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Retirement Planning Beginner

Established Contributor

Re: Retirement Planning Beginner

i would keep it simple..100% in global index fund.

 

a lot of overlap here..

 

-large company/S&P 500 index

-international index/internat small and large Co

 

and so on.

 

Message 31 of 42
New Visitor

Re: Retirement Planning Beginner


@What's your personality?  Do you like to read the Wall Street Journal every morning and have a stock ticker going across your phone during the day?  I came fresh out of college with finance wet behind my ears doing software.  I understood how investing and all that worked, even bought scores of unread books on it.  Took me almost a decade to realize I don't CARE about the stock market, I have other things I'd wish to spend my time doing. 

I got a job matching up to 6%? 3%? I forget, and I "paid myself" 10% right off the bat at age 22.  And went 97% aggressive.  You don't miss it if you never see it.  If you are tight for money now, pre-tax 401(k) is the way to go.  It will hurt less.  But it certainly hurts when you go to withdraw and get full career-tax yanked off it!  (plus I had penalty, long story of losing my life). 

If you can hold $ in your hot little hands and dilligently put it into a Roth IRA, it will be easier to swallow when you need retirement disbursements.

Both those approaches use mutual funds. 
I read index funds out perform all mutual funds over time and put the bulk of my contributions towards those.  Following all that - I'm really not detailed oriented and ability != desire.  After an acquisition I put what I had into a Rollover IRA at Fidelity and saw what a mess it was.  Funds overlap, I don't follow foreign policy so had no clue about international funds other than I should have a chunk in those too, for a balanced portfolio.  Finally I just paid Fidelity to manage it for me.  All funds have fees, these are more transparent.  (my company somehow made money off our contributions before investing them, legal but sketch....)  They have 'buckets' of investors that a 'team' manages based on your risk or wants, etc. which replaced the minimum investment rule before they would manage it for you. 

Morningstar may have something similar.
They all offer Roth IRAs and I presume they're mutual fund based as well. 
If you like gambling, you can try your hand at researching industries, trends, companies, and go for individual stocks as well, once you're in a rollover.  Probably Roth too.  OR you could go straight to the company and start up a DRP - any profits (cents per share - takes a while to build up your shares to gain momentum) go back into the DRP account and once they collect enough to buy one shiny new share, they'll buy it for you.  Again, this comes with fees.

Or cavalier and e-trade it.

It all depends on your personality, how interested you are (I mistakenly left 100k in CASH for a year after another acquisition!!!!! That's how much I know it's best for ME to have someone manage monies for me).  And when things drop, they know what adjustments to make so you drop less, then when everything starts rising again, your hit wasn't as bad.  But they have teams doing this for a living. 

Lots of factors to consider.  Suzi Orman is out there tooting the Roth IRA and got famous for it, but as all documention states, "past results do not predict future performance" and the stock market is like a unicorn.  Perception and fear.

Props for deciding to start saving!



Message 32 of 42
Frequent Contributor

Re: Retirement Planning Beginner


@wrote:

 

  1. Open a Roth IRA at Charles Schwab.
  2. First, make contributions for 2017. Can contribute up to 5,500. Deadline for 2017 contributions is 4/17/2018.
  3. Next, make contributions for 2018. Can contribute up to 5,500. Deadline for 2018 contributions is the tax filing deadline in 2019.
  4. Finally, invest the money in your Roth IRA. Here comes the very specific part...
    10% SWPPX Schwab® S&P 500 Index Fund
    10% SFLNX Schwab Fundamental US Large Company Index Fund
    10% SWSSX Schwab Small-Cap Index Fund®
    15% SFSNX Schwab Fundamental US Small Company Index Fund
    10% SFREX Schwab Fundamental Global Real Estt Idx
    10% SWISX Schwab International Index Fund®
    15% SFNNX Schwab Fundamental International Large Company Index Fund
    10% SFILX Schwab Fundamental International Small Company Index Fund
    10% SFENX Schwab Fundamental Emerging Markets Large Company Index Fund

 


What's the purpose of investing in the S&P500 and a Large Cap fund?  Just looking at the top 5 holdings of SWPPX and SFLNX, Apple and Microsoft show up in both.  I'm sure there are many more that will overlap.  

 

Same question with the other funds that are similar to each other.  

Message 33 of 42
Frequent Contributor

Re: Retirement Planning Beginner

Academic studies have shown that Value stocks tend to outperform Growth stocks. This is called the Value factor.

 

Consider two standard Vanguard mutual funds:

  • Vanguard Small-Cap Index Fund (VSMAX)
  • Vanguard Small-Cap Value Index Fund (VSIAX)

Why would a portfolio contain both? To "tilt" the portfolio towards Value.

 

The same reasoning applies to SWPPX+SFLNX and SWSSX+SFSNX and SWISX+SFNNX+SFILX.

 

6 of the 9 funds listed are Schwab Fundamental funds. Fundamental indices are not market cap-weighted, rather they are value-oriented.

Reference: A Peek Inside Fundamental Strategies (Schwab.com)

 

There's nothing forbidden about investing in mutual funds that overlap in holdings. The same would happen if you owned an S&P 500 index fund and a Technology sector fund... both would contain Apple.

 



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Message 34 of 42
New Contributor

Re: Retirement Planning Beginner

I would still wait for more of a pullback before putting large amount into equities. 

 

S&p earnings grew an average of 3.2% last 10 years. Using same growth rate, certainly no given , and put a 17 multiple on it, higher than average and lower than current 24 , puts index at 2465.  S&P is currently at 2600. Could be a lost decade for stocks. This might be a period where gold out performs. And I am no gold bug. Never owned it. 

 

 

Message 35 of 42
Contributor

Re: Retirement Planning Beginner

So to catch everyone up lol my job does not offer a 401K only profit sharing that I cannot contribute to. I can choose where I want to invest those funds so I have. I also opened up a td ameritrade ira and will be investing a miniscule $100ish dollars a month into a fund I've picked TRIRX (opinions welcome) until I finish paying off card debt and meet my 3 month emergency fund goal.
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Message 36 of 42
Frequent Contributor

Re: Retirement Planning Beginner


@wrote:
I also opened up a td ameritrade ira and will be investing a miniscule $100ish dollars a month into a fund I've picked TRIRX (opinions welcome)

TIAA-CREF Large-Cap Gr Idx Retire (TRIRX) is a large-cap growth fund with an expense ratio of 0.31%. I'd look for an S&P 500 index fund with lower ER.

Personally, I would NOT have chosen TD Ameritrade. Recently, TD Ameritrade dropped all Vanguard offerings from its commission-free list. Kinda puts an exclamation point on their profit motives.



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Message 37 of 42
Contributor

Re: Retirement Planning Beginner

I have access to majority of the vanguard funds through my profit sharing account through my employer. I'll have to check but I believe the S&P 500 requires a minimum initial ira purchase which I'm starting out at $50. I know but I gotta start somewhere. What is considered a good ER? All new to this guys sorry. I'm watching my education videos on ameritrade lol
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Message 38 of 42
Community Leader
Super Contributor

Re: Retirement Planning Beginner

The other folks may be able to suggest funds (including ETFs) that permit you to buy small amounts each month.

 

The important thing is having a Roth set up somewhere in a place you like and which will give you a wide range of low-cost and low-expense options for the future.  Even if you place your money right now into a money market (inside the Roth) you can always move it to a different fund in April or May.

 

I really like your idea of giving preference to paying off CC debt and building your emergency fund.  You may want to look at an Insight account for your emergency fund, which will give you 5% interest on the first $5000.

 

In the next few months I would spend a lot more time reading basic resources about investment and retirement planning.  How is IF YOU CAN working out for you?  If you are liking it, I'd buy THE INVESTOR'S MANIFESTO (by the same author).  I'd also head over the Bogleheads forum and you will likely get a lot of good advice there.

Message 39 of 42
New Contributor

Re: Retirement Planning Beginner

GuruFocus is also a good website 

Message 40 of 42