401K help
Amy
dollar upto 6%. Missed out on this free money for a couple of years. I
am 29 and won't need the money for the next 30 years. Here are the
choices I made.
Name % Expenses
GESSX - Large blend - 20% 0.13
VIIIX - S&P 500 index - 30% 0.03
GESLX - Income fund - 5% 0.14
GIEIX - Intl large blend - 22.5% 0.57
GSVIX - Small blend - 22.5% 0.62
The other fund available which I did not opt for is GSIVX.
What do the gurus here think about my portfolio? What would your ideal
portfolio look like with these options? From the couple of
questionaires I have taken, I seem to be neither too agressive or
conservative.
Thanks for your time
Arne
out why someone would pass up an immediate 100% return on their money....
but lots did.... at my early retirement lunch, I said I was able to retire
in part because of my 401k..... one young woman said I made her get off her
butt and start..... by putting in 1%.... the max we could put in was 5.5%...
Actually, we could go to 15%, but no match above 5.5....
Arne
"Amy" <testing.a...@gmail.com> wrote in message
news:1119494912.3...@g14g2000cwa.googlegroups.com...
Elle
Do you have any other money invested for retirement?
I am assuming you have
-- six months to a year of living expenses set aside in an emergency fund
-- no debt
-- have considered home mortgage payments (now or in the future)
GESSX and VIIIX are both large blend. Why not hold just VIIIX for your large
blend position?
I personally don't like investing in investment grade bond funds like GESLX
right now. Interest rates are likely rising, so an intermediate-to-long term
bond fund like this will likely lose principal.
Any chance you can allocate your bond position outside your 401k by buying
individual CDs and bonds and laddering them? Not a big deal; more to alert
you to bond fund behavior.
I agree about not holding GSIVX.
Your breakdown seems consistent with the various online portfolio allocator
tools I use a lot. Go to site
http://home.earthlink.net/~elle_navorski/id4.html
and you can compare the outputs of several such free, online allocator for
your age, risk tolerance, etc. (Though it sounds like you are already
studied on the subject, so this is just more reinforcement.)
"Amy" <testing.a...@gmail.com> wrote
Elle
and has similar expertise to this newsgroup, but it focuses more on
allocating one's portfolio, which seems to be relevant to your question
here.
Amy
I do not have an IRA. I am trying to read about IRAs etc to make an
informed decision. I do not have any other money invested for
retirement. But I have some liquid assets in the form of I-Bonds for
emergency.
The reason why I chose both GESSX and VIIIX is because GESSX has better
long-term performance than VIIIX but is more expensive. So I could not
decide on one.
So, you mean to say that bond funds lose value when interest rates are
rising? Thanks for this tip. I will try to read about it and make
changes to my portfolio accordingly.
Elle
>
> I do not have an IRA. I am trying to read about IRAs etc to make an
> informed decision.
Great. It sounds like you're planning carefully and well.
> I do not have any other money invested for
> retirement. But I have some liquid assets in the form of I-Bonds for
> emergency.
Good plan!
> The reason why I chose both GESSX and VIIIX is because GESSX has better
> long-term performance than VIIIX but is more expensive. So I could not
> decide on one.
I understand. However, may I suggest you consider some evidence that
indicates that (1) chasing returns is a poor strategy for investing; and (2)
lower expense ratio funds (like index funds such as VIIIX) tend to do better
in the long run than higher expense funds?
Let me know if you want a few online citations on this topic.
> So, you mean to say that bond funds lose value when interest rates are
> rising? Thanks for this tip.
Investment grade bond funds do, yes. (Junk bond funds are erratic.)
The longer the maturity of the bonds in the fund, the more the NAV of the
bond fund declines as interest rates rise.
If you want some idea of how much the principal declines, see
http://finance.yahoo.com/q/bc?s=GESLX&t=my&l=on&z=m&q=l&c=
and
http://finance.yahoo.com/q/bc?t=my&l=on&z=m&q=l&p=&a=&c=&s=fthrx
Obviously, it's not disastrous at all, especially if you're invested for 30
years.
> I will try to read about it and make
> changes to my portfolio accordingly.
Good luck, and good job saving at such a young age! Generous Electric can
rock...
Amy
just too many of them. Can you give me some tips about which funds to
invest in?
Thanks
Elle
shares of a fund that had a great return, say, last year or the last five
years) is a failing strategy. A safer bet is buying strictly index funds in
one's desired aset allocation categories, and rebalancing as needed as you
get closer to retirement.
Articles on the merits of low expense ratio, no load index funds:
http://biz.yahoo.com/funds/vami.html , reading the articles linked at the
bottom, too, on this subject.
"Reflections on the Efficient Market Hypothesis: 30 Years Later,"
by Burton G. Malkiel, available in PDF format from
http://www.thefinancialreview.觔rg (the link is at the bottom). If you're
pressed for time, just look at the tables.
I think the 49-question survey at http://www.ifa.com/SurveyNET/ also
provides some excellent insight on index funds. Read EVERY hint that comes
with each question here, as the hint usually provides the correct answer.
It's an education of sorts within itself.
If you read these and also other reports, and also maybe ask your question
at misc.invest.financial-plan, then there's a strong likelihood you'll
ultimately want only index funds. Vanguard company was the leader for many
years when it came to low expense, no load funds, and still does lead. As an
introduction to what's out there, and once you know your desired asset
allocation categories, try looking over Vanguard's list of index funds at
the following site and seeing if you can put together your portfolio using
striclty Vanguard funds.
http://flagship2.vanguard.com/VGApp/hnw/FundsIndexOnly
See also a list of all Vanguard funds at
http://flagship2.vanguard.com/VGApp/hnw/FundsByType . Not all their funds
are "index funds," but their expenses tend to be competitive. So if there is
a particular asset allocation category you want, but for which you cannot
find an index, shop around for simply a low expense ratio, no load fund.
I am actually not a Vanguard client but have read about and looked at its
offerings many a time and have relatives who swear by it. If I were young
and just starting out, I might very well go with Vanguard. I currently do
most of my mutual fund business with Fidelity over the years. In the last
few years, Fidelity's index fund offerings, though sparse in number, have
become quite competitive with Vanguard's as far as expense ratio is
concerned. Go to www.fidelity.com , type in "index funds" into its search
engine, and click on the first link that comes up. Fidelity's international
index fund, FSIIX, I believe was recently written up to be the lowest
expense ratio international index fund available. Fidelity's customer
service is fantastic, based on my 20 years experience with it.
In summary, I think you now have four steps to take:
1. If you haven't already, devise an asset allocation plan you like.
Remember, these are always kind of fuzzy and not precise. This is not an
exact science.
2. Read the articles on index funds above.
3. Repeat your question at misc.invest.financial-plan for still more
experience.
4. Open an account with a mutual fund company that has index funds you like.
"Amy" <testing.a...@gmail.com> wrote
Joe Stella
On 22 Jun 2005 19:48:32 -0700, "Amy" <testing.a...@gmail.com> wrote:
>[...]
>What do the gurus here think about my portfolio?
Gurus? There is no such thing.
Buying mutual funds is just like buying anything else. Do
your homework, understand what you are buying, and your choices
will end up being good enough to get you where you want to go.
Newbie investors always think that knowing how to pick funds is
the most important factor for investment success. This is not so.
The most important (and by far the most difficult) factor for
investment success is having the will to stick with it. At some
point you will be tempted to stop contributing to your 401k "for
just a little while" in order to do something else with the money.
Some people even withdraw the money or take a loan against it,
planning to "pay it back later".
Don't ever do that. Once you stop, it's very hard to start up
again. The "little while" never seems to end. And "paying
it back" never quite seems to happen.
For more information on this I recommend reading Clason's excellent
little book "The Richest Man in Babylon" and Stanley's book "The
Millionaire Next Door". "Millionaire" especially has lots of
other good information besides what I have said here.
Mark Freeland
news:D3sue.7859$hK3....@newsread3.news.pas.earthlink.net...
> "Amy" <testing.a...@gmail.com> wrote
>
> > I do not have any other money invested for
> > retirement. But I have some liquid assets in the form of I-Bonds for
> > emergency.
>
> Good plan!
Just remember that you can't get that money out, even with paying a penalty,
for one year after you buy the savings bonds. Other than that, I agree this
is a good place to stash cash.
> > The reason why I chose both GESSX and VIIIX is because GESSX
> > has better long-term performance than VIIIX but is more expensive.
> > So I could not decide on one.
I agree with Elle's suggestion to focus on VIIIX, but for completely
different reasons. If you take a closer look at the GE fund's performance
since 1998, you'll see that it is better because of three years - 2000,
2001, and 2002. These were years in which the market fell. In most other
years it was in or near the bottom half of the large blend category.
What this means is that, because it invests a bit more conservatively, it
does better than other funds in down markets (losing less), and poorer in up
markets (gaining less). Over the long term, I expect the market to go up,
and would prefer a fund that went up a little more with it.
Clearly you are looking at long term performance, and not chasing current
returns, as was suggested below.
> I understand. However, may I suggest you consider some evidence that
> indicates that (1) chasing returns is a poor strategy for investing; and
(2)
> lower expense ratio funds (like index funds such as VIIIX) tend to do
> better in the long run than higher expense funds?
0.10% expense difference is not at all significant for a stock fund. The GE
fund in fact costs less than Vanguard's retail version of its S&P 500 index
fund. It would be different if you were looking at a fund costing over,
say, 1% in expenses. Or if you were looking at bond funds, where there is a
much closer relationship between expenses and performance than there is with
stock funds.
Regarding your overall breakdown - I would drop the bond fund, but not
because it might go down in value now. Timing the market, even timing
"trends" is a questionable strategy. Everyone here who has predicted trends
has said that interest rates *must* go up (and bond prices down), for the
past 1-2 years. Even this year, interest rates have not risen (the 10 year
Treasury started the year with a yield of 4.23%; it is now at 3.96%).
Rather, I would drop the bond fund, because at your age and with your
investment horizon (30 years until retirement, and many years after that),
you don't need bonds to add stability to your investments. You need growth,
i.e. stocks.
Best of luck.
--
Mark Freeland
nBe...@pacbell.net
Ed
"Elle" <elle_n...@nospam.earthlink.net> wrote
> Much data demonstrates that chasing mutual fund returns (that is, buying
> shares of a fund that had a great return, say, last year or the last five
> years) is a failing strategy. A safer bet is buying strictly index funds
> in
> one's desired aset allocation categories, and rebalancing as needed as you
> get closer to retirement.
5 year average annual total returns for major index funds through 5/31/05:
Vanguard 500, -2.01%
Vanguard Total Stock Market, -0.65%
Vanguard Growth Index, -6.20%
Vanguard Total International Stock Index, +0.68%
Vanguard Prime Money Market, 2.51%
CPI, 2.48%
Flasherly
especially on sector performance this year. Compare your choices for
past returns to a broader fund group within same objectives. Style
could an indication and profile of what group of funds are determined
suitable for selection. The broadest defination of "style" generally
accords diversification as most important to balance losses with gains
between moving sector averages. Apart from basic advice to the fund
investor, there's the capital market to consider. The globalization of
expanding multinational corporations and a potential immediacy, such as
energy resources presently pose, or political acts between nations and
their market ramifications. While mutuals may offer some insulation
time is apt quickly to exact on moving market factors, nevertheless, an
informed understanding of market conditions would further gains when
employing investment interests.
Amy
Which funds would you recommend Ed?
Thanks
Elle
I think I'll pass on leaving my investments in a money market fund for the
next forty years. For the obvious reason that one can pick any number of
short periods and find that a money market fund returned more than stocks.
But for the long haul, as Eddie knows, stocks have been far superior.
This is the stuff of foolish and unreasoned market timers.
SD
How about adding some of - VEIEX, VDMIX.
Ed
"Amy" <testing.a...@gmail.com> wrote
> Which funds would you recommend Ed?
> Thanks
Most portfolios have core positions, not market timing. Elle really tries to
do her best but she's not very smart, please ignore her.
If I were to suggest funds for a core position, and I don't really care to
do that, I would say that Oakmark Equity & Income & T. Rowe Price Capital
Appreciation are really hard to beat, AT ANY AGE and with any goal. Add some
Tweedy Browne Global and you've got a winner. Sorry, Tweedy Browne Global
Value is closed to new investors. Another international fund I like, and
own, is T. Rowe Price International Growth & Income. These are relatively
low risk funds with steady returns, great funds.
Elle can save a few pennies with index fund expenses but expenses are not
the only consideration. Check this out. For the period ended 5/31/05.,
here's what $10,000 invested for 5 years would be worth:
Vanguard 500, $9,034.60
Oakmark E&I, $17,956.34
TRP CapAp, $18,686.71
Since you asked.
Good luck.
Amy
R. Anton Rave
Amy wrote:
Don't try in vain to find the best mutual funds because it's
impossible, so don't waste your time. Just find a suitable asset
allocation and choose some low-cost funds to implement it. Avoid funds
with high risk ratings or statistics inferior bear market performance
for their catagory. Indexing isn't really bad, regardless of the
record of the overall market over the past 5 years, but if you index,
index broadly, such as with the Wilshire 5000 or Russell 3000 and not
just the S&P 500 or Russell 2000.
Books like MUTUAL FUNDS FOR DUMMIES and COMMON SENSE ON MUTUAL FUNDS,
web sites of fund groups like T. Rowe Price, Vanguard, and Fidelity,
magazines like MONEY and KIPLINGER'S, and financial software like MONEY
and QUIKEN can suggest asset allocations, but don't be surprised if the
suggestions vary greatly since this isn't an exact science.
Costs matter, and www.personalfund.com can show you their impact.
That's not to say low-cost Vanguard lacks bad funds, but it's harder to
randomly pick a bad fund from among cheap ones than expensive ones.
FORBES may publish the best fund guide, every Aug. or Sept., and it
should be read more for its articles than its ratings. Unlike other
financial magazines, FORBES readily admits it doesn't know what the
best funds are. That means it's more honest in this respect, not that
it's dumber.
dumbstruck
mutual fund companies, you do better by owning their stock rather their
core funds. I don't think he mentioned TRP or the huge families, but
take a look at the funds ed mentions vs TROW:
http://finance.yahoo.com/q/bc?t=2y&s=TROW&l=on&z=m&q=l&c=trigx%2Cprwcx&c=%5EDJI
Oh, you don't like the volatility of an individual stock vs a fund?
Look at the much more favorable volatility of TROW over long term in:
http://finance.yahoo.com/q/bc?s=TROW&t=5y&l=on&z=m&q=l&c=trigx,prwcx,%5EDJI
Now there's a lot of nitpicking that could be flung against this claim,
but if Cramer is right that this is a widespread pattern with often
even better outperformance than shown above... that is kind of an
amazing statement about mutual funds. Maybe it represented the fatter
profits possible before recent SEC crackdowns. Or maybe it means if
mutual fund companies are skilled at recognizing successful, efficient,
and valuable businesses to invest in, then they can apply these lessons
to to make their own business even more so?
dumbstruck
unbelievable - stocks have frightening volatility compared to mutual
funds. But how about a basket of mutual fund family stocks (fslbx not
fair), or maybe that is too cyclical...
Ed
the risk of owning a single stock or even several.
"dumbstruck" <dumb...@gmail.com> wrote in message
news:1119815369.9...@g47g2000cwa.googlegroups.com...
Ed
"dumbstruck" <dumb...@gmail.com> wrote
You would be in the same sector. I'm not saying that it's a good or bad idea
just that if the sector sours then so do your returns. PRWCX, OAKBX, &
TRIGX are diversified across many sectors. If one does poorly the others
will reduce your loss. Same thing on the upside. If one does really great
then the others will normalize your returns.
Elle
tries to
> > do her best but she's not very smart, please ignore her.
Ask your question at misc.invest.financial-plan, Amy, and bona fide
financial experts and long-time successful DIY-ers like myself will support
my contention re index funds.
snip
> > Vanguard 500, $9,034.60
> > Oakmark E&I, $17,956.34
> > TRP CapAp, $18,686.71
See Ed's posts c. 2000 where he tried to pick the funds that would beat the
S&P 500 and failed miserably.
It's not about saving a few pennies; far more is reaped than that by
sticking with index funds for the long haul.
Elle
> Jim Cramer made a surprising claim on cnbc that for many of the favored
> mutual fund companies, you do better by owning their stock rather their
> core funds. I don't think he mentioned TRP or the huge families, but
> take a look at the funds ed mentions vs TROW:
>
>
http://finance.yahoo.com/q/bc?t=2y&s=TROW&l=on&z=m&q=l&c=trigx%2Cprwcx&c=%5E
DJI
>
> Oh, you don't like the volatility of an individual stock vs a fund?
I don't like the short time period. Plus, financial companies in general did
as these mutual fund companies did over the last 15 years or so
Look instead at:
http://finance.yahoo.com/q/bc?s=TROW&t=my&l=on&z=m&q=l&c=trigx,prwcx,nyb,%5E
DJI
Change out NYB with BAC and then WM, three banks I pulled out of thin air,
and you'll see my point.
> Look at the much more favorable volatility of TROW over long term in:
>
>
http://finance.yahoo.com/q/bc?s=TROW&t=5y&l=on&z=m&q=l&c=trigx,prwcx,%5EDJI
>
> Now there's a lot of nitpicking that could be flung against this claim,
He's chasing returns.
> but if Cramer is right that this is a widespread pattern with often
> even better outperformance than shown above... that is kind of an
> amazing statement about mutual funds.
Cramer need only have gone back to the early 1990s.
Ed
"Elle" <elle_n...@nospam.earthlink.net> wrote
> See Ed's posts c. 2000 where he tried to pick the funds that would beat
> the
> S&P 500 and failed miserably.
That depends on how you define 'failed'. First, it was just a game and had
nothing to do with reality.
> It's not about saving a few pennies; far more is reaped than that by
> sticking with index funds for the long haul.
And this is based on history or do you have some proof that index funds will
beat those I listed?
Oakmark Equity & Income and T. Rowe Price Capital Appreciation are
diversified low risk funds and their performance speaks for itself.
do_not_...@my-deja.com
Elle wrote:
> > Most portfolios have core positions, not market timing.
> > Elle really tries to do her best but she's not very
> > smart, please ignore her.
>
> Ask your question at misc.invest.financial-plan, Amy,
> and bona fide financial experts and long-time successful
> DIY-ers like myself will support my contention re index funds.
misc.invest.financial-plan is occupied mostly by commissioned salesmen
whose own investments have done nothing special. They "experts" there
are probably better for tax and legal information, not advice about
choosing specific stocks or funds.
Other good forums can be found at www.morningstar.com and
www.fundalarm.com.
Elle
> Elle wrote:
>
> > > Most portfolios have core positions, not market timing.
> > > Elle really tries to do her best but she's not very
> > > smart, please ignore her.
> >
> > Ask your question at misc.invest.financial-plan, Amy,
> > and bona fide financial experts and long-time successful
> > DIY-ers like myself will support my contention re index funds.
>
> misc.invest.financial-plan is occupied mostly by commissioned salesmen
> whose own investments have done nothing special.
Prove it.
From my reading there, a few of the regulars are financial planners of one
flavor or anther. Some, if not all, of these are "for fee" types, not
commissioned types.
The majority to me appear to be DIY-ers who are older and have grappled with
the questions that frequently come up here.
This isn't rocket science. A high school graduate with good grades in math
and maybe a year of study in economics, statistics, and history applied to
the markets suffices.
> They "experts" there
> are probably better for tax and legal information, not advice about
> choosing specific stocks or funds.
The argument for index funds is so simple one would think even Ed could
handle it. But instead, he continues to reason that, since yesterday money
markets gave a better return than the S&P 500, one should be in money
markets.
Regardless, if one simply allocates using basic guidelines and avoids the
really expensive and/or loaded funds, saves regularly, and lives within
one's means, one will require comfortably.
Ed
"Elle" <elle_n...@nospam.earthlink.net> wrote
> The argument for index funds is so simple one would think even Ed could
> handle it. But instead, he continues to reason that, since yesterday money
> markets gave a better return than the S&P 500, one should be in money
> markets.
There are times, sometimes long periods of time, when money markets are far
superior to the S&P500 and the Wilshire 5000 indices. I don't ever expect
you to get it. Don't fret, you are not alone.
Neither T. Rowe Price Capital Appreciation Fund nor Oakmark Equity & Income
Fund are money market funds. I have reposted my suggested funds along with
their returns below. Study carefully and tell me where you see a money
market fund.
For the period ended 5/31/05.,
here's what $10,000 invested for 5 years would be worth:
Vanguard 500, $9,034.60
Oakmark E&I, $17,956.34
TRP CapAp, $18,686.71
"do_not_spam_me" is correct. While there may be some 'professional' peope
that visit mifp, not all 'pros' are the same. Most investors tend not to do
any better just because they are financial planners. I think a planners
first order of the day should be not to lose money for a client, risk
management.
jIM
amount was invested, or what the amount was invested in. How long it
was invested is also a consideration more important than what the money
was invested in.
I think the argument for index funds is educating people "mediocrity is
acceptable". You will do no better and no worse than the other people
which save. For some that is acceptable. I hold myself and the people
I let hold onto my money to a MUCH HIGHER standard. Make money.
To improve the savings rate, we need to SIMPLIFY the terminology.
Dollar cost averaging... what is that- 3 words which when put together
mean absolutely nothing. Index mutual fund- three more words when put
together mean nothing to the uneducated.
David Wilkinson
> The primary issue with saving is the amount saved, not whether the
> amount was invested, or what the amount was invested in. How long it
> was invested is also a consideration more important than what the money
> was invested in.
>
of saving, how long you save for and how well you invest it, or the
annual return obtained. Look up the equation.
> I think the argument for index funds is educating people "mediocrity is
> acceptable". You will do no better and no worse than the other people
> which save. For some that is acceptable. I hold myself and the people
> I let hold onto my money to a MUCH HIGHER standard. Make money.
>
There is nothing mediocre about index funds. They regularly beat 2/3rds
to 3/4 of managed funds run by "expert" fund managers. If fund managers
can't regularly beat the index then I am sure you can't. Of course some
fund managers beat the index every year, but they are not the same ones
each year. The whole thing is an exercise in chance and probability.
> To improve the savings rate, we need to SIMPLIFY the terminology.
> Dollar cost averaging... what is that- 3 words which when put together
> mean absolutely nothing. Index mutual fund- three more words when put
> together mean nothing to the uneducated.
>
Dollar cost averaging gives a small gain over most time periods compared
to regularly buying equal numbers of shares or units. It means
something, and is free, but not a lot.
Index mutual funds are a valuable investment medium that give
diversification, relative security (unlike a share an index never goes
bust) and low costs. You would do far better in the long run to invest
primarily in index funds.
A collection of errors and unsupported and unlikely claims is not going
to win you any customers here.
Elle
> I think the argument for index funds is educating people "mediocrity is
> acceptable". You will do no better and no worse than the other people
> which save.
This is not what studies indicate about index funds.
jIM
jIM
returns because of their discipline to save and they follow their
strategy. It's the system of saving which is benfiting them more than
the type of investment chosen.