Suggestion for Simple AA with Vanguard

[av8r]

I've been doing quite a bit of research and am ready to make some changes to my 401k. I'm moving my account from an expensive advisor charging 1.25% and .5% to the investment company. The advisor is actually very knowlegeable and had me in the highly recommenede DFA funds.

My thoughts were to have an 80/20 equity to bond mix with the Vanguard total stock market index, the total intl stock index and the total bond market index. With the appropriate percentages of course. Does this sound right, or too simplistic? Should I pay for more exerienced advice?

 

[LOL!]

Why not transfer your DFA funds "in-kind" to one of those fixed fee DFA advisors mentioned at the beginning of the "fixed fee investment advisor" thread?

 

[mickeyd]

Does this sound right, or too simplistic? Should I pay for more exerienced advice?

Sounds like a good, simple plan. You should save a lot in fund expenses alone.

“The simpler the explanation, the more likely it is to be correct” Occam’s Razor

 

[FIREd]

Why not make it even simpler and buy one of Vanguard's Target Retirement funds? The 2025 fund has about the asset allocation you are looking for. They invest in the same 3 funds you listed (well not quite but pretty close) and you don't have to worry about rebalancing your portfolio...

 

[mathjak107]

i find the target funds work best if the money is put in all at once. they dont work well if your going to dollar cost average in. since markets rise 67% of the time and are only down 1/3 you will be buying in dollar cost averaging at usually higher and higher prices while at the same time the funds usually cutting stock allocations too as time goes on. end result is you usually will end up much more conservative then you may want to be if you dollar cost average in.

 

[av8r]

Thanks for the input. It sounds like I'm heading in the right direction. It seems most members on this forum have more complicated investments than what I'm considering though.

 

[Dude]

i find the target funds work best if the money is put in all at once. they dont work well if your going to dollar cost average in. since markets rise 67% of the time and are only down 1/3 you will be buying in dollar cost averaging at usually higher and higher prices while at the same time the funds usually cutting stock allocations too as time goes on. end result is you usually will end up much more conservative then you may want to be if you dollar cost average in.

I don't understand this argument. The Target Retirement funds do get more conservative as they approach their target date, which is what you want to do to lower risk of a big drop in your retirement funds balance. You know how conservative (what mix) the fund will be at this date, it's in the prospectus. The stock/bond ratio is set according to how far away you are from your target date, and is reballanced automatically. I don't see how this is any different that buying the underlying index funds individually and moving to a more conservative mix/reballancing manually. I don't see the downside of DCA into one of these TR funds. Maybe if you could provide an example with numbers it would be clearer? Thanks.

 

[mathjak107]

if you dollar cost average in ,the combination of dollar cost averaging, and the fact that statistically you will be buying in at higher and higher prices as we are up 2/3 of the time and only down 1/3 ,while at the same time the fund cuts stock allocations over the time frame which gives you less of a stock holding then had you bought in all in one shot maybe making you a little more conservative than you hoped for.

think about it.. it makes sense