Author Topic: Taking "stock" and looking for advice  (Read 4265 times)

RhythmKats

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Taking "stock" and looking for advice
« on: August 15, 2013, 09:25:20 AM »
Hi

I'm 32 and have had an IRA for a few years now. I don't make a lot of money, but I'm pretty frugal and try to contribute regularly. I set up my current IRA with my parents' financial advisor when I was in my 20's. She doesn't charge me an fee or commission since we speak so infrequently. My portfolio currently looks like this:

FTGTX - Franklin Templeton Growth Allocation Fund C $1402.65
gross expense ratio 2.07%

FBMCX - Franklin Templeton Balanced Fund C  $1243.68
gross expense ratio 1.87%

FCISX - Franklin Income Fund C  $1149.60
gross expense ratio 1.14%

I contribute $100/month....so $100 to each fund every 3 months.

Total Value $3797.93

After spending the past few months learning a bit about investing, I'm ready to go ahead and open a Vanguard account (IRA). In addition to the above funds, I have $3100.00 in cash that I can safely invest.

1. I'll probably use the $3100.00 in cash to invest in an Index Fund...either total stock market or S&P 500.
2. I'm thinking I should also think about rolling over the above funds into the new Vanguard IRA to cut down on expenses. I'm assuming if I roll over, it won't count towards my $5,500 limit for 2013? Should I roll this money into the same Index fund as the $3,100 cash, or a different Index fund? If so, which funds might make sense?

I appreciate any thoughts or suggestions! Feel free to ask questions if I'm leaving out info.
« Last Edit: August 15, 2013, 09:40:03 AM by RhythmKats »

matchewed

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Re: Taking "stock" and looking for advice
« Reply #1 on: August 15, 2013, 09:30:23 AM »
Correct a rollover does not count towards your contribution limit. Whatever fund works for your strategy will be fine. If you do not have a strategy read up on jlcollinsnh's stock series for a better understanding.

RhythmKats

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Re: Taking "stock" and looking for advice
« Reply #2 on: August 15, 2013, 09:42:11 AM »
Thanks for the blog info. I was unfamiliar with it. Will take a look.

GreenGuava

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Re: Taking "stock" and looking for advice
« Reply #3 on: August 15, 2013, 01:47:27 PM »
2. I'm thinking I should also think about rolling over the above funds into the new Vanguard IRA to cut down on expenses. I'm assuming if I roll over, it won't count towards my $5,500 limit for 2013? Should I roll this money into the same Index fund as the $3,100 cash, or a different Index fund? If so, which funds might make sense?

Is this the totality of your retirement investments, or do you have other ones, such as current or older workplace plans?

If the totality of your investments are in IRAs, and the total invested amount is under $30,000, I'd suggest taking a target date fund - 2040 should work for you - until you have a desired asset allocation.

Also, for rolling over the investment, have Vanguard initiate the pull (talk to them on the phone and they can help with this) rather than going through your current investing advisor - no room for misunderstanding that way.  Keep the rollover in the same tax status:  if it's pre-tax, keep it pre-tax;  Roth stays Roth, too.

Frankies Girl

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Re: Taking "stock" and looking for advice
« Reply #4 on: August 15, 2013, 02:21:29 PM »
I am still learning my way around investing, but one thing that jumped out at me is the expense ratios on the funds you're in - over 1% on all of them and 2%... that is crazy high.

One of the things I started looking at in the beginning was the long term performance, the fee structures and Morningstar ratings.


matchewed

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Re: Taking "stock" and looking for advice
« Reply #5 on: August 15, 2013, 03:38:38 PM »
I am still learning my way around investing, but one thing that jumped out at me is the expense ratios on the funds you're in - over 1% on all of them and 2%... that is crazy high.

One of the things I started looking at in the beginning was the long term performance, the fee structures and Morningstar ratings.

Yeah the OP is looking to jump onto the Vanguard bandwagon which should drastically reduce those fees.

RhythmKats

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Re: Taking "stock" and looking for advice
« Reply #6 on: August 15, 2013, 06:57:57 PM »
I know the ER's are high. When I first invested in the accounts I didn't have much capital, so I think the advisor was trying to get me into funds that didn't require a lot of initial investment to get in. But when I started reading and learning on my own I realized how those fees can get you over the long haul. I read Bogle's Little Investment Book and have been poking around Bogleheads a bit. But yes, the goal is to lessen those fees substantially.

Another question that I forgot to ask in my initial post. I know it's a bad idea to try to "time" the market, but with everything kind of soaring right now, would it be better to wait a bit before jumping into a new fund? (Although seems like the market was down today).
« Last Edit: August 16, 2013, 05:37:44 AM by RhythmKats »

RhythmKats

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Re: Taking "stock" and looking for advice
« Reply #7 on: August 15, 2013, 07:02:45 PM »
GreenGuava

Sorry, missed your comment earlier. I'm freelance and so I don't have any employer sponsored retirement. So yes, that is the entirety of my retirement. I've seen the target funds but have not looked closely. I'll check them out. Thanks for the suggestion.

In the future I'll, hopefully, be earning more $$ and will think about a SEP or similar. As of now, maxing out the IRA (Roth) is about all I can manage.

ArtieStrongestInTheWorld

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Re: Taking "stock" and looking for advice
« Reply #8 on: August 15, 2013, 07:18:41 PM »
Another question that I forgot to ask in my initial post. I know it's a bad idea to try to "time" the market, but with everything kind of soaring right now, would it be better to wait a bit before jumping into a new fund? (Although seems like the market was down today).

Yeah, timing the market is a losing proposition.  To a certain extent, however, there are down times.  In general, the broader market is consistently down in December due to investors selling off stocks to lock in losses to write off from their taxes.  However, I believe this effect is not very substantial.

If you're worried about market fluctuations, your best bet is to buy a little at a time over a certain period (dollar cost averaging).  This will mitigate against any major drops in the market (although you'll also miss out on any sudden market gains).

Good luck!

matchewed

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Re: Taking "stock" and looking for advice
« Reply #9 on: August 15, 2013, 07:22:39 PM »
Yes worrying about the market now is timing. I'm assuming you're investing for the long haul. Now is not a peak when you're investing for 10/20/30...etc years.

RhythmKats

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Re: Taking "stock" and looking for advice
« Reply #10 on: August 15, 2013, 07:51:49 PM »
That's a good way of looking at it. I am indeed planning to be in for the long haul.

LowER

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Re: Taking "stock" and looking for advice
« Reply #11 on: August 15, 2013, 08:49:07 PM »
Please please go to FIREcalc.com and enter your financial information; it takes a little bit to figure it out but I can virtually guarantee you that you will never look at an ER the same again after you change the variable near the end of the questionnaire that allows you to put in the average ER of your investments.  For me, the difference between an ER of 0.18 and 1 is hundreds of thousands of dollars.  For a 31 year old like you, it is probably more!  No joke.

You will lose an EXTRAORDINARY amount of your savings with an ER that is as high as yours.  The difference is astounding and will create feelings of anger toward anyone who suggests that you "invest" in something with a 2%, or even 1%, ER. 

You are so young with so many years to be affected by those ERs.  The time to learn is NOW.

Your ER hair is on fire.  Run from those options.

And if you don't believe me, spend a few hours perusing bogleheads.com wiki and or buying/librarying a good used investing book or two.

GreenGuava

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Re: Taking "stock" and looking for advice
« Reply #12 on: August 17, 2013, 01:07:32 PM »
Another question that I forgot to ask in my initial post. I know it's a bad idea to try to "time" the market, but with everything kind of soaring right now, would it be better to wait a bit before jumping into a new fund? (Although seems like the market was down today).

You're shifting between two funds in the same asset class, so even if the market drops, it's reasonable to expect that both old and new would drop roughly the same;  the difference is that the new one won't charge you the same high fee.

But timing the market is a losing proposition.  Things are soaring, sure, but if there's some real reason to believe it's going to drop, don't you think professionals - who manage far more than you do - would have bought or sold accordingly already?  Trying to market time is bad enough, but reacting to news after the professionals have already had their chance to do so is even worse.