Author Topic: Investment options needed  (Read 2768 times)

dragonwalker

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Investment options needed
« on: April 06, 2015, 11:45:56 PM »
Ok so in August of last year I asked a similar question on the forums about what I should do in my situation. The two suggestions I got were to sell my holdings in Apple and invest in a Vanguard index fund. I took a chance and didn't do as I was advised. So far I am better for it but now. I'm coming up on the 1 year mark for my Apple stock and I think it may be a time to evaluate options. I will definitely hold onto the Apple stock until at least the 1 year mark which is next week I believe so I get that tax break at least but beyond that I'm not entirely sure. I'm going to repost what I did before but with edits for my current situation:

Alright, so about a year ago I thought of possibly purchasing a condo, I've since decided that I will hold off for a better time. I am 27 and a resident of the suburbs of the Los Angeles area, no children, single, no debt, college degree. I work at a job that pays a base of $38,934 + about $10K in commissions yearly. I have some side jobs that come out to about $5000/year. I do have 401K benefits of 100% match up to 7% of total pay. My financial situation is as follows:

Cash: $38,513

Stocks (current market value): $78,448 (Apple, +56.11% since acquisition), $3,267 (GLD, gold, -32.90%), $6,659 (C, Citibank, +14.23%), $558 (BAC, Bank of America, -86.66%). Total market value about: $88,932

401K: $49,515 in S&P 500 index fund about 1.71% growth so far this year. My contribution rate is 10% into a Roth 401K. I am not contributing to a IRA. 

I am currently renting: $494/month which covers all utilities
All other expenses average about: $700/month

In the near to long term future expenses:
I still have ambitions for my own home but I'm being much more cautious about it however I'm not against taking a good opportunity.
I am eventually going to go back to school to get my MBA which may happen in the next year but I plan to continue working full time at which time I may move back home to cut expenses.

What do you guys think is the best thing I should do with what I have? I have a growing stockpile of cash which I feel I should be putting to better use but not sure how. I'm considering putting about $30,000 into a Vanguard index fund but then that would mean over half my money linked to the S&P 500. Not sure if that is the best idea. I would like some suggestions with sound reasoning to think on. Thanks so much. 

Heckler

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Re: Investment options needed
« Reply #1 on: April 07, 2015, 12:08:58 AM »
So what's changed that you listen to our advice this time?

Your examples make me happy I'm not picking individual stocks, waiting for them to skyrocket or  plummet.

Start here

https://investor.vanguard.com/investing/advice-guidance

http://www.bogleheads.org/wiki/Getting_started

A vanguard index fund is not only available as an S&P500.  There are many indices available to chose from.
« Last Edit: April 07, 2015, 12:11:29 AM by Heckler »

dragonwalker

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Re: Investment options needed
« Reply #2 on: April 07, 2015, 12:59:38 AM »
@Heckler, what's changed is that now after 1 year I am not going to have to pay the higher capital gains tax so I have more of an incentive to sell if advised to do so. 

theoverlook

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Re: Investment options needed
« Reply #3 on: April 07, 2015, 09:18:24 AM »
If you're happy with your current living arrangement then I would definitely not consider buying a condo.  $500/mo in the bay area with all utilities included is dynamite.  Keep saving.

I would worry more about the gold than the Apple stock.  Yes it's less of your portfolio but it's not actively trying to create new markets or take over more of the market it's in.  It's a lump of useless metal that's shown to be a relatively poor performer.

As long as you have no short term demands on the cash (ie, the house thing) then I would be comfortable putting it in the market.  You could buy some bond funds or international funds if you want to diversify.

dragonwalker

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Re: Investment options needed
« Reply #4 on: April 23, 2015, 12:42:20 AM »
If I wanted to say put about $30,000 into one of Vanguard's S&P500 funds, do you guys think I should do it all at once or over time?

mrpercentage

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Re: Investment options needed
« Reply #5 on: April 23, 2015, 03:22:40 AM »

Stocks (current market value): $78,448 (Apple, +56.11% since acquisition), $3,267 (GLD, gold, -32.90%), $6,659 (C, Citibank, +14.23%), $558 (BAC, Bank of America, -86.66%). Total market value about: $88,932


Im going to go Socratic here and not give advice. You know better than me but let me ask you a few questions that you can silently answer to yourself.

1. Do you think Apple is still a good company with a model for success?
2. Do you think Apple will still beat the S&P 500 next year? Now repeat for citi group.
3. Is it wise to sell an allstar after a good year?
4. Do you think gold is a good insurance policy for reverse markets?
5. Do you think you will make more by cutting your losses to invest is something else or by holding on and regaining loss principle?
6. Do you plan to take your principal off the table and let your winnings ride or switch everything?
7. If the market turned south tomorrow would be in a better or worse position having switched to index?
8. If the market superbulls would you be in a better or worse position?
9. What does your gut tell you?
10. What does cold logic tell you? Do they match?
11. What are you trying to accomplish? Gains.. Loss Protection.. Recovery.. or Reposition


dragonwalker

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Re: Investment options needed
« Reply #6 on: April 24, 2015, 01:16:25 AM »

Stocks (current market value): $78,448 (Apple, +56.11% since acquisition), $3,267 (GLD, gold, -32.90%), $6,659 (C, Citibank, +14.23%), $558 (BAC, Bank of America, -86.66%). Total market value about: $88,932


Im going to go Socratic here and not give advice. You know better than me but let me ask you a few questions that you can silently answer to yourself.

1. Do you think Apple is still a good company with a model for success?
2. Do you think Apple will still beat the S&P 500 next year? Now repeat for citi group.
3. Is it wise to sell an allstar after a good year?
4. Do you think gold is a good insurance policy for reverse markets?
5. Do you think you will make more by cutting your losses to invest is something else or by holding on and regaining loss principle?
6. Do you plan to take your principal off the table and let your winnings ride or switch everything?
7. If the market turned south tomorrow would be in a better or worse position having switched to index?
8. If the market superbulls would you be in a better or worse position?
9. What does your gut tell you?
10. What does cold logic tell you? Do they match?
11. What are you trying to accomplish? Gains.. Loss Protection.. Recovery.. or Reposition

I'm going to try it your way and answer your questions out loud:

1. Do you think Apple is still a good company with a model for success? Yes.
2. Do you think Apple will still beat the S&P 500 next year? Now repeat for citi group. Yes and Yes.
3. Is it wise to sell an allstar after a good year? Not sure but leaning towards no.
4. Do you think gold is a good insurance policy for reverse markets? Not exactly sure but leaning toward yes.
5. Do you think you will make more by cutting your losses to invest is something else or by holding on and regaining loss principle? I think I will make more by cutting my losses in the stocks I am in the red.
6. Do you plan to take your principal off the table and let your winnings ride or switch everything? I have thought of this option but believe that if I am willing to keep my earnings in the same stock then I have the same desire to put the principal and being confident enough that I will have time to sell off if indeed I truly felt my principal was at risk for a permanent loss.
7. If the market turned south tomorrow would be in a better or worse position having switched to index? Not sure on this one because my current holdings are largely in 1 stock so a market turndown may or may not effect that one.
8. If the market superbulls would you be in a better or worse position? Again, not certain but likely better seeing as I have holdings in financials.
9. What does your gut tell you? My gut tells me that I've had a very good run in the last 1 year seeing about a  60% gain from Apple and that I should hedge my bets and diversify but I'm not sure exactly how other than to put it into some Vanguard S & P 500 index. 
10. What does cold logic tell you? Do they match? I believe from what I know about maintaining a balanced portfolio, I should diversify.
11. What are you trying to accomplish? Gains.. Loss Protection.. Recovery.. or Reposition. I am trying to accomplish gains over the long term.

This still doesn't help answer my question about how I should distribute my remaining cash or how quickly. I am asking because I believe that I am truly not experienced in the larger sense of investing and that I benefited from Apple more on luck and intuition than logic or skillset.

mrpercentage

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Re: Investment options needed
« Reply #7 on: April 24, 2015, 03:03:07 AM »
Well personally I wouldn't touch apple. If I did I would take the principle. I wouldn't take it until it was even with the 500. Gold is good but you bought high it would wait till late September though before you cut it. I know it's painful to watch.
An index is an index. I would go 500 personally. ishares or vanguard. Look at the fees. Or you can cash and wait till the next dip and snag Disney. I think they will beat the 500 for a while blow up atomically about mid second Star Wars release and drop at some point after realizing they got way carried away. It's good for long term too. Disney is just good. Star Wars has made buttloads  under Lucas. Disney will do better. You have done pretty well for yourself. If only everyone could see the red in the index all the time. You were smart enough to snag apple and smart enough to hold it while others sold at gains much lower. Not sure if that's what you are looking for but that's my thoughts



mrpercentage

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Re: Investment options needed
« Reply #8 on: April 24, 2015, 03:51:24 AM »
The market does tend to over react. Bet on it. Consider that with boa before you sell. I don't like boa at all but in your situation you might have more to gain by holding. I have hated them with a passion since napster over withdrew my account with 10 individual .99 charges and boa didn't give me a beak on one not one.

dcunitedfan

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Re: Investment options needed
« Reply #9 on: April 24, 2015, 06:03:33 AM »
There's 2 issues that I think you have to ponder:

1) how much is the "right" amount of cash to have
2) how to better diversify your investment portfolio

1) is basic risk/reward.  Everyone has their own comfort level for how much cash one should have.  I find myself playing mental games of "how comfortable do I feel taking X dollars out of savings, and then potentially losing 10-25% before I might need to spend it", when contemplating adding to pretax investments.  Your ultimate needs for cash (monthly expenses, saving for house or education, etc) will tell you when and how much you need in the short-mid term.  Whether you want to risk any of that in the market over that time period is up to you - some people will advise against investing anything you expect to have to spend in less than 5 years, for example, that being a somewhat arbitrary yardstick of how long it takes to recover from a market correction.

2) Obviously you are way overweighted in a single company (Apple, which arguably isn't a bad stock to pick if you have to have only a single stock).  You don't have to create a more balanced portfolio all at once (or all in a single tax year) but I would think that some combination of additional money being invested in things other than Apple (other stocks or index funds I'll leave up to you) as well as maybe some sales of Apple over time, invested in those same "other" stocks/funds, will over time give you better diversification.  You can consider sales commission expense and capital gains when deciding how much and when to sell.  Why diversify - to protect yourself from having your results closely tied to a single company.  Say Apple has some bad news and the price drops 40+% (which happened a few years ago, and yes I know it more than recovered, but I'm just illustrating that nearly any investment can move against you, and perhaps right when you don't want it to!).  Any single investment can have bad news like this, but picking multiple investments (and even better in unrelated sectors of the economy) reduces the odds that they all will have bad news at the same time.  (They all can be subject to broad market selling at the same time, but even buying a stock index fund won't protect against that - the best you can do there is diversify across different types of investments - stocks vs bonds vs commodities vs cash)