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Vanguard Advice, Good or Not?
Old 03-23-2012, 05:19 PM   #1
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Vanguard Advice, Good or Not?

We recently rolled a 401K and pension from my husband's previous employer into Vanguard. It is currently sitting in the Vanguard Prime Money Market Fund. $335,000. The 401K had been in a Stable Value Fund for the last several yrs.

Since this is a new rollover we were able to call and talk to an adviser at no cost. We don't have any expertise in this area and were looking for guidance to grow the small amount of money we have without taking on to much risk. The adviser told us that the Vanguard Life Strategy Conservative Growth Fund would be best in this situation.

Further reading online on this forum and the Vanguard forum I get the impression many don't like this type of fund. I read it's allocation changes. The adviser indicated it was 40% stock and 60% bonds and was a no maintenance type account.

I noticed many who hold this balanced fund don't put all the money they have in it, it is a piece of a portfolio.

Also, this yr. our monthly disposable income grew considerably and we would like to maybe open another after tax account with Vanguard to dump that additional money into. Again, uncertain as to where to invest that money once the account is opened.

Our Situation:

My husband is turning 65 this yr. He plans on working for another 4 yrs or so. I am 45, a stay at home mom and our son is 10.

We own both our vehicles

No CC debt

The balance on our mortgage is under $50K @ 6.2% interest. I have considered paying it off with our savings of $75K, but since the housing market is so poor I am concerned about depleting our savings with a low chance of selling our home quickly to obtain the cash.


No need to point out that this is less than an ideal situation, from our point of view we have come along way, trust me on that. We're just looking for support and guidance in continuing an upward trend with what we have achieved.

Thanks All
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Old 03-23-2012, 05:35 PM   #2
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I'm not sure if the vanguard forum you mentioned is really the Bogleheads forum. I think you will get better answers by posting your question over there, but be forewarned, they seem to have a certain format for such questions and don't seem to like it if you don't follow the format.

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Old 03-23-2012, 05:37 PM   #3
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I have no specific knowledge or advice on that particular fund, but Vanguard in general is a GREAT place to be. I would recommend spreading the money around to a few different places... you might consider looking at the Target Retirement Funds which range from 2005 all the way to 2050
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Old 03-23-2012, 06:05 PM   #4
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Without knowing more about your situation, and just looking at Life Strategy Conservative Growth Fund, it seems to cover all the legs of the stool.

http://www.early-retirement.org/foru...1&d=1332543840
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Old 03-23-2012, 06:14 PM   #5
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I don't remember reading anything particularly bad about the Life Strategy Funds. They're a balanced fund that maintains an asset allocation, the Conservative Growth fund is 40:60 as the OP mentioned. It's not entirely different than psst...Wellesley, an extremely popular fund here and elsewhere. https://personal.vanguard.com/us/fun...vigatingFrom=1.

Unless you want to choose your own asset allocation, pick funds to fill it out and rebalance as required - you could do a lot worse than Vanguard Life Strategy Funds.

And using Life Strategy Funds as part of a portfolio isn't ideal, they're intended to be reasonably complete portfolios themselves like most balanced funds. But many people do so unknowingly thinking they're hedging their bet by doing so.
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Old 03-23-2012, 06:17 PM   #6
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Well, to do this right you first need to decide on the mix of assets you both would like to have--that's step one before diving in to a particular fund. I recommend you read up on that (visit the FAQ's here, etc) and then we can help you pick some funds.

If we were in an elevator and I had just 30 seconds to give you advice, I'd say your present fund may have too high an allocation to bonds and too low an allocation to equities (just 39%) to be your "one fund answer." Your husband probably needs to plan for his money to last another 25-30 years, and you need to be looking even longer than that. To have over 60% of your funds in bonds doesn't offer much chance for you to keep up with inflation over such a long timeframe. Also, there are monetary policies and market conditions now in effect that many people believe are making bonds, especially long-maturity bonds, much riskier than they have historically been. If I had to select one fund I'd probably pick Vanguard's 2020 (65% stocks) or 2025 (72% stocks) Target Retirement fund instead.

But the much better approach is for you guys to do some reading and decide on an allocation that suits your situation.
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Old 03-23-2012, 06:40 PM   #7
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Well, to do this right you first need to decide on the mix of assets you both would like to have--that's step one before diving in to a particular fund. I recommend you read up on that (visit the FAQ's here, etc) and then we can help you pick some funds.
A good idea, this might be a good place to start. Your risk tolerance is uniquely your own, not what someone else suggests. https://personal.vanguard.com/us/FundsInvQuestionnaire
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Old 03-23-2012, 07:08 PM   #8
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While I echo what SamClem says I also agree that you could do much worse than the Lifecyle recommendation. The question to ask the Vanguard rep is the recommendation based on your husband's age or your. I'd be inclined to focus on your needs as your life expectancy is so much higher.

With a fairly small balance I'd also be inclined to pay off your 6.2%. You don't have to pay off all at once maybe 25K now and 25K at the end of the year or when every you feel you have a sufficient emergency fund.
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Old 03-23-2012, 07:31 PM   #9
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A Life Strategy or Target Retirement fund is fine if you have only tax advantaged or only taxable savings. If as you say you are about to start putting substantial money into taxable accounts, then it would make more sense to use the three component funds - Total Stock, Total Bond, and Total International. Put the Bonds in tax advantaged, the International in taxable, and the Total Stock wherever space is left. You will pay less in taxes that way and save a bit on the expense ratio although all Vanguard funds are pretty low cost.

I would definitely pay off the mortgage vs keep it and invest in bonds yielding 2%.
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Old 03-23-2012, 09:07 PM   #10
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Quote:
Originally Posted by grasshopper View Post
Without knowing more about your situation, and just looking at Life Strategy Conservative Growth Fund, it seems to cover all the legs of the stool.

http://www.early-retirement.org/foru...1&d=1332543840
If you want a 60 fixed/40 equity AA, then this is a easy way to get there. I'm more of a DIY and would just buy the Admiral shares in similar proportions, which would reduce your expense ratio somewhat.

I actually own the same funds (albeit the Admiral share versions and 40/60 rather than 60/40) and have for many years and have been quite pleased with Vanguard.

On the mortgage, I agree with others that at 6.2% it makes sense to pay it off unless it would deplete your emergency fund below your level of comfort. Where else can you earn a risk free 6.2%?
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Old 03-24-2012, 01:49 PM   #11
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Thanks for all the good suggestions. I really appreciate the time everyone takes to help.

I will do some more homework as suggested before committing to a path with Vanguard.

I agree about the mortgage. There has been some rumblings about my husband's employer giving us an opportunity to move, so I wanted to keep our cash reserves available until I knew which way that was going to go. If we end up staying put then I will be paying the mortgage off this yr. Most likely in a couple chunks as suggested.
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Old 03-24-2012, 04:08 PM   #12
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Given that you are moving from a stable value fund, the Life Strategy Conservative Growth Fund sounds like an excellent way to add some growth with no work on your part. Check how soon you would be able to move out of that fund without an early redemption fee. Once that period is over you can move into other funds if you want something more complex or with a different allocation.

Paying off the mortage would be nice since the interest rate is high. You could consider refinancing if you don't want to deplete your savings. Semi-best of both worlds with a lower interest rate and your savings still in place.
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Old 03-24-2012, 04:12 PM   #13
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If you don't want to just pay off the mortgage, I would look to refinance it. Many banks will offer you a HELOC with no closing costs, an interest rate under 4% and probably a line of credit significantly in excess of your present balance.
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Old 03-24-2012, 04:50 PM   #14
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The advantage to one of the LifeStrategy or Target Retirement funds over "DIY" is that Vanguard takes care of the rebalancing to maintain your asset allocation.

We rolled over 401Ks into Vanguard IRAs using LifeStrategy Growth about 10 years ago when I had no time for dealing with rebalancing, etc. Have been satisfied overall.

Just rolled over the remaining 401Ks into VG as well but this time I decided to go "DIY" with several index funds. I'll monitor how well I do at this compared to LifeStrategy for a few years to see if it's worth the additional work.
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Old 03-25-2012, 10:38 AM   #15
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I think you could do a whole lot worse, all things considered. You could roll evrything into the suggested fund and then take your time reading and rsearching. If, in time, you want a more hands on approach, it is easy enough to move funds around.

Last year, we moved our IRA accounts to VG (from a fee based CFP with Smith Barney). I left the funds as they were for about six months (we had a number of front load, high ER funds) while I rsearched and learned. Then I moved them to VG funds. I'd have saved us money if I'd just moved everything to a fund like the LS fund while doing my due diligence.

I did post questions on the bogleheads' aite and received some excellent advice and suggestions.
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Old 03-25-2012, 11:20 AM   #16
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Originally Posted by TiredinTX View Post
Thanks for all the good suggestions. I really appreciate the time everyone takes to help.

I will do some more homework as suggested before committing to a path with Vanguard.

I agree about the mortgage. There has been some rumblings about my husband's employer giving us an opportunity to move, so I wanted to keep our cash reserves available until I knew which way that was going to go. If we end up staying put then I will be paying the mortgage off this yr. Most likely in a couple chunks as suggested.
Vanguard gave you very good advice. They probably realized that you are not an investing geek like many on this board and needed a balanced fund that rebalances automatically. The Life Strategy Conservative Growth Fund is exactly that and a good choice for your situation. Many investment advisers and mutual fund companies would have pointed you to more complicated and expensive investments that would have been better for them, but not necessarily for you.

Stay with Vanguard and research some "couch potato" portfolios.
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