Should I invest in Mutual funds or Stocks in a Roth IRA ?

[kv968]

With target funds, you would use your risk factor more than the actual year in which you plan to retire if you ask me. The closer the year of retirement in the fund, the "safer" it'll be due to it's bond/equity and other holdings. The risk factor is dependent upon how much you're willing to take. You have some time before retirement so you can afford to somewhat riskier in your selections as long as you feel comfortable with it.

If you don't want to go with a target fund, just looking at the funds you have listed, I would say if you went with something like this you'd be well diversified:

~35% Spartan US Equity
~25% Spartan Extended
~25% EuroPacific
~10-20% Pimco Total Return
~5-10% Company Stock

Now that's not "professional" advice by any means but just something to look at as a starting point. The only addition I would make to that is maybe 5 or 10% (these percents add up somehow ) in a good emerging markets fund if one's offered in your 401k (if not you can most likely get a good one in an IRA). Europacific is a good int'l fund, but it doesn't have enough emerging exposure for me.

[aim-high]

This thread is going more towards 401k so I have opened another thread for some advise on what vanguard fund to choose

"Any recommendation on these vanguard funds"

Thanks.

[kv968]

Sorry to focus in on just your 401k, but I feel you have to look at all the retirement accounts (401k, IRA, etc...) pretty much as one account. In doing so, what I would do is invest like I stated in the previous post and just use Vanguard's Emerging Market Index in my Roth for my emerging markets exposure. However, with wanting my exposure to that market at 5-10% you would need $30-60K in you 401k to reach that percentage with the $3000 minimum that the fund has. Again, treating both accounts as a whole.

If you don't have that amount in your 401k then I would suggest you going with something else. Perhaps even using one of their target retirement funds. It's all about deciding first how much risk you want and coming up with an allocation that reflects that risk.

[Broken Arrow]

aim-high, in this case, I would recommend looking into Fidelity Freedom 2040 (FFFFX). My current 401(k) is 100% Freedom 2040. Easy peasy. And when you flip through its prospectus, you'll see that it diversifies your money into about 20 or so other Fidelity mutual funds, with a rough allocation 85% stocks / 15% bonds.

Look at just the 401(k), I do feel that your stock/stock fund allocations seem rather high. Please remember that this exercise isn't just to grow our money, but more importantly, we also have to protect our money.

For that matter, while I too think it's acceptable to have individual stocks, I would say 10% is the very upper limits of what I think is appropriate for a passive retirement fund. Yeah, it depends on what your other accounts look like, but personally, I would be more comfortable with 5%, maybe less depending on the quality of the stock.

Again, all this depends your overall allocations with your other retirement accounts....

[aim-high]

Hi Broken Arrow,

Thanks for the input.
Yes, I just pulled up my online statement for my 401k and I see the asset allocation like this
92.1% Stocks
7.00% Bond investments
0.87% Short term investments.

I then went to the x-ray tool in morningstar and put just the Freedom 2040 fund to see its allocation and it is like this

U.S. Stocks 62
Foreign Stocks 21
Bonds 13

So the total number of stock investments in Freedom 2040 = 83 (though there is a diversification between US stocks and Foreign stocks)

My question is, since I have 30 more years to retire, Isn't it better to be aggressive now (I mean invest in Large growth stocks) rather than investing in Bonds and then when I have about 10-15 years of retirement, Can I shift them to 80% stocks + 20% bonds ?

I completely understand that 401k and other retirement funds should be diversified but shouldn't i be taking little more risk now than closer to retirement ?

[Broken Arrow]

My question is, since I have 30 more years to retire, Isn't it better to be aggressive now (I mean invest in Large growth stocks) rather than investing in Bonds and then when I have about 10-15 years of retirement, Can I shift them to 80% stocks + 20% bonds ?

Yes, I believe the younger we are, the more we can afford to take risks. And should....

But... 100% stock funds or anything close to that, to me, is for people in their early to mid 20s. By now, hopefully we've amassed some capital, and with a little bit less time to invest, we should also scale it back just a bit and protect some of that capital.

Of course, all this depends on lots of things, such as current balance, personal risk tolerance, personal financial situation (ex. a 30 year old single vs a 30 year old married with 3 kids), asset allocation of other, similar accounts, and so forth....

Personally, I am extremely risk tolerant. Very. My overall asset allocation is more like 90% stocks / 10% bonds or cash, depending on the situation at the time. But... even I don't go 100% stock anymore.

There is such a thing as being too aggressive and risky, and stocks are inherently volatile. But I suppose we all have to figure out for ourselves where to draw that line.

[jimbo970]

Hi Everyone,

I am really interested in beginning to invest with vanguard. I am in the process of opening a MM account with them so I can have funds inside to beging investing. Where should I start?? I am looking at investing 25K total. I notices some funds you must invest this much for one fund? that is scary for a beginner. Any good advice on this is appreciated.

[disneysteve]

Hi Everyone,

I am really interested in beginning to invest with vanguard. I am in the process of opening a MM account with them so I can have funds inside to beging investing. Where should I start?? I am looking at investing 25K total. I notices some funds you must invest this much for one fund? that is scary for a beginner. Any good advice on this is appreciated.

Can you tell us more about your situation? What will this money be for? Is this a retirement account? What other investments do you currently have? What is your asset allocation plan? How old are you?

Most Vanguard funds have a minimum opening investment of $3,000. That is a lot, but if you are investing 25K total, that really doesn't pose a problem.

[jimbo970]

I just opened a vanguard account

Everyone,

I just opened a vanguard account and am moving 25K into this. Where should I invest with this money - right now it is in their prime MM account

I was looking at the 500 index fund but want to diversify.

I was also looking at the all in one 2035 mutual fund. thoughts?

I am early 40's and have been heavily invested with Ameriprise. I was paying the usual 5.75 and then the wrap fees etc.. for the last 12 yrs. I have a 401 k with my employer. Thjis money would be after tax and want to take adv of the low market so that I can buy a new house in a about 3-5 years with cash

[Broken Arrow]

...so that I can buy a new house in a about 3-5 years with cash

Oh! Well, that changes things. You can go 100% in Vanguard Total Bond Market Index Fund (VBMFX) and that would work.

[disneysteve]

want to take adv of the low market so that I can buy a new house in a about 3-5 years with cash

If this is money you will need to buy your house in 3-5 years, it should definitely not be invested in stocks. That money needs to be kept safe in money markets or CDs.

[aim-high]

I'll comment on the overall portfolio later, but I wanted to say that there is nothing inherently wrong with investing in company stock. I do think 10% of your portfolio is the max you should have in any single company, including the company you work for. If you feel the company has good prospects going forward and you keep your allocation at 10% or less, I wouldn't argue with this.

Steve, Any suggestions regarding my current 401k and what I can do to diversify it better ? I think it is kind of over diversified at this point.

Thanks

[Lilylady]

What about American Funds ? That was something my financial advisor was saying he would pick from.

I've got a number of American Funds, yes, with the high expense ratio, but they've done well....

[StockTrader6080]

I stopped investing into funds that I cannot control after my fund managers didn't have the intelligence to close out of positions last year that were CLEARLY GOING DOWN.

Now I manage my own money in stocks, and do it my way.
It turns out it 100 times easier than I was ever led to believe.

Keith

Goodbye mutual funds. Hello CoolTrade robotic traders.

[kgloh_23]

Risk tolerance

It is depend on your risk tolerance. Aggressive investor , moderate or conservative. But you seen like an aggressive investor.
Invest both if you have enough capital. Remember, never put all eggs into one bracket.