Author Topic: Starting my investment plan - what do you think?  (Read 3742 times)

Carbonizado

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Starting my investment plan - what do you think?
« on: January 28, 2015, 03:01:12 AM »
I found out about FI about a year ago and have been cutting down my expenses since then, and just recently realized how easy it is as an American to start investing.  I have decided to bite the bullet and do it!  Here are the details:

I am 37 years old, American living overseas, no debt but no IRA/401ks/SS either, due to not working for a US company.  I have 30k saved now, and can save about 30k more per year.  The career's fine, and I will probably see a gradual increase in the amount I can save per year.  But I'd rather spend my time doing fun stuff than working!

My goal is to be retired within 13 years, hopefully sooner.  Despite having no fixed income/SS, I feel willing to take risk, because I have some family backup, if it came to that.  Going with more bonds & having a high probability of being able to retire in 20 years is worse for me than a somewhat lower chance to retire in 13 years.

My plan is use a Schwab brokerage account & run a lazy portfolio, just checking in every time I deposit more money, and rebalancing.

Here's my planned asset allocation:
FNDE    10%    http://www.etf.com/FNDE
FNDF    15%    http://www.etf.com/FNDF
IAU     10%    http://www.etf.com/IAU
SCHB    45%    http://www.etf.com/SCHB
SCHZ    20%    http://www.etf.com/SCHZ

All trading free in Schwab except IAU which is 9$/trade.  I'm still flexible on the percentages.  I put in the gold due to reading about the permanent portfolio.  I'm not committed to the fundamental indexes; they have higher expense ratios, which I don't like, but also promise more returns.

My investment procedure:
1. Start with the 30k USD
2. Transfer new money into the account every time I accumulate 3-4k.
3. Buy shares up to the allowance while maintaining balance.
4. When paying fees only buy IAU in chunks of 900 usd or more
5. Put new money into whatever needs it to maintain asset balances.  Any left over money should be spent rather than kept as cash in the account, though.
6. If a particular asset class percentage is off by more than 5%, and regular additions of money aren't enough to fix it over a couple of months, investigate the tax effects of selling to rebalance.  At that point, make a decision on what to do.  Otherwise don't sell.
7. Re-invest all dividends

Goal:
Follow the plan, without adding or removing new entries or changing the target percentages, for 3 years or until 100k.  Don't fiddle with or spend much time on it.

What do you think of my plan, asset allocation, and procedure?

SaintM

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Re: Starting my investment plan - what do you think?
« Reply #1 on: January 28, 2015, 04:20:36 AM »
Not a bad plan. You might consider a higher yielder (VMY, HDV, or whatever Schwab has). Instead of selling to rebalance, I just buy more of the others. If you don't need the current income and can afford the taxes (qualified rate for US companies), your #7 is the secret to immense wealth.

FFA

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Re: Starting my investment plan - what do you think?
« Reply #2 on: January 28, 2015, 08:51:43 AM »
Looks like a solid plan.
Personally I would also not sell to rebalance, and I think 10% gold is 10% too much. :p
+1. The only other question I had is why only "for 3 years or until 100k"? ie. What do you intend to do at that point....

DrF

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Re: Starting my investment plan - what do you think?
« Reply #3 on: January 28, 2015, 09:15:40 AM »
http://fortune.com/2012/02/09/warren-buffett-why-stocks-beat-gold-and-bonds/

please don't invest in gold. If it does run up in price, it is just luck.

FFA

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Re: Starting my investment plan - what do you think?
« Reply #4 on: January 28, 2015, 08:37:01 PM »
http://fortune.com/2012/02/09/warren-buffett-why-stocks-beat-gold-and-bonds/

please don't invest in gold. If it does run up in price, it is just luck.
Thanks for the link DrFunk, I hadn't seen this article and it's always a huge education to read Buffett.

This part stuck out for me : "Today, a wry comment that Wall Streeter Shelby Cullom Davis made long ago seems apt: “Bonds promoted as offering risk-free returns are now priced to deliver return-free risk.” "

If he felt that way back in 2012, it must be much much worse now with most govt bonds yields at very low historical levels and in some cases even negative...  I have been puzzling over low govt bond yields and the effects of central bank QE. Personally I am minimizing my bond investments and keeping my defensive allocation more in cash on floating interest rates. Fortunately in Australia the cash rates are a bit higher than most other developed countries.

But back to the point on gold, yes I agree completely and would never include in my portfolio!

Carbonizado

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Re: Starting my investment plan - what do you think?
« Reply #5 on: January 29, 2015, 07:20:24 AM »
Okay, thanks for the replies.  To get started with Schwab internationally, it turns out I need to show up in person in one of their offices, so I have about a month delay before I have to finalize this.

I've read some more about it on Bogleheads and will probably switch to something simpler, such as

70% Schwab US equity (SCHB)
20% Schwab International equity (combination of SCHF, SCHC & SCHE)
10% Schwab Bonds (SCHZ)

Thanks guys!

SunshineGirl

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Re: Starting my investment plan - what do you think?
« Reply #6 on: January 29, 2015, 08:22:47 AM »
The reason for the gold allocation in the Permanent Portfolio, which I studied years ago and which made good sense to me, is that it can be a stabilizing influence and often performs inversely to other asset classes. If you're doing the Permanent Portfolio, you have to do it as stated, you can't just pick and choose which parts to implement, so keep that gold if that's the plan..although isn't it supposed to be 20 or 25%?