Jump to content


Photo

The Best Index Funds For Every Investor

Fidelity Insights /Kiplinger

  • Please log in to reply
20 replies to this topic

#1 tony

tony
  • Members
  • 3,620 posts

Posted 15 June 2017 - 04:50 PM

https://www.fidelity...ock-index-funds



#2 EdLaFave

EdLaFave
  • Members
  • 164 posts
  • Gender:Male
  • Location:Orlando, Fl

Posted 15 June 2017 - 05:02 PM

I'll make it even simpler! Choose a category and move on with your life...
 
3 Fund Portfolio
Vanguard Total Stock Market Index (VTSAX)
Vanguard Total International Stock Index (VTIAX)
Vanguard Total Bond Market Index (VBTLX)
 
1 Fund That Automatically Buys More Bonds As You Approach Retirement
Vanguard Target Retirement 2020 Fund (VTWNX)
Vanguard Target Retirement 2035 Fund (VTTHX)
Vanguard Target Retirement 2060 Fund (VTTSX)
 
1 Fund That Keeps The Stock/Bond Mix Constant
Vanguard LifeStrategy Growth Fund (VASGX)
Vanguard LifeStrategy Moderate Growth Fund (VSMGX)
Vanguard LifeStrategy Conservative Growth Fund (VSCGX)
Vanguard LifeStrategy Income Fund (VASIX)

Navigate and reform OCPS' 403b and 457b.

#3 jebjebitz

jebjebitz
  • Members
  • 32 posts

Posted 15 June 2017 - 07:54 PM

With the three fund portfolio, what percentage do you recommend for each? Would 80 stock, 20 bond be too aggressive?

#4 tony

tony
  • Members
  • 3,620 posts

Posted 15 June 2017 - 08:43 PM

Jeb

 

It depends on your age. Bogle recommends your age in bonds. So if you are 30 years old you should be 70% stocks 30% Bonds.  An easier way is to buy a target fund which does the proper allocation for you. I have the majority of my money in one of the funds Ed mentioned VSCGX. Its allocation looks like this:

 

1Vanguard Total Bond Market II Index Fund†42.0%

2Vanguard Total Stock Market Index Fund 23.9%

3Vanguard Total International Bond Index Fund 18.0%

4Vanguard Total International Stock Index Fund 16.1%

 

I also own some mid cap and  small cap index funds to boost my small cap allocation. I also own some TIPS (inflated protected securities)

 

Overall I am  close to a 50% stocks 50% Bonds allocation. At 62 years old I am probably a bit more aggressive than Bogle recommends but I have a pension plan for life  too so that kind of equalizes it all.

 

If you are young you should be more aggressive and let the market do its thing good or bad. You will come out ahead long term if you don't mess with it. As you get older you want more bonds because they protect your money during downturns. I really think a target fund is a very savvy way to invest.

 

Hope this helps



#5 EdLaFave

EdLaFave
  • Members
  • 164 posts
  • Gender:Male
  • Location:Orlando, Fl

Posted 15 June 2017 - 08:44 PM

With regards to bonds it is a really personal question that only you can answer. This is what I said on my site
https://educatorsfig...m/investing-101

The most important choice you'll make is deciding what percentage of your portfolio should be allocated to bonds. Bonds will reduce your expected returns but they'll buy you stability, peace of mind, and lower the likelihood of behavioral errors like selling during a crash only to reenter the market after the recovery. These mistakes can be far more disastrous than paying high fees.

Our personal approach is to recognize that stocks can lose half their value over night and take many years to recover. After serious introspection, ask yourself how much you can emotionally and financially "afford" to lose in that scenario. If your answer were 37.5% then you'd use the formula (100 - 37.5 * 2) to calculate that 25% of your portfolio should be allocated to bonds.
Navigate and reform OCPS' 403b and 457b.

#6 EdLaFave

EdLaFave
  • Members
  • 164 posts
  • Gender:Male
  • Location:Orlando, Fl

Posted 15 June 2017 - 08:51 PM

With regards to international stock vs US stock, sticking to your decision is far more important than what you choose. To give some context:

US represents about 55% of the world market.

Vanguard Target Date funds have 60% US and 40% international.

I believe Buffett and Bogle have suggested 100% US is fine. I personally prefer diversification but I am susceptible to the argument that so many US companies are global and the US fund is nearly a third as expensive to own.
Navigate and reform OCPS' 403b and 457b.

#7 tony

tony
  • Members
  • 3,620 posts

Posted 15 June 2017 - 09:08 PM

I Agree I am only 16% International. Thats enough for the very reason you cited. But perhaps adding a small cap international allocation may make more sense .



#8 jebjebitz

jebjebitz
  • Members
  • 32 posts

Posted 16 June 2017 - 06:07 PM

When I finally got into the Lincoln PDP I went on Vanguard's site and completed the investor questionnaire. I went with what they recommended based on my answers:

48% total stock
32% international stock
20% total bond

They recommended splitting up the 20% between total bond and total international bond but I just went with total bond.
I'm 37 years old and still about 25 years away from retiring. I feel comfortable with the risk.

#9 tony

tony
  • Members
  • 3,620 posts

Posted 16 June 2017 - 06:29 PM

Yea, Bogle 's rule of age in bonds might be a little strict. Still its a good reference. It all comes down to the risk you are comfortable with. With 20% bonds though you could lose a good bit of money if the market crashes. But with probably 25 years or more until retirement you would recoup your loses and then rebound comfortably if you keep investing through good and bad markets.   Just stick with low cost index funds and try to invest a good bit every paycheck.

 

 

Tony



#10 EdLaFave

EdLaFave
  • Members
  • 164 posts
  • Gender:Male
  • Location:Orlando, Fl

Posted 16 June 2017 - 06:45 PM

That is a completely reasonable portfolio and asset allocation, congrats!

A 50% drop in stocks will result in a roughly 40% loss.
Navigate and reform OCPS' 403b and 457b.

#11 jebjebitz

jebjebitz
  • Members
  • 32 posts

Posted 16 June 2017 - 07:39 PM

Thanks Ed and Tony for your responses. I didn't read about Bogles advice on allocation based on age until after I selected my funds. I just wanted to make sure 80% stock 20% bond wasn't out of the ordinary. I read about how the target date funds work and plan on following the formula of gradually shifting from stocks to bonds. It's been exciting reading about how this works and I appreciate the responses I've received on here. Thanks

#12 tony

tony
  • Members
  • 3,620 posts

Posted 17 June 2017 - 08:06 AM

No  problem Jeb. Sounds to me like you've gotten it all down now and are ready to roll l!!. Good luck



#13 whyme

whyme
  • Members
  • 242 posts

Posted 17 June 2017 - 02:15 PM

That is a completely reasonable portfolio and asset allocation, congrats!

A 50% drop in stocks will result in a roughly 40% loss.

 

Jeb, just to amplify what Ed and Tony have said: that allocation is great, so long as you stick to it and keep contributing even when that 40% portfolio value drop occurs.  

 

One gets a very queasy feeling (or worse) during a big market drop that seems to head nowhere but still further down, and when decades of slowly accumulated wealth has (on paper) disappeared.  And it will almost certainly happen during your investing lifetime--it did happen in 2007-9, and many of the folks here have had to navigate it when well down the path to retirement.  The key is to stick with the plan at those times--don't sell, keep the same asset allocation and keep making regular contributions when things are at their bleakest.   If you are not sure of your ability to stay the course in such an extreme market event, then you should probably raise your proportion of bonds (or use a stable value fund if your plan offers it). 80% equities is great for long term (multiple decade) holdings, but many an investor has bailed out at exactly the wrong time when the market goes mad and all around are declaring doom.  That scenario will create a much worse result than sticking with a conservative (i.e., less volatile) portfolio.  In a way, knowing your emotional reactions and managing your behavior with regard to your portfolio is the most important factor in long term success.



#14 tony

tony
  • Members
  • 3,620 posts

Posted 17 June 2017 - 05:02 PM

 

In a way, knowing your emotional reactions and managing your behavior with regard to your portfolio is the most important factor in long term success.

Thats it Exactly!!   Thanks Whyme



#15 jebjebitz

jebjebitz
  • Members
  • 32 posts

Posted 17 June 2017 - 08:01 PM


That is a completely reasonable portfolio and asset allocation, congrats!

A 50% drop in stocks will result in a roughly 40% loss.

 
Jeb, just to amplify what Ed and Tony have said: that allocation is great, so long as you stick to it and keep contributing even when that 40% portfolio value drop occurs.  
 
One gets a very queasy feeling (or worse) during a big market drop that seems to head nowhere but still further down, and when decades of slowly accumulated wealth has (on paper) disappeared.  And it will almost certainly happen during your investing lifetime--it did happen in 2007-9, and many of the folks here have had to navigate it when well down the path to retirement.  The key is to stick with the plan at those times--don't sell, keep the same asset allocation and keep making regular contributions when things are at their bleakest.   If you are not sure of your ability to stay the course in such an extreme market event, then you should probably raise your proportion of bonds (or use a stable value fund if your plan offers it). 80% equities is great for long term (multiple decade) holdings, but many an investor has bailed out at exactly the wrong time when the market goes mad and all around are declaring doom.  That scenario will create a much worse result than sticking with a conservative (i.e., less volatile) portfolio.  In a way, knowing your emotional reactions and managing your behavior with regard to your portfolio is the most important factor in long term success.

Thank you! I appreciate the response. This is definitely reassuring as I prepare for the long haul. When I started my 403b it was 2007. I was living at home so I decided to invest aggressively and contribute $6000 a year from my annual salary. We know what happened to the market the following year. I stayed the course and ended up ahead ten years later. It's great to hear that this is the right approach for the future. Thank you