Roth IRA - help me choose funds

[simple987]

Hello, in the next few days I will be opening a Roth IRA at Vanguard. I currently have my employer 401k there with $36,000 as of now and allocated as shown below:


20% Vanguard International Value Fund
20% Vanguard LifeStrategy Growth Fund
20% Vanguard Mid-Cap Index Fund Signal Shares
40% Vanguard PRIMECAP Fund Investor Shares


I will deposit the full $4000 contribution when I open, and so far my plan is:

$1000 to Vanguard Star
$3000 to Vanguard Target 2035

Does this look like a good plan or should I change it up?

[jIM_Ohio]

Lifestartegy is a fund of funds
Star is a fund of funds
Target 2035 is a fund of funds

You may want to a) choose only one fund (like target 2035) and be done with both 401k and IRA.
or b) choose an asset allocation and stick to it using only single investment funds.

I think keeping track of the overlap with 3 different fund of funds will be difficult, rebalancing will be a challenge.

[sweeps]

I agree with Jim... doesn't make sense to buy more than one "fund of funds". Either go with Star or with Target 2035, but not both.

You could do a FOF and another individual fund or two. For example, you could add a real estate fund or a precious metals fund since the FOF doesn't provide exposure to those.

Or as Jim mentioned, you can "build it yourself" by buying single investment funds. But you will be responsible for rebalancing, and since you are just starting out, you will have difficulty meeting minimum balance requirements for more than 1 or 2 funds.

[simple987]

Ok, I understand what you are saying about FOFs. Most likely I will put most into the Target 2035 fund.

I have been reading a lot about target funds, and they are supposed to be one-size-fits-all investing. What if I hold it for a few years and then want to change to another fund? Do I lose the effectiveness of a target fund by not holding it until retirement?

[sweeps]

Do I lose the effectiveness of a target fund by not holding it until retirement?

This is a good question. And my opinion... absolutely not. I think it is a very sound strategy to start off with a Target 20xx fund, keep it for a while until you (a) build up a bigger balance, and (b) increase your understanding/experience in investing, and at that time transfer the money to a set of other funds that meet your needs.

[jIM_Ohio]

The OP needs to learn about asset allocation. This will do 3 things

1) add posts to the other asset allocation thread going on now (tongue in cheek)
2) Jusify the reason the 2035 is a good choice right now and going forward into retirement
3) possible suggest why the OP would prefer to NOT be in the 2035 fund during retirement

[sweeps]

I agree that OP needs to learn about asset allocation, but that's not the immediate concern.

For most people, the Target Retirement fund is a wise, middle-of-the-road, non-controversial investment. What would be worse is to inflict OP with paralysis-by-analysis, and he or she misses out on a year or two of precious compounding. Start putting money in the TR fund, and do research while that money starts growing.

[jIM_Ohio]

I agree that OP needs to learn about asset allocation, but that's not the immediate concern.

For most people, the Target Retirement fund is a wise, middle-of-the-road, non-controversial investment. What would be worse is to inflict OP with paralysis-by-analysis, and he or she misses out on a year or two of precious compounding. Start putting money in the TR fund, and do research while that money starts growing.

Agreed and did not mean to imply or suggest or otherwise hint OP not invest in TR 2035 fund right now.

Invest now, learn more, change mind later.

It's human nature.