Vanguard Advisor's Portfolio Proposal

[hnzw_rui]

But paying a manager won't change the fluctuations, and the angst will still be there.

No but they will hold your hand through it and do the rebalancing for you. Granted, pretty expensive for hand holding service. I'd rather go with a cheaper balanced fund for the automatic rebalancing. Alas, no hand holding.

Steps to avoiding stress and improving investment results:
1) Determine the desired asset allocation
2) set up the portfolio
3) Don't check the balance or look at the statements.
4) in December, make a withdrawal for all of the next year's spending, put into a MM fund for monthly transfers to bank account. Rebalance all the investments back to the desired allocation from Step 1.
5) Repeat steps 3 and 4 until dead.

Don't consider daily, monthly, quarterly fluctuations to be gains or losses. All that matters is the price the asset brings on the date you sell it.

+1.

Personally, I'm planning on going all in with LifeStrategy Conservative Growth, Target Retirement Income or Wellesley Income when I retire, tax efficient placement be damned. Should take away much of the stress. Just need a once a year balance check for RMDs and schedule automatic withdrawals for the year.

 

[N02L84ER]

Hi LOL!
I invested $100,000 in Vanguard Intermediate-term Treasury Fund on 10/28 and it's now valued at $9898.03. I wasn't expecting a loss of over 1K from a Treasury fund in November. I bought it because I thought it was safe and secure. Typical rookie mistake, huh?

No more bond funds for me. Too risky. Thought they were supposed to be a buffer. Equities and cash or CDs in the future. Glad I didn't invest more.

Your thoughts? Please be candid. I realize I am in a learning curve and I seek advice of more seasoned investors. I have spent my life teaching primary school and am new to investing especially against robots and high-frequency traders.

Goldenmom

Something is wrong with your numbers. Did you invest $10,000 and it is now worth $9,898.03 (you only lost $101.97 or 1.02%)? Or did you really invest $100,000 and it is now only worth $9,898.03 as you posted in which case you lost $90,101.97 or 90.1% and you REALLY SHOULD PANIC!

 

[statsman]

Something is wrong with your numbers. Did you invest $10,000 and it is now worth $9,898.03 (you only lost $101.97 or 1.02%)? Or did you really invest $100,000 and it is now only worth $9,898.03 as you posted in which case you lost $90,101.97 or 90.1% and you REALLY SHOULD PANIC!

Given the OP mentioned over a $1K loss, I suspect $9,898.03 is really something like $98,98x.xx.

 

[N02L84ER]

statsman
I suspect you are right and that is only the 1.02% loss. Nothing to panic about. I just wanted to be cute and show that the calculation as posted was a 90% loss.

 

[samclem]

Since I'm still funding my accounts, I do tend to watch my accounts daily to see if it is a good day to add more. Interestingly, they are up one day and down the next. This pattern makes it hard to time my buys, so I just buy a little bit a day now. I fancy that I am value averaging and in fact have noticed that I have bought at lower prices by buying incrementally across days due to the volatility.

As you've seen, it's not really practical to buy on the dips (but we've all tried it!). Buying a set dollar amount every day/week/month until the desired allocations are reached ("dollar cost averaging") is a low- stress way to get into the market. Studies show it actually doesn't result in returns as high, on average, as just investing a lump sum all at once (because markets trend up overall, and money in a cash account waiting to be invested sits idle). But, the difference is minor, and in any one particular case DCAing might prove superior.

Regarding the portfolio overall--don't get stressed out over the details of the allocation. Nobody knows what is coming next, none of us will, in retrospect, have an ideal allocation. Avoid the big errors (high costs, lack of diversification, lack of regard for inflation) and you'll do fine if history is any guide. And if history isn't a guide, at least you'll have a lot of company!

 

[statsman]

As you've seen, it's not really practical to buy on the dips (but we've all tried it!). Buying a set dollar amount every day/week/month until the desired allocations are reached ("dollar cost averaging") is a low- stress way to get into the market. Studies show it actually doesn't result in returns as high, on average, as just investing a lump sum all at once (because markets trend up overall, and money in a cash account waiting to be invested sits idle). But, the difference is minor, and in any one particular case DCAing might prove superior.

Doesn't DCAing in a taxable account increase the complexity of determining the basis for the assets sold at a later date?

 

[Mulligan]

Doesn't DCAing in a taxable account increase the complexity of determining the basis for the assets sold at a later date?

If buying index funds, they all take care of it now as long as you are using average cost.


Sent from my iPad using Tapatalk

 

[samclem]

If buying index funds, they all take care of it now as long as you are using average cost.

True, but even better than that now. With a change in reporting requirements as of a couple of years ago, almost all brokers track specific shares for their customers. It is now very easy to sell shares bought on a particular date. With Vanguard (and probably most others) the customer gets a pull down menu showing all the shares and their prices bought on various dates, they can just pick and choose which to sell. The gain/loss gets reported to the IRS, no need for the customer to manually track specific shares anymore.

In the past, I always used "average cost basis" because tracking was such a PITA. Now, as lazy as I am, I've still gone to the "specific shares" basis method because it is so easy and allows greater control over tax liabilities.

 

[Mulligan]

True, but even better than that now. With a change in reporting requirements as of a couple of years ago, almost all brokers track specific shares for their customers. It is now very easy to sell shares bought on a particular date. With Vanguard (and probably most others) the customer gets a pull down menu showing all the shares and their prices bought on various dates, they can just pick and choose which to sell. The gain/loss gets reported to the IRS, no need for the customer to manually track specific shares anymore.

In the past, I always used "average cost basis" because tracking was such a PITA. Now, as lazy as I am, I've still gone to the "specific shares" basis method because it is so easy and allows greater control over tax liabilities.

You shoulda kept your trap shut, Sam as you may have earned yourself a PM from me. . I declared average cost on some sales of a mutual fund, but would rather push it forward next year because I am dangerously close to losing a tax credit. I have Vanguard. Didnt see a pull down, but I will refocus and see if I can figure it out before I bother you.


Sent from my iPad using Tapatalk

 

[samclem]

You shoulda kept your trap shut, Sam as you may have earned yourself a PM from me. . I declared average cost on some sales of a mutual fund, but would rather push it forward next year because I am dangerously close to losing a tax credit. I have Vanguard. Didnt see a pull down, but I will refocus and see if I can figure it out before I bother you.

If you've sold already, it may be too late. If not, look for the "Select cost basis method" tab to the right after you select "Sell shares". Shares you bought before 1 Jan 2012 will show up as a single bunch, and can only be sold using their average cost (unless you've tracked the costs yourself, that is. Before that date, Vanguard didn't track them separately). Any shares you bought after 1 Jan 2012 should show up with separate entries for each purchased batch. Anyway, it works for me.

 

[Mulligan]

If you've sold already, it may be too late. If not, look for the "Select cost basis method" tab to the right after you select "Sell shares". Shares you bought before 1 Jan 2012 will show up as a single bunch, and can only be sold using their average cost (unless you've tracked the costs yourself, that is. Before that date, Vanguard didn't track them separately). Any shares you bought after 1 Jan 2012 should show up with separate entries for each purchased batch. Anyway, it works for me.

Thanks, I will dig. I did select average cost already and sold. But I thought maybe I could change my decision since it isn't Jan. 1 yet. I will check!


Sent from my iPad using Tapatalk

 

[LOL!]

Doesn't DCAing in a taxable account increase the complexity of determining the basis for the assets sold at a later date?

Absolutely not. Nowadays all shares are covered which means the brokerage keeps track of everything for the IRS (and you).

 

[LOL!]

@Goldenmom, so your bond fund held up well today compared to your equity funds? Did you buy more equity fund shares today?

 

[Animorph]

Past history can be a decent indicator of volatility. Take a look at your bond fund's total return chart for the past three or more years. You can't really expect better than that.

I was looking for better returns for my 2 years of expenses worth of cash. The only fund I found that looked relatively stable over that period was a GNMA fund. It was still up and down more than I would have liked, but because it was short-term money I was able to sell high and early and goose my return a bit.

Longer term you just put your money in and if it is diversifying your portfolio and blunting some of the equity ups and downs then it's doing its job.

 

[Goldenmom]

I invested $100,000 and it's value on 11/12 was $98,708.35. (I left out a digit in original post.)

 

[Goldenmom]

Yes, I'm buying more equities every day and more when the market is down. It's been tricky since prices bounce back up again, so I invest in drips.

 

[LOL!]

I gather that you are not following the market timing tips in LOL!'s Market Timing Newsletter then.

(It is one of the most-viewed threads on the forum.)

 

[REWahoo]

(It is one of the most-viewed threads on the forum.)

The forum version of rubbernecking?

 

[steelyman]

The forum version of rubbernecking?

LOL!

 

[Goldenmom]

I will see if I can find it. Thanks!

I thought it would be easy to buy more of a fund when the market is down, but by the time my order goes in prices are up again. I am blaming the robots for this (smile).

Buying into the market in daily drips is the only way I can figure you can catch the dips. Comments?

Really makes you respect David Swensen, as he rebalances daily, huh?

 

[samclem]

Buying into the market in daily drips is the only way I can figure you can catch the dips. Comments?

It's not worth the trouble. You're going to be holding these things for years. What matters is only the difference between the price at which you buy and the price at which you sell. Any daily ups and downs you can capture now will be swamped by the changes after years of holding them. A "dip" is only diagnosable in retrospect. If the stock keeps going down the next day/week, then it wasn't initially a "dip", just the start of a deeper decline. And jumps in price can happen quickly, too soon to be capitalized on unless the person is doing little else. Meanwhile, the "dip hunter" has his money on the sidelines, missing dividends and the overall upward trend in the market (over many years).

Humans are masters of seeing patterns, it's what our brains are wired to do--even when no patterns exist.

 

[LOL!]

Buying into the market in daily drips is the only way I can figure you can catch the dips. Comments?

I don't believe that is the only way.

If you wish to dollar-cost average into the market, (not sure that's legit), then you should create a plan. Here is such a plan:
1. Invest 50% now into your asset allocation.
2. Invest 5% every month for the next 10 months NO MATTER WHAT!
3. If the market drops enough that "LOL!'s Market Timing Newsletter" mentions buying, then commit another 5% to your asset allocation on that day. This will use of one of the 10 monthly buys and cause you to buy twice that month.
4. If there is another "buy" mentioned in the same month, then commit another 5% and that means you will buy 3 times that month.

It is also possible to accelerate your investing schedule. For instance, instead of every month, your plan could be every 3 weeks or every 2 weeks or whatever you decide.

Basically, you will be finished investing within 10 months or less. From there on, you are in "buy, hold, and rebalance" mode. You can use "LOL!'s Market Timing Newsletter" to tell you when to look for rebalancing opportunities which should occur a few times a year, but not very often.

Also be prepared to lose money as investing is all about losing money.

And I think the rubbernecking comment must be true.

 

[pb4uski]

......Buying into the market in daily drips is the only way I can figure you can catch the dips. Comments?

Really makes you respect David Swensen, as he rebalances daily, huh?

No, not really... daily rebalancing sounds like a waste of time to me.

GM, you are making it way too complicated. Chill.

Sent from my SAMSUNG-SGH-I777 using Early Retirement Forum mobile app