24 year old trying to get to millionaire by 35, punch holes in me plan

AirJordan · 03-01-2007, 11:30 AM

Hey all, first post in this forum. Like the post says I'm 24, and have a 100k a year job (got really lucky don't ask)
I'm basically putting all of my money in the market and after taxes and car notes etc. for the past year I've DCA'ed in about 65k.

My portfolio looks like this as of now:
8k in a Roth IRA, Vanguard Target Retirement 2045, I'll find a better fund but right now I'm a bit swamped with work

10k DODFX (Dodge and Cox)
8k RYVPX (Royce Value Plus)
5k FAIRX (Fairholme)
5k JSVAX (Janus Contrarian)
5k FBRVX (FBR Small Cap)
5k ARTKX (Artisan Small Cap)
10k VPCCX (Primecap Core)
10k VTSMX (Total Stock Market)

I'm going to keep DCA'ing in for the rest of the year, after the market settles down a bit, and try to get all my positions up to 10k. Then I need to find a SCV, and LCV value fund.

Couple of things
1. How's the portfolio look so far?
2. Any suggestions for the SCV and LCV funds?
3. Millionaire by 35 possible?

Thanks for the help
AJ

wheel9 · 03-01-2007, 12:25 PM

Mathmatically, if you save $65K each and every year, and achieve a 5.5% average annual return on your investments, you can reach $1 million by 35.

Math is easy, execution is more work!

AirJordan · 03-01-2007, 12:30 PM

5.5%?? I'm not looking for CD like returns, I'm aiming for 12-14% annually over the next 12 year. Any comments on my fund selections?

Sam · 03-01-2007, 12:56 PM

12-14% is kind of conservative. How about 15-17%?

MasterBlaster · 03-01-2007, 01:00 PM

Here's the plan...

Start with $1000

Take all of your money and go to vegas (or invest in commodities the result is the same).

Using the roulette wheel, bet all of your money on black.

When you win that bet you have doubled your money.

you then let it ride and repeat the process. After you win again you have quadroupled your money.

Let it ride and repeat.

You'll only have to play 10 rounds to become a millionaire.

If a million won't be enough, just play another 10 rounds until you then have a billion.

- now wasn't that easy !

laurence · 03-01-2007, 01:17 PM

So seriously folks....

12 to 14% is ambitious, I think the prevalent school of thought on this forum is 11% is about the maximum you can strive for, and you have to be willing to take the roller coaster ride. Many funds outperform the market for a year or two, but in the long run they don't, plus actively managed funds cut into your returns quite a bit more than indexed funds. I'm not super familiar with all the funds in your portfolio, but I think your expense ratio is well north of 1% - remember, this is your whole portfolio, not 1% of your return. So my advice is less funds, prolly 4-5 would be enough to get all the exposure you need. Go Vanguard, anchor with S&P index, Russel 2000, find cheap international and small cap funds and stick up to 40% of your portfolio in these maybe involve some value funds (Dodge and Cox there is a decent fund). Get your expense ratio overall below .5%.

Like others said, the math is easy, let's take a doable 9% for 11 years with 65k going in every year, I have you at about 1.2 Mil. But

Marriage?
Kids?
Inflation? 1 Mil won't be what it is now, and it's not enough to ensure much of a lifestyle for the 60 years you might need it.
Your job? So you make 100k a year at 24 - that's great, but how can you be so sure that will last? Are you part of a movie star's entourage? Dealing Coke? What skill set is required for this job? What industry is it?

It's great to save money, good job. Have ambitious goals with your finances, great job. But it sounds like you have some areas to flesh out for us (and yourself) before we can intelligently critique your plan.

ScaredtoQuit · 03-01-2007, 01:29 PM

You are getting sarcastic comments because it's extremely hard to achieve an annualized return of 12 to 14%, especially for a long period like 11 years. A more reasonable goal for a balanced portfolio is probably about 8%... for a portfolio of all equities, maybe 10%. Because of a change in the underlying fundamentals during the past decade, some experts believe that these numbers may be optimistic.

A return of that much is not bad... with compounding you can probably double your money in 8 to 10 years. Yes, you can chase higher yields, but after spending a little time investing, you will soon learn that high yields do not come without a price. (volatility)

Most of the people on this board are quite conservative (myself included) and would recommend that you put together a portfolio consisting of index funds invested in multiple asset classes... you should include the following:

Large cap growth stocks
Large-Cap Value
Small-Cap Growth
Small-Cap Value
Developed Int'l Stocks
Int'l Value Stocks
Int'l Emerging Market stocks
A REIT Index fund

A great many of us once believed that you could ear returns of 12 to 14% with little trouble. Most of us that believed that had to learn the hard way. Do yourself a favor and avoid some unpleasant learning experiences.

CybrMike · 03-01-2007, 01:30 PM

Start your own business if you want to get rich young.

Empty Pockets · 03-01-2007, 01:35 PM

You remind me of me when I was your age. Very similar situation. My goal was $1,000,000 by 40 and I made it at 38.

I wrote out a financial plan on two pages of a spiral notebook one night. I've tweaked a few things, but have stuck to my plan and I made it. Your plan looks better than mine did. You have some advantages over me when I was your age. It is a lot easier for a do it yourselfer than it was 20 years ago. I'm very new to this site, but I believe it will be very useful to you. Income taxes are lower now than they've been in recent history.

The best advice I can give you is: Don't get carried away with what the market is doing. Take fluctuations in stride and stay 100% invested at all times. Keep DCA like you're doing and rebalance regularly. Buy your own home. Stay away from "tax shelter" types of investment unless it is a tax advantaged investment such as IRA's, 401k's, etc... Don't lose focus of your plan if you get married. If you can average 9%-10% annually you'll be fine, don't get too excited about beating the index averages, long term it is very hard. Invest at least part of every raise or windfall you may get.

You've got the most important things you need to make it. A plan, an income and most importantly the desire.

I have no doubts you'll make $1,000,000 by 35. It's not too early to start thinking about your next goal.

AirJordan · 03-01-2007, 01:39 PM

Quote:

Originally Posted by Laurence

(Dodge and Cox there is a decent fund). Get your expense ratio overall below .5%.

Like others said, the math is easy, let's take a doable 9% for 11 years with 65k going in every year, I have you at about 1.2 Mil. But

Marriage?
Kids?
Inflation? 1 Mil won't be what it is now, and it's not enough to ensure much of a lifestyle for the 60 years you might need it.
Your job? So you make 100k a year at 24 - that's great, but how can you be so sure that will last? Are you part of a movie star's entourage? Dealing Coke? What skill set is required for this job? What industry is it?

It's great to save money, good job. Have ambitious goals with your finances, great job. But it sounds like you have some areas to flesh out for us (and yourself) before we can intelligently critique your plan.

D&C is better than decent, it's the gold standard for mutual funds. It's looking like the sentiment here is indexing is the only way to beat the market...siigh...so deluded. I mean do any of you invest in actively managed funds? Seriously compare DODFX's returns to VGTSX for the past 5 years. 17% annualized vs. 21% annualized. That extra .4% ER doesn't mean anything.

And if you want to know what I do, I graduated law school at 23, yeah I'm a wunderkind of sorts, and do title analysis for a big oil company (won't say which one). Yipes other message boards were much nicer than this one

FinanceDude · 03-01-2007, 01:45 PM

Quote:

Originally Posted by AirJordan

D&C is better than decent, it's the gold standard for mutual funds. It's looking like the sentiment here is indexing is the only way to beat the market...siigh...so deluded. I mean do any of you invest in actively managed funds? Seriously compare DODFX's returns to VGTSX for the past 5 years. 17% annualized vs. 21% annualized. That extra .4% ER doesn't mean anything.

And if you want to know what I do, I graduated law school at 23, yeah I'm a wunderkind of sorts, and do title analysis for a big oil company (won't say which one). Yipes other message boards were much nicer than this one

We're pretty nice, once you get to know us............

But if you're looking for "diehard Vanguard indexers"............you've come to the right place...........

IMHO, nothing wrong with DODFX, the Dodge and Cox folks are well thought of in the industry.......besides, it's YOUR money.............

**Sarah in SC** · 03-01-2007, 01:51 PM

Quote:

Originally Posted by AirJordan

...siigh...so deluded.

Using that Dale Carnegie training to make friends.....

Sarah, who owns only actively managed funds, including that Dodge & Cox

AirJordan · 03-01-2007, 01:56 PM

Quote:

Originally Posted by mclesters

Using that Dale Carnegie training to make friends.....

Sarah, who owns only actively managed funds, including that Dodge & Cox

Hahah, maybe I should have listened to my dad and read that book. Just a bit surprised here that everyone is so enamored with haystacks here.

And Sarah, since everyone else seems to hate the fact I prefer active management, can I ask for what you think of my portfolio so far?

unclemick · 03-01-2007, 02:11 PM

Quote:

Originally Posted by FinanceDude

We're pretty nice, once you get to know us............

Wellll - not all of us - heh heh heh - those with Curmudgeon certificates must practice using them from time to time:

Now pay attention!

Circa 1994 my nephew fresh out of Navy flight school asked a similar question - whereupon I dazzled him with De Gaul (God Looks After Drunkards, Fools, And The United States of America) and presented him with 1994's Bogle on Mutual Funds - explaining there WOULD be a test.

He done good - maybe 9-10 years of TSP's version of 500 Index before last transfer from Whidby to CA(Coronado?) and he went over to the Dark Side falling for all that Slice and Dice claptrap - slipped up read Bernstein's Four Pillars and possibly got too much CA sun - you gotta watch that sunshine when you come directly from the PacNW.

Not a millionaire - but a good base - he promised to keep the 500 and only Bernstein with 'new money'.

Now for your homework - google up Bogles Financial Markets Research Center - read the May 2006 speech at the Vegas Money Show - and decide whether you like active or passive.

The test ? - the next eleven years of Mr Market!

heh heh heh heh - here's hoping we don't get a 1966 - 1982 flat ceiling like when I started investing.

eridanus · 03-01-2007, 02:18 PM

Quote:

Originally Posted by AirJordan

D&C is better than decent, it's the gold standard for mutual funds. It's looking like the sentiment here is indexing is the only way to beat the market...siigh...so deluded. I mean do any of you invest in actively managed funds? Seriously compare DODFX's returns to VGTSX for the past 5 years. 17% annualized vs. 21% annualized. That extra .4% ER doesn't mean anything.

Q: Which actively managed fund has beat the S&P 500 for the past 15 years?
.
.
.
.
.
.
.
A: None! Legg Mason didn't make it last year. The next runner up is around 7 years.

Now all you have to do is pick which one will make the new record. You're a wunderkind. I'm sure you can do it!

semtex · 03-01-2007, 02:21 PM

A couple years ago, there was an old guy in our building, whom people refered as one of the greatest investors in the world. Later, I read one of his books. Still remember his performance, 13.8%.

laurence · 03-01-2007, 02:23 PM

Quote:

Originally Posted by AirJordan

Hahah, maybe I should have listened to my dad and read that book. Just a bit surprised here that everyone is so enamored with haystacks here.

And Sarah, since everyone else seems to hate the fact I prefer active management, can I ask for what you think of my portfolio so far?

Forget that book, and read "the four pillars of investing"

LOL, I can't believe you tried to back your stance with a 5 year return history...you planning on dying that soon? How many funds have outperformed the market over 20 years? 30? 40? 50?

It's your money, dude. I've met plenty of people who are very smart, and they think because they beat the averages in education and career, they can beat the market, too. One Ph.D here at work (engineering) was sure he could clobber index returns doing covered calls, then puts and leaps, and all sorts of other things. He even pulled money out of his house to do it. Hasn't talked much about it in a while.

I own some Dodge and Cox, sorry if I didn't gush enough about the fund.

I also own Wellington. My international is not an index, so I'm not 100% index.

If you drool over Morningstar ratings and such, well, there's not much more I can say.

But fine, you'll be the one who does it, actively manage all the way, good for you. You didn't get to the other questions in my post about having a life etc. You really think 1 million will be enough to live on for 50 years? Have you used FireCalc yet? Are you expecting 10% + returns every year when you are withdrawing from your portfolio?

macdaddy · 03-01-2007, 02:25 PM

Hi AirJordan, welcome to the board. I'm in almost the same situation as you so I thought I would chime in. The two questions that come to mind immediately are the stability of your job and your future relationships. Is your job stable? How does the industry look, i.e. is it likely to be downsized or off-shored in the future? On the flip side, maybe your salary is expected to increase considerably over time? Will you need to take 2 years off for an MBA? Relationships are harder to predict. Do you want your future SO to stay at home with any kids? Is it important to you that they keep working? Do you want kids at all? If you stay double income throughout your 20s and early 30s and marry somebody who saves more than they spend, you should be set. What if you fell madly in love with a woman who liked expensive vacations and new cars and the idea of staying home and raising kids in a big house?

eridanus · 03-01-2007, 02:25 PM

Quote:

Originally Posted by Laurence

It's your money, dude. I've met plenty of people who are very smart, and they think because they beat the averages in education and career, they can beat the market, too.

LTCM comes to mind when thinking of "genius" types who thought they could play fast and loose with risk.

03-01-2007, 11:30 AM	#1
AirJordan Recycles dryer sheets Join Date: Mar 2007 Posts: 79	24 year old trying to get to millionaire by 35, punch holes in me plan Hey all, first post in this forum. Like the post says I'm 24, and have a 100k a year job (got really lucky don't ask) I'm basically putting all of my money in the market and after taxes and car notes etc. for the past year I've DCA'ed in about 65k. My portfolio looks like this as of now: 8k in a Roth IRA, Vanguard Target Retirement 2045, I'll find a better fund but right now I'm a bit swamped with work 10k DODFX (Dodge and Cox) 8k RYVPX (Royce Value Plus) 5k FAIRX (Fairholme) 5k JSVAX (Janus Contrarian) 5k FBRVX (FBR Small Cap) 5k ARTKX (Artisan Small Cap) 10k VPCCX (Primecap Core) 10k VTSMX (Total Stock Market) I'm going to keep DCA'ing in for the rest of the year, after the market settles down a bit, and try to get all my positions up to 10k. Then I need to find a SCV, and LCV value fund. Couple of things 1. How's the portfolio look so far? 2. Any suggestions for the SCV and LCV funds? 3. Millionaire by 35 possible? Thanks for the help AJ

03-01-2007, 12:25 PM	#2
wheel9 Recycles dryer sheets Join Date: Nov 2006 Posts: 54	Re: 24 year old trying to get to millionaire by 35, punch holes in me plan Mathmatically, if you save $65K each and every year, and achieve a 5.5% average annual return on your investments, you can reach $1 million by 35. Math is easy, execution is more work!

03-01-2007, 12:30 PM	#3
AirJordan Recycles dryer sheets Join Date: Mar 2007 Posts: 79	Re: 24 year old trying to get to millionaire by 35, punch holes in me plan 5.5%?? I'm not looking for CD like returns, I'm aiming for 12-14% annually over the next 12 year. Any comments on my fund selections?

03-01-2007, 12:56 PM	#4
Sam Thinks s/he gets paid by the post Join Date: Mar 2006 Posts: 1,743	Re: 24 year old trying to get to millionaire by 35, punch holes in me plan 12-14% is kind of conservative. How about 15-17%?

03-01-2007, 01:00 PM	#5
MasterBlaster Thinks s/he gets paid by the post Join Date: Jun 2005 Posts: 1,777	Re: 24 year old trying to get to millionaire by 35, punch holes in me plan Here's the plan... Start with $1000 Take all of your money and go to vegas (or invest in commodities the result is the same). Using the roulette wheel, bet all of your money on black. When you win that bet you have doubled your money. you then let it ride and repeat the process. After you win again you have quadroupled your money. Let it ride and repeat. You'll only have to play 10 rounds to become a millionaire. If a million won't be enough, just play another 10 rounds until you then have a billion. - now wasn't that easy !

03-01-2007, 01:17 PM	#6
laurence Moderator Emeritus Join Date: Feb 2005 Location: San Diego Posts: 4,788	Re: 24 year old trying to get to millionaire by 35, punch holes in me plan So seriously folks.... 12 to 14% is ambitious, I think the prevalent school of thought on this forum is 11% is about the maximum you can strive for, and you have to be willing to take the roller coaster ride. Many funds outperform the market for a year or two, but in the long run they don't, plus actively managed funds cut into your returns quite a bit more than indexed funds. I'm not super familiar with all the funds in your portfolio, but I think your expense ratio is well north of 1% - remember, this is your whole portfolio, not 1% of your return. So my advice is less funds, prolly 4-5 would be enough to get all the exposure you need. Go Vanguard, anchor with S&P index, Russel 2000, find cheap international and small cap funds and stick up to 40% of your portfolio in these maybe involve some value funds (Dodge and Cox there is a decent fund). Get your expense ratio overall below .5%. Like others said, the math is easy, let's take a doable 9% for 11 years with 65k going in every year, I have you at about 1.2 Mil. But Marriage? Kids? Inflation? 1 Mil won't be what it is now, and it's not enough to ensure much of a lifestyle for the 60 years you might need it. Your job? So you make 100k a year at 24 - that's great, but how can you be so sure that will last? Are you part of a movie star's entourage? Dealing Coke? What skill set is required for this job? What industry is it? It's great to save money, good job. Have ambitious goals with your finances, great job. But it sounds like you have some areas to flesh out for us (and yourself) before we can intelligently critique your plan.

03-01-2007, 01:29 PM	#7
ScaredtoQuit Recycles dryer sheets Join Date: Jan 2007 Posts: 149	Re: 24 year old trying to get to millionaire by 35, punch holes in me plan You are getting sarcastic comments because it's extremely hard to achieve an annualized return of 12 to 14%, especially for a long period like 11 years. A more reasonable goal for a balanced portfolio is probably about 8%... for a portfolio of all equities, maybe 10%. Because of a change in the underlying fundamentals during the past decade, some experts believe that these numbers may be optimistic. A return of that much is not bad... with compounding you can probably double your money in 8 to 10 years. Yes, you can chase higher yields, but after spending a little time investing, you will soon learn that high yields do not come without a price. (volatility) Most of the people on this board are quite conservative (myself included) and would recommend that you put together a portfolio consisting of index funds invested in multiple asset classes... you should include the following: Large cap growth stocks Large-Cap Value Small-Cap Growth Small-Cap Value Developed Int'l Stocks Int'l Value Stocks Int'l Emerging Market stocks A REIT Index fund A great many of us once believed that you could ear returns of 12 to 14% with little trouble. Most of us that believed that had to learn the hard way. Do yourself a favor and avoid some unpleasant learning experiences.

03-01-2007, 01:30 PM	#8
CybrMike Recycles dryer sheets Join Date: Oct 2005 Posts: 293	Re: 24 year old trying to get to millionaire by 35, punch holes in me plan Start your own business if you want to get rich young.

03-01-2007, 01:35 PM	#9
Empty Pockets Recycles dryer sheets Join Date: Dec 2006 Posts: 149	Re: 24 year old trying to get to millionaire by 35, punch holes in me plan You remind me of me when I was your age. Very similar situation. My goal was $1,000,000 by 40 and I made it at 38. I wrote out a financial plan on two pages of a spiral notebook one night. I've tweaked a few things, but have stuck to my plan and I made it. Your plan looks better than mine did. You have some advantages over me when I was your age. It is a lot easier for a do it yourselfer than it was 20 years ago. I'm very new to this site, but I believe it will be very useful to you. Income taxes are lower now than they've been in recent history. The best advice I can give you is: Don't get carried away with what the market is doing. Take fluctuations in stride and stay 100% invested at all times. Keep DCA like you're doing and rebalance regularly. Buy your own home. Stay away from "tax shelter" types of investment unless it is a tax advantaged investment such as IRA's, 401k's, etc... Don't lose focus of your plan if you get married. If you can average 9%-10% annually you'll be fine, don't get too excited about beating the index averages, long term it is very hard. Invest at least part of every raise or windfall you may get. You've got the most important things you need to make it. A plan, an income and most importantly the desire. I have no doubts you'll make $1,000,000 by 35. It's not too early to start thinking about your next goal. __________________ "Watch your topknot"

03-01-2007, 02:21 PM	#16
semtex Recycles dryer sheets Join Date: Jul 2006 Posts: 181	Re: 24 year old trying to get to millionaire by 35, punch holes in me plan A couple years ago, there was an old guy in our building, whom people refered as one of the greatest investors in the world. Later, I read one of his books. Still remember his performance, 13.8%.

03-01-2007, 02:25 PM	#18
macdaddy Recycles dryer sheets Join Date: Feb 2006 Posts: 403	Re: 24 year old trying to get to millionaire by 35, punch holes in me plan Hi AirJordan, welcome to the board. I'm in almost the same situation as you so I thought I would chime in. The two questions that come to mind immediately are the stability of your job and your future relationships. Is your job stable? How does the industry look, i.e. is it likely to be downsized or off-shored in the future? On the flip side, maybe your salary is expected to increase considerably over time? Will you need to take 2 years off for an MBA? Relationships are harder to predict. Do you want your future SO to stay at home with any kids? Is it important to you that they keep working? Do you want kids at all? If you stay double income throughout your 20s and early 30s and marry somebody who saves more than they spend, you should be set. What if you fell madly in love with a woman who liked expensive vacations and new cars and the idea of staying home and raising kids in a big house?