My Plan (Tell me what you think!)

[Vitai Slade]

I'm 24 years old, currently saving as much as I can to shove into investments. The last two years, I have maxed out my Roth Brokerage Account (for the total amount of $10,500). I was new to investing and tried my hand at picking stocks. Needless to say, I was pretty bad at this so my account is now only worth $7,850 (ouch). I'm am currently holding a big portion of AGNC and a small portion of NLY and a very very very small position in KO. I like the idea of REITs in my ROTH for the tax benefits. Sadly, it has killed me this past couple years, but I am hoping that they will eventually rebound. I have a long time to hold and they pay decent dividends to just hold. As long as they don't go under, I'll eventually come back out on top... is the hope.

Those are mortgage REITs though. This year I decided to not purchase more of AGNC in favor of more diversification. I am holding those positions until I at least break even while my new Roth max for 2014 was shoved into the Vanguard REIT Index Fund (VGSIX). These are property REITs. Hopefully it will perform decently for me. High dividend yield with compounding and avoiding taxes completely? Awesome.

I also have a 401k that I started with my company this last year contributing the max 15% of my income with a 25% match on the first 8%. The entirety of that is going into the lowest expense index fund and most common S&P 500 fund. The final piece to my plan was to open a taxable account with Vanguard and put everything not already going into my Roth and 401k into the Extended Market Index Fund (VEXMX). I know that I'm pretty weighted towards REITs right now (High high risk, high high reward) but I'm comfortable with the risk, especially being this early in the game. I don't have to cash out for a long long time. I'm also invested for a very small amount (in regards to investing) so the unbalanced portfolio still has plenty of room to grow into a more balanced fund and evolve until I'm happy with it. For now though, I'm hoping the final product will look like this:

40% S&P 500 Index (401k)
35% Extended Market Index (Taxable Account)
25% REITs (Roth IRA)

I am not planning for bonds in these early early stages as they have the least growth potential. Once I am nearing the end of my "accumulation" phase of asset building, I'll think more on bonds.

My REITs and Taxable account sort of act as my emergency fund right now (Not counting the approx. 2k in my vacation fund that would be used up before those accounts) and during the early part of retirement, I am hoping my Roth Contributions and Taxable account will be enough to get me through so that I don't have to pay penalties. I can also use the 5 year pipeline loophole that some of you may know about.

[dmn]

Do you have a reason for buying only domestic stocks? You would probably get better diversification by adding international equities.

[Vitai Slade]

Do you have a reason for buying only domestic stocks? You would probably get better diversification by adding international equities.

The market is highly regulated here... a lot moreso than international companies/countries. Not to mention, I automatically gain exposure to at least SOME international stock by investing in companies like McDonalds that also have interests overseas. It also seems that all of the big world power countries seem to all get hit at the same time. One country's economy goes, then so do the others. I think it's really just a personal preference.

[wtjbatman]

Overall it looks pretty good. You may be a bit heavy on REITs for some people, but obviously you know you're not going to sell your mREITs at a loss, so hang on to what you have in your Roth and let those come back. I'm looking at starting a strong REIT position when I finish up my 2013 Roth IRA contribution, at the moment my portfolio is all stocks and ETFs (my portfolio is on my blog, if you're curious). REITs have taken a beating lately, and look pretty ripe for the taking for future dividends and growth.

I wouldn't worry too much about the domestic/international aspect either. Like you pointed out, most of these multinational corporations have large overseas operations. I believe some of the major players (like, say, JNJ) actually do more business internationally than domestically.