The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: SAVR on December 29, 2014, 06:50:06 PM
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I am: 28, single, student, no debts, +$24,000 income, -$12,000 expenses, MAX IRA contributions, no immediate future plans for money except to keep $5,000 in cash held in my credit union, and the rest in Fidelity & Vangard. Furthermore, I am thinking about selling AROIX (Target Retirement 2045) with an expense ratio of 0.94%, and moving this ROTH IRA to Vangard. My Assets are listed below:
Credit Union
Savings: $2,000
Checking: $2,500
CD: $10,000 (Matures 4/23/2015)
Fidelity
FSAXX: $9,000 (Money Market, Taxable)
FFNOX: $33,000 (Taxable)
AROIX: $12,000 (Target Retirement 2045, Roth IRA)
Vangard
VGSTX: $3,000 (Taxable)
All input is welcome, Thank you!
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SAVR, welcome to the forums.
Taking your post literally, you have $12K/yr to invest. IRA will only take $5500. Do you have a 401k available for the other $6500?
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Thank you, unfortunately I do not have a 401k available, I was planning on putting everything in FFNOX...bad idea? And that is an after tax income of $24,000.
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With $12k annual expenses, that's $1k a month. Personally, I'd keep no more than 6 months expenses ($6k) in the bank (a "high-yield" online savings of about 1% interest) for emergencies and invest the rest.
Your current FidelityŽ Four-in-One Index Fund (FFNOX) will do just fine and is basically a three-fund portfolio (http://www.bogleheads.org/wiki/Three-fund_portfolio). Moving to a 3 fund portfolio eventually will probably save you in fees. But in a taxable account, you'd have to take a large tax hit to switch funds down the road, which wouldn't be ideal. So if your long term goal would be a 3 fund portfolio, you may want new investments to go that route.
I'd get the money from that money market account invested. No point to keep the money sitting in cash.
The only problem with FFNOX is that usually, all bonds will be in your tax-advantaged accounts (Roth IRA in this case) and stocks in your taxable account for tax efficiency. https://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement
I'd stay away from any managed fund and go all index to keep the costs low. Your 0.94% expense ratio target retirement at Fidelity is extremely expensive. Move that to a FFNOX or to Fidelity FreedomŽ Index 2045 Fund (FIOFX). Since its in a Roth IRA, there will be no tax consequences from selling it and buying the new fund.
You could also go with a cheaper index fund at Vanguard. Either Lifestrategy Growth Fund or Target Retiremetn 2045 if you wanted to keep similar funds to what you have at Fidelity. Both would be about half as expensive as the STAR fund. But if you were going to sell and change funds, you may as well sell and move the money to Fidelity to keep all of your accounts in one place.
For a $24,000 income, you are doing great with a 50% savings rate. Keep it up!
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Saving 50% of your income is definitely badass.
This guy has some of the best posts on how to invest in the stock market. It is well written, through yet not too technical:
http://jlcollinsnh.com/2011/06/14/what-we-own-and-why-we-own-it/
Check out his blog, he's written a lot about investing.