Author Topic: Question of when to balance porfolio? (just starting out)  (Read 2136 times)

medevac

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Question of when to balance porfolio? (just starting out)
« on: December 26, 2013, 05:11:31 PM »
Hi! I'm new to the forum but I've lurked for a few months.  I'm to a point now where I'm able to live off my part time job (EMS) and save pretty much all of my full time pay (RN).  I just have a quick A or B question for anyone that would like to reply.

I opened a post-tax account maybe 3 months ago with Vanguard investing in the total stock market index.  I have no immediate need for this money and I'm looking in january to start my automatic deposit (until now just doing it on the fly to see how it all budgeted out).

My question is, eventually I would like to do a simple two fund with Vanguard.  Maybe something like the total bond index, etc.  Working OT this month and a bonus I have enough to open an investor account with a second fund.  Initially I was just going to shuttle it all into the total stock index I opened.  My question is would it be better to open this second account now from the start and allocate the monthly deposit and forget about it?  Or just keep building the index single account building?  My choices are:


A: just grow the index fund and don't worry about it for now

B. open the second account and spit the monthly deposit and then forget about it (like 80 index 20 bond or whatever)


Psychologically I like the option B just because I can set it and just move money over each month and not wonder/care about doing it later.  But option A makes sense as well since this isn't money for any sort of goal like house down payment or anything.  And I guess option C would be "it doesn't really matter in the long run" since this all long term.  Just wondering if anyone had any opinions either way.

Not sure if it matters but I'm single and have a 6 month (probably longer if I stretched it) emergency fund with good job security, no debt, and investment-wise maxed 401K in a auto-balanced Fidelity Fund and a Roth with Vanguard in a target retirement fund.

Thanks and I'm enjoying the site/forums!  Strangely I started reading to learn about saving money, etc but I'm starting to really getting into the anti-stuffitis and "enjoying life" articles and posts.  I'm starting to realize rather late in life that I've been trying to "spend-distract" myself for years.

-David

Lans Holman

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Re: Question of when to balance porfolio? (just starting out)
« Reply #1 on: December 26, 2013, 05:47:35 PM »
Psychologically I like the option B just because I can set it and just move money over each month and not wonder/care about doing it later.  But option A makes sense as well since this isn't money for any sort of goal like house down payment or anything.  And I guess option C would be "it doesn't really matter in the long run" since this all long term.  Just wondering if anyone had any opinions either way.
-David

I think the problem here is that anything could make sense if you don't have any goals for this money.  How much risk you want to take with your investing depends on when and how you're planning to use the money.  You've got good income, low expenses, no debt, no obligations, so you've got a pretty good opportunity to make lots of good things happen with that money.  Are you interested in retiring early or even just getting rid of one of your jobs?  Travel, kids, charity?

medevac

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Re: Question of when to balance porfolio? (just starting out)
« Reply #2 on: December 26, 2013, 06:08:08 PM »

I think the problem here is that anything could make sense if you don't have any goals for this money.  How much risk you want to take with your investing depends on when and how you're planning to use the money.  You've got good income, low expenses, no debt, no obligations, so you've got a pretty good opportunity to make lots of good things happen with that money.  Are you interested in retiring early or even just getting rid of one of your jobs?  Travel, kids, charity?

Thanks for taking the time to reply, I know you don't really have a lot to go on with my one post.  I'm not interested in retiring from either of my jobs really, I'm enjoying both professions and will probably always volunteer at the FD in some fashion.  I also love nursing and will do that until I croak but I like the idea of being independent enough I could volunteer in that regard as well, or possibly teach.

I guess the best answer I could give is that I would not expect to need any of this investing money for over a decade, barring something that wipes out my emergency fund and my income streams for longer than 6 months obviously.  I count my 401K and my Roth as my "retirement" accounts and have them balanced with the "bond = your age" theory for now.  I'm just starting to branch out into FI instead of just thinking of retirement as some hazy future. 

I know this sounds silly to some of you but I was raised to work until you were 60-ish and retire and do nothing...which doesn't appeal to me at all.  So I have all of this leftover money after starting my emergency fund and then killing my debt over the last year and half. 

I've always wanted kids/family but so far that hasn't worked out (divorced in 2011).

I'm feeling like maybe I should just get settled and sweep everything into my current index fund and worry about it once I get into the admiral-shares range.  Maybe it's paralysis by analysis?
« Last Edit: December 26, 2013, 06:09:56 PM by medevac »

Frankies Girl

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Re: Question of when to balance porfolio? (just starting out)
« Reply #3 on: December 26, 2013, 06:25:47 PM »
If you're maxed in 401k and Roth in target funds, then you already have self balancing funds - they adjust the ratio of stocks to bonds as you get closer to the target date.

And as you're not sure what exactly you'll be doing with the money, and you don't see yourself stopping either of your other jobs, I'd go for option A - set it up in the total stock market index fund and forget about it for the most part. Revisit a few times a year just to say "hi" to your growing amount, and ponder what you want to do with yourself.

Don't know how old you are, but might want to figure out some life goals - work at both jobs for as long as it's enjoyable is cool, but you're bound to have something else in a bucket list (travel, write, go back to school, learn a certain skill or take up a nifty new hobby) and don't write off the idea of having a family any time soon - life has a funny way of throwing curve balls. :)

medevac

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Re: Question of when to balance porfolio? (just starting out)
« Reply #4 on: December 26, 2013, 06:34:02 PM »
If you're maxed in 401k and Roth in target funds, then you already have self balancing funds - they adjust the ratio of stocks to bonds as you get closer to the target date.

And as you're not sure what exactly you'll be doing with the money, and you don't see yourself stopping either of your other jobs, I'd go for option A - set it up in the total stock market index fund and forget about it for the most part. Revisit a few times a year just to say "hi" to your growing amount, and ponder what you want to do with yourself.

Don't know how old you are, but might want to figure out some life goals - work at both jobs for as long as it's enjoyable is cool, but you're bound to have something else in a bucket list (travel, write, go back to school, learn a certain skill or take up a nifty new hobby) and don't write off the idea of having a family any time soon - life has a funny way of throwing curve balls. :)

Thanks! Yes I agree with the "ponder what to do with yourself".  Honestly the divorce and a death in the family coupled with the holidays have me in such an apathetic state of mind.  I do have a few bucket list things:

Travel to Hawaii (short trip)
Travel to Thailand (loooong trip...love to stay a couple of months!)
Do some writing...though my brother was the writer of the family until he passed away, he wrote comic books :)

For the record I'm 41.