Author Topic: Newbie Investor - How Is My Roth Allocation?  (Read 2711 times)

NeoGenMike

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Newbie Investor - How Is My Roth Allocation?
« on: April 04, 2017, 06:30:22 PM »
Hey everyone! I've spent many sleepless nights lately learning all I absolutely can about FI and the stock market. I'm so grateful to everyone who helped me. I'm dead set on retiring ASAP. I'm 27 years old and am looking for a 45-50ish retirement, so I've been reading and taking in alllll the advice I could. I JUST made my first Roth IRA and I think I've come up with a general idea for a good spread.
40% VTI
30% VGT
20% Eithers BND or VXUS ( leaning towards)
10% Bonds

I'm also starting a brokerage with Vanguard with a similar setup.
Now, I'd like you guys to trash this. Tell me why this is terrible and why I'm dumb for coming to this conclusion.
But whatever advice you give, thank you so much for your support. I appreciate all you all have done for me from the bottom of my heart!
« Last Edit: April 04, 2017, 06:31:56 PM by NeoGenMike »

Karinajane8

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #1 on: April 04, 2017, 07:15:13 PM »
Have you read JL Collins' stock series? His site is jlcollinsnh.com. If you haven't yet, I definitely recommend it. And given your age I'd recommend a simple allocation weighted very aggressively toward stocks.  Good luck on your journey! Congrats on starting so soon.

NeoGenMike

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #2 on: April 04, 2017, 07:25:43 PM »
No I haven't, thank you! I'll read into that!
Now, after you said that someone who I trust a lot suggested this spread
40% VTI
40% VOO
5% VOOV
5% VOOG
5% EEM
5% VNQ
I'm not sure how aggressive you think, but I think that's pretty aggro.

SeattleCPA

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #3 on: April 04, 2017, 07:37:27 PM »
Hey everyone! I've spent many sleepless nights lately learning all I absolutely can about FI and the stock market. I'm so grateful to everyone who helped me. I'm dead set on retiring ASAP. I'm 27 years old and am looking for a 45-50ish retirement, so I've been reading and taking in alllll the advice I could. I JUST made my first Roth IRA and I think I've come up with a general idea for a good spread.
40% VTI
30% VGT
20% Eithers BND or VXUS ( leaning towards)
10% Bonds

I'm also starting a brokerage with Vanguard with a similar setup.
Now, I'd like you guys to trash this. Tell me why this is terrible and why I'm dumb for coming to this conclusion.
But whatever advice you give, thank you so much for your support. I appreciate all you all have done for me from the bottom of my heart!

So here's my (hopefully constructive) criticism: I don't know why you're using a Roth account. Probably that's a mistake:

Here's my lengthy argument:

http://evergreensmallbusiness.com/are-roth-iras-and-roth-401ks-really-a-good-deal/

rubybeth

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #4 on: April 04, 2017, 07:38:56 PM »
How much do you have to invest? Do any of these have minimum investment amounts? I am unfamiliar with most of these so had to look them up. Why invest in so many different index ETFs that are basically the same thing? Why not go with one like VTSMX (or VTSAX if you have the minimum $10k? Highly recommend Jack Bogle's Little Book of Common Sense investing, if you haven't already read it.

NeoGenMike

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #5 on: April 04, 2017, 07:44:03 PM »
How much do you have to invest? Do any of these have minimum investment amounts? I am unfamiliar with most of these so had to look them up. Why invest in so many different index ETFs that are basically the same thing? Why not go with one like VTSMX (or VTSAX if you have the minimum $10k? Highly recommend Jack Bogle's Little Book of Common Sense investing, if you haven't already read it.

Just 5500 at first. Are you referring to my first or second post?
I'm doing ETF versions because there's no minimum, and VTI is the same as VTSAX.

MustacheAndaHalf

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #6 on: April 05, 2017, 05:43:42 AM »
Someone suggested you hold U.S. Total Market (VTI) separately from the S&P 500 (VOO)?  And even more strangely, hold both S&P 500 value and S&P 500 growth?

That doesn't add up well: VOOV and VOOG are two halves of the same index.  And that suggestion seems to be almost all U.S. stocks with no international.  The fact you posted it instead of rejecting it suggests you have some reading/learning to do.

Have you read the "Bogleheads Guide to Investing"?  The S&P 500 index was championed by John Bogle, founder of Vanguard, and Bogleheads follow a simple but powerful approach to diversification.  You get U.S. stocks, international stocks, and bonds... that's it.  Not every Boglehead agrees, but they all agree it works as a starting portfolio until you learn more.

I'd suggest something more like:
60% U.S. Total Stock ("VTI")
30% Total International ("VXUS")
10% Bonds ("BND")

If you have a 401(k) plan with company match, invest there (up to the match) before you invest in a Roth IRA.  Depending on your tax bracket, a Roth IRA might not be as good as a Traditional IRA.

NeoGenMike

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #7 on: April 05, 2017, 07:36:14 AM »
Someone suggested you hold U.S. Total Market (VTI) separately from the S&P 500 (VOO)?  And even more strangely, hold both S&P 500 value and S&P 500 growth?

That doesn't add up well: VOOV and VOOG are two halves of the same index.  And that suggestion seems to be almost all U.S. stocks with no international.  The fact you posted it instead of rejecting it suggests you have some reading/learning to do.

Have you read the "Bogleheads Guide to Investing"?  The S&P 500 index was championed by John Bogle, founder of Vanguard, and Bogleheads follow a simple but powerful approach to diversification.  You get U.S. stocks, international stocks, and bonds... that's it.  Not every Boglehead agrees, but they all agree it works as a starting portfolio until you learn more.

I'd suggest something more like:
60% U.S. Total Stock ("VTI")
30% Total International ("VXUS")
10% Bonds ("BND")

If you have a 401(k) plan with company match, invest there (up to the match) before you invest in a Roth IRA.  Depending on your tax bracket, a Roth IRA might not be as good as a Traditional IRA.

Hey thanks for the post. Im glad to see your spread is so close to my original.
Now, as to why I didnt reject. Im trying to look at all the faces of the coin, so to speak, and i wanted to run it by everyone. His approach contradicts what everyone else tells me, but the funny thing is it works for him. He's 31 and almost retired. I asked him, "Why all the same stock, they are so similiar?" and he said that if the US market goes down that that doesnt magically mean the rest of the world is going to compensate, that international is also dependent on US dollars as well. He told me that sometimes people tend to ignore the big losses on international. And While I DO want international, just not so much in my roth.

Now, He's the only person I've met to say that, so It kind of rustled the pot because it worked well for him. Do you think theres any merit to this form of thinking?

And yep, I do have a company IRA with Match. I'm doing 3% (Because of the Company match) and the rest into Brokerage and IRA). Vanguard just hasnt cleared my funds, yet, so I'm getting my last bits of doubt out of the way before I invest. Thanks for all your help, by the way, I appreciate it!
« Last Edit: April 05, 2017, 07:39:51 AM by NeoGenMike »

Guide2003

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #8 on: April 06, 2017, 06:50:01 PM »
I would agree that simpler (fewer funds) is better. Don't confuse complexity with diversity. When it's time to rebalance, it will be easier with fewer funds. The JL Collins Stock series champions this concept, as well as Interest Compound's posts on this thread: https://forum.mrmoneymustache.com/investor-alley/betterment-price-increase/

NeoGenMike

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #9 on: April 07, 2017, 08:22:47 AM »
I would agree that simpler (fewer funds) is better. Don't confuse complexity with diversity. When it's time to rebalance, it will be easier with fewer funds. The JL Collins Stock series champions this concept, as well as Interest Compound's posts on this thread: https://forum.mrmoneymustache.com/investor-alley/betterment-price-increase/

I hear you, That's actually a good point. Thanks for that. I've since re-evaluated my Spread with a combination of what experienced people say, what, maybe, a riskier person might say, and my, personal, flavor sprinkled on top.
50% VTI
20% VGT
20% VXUS
10% BND

VTI/VTSAX because it is the "go-to" index. VXUS and BND because it's a steady market. And VGT because it just does so nicely.

ChpBstrd

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #10 on: April 07, 2017, 11:27:17 AM »
I wouldn't worry about diversifying outside VTI until you had at least $100k to invest. The whole point of these funds is to provide cheap and easy diversification. Plus, if your $5500 lost 40% of its value in a market crash, for example, that's not going to set you back multiple years. More like weeks at this point. Bond funds with 2% yields? Naaa. At least with cash I can collect options premiums.

100% VTI

I could, however, talk myself out of this opinion. Small caps are more volatile, but have tended to outperform the rest of the market over time. If your goal is FIRE ASAP and you can stand firm through slightly higher volatility, you should consider:

100% VB

Last point, why do you expect to retire in 18-23 years? The instruction manual to do it in 10 is right here.

NeoGenMike

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #11 on: April 08, 2017, 12:07:09 AM »
I wouldn't worry about diversifying outside VTI until you had at least $100k to invest. The whole point of these funds is to provide cheap and easy diversification. Plus, if your $5500 lost 40% of its value in a market crash, for example, that's not going to set you back multiple years. More like weeks at this point. Bond funds with 2% yields? Naaa. At least with cash I can collect options premiums.

100% VTI

I could, however, talk myself out of this opinion. Small caps are more volatile, but have tended to outperform the rest of the market over time. If your goal is FIRE ASAP and you can stand firm through slightly higher volatility, you should consider:

100% VB

Last point, why do you expect to retire in 18-23 years? The instruction manual to do it in 10 is right here.

Hey thanks for the tip! I'll check that idea out! And this Manuel has me intrigued, where is it if I may ask? I'm not very bright.

ChpBstrd

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #12 on: April 08, 2017, 07:56:07 AM »
I wouldn't worry about diversifying outside VTI until you had at least $100k to invest. The whole point of these funds is to provide cheap and easy diversification. Plus, if your $5500 lost 40% of its value in a market crash, for example, that's not going to set you back multiple years. More like weeks at this point. Bond funds with 2% yields? Naaa. At least with cash I can collect options premiums.

100% VTI

I could, however, talk myself out of this opinion. Small caps are more volatile, but have tended to outperform the rest of the market over time. If your goal is FIRE ASAP and you can stand firm through slightly higher volatility, you should consider:

100% VB

Last point, why do you expect to retire in 18-23 years? The instruction manual to do it in 10 is right here.

Hey thanks for the tip! I'll check that idea out! And this Manuel has me intrigued, where is it if I may ask? I'm not very bright.

I mean the whole website.

NeoGenMike

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Re: Newbie Investor - How Is My Roth Allocation?
« Reply #13 on: April 09, 2017, 07:28:48 AM »
Oh, well the website implies I make a lot more than what I do (25K). My work covers college if the major is in their best interest, so I'm probably going to go for an accounting degree. So hopefully that changes in the next 4 years.