Author Topic: Overwhelmed with Options  (Read 1635 times)

gsd802

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Overwhelmed with Options
« on: January 28, 2020, 05:46:19 PM »
Hello,

I have read alot on here and taken advice on articles, looked at many options and just am having a hard time on what my next step should be.  I have been investing for about 6 years now, and was formally with Edward Jones but recently jumped to Vanguard.  Still somewhat uneducated, but trying to learn.  I think I am looking for somewhat of a hands off investment strategy, but at the age of 30 I am willing to have some risk.  Sure I would love to retire early, but I think a goal would be retiring in 25 years at the age of 55.

I have 3 accounts...

Individual which is a VTSAX

ROTH - Max each year.

Traditional 401k. -  No longer have a employer match.

Breaking down my retirement accounts

19% in my VTSAX individual account
39% in my ROTH
42% in my Traditional

I have about 46% of all combined money in cash, but want to keep that available for house deposit.

Both my ROTH and Traditional are in funds that came from Ed Jones (but now currently with vanguard rolled into IRAs).  Vanguard said I would need to sell those funds, get the cash, and then buy into Vanguard Funds.  I believe I want to be either 90/10 or 80/20.  I have looked at the Target Date Funds (VTIVX), Life Strategy Growth Fund (VASGX), and then of course all in with VTSAX.  The first two funds have an expense ratio of 0.14% and 0.15%.  Still much nicer than my close to 2.00% with Ed Jones.

Everyone seems to have different opinions from their personal goals, but does anyone have any advice based on my situation in what funds to invest in?  I want to max my 2020 ROTH immediately.  I really want to get this set up and just let the market do its thing.  I plan on never selling, but when the market goes way down, I do plan on taking some of my available cash and throwing it into an account like my VTSAX.

Thank you!

dandarc

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Re: Overwhelmed with Options
« Reply #1 on: January 28, 2020, 06:05:28 PM »
Nothing wrong with VASGX - is an easy fund to deal with. If I were you and hesitating on all this, I'd probably go with that in the IRAs, and leave the taxable account in VTSAX. Hits your 80-20 to 90-10 allocation in a very easy way.

BECABECA

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Re: Overwhelmed with Options
« Reply #2 on: January 28, 2020, 06:09:18 PM »
First, congrats for getting out from under Edward Jones and into Vanguard! That’s going to have a huge benefit on your wealth accumulation from here on out, due to the enormous reduction in fees.

As for what to invest in, you can’t go wrong with any of those options.

It’s really about what you feel comfortable buying and holding for the long run, and if you want to do rebalancing annually yourself or if you want one fund to just do it all for you.

I find this tool useful for comparing how different portfolios have done over the years. Of course, future performance isn’t guaranteed to follow past performance, but looking at past performance is better than not having any data at all.
https://www.portfoliovisualizer.com/backtest-portfolio

AdrianC

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Re: Overwhelmed with Options
« Reply #3 on: January 28, 2020, 06:28:10 PM »
Nothing wrong with VASGX - is an easy fund to deal with. If I were you and hesitating on all this, I'd probably go with that in the IRAs, and leave the taxable account in VTSAX. Hits your 80-20 to 90-10 allocation in a very easy way.

I’ll vote for this. We got a lot in VASGX. It’s easy and stops me from messing with it.

gsd802

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Re: Overwhelmed with Options
« Reply #4 on: January 29, 2020, 01:52:43 PM »
Thank you for the responses.  What about the higher expense ratio with the VASGX?  How much more is that really costing me?  Is it safe to say that even with a little higher expense ratio I will still be ahead from the automation since I am inexperienced in how to allocate my funds?  I am leaning now on putting my two IRAs in the VASGX and keeping my individual account in VTSAX like dandarc mentioned

dandarc

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Re: Overwhelmed with Options
« Reply #5 on: January 29, 2020, 03:12:14 PM »
You can do a 3 or 4 fund portfolio cheaper at Vanguard.

I personally use VTSAX (55%), VTIAX (25%), VBLTX (20%). VASGX is actually a 4 fund portfolio - I'm forgoing the "International Bonds" component entirely, and of course my allocation is not exactly the same as VASGX. But for me it is close enough. I always buy in those ratios and rebalance annually if things get far enough out of whack. Saves around .07% on the ERs (I just ball-parked this in my head just now - maybe do the weighted-balance analysis as fun exercise if you're really interested), which isn't that much - about $130 / year in those accounts currently. Of course that scales as our balances go up.

So it isn't an absurd amount of money, even on low 6-figure balances, but it does add up. Plus it gives me something to do, figuring the amounts to contribute and re-balance day is particularly fun. But if I was not the kind of person who enjoys doing that sort of thing, I'd happily be putting it all in to the VASGX.

Buffaloski Boris

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Re: Overwhelmed with Options
« Reply #6 on: January 29, 2020, 06:01:33 PM »
An investor doesn’t have to make an investment decision the moment they decide to put money in a Roth. Money can be left in a money market type of option to take advantage of the tax advantages before April 15th and before making an investment in a mutual fund or ETF or whatever.

Speaking for myself, I don’t have much interest in the US stock market or VTSAX. But to each their own.

Lucky13

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Re: Overwhelmed with Options
« Reply #7 on: January 29, 2020, 06:56:34 PM »
Both my ROTH and Traditional are in funds that came from Ed Jones (but now currently with vanguard rolled into IRAs).  Vanguard said I would need to sell those funds, get the cash, and then buy into Vanguard Funds.
I'm confused by this, if you sell and get cash, you are effectively withdrawing from your IRA which will be an early-withdrawal penalty? unless I'm misunderstanding.

Mustache ride

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Re: Overwhelmed with Options
« Reply #8 on: January 29, 2020, 07:32:53 PM »
Both my ROTH and Traditional are in funds that came from Ed Jones (but now currently with vanguard rolled into IRAs).  Vanguard said I would need to sell those funds, get the cash, and then buy into Vanguard Funds.
I'm confused by this, if you sell and get cash, you are effectively withdrawing from your IRA which will be an early-withdrawal penalty? unless I'm misunderstanding.

I think OP is talking about a money market fund or a similar cash alternative fund within the IRA/401k, not actually taking the money out of the account.

gsd802

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Re: Overwhelmed with Options
« Reply #9 on: January 30, 2020, 02:23:13 AM »
Both my ROTH and Traditional are in funds that came from Ed Jones (but now currently with vanguard rolled into IRAs).  Vanguard said I would need to sell those funds, get the cash, and then buy into Vanguard Funds.
I'm confused by this, if you sell and get cash, you are effectively withdrawing from your IRA which will be an early-withdrawal penalty? unless I'm misunderstanding.

I think OP is talking about a money market fund or a similar cash alternative fund within the IRA/401k, not actually taking the money out of the account.

Yes, that is correct.  I ended up selling all the funds that were in the non Vanguard funds and that money is now left in the money market within the IRA.  If I am understanding it all correctly.  Now, once the shares have been sold/processed, I can buy into a Vanguard fund for my IRAs.  All the terminology is new to me but Vanguard has also been very helpful over the phone. 

keyvaluepair

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Re: Overwhelmed with Options
« Reply #10 on: January 30, 2020, 04:59:58 AM »
    (1) Costs will kill you long term so your move to VG is good. Pick (low-cost) index funds for low cost as well as tax efficiency - since they don't trade much, they have small distributions. Take a look at the 3 fund portfolio in the
Bogleheads Wiki .
(2) Decide your equity/bond mix. A rough rule of thumb for bond % is your age.
(3)  Don't trade frequently. Buy and hold. Make sure you have an emergency fund if you are not Fire'd yet.[/list]

AdrianC

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Re: Overwhelmed with Options
« Reply #11 on: January 30, 2020, 11:01:22 AM »
I personally use VTSAX (55%), VTIAX (25%), VBLTX (20%). VASGX is actually a 4 fund portfolio - I'm forgoing the "International Bonds" component entirely, and of course my allocation is not exactly the same as VASGX. But for me it is close enough. I always buy in those ratios and rebalance annually if things get far enough out of whack. Saves around .07% on the ERs (I just ball-parked this in my head just now - maybe do the weighted-balance analysis as fun exercise if you're really interested), which isn't that much - about $130 / year in those accounts currently. Of course that scales as our balances go up.

So it isn't an absurd amount of money, even on low 6-figure balances, but it does add up. Plus it gives me something to do, figuring the amounts to contribute and re-balance day is particularly fun. But if I was not the kind of person who enjoys doing that sort of thing, I'd happily be putting it all in to the VASGX.
VASGX does cost a little more, but that doesn't mean your results will necessarily be much worse.

2012 - 2019 (Lifestrategy went to full indexing in 2011)
48% VTSAX 32% VTIAX 20% VBTLX rebalanced annually
CAGR 10.00%

100% VASGX
CAGR 10.19%

Presumably that's something to do with international bonds and/or constant rebalancing.

I like the simplicity of VASGX, for part of our portfolio at least. Edit: In tax advantaged space only.
« Last Edit: January 30, 2020, 11:04:14 AM by AdrianC »