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Hi from amateur investor!
Old 01-16-2012, 08:13 PM   #1
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Hi from amateur investor!

Hi All,
I have started investment about 12 years ago and mostly it was saving cash for rainy day ,401K, adding equity in the house and some gold, but quite recently I started actual investment on my own in Vanguard. Initially it was the same saving cash in the money market, but later I start adding mutual funds ( mostly blended and bonds funds). So, now I have very fragmented portfolio, especially in the bonds.
Here how bonds allocation looks like:
Vanguard Long-Term Treasury 9.8%
Vanguard Inter-Term Treasury 19.10%
Vanguard Total Bond Mkt Index 10.10%
Vanguard Inflation-Protect Sec 5.30%
Vanguard Target Retirement 2025 3.60%
Vanguard Wellington Fund 11.30%
Vanguard Wellesley Income Fund 22.60%
Vanguard Short-Term Bond Index 18.20%

Do you think I need to keep all of those funds? Something missing? Thanks in advance!
I'm still adding money to W&W, Total Bond Mkt and Inflation-Protect Sec
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Old 01-16-2012, 10:25 PM   #2
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Welcome to the board. That's a very conservative mix, perhaps too conservative to keep up with inflation. IMO even after FIRE most people need to allocate somewhat more to equities.
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Old 01-17-2012, 12:05 AM   #3
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Welcome to the board, Aleabo.

Quote:
Originally Posted by aleabo View Post
Do you think I need to keep all of those funds? Something missing? Thanks in advance!
Those are trick questions. You need to take one step back and start at the beginning.

Before everyone gets all distracted with whether the allocation to Wellington should be 11.30% or 11.35%, you'd want to decide what you're saving for (presumably retirement but maybe a kid's college fund?) and what asset allocation you're most comfortable with.

Then you can start slicing & dicing to two significant digits.

Since you've chosen Vanguard funds, you can find more about the process at Getting Started - Bogleheads -- especially the subject header "Implementing an Investment Plan".
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Old 01-17-2012, 12:24 AM   #4
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Nice Avatar.

I'd consolidate your funds. Short term bond for money you'll need in the short term and maybe a mix of Wellesley, Wellington and TIPs
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Old 01-17-2012, 10:22 AM   #5
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Welcome aboard, most if not all are amateur investors here. You will probably get a variety or responses here, as you know only a few will be uniquely right for you.

Your asset allocation is on the conservative side of the mainstream, but that appears consistent with your risk tolerance (admittedly based on very little info). The sizes of your positions (large enough to be meaningful) and number of funds is not unreasonable. The only question that jumps out at me, why own Wellington if you already own Wellesley and several bond funds? No harm, I just don't understand the thinking there.

I'd encourage you to learn more on your own, the more you can "learn to fish..." the better. Nords gave you a good link to follow and here's what I still consider the best reading list out there Investment Books. There isn't a single bad resource on this list IMO.

To begin, I'd suggest you start with a proven 'lazy portfolio', I've pasted a classic below just for example. Then ask yourself why you're invested in each of your holdings vs the simplest example below - why that asset class and specific fund for each that you own. There is some overlap/duplication in your holdings (true for many of us, and OK if you're delibately/knowingly emphasizing particular asset classes) but if you have sound reasons for each, I'd stay the course until something substantial changes your investment philosophy. If you can't explain why for each fund, some consolidation may be in order, but you'll want to consider and manage the tax implications if you start changing funds and/or asset classes.

My 2¢. Best of luck!
Quote:
  • 1/3—Vanguard Total Bond Market Index (VBMFX)
  • 1/3—Vanguard Total Stock Mkt Idx (VTSMX)
  • 1/3—Vanguard Total Intl Stock Index (VGTSX)
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Old 01-22-2012, 04:09 PM   #6
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Since you just started to invest in Vanguard funds you may be guilty of chasing recent returns with your choices. Balanced funds and bond funds have done well as interest rates have dropped but may not do as well going forward. If I'm wrong and you have held this portfolio for the past 12 years, you should be giving us advice. lol
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Old 01-23-2012, 04:58 PM   #7
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A classic 'safe haven' portfolio. Or is it ?

Investors have piled into bond funds as equity markets have been volatile over the last several years. And this strategy has been highly effective as 10 year Treasury yields are below 2%.

When (not if) Bernanke cranks up the printing presses to stave off deflation - interest rates are going to take off. And a portfolio consisting solely of bonds will be crushed. A more balanced mix of bonds, stocks - particularly those who have enough pricing power to offset inflation and precious metals would be more appropriate.
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Old 01-23-2012, 09:48 PM   #8
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Quote:
Originally Posted by wingfooted
A classic 'safe haven' portfolio. Or is it ?

Investors have piled into bond funds as equity markets have been volatile over the last several years. And this strategy has been highly effective as 10 year Treasury yields are below 2%.

When (not if) Bernanke cranks up the printing presses to stave off deflation - interest rates are going to take off. And a portfolio consisting solely of bonds will be crushed. A more balanced mix of bonds, stocks - particularly those who have enough pricing power to offset inflation and precious metals would be more appropriate.

I agree with this. I don't know when interest rates will rise, it may not be for 20 years. But when a investment like long term treasury bond funds return 30 % when the individual bonds held by those funds pay 3 to 4% , a huge correction is in order.
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Old 01-25-2012, 10:33 PM   #9
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Quote:
Originally Posted by Gatordoc50 View Post
I agree with this. I don't know when interest rates will rise, it may not be for 20 years. But when a investment like long term treasury bond funds return 30 % when the individual bonds held by those funds pay 3 to 4% , a huge correction is in order.
While I'm hoping to be around in 20 years, still 20 years from now is my least concerns.
We already had lost decade. We will have another one. Unemployment here to stay. Growth anemic and why it should pick up? What policies do we have to support economic growth?
Circus in Europe will go on. Until risk of default exists for Greece, Italy, Spain investors will buy US bonds.
If Mr. Bernanke will start raising interest rate in this condition we can get in stagflation. I'm not sure what the right AA for this scenario.
I'm keeping about 5% in gold and 25% in cash and other investments as 60 bonds/40 stocks for now. Depends how things will go I'll make adjustment.
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Old 01-25-2012, 11:45 PM   #10
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While I'm hoping to be around in 20 years, still 20 years from now is my least concerns.
We already had lost decade. We will have another one. Unemployment here to stay. Growth anemic and why it should pick up? What policies do we have to support economic growth?
Circus in Europe will go on. Until risk of default exists for Greece, Italy, Spain investors will buy US bonds.
If Mr. Bernanke will start raising interest rate in this condition we can get in stagflation. I'm not sure what the right AA for this scenario.
I'm keeping about 5% in gold and 25% in cash and other investments as 60 bonds/40 stocks for now. Depends how things will go I'll make adjustment.
The right AA is the one you're comfortable with. If you're worried that a European country or the Fed could mess up your investments... then you're not comfortable with your AA.

There's always going to be something messing up part of your portfolio. The trick is to diversify among enough asset classes that the effects are minimized. If you feel strongly that things really are going somewhere in a handbasket then you could try to choose assets which will do well in dire times. If you're long on gold bullion, shotgun ammunition, and MREs then you could be praying for Greece & Bernanke to throw the economy into the toilet.

Is it possible that you're experiencing analysis paralysis? What could break the logjam of questions and political issues that you're attempting to confront?
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Old 01-26-2012, 03:04 PM   #11
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The right AA is the one you're comfortable with.
I cannot agree more. Too many investors let their advisers tinker with their portfolios for reasons like: need equities for growth, need globals for diversification, need gold for inflation etc... and the investor becomes uncomfortable.

When asked about risk tolerance, investors frequently overstate this, when the answer may lie in the portfolio allocation itself right now. That may be the investor's true measure of risk tolerance.
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