Investments for Coworker

[freedomatlast]

A coworker recently approached me looking for investment help. From a previous job, he has rolled his 401K from that job into an iRA with Schwab.

He had me take a quick look at the funds the investment advisor put him in. In all, there's at least 15 different funds ranging from small cap, mid cap, REIT's, foreign, you name it, all actively managed with fees to match.

I wanted to suggest a three fund portfolio of index funds from Schwab including a stock fund equivalent to VTSAX,

I know there are some some folks on here that use Schwab and are familiar with their fund offerings and was hoping for some suggestions for him.

[Koolau]

Quote:

Originally Posted by freedomatlast A coworker recently approached me looking for investment help. From a previous job, he has rolled his 401K from that job into an iRA with Schwab. He had me take a quick look at the funds the investment advisor put him in. In all, there's at least 15 different funds ranging from small cap, mid cap, REIT's, foreign, you name it, all actively managed with fees to match. I wanted to suggest a three fund portfolio of index funds from Schwab including a stock fund equivalent to VTSAX, I know there are some some folks on here that use Schwab and are familiar with their fund offerings and was hoping for some suggestions for him.

Not a Schwab guy, but just picking 2 or 3 index funds would already be way ahead of the game for your coworker. Anything he MIGHT lose by not being "managed" he would make up in fees. I favor the Couch Potato type investing as suggested by Scott Burns. Possibly a target-date type fund instead of C-P to handle the balancing. It would be hard to make a (serious) mistake (by comparison to where coworker is now) if you pick funds with low fees. Oh, and if you are giving advice to him, be sure he understands the term YMMV.

[f35phixer]

this is Boglehead Schwab funds.

With Schwab, investors can construct a three-fund portfolio using: [note 1]
Schwab Total Stock Market Index (SWTSX)
Schwab International Index (SWISX)
Schwab U.S. Aggregate Bond Index Fund (SWAGX)

here is note 1
The Schwab International Index is based on the MSCI EAFE index, which does not include emerging market stocks, Canadian stocks, and which has minimal exposure to international small cap stocks.

[easysurfer]

Quote:

Originally Posted by freedomatlast ... I wanted to suggest a three fund portfolio of index funds from Schwab including a stock fund equivalent to VTSAX,

You should have .

[OldShooter]

Quote:

Originally Posted by freedomatlast ... I know there are some some folks on here that use Schwab and are familiar with their fund offerings and was hoping for some suggestions for him.

No need to buy house brand funds any more. We've been at Schwab for decades and have always held primarily VG funds. For a long time Schwab clients couldn't hold the cheapest, Admiral, VG funds but that is no longer the case.

Buy a gift copy for him: "The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Gu.../dp/0470067365

[OldShooter]

Quote:

Originally Posted by freedomatlast ... He had me take a quick look at the funds the investment advisor put him in. In all, there's at least 15 different funds ranging from small cap, mid cap, REIT's, foreign, you name it, all actively managed with fees to match. I wanted to suggest a three fund portfolio of index funds from Schwab including a stock fund equivalent to VTSAX, ...

You are a good friend; the advisor can be most charitably described as an idiot. His sole objective is to make investing look so complicated that the client is afraid to DIY. In contrast, our equity tranche is very serious seven figures an is 95% in one VG fund, VTWAX. It's very simple: we own all the investable stocks in the world on a cap-weighted basis.

[firemediceric]

Quote:

Originally Posted by f35phixer this is Boglehead Schwab funds. With Schwab, investors can construct a three-fund portfolio using: [note 1] Schwab Total Stock Market Index (SWTSX) Schwab International Index (SWISX) Schwab U.S. Aggregate Bond Index Fund (SWAGX)

Do I infer correctly that this approach would have me putting 40% of my money into the SWAGX bond fund? 60/40 stocks to bonds?
It looks like SWAGX YTD return is -.95%. I think I would be crying if I watched the bulls run with so much money sitting idle, or backsliding, in the bond fund. Admittedly, I have a lot of learning to do in this area.

[FI_RElater]

sometimes, rather than a total bond fund (which you note has negative yield)... either a CD or treasury ladder or a shorter term bond fund makes more sense (and is what I do)
...and as noted above, ETF's of Vanguard are available (as well as other decent funds for that purpose) so that the yield might be small but positive

[Koolau]

Quote:

Originally Posted by FI_RElater sometimes, rather than a total bond fund (which you note has negative yield)... either a CD or treasury ladder or a shorter term bond fund makes more sense (and is what I do) ...and as noted above, ETF's of Vanguard are available (as well as other decent funds for that purpose) so that the yield might be small but positive

There may also be some non-bond plays available. You may have access to a Guaranteed Income Fund (GIC). Deferred annuities are another possible play. We've been discussing recently I-bonds. Traditional bond funds are not the only non-equity plays available. YMMV