Author Topic: What fund(s) should I buy in my Roth IRA  (Read 7236 times)

Rekon

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What fund(s) should I buy in my Roth IRA
« on: November 25, 2014, 08:37:37 PM »
I have a Roth IRA brokerage account with Vanguard.  I'm thinking of putting the max amount in VFIFX.   

What do you guys think?  Is VFIFX a decent set-it-and-forget-it fund.  Or, should I create my own portfolio?

Druid

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Re: What fund(s) should I buy in my Roth IRA
« Reply #1 on: November 25, 2014, 09:07:55 PM »
Either VFIFX(or later date), VTSMX or VFINX. Will you have a 401k too? How many years are you from retirement?

https://investor.vanguard.com/mutual-funds/vanguard-mutual-funds-list?assetclass=stk

https://investor.vanguard.com/mutual-funds/vanguard-mutual-funds-list?assetclass=bal

"Is VFIFX a decent set-it-and-forget-it fund" Possibly, just keep in mind that once your account accumulates over 10k you will have access to lower cost funds. My problem with the Target Retirement funds is I don't want 30% of my portfolio in international. I also have mixed feelings about bonds at this stage in my life. I am not sure if Vanguard automatically switches you over to the Admiral versions of VTSMX and VFINX when you hit 10k, but they will be cheaper then the target funds once you hit 10k. I am 32 years away from using retirement funds and I am leaning towards 60% VTSAX/VFIAX and 40% VSMAX. However I shift back and fourth on the international..so 15-20% of them might end up in my portfolio.
« Last Edit: November 25, 2014, 10:02:11 PM by Druid »

Rekon

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Re: What fund(s) should I buy in my Roth IRA
« Reply #2 on: November 26, 2014, 12:38:17 AM »
Either VFIFX(or later date), VTSMX or VFINX. Will you have a 401k too? How many years are you from retirement?

https://investor.vanguard.com/mutual-funds/vanguard-mutual-funds-list?assetclass=stk

https://investor.vanguard.com/mutual-funds/vanguard-mutual-funds-list?assetclass=bal

"Is VFIFX a decent set-it-and-forget-it fund" Possibly, just keep in mind that once your account accumulates over 10k you will have access to lower cost funds. My problem with the Target Retirement funds is I don't want 30% of my portfolio in international. I also have mixed feelings about bonds at this stage in my life. I am not sure if Vanguard automatically switches you over to the Admiral versions of VTSMX and VFINX when you hit 10k, but they will be cheaper then the target funds once you hit 10k. I am 32 years away from using retirement funds and I am leaning towards 60% VTSAX/VFIAX and 40% VSMAX. However I shift back and fourth on the international..so 15-20% of them might end up in my portfolio.

Thanks for the input!  I'm 37 years away from retirement.  I have a 401k with my employer I take advantage of the 3% match and all funds are in FFFHX.

GGNoob

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Re: What fund(s) should I buy in my Roth IRA
« Reply #3 on: November 26, 2014, 07:16:39 AM »
I have a Roth IRA brokerage account with Vanguard.  I'm thinking of putting the max amount in VFIFX.   

What do you guys think?  Is VFIFX a decent set-it-and-forget-it fund.  Or, should I create my own portfolio?

VFIFX will be just fine for you and give you everything you need in a single fund. Down the road, if you feel like saving a little money, you can sell it and buy the underlying funds individually. Otherwise you could always buy the ETFs for each of the funds (VTI, VXUS, and BND are all that are needed) and you'd be saving money right away. But buying ETFs also means that you'll have some cash sitting in your account because you can only buy single shares (no fractional shares).

At Fidelity, do you have access to FIPFX? The expenses on FFFHX are 0.78%. If you can get FIPFX, which is the index version of the fund, your expenses would be 0.16%. Otherwise feel free to post your fund options in your 401k and we can help you choose a cheaper allocation.

Rekon

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Re: What fund(s) should I buy in my Roth IRA
« Reply #4 on: November 26, 2014, 08:50:44 AM »
I have a Roth IRA brokerage account with Vanguard.  I'm thinking of putting the max amount in VFIFX.   

What do you guys think?  Is VFIFX a decent set-it-and-forget-it fund.  Or, should I create my own portfolio?

VFIFX will be just fine for you and give you everything you need in a single fund. Down the road, if you feel like saving a little money, you can sell it and buy the underlying funds individually. Otherwise you could always buy the ETFs for each of the funds (VTI, VXUS, and BND are all that are needed) and you'd be saving money right away. But buying ETFs also means that you'll have some cash sitting in your account because you can only buy single shares (no fractional shares).

At Fidelity, do you have access to FIPFX? The expenses on FFFHX are 0.78%. If you can get FIPFX, which is the index version of the fund, your expenses would be 0.16%. Otherwise feel free to post your fund options in your 401k and we can help you choose a cheaper allocation.

Thanks for the feedback!  Unfortunately I don't have access to FIPFX.

I only have access to the following funds:

ABF LG CAP VAL INV (AAGPX)07/17/1987
FID CAPITAL APPREC (FDCAX)11/26/1986
FID CONTRAFUND (FCNTX)05/17/1967
NB SOCIALLY RESP TR (NBSTX)03/16/1994
OAKMARK FUND I (OAKMX)08/05/1991
SPTN 500 INDEX ADV (FUSVX)02/17/1988
ALL/B DISC VAL A (ABASX)03/29/2001
COLUMBIA ACORN Z (ACRNX)06/09/1970
FID LOW PRICED STK (FLPSX)12/27/1989
SPTN EXT MKT IDX ADV (FSEVX)11/05/1997
JANUS TRITON T (JATTX)02/25/2005
LOOMIS SM CAP VAL R (LSCRX)05/13/1991
DEUT GLB SM CAP S (SGSCX)09/10/1991
FID INTL DISCOVERY (FIGRX)12/31/1986
SPTN INTL INDEX ADV (FSIVX)11/05/1997
WFA EMRG MKTS EQ I (EMGNX)09/06/1994
FID BALANCED (FBALX)11/06/1986
FID FREEDOM K 2005 (FFKVX)07/02/2009
FID FREEDOM K 2010 (FFKCX)07/02/2009
FID FREEDOM K 2015 (FKVFX)07/02/2009
FID FREEDOM K 2020 (FFKDX)07/02/2009
FID FREEDOM K 2025 (FKTWX)07/02/2009
FID FREEDOM K 2030 (FFKEX)07/02/2009
FID FREEDOM K 2035 (FKTHX)07/02/2009
FID FREEDOM K 2040 (FFKFX)07/02/2009
FID FREEDOM K 2045 (FFKGX)07/02/2009
FID FREEDOM K 2050 (FFKHX)07/02/2009 **current fund**
FID FREEDOM K 2055 (FDENX)06/01/2011
FID FREEDOM K INCOME (FFKAX)07/02/2009
FID STRAT REAL RET (FSRRX)09/07/2005
MIP CL 109/07/19897 day yield as of10/31/2014   1.02%
BLKRK INFL PRO BD BR (BPLBX)06/28/2004
FID TOTAL BOND (FTBFX)10/15/2002
FIDELITY GOVT INCOME (FGOVX)04/04/1979
LOOMIS GLBL BD INST (LSGBX)05/10/1991
FID US GOVT RES (FGRXX)11/03/19817 day yield as of10/31/2014   0.01%

Druid

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Re: What fund(s) should I buy in my Roth IRA
« Reply #5 on: November 26, 2014, 09:39:37 AM »
Since you also will have a 401k I would compare the relative funds prices between the 401k and the regular Vanguard IRA funds, after you determine your portfolio:

http://www.bogleheads.org/wiki/Three-fund_portfolio

http://jlcollinsnh.com/2014/06/10/stocks-part-xxiii-selecting-your-asset-allocation/

http://www.mrmoneymustache.com/2012/02/17/book-review-the-intelligent-asset-allocator/

For example I have 0.01 less expense if I have the equivalent of VTSAX in my 401k, save 0.03 on both 500 index and my small cap in my 401k, and I save 0.11 if I have the target funds in my 401k. So if I wanted to hold both a target retirement fund and VTSAX then I should have the target retirement fund in my 401k and the VTSAX in my IRA. Chances are that you can get a similar portfolio to the target fund with a lower expense ratio by breaking up the components yourself.

« Last Edit: November 26, 2014, 10:22:38 AM by Druid »

GGNoob

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Re: What fund(s) should I buy in my Roth IRA
« Reply #6 on: November 26, 2014, 09:53:02 AM »
I have a Roth IRA brokerage account with Vanguard.  I'm thinking of putting the max amount in VFIFX.   

What do you guys think?  Is VFIFX a decent set-it-and-forget-it fund.  Or, should I create my own portfolio?

VFIFX will be just fine for you and give you everything you need in a single fund. Down the road, if you feel like saving a little money, you can sell it and buy the underlying funds individually. Otherwise you could always buy the ETFs for each of the funds (VTI, VXUS, and BND are all that are needed) and you'd be saving money right away. But buying ETFs also means that you'll have some cash sitting in your account because you can only buy single shares (no fractional shares).

At Fidelity, do you have access to FIPFX? The expenses on FFFHX are 0.78%. If you can get FIPFX, which is the index version of the fund, your expenses would be 0.16%. Otherwise feel free to post your fund options in your 401k and we can help you choose a cheaper allocation.

Thanks for the feedback!  Unfortunately I don't have access to FIPFX.

I only have access to the following funds:

ABF LG CAP VAL INV (AAGPX)07/17/1987
FID CAPITAL APPREC (FDCAX)11/26/1986
FID CONTRAFUND (FCNTX)05/17/1967
NB SOCIALLY RESP TR (NBSTX)03/16/1994
OAKMARK FUND I (OAKMX)08/05/1991
SPTN 500 INDEX ADV (FUSVX)02/17/1988
ALL/B DISC VAL A (ABASX)03/29/2001
COLUMBIA ACORN Z (ACRNX)06/09/1970
FID LOW PRICED STK (FLPSX)12/27/1989
SPTN EXT MKT IDX ADV (FSEVX)11/05/1997
JANUS TRITON T (JATTX)02/25/2005
LOOMIS SM CAP VAL R (LSCRX)05/13/1991
DEUT GLB SM CAP S (SGSCX)09/10/1991
FID INTL DISCOVERY (FIGRX)12/31/1986
SPTN INTL INDEX ADV (FSIVX)11/05/1997
WFA EMRG MKTS EQ I (EMGNX)09/06/1994
FID BALANCED (FBALX)11/06/1986
FID FREEDOM K 2005 (FFKVX)07/02/2009
FID FREEDOM K 2010 (FFKCX)07/02/2009
FID FREEDOM K 2015 (FKVFX)07/02/2009
FID FREEDOM K 2020 (FFKDX)07/02/2009
FID FREEDOM K 2025 (FKTWX)07/02/2009
FID FREEDOM K 2030 (FFKEX)07/02/2009
FID FREEDOM K 2035 (FKTHX)07/02/2009
FID FREEDOM K 2040 (FFKFX)07/02/2009
FID FREEDOM K 2045 (FFKGX)07/02/2009
FID FREEDOM K 2050 (FFKHX)07/02/2009 **current fund**
FID FREEDOM K 2055 (FDENX)06/01/2011
FID FREEDOM K INCOME (FFKAX)07/02/2009
FID STRAT REAL RET (FSRRX)09/07/2005
MIP CL 109/07/19897 day yield as of10/31/2014   1.02%
BLKRK INFL PRO BD BR (BPLBX)06/28/2004
FID TOTAL BOND (FTBFX)10/15/2002
FIDELITY GOVT INCOME (FGOVX)04/04/1979
LOOMIS GLBL BD INST (LSGBX)05/10/1991
FID US GOVT RES (FGRXX)11/03/19817 day yield as of10/31/2014   0.01%

Your best bet for cheap founds would be to create an allocation with these  Spartan funds:
SPTN 500 INDEX ADV (FUSVX)
SPTN EXT MKT IDX ADV (FSEVX)
SPTN INTL INDEX ADV (FSIVX)

Your stock allocation would look something like this with 70% US and 30% International:
56% FUSVX (80% of US stocks)
14% FSEVX (20% of US stocks)
30% FSIVX

Then it looks like your cheapest bond fund is FTBFX, which isn't all that cheap. So you could leave that out of your portfolio and invest in bonds in your IRA if you wanted to. Otherwise you could add it at 10%, which is equal to your current 2050 fund.

To match your allocation of 90% stocks and 10% bonds in the FFKHX fund, your portfolio would look like this:
50% FUSVX Fidelity Spartan 500 Index (ER 0.05%)
13% FSEVX Fidelity Spartan Extended Market Index (ER 0.07%)
27% FSIVX Fidelity Spartan International Index (ER 0.12%)
10% FTBFX Fidelity Total Bond (ER 0.45%)

That allocation puts your total expenses at 0.11% compared to 0.65%. That's a savings of $54 per $10,000 invested.

You can read more about this "three-fund" portfolio at Bogleheads.

Druid

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Re: What fund(s) should I buy in my Roth IRA
« Reply #7 on: November 26, 2014, 10:36:59 AM »
Well if he goes to the effort of switching to fidelity and since he is 37 years away from using retirement funds he should read:

http://jlcollinsnh.com/2013/12/05/stocks-part-xx-early-retirement-withdrawal-strategies-and-roth-conversion-ladders-from-a-mad-fientist/

http://www.retirementincomevisions.com/retirement-income-visions/2012/11/black-friday-think-roth-ira-conversion.html

http://www.marketwatch.com/story/no-bargains-on-roth-ira-conversions-this-friday-2014-11-25

The conclusion of these articles appears to be that the traditional IRA is the better place to put your money initially; unless stocks are selling at a discount. However if Reckon is already making more than 80k he will not qualify for the traditional IRA and it is a mute point.

Since many people believe the market is over priced right now investing in the traditional now and doing a Roth conversion if it drops 25% more will net you higher returns in the long run. Not only that but the money you save on taxes will hedge against a near market downturn and near term losses.
« Last Edit: November 26, 2014, 10:44:49 AM by Druid »

GGNoob

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Re: What fund(s) should I buy in my Roth IRA
« Reply #8 on: November 26, 2014, 10:48:06 AM »
Well if he goes to the effort of switching to fidelity

I don't think there was any talk of switching to Fidelity. My post was directed towards his 401k to help him lower his fees.

The conclusion of these articles appears to be that the traditional IRA is the better place to put your money initially; unless stocks are selling at a discount. However if Reckon is already making more than 80k he will not qualify for the traditional IRA and it is a mute point.

Since many people believe the market is over priced right now investing in the traditional now and doing a Roth conversion if it drops 25% more will net you higher returns in the long run. Not only that but the money you save on taxes will hedge against a near market downturn and near term losses.

I didn't read the articles, but I agree. If the OP is eligible for the Traditional IRA deduction, I'd recommend he go with a Traditional.

My wife and I are not currently eligible for the full deduction, but within the next couple of years when we are able to contribute more to our 401k accounts, we might be (unless our income increases too much, but that wouldn't be a bad thing). So until then, we are doing Roth IRAs.

Druid

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Re: What fund(s) should I buy in my Roth IRA
« Reply #9 on: November 26, 2014, 11:19:41 AM »
Sorry I am guilty of skimming on occasion and probably missed the transition where you were talking about his 401k.

Rekon

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Re: What fund(s) should I buy in my Roth IRA
« Reply #10 on: November 26, 2014, 02:27:23 PM »
Thanks guys!  This helps a lot!!

To match your allocation of 90% stocks and 10% bonds in the FFKHX fund, your portfolio would look like this:
50% FUSVX Fidelity Spartan 500 Index (ER 0.05%)
13% FSEVX Fidelity Spartan Extended Market Index (ER 0.07%)
27% FSIVX Fidelity Spartan International Index (ER 0.12%)
10% FTBFX Fidelity Total Bond (ER 0.45%)


This is probably a stupid question - but do I ever have to modify these percentages? 

Druid

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Re: What fund(s) should I buy in my Roth IRA
« Reply #11 on: November 26, 2014, 03:46:46 PM »
..

GGNoob

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Re: What fund(s) should I buy in my Roth IRA
« Reply #12 on: November 26, 2014, 05:05:59 PM »
Thanks guys!  This helps a lot!!

To match your allocation of 90% stocks and 10% bonds in the FFKHX fund, your portfolio would look like this:
50% FUSVX Fidelity Spartan 500 Index (ER 0.05%)
13% FSEVX Fidelity Spartan Extended Market Index (ER 0.07%)
27% FSIVX Fidelity Spartan International Index (ER 0.12%)
10% FTBFX Fidelity Total Bond (ER 0.45%)


This is probably a stupid question - but do I ever have to modify these percentages?

Most likely you would want to reduce the allocation to stocks and increase your allocation to bonds as you get older. You may also have to do re-balancing once a year to sell what has performed well and buy what has lost (selling high and buying low). So this is why the all-in-one fund solutions are nice. However, most will argue that the few minutes you spend re-balancing is worth the cost savings.

Bikeguy

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Re: What fund(s) should I buy in my Roth IRA
« Reply #13 on: November 27, 2014, 06:50:49 AM »
Target funds are always more conservative than I'd like.   Too big of a percentage in bonds.  I like to pick my own and rebalance.

wtjbatman

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Re: What fund(s) should I buy in my Roth IRA
« Reply #14 on: November 27, 2014, 10:10:41 AM »
Target funds are always more conservative than I'd like.   Too big of a percentage in bonds.  I like to pick my own and rebalance.

You should read the Bogleheads forums, they frequently complain that Vanguard's Target Funds are too aggressive, due to the funds spending the first 20 years with 10% in bonds.