Author Topic: Need immediate help from seasoned Vanguard investor.  (Read 3081 times)

moosejaw

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Need immediate help from seasoned Vanguard investor.
« on: October 06, 2014, 12:54:56 PM »
Hey all...if you saw my previous post I need to invest on behalf of my son.   The amount to invest is approximately 36,000.  Due to it being part of a settlement and him being a minor, I need to be approved by the court after I submit an investment plan.  The court likes annuities and bonds.  I do not.  My son is 8 so there will be a minimum of 10 years of investment time.

What I have considered proposing are one of three options:

Option A.  Invest in Berkshire Hathaway B shares, split evenly over an 18 month - 24 month period for dollar cost averaging.

Option B. Invest in 4 Index funds via Vanguard, again over an 18 month - 24 month period.

Option C. Invest in 4 ETF's that represent 4 different industries, with 18-24 month period.


#1. What do you as investors think is the smartest idea?
#2. Which ETF's or Index funds would you invest in over these time periods.  Ideally Vanguard funds.
#3.  Could you provide a reasonable explanation(that I can pass along in defense of my choice over annuities or bonds) on why it's the most effective choice.
#4. Is dollar cost averaging important?(In this current market I believe it is.)

I do not have time on my side to make this decision, and I have to provide the plan very soon.

Thank you reading and all help is appreciated.


GGNoob

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Re: Need immediate help from seasoned Vanguard investor.
« Reply #1 on: October 06, 2014, 01:30:57 PM »
I would do a version of B with only 3 funds...

63% Total US stock index (VTI)
27% Total international stock index (VXUS)
10% Total US bond index (BND)

Going with the ETF's at Vanguard will allow you to get the lowest fees possible on all funds. Then you can rebalance with dividends.

Personally I wouldn't worry about dollar cost averaging and would just invest it all now.

This strategy is basically the Bogleheads strategy, so feel free to check out there website for the reasoning behind the 3-fund portfolio.






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RichMoose

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Re: Need immediate help from seasoned Vanguard investor.
« Reply #2 on: October 06, 2014, 01:42:00 PM »
While I'm not familiar with the courts in your jurisdiction, I would say that Option A would be a tough sell, Options B and C as well but maybe less so if you present it right. Personally, my recommendation would be to select a Vanguard Life Strategy Fund or Target Retirement Fund. I would lean to the LifeStrategy Moderate Growth Fund in your particular circumstances for the following reasons:

- It is easy to convince the court that Vanguard is a reputable company
- It is hands off for you, so you can convince the court that it is not in your interest, but in your sons and you will not meddle in stock picking, A/A, etc
- It is listed on the Vanguard website as a 3 out of 5 for level of risk with a 60/40 stock bond split, a very common strategy that doesn't appear to risky in the eyes of a judge
- It has a long history, been around since 1994 with over $11B in assets
- It is not overly technical and has low fees

If the payment is a lump-sum, I would invest in a lump-sum. There's much to be said for DCA but for a judge who may not understand DCA it may just appear confusing and more risky to him.

I am in court a lot as part of my job and have quite a bit of experience with judges. In my experiences I've noticed that the simpler and easier something is to understand, the more likely a judge will support your application. If a judge doesn't understand, he will likely reject it or take his sweet time making a decision because he doesn't want to make any decisions that could make him or the courts look stupid down the road. How about this headline on your state newspaper in 2024: "Boy Loses College Fund: Judge Authorizes Unqualified Dad To Manage Lump-Sum Payment"
« Last Edit: October 06, 2014, 01:58:05 PM by TuxedoEagle »

Le Barbu

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Re: Need immediate help from seasoned Vanguard investor.
« Reply #3 on: October 06, 2014, 01:51:40 PM »
TuxedoEagle proposition is just perfect !

Dodge

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Re: Need immediate help from seasoned Vanguard investor.
« Reply #4 on: October 06, 2014, 02:37:00 PM »

While I'm not familiar with the courts in your jurisdiction, I would say that Option A would be a tough sell, Options B and C as well but maybe less so if you present it right. Personally, my recommendation would be to select a Vanguard Life Strategy Fund or Target Retirement Fund. I would lean to the LifeStrategy Moderate Growth Fund in your particular circumstances for the following reasons:

- It is easy to convince the court that Vanguard is a reputable company
- It is hands off for you, so you can convince the court that it is not in your interest, but in your sons and you will not meddle in stock picking, A/A, etc
- It is listed on the Vanguard website as a 3 out of 5 for level of risk with a 60/40 stock bond split, a very common strategy that doesn't appear to risky in the eyes of a judge
- It has a long history, been around since 1994 with over $11B in assets
- It is not overly technical and has low fees

If the payment is a lump-sum, I would invest in a lump-sum. There's much to be said for DCA but for a judge who may not understand DCA it may just appear confusing and more risky to him.

I am in court a lot as part of my job and have quite a bit of experience with judges. In my experiences I've noticed that the simpler and easier something is to understand, the more likely a judge will support your application. If a judge doesn't understand, he will likely reject it or take his sweet time making a decision because he doesn't want to make any decisions that could make him or the courts look stupid down the road. How about this headline on your state newspaper in 2024: "Boy Loses College Fund: Judge Authorizes Unqualified Dad To Manage Lump-Sum Payment"

I would go with this idea, but the Vanguard "Target Retirement 2060" fund. This will give you exactly what you want, as much stock as possible (90%), and an easy justification to the judge:

"I want to make sure my son can retire in his old age, after I'm gone. So I did my research, and choose the most reputable and cheapest cost retirement plan for my son."

If he asks more questions, talk about how Vanguard funds are owned by their owners, like the credit union of investment firms. That should do it :)

The_Dude

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Re: Need immediate help from seasoned Vanguard investor.
« Reply #5 on: October 06, 2014, 02:51:20 PM »
If your son is 8 and may need the money in 10 years aka a college fund then I'd think twice about all equity or super high equity positions.  For example I would not select a target date retirement fund of 2060.

surfhb

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Re: Need immediate help from seasoned Vanguard investor.
« Reply #6 on: October 06, 2014, 04:22:05 PM »
I would do a version of B with only 3 funds...

63% Total US stock index (VTI)
27% Total international stock index (VXUS)
10% Total US bond index (BND)

Going with the ETF's at Vanguard will allow you to get the lowest fees possible on all funds. Then you can rebalance with dividends.

Personally I wouldn't worry about dollar cost averaging and would just invest it all now.

This strategy is basically the Bogleheads strategy, so feel free to check out there website for the reasoning behind the 3-fund portfolio.



+1.  Pretty basic.....should be easy to explain to a judge.    Have you read the Boglehead wiki page.   It pretty much contains everything you need to know about smart investing

moosejaw

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Re: Need immediate help from seasoned Vanguard investor.
« Reply #7 on: October 06, 2014, 05:30:05 PM »
Thank you for your replies everyone!  I have been overwhelmed with suggesting the correct place for this money.

I chose to recommend the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) since it was so straight forward.

If this does not cut it in the eyes of the court, I recommend choice #2 involving the 3 ETF split that was suggested.

Your help is greatly appreciated, and I hope it works out for my son.

LordSquidworth

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Re: Need immediate help from seasoned Vanguard investor.
« Reply #8 on: October 07, 2014, 07:28:48 PM »
Annuities in the US are a waste of money. They're loaded with fees, restrictive, performance is lacking, and I don't see how they're suitable for an 8 year old that might need college money. Or an 8 year old period.

Bonds aren't necessarily a good investment currently outside of short term bonds with the projections for interest rates over the rest of the decade.


PS: Who ever at the courts that is partial to annuities or bonds doesn't appear to know anything if that's what they're suggesting for an 8 year old.