Author Topic: Admiral shares or more diversity?  (Read 4799 times)

La Bibliotecaria Feroz

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Admiral shares or more diversity?
« on: April 01, 2014, 10:48:30 AM »
I'm rolling over about $16000 from a dreadful TIAA-CREF 403(b) to a shiny new Vanguard IRA. Hooray!

I could take, say, $11-12K (to reduce the risk of falling below $10K) and buy Admiral shares of either the 500 or the Total Stock Market. I was going to put a lot of the money in one of those anyway, then buy I guess just one other fund. (Small cap value? REIT?)

OR I could skip the admiral shares and just spread the money around more--maybe a third in a big index fund and the rest in a variety of equities.

What do think? I'm quite a newbie investor.

imustachemystash

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Re: Admiral shares or more diversity?
« Reply #1 on: April 01, 2014, 10:54:48 AM »
Well, from what I have learned from this website and Jim Collins' is that it is best to buy the Total Stock Market (VTSAX) because it encompasses the entire stock market (small, mid, and large caps).  I will be interested to see what others suggest.

nereo

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Re: Admiral shares or more diversity?
« Reply #2 on: April 01, 2014, 11:03:31 AM »
Personally, I hate fees and investing in either the 500 OR the total market index will give you a huge amount of diversity, so I would just pick which one you like and go with it.
Also, from what I understand from speaking with Vanguard, once you set up your Admiral shares (at a starting price of $10k), they remain Admiral shares unless you cash out shares. As I understand it, it doesn't matter if the market drops and the value goes below $10k.  They'll keep them as Admiral shares.

I know I'm in the minority, but I like the 500 over the total market index because it gives you slightly more exposure internationally, at the expense of small-cap stocks..  It's the large and medium-sized players that make much of their money internationally - think Apple, Exxon-Mobile, Coke, etc... the total market fund dilutes this somewhat by having a lot of small-cap stocks in there.

matchewed

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Re: Admiral shares or more diversity?
« Reply #3 on: April 01, 2014, 11:06:10 AM »
Another vote for reducing fees. The broad index funds have great diversification built in for building your foundation of investing. As you collect more money to invest, educate yourself, and acquire various investment vehicles you can diversify beyond that if you wish.

kyleaaa

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Re: Admiral shares or more diversity?
« Reply #4 on: April 01, 2014, 11:28:02 AM »
What does your overall portfolio look like? Impossible to give decent advice without knowing all the relevant information. That said, with small portfolios diversification isn't a big deal because your new contributions are going to overwhelm whatever impact some lack of diversity might have. You can build up a more diversified portfolio over the next 5 years or so. No rush.

I'd just go with the total stock market fund for starters. Oh, and you don't have to worry about dipping below $10,000. Once you're in, it's unheard of for them to take away admiral status just because the market goes down.

Do you own any international stocks or bonds or whatever in another account or is this it?

the fixer

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Re: Admiral shares or more diversity?
« Reply #5 on: April 01, 2014, 11:34:36 AM »
Diversifying with multiple funds gives you a chance for increased returns/reduced risk based on projections of performance and correlations. Buying admiral shares, though, gives you guaranteed increased returns over the alternative. I make sure all my accounts hold as much in admiral shares as they can for this reason.

La Bibliotecaria Feroz

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Re: Admiral shares or more diversity?
« Reply #6 on: April 01, 2014, 11:57:51 AM »
Sounds like there's a consensus so far for going Admiral!

To answer kyleaa's question, this pretty much IS my portfolio! My husband has more than that in his 403(b) with a mix of Vanguard index funds--nothing exotic, but Total Stock Market plus I think a mid and small cap--and a REIT. And I have a little money--low four figures--in a Target Retirement fund.

soccerluvof4

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Re: Admiral shares or more diversity?
« Reply #7 on: April 01, 2014, 02:15:59 PM »
Diversifying with multiple funds gives you a chance for increased returns/reduced risk based on projections of performance and correlations. Buying admiral shares, though, gives you guaranteed increased returns over the alternative. I make sure all my accounts hold as much in admiral shares as they can for this reason.


^+1. Definately Admiral Shares but versify when you can IMHO

I use 5 index funds through Vanguard to achieve this including the VTSAX...


Kierun

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Re: Admiral shares or more diversity?
« Reply #8 on: April 01, 2014, 02:31:35 PM »
Also, from what I understand from speaking with Vanguard, once you set up your Admiral shares (at a starting price of $10k), they remain Admiral shares unless you cash out shares. As I understand it, it doesn't matter if the market drops and the value goes below $10k.  They'll keep them as Admiral shares.

From my experience that's correct.  I've had one of my admiral shares drop below 10k and it remained as an admiral.

TomTX

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Re: Admiral shares or more diversity?
« Reply #9 on: April 01, 2014, 08:23:58 PM »
With only $16k? Just put it all in a broadly based Admiral (like Total Stock Market or 500) - when you get over $20k, then look at splitting it into 2 Admiral funds.

Really, until you have more money - it's just not worth the hassle of super-diversifying. Plus, since we are in this together - I consider my spouse's accounts when thinking of diversity. Why do each of us separately need to have a Total Stock Market, a Bond Fund, and a REIT? Maybe mine go into TSM, but she likes bonds and REIT?

Simplify, simplify.

warfreak2

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Re: Admiral shares or more diversity?
« Reply #10 on: April 02, 2014, 04:01:43 AM »
Plus, since we are in this together - I consider my spouse's accounts when thinking of diversity. Why do each of us separately need to have a Total Stock Market, a Bond Fund, and a REIT? Maybe mine go into TSM, but she likes bonds and REIT?
This isn't functionally equivalent, unless you rebalance money between the accounts. A 75/25 stocks/bonds split (e.g.) doesn't mean you buy 75% stocks, 25% bonds, and just leave it there; every so often (quarterly, yearly...) you sell off a bit of whatever did better, and use it to buy more of the other one, so that your portfolio remains 75% stocks and 25% bonds. What this means is that most of your stocks and most of your bonds are bought when they are relatively cheaper and sold when they are relatively more expensive. The Trinity study, which established safe withdrawal rates for various portfolios, assumed this kind of rebalancing.

TomTX

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Re: Admiral shares or more diversity?
« Reply #11 on: April 02, 2014, 06:30:20 AM »
Plus, since we are in this together - I consider my spouse's accounts when thinking of diversity. Why do each of us separately need to have a Total Stock Market, a Bond Fund, and a REIT? Maybe mine go into TSM, but she likes bonds and REIT?
This isn't functionally equivalent, unless you rebalance money between the accounts. A 75/25 stocks/bonds split (e.g.) doesn't mean you buy 75% stocks, 25% bonds, and just leave it there; every so often (quarterly, yearly...) you sell off a bit of whatever did better, and use it to buy more of the other one, so that your portfolio remains 75% stocks and 25% bonds. What this means is that most of your stocks and most of your bonds are bought when they are relatively cheaper and sold when they are relatively more expensive. The Trinity study, which established safe withdrawal rates for various portfolios, assumed this kind of rebalancing.

Fair point. At the moment, I'm working on organizing and consolidating - accounts are scattered across a variety of vendors.