Author Topic: Where to Save After Maxing Out Other Avenues  (Read 5685 times)

oldtoyota

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Where to Save After Maxing Out Other Avenues
« on: May 20, 2013, 05:25:56 PM »
I'm saving a good chunk every year in an automated process.

My question is where to save my non-tax-advantaged money.

After reading books suggested here, individual stocks are out.

Vanguard is what I'm thinking. I already have a number of holdings via Vanguard, so I'm wondering what I need to review in order to pick a new mutual fund?

I was thinking VFIAX, but I may not want to invest $10K all at once.

Any other fund ideas that would point me in the right direction for research purposes? I admit to being a bit overwhelmed by the number of choices.

nktokyo

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Re: Where to Save After Maxing Out Other Avenues
« Reply #1 on: May 20, 2013, 05:29:31 PM »
Hi,

What is the purpose of the investment?

Grow money slowly? Get dividend income? Grow money rapidly? Not lose vs inflation?

Villanelle

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Re: Where to Save After Maxing Out Other Avenues
« Reply #2 on: May 20, 2013, 05:45:43 PM »
Thus far, I am very, very pleased with Lending Club.  I don't know how much you already have in the market, but if you are looking for something truly different and diverse, as opposed to just a different mutual fund, throwing some money into Lending Club is worth exploring.  It has great returns and in some ways works like a dividend paying stock, since each month you receive payments (principal return and interest). 

oldtoyota

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Re: Where to Save After Maxing Out Other Avenues
« Reply #3 on: May 20, 2013, 06:14:57 PM »
Hi,

What is the purpose of the investment?

Grow money slowly? Get dividend income? Grow money rapidly? Not lose vs inflation?

Dividend income and retirement. I do not need the money soon, so slowly is fine. Rapidly would be great too.

Joet

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Re: Where to Save After Maxing Out Other Avenues
« Reply #4 on: May 20, 2013, 06:30:04 PM »
I think lending club may be fine also, just [imo] keep to under 10% of your portfolio [which, incidentally, are the user agreement you agree to when you open an account].

Normally tax efficiency is key in taxable investing. So that normally means things like bonds, high dividend stocks, etc are out when you are in a higher tax bracket. Perhaps not a big deal if you have a zero-or-close-to-it W2 income. More of a big deal in the 30%+ marginal brackets, and theres even a new 3.8% tax on dividends above the 250k AGI level for tax years 2013 and beyond. Yay.

normally that means investing in something like a foreign broad equity fund is your best bet in taxable. Tax effecient, lowish dividends, foreign tax credit, are all great things. High dividend stuff like lending club and REITs are especially hurtful in taxable accounts, but like I said can work if your W2 income is low enough.

These are all my personal opinions, anyways. YMMV

nktokyo

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Re: Where to Save After Maxing Out Other Avenues
« Reply #5 on: May 20, 2013, 06:33:42 PM »
Hi,

What is the purpose of the investment?

Grow money slowly? Get dividend income? Grow money rapidly? Not lose vs inflation?

Dividend income and retirement. I do not need the money soon, so slowly is fine. Rapidly would be great too.

Do you have the slow and certain path to retirement covered already?
I ask because if you have the guaranteed-retirement-in-15-years thing locked away then what makes sense to you? Lowering that number to 13 or 14, or doing something a bit more focussed and aggressive and trying to lop say 5 years off?

jrhampt

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Re: Where to Save After Maxing Out Other Avenues
« Reply #6 on: May 21, 2013, 08:35:24 AM »
In my taxable accounts at Vanguard, I split my investments among the following (I am in 28% tax bracket):

S&P 500 admiral shares (might have been better to go with total stock market, but I'm not switching over now)
Total International admiral shares
Long-term national tax-exempt (muni) bond fund - note that "long-term" in this case isn't all that long-term - about 5-6 years.

oldtoyota

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Re: Where to Save After Maxing Out Other Avenues
« Reply #7 on: May 21, 2013, 10:57:41 AM »
Hi,

What is the purpose of the investment?

Grow money slowly? Get dividend income? Grow money rapidly? Not lose vs inflation?

Dividend income and retirement. I do not need the money soon, so slowly is fine. Rapidly would be great too.

Do you have the slow and certain path to retirement covered already?
I ask because if you have the guaranteed-retirement-in-15-years thing locked away then what makes sense to you? Lowering that number to 13 or 14, or doing something a bit more focussed and aggressive and trying to lop say 5 years off?

So many things could happen that I do not consider retiring in 15 years to be guaranteed. However, that is close to my goal.

nktokyo

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Re: Where to Save After Maxing Out Other Avenues
« Reply #8 on: May 22, 2013, 03:32:28 AM »
So assuming you don't blow up or suffer some black swan event you have 15 years covered, right?

So why not look at creating investments or assets that could halve that target. I'm thinking property renovations and/or starting a side business to create an extra income.

aj_yooper

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Re: Where to Save After Maxing Out Other Avenues
« Reply #9 on: May 22, 2013, 06:02:28 AM »
Way to auto-pilot your savings!  Just a thought.  So are you saying your 401k is maxed, your HSA is maxed, and your Roth IRA is maxed?  If not, go back and fill them up.   Do you have debt?  How are you scaling it down? Do you plan to build debt?  Do you have an emergency fund?  Use efficient investment companies like your Vanguard; run from the JP Morgans, Morgan Stanleys, etc.  If you do a taxable account, use tax efficient methods of investing.  Bernstein in The Intelligent Asset Allocator p 145 gives some ideas on what to use.  Don't put interest or dividend equities there, bonds, CDs, or indexes that frequently adjust their composition.  Keep saving but spend some time reading before starting more funds.  Possible books to start with:  Burton Malkiel, The Random Walk Guide to Investing, Taylor Larimore, et. al., The Bogleheadsí Guide to Investing, Andrew Tobias, The Only Investment Guide Youíll Ever Need, Thomas Stanley and William Danko, The Millionaire Next Door

Read about the total stock market index on Vanguard.

acanthurus

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Re: Where to Save After Maxing Out Other Avenues
« Reply #10 on: May 22, 2013, 10:13:06 AM »
Quote
S&P 500 admiral shares (might have been better to go with total stock market, but I'm not switching over now)

If anyone has VFIAX in a taxable account, you can add VEXAX with an appropriate market weighting to approximate VTSAX without taking a tax hit. It was pretty much created for this purpose:

https://personal.vanguard.com/us/funds/snapshot?FundId=0598&FundIntExt=INT

Quote
The fund is considered a complement to Vanguard 500 Index Fund. Together they provide exposure to the entire U.S. equity market.

Just FYI for anyone out there who wants to approximate total market but already has money in an S&P500 equivalent.

jrhampt

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Re: Where to Save After Maxing Out Other Avenues
« Reply #11 on: May 22, 2013, 10:15:05 AM »
Thanks, acanthurus!  I may look into adding VEXAX in the future...was unaware this fund existed.

acanthurus

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Re: Where to Save After Maxing Out Other Avenues
« Reply #12 on: May 22, 2013, 10:24:59 AM »
No problem! I am in VTSAX myself, but came across people wanting to add small caps to VFIAX at Bogleheads and found out about the fund.  I think you want them in roughly a 4:1 VFIAX:VEXAX ratio to approximate VTSAX.

aj_yooper

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Re: Where to Save After Maxing Out Other Avenues
« Reply #13 on: May 22, 2013, 10:37:46 AM »
Don't small caps funds have more frequent turnover (due to becoming larger and no longer in the fund range) and thus cause more capital gains events for you in a taxable account?

icefr

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Re: Where to Save After Maxing Out Other Avenues
« Reply #14 on: May 22, 2013, 11:56:13 AM »
^ That's what I thought too, which is why I'm keeping my VEXMX to offset my 401(k)'s S&P 500 index fund in my Roth IRA, not in taxable. If I was to add something domestic in taxable, it would be the Total Stock Market Index.