24 year old trying to get to millionaire by 35, punch holes in me plan

A

AirJordan

Recycles dryer sheets
Joined
Mar 1, 2007
Messages
79
Hey all, first post in this forum. Like the post says I'm 24, and have a 100k a year job (got really lucky don't ask)
I'm basically putting all of my money in the market and after taxes and car notes etc. for the past year I've DCA'ed in about 65k.

My portfolio looks like this as of now:
8k in a Roth IRA, Vanguard Target Retirement 2045, I'll find a better fund but right now I'm a bit swamped with work

10k DODFX (Dodge and Cox)
8k RYVPX (Royce Value Plus)
5k FAIRX (Fairholme)
5k JSVAX (Janus Contrarian)
5k FBRVX (FBR Small Cap)
5k ARTKX (Artisan Small Cap)
10k VPCCX (Primecap Core)
10k VTSMX (Total Stock Market)

I'm going to keep DCA'ing in for the rest of the year, after the market settles down a bit, and try to get all my positions up to 10k. Then I need to find a SCV, and LCV value fund.

Couple of things
1. How's the portfolio look so far?
2. Any suggestions for the SCV and LCV funds?
3. Millionaire by 35 possible?

Thanks for the help
AJ
 
Mathmatically, if you save $65K each and every year, and achieve a 5.5% average annual return on your investments, you can reach $1 million by 35.

Math is easy, execution is more work!
 
5.5%?? I'm not looking for CD like returns, I'm aiming for 12-14% annually over the next 12 year. Any comments on my fund selections?
 
12-14% is kind of conservative. How about 15-17%? :D
 
Here's the plan...

Start with $1000

Take all of your money and go to vegas (or invest in commodities the result is the same).

Using the roulette wheel, bet all of your money on black.

When you win that bet you have doubled your money.

you then let it ride and repeat the process. After you win again you have quadroupled your money.

Let it ride and repeat.

You'll only have to play 10 rounds to become a millionaire.

If a million won't be enough, just play another 10 rounds until you then have a billion.

- now wasn't that easy !
 
So seriously folks....

12 to 14% is ambitious, I think the prevalent school of thought on this forum is 11% is about the maximum you can strive for, and you have to be willing to take the roller coaster ride. Many funds outperform the market for a year or two, but in the long run they don't, plus actively managed funds cut into your returns quite a bit more than indexed funds. I'm not super familiar with all the funds in your portfolio, but I think your expense ratio is well north of 1% - remember, this is your whole portfolio, not 1% of your return. So my advice is less funds, prolly 4-5 would be enough to get all the exposure you need. Go Vanguard, anchor with S&P index, Russel 2000, find cheap international and small cap funds and stick up to 40% of your portfolio in these maybe involve some value funds (Dodge and Cox there is a decent fund). Get your expense ratio overall below .5%.

Like others said, the math is easy, let's take a doable 9% for 11 years with 65k going in every year, I have you at about 1.2 Mil. But

Marriage?
Kids?
Inflation? 1 Mil won't be what it is now, and it's not enough to ensure much of a lifestyle for the 60 years you might need it.
Your job? So you make 100k a year at 24 - that's great, but how can you be so sure that will last? Are you part of a movie star's entourage? Dealing Coke? What skill set is required for this job? What industry is it?

It's great to save money, good job. Have ambitious goals with your finances, great job. But it sounds like you have some areas to flesh out for us (and yourself) before we can intelligently critique your plan.
 
You are getting sarcastic comments because it's extremely hard to achieve an annualized return of 12 to 14%, especially for a long period like 11 years. A more reasonable goal for a balanced portfolio is probably about 8%... for a portfolio of all equities, maybe 10%. Because of a change in the underlying fundamentals during the past decade, some experts believe that these numbers may be optimistic.

A return of that much is not bad... with compounding you can probably double your money in 8 to 10 years. Yes, you can chase higher yields, but after spending a little time investing, you will soon learn that high yields do not come without a price. (volatility)

Most of the people on this board are quite conservative (myself included) and would recommend that you put together a portfolio consisting of index funds invested in multiple asset classes... you should include the following:

Large cap growth stocks
Large-Cap Value
Small-Cap Growth
Small-Cap Value
Developed Int'l Stocks
Int'l Value Stocks
Int'l Emerging Market stocks
A REIT Index fund

A great many of us once believed that you could ear returns of 12 to 14% with little trouble. Most of us that believed that had to learn the hard way. Do yourself a favor and avoid some unpleasant learning experiences.
 
You remind me of me when I was your age. Very similar situation. My goal was $1,000,000 by 40 and I made it at 38.

I wrote out a financial plan on two pages of a spiral notebook one night. I've tweaked a few things, but have stuck to my plan and I made it. Your plan looks better than mine did. You have some advantages over me when I was your age. It is a lot easier for a do it yourselfer than it was 20 years ago. I'm very new to this site, but I believe it will be very useful to you. Income taxes are lower now than they've been in recent history.

The best advice I can give you is: Don't get carried away with what the market is doing. Take fluctuations in stride and stay 100% invested at all times. Keep DCA like you're doing and rebalance regularly. Buy your own home. Stay away from "tax shelter" types of investment unless it is a tax advantaged investment such as IRA's, 401k's, etc... Don't lose focus of your plan if you get married. If you can average 9%-10% annually you'll be fine, don't get too excited about beating the index averages, long term it is very hard. Invest at least part of every raise or windfall you may get.

You've got the most important things you need to make it. A plan, an income and most importantly the desire.

I have no doubts you'll make $1,000,000 by 35. It's not too early to start thinking about your next goal.
 
Laurence said:
(Dodge and Cox there is a decent fund). Get your expense ratio overall below .5%.

Like others said, the math is easy, let's take a doable 9% for 11 years with 65k going in every year, I have you at about 1.2 Mil. But

Marriage?
Kids?
Inflation? 1 Mil won't be what it is now, and it's not enough to ensure much of a lifestyle for the 60 years you might need it.
Your job? So you make 100k a year at 24 - that's great, but how can you be so sure that will last? Are you part of a movie star's entourage? Dealing Coke? What skill set is required for this job? What industry is it?

It's great to save money, good job. Have ambitious goals with your finances, great job. But it sounds like you have some areas to flesh out for us (and yourself) before we can intelligently critique your plan.
Click to expand...

D&C is better than decent, it's the gold standard for mutual funds. It's looking like the sentiment here is indexing is the only way to beat the market...siigh...so deluded. I mean do any of you invest in actively managed funds? Seriously compare DODFX's returns to VGTSX for the past 5 years. 17% annualized vs. 21% annualized. That extra .4% ER doesn't mean anything.

And if you want to know what I do, I graduated law school at 23, yeah I'm a wunderkind of sorts, and do title analysis for a big oil company (won't say which one). Yipes other message boards were much nicer than this one
 
AirJordan said:
D&C is better than decent, it's the gold standard for mutual funds. It's looking like the sentiment here is indexing is the only way to beat the market...siigh...so deluded. I mean do any of you invest in actively managed funds? Seriously compare DODFX's returns to VGTSX for the past 5 years. 17% annualized vs. 21% annualized. That extra .4% ER doesn't mean anything.

And if you want to know what I do, I graduated law school at 23, yeah I'm a wunderkind of sorts, and do title analysis for a big oil company (won't say which one). Yipes other message boards were much nicer than this one
Click to expand...

We're pretty nice, once you get to know us............ :D :D But if you're looking for "diehard Vanguard indexers"............you've come to the right place........... ;)

IMHO, nothing wrong with DODFX, the Dodge and Cox folks are well thought of in the industry.......besides, it's YOUR money............. ;)
 
mclesters said:
Using that Dale Carnegie training to make friends..... :D

Sarah, who owns only actively managed funds, including that Dodge & Cox :D
Click to expand...

Hahah, maybe I should have listened to my dad and read that book. Just a bit surprised here that everyone is so enamored with haystacks here.

And Sarah, since everyone else seems to hate the fact I prefer active management, can I ask for what you think of my portfolio so far?
 
FinanceDude said:
We're pretty nice, once you get to know us............
Click to expand...

Wellll - not all of us - heh heh heh - those with Curmudgeon certificates must practice using them from time to time:

Now pay attention!

Circa 1994 my nephew fresh out of Navy flight school asked a similar question - whereupon I dazzled him with De Gaul (God Looks After Drunkards, Fools, And The United States of America) and presented him with 1994's Bogle on Mutual Funds - explaining there WOULD be a test.

He done good - maybe 9-10 years of TSP's version of 500 Index before last transfer from Whidby to CA(Coronado?) and he went over to the Dark Side falling for all that Slice and Dice claptrap - slipped up read Bernstein's Four Pillars and possibly got too much CA sun - you gotta watch that sunshine when you come directly from the PacNW.

Not a millionaire - but a good base - he promised to keep the 500 and only Bernstein with 'new money'.

Now for your homework - google up Bogles Financial Markets Research Center - read the May 2006 speech at the Vegas Money Show - and decide whether you like active or passive.

The test ? - the next eleven years of Mr Market!

heh heh heh heh - here's hoping we don't get a 1966 - 1982 flat ceiling like when I started investing.
 
AirJordan said:
D&C is better than decent, it's the gold standard for mutual funds. It's looking like the sentiment here is indexing is the only way to beat the market...siigh...so deluded. I mean do any of you invest in actively managed funds? Seriously compare DODFX's returns to VGTSX for the past 5 years. 17% annualized vs. 21% annualized. That extra .4% ER doesn't mean anything.
Click to expand...

Q: Which actively managed fund has beat the S&P 500 for the past 15 years?
.
.
.
.
.
.
.
A: None! Legg Mason didn't make it last year. The next runner up is around 7 years.


Now all you have to do is pick which one will make the new record. You're a wunderkind. I'm sure you can do it!
 
A couple years ago, there was an old guy in our building, whom people refered as one of the greatest investors in the world. Later, I read one of his books. Still remember his performance, 13.8%.
 
AirJordan said:
Hahah, maybe I should have listened to my dad and read that book. Just a bit surprised here that everyone is so enamored with haystacks here.

And Sarah, since everyone else seems to hate the fact I prefer active management, can I ask for what you think of my portfolio so far?
Click to expand...

Forget that book, and read "the four pillars of investing"

LOL, I can't believe you tried to back your stance with a 5 year return history...you planning on dying that soon? How many funds have outperformed the market over 20 years? 30? 40? 50?

It's your money, dude. I've met plenty of people who are very smart, and they think because they beat the averages in education and career, they can beat the market, too. One Ph.D here at work (engineering) was sure he could clobber index returns doing covered calls, then puts and leaps, and all sorts of other things. He even pulled money out of his house to do it. Hasn't talked much about it in a while.

I own some Dodge and Cox, sorry if I didn't gush enough about the fund. ::) I also own Wellington. My international is not an index, so I'm not 100% index.

If you drool over Morningstar ratings and such, well, there's not much more I can say.

But fine, you'll be the one who does it, actively manage all the way, good for you. You didn't get to the other questions in my post about having a life etc. You really think 1 million will be enough to live on for 50 years? Have you used FireCalc yet? Are you expecting 10% + returns every year when you are withdrawing from your portfolio?
 
Hi AirJordan, welcome to the board. I'm in almost the same situation as you so I thought I would chime in. The two questions that come to mind immediately are the stability of your job and your future relationships. Is your job stable? How does the industry look, i.e. is it likely to be downsized or off-shored in the future? On the flip side, maybe your salary is expected to increase considerably over time? Will you need to take 2 years off for an MBA? Relationships are harder to predict. Do you want your future SO to stay at home with any kids? Is it important to you that they keep working? Do you want kids at all? If you stay double income throughout your 20s and early 30s and marry somebody who saves more than they spend, you should be set. What if you fell madly in love with a woman who liked expensive vacations and new cars and the idea of staying home and raising kids in a big house?
 
Laurence said:
It's your money, dude. I've met plenty of people who are very smart, and they think because they beat the averages in education and career, they can beat the market, too.
Click to expand...

LTCM comes to mind when thinking of "genius" types who thought they could play fast and loose with risk.
 
If you can keep up that pace of sinking in ~$65K per year, you should be at $1M easily by the time you're 35. Heck, if you have $65K in already, and keep up that pace for the next 11 years, you will have put in about $780K just in principal.

If you average just ~4.5%, that'll put you at $1M. Of course, you have to factor in taxes on distributions/capital gains, and that nasty little oversight called inflation. :D
 
Um, I am the go-to person for dogs and rural living and old cars....I don't do much mutual fund evaluation....

I know that we (the FA firm for whom I work) own and use Dodge & Cox, Artisan, and Fairholme funds as suggestions for folks whose accounts don't meet SAM minimums. We also like (& I own) T.Rowe Price Cap Appreciation, Oakmark Global, and American Funds Capital Income Builder. Not anything red-hot by any stretch of the imagination.

I think that you might best use this forum as more of a lifestyle guide, rather than for how your funds might stack up return-wise. Keep the thick skin going! There is some great information here for you if you keep reading!

Sarah :D
 
I think your funds look OK, if rather epensive (lots of over 1% expense ratios and plenty of turnover), but it is clear that you are chasing performance. I also think that as a single guy with a high income, you would probably be better off in more tax eficient investments.

I wuld suggest you get out a spreadsheet and see what the variables look like. If you slug away $65k a year, you don't need to chase return to meet your goals.
 
what's up air jordan? I'm kinda in your shoes - graduated law school at 23 (though not practicing). Putting away ~60-65k a year. Plan on hitting $1 million by 35 or a little sooner. Blah, blah, blah... But my weapon of choice is the index fund. Read Four pillars of investing by bernstein and keep an open mind. Expense ratios and costs do matter.
 
First congradulations. This forum often hashes over the "Why others don't save for retirement" question. You, at a very young age, are dead on, focused, motivated, etc..

As others have mentioned, discussing a particular managed fund here is kinda dangerous. Please don't mention that you use an FA. ;)

Lots can happen in 11 years. If you can keep to your plan, regardless of the final number in 11 years, you will have accomplished much and positioned yourself for many life options.
 
I think the biggest obstacle to you succeeding is your attitude and maturity level. You come here and post something that is partly titled "punch holes in me plan" and then get upset and defensive when people give you some solid constructive criticism. I think you should be appreciative, not offended. I'm sure there are internet boards out there full of sycophants if that's what you really decide you want. But first I suggest you ask yourself if a bunch of people agreeing with you is going to increase your chances of achieving your goal or just make you feel better.

By the way, did you take much math in your undergraduate program? I was going to ask about logic as well but I would think that would come with the law degree. You might try reading up on reversion to the mean, the law of large numbers, volatility, the whole field of probability and statistics, economics, and finance. On the logic side you might read some of Bogle's more famous speeches and practice poking holes in his arguments.

Whoops, sorry...that was some more constructive criticism. Never mind.

2Cor521
 
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