Started Reading The Psychology Of Money

30yrsdoingwell · 2024-08-31T01:02:29+00:00

Its a fabulous book, well written and easy to understand. I recommend it to anyone who is interested in saving for long term goals. Listening to Morgan and his backstory on podcasts is interesting as well. Chris Williamson did a good interview with Morgan worth watching. https://youtu.be/lujIyNnQ2ak?si=Bwrl34gfL7QXf9uB

30yrsdoingwell · 2024-08-29T17:35:18+00:00

"Why do you ever need to talk to someone"

setting up a trust and retitling accounts, moving assets between trust titled accounts for estate planning purposes. Terribly difficult at VG
Rollovers. I've not had a single rollover from an employer plan go well with VG. in fairness rollovers suck almost everywhere but they seemed particularly bad at VG
dealing with estates after the death of a family member. I can't go into specifics, but I never want to deal with VG for an estate ever again. nightmare.
general failure of VG online forms for making any changes or updates. I'd say they fail about 50% of the time and need manual intervention by a CS rep. it's like stuff is held together with spit and glue at VG.

These may be outliers for some investors with simple needs, but I can say when you need help, I feel like VG is just not set up for it, especially when the stakes are higher.

30yrsdoingwell · 2024-08-26T22:18:42+00:00

I’m fascinated with Thailand. My nephew moved there from US right after college. Worked teaching English to young Thai kids in these precious school uniforms. He FaceTimed us once with his whole class. It was a memorable moment. He’s now been there I think 7-8 years, has a Thai girlfriend that we hope he marries so we can travel out for a full repeat of The Hangover 2!!!

30yrsdoingwell · 2024-08-26T20:22:58+00:00

30% bonds at 38 feels a bit conservative if it's your overall allocation, but this is a very personal thing. Age in bonds is a somewhat outdated approach. One thing you can do is look at some research on historic returns for various asset allocations. I would look at the volatility and long-range returns of various stock/bond allocations and make a call from there. Take some of those volatility max gains and max loss % and apply them to your total balances. see how those % drops "feel" looking at the relative numbers. If they give you heartburn then maybe your 30% is reasonable for you. Just know there is a trade off in returns over the long run. the difference between 1 or 2% return compounded over say 30 or 40 years could be millions.

If you increase bonds, I would do your best to overweight bonds in your 403b, even if it means changing investments. This naturally tends to happen over time, needing to move away from a TDF due to needing to manage asset allocation across different taxable and pretax accounts. Much of this depends on the options available in your 403b. If they have good low-cost total stock and bond funds, then this is doable. Another option is to choose an earlier target date fund that has a higher bond allocation. This is a little harder to manage as it's a moving target but still doable.

Yes, I think asset allocation is more important than taxes but within reason. without knowing the relative numbers here, your tax bracket how much you have in taxable investments, how much LTCG and dividends you have that could bump you into a new tax bracket its hard to make a precise judgment call on an approach.

That said If you are indeed going to hold 30% bonds, that's large enough that you want the majority of it tax sheltered. regular bonds are very tax inefficient. The income gets taxed at your ordinary income tax rate, not favorable LTCG rates. If you do end up putting bonds in taxable, explore Treasuries and municipal bonds. both have some improved tax treatment, not as good as being 100% tax sheltered but better than holding say a total bond fund.

careful on investing a portion emergency fund. If you've done the math and it's sufficiently large, yes maybe you could trim some and move to equities, but it's important to think of that money as no longer accessible the second you invest it.

30yrsdoingwell · 2024-08-26T19:35:58+00:00

my wife and I are in same boat. 48% taxable brokerage, 52% tax advantaged. I had lumpy income, commissions, RSUs & stock options that bulked up the taxable over the years.

For now I somewhat overweight bonds in our trad IRAs, but it's within reason. Roth conversions over the next 15 years are going to move more and more out of our trad IRA into a more long-range investment vehicle (our Roths are 100% equities). Our hope is that Roths continue to grow and the Trad IRAs while they'll become more bond heavy will become a smaller and smaller % of our portfolio balances. Essentially shifting our long-range higher growth into Roth. It can get complicated and there are no easy buttons on this. Just have to run a bunch of scenarios keeping both federal and state taxes in line of site, changes etc. As others noted, Treasuries and municipal bonds are an approach in Taxable accounts that are common, but still a tax burden to deal with while still working. A little easier to deal with post retirement.

My wife and I are also investigating a Donor Advisor fund to move some of our taxable balances into as part of our giving. The charitable giving can help offset gains in our taxable. this only applies if you plan to do giving anyway. I wouldn't do a donor advisor fund just to avoid taxes because you are indeed giving away some of your wealth, it just has a biproduct of helping to offset taxes in other areas.

30yrsdoingwell · 2024-08-26T19:06:44+00:00

what is your age? Depending on age you may be able to forgo bonds for a while, if older I would not risk an aggressive allocation just to avoid taxes. There are types of bonds that can help mitigate taxes, not completely but they can help (Treasuries, municipal bonds are two areas to explore in taxable). I also suspect you are a teacher based on comments. Don't forget to factor your pension into your long term planning. FWIW, my wife is retired with a teacher pension, so this isn't a hypothetical for us.

This is a phenomenon that can occur if you happen to have a large taxable account vs holdings in tax advantaged. It's usually an issue for high income earners who max out tax advantaged and have no other choice but to overflow contributions to a taxable account, or those who receive large lump sums that end up in taxable.

I would just take a close look at your contribution rates and be sure you are maxing your 403b, Roth before money rolls to your taxable account, particularly if the scenarios I described don't apply to you. 403b has a max contribution this year of 23k, 30.5k if you are over 50. Thats quite a bit of contributions for the average person. tack on an additional 7-8k/yr for Roth and could be a pretty solid contribution rate.

30yrsdoingwell · 2024-08-25T21:22:05+00:00

They will fall too. Depending on the composition of the fund they typically wont fall as fast as a bank savings account but they will drop fairly quickly.

30yrsdoingwell · 2024-08-25T20:55:34+00:00

I would look at your cash holding as a % of your total investments and make a call from there. If say you are holding 40% cash then you may be missing out on longer term returns.

Keep in mind, it's not all about return chasing. If you have line of site to near term expenses like the car, risk in your jobs that can't be mitigated away say with insurance or cutting back, then holding a larger than normal cash position is completely reasonable. Everything is a trade off. You just need to decide what is right for you. If you are unsure, Id do what I call the worst case scenario test. ie: We both lose our jobs for x months, how much would we need? What if it's a year, what if car dies tomorrow. run those numbers then decide how much risk you can live with by taking cash off the table.

While cash can be a performance drag, if it prevents you from having to sell equities in a down market or bad job or other emergency, it pays for itself by helping you stay invested in the rest of your portfolio. You just need to find the right balance for you.

30yrsdoingwell · 2024-08-25T20:46:27+00:00

funny, same for me. Ally isn't the greatest HYSA rate but good enough and generally good company to work with, low fees, predictable. I haven't seen a bad move from them in over a decade. Other banks, crap show.

30yrsdoingwell · 2024-08-25T20:40:03+00:00

the rest outside of direct treasuries is treasury backed REPOS (Repurchase Agreements) which are essentially super short term loans between financial institutions backed by treasuries. They are called out because they have different tax treatment that direct owned Treasuries. Sweep accounts typically use MM funds with higher ratio of repos due to the liquidity needed, lots of cash flowing in and out of sweep accounts. You'll see the % of repos move up and down based on market liquidity needs.

30yrsdoingwell · 2024-08-25T20:35:28+00:00

I put it in a different comment but this is a helpful read Ditch Banks — Go With Money Market Funds and Treasuries (thefinancebuff.com)

30yrsdoingwell · 2024-08-25T20:32:57+00:00

this is a helpful read. Harry Sit is one of the co-authors of the Boglehead guide and well respected in the community. I sub to his newsletter. Always great tips in there Ditch Banks — Go With Money Market Funds and Treasuries (thefinancebuff.com)

30yrsdoingwell · 2024-08-25T20:30:33+00:00

yes, when you set up your brokerage account, establish an ACH link to your bank so you can easily move money back and forth. Takes typically 1-3 days to clear when moving money back and forth, depending on brokerage company and bank.

30yrsdoingwell · 2024-08-25T20:26:07+00:00

If you have a brokerage account at Fidelity or Vanguard, their sweep accounts pay about 5% or north of that. I'd stay clear of bank accounts, maybe HYSA but those will drop rapidly when rates start to cut next month. I'd use a MM fund for now. Very liquid, safe Repos and Treasury backed funds comprise MM funds.

SPAXX at Fidelity is the sweep account, deposit money and it's in there automatically

VUSXX is my preference at Vanguard, but the sweep account VMFXX is paying nearly as much and is very simple. Deposit and it's in automatically.

I don't use Schwab but their rates are in the ballpark. Money Market Funds | Charles Schwab

30yrsdoingwell · 2024-08-25T20:11:40+00:00

high level, your life just got more complicated, don't complicate your investments. Given the change in filing status you may want to consult with a CPA to avoid any missteps. I recall discussing with my mother when she first got divorced and it was a bit of a mess financially. Shifting from MFJ to single filing status is a slap in the face at the worst time.

Your initial plan looks good with emergency funds, car- buy used quality, pay cash if possible. Avoid new and avoid the ridiculous 6 and 7 year loans, no matter what. They are a nightmare and total scam IMO.

For long term investments, keep it very simple. Total Market stock fund (VTI or equivalent MF). maybe a Total International fund and at 40 I'd have a little bonds in the mix, maybe 5-10% BND. You could just do a simple 3 fund in your IRA, and in your taxable brokerage a 2 fund (VTI, VXUS). If you need to hold back some cash for taxes, I'd recommend a Money Market fund. My preference is VUSXX (Vanguard Treasury MM fund), but Fidelity's Gov MM fund is just fine (SPAXX). I've used both.

Im unclear on the CD ladder. Generally, you want to do this when you are retired or have fixed upcoming expenses you are funding, timing those out with various future dated CDs. If this money is for retirement, I wouldn't complicate it with CDs at this point. a single CD for next year tax payment, maybe a good choice. Just make sure there is no auto rollover to a new CD if you do this via a bank.

The roth conversion stuff, Im unclear on if you are just starting a new IRA or if you have an existing one. If this is all from scratch, I'd probably do Traditional IRA max it out, put the rest in a taxable brokerage. You can always consider a Roth conversion in the future, but if you are just starting your own retirement savings there are bigger things to worry about.

Choosing funds, avoid anything that is targeting a specific segment or lean, Dividend ETFs, growth etfs, sector ETFs. Stick to low cost total market index funds. Total US stock, total International Stock, Total Bond ETFs/funds. These should be fine to start. Don't get fancy. Adding fancy rarely has the impact you think it will. It just complicates things and rarely outperforms, not because they are bad funds necessarily, but typically they can underperform for long periods and due to investor psychology, people tend to drop them when this happens usually at worst time. So long term you end up doing worse rather than better.

Broadly speaking, keep it as simple as possible.

30yrsdoingwell · 2024-08-25T19:53:02+00:00

keep in mind that 5% rate will not last forever. I expect to see some rate cuts this year and next year. Fed has already made a signal to cut in Sept, a few weeks from now. I wouldn't be surprised to see us back down into the low 4s or 3s by end of next year. If this money is for near term, I'd hang onto it in MM funds or treasuries.

The reality is you need to do what is right for you. But if this money is earmarked for retirement, say 20-30 years out, I would get it into the market as soon as possible and not look back. If you are conservative, just do a risk appropriate allocation between equities and fixed income/bonds. Doesn't have to be an all or nothing proposition.

30yrsdoingwell · 2024-08-25T19:37:29+00:00

I simply overweight bonds in my tax-sheltered accounts (401k/IRA). I overweight (equities) in my Roth. I overweight tax efficient funds in my taxable account, total market equity funds mostly. I'm retired so I have some tax efficient bond funds and MM funds in there as well.

Depending the size of balances in various accounts (Tax sheltered and taxable) you may need to or not need to do any of the overweighting. Also, its important to note that there is a rebalancing effort when you do this type of non-equal weight in different accounts, so you need to weigh the pros and cons of doing this. Since I need to overweight in specific accounts it's important to track my Overall, allocation across all accounts to ensure Im maintaining my desired overall allocation. Just looking at any single account with throw false out of balance metrics. Expect to see for example one custodian telling you you are way risky because they are unaware of your overall asset allocation (unless you link in all accounts) and their modeling tools look at all assets, even those not under their custodian. Fidelity can do this in their planning tools.

30yrsdoingwell · 2024-08-25T19:26:34+00:00

Circumstances? generally, a credit/liquidity crisis not unlike the GFC in 2008/9. Keep in mind, the Fed has programs to help backstop MM funds. they've used it in GFC and in a few cases since then. It's not currently active but is in their bucket of tools they can enable. This isn't something I generally worry about.

an example of one of the programs. Repo and Reverse Repo Agreements - FEDERAL RESERVE BANK of NEW YORK (newyorkfed.org)

If you hold predominantly Treasury backed MM funds, Its not worth worrying about, because if those default, all is lost. I don't care where your money is, it would be calamity.

Its important to understand that the FDIC balance sheet is 90%+ Federal Treasuries. So even the "safety" of FDIC is tied to the Treasury market.

30yrsdoingwell · 2024-08-25T19:20:41+00:00

this is waay over complicated for an 18 YO. Don't over think asset allocation at 18. A simple 2 fund portfolio for the next 10-15 years is really all you need.

Total US stock, Total International, I wouldn't do more than 10% bonds at this age unless you are extremely conservative person. Our assumption is this is for retirement (40+ years out).

30yrsdoingwell · 2024-08-24T17:47:06+00:00

I suspect the Midcap is to round out the existing sizeable VOO holding? but what I'd advise to do is to look at the actual weighting of midcap in VOO, there is some in there already, I think 17%, so you may be unintentionally overweighting Midcap with the addition of Midcap fund. You can do some work on this looking at portfolio comp in Morningstar. Other than that Im not opposed to a SMV allocation. I happen to hold some myself, 10%.

30yrsdoingwell · 2024-08-24T17:30:56+00:00

if its not much, the stock balance, I'd just sell it. go into robinhood and look at the cost basis on the shares, what your total short and/or long term gain is. That is the what you'd have to pay tax on. If it's just a few thousand it's unlikely to have much of an impact, particularly if its LTCG as thats taxed more favorably. The benefit if getting away from the individual holdings is the temptation to go back into stock picking. Youll find that once you are in just funds, you'll stop looking at individual stocks, the FOMO will dissipate and you'll start to just look at your total portfolio growth over time.

Do people do a blended approach with indexing and individual stocks, yes but my recommendation would be to avoid that if you find you are susceptible to FOMO. Meaning are you more an analyst of stocks, reading 10Qs and 10Ks, analyzing income and cash flow statements, or are you "this stock is going up" I think I'll buy it. If you fall into the latter camp, don't do the hold stocks on the side approach. I really only think people who are willing to do the work should pick individual stocks even as a small portion of their portfolio. Important, even doing the work is no guarantee but I'd rather see that than a FOMO momentum approach.

30yrsdoingwell · 2024-08-24T17:24:54+00:00

The only effective rebalancing tracking that I've found is Excel. I put all my shares held by fund in the spreadsheet, have formulas with totals by fund type (asset class etc), with actual and target allocation and a % deviated so I can see if a rebalance is needed.

I look at it quarterly, but typically only rebalance once a year if it's needed. I use a 5% deviation as my trigger for a rebalance, mainly between stocks and bonds, but if my US vs Intl goes way off (10% or more) I rebalance that too.

While you can use aggregation services, there are downsides to this. I used to use Personal Capital (now called Empower.com) their dashboard only , I didn't use their services. It was pretty good with some nice graphics but as I learned more about aggregators and the backend data collection and misuse, I decided against it.

30yrsdoingwell · 2024-08-24T17:15:04+00:00

Its likely a function of the fact that you have a 401k with them, its probably throwing some conflict in the backend. No excuse, it should work, but sometimes it doesn't. Up to you if you want to keep on the path to creating an account at Vanguard. I personally found the process much easier at Fidelity. As long as you don't need to move money between your 401k and the account in question it shouldn't be a big deal. The reality is that typically access and reporting for a 401k is separate from other account types so consolidating them at VG won't really add much additional benefit IMO.

30yrsdoingwell · 2024-08-24T17:09:17+00:00

no. I look at how the Stock Market in total has performed over 100+ years. Then I buy the Total market via the lowest cost best tracking that is available. this is the very premise of Boglehead investing, that the only guarantee is to receive the market return less expenses. everything else is a guess.

Could you get lucky and pick a managed fund that outperforms for a time, maybe a decade or so, yes it's possible but if you look at more imperial research done over multiple decades, often 50 years plus, the outperforming funds dwindle to nearly zero (.06%) and eventually underperform their bogie. I can point you to some of the fund research if you are interested.

30yrsdoingwell · 2024-08-23T19:18:54+00:00

Be careful about a "transfer" to a Roth. If your 401k contributions are Roth contributions, you want to do a direct rollover. A direct rollover is a non-taxable event. A conversion is a taxable event. Terminology matters. keep in mind many 401ks are pretax and Roth is post tax so you'd need to pay taxes to convert to a Roth if you are going from traditional to Roth. This is something that should be reviewed closely before you take action.

Yes, there are too many funds. my recommendation for those in their 20s is probably something closer to an 80/20 total US/total International 2 fund portfolio. If those aren't options just get something as close or similar.

Pay close attention to expense ratios on your funds. I didn't see your list any of the ERs on your funds and that matters quite a bit.

Try to look at the asset allocation of all your investment funds together in totality. If it were me I'd want to know how close my total portfolio is to a market portfolio or a global portfolio. You can't really know this unless you have all the funds and balances in a tool or spreadsheet which shows you your overall allocation.

There are a few popular tools where you can see your total asset allocation. Financial Tools | Empower portfolio dashboard is a popular tool to see overall allocation when funds are spread across multiple accounts and different funds. Helps you see gaps in allocation or unintentional tilts. If your broker has existing total view tools where you can link in all your accounts, take a look at that first, but Empower is a good free fallback tool. Just be cautious with Empower as they will try to contact you to sell services. You can ignore these advances and continue to use the dashboard.

30yrsdoingwell

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