Posted: 1/26/2008 1:05:51 PM EDT
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Guys, I have a few questions on my current investment strategy. Presently I am maxing out my Roth IRA every year (this will be my third year) that is using the Vanguard Star fund. I am also contributing to my 403(b) every pay period up to the level that my employer will match. The 403(b) consists of two funds, Vanguard REIT Index Fund and Vanguard Long Term Bond Index Fund. My first question has to do with foreign market funds. Is that something I should look into adding to diversify a little bit more? I realize that a year ago or so would have been a much better time to have jumped into that. At the suggestion of Ar-jedi and others, I have have purchased The Four Pillars of Investing and am about a quarter of the way through. What other investments should I look into? With the drop in the stock market, would it be a good time to look into that? My plan would be mainly index funds since I do not have enough time to research a ton of companies for individual stock purchases. I do have $500 in I-bonds from four years ago but that is about it. A 529 plan was next, but my employer offered to pay for my graduate classes and books. I do plan on building a house within the next year or two and presently have my savings in an Emigrant Direct savings account. In regards to debt, I have none. My college is paid off, I bought a used car last year that I paid off, and I do not have any credit card debt. Does anyone have any other suggestions or things that I should change or look into? |
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Well lately people have been finding more and more that overseas markets, even ones that could be termed "emerging" are not as "decoupled" from the American economy as they were thought to be. Result? If the American economy takes a turn for the worse, even international exposure might not help your portfolio stay above water. BUT, Current issues aside you should certainly have international exposure in your portfolio, and you sound young so I would say go ahead and make international something like 20% of your portfolio as a whole while there is great (slightly riskier) money to be made abroad. As to your other questions IMHO: a) Housing isn't going to lead a recovery, don't invest there b) More stable financials are cheap, try the Financial SPDR if you want an ETF c) Don't be afraid to assume some risk and play with your own money. If you don't already open a brokerage account, research a stock or two in your spare time and put a small amount of $$ in your own control (~$1000) |
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a couple of comments/questions: 
highlighted in blue -- excellent. how did you select the VG Star fund?
how did you select the REIT index fund and LT Bond fund?
international is an excellent diversifier, protects you against a falling dollar, and IMHO should be anwhere between 10 and 40% of your portfolio.
keep reading it -- an excellent text.
have you run your current portfolio through Morningstar Xray? if not, do so. if you don't know how, simply post your current *complete* portfolio holdings in PERCENTAGES, not dollar amounts, and i'll do it. e.g. REIT index 60% LT Bond index 40%
finally, someone with their head screwed on correctly -- excellent!
your approx age? have an emergency fund? ar-jedi |
When I first started looking at IRAs, the Star and Wellington funds were recommended to me. I asked around and had more then one person suggest that fund.
When I setup my 403(b) the business office suggested those two funds. Presently I am doing a 50-50 split between the two every pay period.
I figured that might be the case, just seeking advise on the best avenue to take.
I will have to say that it has changed my views on stocks/funds. Especially the low relevance in regards to past growth. The other thing I like is that I can understand it without having an economics degree.
No, I have not done that but will look into it. In regards to percentages, do you mean total percents in IRA and the 403 or simply percentages within the 403?
I like to be independent and pay for things in cash. It feels great to not have debt.
I am 27 and yes, I do have an emergency fund. Most of my money I keep with Emigrant but I do have enough at my local bank to maintain my present lifestyle for three months if I lost my job tomorrow. |
I agree that many of the markets affect each other. My rational is not so much to get rich quick but to have a little buffer depending on what happens here. In regards to my age, I am 27.
a) Presently I do have a rental house that I lease out, but with the market I am not going to invest in it. I have heard that commercial real estate would be a much better choice to invest in if one was going to go that route. b) Thanks for the suggestion, I will take a look at it. c) I will take a look into stocks, with the drop it might be a better time to invest. |
if you are going to do it yourself, just put your ENTIRE portfolio (including Roth, 403b, and cash amounts) into M* Xray. run that, and tell me what the style box looks like, and also the complete "Asset Allocation" table. see here for an example: losdos.dyndns.org:8080/public/stocks/arfcom-4funds-31dec2007-instantxray-1.jpg losdos.dyndns.org:8080/public/stocks/arfcom-4funds-31dec2007-instantxray-2.jpg again, if you can't figure out how to do it, just total up *all* of your holdings, and give me the percentages for each fund. in this case i just build a $100 total portfolio out of your holdings, and the percentages map as dollars. the results of the M* Xray run come out the same. regards, ar-jedi |
I fancy myself a decently savy investor, and I learn a LOT on here as a result of ar-jedi and others...the key is knowing how to filter some of the slightly reactionary *stuff*. Now, anybody who ONLY gets their advice from a gun-board probably needs to do more research, but that is also ar jedi's fundamental tenent, learn enough to protect yourself. shooter |
ok, since the B&I forum has finally found someone else able to post their data,  , can you post the rest of the M* Xray output? then we can start up this analysis business in earnest.thanks, ar-jedi |
I agree, but how does someone who needs financial guidance know which is which? There are more of the one than the other. |
a hedge in an insurance policy -- and insurance costs money. buying out-of-the-money S&P500 puts against your long position should be a temporary measure, not an investment strategy. KISS makes money. ar-jedi |
there is thread here titled "Long Term Investing 101" which includes, among other things, links to well-regarded investing books, articles, and even an on-line tutorial. sometimes a couple of good pointers are all that's needed for intelligent folks to find their own way. ar-jedi |
do longterm investors, non traders really need a "hedge" or just monitored asset allocation? are you a trader? most here just need low cost investing with sound asset allocation. if you mean to imply this is unsophisticated and not useful then go to a real financial forum where you can feel at home with your mad portfolio management skillz. |
  above, the things that jump out at me, or things that you may want to consider... please remember, these are suggestions/points of discussion -- not criticism in any way. as noted above, i think you are off to a good start by fully funding your Roth and contributing to your 403b. really all you need is some fine tuning of your long term investments. (note that i am quoting here you from prior posts in this thread)
1) your bond allocation (36%) is high for your age. however, i say this with caution because i don't know your risk tolerance. but as you can read in Bernstein's text, bonds have only eeked out marginal "real" gains in the recent past. in today's credit market, and with the government doing their best to prop up the economy at the expense of the dollar, i'd be cautious here. 2) your international allocation (15%) is a little lower than i'd suggest. holding international stocks (via an international fund) hedges you somewhat against a falling dollar. holding *quality* international stocks (via an international fund) will also help stabilize your portfolio. 3) much of your holdings are in large cap growth (LCG) stocks. historically, these stocks have provided good returns at the expense of being taken out back and shot at the mere mention of an earnings surprise (for example, it will happen to Apple, sooner or later). as you will read from Bernstein, the best long term returns come from the Value end of the spectrum, and in stocks a little smaller. for the two reasons i discussed here, i'd like to see you tilt the style box a little more to the left side, and a little bit downward. not much, just a little. but don't try to perfectly balance things out -- you can't, and it's dynamic. also, for interesting reading, see a periodic table of stock returns such as link.
4) IMHO, you are overweight in real estate (RE). thus you are either a genius for being "in" at near the bottom (if the bottom is near) or you are in for more pain.  seriously, though, here we have an example where you have an income-producing asset which hopefully is (mostly?) paying for itself. that's about all of the real estate market exposure you need. having a REIT fund in your portfolio, bringing your "hard asset" percentage to nearly 18%, is putting a lot of your eggs in one market basket. nevertheless, as noted above, you may be at ease with this. i have friends with three investment properties and a pile of REIT funds. they "get" RE. investing in RE to that extent is not *my* thing, but there is more than one way to Rome. again, this is just a discussion point, not a maxim to change your portfolio. 5) financial services seems high; energy, seems low. but you are dealing with an index fund, so trying to optimize these is going to be a fools errand. 6) stellar mutual fund expense ratio. that's the way to do it. 7) very little asia/far east exposure. these are growing markets. by the time you are nearing retirement, china and india will have taken over the world. buy some of that now. google "BRIC". take a look at vanguard's ETF "VWO". 8) REIT again. hard not to harp on this since you have an investment property. look at the property as the RE section of your portfolio. suggestions: - consider your RE allocation. - a mid cap index fund. - an international ETF (if lump sum) or index fund (if DCA'ing) - run JUST Vanguard STAR through Xray. see what you think about the composition. this is more academic than anything. - keep doing what you are doing. good luck. ar-jedi |