: HSA investments
« Reply #6 on: March 28, 2016, 12:17:20 PM »
Don't leave it in cash, even if you have zero risk tolerance.  If you save 10% of your salary each year, and consume the other 90%, it takes you 9 years to earn one year of retirement.  After working 45 years, you would have about 5 years of retirement expenses in cash.  With stocks, the long term growth has historically outpaced inflation, and you'd have far more.  You might take a look at a tool like portfoliovisualizer or the Vanguard nest egg simulation to compare the two.  It's probably better to pick the worst stock fund in your plan rather than go 100% cash for the rest of your retirement - that's how bad cash performs over time.

GrOW

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Re: HSA investments
« Reply #7 on: March 29, 2016, 07:45:34 PM »
If you are in for the long haul with your HSA and you should be right, then invest like it. $5k today is $10k tomorrow and then $30k layer. You have met your cash requirement. You have money for any necessary claims. Now is a great point to begin your investment plan.