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Old 11-28-2013, 11:28 AM   #21
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I should have picked my words more carefully. What percentage drop can you tolerate? Obviously if all of the 3k disappears the game is over. Unless you invested in a few stocks only, that won't occur.

If you invest in the target fund with 90% equities, would you be OK with a drop of 45 percent? It sounds like you would be.
Yes, I would be.
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Old 11-28-2013, 12:26 PM   #22
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In fact having the courage to buy more after the drop is even better, unfortunately most individual "investors" do the opposite, and talk about how bad the market is. Sounds like you are thinking right, stick your ground when all the experts say sell
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Old 11-28-2013, 12:59 PM   #23
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In fact having the courage to buy more after the drop is even better, unfortunately most individual "investors" do the opposite, and talk about how bad the market is. Sounds like you are thinking right, stick your ground when all the experts say sell
Whatever portfolio I choose to go with, I intend to stick with it. I realize there will be speed bumps along the way, but I'm committed to continue to invest even through the hard times.

From the positive input I've received, it seems as though my goal to match my company 401K contributions (5%), and take an additional 5% of my paycheck every month and contribute it to my portfolio (which I intend to setup within my Roth IRA) is a good start.

I'm going to buy myself a Kindle Paperwhite tomorrow and get my first investment book, Investors Manifesto by Bernstein. Time to educate myself!
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Old 11-28-2013, 02:02 PM   #24
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Nothing against the Kindle, but think of the $$ you'd save (for investment) if you went to the library and borrowed paper investment books, instead! If your local branch doesn't have Bernstein, they may be able to order it from another branch in their system.

Good luck! You sound like a very level-headed person who will do well.

Amethyst


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I'm going to buy myself a Kindle Paperwhite tomorrow and get my first investment book, Investors Manifesto by Bernstein. Time to educate myself!
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Old 11-28-2013, 02:18 PM   #25
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Nothing against the Kindle, but think of the $$ you'd save (for investment) if you went to the library and borrowed paper investment books, instead! If your local branch doesn't have Bernstein, they may be able to order it from another branch in their system.

Good luck! You sound like a very level-headed person who will do well.

Amethyst
Thank you for the suggestion!

I do a lot of traveling and often times I find myself bored out of my mind! I think the Kindle will help me become more of a reader, something I need to do more of
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Old 11-28-2013, 08:16 PM   #26
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+1 to the average advice so far. Get the 401k match, the rest in a Roth, both in something like a target retirement fund. I'd prefer to go with something like a 2055 fund instead of 2045, just to get more equities since you will have a long retirement. However, there is probably very little difference between them now. You should be very high in equities now because you have a long time to ride out the market dips without making withdrawals. That's your best bet, historically, for long-term growth.

Once you fill up your Roth contribution, go back to the 401k until you max it out. With $8k/year I think you might have a little left over after a maximum Roth contribution. You should be able to withdraw your Roth contributions in an emergency without a penalty, but the 401k contributions are pretty well in there until you hit 55/59.5. So make sure you have cash on hand or a taxable brokerage account with some emergency funds before committing everything to the 401k.
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Old 11-29-2013, 10:06 AM   #27
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My son graduates from college next semester and I hope he will start thinking along these lines early in his career as well.

Well done on starting early. It should serve you quite well over the years.
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Old 12-01-2013, 12:01 AM   #28
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+1 to the average advice so far. Get the 401k match, the rest in a Roth, both in something like a target retirement fund. I'd prefer to go with something like a 2055 fund instead of 2045, just to get more equities since you will have a long retirement. However, there is probably very little difference between them now. You should be very high in equities now because you have a long time to ride out the market dips without making withdrawals. That's your best bet, historically, for long-term growth.

Once you fill up your Roth contribution, go back to the 401k until you max it out. With $8k/year I think you might have a little left over after a maximum Roth contribution. You should be able to withdraw your Roth contributions in an emergency without a penalty, but the 401k contributions are pretty well in there until you hit 55/59.5. So make sure you have cash on hand or a taxable brokerage account with some emergency funds before committing everything to the 401k.
Thanks for the input! You're the first person to suggest a taxable brokerage account, I'm going to have to look more into this as I'm unfamiliar with them.


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My son graduates from college next semester and I hope he will start thinking along these lines early in his career as well.

Well done on starting early. It should serve you quite well over the years.
Thanks!
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Old 12-01-2013, 10:00 AM   #29
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Saving $8k on $36k of income is awesome. If you can maintain such low annual spending going forward, as your earnings increase, you will make fast progress toward financial independence. Lifestyle inflation is a killer of such dreams. I think a lot of people start out living like students on $20k per year but then they increase their standard of living with every raise until they become quite accustomed to spending $80k per year. I'm only a couple years older than you, and I believe I've already seen this among my peers.

Buying a Vanguard Target fund is fine. These funds are diversified and low-cost, and I love the simplicity of owning a single mutual fund. You could do much worse. I'll offer a couple cautionary notes, however:

1. You should be aware of the history of the Vanguard Target funds. They tinker with the composition fairly often. A few years ago they increased the amount of stocks in each fund, and this past year they replaced some of the US bonds with international bonds. Who knows what will change next? I personally like Vanguard's Balanced Index because it is super low-cost (after you have $10k invested) and the composition (60% US stocks and 40% US bonds) has not changed since its inception 20 years ago. I supplement this with international stocks in my employer-sponsored account (like a 401k).

2. I think it is difficult to determine your risk tolerance until you've experienced a crash. It's easy to look at a chart of 2008-2009 and say, "Yeah, I'm OK with having a lot of money in stocks because the market will recover if it drops." In retrospect, there seem to be so many obvious signals and explanations for what happened. This leads a lot of people to believe market-timing is easy too. When you actually experience things in real-time, there is no certainty, there are contradicting opinions and data, and you constantly wonder if "this time it's different" while watching real money disappear. My point is that you might want to err on the conservative side for now.

Tim
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Old 12-01-2013, 12:18 PM   #30
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Originally Posted by timwalsh300 View Post
Saving $8k on $36k of income is awesome. If you can maintain such low annual spending going forward, as your earnings increase, you will make fast progress toward financial independence. Lifestyle inflation is a killer of such dreams. I think a lot of people start out living like students on $20k per year but then they increase their standard of living with every raise until they become quite accustomed to spending $80k per year. I'm only a couple years older than you, and I believe I've already seen this among my peers.

Buying a Vanguard Target fund is fine. These funds are diversified and low-cost, and I love the simplicity of owning a single mutual fund. You could do much worse. I'll offer a couple cautionary notes, however:

1. You should be aware of the history of the Vanguard Target funds. They tinker with the composition fairly often. A few years ago they increased the amount of stocks in each fund, and this past year they replaced some of the US bonds with international bonds. Who knows what will change next? I personally like Vanguard's Balanced Index because it is super low-cost (after you have $10k invested) and the composition (60% US stocks and 40% US bonds) has not changed since its inception 20 years ago. I supplement this with international stocks in my employer-sponsored account (like a 401k).

2. I think it is difficult to determine your risk tolerance until you've experienced a crash. It's easy to look at a chart of 2008-2009 and say, "Yeah, I'm OK with having a lot of money in stocks because the market will recover if it drops." In retrospect, there seem to be so many obvious signals and explanations for what happened. This leads a lot of people to believe market-timing is easy too. When you actually experience things in real-time, there is no certainty, there are contradicting opinions and data, and you constantly wonder if "this time it's different" while watching real money disappear. My point is that you might want to err on the conservative side for now.

Tim
Having my car paid off definitely helps me save!

Thanks for the suggestion. Seems like you've done your research on the various Vanguard Funds; I'll be sure to look into the Balanced Index fund. I was originally thinking of investing in a fund with a stock/bond ratio that you mentioned, but it seems like the popular choice (from those who have posted here) for people our age is to go for a fund that has a higher percentage of stocks. I'm thinking of giving it at least another month of more research to find the portfolio I feel suits me best.

Again, appreciate your input.
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Old 12-01-2013, 02:59 PM   #31
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Yes, my wife and I are highly unusual in that we probably have a lower % in stocks than most people on this forum who are twice our age. Take that for what it's worth.

Tim
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Old 12-01-2013, 07:43 PM   #32
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Yes, my wife and I are highly unusual in that we probably have a lower % in stocks than most people on this forum who are twice our age. Take that for what it's worth.

Tim
I feel like I am looking back in time..I started investing at 25....48 now..laid off 3 months ago...and going back to work will be a choice not a necessity...Because!..I invested diligently and almost 100% in equities...which I strongly recommend!
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