Where Should I Put NEW IRA Money?

[cute fuzzy bunny]

One other thing back on the original topic.

I like the lifestrategy and target retirement series.

But I'm not recommending them right now to novice or hands-off investors, probably their best customers.

The reason is that the equity component is based on the total stock market or s&p 500 indexes.

I feel both are very much overvalued right now. DCA'ing over a long period might help this. Maybe not.

I'm generally suggesting that people with large sums to invest make their own small basket from value stocks and either short term corp or intermediate term muni bond funds (the latter if their tax rate is high).

I'd probably buy vanguards large value index in the 40-60% range (depending on my willingness to take risk) and fill out the rest with 5-8% high yield or tax free money market and between 32 and 52% short term corp or intermediate term muni, again depending on the amount allocated to stock.

A little more volatility with the value stocks, but at p/e's in the mid-teens theres less room for downdrafts, and the long term returns are better than TSM and SP500.

The retirement income fund isnt a bad choice, although it doesnt have a huge exposure to stocks...which may be a good thing. Vanguards Wellesley is also a good income option and is weighted towards large cap value and intermediate term non government bond issues.

 

[unclemick]

Shok

I forgot to ask - now that you have the 200k shift rather unexpectedly - what is it's mission asignment. Fight inflation, preserve capital to be tapped in 20 years, help balance overall portfolio asset classes?

I.e. what was it doing before, and what are the plans now? Where does it fit in context with your overall plan.

 

[ShokWaveRider]

Shok

I forgot to ask - now that you have the 200k shift rather unexpectedly - what is it's mission asignment. Fight inflation, preserve capital to be tapped in 20 years, help balance overall portfolio asset classes?

I.e. what was it doing before, and what are the plans now? Where does it fit in context with your overall plan.

It was preserving Capital I suppose and fighting inflation, i.e in Money Market in a 401k earning 4% for some reason Money Market funds, called Stable Value Funds ($1 NAV) in 401ks, appear to earn a lot more than regualr MM funds. I was really happy with a minimum of 4% steady income, and no loss in Principle for the last 5 years. No hope in hell finding that now. So I am looking for alternatives.

As far as plans for it. Not to loose any would be good. I do not need to tap it for 10 years or so. But I get really nervous with the market. I am the type that would see the market go down and pull it out and loose, when I know full well I should just hang in there. Conversly I am also the type who would pull it if it went up 10 - 15%. THis may sound like a paranoid attitude, but I cannot afford to llose any of our capital. (About $1.5m) of which sooner or later we will have to buy a home and settle down. All that said, in 2000 (If I remember) when the stock market went down fast. I pulled everything out of stocks after a 5% drop and invested in MM @ 8%. we only had about $500k cash in those days,(the rest was in a home to toal a net worth of about $900k) but I know folks that lost over 50% of their nest egg then. So I do not think we did that bad.

SWR

 

[charlie]

Hey SWR,

There is more than one way to lose capital. One sure
way is to not allow for inflation!

Feeling as you do, IMHO you should start maxing out
on I-bonds and EE bonds. No loss of capital and they
track inflation (I-bonds a little better). You could find
5 year CDs paying better than I-bonds (3.39% now) but you lose if inflation is higher than the rate baked
into CDs.

Cheers,

Charlie