Doctor Detroit
Please remove your headgear
How old are you?
Is it a retirement account?
How risk averse are you?
What investment house are you at?
Who's on first?
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Personal Finance Advice and Education! (4 Viewers)
- Thread starter No. 16
- Start date
Is it a retirement account?
How risk averse are you?
What investment house are you at?
Who's on first?
ghostguy123
Footballguy
35
Yes it is a 403b
I am willing to be risky
Fidelity
WHo is on 2nd
I have these choices it appears
vinix
vieix
vtsnx
vbtix
Doctor Detroit
Please remove your headgear
If those are the only four you have access to, I'd go with this mix
Total Stock Market 70% International 20% VTSNX 10%
The vieix looks good but you already have that sector covered in the total market index. If you want more risk, put 20% into the midcap fund and remove from the total stock market fund.
I own the Total Stock Market fund FWIW.
ghostguy123
Footballguy
Those are my only index fund choices. I have target date fund options available also.
Right now I actually have 100% in VINIX (Fees are less than 0.1%).
I have nothing in the foreign market, so I suppose I should probably at least put something there.
Right now I actually have 100% in VINIX (Fees are less than 0.1%).
I have nothing in the foreign market, so I suppose I should probably at least put something there.
Doctor Detroit
Please remove your headgear
Yeah I suggest around 70 in the VINIX but 80% is fine with 20% in the international. If you look at the target date funds they probably are just a mix of those four funds with appropriate allocations for your age. Vanguard tends to be a little conservative so like I said earlier in the thread, go with the year group option that follow your target retirement date. So if you are looking at a 2040 target, buy the 2045 or even the 2050.
Or just leave it like it is. I would suggest some international exposure though.
wilked
Footballguy
DD, I don't think you quoted the right index reference...
I have health care index at 28% for previous year.
wilked
Footballguy
When comparing actively managed funds to a benchmark, you shouldn't use s&p as a blanket. Funds need to be compared to a like-index fund. Vanguard can get you similar risk and market exposure with 1/3 of the fees of that fund you mentioned (see vhcix)
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Doctor Detroit
Please remove your headgear
Look up the fund I quoted and see their comparison. They have 20% listed, Galileo. I'm sure they are wrong and you are right though.
FUBAR
Footballguy
DD likes being right. And apparently showing one fund that beat the index means he's right.
Doctor Detroit
Please remove your headgear
I explained myself throughout. Not sure what your issue is, I've assisted you many times over the years.
KCitons
Footballguy
FUBAR
Footballguy
joking, but you have to understand that showing one fund that beat the index means nothing.
Doctor Detroit
Please remove your headgear
I can show pages and pages of actively managed funds that beat the indexes, they are quite easy to find. I won't because Wilked loves taking meaningful numbers, and make them seem meaningless. Show a three year winning record, Wilked wants ten. Show ten, he says its lucky.
I don't speak in absolutes like he does, because there are no absolutes in investing. I offered a seven paragraph explanation of my position above, if someone disagrees fine.
I don't speak in absolutes like he does, because there are no absolutes in investing. I offered a seven paragraph explanation of my position above, if someone disagrees fine.
Dentist
***Official FBG Dentist***
I myself use one active fund, and have acted as an active fund manager for myself in many ways when i make speculative plays in the non-retirement account portion of my investment portfolio.
I also am a Kiplinger's subscriber and read the article you site about active funds.
However, even Kiplinger is a bit of a hypocrite as with their "Kiplinger 25" mutual funds they are always moving funds in an out to catch the next "hot fund" and eliminating poor performers. But it's all based on history.... how do they know they aren't cutting a fund that's about to blow up?
I've read Kiplingers for 10 years and the turnover in their Kiplinger 25 is reason enough for me to not attempt to find the "hot fund manager" because I'm satisfied simply with "market performance" Market outperformance isn't even a goal.
lumpy19
Footballguy
Most of this is way over my head but investing based on "feel" seems like a really bad ideaYeah, all Mexicans eat beans for lunch and Michael Jordan never had an off night. All target date funds are terrible, all actively managed funds are ripoffs, and gold coins are the way to go. Some actively managed funds do quite well, I have two of them. If you have no time, no feel, no acumen and feel like you can properly diversify then index to 100%.
But everyone is different, and some people in these financial threads seem to think they have all the answers and those answers apply to everyone. If everyone just piled into index funds and never gave it a second thought, there really would be no use for these threads.
Mods please delete, Wilked has all the answers.
wilked
Footballguy
DD, are you talking about this?
https://personal.vanguard.com/us/funds/snapshot?FundId=0052&FundIntExt=INT#tab=1
It has a drop-down to select a benchmark... I am only telling you that S&P is not an appropriate benchmark - you might as well use the Nikkei for all of its relevance. The appropriate benchmark for a Health-care active fund would be a Health Care Index fund. Vanguard has one here
https://personal.vanguard.com/us/funds/snapshot?FundId=5485&FundIntExt=INT#tab=1
Benchmark numbers would be:
1 Year
3 Year
5 Year
10 Year Since Inception
02/05/2004 Health Care Index Admiral 27.85% 27.67% 20.76% 12.13% 10.68%
As others have noted you seem to be taking this very personally, I am not sure why? I don't doubt this fund has done well for you, but let's also acknowledge that it is both a high-risk fund (rated a 5 out of 5 on Vanguard's scale, and thus not comparable to something like an S&P fund which carries less risk) and that it has basically tracked with its equivalent Vanguard index fund (I have the index fund coming out slightly ahead, a bit lower returns but lower fees make up for it. Net-net the result is more or less even).
There are definitely examples where the active fund has outperformed its benchmark, but VGHCX is not one of them. Wellington is a great example of one that has and I completely agree with you... It is one of these active funds that is an index fund in sheep's clothing along with excellent management. My concern would be that the managers that took it to great heights are not the managers that will be there tomorrow, but I haven't looked into it too closely.
Overall I think you have a great investment strategy and anyone that wants to invest in an active fund that has an ER of 30 basis points or lower is doing better than 90% of the public.
https://personal.vanguard.com/us/funds/snapshot?FundId=0052&FundIntExt=INT#tab=1
It has a drop-down to select a benchmark... I am only telling you that S&P is not an appropriate benchmark - you might as well use the Nikkei for all of its relevance. The appropriate benchmark for a Health-care active fund would be a Health Care Index fund. Vanguard has one here
https://personal.vanguard.com/us/funds/snapshot?FundId=5485&FundIntExt=INT#tab=1
Benchmark numbers would be:
1 Year
3 Year
5 Year
10 Year Since Inception
02/05/2004 Health Care Index Admiral 27.85% 27.67% 20.76% 12.13% 10.68%
As others have noted you seem to be taking this very personally, I am not sure why? I don't doubt this fund has done well for you, but let's also acknowledge that it is both a high-risk fund (rated a 5 out of 5 on Vanguard's scale, and thus not comparable to something like an S&P fund which carries less risk) and that it has basically tracked with its equivalent Vanguard index fund (I have the index fund coming out slightly ahead, a bit lower returns but lower fees make up for it. Net-net the result is more or less even).
There are definitely examples where the active fund has outperformed its benchmark, but VGHCX is not one of them. Wellington is a great example of one that has and I completely agree with you... It is one of these active funds that is an index fund in sheep's clothing along with excellent management. My concern would be that the managers that took it to great heights are not the managers that will be there tomorrow, but I haven't looked into it too closely.
Overall I think you have a great investment strategy and anyone that wants to invest in an active fund that has an ER of 30 basis points or lower is doing better than 90% of the public.
Doctor Detroit
Please remove your headgear
Hey Wilked. Why don't you look below the chart and find the funds returns, then the relative index (spliced health care index) that is RIGHT BELOW IT!Those are the exact number I gave you yesterday!
I'm not taking anything personally, I've just been reading your posts for over a decade. I know you like the numbers shell game, and you're not good at it.
Doctor Detroit
Please remove your headgear
Oh and the benchmark you quoted is actually another Vanguard Fund. "Admiral Shares" is just the higher end version of the regular health care index fund. So you're benchmark for the investor shares fund is the admiral shares fund, which is the same exact fund. Well played.
ghostguy123
Footballguy
It seems more a matter of philosophy and preference as to investing. I can see some fairly obvious "things not to do", but based on your skill/knowledge level and your overall philosophy, it doesn't seem like it is right or wrong to use an active manager, or right or wrong to just use index funds or target date funds.
I have learned more about investing in the last 2 weeks than I have in the 35 years leading up to that. Clearly I am light years from being an expert. The more I toggle with things the more likely I am to screw things up. I prefer to put my money somewhere and just let it ride for about the next 20 years, and then maybe change my philosophy. For me, indexing seems to work.
I have zero interest in paying someone to help me invest because, as some pretty clear research shows, it does NOT make it more likely you will out perform the market due to the fees, and how much you would have to outperform the market just to make up for that.
Even if the odds were 50-50 of beating the market that way, I would still prefer not to do that. Partially because I would have zero clue who to go to or who to trust, plus I don't want to have to think about it or talk to the guy or work for it.
I plan to leisurely stroll some of these threads here, maybe read a little more when I get bored at work at night, and let my money sit and index for a while using my 403b.
The only thing I think that could make me change that approach is if the market did really well for like the next year, and then I would swap my money into safer (pretty much zero risk) funds while I wait for a downspell, then change back. But even that is all a coinflip (for me).
Doctor Detroit
Please remove your headgear
I'm over it, that was soooooo yesterday. Let's talk about the best way to buy and hold REITs.
wilked
Footballguy
depends...is this guy selling it?
http://graphics8.nytimes.com/images/2009/03/11/opinion/10madoff.480.jpg
fred_1_15301
Footballguy
I'm about to invest a chunk of money into a taxable account. From a tax efficiency standpoint, is there any difference in going with the S&P 500 ETF (VOO) vs 500 Index Admiral Shares mutual fund (VFIAX)? Also I'm planning to buy and hold (maybe rebalance every 12-18 months). Is there any reason to include bonds in my portfolio if my risk tolerance is high and I'm planning to basically hold for 20+ years?
FUBAR
Footballguy
agreed, it's just a matter of risk.ghostguy123 said:
I have about 5% of my portfolio in VNQ. If there's a better way, please educate.
mquinnjr
Footballguy
Great article on the tax differences between ETF's and Mutual Funds: http://www.investopedia.com/articles/mutualfund/05/etfindexfund.asp
Read the rest of the article, but if choosing between just the two above in a taxable account I'd go VOO. 0.05% is awesome, and more tax efficient than VFIAX @ the same expense ratio rate in the Admiral class.
As for the bonds part, it's just a hedge that presents a lot less upside vs. the equity portion. If you have an appetite for risk and can mentally deal with the ups and downs, I'd say avoid bonds/bond funds for a least the first few years of the horizon, and re-evaluate later.
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fred_1_15301
Footballguy
ghostguy123
Footballguy
Woohoo, VINIX up a couple points this week 
Just kidding just kidding.
Hey, when doing these future retirement projections, I keep reading that you should use something like a 5-8% annual gain in interest.
Color me skeptical, but I just can't see that happening on average over the course of the next 30 years.
When doing my own calculations I have been using 3%. Am I nuts?
Just kidding just kidding.
Hey, when doing these future retirement projections, I keep reading that you should use something like a 5-8% annual gain in interest.
Color me skeptical, but I just can't see that happening on average over the course of the next 30 years.
When doing my own calculations I have been using 3%. Am I nuts?
NutterButter
Footballguy
Are we talking inflation adjusted?Woohoo, VINIX up a couple points this week
Just kidding just kidding.
Hey, when doing these future retirement projections, I keep reading that you should use something like a 5-8% annual gain in interest.
Color me skeptical, but I just can't see that happening on average over the course of the next 30 years.
When doing my own calculations I have been using 3%. Am I nuts?
Since I'm entirely invested in stocks, I personally use 10% non-inflation adjusted since I thought that was the historical average return of the market including dividends. I have no reason to believe that will be any different over the next 20 years. And I'm an optimist. I do adjust my rate of return for the years closer to retirement as I begin to rebalance and expect lower returns. I also inflation adjust how much I'll need to withdraw each year during retirement rather than the return I'm getting.
NutterButter
Footballguy
For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.
Steve Tasker
Footballguy
Code section 72(t) allows you to take distributions early penalty-free if you take the money in "substantially equal periodic payments". It's a common strategy among early retirees, I believe.NutterButter said:
Need simple finance advise.
Loan 1: 600 units owed against a 30 year mortgage at 4.0% APR.
Loan 2: 300 units owed against a revolving door at 1.0% APR.
If you had 300 units fall into your lap of free cash what's the play?
1- Pay off half the mortgage and refinance a 15 year loan?
2- Just pay off the lower rate loan?
3- Invest elsewhere to leverage against the two loans?
4- Other?
Loan 1: 600 units owed against a 30 year mortgage at 4.0% APR.
Loan 2: 300 units owed against a revolving door at 1.0% APR.
If you had 300 units fall into your lap of free cash what's the play?
1- Pay off half the mortgage and refinance a 15 year loan?
2- Just pay off the lower rate loan?
3- Invest elsewhere to leverage against the two loans?
4- Other?
FUBAR
Footballguy
I'll use 5 as a conservative estimate, but whatever you feel comfortable with. Just don't go too high. Which is the biggest complaint I have with Ramsey - he uses 12% on his calculations based on historic return. He'll come up with figures like $7 million in 30 years when $2 million is far more likely IMO. He does it to get people to save but the expectations are unreasonable.Woohoo, VINIX up a couple points this week
Just kidding just kidding.
Hey, when doing these future retirement projections, I keep reading that you should use something like a 5-8% annual gain in interest.
Color me skeptical, but I just can't see that happening on average over the course of the next 30 years.
When doing my own calculations I have been using 3%. Am I nuts?
proteus126
Footballguy
5% (inflation adjusted) is typically what I use.Woohoo, VINIX up a couple points this week
Just kidding just kidding.
Hey, when doing these future retirement projections, I keep reading that you should use something like a 5-8% annual gain in interest.
Color me skeptical, but I just can't see that happening on average over the course of the next 30 years.
When doing my own calculations I have been using 3%. Am I nuts?
ghostguy123
Footballguy
I have all kinds of reasons to believe we dont see an a 10% return on average. What has the average been the last 10 years?NutterButter said:Are we talking inflation adjusted?Woohoo, VINIX up a couple points this week
Just kidding just kidding.
Hey, when doing these future retirement projections, I keep reading that you should use something like a 5-8% annual gain in interest.
Color me skeptical, but I just can't see that happening on average over the course of the next 30 years.
When doing my own calculations I have been using 3%. Am I nuts?
Since I'm entirely invested in stocks, I personally use 10% non-inflation adjusted since I thought that was the historical average return of the market including dividends. I have no reason to believe that will be any different over the next 20 years. And I'm an optimist. I do adjust my rate of return for the years closer to retirement as I begin to rebalance and expect lower returns. I also inflation adjust how much I'll need to withdraw each year during retirement rather than the return I'm getting.
NutterButter
Footballguy
7,6 according to this at the bottom. I don't think that includes dividends though. That's the s&p 500 though (I have most of my money in an s&p 500 index). You'd have to look up the dow.I have all kinds of reasons to believe we dont see an a 10% return on average. What has the average been the last 10 years?NutterButter said:Are we talking inflation adjusted?Woohoo, VINIX up a couple points this week
Just kidding just kidding.
Hey, when doing these future retirement projections, I keep reading that you should use something like a 5-8% annual gain in interest.
Color me skeptical, but I just can't see that happening on average over the course of the next 30 years.
When doing my own calculations I have been using 3%. Am I nuts?
Since I'm entirely invested in stocks, I personally use 10% non-inflation adjusted since I thought that was the historical average return of the market including dividends. I have no reason to believe that will be any different over the next 20 years. And I'm an optimist. I do adjust my rate of return for the years closer to retirement as I begin to rebalance and expect lower returns. I also inflation adjust how much I'll need to withdraw each year during retirement rather than the return I'm getting.
ETA: That looks like it does include dividends. This site let's you enter in whatever years you want. Things would've looked a lot bleaker if you asked me the return for the last 10 years in 2010.
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ghostguy123
Footballguy
I'll just say, I don't feel the slightest bit comfortable in assuming anywhere close to a 10% average return for the next 30 years.
NutterButter
Footballguy
wilked
Footballguy
Polish Hammer
made of glass
Does anyone here do whole life insurance? What kind of person is this a good vehicle for? I feel like most people would say it is a bad tool, but I am curious for whom it would be good.
Also, in general financial planning, how many months of average expenses should you keep in the bank as liquid assets? I feel I am waaaaay over the reasonable limits. As in I may have nearly 2 years' worth. Plus another 5 months in cash in a brokerage account from a stock transaction.
78% of my retirement investments are in my 401k. About 15% is in various American Funds, with a little less than half of that as rolled over IRAs. My wife and I turn 38 this year. I don't know if this is a good way to explain without revealing specific dollars I have, but the total in those investments equates to about 7.5 years of my current expenses today. We have 2 boys ages 7 and 9 and have some put away for college for them, but I am pretty confident it won't be enough yet.
What should I be thinking about at this stage to properly set us up to retire at 60 or earlier?
Also, in general financial planning, how many months of average expenses should you keep in the bank as liquid assets? I feel I am waaaaay over the reasonable limits. As in I may have nearly 2 years' worth. Plus another 5 months in cash in a brokerage account from a stock transaction.
78% of my retirement investments are in my 401k. About 15% is in various American Funds, with a little less than half of that as rolled over IRAs. My wife and I turn 38 this year. I don't know if this is a good way to explain without revealing specific dollars I have, but the total in those investments equates to about 7.5 years of my current expenses today. We have 2 boys ages 7 and 9 and have some put away for college for them, but I am pretty confident it won't be enough yet.
What should I be thinking about at this stage to properly set us up to retire at 60 or earlier?
NutterButter
Footballguy
I think I'm going to actually drop my original from 10 to 9 non-inflation adjusted. That's less than what its been over the past 20, but I'll be a little conservative.
Binky The Doormat
Footballguy
1) Save more so that you exceed the 401k max per year and have to use non-401 accounts. If all you are doing is maxing out your 401K, I don't think you will be in a great position to retire until you are over 67. At 50? Maybe if you live in a swamp and hunt gators on a seasonal basis.
2) Go to Firecalc and run lots of assumption scenarios. DO NOT use 9% as a growth assumption
3) Go to Booglehead and Firecalc chat boards.
NutterButter
Footballguy
But I like 9%. Why can't I use that? So what if it comes in lower than that. Just work a few more years. Why think its going to be significantly lower than its historically been? If you want to use recent history, that's what its been over the pass 20 years. At 9%, 85% chance at 50. I probably wouldn't retire at 50 even if I could especially if I have an easy gig like I do know, but its nice to have that option.
wilked
Footballguy
But I like 6%. Why can't I use that? So what if it comes in higher than that. Just get to retire a few more years early. Why think a globalized American market is anything like America when it was in the Industrial Revolution? If you want to use recent history, that's what its been over the past 10 years. I probably wouldn't retire at 70 even if I had to as I wouldn't be able to walk then but I would rather plan for a conservative number and it is ends up higher, it is nice to have that option
Binky The Doormat
Footballguy
Sure you can. But for something so important and irreversible - why plan for your future using assumptions that no reasonable financial planner would ever use? Kinda like packing your own parachute when you've never done it before because you "feel like it."
Run the other scenarios anyway - its kind of fun to see just how much money you may end up with.
One of the things to think about is the change that is recommended in your portfolio - going more conservative with a higher portion of your investments so that your overall growth is lower but your volatility is lower and a portion of your money is closer to cash (because you need a chunk of the money to live on).
I am retired and living this now so its not theoretical or in the future for me.
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Sand
Footballguy
I use 5.5% returns, not inflation adjusted. That is a conservative 60/40 type return number. Inflation effects are assumed to be 2.5% and that is certainly conservative as of late.I'll use 5 as a conservative estimate, but whatever you feel comfortable with. Just don't go too high. Which is the biggest complaint I have with Ramsey - he uses 12% on his calculations based on historic return. He'll come up with figures like $7 million in 30 years when $2 million is far more likely IMO. He does it to get people to save but the expectations are unreasonable.Woohoo, VINIX up a couple points this week
Just kidding just kidding.
Hey, when doing these future retirement projections, I keep reading that you should use something like a 5-8% annual gain in interest.
Color me skeptical, but I just can't see that happening on average over the course of the next 30 years.
When doing my own calculations I have been using 3%. Am I nuts?
One of these days I'm going to have to put the finishing touches on my retirement projection excel file and put it out here for you folks. I like it better than just about anything else out there except Firecalc. It can do things that Firecalc can't, though, so it even has that beat in some ways.
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