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What to do with this Roth?
Old 02-09-2014, 09:21 PM   #1
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What to do with this Roth?

Hello all,

I have a Roth IRA that I contributed to in 2005-2007 before knowing anything about investing. Since I was young, I made overly aggressive choices, and my Roth's poor performance kept me out of the market for years after. I never sold anything. I don't know what to do with this account. I want to make changes, maybe even buying VEIEX since it's having a hard time, but I can't contribute anything. I have a TIRA that I established after finding this forum in 2013. I don't have a hard AA yet, but the majority of my new investments go in S&P500 indexes and I have some bond funds, too, now. I figured I would let this ride while I focus on future investments, but keep getting an itch to do something with it.

The Roth is 12% of my portfolio.

5.8K - VEIEX - Emerging Markets (down a lot, less than I bouhght it for years ago)
3K - VHGEX - Global Equity Fund (flat)
3.3K - VGSIX - REITs (doing ok)
1.5K - VGSTX - STAR (doing well)

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Old 02-10-2014, 05:45 AM   #2
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I don't wish to sound unkind, but it's very difficult to read your post without concluding that you are suffering from a strong and ongoing case of recency bias. Emerging markets were hot in 2005-2007, so you naturally put much of your Roth IRA contributions there. More recently U.S. stocks have outperformed international, so the traditional IRA that you established last year is getting a heavy dose of S&P500 index funds.

Please stop doing this ASAP, pronto, macht schnell. You don't have a fixed asset allocation, so sit down and figure one out. Then in the future make your contributions to keep your asset allocations in line with your targets.

If I may be permitted a little speculation regarding VEIEX, I personally think it would be a mistake to sell it now. The bad performance you've experienced over the years has led to reasonable valuations for EM, so I think that its performance over the next ten years will be much better than what you've seen so far.

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Old 02-11-2014, 10:26 PM   #3
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I guess I can see how you came to that conclusion, and you're right on 2005-2007 Roth purchases, I bought what was aggressive and hot at the time.

Now since then, I'm doing things differently. I've bought everything under basic Bogleheads philosophy (working my way through the book). While I don't have an AA on paper (yet), it's generally 60% US stocks (via indexes), 20% foreign stocks (via indexes), 20% bonds. All the investing happening now, is happening automatically, which was a key part for me. I know I'll have to tweak periodically.

Now, back to my question. The ROTH has just been sitting there, off on its own, since I can't contribute anymore...and also I've been reading that a lot of people keep a round a small chunk of EM and REIT in their portfolios. I guess if I wanted to exchange funds I could do that. But is my only option for adding new money to the Roth via a Roth conversion? Is that even worth doing? Or should I just buy a bit of VEIEX while it's low in my TIRA and let it ride?
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Old 02-12-2014, 06:38 PM   #4
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Are you now above the income limits for a Roth? You may be able to do a backdoor Roth:
Backdoor Roth IRA - Bogleheads

I would treat the Roth IRA the same as any of your other tax advantaged accounts and would generally hold the same type of investments there as the others.
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Old 02-12-2014, 07:48 PM   #5
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I would agree you treat the Roth like its part of your portfolio in your AA, but since it's growth is tax free forever I would keep it all equities, low cost Index of course. Regarding adding to Roth, would you convert trad. IRA to Roth if this Roth didn't exist? I believe in a mix of taxable, tax advantaged and tax free, you need to look at your future needs for money and at what age to answer this question. Often Roths which have no mandatory withdrawals are a great end game to be passed to heirs.
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Old 02-12-2014, 08:03 PM   #6
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As long as it fits your "soft" AA, it is doing fine. It won't go stale if you're not adding to it every year. Those are reasonable funds in it. Let it grow.

I have tons of EM and REITs in my portfolio, but always a constant percentage of the portfolio and rebalanced as needed to keep the close to that percentage.
I've been buying EM since it has severely lagged US equities.

Get that AA figured out, and apply it to your portfolio as a whole. It's OK to have EM in Roth, bonds in 401k, and US equities in a taxable account. As long as the whole portfolio follows the AA.

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