The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: kalenamustache on August 22, 2013, 10:47:13 AM
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Hey everyone. I'm new to this forum and I'm a budding investor. When I mean budding, I mean I opened a Sharebuilder account with $100 three years ago.
My current portfolio has 75% in equities, 18% in cash, and about 2% fixed income. My equities allocations are between 42% in ETFs and about 33% in individual stocks.
For my investor mustachians out there, is this a decent allocation of my equity funds?
Also, my fixed income is all in a US Treasury 7-10 year bond that has lost so much money. The market value on my shares is only about $7 right now. Is it wise to sell and just put that money in to savings for now?
Thank you so much for any help!!
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For my investor mustachians out there, is this a decent allocation of my equity funds?
No. Or maybe. There isn't enough information.
The market value on my shares is only about $7 right now. Is it wise to sell and just put that money in to savings for no[/b]w?
What money? It's $7.
Honestly, I'm not even sure where to start. Based on your wording, you need to read. A lot. Personally, I'd start with bogleheads.org (http://bogleheads.org)
Also, the opinions you're probably going to get on this board will be all over the map; this forum has a huge cross-section of people, and investing isn't math - there's no right answer, really. Though I'd argue there are some wrong ones.
Having said that, if you really want an over-simplified answer, here's mine: Sell everything and pick a single target date fund from a low-cost provider (Vanguard, Schwab, etc.), and put everything into that.
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I can respond to some of these questions, but much more important is building up a knowledge-base so you can answer them yourself. Understanding is more valuable than the answers themselves. These books are a good place to start:
http://www.amazon.com/Random-Walk-Guide-Investing/dp/039332639X/ref=sr_1_3?s=books&ie=UTF8&qid=1376508625&sr=1-3
http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365
1) There's really very little reason to own individual stocks. If your holdings are diverse, it's not necessarily a big deal, but especially as a novice, I'd focus on big picture asset classes to avoid the confusion of tons of moving pieces and the risk that you're overallocated to an individual company or sector. Ultimately, without knowing what ETFs you hold, what individual stocks you hold, and what your goals are, it's impossible to comment on whether your equity allocation is "decent" or not.
2) Don't sell your bonds. At only 2% of your portfolio you're underallocated. Furthermore, as an asset class falls, all things equal, you should be a marginal buyer not a marginal seller. The market value of the shares is irrelevant (I assume you mean the shares are at $7 and not that you have $7 invested).
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Having said that, if you really want an over-simplified answer, here's mine: Sell everything and pick a single target date fund from a low-cost provider (Vanguard, Schwab, etc.), and put everything into that.
I think this is a good suggestion.
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I will review all of these references you both have suggested and I appreciate your feedback.
I have bought and read The Four Pillars of Investing and The Little Book of Common Sense Investing already and having read those two books, it brought me to this forum to ask people about their experiences and recommendations in real time.
Here's what I have in ETF equity allocations:
ETFs - 16% - Vanguard Dividend Appreciation ETF, 15% Guggenheim S&P Smallcap Pure Growth ETF, 8% First Trust Consumer Staples AplahDEX Fund, 3% Vanguard REIT Index Fund, 2% Vanguard Extended Market Index ETF
I would actually agree that owning individual stocks is not the smartest thing to do for a beginner investor such as myself. I just bought very small percentages of shares in companies like Google, Target, Ford, Scripps Networks, Motorola, Activision and American Railcar Industries about two years ago before I did any real research.
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2) Don't sell your bonds. At only 2% of your portfolio you're underallocated. Furthermore, as an asset class falls, all things equal, you should be a marginal buyer not a marginal seller. The market value of the shares is irrelevant (I assume you mean the shares are at $7 and not that you have $7 invested).
I meant the market value of the shares that I own equal about $7. That's only 0.06 shares. I was able to purchase this early one when I was experimenting with monthly investment plans with Sharebuilder, where you buy with a specific dollar amount and not by the shares in whole numbers.
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Do you have a target asset allocation or an investment plan? If not, that's probably where you should start.
Also, what are your goals and timelines for these funds? Are they retirement funds? Are they in a taxable or tax-advantage (and what kind?) account? It would also help to know how much $$ we are talking about. (Is it really $350 total?)
Edit: Probably helpful to the conversation to know what your other assets/liabilities are. Do you have an EF? What is your cash flow? etc. We need a good overall picture if you want to broaden the conversation at all.
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If your total investments are less than $500, I wouldn't spend any time worrying about your current holdings. What you have is good enough given the scale of the investment. You'll likely want to liquidate this account at some point, but in the meantime get educated, figure out what you want to do going forward, and then liquidate or add holdings as needed.
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Gecko, I have a starter investment plan of $20/mo going toward the ETFs I listed earlier. I am holding everything else in my portfolio. As of now, the goal for this account is strictly as a learning platform. Once I understand more I would like to have this taxable account supplement my retirement savings in my 401k.
Here's the rest of my allocations:
CASH - $83.64 - 17%
STOCKS - American Railcar Industries - 8%, Activision Blizzard, Inc. - 7%, Motorola Solutions - 5.3%, American Airlines - 2.6%, Google - 2.4%, Scripps Networks - 2%, Apple - 1.8%, Ford - 1.6%, Target - 1.3%
Total Market Value of Account : $463.35
KingCoin, I think I agree with you. I have a lot of money in other savings accounts but I'm holding the bulk of the money in those accounts for now.
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If your total investments are less than $500, I wouldn't spend any time worrying about your current holdings. What you have is good enough given the scale of the investment. You'll likely want to liquidate this account at some point, but in the meantime get educated, figure out what you want to do going forward, and then liquidate or add holdings as needed.
+1
So... now that we know the balance is small, and this account is just for learning, I guess I'm confused as to why you asked the question in the first place. It doesn't really matter what the Asset Allocation is in this case.
Play, learn, read. Develop an investment plan and an AA (which should apply to your 401k as well).