Author Topic: Help with my investment strategy  (Read 6980 times)

NumberJohnny5

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Help with my investment strategy
« on: July 08, 2015, 05:42:21 PM »
Been doing lots of research. A few things are starting to make sense, but the more I learn the more questions I have. I don't want to put this off for months/years while I work out the best investment strategy. I would prefer a "good enough" approach to start with, and worry about small tweaks later.

Wife and I have about $35k each in Roth IRAs at Vanguard. Unknown amount in 401k. Once we're back in the US and can get info on that (company will only mail to a US address), I'm going to look into the backdoor Roth option.

Right now we have some extra money that we want to invest. So I'm looking at the best way to do that. Will probably setup another account/fund at Vanguard. I'm leaning toward a 50% US stock and 50% international stock allocation. I can't find any information supporting buying bonds other than "it's the way it's always been done" and "it's insurance". If the main reason I'm holding onto bonds is for stability/insurance, why not just keep my money under a mattress? Ok, not literally, but you get the idea.

Vanguard's VTI looks good for US stocks, and VXUS for international stocks. Both are available as Admiral shares (which we would qualify for). Is there any reason we shouldn't do a straight 50/50 on those two funds?

We would like to retire in 5-10 years, but I'm fairly certain income would still be earned (slow years might see enough income to live off of, but not to invest). I prefer high risk/high reward if it's "logical" (i.e. invest $10k in a something risky and have it turn into $7k-$15k, vs something safe and know you'll get $10.5k).

Thoughts/guidance most appreciated.

MDM

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Re: Help with my investment strategy
« Reply #1 on: July 08, 2015, 05:57:17 PM »
Unknown amount in 401k. Once we're back in the US and can get info on that (company will only mail to a US address)
Online access?  That's how we view our 401k.

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I'm going to look into the backdoor Roth option.
The terminology can be confusing - do you mean mega backdoor Roth?  That's the one involving a 401k, and great for you if you qualify.  The regular ol' backdoor Roth does not involve a 401k.

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I'm leaning toward a 50% US stock and 50% international stock allocation. ... Vanguard's VTI looks good for US stocks, and VXUS for international stocks. Both are available as Admiral shares (which we would qualify for). Is there any reason we shouldn't do a straight 50/50 on those two funds?
That is within the realm of defensible allocations, and those are perfectly reasonable funds for that allocation.  As you seem to know, there is no "best" allocation (at least not one knowable in advance).

NumberJohnny5

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Re: Help with my investment strategy
« Reply #2 on: July 08, 2015, 06:41:30 PM »
Unknown amount in 401k. Once we're back in the US and can get info on that (company will only mail to a US address)
Online access?  That's how we view our 401k.

I forget what happened, but some time back they changed the company that was holding the 401k, and it's just super-duper-easy to log in if you're still an employee. They won't give out any information over the phone, there's no way to request a password reset via email (or phone, obviously), the only way they'll give you the login is to send the details via mail. I'm guessing there will be an ID verification too, since our address has changed multiple times. I haven't bothered to check on company #2, I probably should. I just figured I'd get both done at the same time.

The terminology can be confusing - do you mean mega backdoor Roth?  That's the one involving a 401k, and great for you if you qualify.  The regular ol' backdoor Roth does not involve a 401k.

Yeah, the one where you convert a 401k into a Roth. I've only done sparse research into that...once we're about to get access to the 401k then I'll dive into it 100%

Quote
I'm leaning toward a 50% US stock and 50% international stock allocation. ... Vanguard's VTI looks good for US stocks, and VXUS for international stocks. Both are available as Admiral shares (which we would qualify for). Is there any reason we shouldn't do a straight 50/50 on those two funds?
That is within the realm of defensible allocations, and those are perfectly reasonable funds for that allocation.  As you seem to know, there is no "best" allocation (at least not one knowable in advance).

Heh, "realm of defensible allocations", I like that. I know hindsight is always 20/20. I just want to look back and go "well, I did the best with the information I had."

johnny847

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Re: Help with my investment strategy
« Reply #3 on: July 08, 2015, 06:44:08 PM »
I would probably go with market weight US international (which is currently about 50 50). So no difference now but that may change in the future

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NumberJohnny5

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Re: Help with my investment strategy
« Reply #4 on: July 08, 2015, 07:35:44 PM »
I would probably go with market weight US international (which is currently about 50 50). So no difference now but that may change in the future

Which one is that? I doubt the Google results for "market weight US international" is what you're referring to. :)

forummm

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Re: Help with my investment strategy
« Reply #5 on: July 08, 2015, 07:38:50 PM »
I would probably go with market weight US international (which is currently about 50 50). So no difference now but that may change in the future

Which one is that? I doubt the Google results for "market weight US international" is what you're referring to. :)

I think he's saying that if you use the market weighting (like VTSAX is the market weighted allocation of the investible US market), the allocation would be 50% VTSAX and 50% VTIAX roughly. Last I checked it was 55/45, but 50/50 is close enough and easier to keep in balance.

NumberJohnny5

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Re: Help with my investment strategy
« Reply #6 on: July 08, 2015, 07:57:27 PM »
Gotcha. Thought there was a special fund that was already 50/50 in US and international stocks. Was pretty sure he wasn't advising I invest 100% in WTW.

johnny847

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Re: Help with my investment strategy
« Reply #7 on: July 08, 2015, 09:51:13 PM »
Oh sorry that was poorly articulated. I meant use market weighting.
There are funds that track a market weighted all world stock index. Vanguard Total world (vtwsx).
However, I wouldn't recommend using that fund. I'd separate it out to vtsax and vtiax because that way you can tax loss harvest those individually. Also, it let's you hold vtiax in a taxable and vtsax in a retirement account so you can claim the foreign tax credit (but it's not always optimal to hold vtiax in a taxable, see one of the taxes stickies for my post on the matter)

And the market weight is currently 51/49 us/Intl according to the FTSE global all cap index that the total world fund tracks.

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NumberJohnny5

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Re: Help with my investment strategy
« Reply #8 on: July 08, 2015, 10:26:48 PM »
Oh sorry that was poorly articulated. I meant use market weighting.
There are funds that track a market weighted all world stock index. Vanguard Total world (vtwsx).
However, I wouldn't recommend using that fund. I'd separate it out to vtsax and vtiax because that way you can tax loss harvest those individually.

Also, I believe the expense ratio was lower if you separated the US/Global funds vs having the single. Supply/demand.

Also, it let's you hold vtiax in a taxable and vtsax in a retirement account so you can claim the foreign tax credit (but it's not always optimal to hold vtiax in a taxable, see one of the taxes stickies for my post on the matter)

First thing I'm doing is converting the Roth, so no tax implication there. I'm leaning toward an ETF for the taxable account, but for now I'll keep it in mutual funds. I'll look into the foreign tax credit later.

And the market weight is currently 51/49 us/Intl according to the FTSE global all cap index that the total world fund tracks.

That's pretty darn close to my 50/50 plans. Hey, I should do this for a living! Give me all your money, I'll charge 1% to put it in Vanguard funds for you, and everyone (well, at least me) is happy. Hrm, would checking the fund status once a month count as "Actively Managed"?

I started to convert my current fund into the new ones, but Vanguard says some funds have not cleared the bank yet (just fully funded my Roth for the year). Odd, since it was electronically transferred. I shall wait and make sure everything's done properly.

NumberJohnny5

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Re: Help with my investment strategy
« Reply #9 on: July 12, 2015, 04:10:42 PM »
I know this is a different question, but I don't want to clutter the forum.

What difference, if any, is there between a taxable retirement account and a general savings account? When setting up a new account I'm asked "Why are you investing?" I can select Retirement, General Savings, or College. If I select Retirement, I'm asked if I want a Roth IRA or Traditional IRA; if I click "Show more account types >>" then I'm shown SEP-IRA, Taxable account, and Variable annuity. Now, I need to research what a variable annuity is (heard of it, but haven't really looked into it), but am I wrong in thinking that a taxable retirement account and a general savings account is the exact same thing? If I am wrong...what's the difference?

Already have a Roth IRA with Vanguard, trying to get a brokerage account for taxable investments.

forummm

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Re: Help with my investment strategy
« Reply #10 on: July 12, 2015, 04:57:57 PM »
Hey, I should do this for a living! Give me all your money, I'll charge 1% to put it in Vanguard funds for you, and everyone (well, at least me) is happy. Hrm, would checking the fund status once a month count as "Actively Managed"?

That's more than many "advisors" do. Also, in addition to the 1% advisory fee, they put their clients into funds that charge 1-2% per year (giving the advisor a kickback) and 6% load fees (going to the advisor's pocket).

What difference, if any, is there between a taxable retirement account and a general savings account? When setting up a new account I'm asked "Why are you investing?" I can select Retirement, General Savings, or College. If I select Retirement, I'm asked if I want a Roth IRA or Traditional IRA; if I click "Show more account types >>" then I'm shown SEP-IRA, Taxable account, and Variable annuity. Now, I need to research what a variable annuity is (heard of it, but haven't really looked into it), but am I wrong in thinking that a taxable retirement account and a general savings account is the exact same thing? If I am wrong...what's the difference?

Already have a Roth IRA with Vanguard, trying to get a brokerage account for taxable investments.

The normal vernacular is retirement account=tax advantaged account. And savings=taxable. You want savings for taxable brokerage investing.

nobodyspecial

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Re: Help with my investment strategy
« Reply #11 on: July 12, 2015, 05:12:56 PM »
Yes, they are likely just asking you for marketing reasons - to push retirement accounts.
Or they think it is required by a know-the-customer law.

I asked my bank why they needed to know the source of and use for some money I was transferring. It's "for security reasons". So if the purpose is to catch bad guys - why doesn't the web page have "from drug dealing" and "to fund terrorism" as options ?
   

NumberJohnny5

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Re: Help with my investment strategy
« Reply #12 on: July 12, 2015, 05:21:19 PM »
The normal vernacular is retirement account=tax advantaged account. And savings=taxable. You want savings for taxable brokerage investing.

But what is a taxable retirement account? I'm assuming that it's Vanguard's way of dumbing things down, which just confuses me.

Hrm, there must be a difference though. If I select a taxable retirement account, it goes straight to verifying my information. If I choose a General Savings account, it asks if I want Individual, Joint, or Trust.

At least I know this much. At the beginning of opening an account, you're given several options such as "Open a new account" and "Add a new brokerage account using your existing Vanguard information". Based on the wording, I thought option 2 was what I wanted. When I got further into the process, it seems this option was for adding a brokerage account to an existing account (i.e., the Roth IRA). Confusing.

I'm just going to guess that there's nothing special about the taxable retirement account it's offering. I'll select General Savings, setup a brokerage account (so I can get ETFs vs mutual funds, I "think" that would make tax time less complicated), and if I ever want to move funds from that to the Roth, it should be relatively easy (maybe it'll be one-click, or two-clicks to move into a MM account, and then to the Roth).

NumberJohnny5

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Re: Help with my investment strategy
« Reply #13 on: July 12, 2015, 05:28:18 PM »
I asked my bank why they needed to know the source of and use for some money I was transferring. It's "for security reasons". So if the purpose is to catch bad guys - why doesn't the web page have "from drug dealing" ... as options ?

I would make a joke about being worried I'd have to disclose that. But "they" might be listening.

It does seem rather silly. What would a bank do if you said "I got mah money from pimpin' and I plan on buying drugs"? Seriously, if the bank asks "where'd you get this money?" is anyone really going to say "I robbed you guys last week"? I guess it's a good way of catching really stupid crooks?

forummm

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Re: Help with my investment strategy
« Reply #14 on: July 12, 2015, 05:42:48 PM »
The normal vernacular is retirement account=tax advantaged account. And savings=taxable. You want savings for taxable brokerage investing.

But what is a taxable retirement account? I'm assuming that it's Vanguard's way of dumbing things down, which just confuses me.

Hrm, there must be a difference though. If I select a taxable retirement account, it goes straight to verifying my information. If I choose a General Savings account, it asks if I want Individual, Joint, or Trust.

At least I know this much. At the beginning of opening an account, you're given several options such as "Open a new account" and "Add a new brokerage account using your existing Vanguard information". Based on the wording, I thought option 2 was what I wanted. When I got further into the process, it seems this option was for adding a brokerage account to an existing account (i.e., the Roth IRA). Confusing.

I'm just going to guess that there's nothing special about the taxable retirement account it's offering. I'll select General Savings, setup a brokerage account (so I can get ETFs vs mutual funds, I "think" that would make tax time less complicated), and if I ever want to move funds from that to the Roth, it should be relatively easy (maybe it'll be one-click, or two-clicks to move into a MM account, and then to the Roth).

I'm going through the process. If I select retirement account, it only gives me tax-advantaged accounts as options. If I select general savings it asks for individual or joint. You want general savings.

There was no option for "taxable retirement" that I saw.

johnny847

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Re: Help with my investment strategy
« Reply #15 on: July 12, 2015, 05:51:19 PM »
The normal vernacular is retirement account=tax advantaged account. And savings=taxable. You want savings for taxable brokerage investing.

But what is a taxable retirement account? I'm assuming that it's Vanguard's way of dumbing things down, which just confuses me.

Hrm, there must be a difference though. If I select a taxable retirement account, it goes straight to verifying my information. If I choose a General Savings account, it asks if I want Individual, Joint, or Trust.

At least I know this much. At the beginning of opening an account, you're given several options such as "Open a new account" and "Add a new brokerage account using your existing Vanguard information". Based on the wording, I thought option 2 was what I wanted. When I got further into the process, it seems this option was for adding a brokerage account to an existing account (i.e., the Roth IRA). Confusing.

I'm just going to guess that there's nothing special about the taxable retirement account it's offering. I'll select General Savings, setup a brokerage account (so I can get ETFs vs mutual funds, I "think" that would make tax time less complicated), and if I ever want to move funds from that to the Roth, it should be relatively easy (maybe it'll be one-click, or two-clicks to move into a MM account, and then to the Roth).

I'm going through the process. If I select retirement account, it only gives me tax-advantaged accounts as options. If I select general savings it asks for individual or joint. You want general savings.

There was no option for "taxable retirement" that I saw.

I too am thoroughly confused. People don't generally use the term "taxable retirement account" because it doesn't really make sense. And I haven't seen Vanguard do it either.

Maybe you can screenshot this for us or something?

NumberJohnny5

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Re: Help with my investment strategy
« Reply #16 on: July 12, 2015, 05:52:34 PM »
I'm going through the process. If I select retirement account, it only gives me tax-advantaged accounts as options. If I select general savings it asks for individual or joint. You want general savings.

There was no option for "taxable retirement" that I saw.

You have to click on "Show more account types ". It's under "Traditional IRA".

NumberJohnny5

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Re: Help with my investment strategy
« Reply #17 on: July 12, 2015, 06:01:52 PM »
Screenshot before I clicked "Show more account types "



Screenshot after I clicked "Show more account types "


forummm

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Re: Help with my investment strategy
« Reply #18 on: July 12, 2015, 06:16:52 PM »
Weird. I get the same screen, except no option for "taxable account"--just the other 4.

Just select "general savings" and be done with it.

NumberJohnny5

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Re: Help with my investment strategy
« Reply #19 on: July 12, 2015, 07:01:43 PM »
Just select "general savings" and be done with it.

That's what I'll do. Just frustrates me to not know what the different options do. Multiple google searches don't come up with any answers (anything regarding taxable accounts for retirement seem to reference the general savings account).

Vanguard, make this easier. There is obviously a difference (since general savings ask about account ownership, and taxable retirement does not). And not everyone sees the same options, so there's some reason you think I may need a taxable account and they don't.

Or maybe Vanguard thinks I'm not as smart as forummm is. They're probably right.

Thanks for looking into it for me. Appreciate the help.

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Re: Help with my investment strategy
« Reply #20 on: July 12, 2015, 10:02:04 PM »
Gotcha. Thought there was a special fund that was already 50/50 in US and international stocks. Was pretty sure he wasn't advising I invest 100% in WTW.
There is kind of... I use Vanguard's VT etf

I had a VTI/VXUS split, decided that it was more work than I wanted and since I wanted 100% stock... VT it is and now I never look at portfolio because there is no rebalancing... I know I miss out on some of the small cap I think, but for what I want at moment, VT does its job
« Last Edit: July 12, 2015, 10:03:52 PM by eyem »

MDM

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Re: Help with my investment strategy
« Reply #21 on: July 13, 2015, 05:27:50 PM »
Folks may be over thinking this.  A taxable retirement account is simply an account one plans to use for retirement (i.e., the money is not needed any time soon), but is not tax advantaged.

NumberJohnny5

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Re: Help with my investment strategy
« Reply #22 on: July 13, 2015, 05:37:24 PM »
Folks may be over thinking this.  A taxable retirement account is simply an account one plans to use for retirement (i.e., the money is not needed any time soon), but is not tax advantaged.

I get that, but my question was "How is it different from a general savings account?"

I'm still curious as to what the difference is (if any), but I've already setup the general savings account.

MDM

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Re: Help with my investment strategy
« Reply #23 on: July 13, 2015, 07:37:05 PM »
I get that, but my question was "How is it different from a general savings account?"

I'm still curious as to what the difference is (if any), but I've already setup the general savings account.
Ok, you're asking about how is it different specifically in terms of Vanguard accounts - correct?

Might be worth scanning http://discuss.morningstar.com/NewSocialize/forums/t/325200.aspx.  If you are able to do what you want with your account, then you have arrived at your desired destination regardless of the path you took.