Should I be investing more?

[rigz]

Sorry for any typos - this is being posted from my phone.

For numerous reasons (laziness, lack of research, fear, etc) I basically saved everything instead of investing it for 5-7 years. I missed some bad market times but also a lot of good so I've finally started investing in some vanguard mutual funds for the past 2-3 months.

I have been throwing about 1k a month into this accout as we are comfortable with that amount. However I feel like i should be investing more. So my questions are:

1) should I throw a big chunk of my savings into this account? Say 25k all at once?

2) or should I up my monthly contribution to say 2k per month by taking an extra 1k out of savings each month?

3) or just keep doing what I'm doing?

We have plenty saved up (over 100k in addition to a nice EF) but I feel this money isn't doing anything.

[BuckyBadger]

What % of your income are you saving for retirement? (Not including company match.)

[J.Apple902]

Yes and include what accounts you have currently. High yield savings? 401k? ROTH? any other investments / savings?

[BuckyBadger]

Yeah, you've asked a question that's impossible to answer without knowing a lot more about you.

Your age, asset allocation, and how much money you want to have when you retire, and at what age you plan on retiring will help get you a better answer.

[J.Apple902]

I went to UW too!

[BuckyBadger]

I went to UW too!

I went for grad school. MS in 2004, PhD in 2008. And I'm still here!

[jpg7n16]

Well what changed and got you interested in investing the money instead of letting it sit in the bank? Was there something in particular that prompted you to re-evaluate your strategy?

Ultimately how much were you looking to invest? What are you saving towards?

[feh]

I went for grad school. MS in 2004, PhD in 2008. And I'm still here!

BS Mathematics, '88. Still live in Dane County.

[rigz]

thanks for all the replies! i will try to answer the questions so that you guys have better information to give me a better answer.

What % of your income are you saving for retirement? (Not including company match.)

we save about 20% for retirement.

Yes and include what accounts you have currently. High yield savings? 401k? ROTH? any other investments / savings?

my wife has a TSP (governemtn job). we both max our ROTH IRAs. i also have a SEP IRA.

as far as investments go, i just started so those are small. everything else is pretty much in low yield savings accounts. the highest is ING which is like .8% now.

I would just save a lot - but i didnt know what to do with it so it just sat in those accounts. i figured as long as it goes up, thats fine. i really didnt think about long term investing or anything like that. i didnt want to invest in something i didnt understand.

Yeah, you've asked a question that's impossible to answer without knowing a lot more about you.

Your age, asset allocation, and how much money you want to have when you retire, and at what age you plan on retiring will help get you a better answer.

my wife and I are in early 30s.
im not sure what asset allocation means.
we want to have as much as possible when we retire (but seriously, how do i calculate how much i will need?)
id say we will retire at 60. (or thats what we want to)

Well what changed and got you interested in investing the money instead of letting it sit in the bank? Was there something in particular that prompted you to re-evaluate your strategy?

Ultimately how much were you looking to invest? What are you saving towards?

as i read more i realized im losing the time that should be working for me. i realized my money isnt doing anything at .8% or less. i need to start investing long term.

i want to save as much as possible for long term. i really want to invest more but not sure if i can or should. thats why i was wondering about throwing my savings into a long term mutual fund or is that stupid? should i keep doing it month by month? should i increase my monthly contribution?

we dont have any short term saving goals. we just bought a house. dont need cars. no kids/college fund yet.

[jpg7n16]

thanks for all the replies! i will try to answer the questions so that you guys have better information to give me a better answer.

we save about 20% for retirement.

that's very good

my wife has a TSP (governemtn job). we both max our ROTH IRAs. i also have a SEP IRA.

as far as investments go, i just started so those are small. everything else is pretty much in low yield savings accounts. the highest is ING which is like .8% now.

I would just save a lot - but i didnt know what to do with it so it just sat in those accounts. i figured as long as it goes up, thats fine. i really didnt think about long term investing or anything like that. i didnt want to invest in something i didnt understand

.
Well what if they don't go up immediately? Part of the way you are expected to earn higher returns on things like stocks, bonds, etc. is that you take the risk of losing money. That higher return is supposed to compensate you for the extra risk you're taking.

How comfortable are you with the fluctuations in the market?

my wife and I are in early 30s.
im not sure what asset allocation means.
we want to have as much as possible when we retire (but seriously, how do i calculate how much i will need?)
id say we will retire at 60. (or thats what we want to).

Asset allocation is the pie chart. What percent of your portfolio is in stocks/bonds/other investments? That is your asset allocation.

Beginners' Guide to Asset Allocation, Diversification, and Rebalancing

There are tools online to help you calculate approximately how much you need to retire.I know most brokerage firms have calculators too.

Retirement Calculators - CNNMoney
Fidelity Investments: MyPlan Snapshot

https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementNestEggCalc.jsf?cbdForceDomain=false

as i read more i realized im losing the time that should be working for me. i realized my money isnt doing anything at .8% or less. i need to start investing long term.

i want to save as much as possible for long term. i really want to invest more but not sure if i can or should. thats why i was wondering about throwing my savings into a long term mutual fund or is that stupid? should i keep doing it month by month? should i increase my monthly contribution?

we dont have any short term saving goals. we just bought a house. dont need cars. no kids/college fund yet.

I agree. With over 30 years to go before retirement begins, and hopefully many more once you get there, inflation will do a number on the purchasing power of your portfolio. Sitting in a 0.8% account isn't good enough when inflation is 2-3%.

And if you have $100k your looking to invest, putting in $1000/month isn't good enough either. That would take like 10 years to be fully invested. I'd likely invest as much as you can as you're comfortable with it.

And since you're saving towards retirement, and aren't really sure how to allocate, you'd likely be best to go with a target date fund of some sort (the target date fund will do all the allocating for you based on your retirement timeframe). Which brokerage do you use?

[rigz]

that's very good

.
Well what if they don't go up immediately? Part of the way you are expected to earn higher returns on things like stocks, bonds, etc. is that you take the risk of losing money. That higher return is supposed to compensate you for the extra risk you're taking.

How comfortable are you with the fluctuations in the market?

pretty comfortable. i dont check it every day since I'm investing long term. I'm the type of guy who wants to just throw money in there and forget about it.

Asset allocation is the pie chart. What percent of your portfolio is in stocks/bonds/other investments? That is your asset allocation.

Beginners' Guide to Asset Allocation, Diversification, and Rebalancing

right now its mostly stocks and some bonds. i threw my ROTH into a target fund 2040 so i think its mostly stocks. i dont buy and sell individual stocks.

There are tools online to help you calculate approximately how much you need to retire.I know most brokerage firms have calculators too.

Retirement Calculators - CNNMoney
Fidelity Investments: MyPlan Snapshot
https://retirementplans.vanguard.com...ceDomain=false

thanks - ill check those out.

I agree. With over 30 years to go before retirement begins, and hopefully many more once you get there, inflation will do a number on the purchasing power of your portfolio. Sitting in a 0.8% account isn't good enough when inflation is 2-3%.

agreed.

And if you have $100k your looking to invest, putting in $1000/month isn't good enough either. That would take like 10 years to be fully invested. I'd likely invest as much as you can as you're comfortable with it.

so are you suggesting i start throwing lots of my extra savings into my investments? i guess i fear i will ruin the "dollar cost averaging" part of it if i throw say, 20k in a few months, then drop back down to 1k per month.

im not worried about accessing the money since this is all separate from my EF and we arent looking at any big purchases for at least 5+ years.

And since you're saving towards retirement, and aren't really sure how to allocate, you'd likely be best to go with a target date fund of some sort (the target date fund will do all the allocating for you based on your retirement timeframe). Which brokerage do you use?

already got target funds going at vanguard for my sep and roth IRAs.

[BuckyBadger]

Dollar cost averaging (DCA) isn't really necessary in this case. If I have $20k to invest, I'd rather have all that $20k in for an extra 20 months, than incrementally invest $1k at a time. Pick an asset allocation that you're comfortable with (i.e. your age in bonds, the rest of your portfolio divided between US and International stock funds).

DCA is good to smooth out fluctuations in the market, but the extra TIME in the market you get from one initial deposit will probably overshadow that anyway.

I wrote a post about my three fund portfolio somewhere. Let me go and find it and I'll copy it here. You might find it helpful...

[BuckyBadger]

This is partially copied form a previous post, plus a little extra.


For what it's worth, my husband and I use a three fund "lazy" portfolio. (You can google that...) This portfolio includes Total Stock Market, Total International Stock Market, and Total Bond Market. All vanguard index funds. We used some conventional wisdom on how much you should have in stocks and how much in bonds. To determine out asset allocation we used the "your age in bonds" idea, so we are 30% bonds. Of our 70% stocks, we are 70% US and 30% International. This gives us an overall portfolio of 30% bonds, 50% US stocks, and 20% International bonds.

Now, the only reason we did this instead of just using a target retirement fund was because of the funds that were available in our 401k and 403b from through work. Target retirement funds do the exact same thing. They use Total Stock, Total International, and Total Bond index funds and they balance them as you get older to decrease your risk, so as you get closer to retirement age you will hold fewer stocks and more bonds. Also, when you start including taxable investing, you don't want bonds in those accounts for tax purposes, and the target date funds have bonds in them.

There is a LOT of research that says a three or four fund portfolio gets you about 99% of what an "slice and dice" portfolio would get you, but you have to really research and spend a lot of time to slice and dice the market.

So invest your retirement in tax advantaged accounts, google three fund lazy portfolio, invest in index funds, modify your asset allocation as you head toward retirement age, and don't check your balances more than once a month if even that frequently.

FYI this is my asset allocation and my exact funds (percentages as of a few months ago), to give you an idea of a lazy three fund portfolio: (This was posted on a different investing board, but it's a really nice way to see everything at a glance.)

Taxable
11.6% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)

His Roth at Vanguard
11.9% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

Her Roth at Vanguard
17.0% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

His 401k at Vanguard
28.5% Vanguard Total Bond Market Index Fund Signal Shares (VBTSX)
8.6% Vanguard Total International Stock Index Fund Investor Shares (VTIAX)

Her 403b at JP Morgan
22.5% Vanguard Institutional Total Stock Market Index Fund Institutional Plus Shares (VITPX)

HSA at Health Equity
0.2% Vanguard Large Cap Index Signal (VLCSX) (considering it to be equivalent to my TSM)

Total of All Accounts Together (not each account individually) equals 100%

Total US Stocks: 51.3%
Total International Stocks: 20.2%
Total Bonds: 28.5%

New annual Contributions
$17,000 (+ co match) his 401k going into Total Bond Market
$17,000 (+ co match) her 403b going into Total Stock Market
$10,000 total into two backdoor Roths going into Total Stock Market
$6,250 HSA account going into Total Stock Market
$16,000 taxable going into International Stock Market

[kv968]

This is partially copied form a previous post, plus a little extra.


For what it's worth, my husband and I use a three fund "lazy" portfolio. (You can google that...) This portfolio includes Total Stock Market, Total International Stock Market, and Total Bond Market. All vanguard index funds. We used some conventional wisdom on how much you should have in stocks and how much in bonds. To determine out asset allocation we used the "your age in bonds" idea, so we are 30% bonds. Of our 70% stocks, we are 70% US and 30% International. This gives us an overall portfolio of 30% bonds, 50% US stocks, and 20% International bonds.

Nothing wrong with being "lazy" And I'm sure you've beaten alot of people who slice and dice. Just remember, don't be TOO "lazy" and rebalance when needed.

[jpg7n16]

so are you suggesting i start throwing lots of my extra savings into my investments? i guess i fear i will ruin the "dollar cost averaging" part of it if i throw say, 20k in a few months, then drop back down to 1k per month.

Yes, I guess I am if you are really trying to invest the full $100k, your DCA amount is too low. Sure, you'd get the benefits of DCA, but you'd miss out on a lot of the benefits of compound interest.

Say your portfolio returns 7% on average going forward. By DCAing in $1,000/month, after 100 months, you would have $135,251. Not bad. But if you invested the full 100k up front you'd have $178,896. Aka double the gains of your DCA strategy in the same timeframe.

DCA has its benefits, but in general, the sooner you invest, the better.

For you, you may want to do like $10k/month until you've invested as much as you wanted to. You'll get to DCA the lump sum in, have it be a little easier to handle psychologically, but still invest the funds pretty quickly. I think that's a pretty good strategy/compromise.

I wrote a post about my three fund portfolio somewhere. Let me go and find it and I'll copy it here. You might find it helpful...

Target date funds are the ultimate lazy portfolio. OP has a 1 fund portfolio that's even lazier! Haha