Author Topic: So basic, I know. Please help a beginner!  (Read 2970 times)

rockstache

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So basic, I know. Please help a beginner!
« on: July 20, 2015, 11:23:09 AM »
I really love Jim Collins' stock series, and since I found it, have been reading and rereading as I become a little more savvy. So, for the first time ever this year, my husband and I will be maxing out both 401Ks, and personal IRAs. Most of these are held in VTSAX, or as close as we can get it depending on the funds available in our companies plans. We are young and not terribly concerned with the risk. We do have our IRAs in the target funds though, as I wanted some slight bond exposure (not much). So now, for the first time, we have some extra money to work with each month, and I am ready to open a taxable account.

My primary question is about international exposure. I have seen this question on the forums before, but still don't know how I feel about it. How much international exposure should I have(%), and would you use VGTSX or a different fund? Are there any special tax considerations I should keep in mind (besides not holding bonds in my taxable account)? I am especially interested in what your allocations are and why, to help make my own decision. What are the criticisms of the Stock Series (if any).   

MDM

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Re: So basic, I know. Please help a beginner!
« Reply #1 on: July 20, 2015, 11:39:40 AM »
We do have our IRAs in the target funds though, as I wanted some slight bond exposure (not much).

My primary question is about international exposure. I have seen this question on the forums before, but still don't know how I feel about it. How much international exposure should I have(%), and would you use VGTSX or a different fund?

See http://www.bogleheads.org/wiki/Callan_periodic_table_of_investment_returns for some reasons why there is no correct answer to what asset allocation you "should have."  One can answer "should have had" easily enough, but....

Long time target funds (VTTSX and similar) are perfectly fine investments in your situation, even in taxable accounts.  Yes, they have a small bond component but not much. 

rockstache

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Re: So basic, I know. Please help a beginner!
« Reply #2 on: July 20, 2015, 11:42:48 AM »
Yeah, I do understand that no one can tell me what to do, and hindsight is 20/20. I'm just curious about how mustachians are investing in general.

forummm

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Re: So basic, I know. Please help a beginner!
« Reply #3 on: July 20, 2015, 12:02:36 PM »
Vanguard research indicates that US-based investors have historically been better off diversifying internationally. Similar returns but with less volatility.

https://personal.vanguard.com/us/insights/article/fund-announcement-02262015
http://www.vanguard.com/pdf/ISGGEB.pdf

Frankies Girl

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Re: So basic, I know. Please help a beginner!
« Reply #4 on: July 20, 2015, 12:12:08 PM »
So I'm one of the ones that doesn't invest in specific international funds, as i feel that the U.S. companies in the total stock index funds tend to be already diversified internationally enough for me. I believe that Jim Collins is the one that I got the idea from.

I personally liked the idea of simple/couch potato portfolios, only holding 2-3 funds total: one total stock market, one total bond market, maybe some REIT index funds for a little variety, and that's it. But adding in a one more fund - a total int'l stock index - wouldn't mean holding that much more, so it really is if you specifically want international or not.

I don't, but there are plenty that do.

rockstache

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Re: So basic, I know. Please help a beginner!
« Reply #5 on: July 20, 2015, 12:14:40 PM »
Ok, so now a really beginner question based on the links posted here:

Can you hold the Vanguard retirement target funds in normal, taxable accounts? I thought those were only for IRAs, retirement roll overs, etc..

dandarc

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Re: So basic, I know. Please help a beginner!
« Reply #6 on: July 20, 2015, 12:20:06 PM »
Ok, so now a really beginner question based on the links posted here:

Can you hold the Vanguard retirement target funds in normal, taxable accounts? I thought those were only for IRAs, retirement roll overs, etc..
Pretty sure you can, but you'll have at least a little bit in bonds in your taxable then.

MDM

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Re: So basic, I know. Please help a beginner!
« Reply #7 on: July 20, 2015, 12:21:02 PM »
Ok, so now a really beginner question based on the links posted here:

Can you hold the Vanguard retirement target funds in normal, taxable accounts?

Yes.

seattlecyclone

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Re: So basic, I know. Please help a beginner!
« Reply #8 on: July 20, 2015, 12:25:55 PM »
I personally have about a 2:1 US:international ratio in my portfolio. Vanguard's Total International fund is a good one. I use VTMGX (Developed Markets fund) and VEMAX (Emerging Markets fund). This allows me to have a slightly lower expense ratio than the Total International Fund and also allows me to tilt toward emerging markets a bit more than the Total International Fund does.

If you're just starting out, don't worry too much about trying to optimize too much. Keep things simple with a three-fund (or one Target Retirement Fund) portfolio.

Crushtheturtle

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Re: So basic, I know. Please help a beginner!
« Reply #9 on: July 20, 2015, 01:24:33 PM »
FYI, bonds don't automatically go in tax-advantaged accounts.

It depends on your tax rate, among other things.

"Bonds go in taxable"

http://whitecoatinvestor.com/asset-location-bonds-go-in-taxable/