Author Topic: Looking for Vanguard Recommendations  (Read 2109 times)

E in DC

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Looking for Vanguard Recommendations
« on: January 26, 2017, 02:08:02 PM »
As we (my wife and I) turn the debt corner, I'm looking to start investing ASAP.  We actually have a significant chunk of money coming our way from an inheritance (never thought I'd be lucky enough to utter those words), and I'm leaning toward funneling it into a Vanguard account. 

Just a few questions for the hive mind our there - is this truly the best route to take with a 6-8 year FI horizon, and what mix of vanguard funds make the most sense?  I think I know the MMM perspective, but I'm interested to hear some other opinions.  I'm sure this has been debated to death, so feel free to point me to an existing thread if that makes sense. 


Thanks!
« Last Edit: January 26, 2017, 02:11:03 PM by E in DC »

AdrianC

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Re: Looking for Vanguard Recommendations
« Reply #1 on: January 26, 2017, 06:07:32 PM »

MustacheAndaHalf

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Re: Looking for Vanguard Recommendations
« Reply #2 on: January 26, 2017, 07:58:40 PM »
Have you read "A Random Walk Down Wall Street"?  It's now in it's 11th edition, and has been an investment classic for laying out theory backed by academic studies and decades of stock market history.

Nice thing about Vanguard is how hard it is to pick an expensive fund.  Vanguard's philosophy is to save the investors money - doubly so since the investors are also the shareholders of Vanguard.  Most of the investment world doesn't have those interests aligned, so be careful out there.

Is this "down payment on a house" money or "4% of this covers our expenses" money? 
If it's $150,000 range maybe an all in one fund is okay.  Not great, but it's easier than having several mutual funds.
But once you get past $750,000 range, you're looking at a significant bond allocation in a taxable account.  It might make sense to divide things into several funds, and even look at tax-exempt bond funds.

One vital caveat: are you inheriting an IRA?  If so, STOP!  Read about inherited IRAs first - you could easily make a mistake that costs you a lot in taxes.  IRAs can be "stretched" over your expected lifetime, where you'll be withdrawing money each year.  You'll need to read up and get advice if this is your situation - if you are inheriting an IRA.

E in DC

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Re: Looking for Vanguard Recommendations
« Reply #3 on: January 27, 2017, 10:27:24 AM »

AdrianC

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Re: Looking for Vanguard Recommendations
« Reply #4 on: January 27, 2017, 10:46:04 AM »
Take a look at this too:

https://personal.vanguard.com/us/funds/tools/recommendation

It will give you a portfolio recommendation, like this for example:

42% $420,000.00 Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
28% $280,000.00 Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
21% $210,000.00 Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)
9% $90,000.00 Vanguard Total International Bond Index Fund Investor Shares (VTIBX)

These are the same funds Vanguard uses within the LifeStrategy funds. Buying them separate gives you control over placement (bonds funds should go in tax-advantaged accounts, e.g. an IRA) and a slightly lower overall expense ratio.

LifeStrategy is easier. Vanguard do the rebalancing for you.

E in DC

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Re: Looking for Vanguard Recommendations
« Reply #5 on: January 27, 2017, 10:49:06 AM »
Is this "down payment on a house" money or "4% of this covers our expenses" money? 
If it's $150,000 range maybe an all in one fund is okay.  Not great, but it's easier than having several mutual funds.
But once you get past $750,000 range, you're looking at a significant bond allocation in a taxable account.  It might make sense to divide things into several funds, and even look at tax-exempt bond funds.

One vital caveat: are you inheriting an IRA?  If so, STOP!  Read about inherited IRAs first - you could easily make a mistake that costs you a lot in taxes.  IRAs can be "stretched" over your expected lifetime, where you'll be withdrawing money each year.  You'll need to read up and get advice if this is your situation - if you are inheriting an IRA.

Thanks for the detailed response MustacheAndaHalf!  I'll check out that book.  Our windfall is going to be about $100K.  We're trying to decide between '-stache' fund and house down payment now.  As an aside, we expect to make about $300K off of our current house sale in the coming year.  We're in a unique situation where we've been offered a free place to live temporarily (in-laws inherited a house).  We'll be there about 2 years, so there's no rush to make a decision either way on what to do with the funds.  Speaking of, the inheritance is not in the form of an IRA.  It's actually coming in the as a check.  I guess they liquidated the estate prior to distribution. 

I see the big question as, do we invest (even in the meantime) and/or pay as much as possible into a (hopefully reasonable) mortgage when/if that time comes.  Whether we plan to throw down a big down payment will also dictate how much risk we'll be willing to assume when investing.           

E in DC

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Re: Looking for Vanguard Recommendations
« Reply #6 on: January 27, 2017, 10:50:46 AM »
Take a look at this too:

https://personal.vanguard.com/us/funds/tools/recommendation

It will give you a portfolio recommendation, like this for example:

42% $420,000.00 Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
28% $280,000.00 Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
21% $210,000.00 Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)
9% $90,000.00 Vanguard Total International Bond Index Fund Investor Shares (VTIBX)

These are the same funds Vanguard uses within the LifeStrategy funds. Buying them separate gives you control over placement (bonds funds should go in tax-advantaged accounts, e.g. an IRA) and a slightly lower overall expense ratio.

LifeStrategy is easier. Vanguard do the rebalancing for you.

This is great info.  Exactly what I was looking for.  Thanks again!