The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: OvertheRainbow on January 01, 2017, 06:36:50 AM
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Background:
25, female, looking to be "FIRE" by 50-55, so about 25 more years of working.
403b at FT job- Vanguard Target Retirement 2050 w/approx 11k
457b at casual gov. job- Vanguard Wellington- only putting 150/paycheck (plus a mandated 10% to PER)
Roth
Over 8k is Vanguard Target Retirement 2050
Over 3k is REIT index fund
Question:
I already have the money to max out my Roth. How should I allocate the money between the two funds?
Thanks!
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I think given your time frame, you should just use the Vanguard Total Stock Market Index Fund and focus on increasing your savings rate.
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What does your IPS say to do with it?
https://www.bogleheads.org/wiki/Investment_policy_statement
(Because you likely don't have one, I'm not trying to be a dick, I'm pointing out you need to create a plan and stick with it instead of asking strangers what you should or shouldn't invest in)
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I would keep the REIT. It is only 3k, so it is not crucial. You are just beginning; like the previous poster said, focus on your savings rate. Dump money into your Roth and work provided plans. If memory serves, the work provided plan funds are deducted pre-tax, lessening your overall tax burden. Consider the REIT as increased diversification and let it sit.
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What does your IPS say to do with it?
https://www.bogleheads.org/wiki/Investment_policy_statement
+1 this is number one, not sure why but many people skip this part, it does not need to be a long document by any means either, just well thought out so a person is ready for what the future brings/next crash!
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I would keep the REIT. It is only 3k, so it is not crucial. You are just beginning; like the previous poster said, focus on your savings rate. Dump money into your Roth and work provided plans. If memory serves, the work provided plan funds are deducted pre-tax, lessening your overall tax burden. Consider the REIT as increased diversification and let it sit.
This +1
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Read JLCollins' stock series.
http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/)
This will help you get a framework on how to answer these questions and why we advocate total market.
Good luck! :)
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What does your IPS say to do with it?
https://www.bogleheads.org/wiki/Investment_policy_statement
+1 this is number one, not sure why but many people skip this part, it does not need to be a long document by any means either, just well thought out so a person is ready for what the future brings/next crash!
+1 as well.
Deciding what to invest in should never start with a conversation about this fund VS that fund. What is your goal? How do you feel about risk? Based on that what is your asset allocation? How diversified are you? Are you tax efficient? Now, what investment do you need based on all of that?
Note about the funds: If you have a Vanguard Target Retirement fund the Vanguard REIT doesn't add any diversification. Adding it actually over concentrates you in one sector. Everything in the REIT is already in the Target Retirement fund. The companies that make up the Vanguard REIT are already in the Vanguard Total Stock Market Index which is the biggest piece of the TR 2050. A Vanguard TR fund can act as your whole portfolio if you want to keep it simple. It has automated diversification, low cost, and rebalancing.
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Thank you so much for the replies!
Indexer, that actually makes sense. I bought the REIT sort of on an impulse because I heard of its high dividend yields. Knowing that buying a REIT is making my portfolio less diverse, I think I will stick with contributing ROTH max toward my target retirement fund. Thank you for your help. I am still very new at investing, having only really started in November 2015.
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Thank you so much for the replies!
Indexer, that actually makes sense. I bought the REIT sort of on an impulse because I heard of its high dividend yields. Knowing that buying a REIT is making my portfolio less diverse, I think I will stick with contributing ROTH max toward my target retirement fund. Thank you for your help. I am still very new at investing, having only really started in November 2015.
I would say A REIT fund actually makes your portfolio more diverse, not less diverse. Nothing wrong with selling it or keeping it. There's also nothing wrong with going all in on Wellington Fund. I think ti's a fantastic one-fund holding.
This is a great post re: the beloved VTSAX in addition to the Collins series:
http://www.mymoneyblog.com/vanguard-total-stock-market-index-fund-review.html
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Unless it somehow ended up a huge tax drag within the portfolio, I wouldn't bother tinkering with it. I also wouldn't bother to throw any new money there either. And YES--agree with everyone here: Write down an IPS and stick to it.