Should I be investing more?

[jpg7n16]

mainly because im still trying to learn how the funds work. it probably is - i just dont know it yet.

yes - that is my main problem. I feel if I have every single cent I invest in one single fund, that it possibly cannot be diversified. but it looks like it can if I stick with target funds. im glad im figuring this out now and not in 10 years.

Yeah. Think of mutual funds like icebergs. All you see in your account is the tip (1 target date 2040 fund), but under the surface, there is a LOT more going on.

By investing in just 1 fund:

You actually have 63% in the Total stock market index fund, which invests in the stocks of 3302 different US based companies.
27% in Total International Stock Index, which invests in 6444 different stocks around the world (not the US)
And 10% in the Total Bond index, which invests in 5086 different bond holdings

So you own stock in nearly 10,000 different companies and have over 5,000 different bond holdings. And you thought you weren't diversified

another question i just through of this morning. i know these target funds re-allocate themselves over the years (for example, mostly stocks now but as it gets closer to 2040 mostly bonds). does this mean vanguard will automatically sell my stocks and buy bonds as time goes on or does that mean anything I buy closer to 2040 will be more bonds and less stocks? (I hope I asked that correctly)

That means Vanguard automatically sells/buys stocks/bonds as appropriate to keep the fund balanced. If you never invested another dime into the fund, it would still rebalance and keep you in line with where they feel you should be given the amount of time you have left til you begin retirement.

In fact they'll even add in other funds as necessary. To see how your fund will change over time, just check out this link from Vanguard:

https://personal.vanguard.com/us/funds/vanguard/TargetRetirementList#targetAnchor

Play with the slider at the bottom and you'll see how it changes over time.

thanks. this helps.

is risk tolerance basically how much volatility I am emotionally able to handle? or is there a number that people use? I am looking very long term (20-30 years) and will try not to look at the balance very often as it goes up and down over the years...does this mean I can handle a lot of risk?

Risk tolerance is how much volatility you can handle emotionally. To help quantify it, most companies will ask you where you fall on a scale from 1-10. With 10 being able to tolerate a large amount of risk.

Not concerned with checking your balance often tends to make you more risk tolerant, but the real question is, if you woke up in 6 months and had lost 1/3-1/2 your money, would you bail out and try a different fund? Or stick to your strategy and tough it out?

[rigz]

Yeah. Think of mutual funds like icebergs. All you see in your account is the tip (1 target date 2040 fund), but under the surface, there is a LOT more going on.

By investing in just 1 fund:

You actually have 63% in the Total stock market index fund, which invests in the stocks of 3302 different US based companies.
27% in Total International Stock Index, which invests in 6444 different stocks around the world (not the US)
And 10% in the Total Bond index, which invests in 5086 different bond holdings

So you own stock in nearly 10,000 different companies and have over 5,000 different bond holdings. And you thought you weren't diversified

That means Vanguard automatically sells/buys stocks/bonds as appropriate to keep the fund balanced. If you never invested another dime into the fund, it would still rebalance and keep you in line with where they feel you should be given the amount of time you have left til you begin retirement.

In fact they'll even add in other funds as necessary. To see how your fund will change over time, just check out this link from Vanguard:

https://personal.vanguard.com/us/funds/vanguard/TargetRetirementList#targetAnchor

Play with the slider at the bottom and you'll see how it changes over time.

awesome. this is good stuff. thanks.

Risk tolerance is how much volatility you can handle emotionally. To help quantify it, most companies will ask you where you fall on a scale from 1-10. With 10 being able to tolerate a large amount of risk.

Not concerned with checking your balance often tends to make you more risk tolerant, but the real question is, if you woke up in 6 months and had lost 1/3-1/2 your money, would you bail out and try a different fund? Or stick to your strategy and tough it out?

in 6 months? id probably just stick is out and hope it recovers. after 10 years if i was down to 1/2? that would be much tougher to handle.

I think i just realized another reason why I went with the wellesley fund instead of just adding to a target fund. I think in my mind, the target funds were retirement funds and thus, must only be added to IRAs like my ROTH or SEP. in other words only put target retirement funds into retirement accounts. didnt realize you could have a target fund outside a retirement account.

[kv968]

another question i just through of this morning. i know these target funds re-allocate themselves over the years (for example, mostly stocks now but as it gets closer to 2040 mostly bonds). does this mean vanguard will automatically sell my stocks and buy bonds as time goes on or does that mean anything I buy closer to 2040 will be more bonds and less stocks? (I hope I asked that correctly)

Not quite sure what you're asking but hopefully I can answer what I think your asking.

Yes, Vanguard will automatically start selling your stocks and buying bonds as time goes on. However if you want to keep the same allocation instead of going down the "glide path", you could just transfer the money to a later dated one.

For example, looking at the link jpg posted, if I were to get into the 2030 fund right now it has about 80% stocks and 20% bonds. As it moves down the glide path, in 5 years it'll be about 72% stocks and 28% bonds. Well if I wanted to stay at that 80/20% allocation instead, all I would have to do is move my money out of it and into the 2035 fund since that'll be at the 80/20% allocation in 5 years.

Not sure if that's what you were getting at but I hope that made sense.

[rigz]

Not quite sure what you're asking but hopefully I can answer what I think your asking.

Yes, Vanguard will automatically start selling your stocks and buying bonds as time goes on. However if you want to keep the same allocation instead of going down the "glide path", you could just transfer the money to a later dated one.

For example, looking at the link jpg posted, if I were to get into the 2030 fund right now it has about 80% stocks and 20% bonds. As it moves down the glide path, in 5 years it'll be about 72% stocks and 28% bonds. Well if I wanted to stay at that 80/20% allocation instead, all I would have to do is move my money out of it and into the 2035 fund since that'll be at the 80/20% allocation in 5 years.

Not sure if that's what you were getting at but I hope that made sense.

yup - exactly what i was asking. thanks.

[Kooshiball]

In this highly inflationary economy due to governments printing around the world (Printing trillions of paper and injects into the economy), it is virtually impossible to get ahead financially without investing your money to get higher return (Current inflation rate is around 8 - 10% after taking off all the phony government manipulations). Therefore, it is pretty much a requirement for people to invest their money in this economic condition. Otherwise, it will be guaranteed lose of 8 - 10% in every single year if you don't invest at all.

However, it is not really smart idea to jump into the investment itself before the preparation. To me, it is crucial to get educated before investing in any investments. Otherwise, investment becomes pure speculations. I highly recommend you to read some books that prepare you to get more financial education. My recommendation is to at first cultivate investment mindset and then learn about macro-economy as well as monetary history of what happened in the past to predict the future.

I hope this will help!