Author Topic: Help a total newbie out?  (Read 2174 times)

regaphysics

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Help a total newbie out?
« on: June 02, 2017, 10:24:18 AM »
Hi all,

I am 30 and have been a terrible investor the past few years.  I mean to change that, but I am looking for some help.  Let me first give you run down of my assets and goals.  I have 80K in my 401(k), which I max out each year.  That is invested in various index funds, broken down approximately into 65% US stock, 10% international stock, 10% global real estate, and 15% fixed income/bond.  I feel good with my allocation there - so no need to touch that unless you all think otherwise.  I currently am in a very high tax bracket (income over 200k), so I don't contribute to a roth or traditional IRA.  I am guessing my tax bracket will be lower when I retire, so I don't think it makes sense to put the money into a IRA, but perhaps I am mistaken.

The problem is that I have been letting about 250K sit in my alliant bank account, which gets 1% interest.  I have been letting it sit because I plan on buying a house in the near future, or possibly starting a small business.  But now I am thinking I should invest it - since I won't be using it for at least a few years. 

My thinking is that of the 250K, I want to keep 40K in cash, and I want to have 100K invested in a very low risk allocation for future use for a house or small business (next 2-5 years).  That leaves about 110K for higher risk investment.   

I have done some research and below is what I was thinking for the 100K (low risk) and 110K (higher risk) allocations.

100K - low risk allocation = 30% VBINX, 20% VFSTX, 15% VBLTX, 15% VTIAX, 10% VAIPX, 10% VGSLX

110K - high risk allocation = 75% VTSAX, 15% VGTSX, 10% VBLFX

I realize those may overlap to some extent - but I am trying to keep the two allocations distinct for now in case my priorities change in the future and I want to shift some from one to the other.  What do you all think?  Is there some tax-avoidance techniques I should employ?  (Municipal bonds perhaps?)

Any advice would be greatly appreciated! 

Thank you.
 

runewell

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Re: Help a total newbie out?
« Reply #1 on: June 02, 2017, 10:33:49 AM »
I would simplify things.  VBLTX has been reasonably stable so it could serve as your bond fund.  VTSAX can serve as your stock fund.
For the low risk allocation, invest at 75% VBLTX + 25% VTSAX
For the high risk allocation invest at 100% VTSAX or 75% VLTSAX + 25% VBLTX

regaphysics

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Re: Help a total newbie out?
« Reply #2 on: June 02, 2017, 11:23:07 AM »
I would simplify things.  VBLTX has been reasonably stable so it could serve as your bond fund.  VTSAX can serve as your stock fund.
For the low risk allocation, invest at 75% VBLTX + 25% VTSAX
For the high risk allocation invest at 100% VTSAX or 75% VLTSAX + 25% VBLTX

I think I'd like to keep some international / real estate / inflation protected types of investments, just to keep a bit more diversified, no?

mgarf

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Re: Help a total newbie out?
« Reply #3 on: June 04, 2017, 02:11:43 PM »
I second runewell with then simplified portfolio. If you want some international (which does lower risk) I'd go VTIAX at maybe 80/20 US/WORLD split. REITs are found already in VTSAX.

As for bonds, I'm not a fan of total bond funds. Short-term bond funds are less risky and I'd choose VSCSX. (it's 100% corporate, but analysis shows same risk but better gains than gov)

Finally for your low risk (ie ~5 year timespan) portfolio 35% stocks is optimum at 5 years. If it's more like 2-years though... I'd only go 5%... and that 5% should NOT be in bonds... choose a high interest CD.

For your high-risk I second runewell. 100% stocks!!!
« Last Edit: June 04, 2017, 02:20:48 PM by mgarf »

regaphysics

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Re: Help a total newbie out?
« Reply #4 on: June 05, 2017, 09:01:38 AM »
I second runewell with then simplified portfolio. If you want some international (which does lower risk) I'd go VTIAX at maybe 80/20 US/WORLD split. REITs are found already in VTSAX.

As for bonds, I'm not a fan of total bond funds. Short-term bond funds are less risky and I'd choose VSCSX. (it's 100% corporate, but analysis shows same risk but better gains than gov)

Finally for your low risk (ie ~5 year timespan) portfolio 35% stocks is optimum at 5 years. If it's more like 2-years though... I'd only go 5%... and that 5% should NOT be in bonds... choose a high interest CD.

For your high-risk I second runewell. 100% stocks!!!

Thanks.  So if I am understanding you all - the recommendation is for nearly 100% stocks for the high risk allocation - with most (if not all) of it in VTSAX?   And for the low risk allocation, you'd do something between 5-35% stock (VTSAX/VTIAX), with the rest in either bonds (perhaps VSCSX) or a CD?

caracarn

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Re: Help a total newbie out?
« Reply #5 on: June 05, 2017, 09:14:39 AM »
I go with Bogle and Buffet who say that you already have enough international exposure in a Total Stock US index fund with all the Fortune 500 exposure to global companies.  I'd had looked at adding Total Intl Stock as well and ultimately decided against it.  I'm 85% VTSAX/15% VBTLX.

wjinghlw

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Re: Help a total newbie out?
« Reply #6 on: June 05, 2017, 09:34:52 AM »
How about adding some real estate?


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