Moving $80K cash to Vanguard taxable account. Funds? Timing?

[catccc]

I'm sitting on some cash $120K that's been earning a pittance (1%) in a savings account for years.  So sad.  It was earmarked for a home purchase, but I don't know when that is going to happen, and the reality is we are happy to rent right now.  So that money needs to get to work.  I'm planning on moving $80K of it.  (Should I move more?  I'm just used to having a lot of cash on hand...) 

Having exhausted tax advantaged accounts (IRA and 401K), and not having an HSA available to me, I'm going to move it to a taxable vanguard account.  I was going to do $40K in VTSMX (Total International Stock Index) and $40K in VGTSX (Total Stock Market Index).  Does that sound okay?  I was going to do a target date fund, but then I read in another thread here that it's not a great idea for a taxable account, with all the rebalancing going on.

I started the application already and I was informed during the process that I can get the "admiral" version of these, VTSAX and VTIAX, respectively.  My understanding is that these are just lower cost versions that you can be eligible for if you invest beyond a certain threshold.  Am I understanding this correctly?

Should I just throw the $80K in there all at once?  Or just put enough in for the admiral shares, then move a set amount of the cash over monthly?

Anything big I'm missing here?  This is a good move, right?

[iamlindoro]

Yes, you are correct about what the Admiral versions are, and you should absolutely use them instead at these levels.  There is no downside, all upside, and it can make a huge difference over 20 or 30 years in how much money you make, even though Vanguards costs are among the lowest in the business.  Go with the admiral funds.

Ref: Lump sum versus over a few months, you will get opinions going either way.  If the market goes up from here, you'll feel like a jerk for not having invested all at once.  If it goes down, you'll feel like a jerk for having invested all at once.  There's just no way to be certain and there's no historical way to say that one way is better than the other.  Personally, w/ the market down 4-5% over the last month, I'd chuck it all in now.

[Louisville]

What's your time horizon? If yoiu think you're going to spend this money within say, five years, you may want to be a little less aggressive in your allocation.
+1 on the Admiral Funds.

[Frankies Girl]

I'm sitting on some cash $120K that's been earning a pittance (1%) in a savings account for years.  So sad.  It was earmarked for a home purchase, but I don't know when that is going to happen, and the reality is we are happy to rent right now.  So that money needs to get to work.  I'm planning on moving $80K of it.  (Should I move more?  I'm just used to having a lot of cash on hand...)
Move what you're comfortable with moving. If it was me, I'd move the whole thing, but you're not me, and it sounds like you picked that amount because that's what you're comfortable with investing.



Having exhausted tax advantaged accounts (IRA and 401K), and not having an HSA available to me, I'm going to move it to a taxable vanguard account.  I was going to do $40K in VTSMX (Total International Stock Index) and $40K in VGTSX (Total Stock Market Index).  Does that sound okay?  I was going to do a target date fund, but then I read in another thread here that it's not a great idea for a taxable account, with all the rebalancing going on.
First part, the VTSMX and VGTSX - I personally believe that having international funds isn't necessary since most US companies do have international exposure, but some folks like a specific fund to get into the international. So I'd actually do all-in VTSAX. This is the admiral level of the total stock market index. This is 100% stock market - no bonds, no nothing but stocks so it's a very wild ride - very volatile. Target retirement funds are going to have a blend of stocks and bonds and some other bits and pieces in there and will rebalance to be more conservative as time goes on. Target funds also charge you more in fees, and won't do as well as VTSAX, but it will be a smoother ride.



I started the application already and I was informed during the process that I can get the "admiral" version of these, VTSAX and VTIAX, respectively.  My understanding is that these are just lower cost versions that you can be eligible for if you invest beyond a certain threshold.  Am I understanding this correctly?
Yup. Admiral level means you are investing a minimum of 10K, and that entitles you to cheaper expense ratios. The investor levels are 3K minimum, and a cost a bit more. That's pretty much the only differences as far as I can remember.



Should I just throw the $80K in there all at once?  Or just put enough in for the admiral shares, then move a set amount of the cash over monthly?
You are better off just lump sum investing according to several studies (I have no idea where they are, but someone might chime in and point you to them) but if you would rather dollar cost average (that's the monthly buy in you're talking about) then do it that way.



Anything big I'm missing here?  This is a good move, right?
It is a good time (especially now with the market being "on sale" due to the pull-back/correction) to get your money invested. 

And the nice thing about VTSAX is that it is tax efficient, so it being in a taxable account won't cause you too many headaches compared to some funds.

You need to make sure that you won't need this money any time seriously over the next 5 years or so. If you haven't already sat down and thought about your risk tolerance, then that's something to do before investing. If you're going to panic or get upset at short term drops (like what is going on now) then you might not want to go with all VTSAX, but you need to get that figured out now.

This time last year, I was pretty naive, but I'm good now due to my new understanding of how this whole things really works. So I do recommend reading the following and ask lots of questions if that's what it takes! :)

http://jlcollinsnh.com/stock-series/

http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/

[soccerluvof4]

I prefer to DCA in. If you want to put 80k in put 40k in and then 20k and 20k. The market will provide always better opportunitys like the last current week. The trend is down so until its not why rush. You can still put the money in a Vanguard account at 1% and transfer free of charge within the Vanguard site itself. Once you have the Admiral shares anything you will add will be a admiral share. 100% of the VTSAX is fine but if you dont want such a bumpy ride you might want to put some money into VBTLX . Best thing is to come up with a plan and tallk to a Vanguard rep. Just make sure to go with the lowest cost ratios which VTSAX, VBTLX, VGSLX and VTIAX all do. Good Luck!

[catccc]

Thanks everyone. 

It is definitely a possibility that we would want this money in the next 5 years.  But I've been sitting on the cash for well over 5 years because we might want to use it, and we haven't.  We missed out on some good times in the market because of this. 

So maybe I'll stick with $80K, and hang onto $40K in cash.

I'll stick with VTSAX, skip the international, and throw some VTBLX in there to reduce the volatility.  And thoughts on stocks/bond allocation percentage?

[soccerluvof4]

60/40 is very very conservative. I would though rethink a little and talk with vanguard to put something in Global/emerging markets as well  as something into REITs. But its all up to you! Good luck!

[catccc]

Okay, decided to do 30% bonds, 70% stocks.  And for the stocks, 80% is in Total Stock Market, and 20% is in Total International Stock.  Or, that's how it was supposed to be.  I wasn't paying enough attention, apparently, and I have 80% in International instead of 20%.  So I guess tomorrow when the transaction posts, I will have to do an exchange.  Oops.  Note to self, double check before clicking submit...

[wtjbatman]

Or, that's how it was supposed to be.  I wasn't paying enough attention, apparently, and I have 80% in International instead of 20%.  So I guess tomorrow when the transaction posts, I will have to do an exchange.  Oops.  Note to self, double check before clicking submit...

Was that the entire $80k?

Jesus... I'd probably have triple checked before I clicked submit. And then checked again. Maybe some people just aren't cut out for investing. (I kid... mostly)

[catccc]

Or, that's how it was supposed to be.  I wasn't paying enough attention, apparently, and I have 80% in International instead of 20%.  So I guess tomorrow when the transaction posts, I will have to do an exchange.  Oops.  Note to self, double check before clicking submit...

Was that the entire $80k?

Jesus... I'd probably have triple checked before I clicked submit. And then checked again. Maybe some people just aren't cut out for investing. (I kid... mostly)

Yup, it was the full 80K, so I have to make an exchange of about 33K today.  I hope the gain/loss is minimal.

I developed a bad habit of full steam ahead w/o double checking things in college.  I was almost "superstitious" about exams.  I found I often second guessed my answers, and would change my previously right answers to wrong answers, or if I spent more time on things, they'd start to seem more complicated than they really were.  So in my junior year, I stopped double checking things, took exams furiously fast.  And here's the superstitious part: if my exam wasn't one of the first one's on the professors desk, I wouldn't get an A.  And if it was the first one on the professor's desk, it would be the highest grade in the class.  It worked for me in college, it worked for the CPA exam... but I'm far beyond that now, and it looks like I need to double check things.

But seriously, I don't think I'm made for investing like some people are, not because I'm too fast of a clicker, but because sometimes I worry I can't stomach the paper losses in short-term investments.  I'm fine taking risk in long-term investments, but moving this money was hard for me.  I told DH that the market had a 5% "correction" last month.  He's like, "that's good, right?  because you just moved that money."  Yes, well, I just hope it's sufficiently up for us when the time comes to sell. 

In the early 2000's, I started investing monthly in mutual funds.  Then high yield savings accounts hit the scene.  I loved the guaranteed return, and soon just started stashing cash.  Big mistake.  I've learned my lesson (10 years later, unfortunately), and going forward, I will be investing more regularly.

[soccerluvof4]

catcc,


Thats why the Vanguard funds are perfect for you IF you hit the right submit button..lol. Just put in there what you dont want to worry about !

Good Luck to you!

[catccc]

catcc,


Thats why the Vanguard funds are perfect for you IF you hit the right submit button..lol. Just put in there what you dont want to worry about !

Good Luck to you!

Thanks!  Good luck to us all, may we always buy low and sell high, or better yet, set it and forget it.

[vespito]

catcccc - are your other funds with Vanguard?  If so, you may qualify for a free meeting with a financial adviser depending on how much you have invested.  Probably not worth it to pay them - but if it's free you may as well take advantage.

[soccerluvof4]

you have to have 500k in vanguard accounts to have someone that will give you "real advice" otherwise its 250$

[catccc]

thanks for the info!  I do have other accounts at Vanguard.  In addition to this 80K investment I made, My 401K is there ($90K), I plan on moving my Roth IRA there ($138K, currently in American Funds, but I pay no load for class A shares), my husband's Roth IRA is there ($23K), and he also has $39K in another Roth at AF, which we can move to VG.  So hopefully it's a short time before we are up to $500K.  Oh, also another $30K in a VG 529, but it's managed through nysaves.org.  I wonder if that counts.

[soccerluvof4]

anything under vanguard counts...ETF's, index's 401ks, annuities etc. 

[phred]

While Vanguard is the current emotional leader, it seems you are putting all your eggs into one basket.  I would definitely remove some cash out of the bank as it's not doing anything.  Of course, leave enough in to qualify for the freebies

[catccc]

While Vanguard is the current emotional leader, it seems you are putting all your eggs into one basket.  I would definitely remove some cash out of the bank as it's not doing anything.  Of course, leave enough in to qualify for the freebies

Hmm, do you mean I'll be putting all my eggs in the vanguard basket if I move my Roth IRA and regular IRA and DH's Roth IRA over there?  My 401K is over there w/ my current employer, and its in a target fund.  The other IRAs are at American Funds... do you suggest I leave them there for the sake of diversification?  I mean, the Vanguard Funds I'm buying are already diversified, to an extent, right?

I wonder what kind of advice they dole out for free.  I feel like I don't need any professional advice.  But here I am getting unprofessional advice, and I'm finding it useful...

[Joel]

Keep in mind it's best to have your international stocks held in your taxable accounts so that you can take advantaged the foreign taxes paid credit.

[notquitefrugal]

Was the entire $120k to purchase a house outright, or a downpayment? I would consider keeping whatever a 20% downpayment would be in cash in case you decide to purchase a house later. Worst case, you could put the 20% down, take out a low rate mortgage for the remaining 80%, and pay it off early.

[Frankies Girl]

While Vanguard is the current emotional leader, it seems you are putting all your eggs into one basket.  I would definitely remove some cash out of the bank as it's not doing anything.  Of course, leave enough in to qualify for the freebies

In the case of Vanguard, it is almost laughable to think that having all you money in there (eggs/basket) is something to worry about. The company won't fail unless there is a world- changing catastrophe, in which case, money would be the least of your worries.

 

[catccc]

In the case of Vanguard, it is almost laughable to think that having all you money in there (eggs/basket) is something to worry about. The company won't fail unless there is a world- changing catastrophe, in which case, money would be the least of your worries.

That's what I thought.

Was the entire $120k to purchase a house outright, or a downpayment? I would consider keeping whatever a 20% downpayment would be in cash in case you decide to purchase a house later. Worst case, you could put the 20% down, take out a low rate mortgage for the remaining 80%, and pay it off early.

The $120K was meant a large down payment, and I ended up keeping about $40K in cash.  Between that cash and another taxable investment account at American Funds, I should have enough for a 20% down payment.  I've been thinking more about not paying a mortgage off early, and investing instead, so I'm okay with that.

[aj_yooper]

I think you are wise to be using Vanguard for your taxable account and also having your other accounts  with Vanguard too.  Since you appear to be good savers, continue building up your cash and consider storing up a nice chunk of Ibonds, municipal bond funds, and CDs to diversify your risk, but keep adding to the total market and international index funds.   

Do some reading about investing.  I especially like Rick Ferri's Asset Allocation and William Bernstein's Four Pillars of Investing.  If you optimize your budget, you could be inline for an early retirement, or definitely financial independence. 

Best wishes.