Quote:
Originally Posted by Anselm24
Thanks for the advice. As far as the additional info requested
-2007/2008 AGI
232,000 (numbers are approximate)
-2007/2008 taxable income
152,000
-monthly spending/saving
I have no housing expense and I currently spend about 700 per month in insurance related costs and food.
I save about $12000 in the average month
-current contributions to retirement accounts
IRA maxed
401k maxed
-availability of 401k at employer
available
-housing situation (rent/own), amts owed if any
I do not own a home and I am provided housing by my employer so I do not have any
Are the stocks/money market in taxable accounts? Yes I have aboput 140k in a taxable brokerage account.
As far as my exposure to APPL. Well I bet big on this one about a year and a half ago and my cost basis is below 100 per share. I am loath to sell it as nothing has changed fundamentally with the company (macro economy yes). I agree that growth can not continue indefinitely at the current rate but I believe that APPL is positioning itself well to capitalize on the emerging market for wireless devices that offer the functionality of a pc. I have already rode out large fluctuations in stock price to the tune of near 50% decline while everyone screams that the market is going down in flames and that this stock in particular will be trading at 2003 levels. Would you have told me to sell this 3 months ago? What stocks offer a better investment value and why?
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I would not worry about the taxable investments now. You save 12k per MONTH? Did I read that right? In one year you could allocate 144k, which would trump the current stocks you own shortly.
Here is what I would do:
1) Set aside 3 months expenses in cash. Keep this in current money market account.
2) Set aside another 3-9 months cash in a moderate investment (better than cash return of 4%, but less risk and volatility from the stock market which moves +/- 5% in a day.
3) come up with an asset allocation and risk profile. Express this as a percent stocks and a percent bonds. 100% stocks would be around a 9% annual return. 80% stocks-20% bonds would be around a 7-8% annual return. 60-40 would be around a 6-7% annual return. 20-80 to 40-60 would be between a 4-6% annual return.
I would then look at #3 and see where the accounts you have fit things. If you express an 80-20 portfolio as:
35% large cap domestic stocks
10% mid cap domestic stocks
10% small cap domestic stocks
15% large cap foreign stocks
10% small cap foreign stocks
10% US bonds
5% international bonds
5% high yield bonds
then the next step is to allocate these asset classes to accounts. Because we are talking about 144k invested per year, tax planning is CRUCIAL to this allocation.
For example:
5% high yield might actually be municipal bonds which are tax free.
35% large cap domestic might be an index fund in a taxable account which is tax efficient.
5% international bonds and 10% US bonds might be in 401k because you have good choices. Mid and small cap might be in taxable accounts because you found another index or two, or managed fund or two you like. You use the international equities in an IRA account because they are tax inefficient but have funds you like.
The key is decide the percentages FIRST, pick the accounts and funds SECOND. A fund might be appropriate for an IRA, but not be appropriate for someone in a taxable account (in such a high tax bracket).
Plan accordingly. Post more info (risk tolerance, goals, timeline to retire, income needs in retirement) and maybe I can be more specific.