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Learning, Sharing, and Teaching => Investor Alley => Topic started by: Zx on July 03, 2016, 10:42:33 AM

Title: Living On The Edge With My 401k?
Post by: Zx on July 03, 2016, 10:42:33 AM
I just posted this in my journal in another place, but it occurred to me that this was probably a better place.

If you are going to face punch me, please use 16oz gloves. I'm old.

About six months ago I began to be impatient with the sheep, with their panics and hysteria and addiction to that great opiate of the masses, the mainstream media, their hormones and the effect the market...sinking like a stone and going back up and sinking like a stone and going back up, so I decided to put all of my 401(k) into my company's stock, which is an option we have in the plan.

I did that in January, I believe. Well here it is, it's now July, and for the year my 401(k) is up about 14.5%. Seeing as I work for a public utility I figured that the growth opportunity was a little weak but then again I was little safer when it came to sinking like a stone. Dividends are paying about 3.2% and they just increased their dividend per-share.

Now, I only have about $22,000 in there because I just started about eight months ago. For the longest time I just put the minimum in to get all of the matching, but because my new job is going to increase my pay from 120k to about 150k/160k, I have increased my percentage into 401(k) to help with the effective tax rate.

I think also that perhaps some of my bravery exists because I only have $22,000 in there. As it grows I will probably start to do something else, I don't know what.

It certainly flies against the established Great Wisdom of Diversification, but then again if I had followed that I would not be up more than 14% for this year. What do you think of my solution, if anything? Stay the course, abandon ship, or what?
Title: Re: Living On The Edge With My 401k?
Post by: Bracken_Joy on July 03, 2016, 10:51:10 AM
You've been very lucky so far, but Math speaks- the statistical probability is that this will go sideways in the near future. Also, by investing in what you work in, you're doubling down your risk- you will have no money to fall back on if your job crumbles as well. Added to that, you aren't diversified at all. HELLO risk. Especially as you state you are "old", this is an incredibly huge gamble. And remember- gambling is for suckers.

Sell now, thank the heavens you didn't lose it all, and invest in something more sensible. If there are no good options in the 401(k), invest only to the employer match and make sure you're maxing your IRA, where you CAN invest in the best case scenario.
Title: Re: Living On The Edge With My 401k?
Post by: Interest Compound on July 03, 2016, 11:02:06 AM
You'd actually have been much better off if you lost everything. Being rewarded for bad decision-making only serves to create a false sense of security, leading to much bigger losses in the future.

Never confuse strategy with outcome.
Title: Re: Living On The Edge With My 401k?
Post by: bacchi on July 03, 2016, 11:13:28 AM
Now, I only have about $22,000 in there because I just started about eight months ago. For the longest time I just put the minimum in to get all of the matching, but because my new job is going to increase my pay from 120k to about 150k/160k, I have increased my percentage into 401(k) to help with the effective tax rate.

Besides the fact that you're not diversified at all (what if you were working for POR, which trails the market?), did you save anything else besides the 401k minimum? Saving only 6% or whatever on 120k is some weak sauce.
Title: Re: Living On The Edge With My 401k?
Post by: MustacheAndaHalf on July 03, 2016, 11:57:37 AM
You're benefiting from momentum, not your stock selection.  In the next week I'll post an update on how my experiment with momentum is going, but as a preview - utilities are doing well.  But my experiment is less than 1% of my money, and when momentum changes I sell one sector and buy another.  When will you sell?

The biggest risk isn't huge profits in utility stocks.  Utility stocks are fairly safe investments.  The main risk is that the S&P 500 will perform very well, and your utility stocks won't match it.  But if you were going to invest in your own company stock, you could do much worse than a utility.

I'd focus on the behavioral problem: you won't invest outside your company because of what you hear in the mainstream media.  Why not buy the US total stock market, and US total bond market?  You pick the risk level, and the amount, and hold everything.  You might want to read "Random Walk Down Wall Street" to help with ignoring the noise from the market and media.  "What Wall Street Doesn't Want You To Know" (Larry Swedroe) might be a good pick as well... also "The Bogleheads' Guide to Investing".
Title: Re: Living On The Edge With My 401k?
Post by: okits on July 03, 2016, 09:54:28 PM
Now, I only have about $22,000 in there because I just started about eight months ago. For the longest time I just put the minimum in to get all of the matching, but because my new job is going to increase my pay from 120k to about 150k/160k, I have increased my percentage into 401(k) to help with the effective tax rate.

Besides the fact that you're not diversified at all (what if you were working for POR, which trails the market?), did you save anything else besides the 401k minimum? Saving only 6% or whatever on 120k is some weak sauce.

OP has been living in his car to save on rent costs and more aggressively attack his debt.  No weak sauce there.

dagiffy1, cash out your 14.5% gain and invest in a balanced, diversified portfolio.  That should reduce volatility somewhat (vs. 100% in the S&P 500, for instance.) If the dips and noise bother you, tune them out.  Having it all in one company's stock is too risky and you miss the benefits of diversification.  You gambled and won, now take the money and run!
Title: Re: Living On The Edge With My 401k?
Post by: Greenpez on July 04, 2016, 12:29:38 PM
 I'll be in the minority and not totally hate your decision. To me it matters more why you did it than that you did it. If you did your research and decided your company is in a better position than the other options in your plan i have no problem with it, if you had no real rationale then it was not a good move.

 I'm in a similar position with JNJ (i'll say who I work for dunno why people don't). While i didn't move all my funds to it I did move more than would be suggested for one holding because our other options aren't that great and did believe it was positioned better. That being said, I also sold some JNJ I had in a taxable account to fund my ira and put it into broad market and reit indexes.

 I would say the answer to the question in your topic is yes, but it seems like it isn't currently enough to be overly worried about.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 04, 2016, 04:58:00 PM
Now, I only have about $22,000 in there because I just started about eight months ago. For the longest time I just put the minimum in to get all of the matching, but because my new job is going to increase my pay from 120k to about 150k/160k, I have increased my percentage into 401(k) to help with the effective tax rate.

Besides the fact that you're not diversified at all (what if you were working for POR, which trails the market?), did you save anything else besides the 401k minimum? Saving only 6% or whatever on 120k is some weak sauce.

I'm doing that because of staggering debt. I'd be maxing it out if I was in the black, or even close to it. I pretty much spend everything I make on debt, aside from the 401k. That's been hashed out before on this forum.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 04, 2016, 05:01:47 PM
You're benefiting from momentum, not your stock selection.  In the next week I'll post an update on how my experiment with momentum is going, but as a preview - utilities are doing well.  But my experiment is less than 1% of my money, and when momentum changes I sell one sector and buy another.  When will you sell?

The biggest risk isn't huge profits in utility stocks.  Utility stocks are fairly safe investments.  The main risk is that the S&P 500 will perform very well, and your utility stocks won't match it.  But if you were going to invest in your own company stock, you could do much worse than a utility.

I'd focus on the behavioral problem: you won't invest outside your company because of what you hear in the mainstream media.  Why not buy the US total stock market, and US total bond market?  You pick the risk level, and the amount, and hold everything.  You might want to read "Random Walk Down Wall Street" to help with ignoring the noise from the market and media.  "What Wall Street Doesn't Want You To Know" (Larry Swedroe) might be a good pick as well... also "The Bogleheads' Guide to Investing".

I won't invest in the stock market because of what so many OTHERS hear in the mainstream media. One piece of news and the sky is falling, another one and the sheep are euphoric. And nothing has changed, other than the koolaid they are putting out for the sheep! I'd rather just invest it and look at it every quarter or so, myself. I know it's just dumb luck that I'm so far ahead, but should I diversify with such a small balance? I'm thinking maybe at 50k or so to start doing that.

Thanks for the reading tips. When I first woke up about 16 months ago now I read voraciously. I started seeing the same patterns in every single book, albeit there were some outliers like ERE who really max out the tasty sauce. I'm kind of burned out on finance books atm, but I think I'll pick Swedroe and the Bogleheads one.

I was really avoiding getting too busy investing because, like I said, I'm investing the minimum to get the maximum match...in my case, putting in 8% and the company will match 6%. So basically I'm putting in 14% of my base income, 103000, into the 401k. The rest is hosing down old, stupid debt. It's working. It's just taking awhile.
Title: Re: Living On The Edge With My 401k?
Post by: Retire-Canada on July 04, 2016, 05:07:16 PM
I know it's just dumb luck that I'm so far ahead, but should I diversify with such a small balance? I'm thinking maybe at 50k or so to start doing that.

I you want to own the utility just leave that $22K alone. Develop an investment plan and as you put in new money grow the assets that you want to hold in addition to the utility. You'll be over weighted for a while, but as you say starting out it's not the end of the world.
Title: Re: Living On The Edge With My 401k?
Post by: Bracken_Joy on July 04, 2016, 05:09:52 PM
You're benefiting from momentum, not your stock selection.  In the next week I'll post an update on how my experiment with momentum is going, but as a preview - utilities are doing well.  But my experiment is less than 1% of my money, and when momentum changes I sell one sector and buy another.  When will you sell?

The biggest risk isn't huge profits in utility stocks.  Utility stocks are fairly safe investments.  The main risk is that the S&P 500 will perform very well, and your utility stocks won't match it.  But if you were going to invest in your own company stock, you could do much worse than a utility.

I'd focus on the behavioral problem: you won't invest outside your company because of what you hear in the mainstream media.  Why not buy the US total stock market, and US total bond market?  You pick the risk level, and the amount, and hold everything.  You might want to read "Random Walk Down Wall Street" to help with ignoring the noise from the market and media.  "What Wall Street Doesn't Want You To Know" (Larry Swedroe) might be a good pick as well... also "The Bogleheads' Guide to Investing".

I won't invest in the stock market because of what so many OTHERS hear in the mainstream media. One piece of news and the sky is falling, another one and the sheep are euphoric. And nothing has changed, other than the koolaid they are putting out for the sheep! I'd rather just invest it and look at it every quarter or so, myself. I know it's just dumb luck that I'm so far ahead, but should I diversify with such a small balance? I'm thinking maybe at 50k or so to start doing that.

The same principles apply whether you're investing $1 or $1 million. The risk factors don't change- just your perception of them. Picking individual stocks is a losing proposition anyway, so if you're doing index fund investing, the mathematically superior method overall, then it's irrelevant how much you're investing. Just that you are less likely to lose it.

And if you're the worried about the "sheep", it sounds like you should be doing something tangible like real estate or gold anyway. Clearly if you have so much distain for fellow people, you psychologically won't be able to buy and hold a balanced portfolio anyway. It involves faith in the principle that, because markets have always gone up, they always will, on the whole. And fundamentally, that involves faith in others.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 04, 2016, 05:15:06 PM
I know it's just dumb luck that I'm so far ahead, but should I diversify with such a small balance? I'm thinking maybe at 50k or so to start doing that.

I you want to own the utility just leave that $22K alone. Develop an investment plan and as you put in new money grow the assets that you want to hold in addition to the utility. You'll be over weighted for a while, but as you say starting out it's not the end of the world.

Oh, you mean like adjust where the money goes into from here on out? That's an idea, there. I was hoping for a precipitous drop with the Brexit thing, and the media was doing its best to rattle the sheep into doing that. It worked...for a few days. If it had dropped to, say, 15500, I would have jumped back in.

I have fidelity, though, and I hate their fees and the options they give us. They all seem so feeble to me. I wish my company would have picked Vanguard. That being said, there are about a dozen of those blends that you are supposed to choose by retirement year. I don't feel I should invest outside of my 401k until I'm maxing it out, and I won't be doing that for several more years, until debt is nearly gone, I should say.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 04, 2016, 05:29:17 PM
You're benefiting from momentum, not your stock selection.  In the next week I'll post an update on how my experiment with momentum is going, but as a preview - utilities are doing well.  But my experiment is less than 1% of my money, and when momentum changes I sell one sector and buy another.  When will you sell?

The biggest risk isn't huge profits in utility stocks.  Utility stocks are fairly safe investments.  The main risk is that the S&P 500 will perform very well, and your utility stocks won't match it.  But if you were going to invest in your own company stock, you could do much worse than a utility.

I'd focus on the behavioral problem: you won't invest outside your company because of what you hear in the mainstream media.  Why not buy the US total stock market, and US total bond market?  You pick the risk level, and the amount, and hold everything.  You might want to read "Random Walk Down Wall Street" to help with ignoring the noise from the market and media.  "What Wall Street Doesn't Want You To Know" (Larry Swedroe) might be a good pick as well... also "The Bogleheads' Guide to Investing".

I won't invest in the stock market because of what so many OTHERS hear in the mainstream media. One piece of news and the sky is falling, another one and the sheep are euphoric. And nothing has changed, other than the koolaid they are putting out for the sheep! I'd rather just invest it and look at it every quarter or so, myself. I know it's just dumb luck that I'm so far ahead, but should I diversify with such a small balance? I'm thinking maybe at 50k or so to start doing that.

The same principles apply whether you're investing $1 or $1 million. The risk factors don't change- just your perception of them. Picking individual stocks is a losing proposition anyway, so if you're doing index fund investing, the mathematically superior method overall, then it's irrelevant how much you're investing. Just that you are less likely to lose it.

And if you're the worried about the "sheep", it sounds like you should be doing something tangible like real estate or gold anyway. Clearly if you have so much distain for fellow people, you psychologically won't be able to buy and hold a balanced portfolio anyway. It involves faith in the principle that, because markets have always gone up, they always will, on the whole. And fundamentally, that involves faith in others.

It goes deeper than that, for me. We've had nearly 0 interest rates since the crash. Any time the FED even hints they MIGHT increase just .25%, the media incite the sheep into panic and house of cards that is this market starts to shake. That's not the sign of a healthy outlook on financial life by the sheep. It's not just me. 

The media, not religion, is now the opiate of the people. People behave according to what they see and hear, and that's why commercials still work even though people know it's a commercial to get them to behave in a certain way...usually to buy something.

I don't have faith in the majority of people when it comes to sound reasoning involving money, no. But faith in people is not required now, nor has it ever been. I chose to invest in my company's stock in my 401k because people will always need...AND buy...electricity and natural gas. That's it. I also trust our management and leadership in doing what it takes to grow the company.

I wouldn't have known about or even cared about this company if I hadn't worked for it. If it wasn't an option, really the only other option besides index funds in our plan, I couldn't have put money into it. I look at those funds over the past couple years and it's weak sauce, to quote someone earlier. Anemic. While I was investing and paying off debt, my company seemed like the best place to park it.

Something might happen tomorrow that makes it not the best place. I realize that. Who wouldn't. I never thought my gains were the result of me being Warren Buffet, Jr, but rather by getting lucky. If I had put it all into an index, I would still be down a little this year, but it would have been the "smart" move. I'd rather be lucky than good, and I'm lucky this time.

Be that as it may, I'm going to start allocating my future money into the indexes, probably a 2020 or a 2025, the equivalent of getting up from the table while you are ahead.
Title: Re: Living On The Edge With My 401k?
Post by: Financial.Velociraptor on July 04, 2016, 06:36:26 PM
*Facepunch with the kid gloves*

If you want to be in utilities and/or other low volatility areas, invest in appropriate indexes and not all in on a single stock.  I'm pretty sure there is a utilities spider out there.
Title: Re: Living On The Edge With My 401k?
Post by: Kaspian on July 04, 2016, 06:41:00 PM
OP, you really need to diversify.  (It's "wisdom" as you call it, is there for a reason.)  You made this list in many different places.  :(

http://www.forbes.com/sites/jrose/2016/02/28/13-financial-advisors-share-the-worst-financial-mistakes-they-have-ever-seen/ (http://www.forbes.com/sites/jrose/2016/02/28/13-financial-advisors-share-the-worst-financial-mistakes-they-have-ever-seen/)

Please, don't live on the edge with your retirement portfolio.
Title: Re: Living On The Edge With My 401k?
Post by: MustacheAndaHalf on July 04, 2016, 07:03:39 PM
...
I won't invest in the stock market because of what so many OTHERS hear in the mainstream media. One piece of news and the sky is falling, another one and the sheep are euphoric. And nothing has changed, other than the koolaid they are putting out for the sheep! I'd rather just invest it and look at it every quarter or so, myself.
...
...
Any time the FED even hints they MIGHT increase just .25%, the media incite the sheep into panic and house of cards that is this market starts to shake. That's not the sign of a healthy outlook on financial life by the sheep. It's not just me.
...
If I can summarize, you're saying when the media shouts "Wolf!" most "sheep" are panic selling.  But you, because of the media, are refusing to even eat in the pasture.  If you won't invest in the broad US stock market, and the reason is the media or other people parroting the media... you've kinda fallen into a similar trap.  You're retreating to your own company stock, increasing your risk.  If you company stock falls -25%, it's much more likely you also lose your job at the same time.

I would recommend doing additional reading of academic backed books/studies.  Make sure you absorb some of the data, even run some experiments yourself (ex: https://www.portfoliovisualizer.com/ ).  Then you can tell people they're ignoring the long term when they panic & sell, and hopefully you'll have the data and confidence to ignore the panic.  Otherwise you'll stick with company stock without a specific sell date, and it's a risk.
Title: Re: Living On The Edge With My 401k?
Post by: Retire-Canada on July 05, 2016, 07:05:35 AM
Oh, you mean like adjust where the money goes into from here on out? That's an idea, there. I was hoping for a precipitous drop with the Brexit thing, and the media was doing its best to rattle the sheep into doing that. It worked...for a few days. If it had dropped to, say, 15500, I would have jumped back in.

Yes. Select an asset allocation like:

- 10% my utility
- 10% bonds
- 30% Int'l
- 50% TSM

Every Time you contribute add money to the asset class that is the most off of your target %.

As for your media/sheep aversion you need to keep in mind you are investing for a 30-50yr+ timeframe. What happens on any one day or week or month or even year is not something to spend your time worried about. If you can't help it go on a low information diet. Automate your additions as much as possible and rebalance once a year. Don't look at your numbers when you don't have to. Don't go out of your way to read financial news.

It's an odd quirk of these forums that most people will acknowledge the long-term nature of FIRE investment plans and then go on to spend lots of time concerned about short-term phenomenon.
Title: Re: Living On The Edge With My 401k?
Post by: ysette9 on July 07, 2016, 04:27:59 PM
Quote
I won't invest in the stock market because of what so many OTHERS hear in the mainstream media. One piece of news and the sky is falling, another one and the sheep are euphoric. And nothing has changed, other than the koolaid they are putting out for the sheep! I'd rather just invest it and look at it every quarter or so, myself. I know it's just dumb luck that I'm so far ahead, but should I diversify with such a small balance? I'm thinking maybe at 50k or so to start doing that.

Two points I want to make.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 10, 2016, 10:17:48 PM
OK I have read all of these responses, bobbed and weaved when the punch was coming for the face, ducked and got out of the way but kept my eye on the ball.

This is only $22,000. If I lose this and it goes to zero, that means I don't have a job and the country is probably not in the position for using our currency anyway.

 I am going to keep that money where it is. On the other hand I am going to allocate all the money I put into 401(k) elsewhere. What would you guys suggest? We use Fidelity. All there are are those index funds with the retirement date next to it.  The 2020 is much more bonds and so forth and then the 2050 is much more stock heavy. I get that.

 There is also an emergent index fund and maybe one or two others like that. Those are all down double digits the past few years.

So Im 51 and I want to retire in 10 years if I can. Where should I put it? In the 2025 index fund?
Title: Re: Living On The Edge With My 401k?
Post by: pbkmaine on July 10, 2016, 10:39:48 PM
The funds are designed for the target date to be your age 65. So put it in the 2030 fund.
Title: Re: Living On The Edge With My 401k?
Post by: Dicey on July 10, 2016, 11:25:52 PM
The funds are designed for the target date to be your age 65. So put it in the 2030 fund.
Can you clarify, please? If dagiffy wants to retire early, he would begin drawdown before age 65. Wouldn't that mess up the built-in projections of a 2030 fund?
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 11, 2016, 07:23:35 AM
The funds are designed for the target date to be your age 65. So put it in the 2030 fund.
Can you clarify, please? If dagiffy wants to retire early, he would begin drawdown before age 65. Wouldn't that mess up the built-in projections of a 2030 fund?

 I have often wondered about that, myself. These blends are designed with the classic retirement at 65 years of age. Would it be the same if we just picked the year we want to retire even if we were going to retire at 40?
Title: Re: Living On The Edge With My 401k?
Post by: pbkmaine on July 11, 2016, 08:23:15 AM
They are designed for your lifetime, with 65 as the target retirement date. Even if your retirement date changes, your lifespan won't.
Title: Re: Living On The Edge With My 401k?
Post by: Classical_Liberal on July 11, 2016, 08:45:32 AM
Hey dagiffy! 

Risk tolerance is a very important issue in investing.  If your investments are not within your tolerance you will not make good decisions in the future. If you are uncomfortable with risk of the stock market there are other portfolio options other than the stock heavy portfolios people in this forum tend to favor.  In fairness, they favor these portfolios because they are best bet for long term returns, but returns are useless if you cant sleep at night.  I would echo the opinion given, in the very least diversify your utilities holding with new investment dollars.  Also, research other portfolios that have less stock exposure, there are plenty of viable options with 25-50 percent stock which may fall more into your risk spectrum.  My personal opinion though, be somewhat wary of bonds a the moment, yields are VERY low so there is little to gain and much to lose.  Keep your main focus on the debt at this point anyway, you have time to learn which asset allocation works best for you long term.

Good luck man!

PS four days off this week, sleeping in the scion for a couple and visiting a friend for the other two.  $800 richer in July :)
Title: Re: Living On The Edge With My 401k?
Post by: talltexan on July 11, 2016, 08:46:42 AM
I also work for a public utility...their low beta makes them ideal for some use as a hedge against the fluctuations of the SP500. I'd encourage OP to consider a portfolio of 60% SP500 and 40% company stock, with occasional rebalancing. 75/25 would also be fine. I'm regretting that I didn't do more rebalancing during BREXIT week.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 11, 2016, 11:10:23 AM
Hey dagiffy! 

Risk tolerance is a very important issue in investing.  If your investments are not within your tolerance you will not make good decisions in the future. If you are uncomfortable with risk of the stock market there are other portfolio options other than the stock heavy portfolios people in this forum tend to favor.  In fairness, they favor these portfolios because they are best bet for long term returns, but returns are useless if you cant sleep at night.  I would echo the opinion given, in the very least diversify your utilities holding with new investment dollars.  Also, research other portfolios that have less stock exposure, there are plenty of viable options with 25-50 percent stock which may fall more into your risk spectrum.  My personal opinion though, be somewhat wary of bonds a the moment, yields are VERY low so there is little to gain and much to lose.  Keep your main focus on the debt at this point anyway, you have time to learn which asset allocation works best for you long term.

Good luck man!

PS four days off this week, sleeping in the scion for a couple and visiting a friend for the other two.  $800 richer in July :)

You are a dominant force in the FIRE universe. Rock on.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 11, 2016, 11:29:44 AM
I also work for a public utility...their low beta makes them ideal for some use as a hedge against the fluctuations of the SP500. I'd encourage OP to consider a portfolio of 60% SP500 and 40% company stock, with occasional rebalancing. 75/25 would also be fine. I'm regretting that I didn't do more rebalancing during BREXIT week.

I was hoping that the sheep would just do a mad panic, the media would enhance their hysteria and drive the market down to 15,000, because then I was just going to call up and transfer all my funds out of my work stock into the market. Alas, the sheep got ahold of themselves in a few days, and when they looked around  didn't see a bogeyman anywhere  they chuckled sheepishly to themselves and got back to it.

For the record, and I think I've said this a couple of times, the 16% gain this year in no way reflects anything positive about me. I know I am not Warren Buffet. In fact, I hardly know what I'm talking about at all. I made a good guess and that's it. So I'm not thinking that I can just do whatever I want and I'm going to be a genius every time. I don't need to lose all my money to teach me a lesson about trying to game market, because I already know that I cannot. I read way too many books to think that I can.

I have a good buddy who has probably got 100,000 in the market and he tells me every single time he makes a decision to move his money somewhere, he ends up losing money. Every single time. This guy is much smarter than I am and actually researches and studies. I didn't make a move to make money, I made a move to stop losing money because every single day since I put money into the market I lost. There was never a day or a week or a month or ytd that I looked at my portfolio and had a positive gain for a period of time. Being new, this rattled me.

I know that what I did is just put all my money on red and spun the wheel. Basically. But I'm leaving my winnings there and putting money in the future into something else. I noticed there's a few other indexes like large-cap, mid cap, and things like that but the returns for the past several years just curdle my blood. It's like throwing my money on an elevator that is going down because everyone else in the world says don't worry it will eventually come back up. It always does!

I must master my hormones and feelings and get with the program. Like Muhammad Ali said years ago, it ain't bragging if you can do it.
Title: Re: Living On The Edge With My 401k?
Post by: MustacheAndaHalf on July 11, 2016, 11:47:55 AM
...
I have a good buddy who has probably got 100,000 in the market and he tells me every single time he makes a decision to move his money somewhere, he ends up losing money. Every single time.
...
A study comparing men and women's investing habits found women did better by ~1% per year.  And the main reason is what you highlighted about your friend: if you trade often, your results tend to trail the market more.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1872211

There's other studies showing the average investor gets only a fraction of the underlying performance of the funds they buy.  They buy the high performing fund and sell when it fails to remain the best returning fund.  If you can learn to stomach passive, low cost index investing you will beat not just the listed returns of most funds, but an even greater percentage of the individuals investing in those funds.

But it's hard, and if you can distract yourself with a tiny allocation of play money, that could be a good idea.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 11, 2016, 11:52:36 AM
...
I have a good buddy who has probably got 100,000 in the market and he tells me every single time he makes a decision to move his money somewhere, he ends up losing money. Every single time.
...
A study comparing men and women's investing habits found women did better by ~1% per year.  And the main reason is what you highlighted about your friend: if you trade often, your results tend to trail the market more.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1872211

There's other studies showing the average investor gets only a fraction of the underlying performance of the funds they buy.  They buy the high performing fund and sell when it fails to remain the best returning fund.  If you can learn to stomach passive, low cost index investing you will beat not just the listed returns of most funds, but an even greater percentage of the individuals investing in those funds.

But it's hard, and if you can distract yourself with a tiny allocation of play money, that could be a good idea.

Does Fidelity have low-cost, low fee funds? I remember comparing them to Vanguard and they were not. But I guess since Fidelity is all I have I should find the best situation and go for it. Though I am sick to death of reading about it, I need to read about Large Cap, Small Cap, and the rest of that cap crap and figure out what I want to do.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 11, 2016, 11:55:36 AM
...
I have a good buddy who has probably got 100,000 in the market and he tells me every single time he makes a decision to move his money somewhere, he ends up losing money. Every single time.
...
A study comparing men and women's investing habits found women did better by ~1% per year.  And the main reason is what you highlighted about your friend: if you trade often, your results tend to trail the market more.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1872211

There's other studies showing the average investor gets only a fraction of the underlying performance of the funds they buy.  They buy the high performing fund and sell when it fails to remain the best returning fund.  If you can learn to stomach passive, low cost index investing you will beat not just the listed returns of most funds, but an even greater percentage of the individuals investing in those funds.

But it's hard, and if you can distract yourself with a tiny allocation of play money, that could be a good idea.

 Wait, so are you saying that I am better off if I put money into a fund that has not performed well in the past few years and just sit on it for a few years? Like I have seen, overtime the market always goes up. If it does not, then we have bigger problems than that.
Title: Re: Living On The Edge With My 401k?
Post by: seattlecyclone on July 11, 2016, 12:08:51 PM
...
I have a good buddy who has probably got 100,000 in the market and he tells me every single time he makes a decision to move his money somewhere, he ends up losing money. Every single time.
...
A study comparing men and women's investing habits found women did better by ~1% per year.  And the main reason is what you highlighted about your friend: if you trade often, your results tend to trail the market more.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1872211

There's other studies showing the average investor gets only a fraction of the underlying performance of the funds they buy.  They buy the high performing fund and sell when it fails to remain the best returning fund.  If you can learn to stomach passive, low cost index investing you will beat not just the listed returns of most funds, but an even greater percentage of the individuals investing in those funds.

But it's hard, and if you can distract yourself with a tiny allocation of play money, that could be a good idea.

Does Fidelity have low-cost, low fee funds? I remember comparing them to Vanguard and they were not. But I guess since Fidelity is all I have I should find the best situation and go for it. Though I am sick to death of reading about it, I need to read about Large Cap, Small Cap, and the rest of that cap crap and figure out what I want to do.

Fidelity does have low-fee index funds, with roughly the same expense ratios as the Vanguard equivalent. They used to go by the "Spartan" name but it looks like they dropped that naming convention. Whether your particular 401(k) has any of those funds is something I can't answer for you.
Title: Re: Living On The Edge With My 401k?
Post by: banjarian on July 11, 2016, 02:00:10 PM
You're just as afraid of the market as the "sheep" you keep talking about. Who cares if it goes up and down, based on people reacting to the news? It goes down, it goes back up. You want to be the kind of investor who just looks at their portfolio once a quarter? Great. You can do that investing in index funds. It really doesn't matter what the "sheep" are doing.

(God, it's such a red flag to hear people talking about "sheep" and "kool aid".)
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 12, 2016, 12:20:08 AM
You're just as afraid of the market as the "sheep" you keep talking about. Who cares if it goes up and down, based on people reacting to the news? It goes down, it goes back up. You want to be the kind of investor who just looks at their portfolio once a quarter? Great. You can do that investing in index funds. It really doesn't matter what the "sheep" are doing.

(God, it's such a red flag to hear people talking about "sheep" and "kool aid".)

What's wrong with red flags? Or with sheep and koolaid? They are metaphors for many different things, which of course is itself a red flag. I prefer my flags to have a few different colors, mainly the primary colors with green trim. But that's just me, which is another red flag, I'm sure.
Title: Re: Living On The Edge With My 401k?
Post by: Radagast on July 12, 2016, 01:31:31 AM
Fidelity has plenty of great funds, even more if you can access their ETF's. Index is the key word.

You should now read about investing rather than financing. For example, The Boglehead's Guide to Investing. There are plenty of great methods out there, such as 50% total stock market and 50% government bonds. Heck with your paranoia, general attitude, and fear of loss, you might even consider the Permanent Portfolio which I am generally slow to recommend. Read up.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 12, 2016, 10:12:55 AM
Fidelity has plenty of great funds, even more if you can access their ETF's. Index is the key word.

You should now read about investing rather than financing. For example, The Boglehead's Guide to Investing. There are plenty of great methods out there, such as 50% total stock market and 50% government bonds. Heck with your paranoia, general attitude, and fear of loss, you might even consider the Permanent Portfolio which I am generally slow to recommend. Read up.

Hey, I am not paranoid. Just seems like everyone's out to get me, that's all.

I guess I am waiting for the actual economic recovery, not the one that is propped up by zero interest rates and some serious QE.

That the Fed put interest rates back at 4 or 5% and then we will see the true health of this economy. Until then it seems to me there is no where to go but down if something happens. I won't trust this market until I no longer see it propped up artificially.

I know that I am not alone in this, because any kind of bad news anywhere sends the sheep into blind, hysterical panic. A mere discussion of a .25% increase by the Fed does the same thing. A herd of confident sheep would not do that.

Nevertheless the market is pretty much the only game in town and the advice you all have given me I believe is the best approach and I'm going to do it. The only other option is buy metal or stuff my money in a mattress!



Title: Re: Living On The Edge With My 401k?
Post by: Bracken_Joy on July 12, 2016, 10:16:06 AM
Fidelity has plenty of great funds, even more if you can access their ETF's. Index is the key word.

You should now read about investing rather than financing. For example, The Boglehead's Guide to Investing. There are plenty of great methods out there, such as 50% total stock market and 50% government bonds. Heck with your paranoia, general attitude, and fear of loss, you might even consider the Permanent Portfolio which I am generally slow to recommend. Read up.

Hey, I am not paranoid. Just seems like everyone's out to get me, that's all.

I guess I am waiting for the actual economic recovery, not the one that is propped up by zero interest rates and some serious QE.

That the Fed put interest rates back at 4 or 5% and then we will see the true health of this economy. Until then it seems to me there is no where to go but down if something happens. I won't trust this market until I no longer see it propped up artificially.

I know that I am not alone in this, because any kind of bad news anywhere sends the sheep into blind, hysterical panic. A mere discussion of a .25% increase by the Fed does the same thing. A herd of confident sheep would not do that.

Nevertheless the market is pretty much the only game in town and the advice you all have given me I believe is the best approach and I'm going to do it. The only other option is buy metal or stuff my money in a mattress!

...so you're waiting to buy at the top of the market? Doesn't that kind of... defeat the purpose of investing?
Title: Re: Living On The Edge With My 401k?
Post by: homestead neohio on July 12, 2016, 11:06:46 AM

Hey, I am not paranoid. Just seems like everyone's out to get me, that's all.


I am no longer out to get you, daggify.  I mean, I was, but it was more of a game when you were in the BatCave.  With an apartment, there is no challenge in it anymore.

-The tow truck driver

Agree you got a good outcome from a bad decision.  Diversify.  Be careful you aren't so focused on being a non-sheep that you get fleeced.  If you are scared to lose money, go with a more conservative asset allocation (more bonds, earlier target date fund, like a 50/50).  Sometimes it is worth it to take lower returns to prevent yourself from making future bad decisions which then lead to a bad outcome.  It is best to learn all this with smaller amounts of money, build some confidence in your plan, then just follow it until FI. 

And those are some pretty red flags you described earlier.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 12, 2016, 06:36:54 PM
Fidelity has plenty of great funds, even more if you can access their ETF's. Index is the key word.

You should now read about investing rather than financing. For example, The Boglehead's Guide to Investing. There are plenty of great methods out there, such as 50% total stock market and 50% government bonds. Heck with your paranoia, general attitude, and fear of loss, you might even consider the Permanent Portfolio which I am generally slow to recommend. Read up.

Hey, I am not paranoid. Just seems like everyone's out to get me, that's all.

I guess I am waiting for the actual economic recovery, not the one that is propped up by zero interest rates and some serious QE.

That the Fed put interest rates back at 4 or 5% and then we will see the true health of this economy. Until then it seems to me there is no where to go but down if something happens. I won't trust this market until I no longer see it propped up artificially.

I know that I am not alone in this, because any kind of bad news anywhere sends the sheep into blind, hysterical panic. A mere discussion of a .25% increase by the Fed does the same thing. A herd of confident sheep would not do that.

Nevertheless the market is pretty much the only game in town and the advice you all have given me I believe is the best approach and I'm going to do it. The only other option is buy metal or stuff my money in a mattress!

...so you're waiting to buy at the top of the market? Doesn't that kind of... defeat the purpose of investing?

Well, that is one strategy. Actually I'm starting in three days whether the market is up or down or all-around I'm just gonna chuck it in there and hope for the best. I'm doing 5% emergent, 25% 2020 retirement index, 10% my company, 30% large cap, and 30% 2030 retirement index. Starting with this Friday's paycheck.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 12, 2016, 06:39:40 PM

Hey, I am not paranoid. Just seems like everyone's out to get me, that's all.


I am no longer out to get you, daggify.  I mean, I was, but it was more of a game when you were in the BatCave.  With an apartment, there is no challenge in it anymore.

-The tow truck driver

Agree you got a good outcome from a bad decision.  Diversify.  Be careful you aren't so focused on being a non-sheep that you get fleeced.  If you are scared to lose money, go with a more conservative asset allocation (more bonds, earlier target date fund, like a 50/50).  Sometimes it is worth it to take lower returns to prevent yourself from making future bad decisions which then lead to a bad outcome.  It is best to learn all this with smaller amounts of money, build some confidence in your plan, then just follow it until FI. 

And those are some pretty red flags you described earlier.

Do you like the lovely shade of red or perhaps the sheer number of red flags arranged in fashionable taste?
Title: Re: Living On The Edge With My 401k?
Post by: Radagast on July 12, 2016, 09:34:25 PM
Hope I didn't seem rude. I don't think there is a reason to have both 2020 and 2030 retirements funds, especially if they are Fidelity target date funds with 0.7% expense ratios, which is about a quarter or more of their reasonably expected returns.

Here are some good sample portofolios, I suggest 40% bonds or more:
https://www.bogleheads.org/wiki/Lazy_portfolios
https://www.bogleheads.org/wiki/How_to_build_a_lazy_portfolio

Good funds and ETF's at Fidelity: https://www.bogleheads.org/wiki/Fidelity

Hey, I am not paranoid. Just seems like everyone's out to get me, that's all.

I guess I am waiting for the actual economic recovery, not the one that is propped up by zero interest rates and some serious QE.

That the Fed put interest rates back at 4 or 5% and then we will see the true health of this economy. Until then it seems to me there is no where to go but down if something happens. I won't trust this market until I no longer see it propped up artificially.

I know that I am not alone in this, because any kind of bad news anywhere sends the sheep into blind, hysterical panic. A mere discussion of a .25% increase by the Fed does the same thing. A herd of confident sheep would not do that.

Nevertheless the market is pretty much the only game in town and the advice you all have given me I believe is the best approach and I'm going to do it. The only other option is buy metal or stuff my money in a mattress!
And because you seem to be asking for it:
http://earlyretirementextreme.com/wiki/index.php?title=Permanent_Portfolio
http://www.gyroscopicinvesting.com/forum/
Title: Re: Living On The Edge With My 401k?
Post by: Dicey on July 12, 2016, 10:27:45 PM
I'm doing 5% emergent, 25% 2020 retirement index, 10% my company, 30% large cap, and 30% 2030 retirement index. Starting with this Friday's paycheck.
Wait! Isn't that like using a belt and suspenders and velcro and safety pins to hold up your pants? I thought the point of the target funds was you put all your money in the one appropriate for your age and leave it there, because it is diversified?

I also think I remember that all target date funds are not alike in terms of return. One 2020 fund does not equal all other 2020 funds. (Or 20-whatever. Not advocating for any particular year because I don't know the answer to that question either.)

I assure you I am no expert (as if you couldn't tell), but for dog's sake, do a little more research before you take the steps outlined above. It may be a hot mess!

Will somebody with deep financial knowledge please step in and help my friend dagiffy 1? His utter badassity has earned my admiration and I want to see him succeed!
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 13, 2016, 11:12:05 AM
I'm doing 5% emergent, 25% 2020 retirement index, 10% my company, 30% large cap, and 30% 2030 retirement index. Starting with this Friday's paycheck.
Wait! Isn't that like using a belt and suspenders and velcro and safety pins to hold up your pants? I thought the point of the target funds was you put all your money in the one appropriate for your age and leave it there, because it is diversified?

I also think I remember that all target date funds are not alike in terms of return. One 2020 fund does not equal all other 2020 funds. (Or 20-whatever. Not advocating for any particular year because I don't know the answer to that question either.)

I assure you I am no expert (as if you couldn't tell), but for dog's sake, do a little more research before you take the steps outlined above. It may be a hot mess!

Will somebody with deep financial knowledge please step in and help my friend dagiffy 1? His utter badassity has earned my admiration and I want to see him succeed!

Thank you Diane C. Well I understood that the further out the retirement date the ratio tended to be more stocks than bonds. So the 2020 would be pretty heavily in bonds while the 2030 more stocks and 2040 even more stocks, so I thought that in itself was fine diversification.

I'm going to read through some of the links that were just posted. Kind of like getting more more knowledgeable but still it's just a crapshoot all you can do is choose the best odds according to what has happened in the past.

 The only other option is to buy metal, stuff the mattress, or do what some of my coworkers are doing and just buy ammunition and keep it and wait for Armageddon and use that as currency lol. This is the first union I belong to where the majority are not dyed in the wool Democrats.

My company has about 24,000 people and pretty much everyone Ive run into in corporate, which is where I have been for two years, or out in the blue-collar field which is where I am now is full of disdain for Democrats and Republicans both. The times they are a changing.

But that's not my problem. I have some links to read. If at first you don't succeed, get smarter I always say.
Title: Re: Living On The Edge With My 401k?
Post by: homestead neohio on July 13, 2016, 11:21:20 AM
I'm doing 5% emergent, 25% 2020 retirement index, 10% my company, 30% large cap, and 30% 2030 retirement index. Starting with this Friday's paycheck.
Wait! Isn't that like using a belt and suspenders and velcro and safety pins to hold up your pants? I thought the point of the target funds was you put all your money in the one appropriate for your age and leave it there, because it is diversified?

I also think I remember that all target date funds are not alike in terms of return. One 2020 fund does not equal all other 2020 funds. (Or 20-whatever. Not advocating for any particular year because I don't know the answer to that question either.)

I assure you I am no expert (as if you couldn't tell), but for dog's sake, do a little more research before you take the steps outlined above. It may be a hot mess!

Will somebody with deep financial knowledge please step in and help my friend dagiffy 1? His utter badassity has earned my admiration and I want to see him succeed!

Well... it's better than 100% company stock.  To optimize daggify's portfolio we'd need to know more about risk tolerance and expenses for those 401k options.  He seems risk intolerant (not wanting dips when all the market is dipping), but also wanting outstanding growth (not under-performing stocks).  Sounds like red flags attractively arranged into a pattern of unrealistic expectations.  He can gamble on the 100% company stock which is crazy risky.  The likelihood this outperforms the market over any significant period of time is so remote he can just buy a lotto ticket instead. 

Time to make some choices based on reality, daggify.  You can accept portfolio volatility following market volatility and get dips, but historically the best returns.  You can mix in bonds or gold or other assets to moderate/prevent dips, but this comes at the cost of not matching market gains.  These are personal choices based on your temperament.  I think before being confident in an asset allocation plan you won't waffle on, you will have to do some more research and introspection.  Which is fine while investing small amounts via dollar-cost-averaging and killing huge debt.  Because your badassity is really on the debt side, and you're dipping a toe in the 401k waters and getting a match on the investment side.    First determine where you want to be, then determine how to get there.

And while picking an appropriate target date and putting all assets in there is a simple way of letting someone else reduce equity exposure and increase bond exposure over time, it doesn't have to be your sole selection.  Adding many different target date funds to a portfolio just makes it harder to know what your equity/bond exposure will look like over time.  To get Asset Allocation right, pick the largest % of equities where you will still not panic and sell on the dips.  Because selling the dips hurts more than the small difference in lack of return on a slightly higher amount of bonds.
Title: Re: Living On The Edge With My 401k?
Post by: seattlecyclone on July 13, 2016, 11:28:40 AM
He can gamble on the 100% company stock which is crazy risky.  The likelihood this outperforms the market over any significant period of time is so remote he can just buy a lotto ticket instead.

I wouldn't say the odds are as bad as you claim. Pick any random stock and it probably has about a 50/50 shot of outperforming the market over a given time period. The reason to avoid putting too much money into one stock isn't the expected value (which is probably about the same as the market), it's the standard deviation. You just don't know what's going to happen. An individual stock can very easily lose 100% of its value and never recover. It can also go up 100-fold if the company experiences amazing growth. Neither of these things is a likely outcome for my total market index fund. Even in a huge market crash it might lose 50% and then mostly recover after a few years.
Title: Re: Living On The Edge With My 401k?
Post by: homestead neohio on July 13, 2016, 11:50:28 AM
He can gamble on the 100% company stock which is crazy risky.  The likelihood this outperforms the market over any significant period of time is so remote he can just buy a lotto ticket instead.

I wouldn't say the odds are as bad as you claim. Pick any random stock and it probably has about a 50/50 shot of outperforming the market over a given time period. The reason to avoid putting too much money into one stock isn't the expected value (which is probably about the same as the market), it's the standard deviation. You just don't know what's going to happen. An individual stock can very easily lose 100% of its value and never recover. It can also go up 100-fold if the company experiences amazing growth. Neither of these things is a likely outcome for my total market index fund. Even in a huge market crash it might lose 50% and then mostly recover after a few years.

That was overstated.  The risk he's taking is very high considering it is also his sole employer, and I equate it to gambling.  There are more companies under-performing the market than those outperforming the market, so a random choice would be <50% chance.  Owning the market ensures you include the few highest performers in there to average up the gains over the mediocre many.  Because those few highest performers are difficult to single out and buy.  There are more businesses that loose 100% of value than those that increase 100 fold.
Title: Re: Living On The Edge With My 401k?
Post by: CorpRaider on July 13, 2016, 11:52:23 AM
This course of action would be less than optimal if Tesla or some other distributed electric player puts the company/industry out of business.  Then your income and your assets go poof together.  Although, if you're looking for a reason to flex your frugality muscles...

Buying a target date fund and forgetting it doesn't sound like a bad idea to consider when one starts projecting numeric DJIA buy targets based on macro events unless one is managing $500MM+ and drawing a 2 and 20 fee.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 13, 2016, 01:09:54 PM
Boy the post before this just rocketed right over my head. 2 and 20???

Seeing what you people are telling me and letting it sink it is getting me to accept the folly of my decision.

I'm just going to leave that 22k alone in my company stock, but I'm not going to put any more in there. When they drop 200 bucks into that account every 3 months, it floats my boat. But that's the only way I'm purchasing more stock.

Eventually I hope this amount will be anywhere from 5% to 10% of my portfolio instead of the 100% that it is now.
Title: Re: Living On The Edge With My 401k?
Post by: pbkmaine on July 13, 2016, 01:22:07 PM
2 and 20 is shorthand for the exorbitant fees that hedge fund managers charge.

http://www.investopedia.com/terms/t/two_and_twenty.asp

Investopedia is your friend!
Title: Re: Living On The Edge With My 401k?
Post by: pbkmaine on July 13, 2016, 01:25:10 PM
More on the Fidelity Freedom Index 2030 Fund

http://www.morningstar.com/funds/xnas/fxifx/quote.html
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 13, 2016, 01:30:47 PM
OK I read the links provided. What was interesting to me is that the bogleheads.org link showed the similarities between Vanguard and Fidelity, or at least the funds they use and their different names for the same thing. From reading MMM I really wanted Vanguard VTSAX, VFIAX, and VEXAX in some mixture.

Alas and alas, when I saw what these were called at Fidelity, I was shocked, hurt, and disillusioned to see they aren't offered in my plan. I took the liberty of taking a screen shot, blacking out my company stock name for old time's sake. You can see that atm it's up 33% for the year. Lucky me.

I've attached what my plan will let me invest in as a .jpg attachment. Doesn't seem too exciting, but maybe you experienced people can see a smart allocation strategy?
Title: Re: Living On The Edge With My 401k?
Post by: Radagast on July 13, 2016, 01:46:58 PM
OK I read the links provided. What was interesting to me is that the bogleheads.org link showed the similarities between Vanguard and Fidelity, or at least the funds they use and their different names for the same thing. From reading MMM I really wanted Vanguard VTSAX, VFIAX, and VEXAX in some mixture.

Alas and alas, when I saw what these were called at Fidelity, I was shocked, hurt, and disillusioned to see they aren't offered in my plan. I took the liberty of taking a screen shot, blacking out my company stock name for old time's sake. You can see that atm it's up 33% for the year. Lucky me.

I've attached what my plan will let me invest in as a .jpg attachment. Doesn't seem too exciting, but maybe you experienced people can see a smart allocation strategy?

Every single one of those has "index" at the end, so I suspect they are exactly what you want. If you click on each you can probably see the fund name and ticker symbol.
Title: Re: Living On The Edge With My 401k?
Post by: andy85 on July 13, 2016, 01:56:42 PM
VSTAX is the total stock market index fund

The VIFAX is just an S&P index...and personally, if i am going to hold a total stock index fund, i am not going to hold an S&P fund too. they would probably track very close to one another.

VEXAX is a mid/small cap stock index fund, which is actually riskier than a total stock market fund i would say

from your image i would chose:
RSP total us stk ind (similar to the vstax)
RSP US bond index
if you want international exposure, RSP Int'l stk index

The allocations would be up to you...i'd probably do something like
70% US
20% international
10% US bonds

based on your apparent risk aversion, maybe anywhere from a 70/30 to 50/50 split of US/Bonds with no international


There is no need to hold more than one target retirement fund. You can pretty much mimic any target fund with the fund options you have.

Also, pick up the new book by JL Collins 'the simple path to wealth'....he really harps on not timing the market and ignoring the talking heads on tv

Edit: to clarify i meant US bonds
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 13, 2016, 05:35:25 PM
VSTAX is the total stock market index fund

The VIFAX is just an S&P index...and personally, if i am going to hold a total stock index fund, i am not going to hold an S&P fund too. they would probably track very close to one another.

VEXAX is a mid/small cap stock index fund, which is actually riskier than a total stock market fund i would say

from your image i would chose:
RSP total us stk ind (similar to the vstax)
RSP bond index
if you want international exposure, RSP Int'l stk index

The allocations would be up to you...i'd probably do something like
70% US
20% international
10% bonds

based on your apparent risk aversion, maybe anywhere from a 70/30 to 50/50 split of US/Bonds


There is no need to hold more than one target retirement fund. You can pretty much mimic any target fund with the fund options you have.

Also, pick up the new book by JL Collins 'the simple path to wealth'....he really harps on not timing the market and ignoring the talking heads on tv

Well, I'm just going to swallow the risk aversion. I don't have enough in play to really be that concerned in any event. I'm taking your advice for now and reading that Collins book you mentioned.
Title: Re: Living On The Edge With My 401k?
Post by: pbkmaine on July 13, 2016, 05:43:16 PM
Could you get me the ticker (five letters ending with X) for the 2030 target date fund, so I can be sure it's the Fidelity Freedom Index? I want to check the expense ratio.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 13, 2016, 06:09:20 PM
Could you get me the ticker (five letters ending with X) for the 2030 target date fund, so I can be sure it's the Fidelity Freedom Index? I want to check the expense ratio.

I looked at the 2030 target date fund, all the tabs, and never saw any ticker symbol of any kind?

I can give you the expense ratio via copy/paste:

Morningstar Category
Target-Date 2030
Fund Inception 7/13/2009

Expense Ratio 0.1% ($1.00 per $1000)

If this should have a ticker symbol, where would I look?
Title: Re: Living On The Edge With My 401k?
Post by: pbkmaine on July 13, 2016, 06:18:36 PM
Sometimes companies do a custom target date fund. Fund inception date is almost right for the Fidelity Freedom Index 2030. Expense ratio is low. Let me dig a little.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 13, 2016, 06:26:42 PM
Sometimes companies do a custom target date fund. Fund inception date is almost right for the Fidelity Freedom Index 2030. Expense ratio is low. Let me dig a little.

Expense ratio for my company stock is .008%...lol...dividend is paying this Friday. Alas and alas, my future money is going elsewhere.
Title: Re: Living On The Edge With My 401k?
Post by: pbkmaine on July 13, 2016, 06:46:16 PM
Past performance is no indicator of future returns, dagiffy. I can't get a handle on your target date funds. The expense ratio would indicate Vanguard, but the inception date would indicate American Funds. Sigh.

I'm inclined to go with Andy's suggestion, but to up your bonds to something more in line with your risk tolerance. 50% Total Stock Market Index, 15% International Index, 35% Bond Index, maybe?
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 13, 2016, 11:59:00 PM
Honestly I have taken my risk intolerance and chucked it out the window. I am not going to invest with much fear, just by sheer force of will. I took his advice but I am still investing a small percentage in my job stock. Before too long my company stock will be a very small percentage of my overall portfolio, and I look forward to the day that happens.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 14, 2016, 12:07:59 AM
My job transferred to Oakland will include a lot more overtime and the guys tell me to expect to make about 150 to 160 K. If you add that to my wife's income it should be I don't know 170, 175K.

At my old job I was making about 115K and so I was content to put 8% into 401(k) because the company would match 6% and so I would leave it at that. But with the increasing income though I would like to protect a little in the affective tax rate increase, so I increased my contribution to 15% and my company still contributing the 6%.

At the same time I am slogging away at my school loan debt and that is my number one priority. We are making minimum payments on the cars living frugally and intentionally and intellectually finding ways not to spend money and will keep our heads down to the grindstone and keep going like this. Pretty soon we will look back and be happy and how far we've come.
Title: Re: Living On The Edge With My 401k?
Post by: homestead neohio on July 14, 2016, 07:25:27 AM
daggify, I think chucking fear can work, especially when starting to invest small amounts.  At this point, you contributions are going to blow out of the water any balance variations up or down due to market conditions.  This will slowly change over time, though.  Eventually market changes dwarf contributions.  That can make a risk-averse person panic and do dumb stuff.  You need to basically ignore your day to day balance changes and gain faith in your strategy so you don't bail on it later.  Pick an asset allocation that objectively makes sense (check!).  Then don't fuck with it.  Don't check your balances more than once per month, but I recommend quarterly.  Don't sweat market drops, expect them.  Rebalance annually, and automate that if you can.  You are investing with a 30+ year time horizon, even if you plan to be FI in 10 years.  "Set it and forget it" is your very. best. friend.  This will lower the amount of "sheer force of will" you need to keep it going. 

You can always consider a different asset allocation in FI.  I'm comfy chasing high returns at 90% stock and 10% REIT during the "accumulation" phase I'm.  I think my risk tolerance will change when I walk away from employment and enter the "drawdown" phase.  I'll want to hang on to what I've got, but keep some big chunk in the market to be sure it doesn't run out.  Haven't worked out that split yet, but I have a few more years.  Just know that is down the road. 

Congrats on the increased income.  You may want to do a separate case study thread on these forums to ensure your other finances are optimized given your income changes.  Focusing on reducing taxes is a good idea!  At this higher income and 15% contribution rate you will likely max your 401k limit of 18k this year.  Congtratulations!  Is a 401k or other tax deferred account available to your wife?  If you file jointly, can she contribute 100% of her money to it? It will reduce your marginal joint tax rate.  Your income is too high for traditional IRA, and probably too high for Roth. 

You mention minimum payments on car notes.  You are paying highest interest rate debts first, right?  Keep killing that debt.  If you haven't seen Eric222's journal called My life is an exploding volcano of awesomeness, check it out.  He's killing huge debt and growing income, too, just started 401k investing.  I love his quote "Stamina is the next level of badassity."

Where did you put the red flags?  They were so pretty.  Did you pass them on to someone else?
Title: Re: Living On The Edge With My 401k?
Post by: Greenpez on July 14, 2016, 08:38:14 AM
 at 150k and 15% you will overshoot 18k in a year (but maybe not with what's left of this year) make sure to check back later this year so you can max your contribution but also so you can get the max company match.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 14, 2016, 10:44:38 AM
at 150k and 15% you will overshoot 18k in a year (but maybe not with what's left of this year) make sure to check back later this year so you can max your contribution but also so you can get the max company match.

I am 51 years old so I actually get 24,000 for my 401(k). But for the first six months of the year I've only been taking out 8% so I will need to do some calculations to make sure I don't hit the max before the last paycheck because they told me if I hit the max before the last paycheck come, then the company will not match from then on.

Also, my base pay is 105k, it's the OT that puts the wage up there so far. Someone told me that I can call Fidelity and have that percentage apply to all of my income on every check. I will have to see if that is true.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 14, 2016, 10:51:41 AM
daggify, I think chucking fear can work, especially when starting to invest small amounts.  At this point, you contributions are going to blow out of the water any balance variations up or down due to market conditions.  This will slowly change over time, though.  Eventually market changes dwarf contributions.  That can make a risk-averse person panic and do dumb stuff.  You need to basically ignore your day to day balance changes and gain faith in your strategy so you don't bail on it later.  Pick an asset allocation that objectively makes sense (check!).  Then don't fuck with it.  Don't check your balances more than once per month, but I recommend quarterly.  Don't sweat market drops, expect them.  Rebalance annually, and automate that if you can.  You are investing with a 30+ year time horizon, even if you plan to be FI in 10 years.  "Set it and forget it" is your very. best. friend.  This will lower the amount of "sheer force of will" you need to keep it going. 

You can always consider a different asset allocation in FI.  I'm comfy chasing high returns at 90% stock and 10% REIT during the "accumulation" phase I'm.  I think my risk tolerance will change when I walk away from employment and enter the "drawdown" phase.  I'll want to hang on to what I've got, but keep some big chunk in the market to be sure it doesn't run out.  Haven't worked out that split yet, but I have a few more years.  Just know that is down the road. 

Congrats on the increased income.  You may want to do a separate case study thread on these forums to ensure your other finances are optimized given your income changes.  Focusing on reducing taxes is a good idea!  At this higher income and 15% contribution rate you will likely max your 401k limit of 18k this year.  Congtratulations!  Is a 401k or other tax deferred account available to your wife?  If you file jointly, can she contribute 100% of her money to it? It will reduce your marginal joint tax rate.  Your income is too high for traditional IRA, and probably too high for Roth. 

You mention minimum payments on car notes.  You are paying highest interest rate debts first, right?  Keep killing that debt.  If you haven't seen Eric222's journal called My life is an exploding volcano of awesomeness, check it out.  He's killing huge debt and growing income, too, just started 401k investing.  I love his quote "Stamina is the next level of badassity."

Where did you put the red flags?  They were so pretty.  Did you pass them on to someone else?

The red flags are still here. I'm using them as tablecloths and coasters on the coffee table. I need to keep them close at hand just in case they are needed. I will look at this legendary Eric222 journal. 

My wife is self-employed so I believe I can open up an 401 account for her and put money there, too. I don't want to get carried away, though, because my student loan is at 111,000 and the interest is about 7.5%(Right next to the interest-rate it says, in red, "these rates are set by Congress").

With my matching I make 6% on my money so I can justify putting in some but I don't think we should max out both of us because the interest rate on my student loans is lethal and that should go down to zero first. The two cars are 1.99% and 2.99%. Highest interest rate first and it just so happens to be $111,000, so it's time to get to work.
Title: Re: Living On The Edge With My 401k?
Post by: homestead neohio on July 14, 2016, 11:48:11 AM
Maybe.  I don't have high income or high student loan debt, I suggest starting a case study thread to get advice on optimizing from those who have been there, done that.  This thread looks like it is only about 401k asset allocation, but your optimizing should go further.  I'm too lazy to do much research or maths for you, but at 175k you'd be in a 28% marginal tax bracket.  You can invest 401k $ pre tax and not pay that 28% tax, then some amount of student loan debt is tax deductible if your MAGI is <160k.   

https://www.irs.gov/publications/p970/ch04.html (https://www.irs.gov/publications/p970/ch04.html)

I expect you are right with 111k debt at 7.5%, that is the target to aim every dollar at once you secure the 401k matches (and we all know matches lead to FIRE).  We're just all so excited to get you investing more and keep taxes low.  It is worth the effort to put enough in 401k that you stay below 160k MAGI to get the deduction.

Good luck optimizing your optimizations.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 14, 2016, 01:10:51 PM
Maybe.  I don't have high income or high student loan debt, I suggest starting a case study thread to get advice on optimizing from those who have been there, done that.  This thread looks like it is only about 401k asset allocation, but your optimizing should go further.  I'm too lazy to do much research or maths for you, but at 175k you'd be in a 28% marginal tax bracket.  You can invest 401k $ pre tax and not pay that 28% tax, then some amount of student loan debt is tax deductible if your MAGI is <160k.   

https://www.irs.gov/publications/p970/ch04.html (https://www.irs.gov/publications/p970/ch04.html)

I expect you are right with 111k debt at 7.5%, that is the target to aim every dollar at once you secure the 401k matches (and we all know matches lead to FIRE).  We're just all so excited to get you investing more and keep taxes low.  It is worth the effort to put enough in 401k that you stay below 160k MAGI to get the deduction.

Good luck optimizing your optimizations.

omg every time I turn around here I learn something else. Never heard of MAGI. I guess because I never made this much money before, not even close. The job I had when I found MMM and this lifestyle paid 64k, so this is new ground for me. I know it's about X's and O's and finding that sweet spot. I still need to get Collins' book and perhaps find some info or a calculator to discover just how to play it for optimization.

Thanks for your input, you and everyone else. First time I ever came on here, people were clubbing me in the head and telling me to divorce my wife to get ahead financially. Glad to see I just got some slaps upside the head, timely wisdom, and encouragement this time.
Title: Re: Living On The Edge With My 401k?
Post by: homestead neohio on July 14, 2016, 02:25:50 PM
First time I ever came on here, people were clubbing me in the head and telling me to divorce my wife to get ahead financially.

And you came back?  That is a red flag, right there. 

omg every time I turn around here I learn something else.

You will get many more experienced advice givers to help you optimize if you start a case study thread instead of relying on a 401k allocation thread.  Now that I said it three times I'll shut up.

Best of luck, daggify. 
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 15, 2016, 08:56:52 AM
Where on the forum do you start a case study? I searched for the words "case study" and got no hits.
Title: Re: Living On The Edge With My 401k?
Post by: homestead neohio on July 15, 2016, 09:06:49 AM
Where on the forum do you start a case study? I searched for the words "case study" and got no hits.

Read this:

http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/ (http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/)

Then go to the Ask A Mustachian section of the forum and start a new post with your specific financial picture and questions following that format you just read about. 

http://forum.mrmoneymustache.com/ask-a-mustachian (http://forum.mrmoneymustache.com/ask-a-mustachian)

I'll be curious to see what advice you get given differences in our finances.
Title: Re: Living On The Edge With My 401k?
Post by: Dicey on July 16, 2016, 07:10:06 AM
I still need to get Collins' book and perhaps find some info or a calculator to discover just how to play it for optimization.
Have you been reading his blog, especially the investment series? I'd start there, 'cause it's free and smaller chunks of new info might be less intimidating + good comments. jlcollinsnh.com

Also, is your wife's salary really 20-25k or is that a typo?
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 16, 2016, 08:10:34 AM
I have read his series, yes.

And yes that is my wife's salary, as living in California she cannot use her massage license and so she is relegated to working at someplace like Tuesday Morning for $10 an hour, for example. I'm hoping she can find contract work as an organizer, as she has done this for many in Oregon with rave reviews.  Anything she does she pretty much gets rave reviews, though. Anyone she works for soon adores her and wants her around all the time, especially if they get sick or have surgery or come down with cancer or something.

The forum already eviscerated her for her job and income, though, in their classic cruelty and tough love brutality. I made the mistake of reading some suggestions from here about her job to her. She was upset for a week and really has no interest in anything I find on this forum. She will follow my lead for the most part but wants absolutely nothing to do with Mustachians at all.
Title: Re: Living On The Edge With My 401k?
Post by: Dicey on July 16, 2016, 08:21:32 AM
Oh, dagiffy, I am sorry that happened. My thinking was more along the lines of wondering why you were living apart. I had kind of assumed that you both had good-paying jobs that weren't portable as the reason you were living apart. Now even more confused. She's in CA too?

Off the top of my head, Costco, Nordstrom and Trader Joe's all pay better than $10/ hr for retail work.

Feel free to ignore if this is too personal. No trashing from this quarter, only admiration.
Title: Re: Living On The Edge With My 401k?
Post by: Zx on July 16, 2016, 08:20:21 PM
Oh, dagiffy, I am sorry that happened. My thinking was more along the lines of wondering why you were living apart. I had kind of assumed that you both had good-paying jobs that weren't portable as the reason you were living apart. Now even more confused. She's in CA too?

Off the top of my head, Costco, Nordstrom and Trader Joe's all pay better than $10/ hr for retail work.

Feel free to ignore if this is too personal. No trashing from this quarter, only admiration.

It's not too personal. When I was offered the job in SF she declared she wasn't prepared to be moving down there again. I think because of jobs or different circumstances we moved 8 times in 3 years. She also hated the bay area with its traffic and difficulty getting out of town on a Friday due to the sheer parking lot syndrome on the freeways. She had lived in Portland for over 30 years and had a network of friends she loved and who loved her, and many of those depended on her for a variety of things and paid her well for being there.

She also couldn't use her massage license in CA nor could she have her network of friends to do things with....so, we decided she'd stay in Portland, give her the chance to say the long goodbye to all her clients, and make use of the greater income she'd have in Portland. She got an apt in the basement of a friend's mansion, for which she pays 425 per month, I moved into my car and the clock has been ticking ever since.

We've picked January for her to move down, but might wait till later because I signed a year long lease on July 1, the day before she announced she wanted to move down to the bay with me. Talk about bad timing!