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Safer ROTH alternative for market downturn?
02-19-2020, 06:20 AM
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#1
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Dryer sheet wannabe
Join Date: Feb 2020
Location: Princeton
Posts: 18
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Safer ROTH alternative for market downturn?
Hello,
I just now joined this forum after finding it....
I am a very healthy 57 year old male, single, no kids, living in NJ. With the exception of a small mortgage balance of 38K, I have ZERO debt...no credit card, no car payments, no student loans, NOTHING. I have a 15 month emergency fund to cover all expenses in the event of a job loss.
I have been contributing 33% of my salary towards retirement and my combined asset total in both my 403(b) and my ROTH is $650,000.00.
I feel I am broadly diversified in my 403(b) but not so much with my ROTH, which I have T Rowe Price's Capital Appreciation Fund. I know it has been a
amazing fund over the last 10 years but a financial advisor I recently met with feels this fund will lost a fair amount in the next market crash and feels my ROTH should be just a bit my diversified and a bit more conservative so when the downtown comes, I don't lose that much.
I plan on working at least 10 more years to 67.
So with that said, what might be a better choice as a SINGLE CORE fund to hold in my ROTH?? I would appreciate all recommendations!
Thanks
Michael in NJ
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02-19-2020, 06:27 AM
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#2
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Thinks s/he gets paid by the post
Join Date: Aug 2010
Location: Back woods of Fennario
Posts: 1,170
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The lowest cost TSM fund you can find? Also dump the FA - that will help your returns over the next 10 years tremendously.
__________________
"Time wounds all heels...." - Groucho Marx
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02-19-2020, 06:30 AM
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#3
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Dryer sheet wannabe
Join Date: Feb 2020
Location: Princeton
Posts: 18
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LRDave,
Sorry, I am not familiar with the lingo and abbreviations here..whats TSM and FA??
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02-19-2020, 06:33 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2016
Location: Northern Virginia
Posts: 7,514
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Do you plan to draw money from the Roth after a downturn? If not, I am not sure it is an issue. Just continue to hold, investments will recover.
I have traditional IRAs and Roths. The Roths are invested for long-term growth. I will tap these last.
Traditional IRA's and taxable both hold a mixture of cash, debt and stocks, so I have safer alternatives to draw from in a down market.
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02-19-2020, 06:36 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Nov 2013
Posts: 1,027
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Welcome to the forum,
Tell us more about yourself.
Income and expenses etc...
How long have you been saving at 33% of your salary?
I hear that people are very happy with vanguard wellesley fund VWIAX
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02-19-2020, 06:40 AM
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#6
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Dryer sheet wannabe
Join Date: Feb 2020
Location: Princeton
Posts: 18
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NgineER,
Income is $72K a year, been saving at 33% for at least 5 years now and plan to increase to 37-38% this year. Monthly expenses about $2500.
At 57, the Wellesley Fund seems a bit too conservative at 40% bonds, 60% stock. Seems a bit conservative for 57 year old with 10 more years left till retirement. no?
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02-19-2020, 06:46 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,201
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Quote:
Originally Posted by michaelc
....but a financial advisor I recently met with feels this fund will lost a fair amount in the next market crash...
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Your FA is an idiot. Reality check, all 55/45 blended funds will lose fair amount in the next market crash... and then they will recover. That looks to be a fine fund to me.... I'd stick with it.
Ditch the FA.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-19-2020, 06:47 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,201
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Quote:
Originally Posted by michaelc
LRDave,
Sorry, I am not familiar with the lingo and abbreviations here..whats TSM and FA??
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TSM = Total Stock Market
FA = Financial advisor
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-19-2020, 06:50 AM
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#9
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Dryer sheet wannabe
Join Date: Feb 2020
Location: Princeton
Posts: 18
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pb4uski,
Thanks, but what's with the name calling?? Is that really necessary? Secondly, he is NOT my advisor, I only did a complementary meeting with him for advice. I DO NOT have a financial advisor.
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02-19-2020, 06:57 AM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,201
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Quote:
Originally Posted by michaelc
NgineER,
Income is $72K a year, been saving at 33% for at least 5 years now and plan to increase to 37-38% this year. Monthly expenses about $2500.
At 57, the Wellesley Fund seems a bit too conservative at 40% bonds, 60% stock. Seems a bit conservative for 57 year old with 10 more years left till retirement. no?
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I agree, Wellesley is more appropriate for conservative investors in retirement.
Wellington is Wellesley's less conservative cousin.
However, you should probably also think about tax efficient placement. I would decide what I want my overall asset allocation (AA) to be, then fill the 403b with fixed income up to your fixed income allocation and the fill out the rest with stocks. That will also put higher growth equties in your tax-free Roth and keeping bonds in your 403b since withdrawals will be taxes as ordinary income when withdrawn.
Having stocks in tax-deferred accounts effectively converts growth that would be tax at preferential tax rates to income that will be taxed at ordinary tax rates.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-19-2020, 06:58 AM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,201
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Quote:
Originally Posted by michaelc
pb4uski,
Thanks, but what's with the name calling?? Is that really necessary? Secondly, he is NOT my advisor, I only did a complementary meeting with him for advice. I DO NOT have a financial advisor.
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I would think that is pretty benign by NJ standards, but perhaps Princeton is different.
My point was that what you are in is a fine fund and there is no reason to change.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-19-2020, 07:08 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Mar 2012
Posts: 3,925
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Not being diversified in each of your accounts is not necessarily taboo depending on the amounts we're talking about. If the Roth is say 10% of the $650k, then you could be fine. On the other hand, if the Roth is 80% with all of it in the TRP fund, then some diversification is likely warranted.
Quote:
At 57, the Wellesley Fund seems a bit too conservative at 40% bonds, 60% stock. Seems a bit conservative for 57 year old with 10 more years left till retirement. no?
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Absolutely not! Without understanding the investor (you), there is nothing which dictates what is "too conservative". What is your level of risk tolerance? At 57, you are within sight of retirement. If the market were to tank next week, and your $650k all of a sudden turned into $400k, could you handle that? Would you lose any sleep over the situation? One popular investment approach is "your age in equities", would have you roughly at 60/40, so Wellesley would be ideal. I'm not saying it's the right approach for everyone, but it is one that is widely accepted.
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02-19-2020, 07:14 AM
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#13
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Dryer sheet wannabe
Join Date: Feb 2020
Location: Princeton
Posts: 18
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Njhowie,
Wee
My Roth is 19% of the 650K. And sorry, I got the Wellesley allocation wrong, its 60% bonds, 40% stocks! Wellington is 60% stocks and 40% bonds.
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02-19-2020, 07:23 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Aug 2010
Location: Back woods of Fennario
Posts: 1,170
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Quote:
Originally Posted by michaelc
LRDave,
Sorry, I am not familiar with the lingo and abbreviations here..whats TSM and FA??
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My apologies - I did not notice the post count before responding. pb4uski defined the acronyms for you already.
__________________
"Time wounds all heels...." - Groucho Marx
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02-19-2020, 07:27 AM
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#15
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Thinks s/he gets paid by the post
Join Date: Mar 2012
Posts: 3,925
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I don't see anything particularly bad with having ~20% in the TRP Capital Appreciation fund. I'm looking at the fact sheet for the fund and it says 50% to 70% equity - so it is inline with what you're leaning towards.
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02-19-2020, 07:30 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,201
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Quote:
Originally Posted by njhowie
....On the other hand, if the Roth is 80% with all of it in the TRP fund, then some diversification is likely warranted. ...
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Howie, what is your reasoning? The TRP AA is below:
Category | % of Total Net Assets | Market Value (USD) | Convertibles | 3.20% | $1,242,300,091.28 | Global ex-US Bonds | 1.13% | $438,687,219.73 | Global ex-US Stock | 3.83% | $1,486,877,921.75 | Options | -0.24% | ($93,172,506.85) | Preferred | 1.77% | $687,147,237.99 | Reserves | 18.11% | $7,030,642,079.06 | US Bonds | 19.91% | $7,729,435,880.40 | US Stock | 53.56% | $20,792,997,777.72 | Total Allocation | | $38,821,877,852.36 |
And it looks like they have over 200 different stocks. They're making some sector bets for Healthcare, Industrial and Business Services and Utilities and against Consumer Staples, Communication Services and Energy, but that is what managed funds do.
According to Portfolio Visualizer the funds has better risk adjusted returns and less market correlation than a generic 60/40 index fund porfolio.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-19-2020, 07:38 AM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,670
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MichaelC, where is the Roth held?
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02-19-2020, 07:38 AM
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#18
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Thinks s/he gets paid by the post
Join Date: Jul 2013
Posts: 1,871
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Quote:
Originally Posted by michaelc
So with that said, what might be a better choice as a SINGLE CORE fund to hold in my ROTH?? I would appreciate all recommendations!
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Hello Michael.
Instead of asking strangers on the 'net which fund to buy, I suggest you educate yourself so you can answer this question yourself.
Start here: https://www.bogleheads.org/wiki/Bogl...g_start-up_kit
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02-19-2020, 08:04 AM
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#19
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Thinks s/he gets paid by the post
Join Date: May 2014
Posts: 1,390
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I would keep PRWCX. I have never found a better conservative fund and I have looked high and low. I have it as part of my Roth Ira . I am not sure what the FA you met with is thinking but go back and look at the yearly returns for Capital Appreciation and then make your own decision. My vote says keep the money in your Roth right where it is.
__________________
Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things. Charlie Munger
The first rule of compounding: Never interupt it unnecessarily. Charlie Munger
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02-19-2020, 08:08 AM
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#20
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Dryer sheet wannabe
Join Date: Feb 2020
Location: Princeton
Posts: 18
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Again guys, I DO NOT have a FA! I only did a complementary meeting with him for some advise! They are a well known, respected fiduciary firm out of both Philly and NYC. I am NOT paying a FA.
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