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2021 contribution plans
Old 11-26-2020, 01:47 PM   #1
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2021 contribution plans

Hi, all

So looking for advice I currently have FZROX (zero total market) and FXAIX (fidelity's 500 index) in my Roth IRA account just started the account this year, it's split evenly $3000 and $3000, but was wondering thoughts on what I should do with next years contribution? Both funds have done quite well. Should I put more into FZROX or FXAIX? Thinking about putting $5000 into one and $1000 into the other or $4000 and $2000.

I also thought about putting some money into an international fund or bond fund maybe $1000 but I'm still young, going to be 26, so seems best to take the risk. Got at least 20+yrs to ride it out. I could add a bond/international fund to my brokerage account maybe.

In my brokerage account I have FXAIX also along with three individual growth index funds (small, medium, and large). Essentially a total market index comprised of 3 separate funds, but my thinking was it will be easy to balance by just adding money without selling anything.The goal is to keep and hold everything long-term.

Any advice would be much appreciated.
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Old 11-26-2020, 02:40 PM   #2
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I would just exchange all your money in the Roth to a Fidelity Freedom Index fund and contribute to that fund. The 2030 fund would probably be OK for now.

Otherwise, you seem to asking people to predict the future for you. How can they do that?
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Old 11-26-2020, 03:36 PM   #3
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A 2030 fund for a 26 yo with a 20+ year horizon? That seems very conservative. Too much so, IMO.

FZROX and FXAIX have a big overlap. FZROX will have a lot more stocks in it, but the bulk of it is dominated by the S&P stocks in FXAIX. What I'm saying is there won't be much of a difference, whether you pick one, split them 50/50 or whatever. I'd probably just keep doing what you're doing.
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Old 11-26-2020, 03:56 PM   #4
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A 2030 fund for a 26 yo with a 20+ year horizon? That seems very conservative. Too much so, IMO.
Right. The OP needs to think about this for themselves.
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Old 11-26-2020, 04:16 PM   #5
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If I was holding FZROX and FXAIX in the same account, I would sell FXAIX and buy FZROX. I don't see a point in holding a total stock market fund and a SP500 fund, I would just put it all in total stock market.
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Old 11-26-2020, 05:18 PM   #6
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Welcome @_MEOW_. You really have only one investment, US total market. The S&P 500 is about 80% of the total market cap and the total cap is highly corellated with the S&P. One good way to look at things like this is with Portfolio Visualizer (https://www.portfoliovisualizer.com/. There's nothing actually wrong with what you have, but you're not getting any value from keeping track of multiple near-identical funds.

At your age I would suggest 100% equities with up to about 50% international. Here are a couple of references on that: Vanguard "Global equity investing:The benefits of diversification and sizing your allocation" https://www.vanguard.com/pdf/ISGGEB.pdf and
French on International: https://famafrench.dimensional.com/v...home-bias.aspx

Investment guru Bill Bernstein has a 19-page paper directly aimed at you and it's a free download: "If You Can" https://www.etf.com/docs/IfYouCan.pdf I don't agree with his portfolio recommendation for someone your age, but he references a number of good books that will help guide you.

Here is something to tattoo on the inside of your eyelids. It's from famous investor Warren Buffett: "Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell. ... Lethargy bordering on sloth should remain the cornerstone of an investment style."

Good luck! You are off to a great start.
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Old 11-26-2020, 06:46 PM   #7
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How about my brokerage account?

Does it make sense to have small, mid, and large cap growth index funds vs. just a total market index fund? I think I may need to wait to consolidate and buy a total market fund, but I like having the option of putting more money into a certain cap. My thinking is was that having all three small, mid, and larger will allow me to balance exposure. To be say 40% large and 30% mid/small or split evenly ect...

I currently have:
$3000 in large cap growth (FSPGX)
$2000 in mid cap growth (FMDGX)
$2000 in small cap growth (FECGX) both the small and mid are new funds added last July. All seem to be performing well though!
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Old 11-27-2020, 05:12 AM   #8
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Originally Posted by _MEOW_ View Post
Hi, all

So looking for advice I currently have FZROX (zero total market) and FXAIX (fidelity's 500 index) in my Roth IRA account just started the account this year, it's split evenly $3000 and $3000, but was wondering thoughts on what I should do with next years contribution? Both funds have done quite well. Should I put more into FZROX or FXAIX? Thinking about putting $5000 into one and $1000 into the other or $4000 and $2000.

I also thought about putting some money into an international fund or bond fund maybe $1000 but I'm still young, going to be 26, so seems best to take the risk. Got at least 20+yrs to ride it out. I could add a bond/international fund to my brokerage account maybe.

In my brokerage account I have FXAIX also along with three individual growth index funds (small, medium, and large). Essentially a total market index comprised of 3 separate funds, but my thinking was it will be easy to balance by just adding money without selling anything.The goal is to keep and hold everything long-term.

Any advice would be much appreciated.
https://www.bogleheads.org/wiki/Bogl...g_start-up_kit
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Old 11-27-2020, 05:15 AM   #9
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Originally Posted by _MEOW_ View Post
How about my brokerage account?

Does it make sense to have small, mid, and large cap growth index funds vs. just a total market index fund? I think I may need to wait to consolidate and buy a total market fund, but I like having the option of putting more money into a certain cap. My thinking is was that having all three small, mid, and larger will allow me to balance exposure. To be say 40% large and 30% mid/small or split evenly ect...

I currently have:
$3000 in large cap growth (FSPGX)
$2000 in mid cap growth (FMDGX)
$2000 in small cap growth (FECGX) both the small and mid are new funds added last July. All seem to be performing well though!
Sounds like you need to do some reading. Start w/ the link I posted above.

You seem to be looking at recent returns as an indication of what to invest in. That would be a mistake.

You'll need to determine your asset allocation and then stick with it. Again, read the link above.
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Old 11-27-2020, 10:02 AM   #10
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How about my brokerage account? ..!
Most of the comments you'll get here are going to be about your whole portfolio regardless of what accounts hold what assets. That is really the only sensible way to look -- the whole thing.

Once the overall picture looks good, then there is a second level of planning re which assets are best held in the various accounts. I think the general rule is to hold assets that throw off income in tax-sheltered accounts and hold assets that produce capital gains and international assets in taxable accounts. There are lots of threads here and lots of opinions.

Quote:
Originally Posted by _MEOW_ View Post
... Does it make sense to have small, mid, and large cap growth index funds vs. just a total market index fund? I think I may need to wait to consolidate and buy a total market fund, but I like having the option of putting more money into a certain cap. My thinking is was that having all three small, mid, and larger will allow me to balance exposure. To be say 40% large and 30% mid/small or split evenly ect. ..!
In a word, no. What you are thinking about here is something we have all thought about and most of us have done: Trying to predict the market. Occasionally we will get lucky and from that begin to suspect that we might be geniuses, but the brutal truth usually comes quickly. In addition to Buffett's admonition above I will remind you of what your mother undoubtedly told you in a different context: Don't play with your food.

The "quilt chart" famously illustrates the futility of predicting sector performance: https://www.callan.com/periodic-table/

I teach an Adult-Ed investing class and one of the final points I make is this: Investing is boring. If you're not bored you're not doing it right.
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Old 11-27-2020, 10:04 AM   #11
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Originally Posted by jimbee View Post
if i was holding fzrox and fxaix in the same account, i would sell fxaix and buy fzrox. I don't see a point in holding a total stock market fund and a sp500 fund, i would just put it all in total stock market.
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Old 11-27-2020, 12:11 PM   #12
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Makes sense I suppose its like hiking you can take the trail, that has been established, might be a longer path to success reaching the peak (retirement). Or attempt to go off trail, which might be quicker but require more work. Conversely it might end up as a complete failure and require going back to the established trail albeit with valuable time (money) lost. I like FXAIX as it's a sp500 fund, but FZROX is very similar it holds more companies but the difference is negligible. And agreed it doesn't make sense to have both. Either consolidate to one or the other.

In terms of my brokerage account I don't want to play with my food particularly and constantly adjust. My idea was to follow the 3 fund portfolio approach there. For example 35% large cap, 25% mid cap and 20% small cap (80% of the account) then 10% international and 10% bond (for now). Maybe it would be best to consolidate all three of the cap index funds into FZROX as well.

Then just look at the brokerage and ira together and balance towards the 3 fund portfolio approach.
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Old 11-27-2020, 12:34 PM   #13
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Originally Posted by _MEOW_ View Post
... I suppose its like hiking you can take the trail, that has been established, might be a longer path to success reaching the peak (retirement). Or attempt to go off trail, which might be quicker but require more work. Conversely it might end up as a complete failure and require going back to the established trail albeit with valuable time (money) lost. ... My idea was to follow the 3 fund portfolio approach there. For example 35% large cap, 25% mid cap and 20% small cap (80% of the account) then 10% international and 10% bond (for now). ...
Yes, stay on the proven hiking trail. Good metaphor. You only get one hike, so experimentation is dangerous.

Bill Schultheis ("The Coffeehouse Investor") has a neat gedanken demo he calls "outfox the box." Visualize ten boxes containing amounts ranging from $1,000 to $10,000 and the value written on the end of the box. Now pick one of the boxes. No brainer to pick the $10,000 box, right? Now blank out the numbers on all the boxes except the $8,000 box -- the others are blind. Now what box would you pick? Hint: The $8,000 box is the proven trail. Your odds of picking a better box are low.

Re your ides, do this: Use portfoliovisualizer to compare yours to a portfolio that is 80% total us market, 10% total international market, and 10% bond. Use actual tickers. Then see what you get. There will be differences in return, probably small, and dependant on the time period but your eyeballs will tell you whether the two options are essentially the same.

You are a guy who is interested in the guts of the machine. IMO portfoliovisualizer would be a good tool for you to master.
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Old 11-27-2020, 08:00 PM   #14
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What do I use on portfoliovisualizer?
I tried out the https://www.portfoliovisualizer.com/backtest-portfolio option, but results seem questionable if you add bonds as 75% the return rate skyrockets.Also since most are fairly new funds will it work? The bond fund has been around since 2005 and is the oldest large cap since 2015, the other are all fairly new mid/large caps are 2019, total market/international are 2018.

Below is my brokerage account with the 5 planned funds which looks fine the % aren't completely perfect but was trying to keep investment amounts round numbers. The IRA is below that, which if I change would be 100% FZROX was playing with different % amounts to play around.

I like the brokerage account (portfolio 1) make up


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