Author Topic: Transfer everything to index funds?  (Read 4340 times)

AllisonNNP

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Transfer everything to index funds?
« on: July 14, 2013, 07:08:01 PM »
I'm going to try to really simplify this question without getting into the details of my current investments because I imagine they're moot.

I currently have $50k in a 403(b) with Vanguard, $18k in a RothIRA, and $130k in a brokerage account, both with Schwab. None of that is invested in index funds (all mutual funds though).

Questions:
1). Should I switch all of it into an index fund? Should it be mixes of small, mid, large cap funds or just a total market fund? Seriously, EVERYTHING in the same fund??
2). Should I switch everything to Vanguard? Seems there are less fees there, even when comparing vanguard's own funds with Schwab's own comparable funds.

Also, I have $70k in a high yield (ha) savings account as an emergency fund and future house down payment (hopefully to be used within a year). Are those just totally useless? Where do you keep your emergency fund? And large sums you plan to use in the fairly short term?

Thanks!

kyleaaa

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Re: Transfer everything to index funds?
« Reply #1 on: July 14, 2013, 07:40:51 PM »
Not enough information. What's your capital gains situation like with the brokerage account? How expensive are the funds? If you have little in the way of unrealized gains, I might be inclined go ahead and make the switch but ONLY IF your current investments really are subpar. If not, do the math and figure out your likely break-even point. As for which funds you should put it in, what does your Investment Policy Statement say? Do you have one? If not, do that first.

http://www.bogleheads.org/wiki/Investment_Policy_Statement

The high yield savings account is fine.
« Last Edit: July 14, 2013, 07:57:24 PM by kyleaaa »

dragoncar

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Re: Transfer everything to index funds?
« Reply #2 on: July 14, 2013, 08:21:39 PM »
Mutual funds can be index funds.  Particularly, Vanguard tends to have very good indexed mutual funds with low fees.  So we really do need more information on what you are currently invested in.

AllisonNNP

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Re: Transfer everything to index funds?
« Reply #3 on: July 14, 2013, 11:02:46 PM »
Okay, more specifics.

- 403(b) with Vanguard: $50k invested in VWINX, automatically takes 9% from paycheck and matches 5%
- Roth IRA with Schwab: $13k in SWERX, $5k in VLAAX, contribute the max each year (which is about 6% of my salary)
- Brokerage acct with Schwab: $8k in DGS, $27k in FMIHX, $15k in SWOBX, $23k in SSIFX, $25k in VWELX, plus $33k that needs to be invested

I do not have an investment policy statement. Off the top of my head, my goals would be to buy a house (and not be house poor) within the next year, get married (within the next two years which will involve taking on his student loans but also add income), having 2-3 kids who I can raise by working only part time and can help send to college and maybe even private high school. I want something simple. Something not risky. Something that doesn't stupidly add on fees and other hidden crap someone like me wouldn't know to look for. Something that won't change a lot.

Does that help?

dragoncar

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Re: Transfer everything to index funds?
« Reply #4 on: July 14, 2013, 11:09:42 PM »
Go through them and look at the expense ratios.  Why did you choose each fund?  Can you attain a similar goal with another choice?  Of the top, Wellesley looks ok at .25% and the others look very expensive.

kyleaaa

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Re: Transfer everything to index funds?
« Reply #5 on: July 15, 2013, 07:16:31 AM »
There are a ton of very basic questions here. If we just tell you what to invest in, you'll never learn the basics and we'll be doing you a huge disservice. You need to drop whatever you're doing and do the research yourself. Come up with an IPS. Read a few books on the subject. Then you won't even need to ask these questions and you'll be far better off in the future.

fiveoclockshadow

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Re: Transfer everything to index funds?
« Reply #6 on: July 15, 2013, 09:11:51 AM »
There isn't a super easy answer, but yes in the long term low cost index funds will give you the best return in the long term.  So you should probably move towards that over time.  You can move immediately towards that in your 403(b) and Roth IRA.  For your taxable brokerage account you will want to think through tax implications a bit more carefully.

If you don't want to buy any books or read too much this would be the fastest and most sensible place to start:

http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit

Again, the warning on the taxable account is that changes within a taxable account generate capital gains taxes.  So you may want to change more carefully over time depending on how individual funds are performing and your tax situation.  The Bogleheads site has lots of good information on taxable accounts.

So yes - put it all in index funds.  Take a little bit of time to decide which ones, and take a bit more time deciding how best to execute that strategy in your taxable brokerage account.

Freeyourchains2

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Re: Transfer everything to index funds?
« Reply #7 on: July 15, 2013, 01:29:29 PM »
Once you have your passive investments set up as you wish, you will get to enjoy complete freedom with your time. On occasion during your free time, you might even want to setup up many other small side businesses just for the fun of it! Monetizing your hobbies can be fun too, and usually take small modifications here and there until they literally run themselves and are gradually profitable, but more importantly fun!

The world is our sandbox, and FI is just the first step.