Well, I'm taking the plunge into taxable investing. I have $8,000 that I would like to invest in the Vanguard TSM. I was wondering if this is a good time to buy...I know I am breaking a fundamental law of investing...trying to time the market. But with all this talk about feds raising rates and the market dropping, I was wondering what the Diehards though?
Total Stock Market
- Thread starter geeman
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I'm not a market timer. I recently sold a condo and put most of the proceeds into the market on one day. One option to consider is putting the $3000 minimum in the TSM fund, then dollar cost averaging in $500/month for the next 10 months. That way, if the market crashes the day after you put in your $3000, you can continue to buy low going forward.
In the long run, that $8000 will be a small part of your total net worth. However in the short run, losing a big chunk of the $8000 due to volatility may sour you on future risk-taking.
In the long run, that $8000 will be a small part of your total net worth. However in the short run, losing a big chunk of the $8000 due to volatility may sour you on future risk-taking.
JPatrick
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If you are investing for the long term I'd do it today.
BTW, I know nothing about your other holdings, but if I were going to buy only one index for the long run, I'd buy an extended market index (total market less the 500). At some later time I'd add a S&P 500 maintaining a ratio of 2 to 1 with the extendedl index being the larger.
Check out the performance records of the Total, 500, and extended.
BTW, I know nothing about your other holdings, but if I were going to buy only one index for the long run, I'd buy an extended market index (total market less the 500). At some later time I'd add a S&P 500 maintaining a ratio of 2 to 1 with the extendedl index being the larger.
Check out the performance records of the Total, 500, and extended.
If stability of principle is a high concern for you, i do not recommend the stock market. The stock market is for long-term growth of capital and really just isnt that appropriate for investment time horizons less than 5 years, unless you consider yourself really risk tolerant.
I plan to keep the Total Stock Market fund for atleast 35 years, DCA $50 a week after the initial $8000. Within the year I want my portfolio to look like this:
Roth IRA:
15% Target Retirement 2045
Taxable:
45% Total Stock Market
20% Tax-Managed International
20% I Bond
Roth IRA:
15% Target Retirement 2045
Taxable:
45% Total Stock Market
20% Tax-Managed International
20% I Bond
You are young, a long-term investor & I imagine you are going to DCA over time.........who cares about timing? If you can't stomach the risk then don't play the game but it is absurd for someone in their 20's to worry about a drop in value. Actually you should welcome it. My account regularly loses/gains $1000 in a week.
JPatrick
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Just my two cents of course, but I'd say that portfolio is far, far to conservative for a 35 year horizon. However, it is you that must sleep at night.geeman said:
JPatrick
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Besides my earlier comment about TSM, I'd add the following:geeman said:
I-Bonds are fine, but not 20%. How about 10% I-Bonds and 10% REITS or something like FNMIX. Check out the long term record on FNMIX.
20% International is fine if the fund you are using is decent and the fees are low. Having some emerging markets is vital.
Ref your retirement 2045- - I've always felt the average person who wanted to work at it a little could beat this type of fund.
I also think that a person your age needs to swing for the fences with 20 % of your stash. By that I mean buying some ETF's and/or sector funds so you are riding the current wave. Look at the $$made in energy the past 3 years. It takes some extra work, but the right sectors will put your portfolio on steroid.
So where is a good starting point. I already have $4000 in a Roth with Vanguard (retirement 2045) and A 401k with about $300 in it (S&P and Salyes and Loomis bond). I just transfered $3000 out of my Money Market today to invest. I was going to buy $3000 Total Stock Market tomorrow. Is this a good idea?
C
Cut-Throat
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geeman,
Why don't you just put the whole sum in the Vanguard Target 2045 and forget about it. That's 40 years from now. And then resist the urge to putz.
Why don't you just put the whole sum in the Vanguard Target 2045 and forget about it. That's 40 years from now. And then resist the urge to putz.
C'mon, Geeman, give us a break. Lemme amplify Cut-Throat's very tactful comments.geeman said:
You've developed paralysis by analysis into an art form. You've put up over 70 posts on this board, another 50+ on the Vanguard Diehards board, and who knows how many other posts in what other places. You keep asking us to tell you if you're doing the right thing. We keep telling you to educate yourself and to make your own decisions as to what's right for you.
Here it is one more time:
1. Read Bernstein's "Four Pillars".
1a. If step 1 doesn't work for you then read something off the Vanguard Diehard's list that discusses asset allocation.
1b. (Optional) Use Vanguard Diehard's links to develop your "Investing Policy Statement". Some investors think that helps them stay the course by referring to it in good times & bad.
2. Use "Four Pillars" (and whatever other references you deem worthwhile) to decide on your asset allocation plan. Keep it simple. You've had enough suggestions and there are many ways to accomplish AA so you don't have to ask us whether or not your latest AA idea is any good. Just put it together and move forward. At this point progress is more important than perfection.
3. DCA at least 10% of your paycheck into your AA. Put in more if you have more. Put the lump sums in NOW and stop waiting for all the planets to align.
4. (Optional) Rebalance every year or so to bring your AA back to its original plan, or adjust your DCA as necessary to bring the AA back into balance. Don't try to tweak the AA if it's within 5% of your goal.
5. Keep an eye on your current expenses and project your ER expenses. Add in extra for an occasional new roof, a replacement car, replacement appliances, a kid's wedding, a fantasy vacation or two, or whatever. You've noticed that ER expense budgets vary widely so as long as you're under $80K/year you're probably all right. $24K/year seems to be the median number but it varies widely.
6. When your retirement portfolio is 25x your annual expenses then you should be able to start your ER at a withdrawal rate of 4% of the portfolio, raised annually by inflation.
Now go make your own decisions for a while and, when you complete step #5, tell us what you did. If you're tempted to ask for our approval before finishing step #5, then reconsider whether or not you're one of the people who really should develop a close personal relationship with a paid financial advisor.
If you really don't care about the above and you just want to debate asset allocation and market timing endlessly and down to the fractions of a percentile, then I'd suggest RADDR's Market Theory & Investment Strategy board. Don't confuse participation on that board with your own actual personal decisive action to implement your own investment & ER plans. RADDR runs a good board and it can teach you a lot, but if you keep asking people to tell you what to do then it'll eventually generate a post like this.
You can buy a Porsche at 23 but it's not very compatible with the ER goal. If the advice you're getting on this board doesn't match with the desires expressed in your first post, then you're on the wrong discussion board.
Once you start making your own decisions it'll get easier. Good luck.
Nords,
Thanks for the in-depth response. I am going to the library to get Bernstein tonight. There are just so many options in terms of investments that it gets overwhelming. I guess posting here also becomes a bit counter productive due to the varying opinions from all of the responses. I’m sure you understand where I am coming from. Any how, I’ll lay low for awhile and I’ll check back and let you all know how everything goes.
Thanks
Thanks for the in-depth response. I am going to the library to get Bernstein tonight. There are just so many options in terms of investments that it gets overwhelming. I guess posting here also becomes a bit counter productive due to the varying opinions from all of the responses. I’m sure you understand where I am coming from. Any how, I’ll lay low for awhile and I’ll check back and let you all know how everything goes.
Thanks
I might have some advice that can help you to get started with a taxable account at Vanguard. I recently started an asset class based portfolio allocation. I'm planning on having probably 6-7 index funds for the core of my portfolio. The way I'm going to do this is by building a $10,000 position in one index fund, then moving to the next and the next and the next until I get my target allocation. The index funds have a fee for balances under $10,000 at vanguard. Like you, I have other positions outside vanguard that will continue to grow (401k, IRA's, other taxable).
It will take me a number of years to reach my target allocation since I'm not putting all of my money into taxable investments. Put your money into TSM if that is what you want, then build that position to $10,000, and move to your next fund if that is what you want. Remember that your investing for ER is a marathon, not a sprint. You have to be willing to accept the fact that your going to have days where you lose $100 or $1000 or $10,000 (depending on how much you have invested). Those are paper losses.
It will take me a number of years to reach my target allocation since I'm not putting all of my money into taxable investments. Put your money into TSM if that is what you want, then build that position to $10,000, and move to your next fund if that is what you want. Remember that your investing for ER is a marathon, not a sprint. You have to be willing to accept the fact that your going to have days where you lose $100 or $1000 or $10,000 (depending on how much you have invested). Those are paper losses.
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