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Javelin
Javelin GRM+ Memberand MegaDork
2/20/19 2:16 p.m.
STM317 said:

Take advantage of tax sheltered accounts.

HSA is the king of tax sheltered accounts as money spent on qualifying purchases is never taxed (and you're guaranteed to have qualifying purchases at some point in your life). IF that's already maxxed out, it's not an option, or you have more than $6000 I'd look to the next rung of the ladder.

401(k), IRA etc come next in the hierarchy as money is only taxed once. You can still max out the IRA for 2018 if you haven't filed your taxes yet, and then apply the rest ot 2019's contributions.

529 plan for the kiddos is a great option as well.

These are all just types of accounts that can contain investments. Any investments within should probably be invested in a mix of low-fee index funds/bonds that reflects your preferred asset allocation.

It's in the 5 digits. I did not max my IRA out for 18 because what I had contributed and my other credits already canceled out what little I made. This year is already way different and I am maxing out the $6K for this year.

Both kids have 529's that are doing well.

I'm in 2 different index funds, and they just aren't doing that hot, plus I see signs of another great recession coming so I kind of want to stay out of there anyways.

Javelin
Javelin GRM+ Memberand MegaDork
2/20/19 2:19 p.m.
1988RedT2 said:

Invest in yourself!

Classes to make you worth more in the employment market, or just to gain knowledge in an area that interests you. 

Spend less.  It's like making more!

I'm already in grad school!

I am spending less as well. Now I gotta figure out what to do with the savings. 0.4% (not a typo) in a money market account isn't cutting it...

spitfirebill
spitfirebill MegaDork
2/20/19 2:45 p.m.

You guys make me mad at myself for not getting schooled on this stuff many years ago.    

Dr. Hess
Dr. Hess MegaDork
2/20/19 2:46 p.m.

I'll add that boomsticks have been steadily going up in value.  Things that cost a hundred bucks five years ago are now over $300.  They're not making any more pre-WWI Mausers, for example. Even absolute junk is $150 today.  If you live in Free America (FA), American Rifleman in the latest issue mentioned that an original Colt SP1 is now worth over three large.  The Colt "snake guns," big S&W's like the 29's, etc., have all been increasing in value.

STM317
STM317 SuperDork
2/20/19 4:35 p.m.
Javelin said:
I'm in 2 different index funds, and they just aren't doing that hot, plus I see signs of another great recession coming so I kind of want to stay out of there anyways.

Which ones? What made you pick those two? Would you be open to switching if there were a more optimal option?

2018 was a bit of a down year for the markets thanks mostly to December. But 2017 was crazy good, and 2019 is starting off gangbusters too. If your index funds follow the market, they should be doing fairly well overall. There have been a ton of things that could've been interpreted as market killers during that timeframe, and yet it's raging ahead. My point is that the market will do what it's going to do. Predicting it is a bit of a fool's errand. The key is to keep buying and acquiring assets until you've reached your predetermined sell down point.

I understand why you'd be concerned about a recession or economic downturn, but unless your investment timeline is just a couple of years, a recession shouldn't concern you (assuming you're investing into funds that follow the market as a whole). You could always dollar cost average the money a bit at a time to reduce some of the worry. It might even allow you to catch a small sale if prices dip. However, It is very likely that buying now (with the full amount) will turn out better than holding the cash and trying to pick the right time to jump back in. Personally, I look at market drops as sales that allow me to acquire more shares for my money. But that's not an easy frame of mind to keep when you see your balance dropping precipitously.

fiesta54
fiesta54 Reader
2/20/19 7:40 p.m.
mtn said:

If you want the money to work on its own, index fund, even if that’s what you’re already in. 

 

If you want whats low risk, index fund, even if it’s what you’re already in. 

 

If you want the safest bet in terms of a decent reward, index fund, even if that’s what you’re already in. 

 

If you want something riskier but potentially much more lucrative, email me and I can send you the algorithm that I’m using for a portion of my IRA that has been pretty lucrative. 

I think I remember you talking about this a year or so again.  I'd be interested in at least reading about what you are doing and your analysis as well. 

1988RedT2
1988RedT2 UltimaDork
2/20/19 7:50 p.m.

If CD's are a part of your asset mix, and they probably should be, at least do yourself the favor of opening an online account.  A Discover online CD is paying over 2.5% APY for a 12 month term.

Your big, local bank is probably screwing you over with some pitiful low rate under 1.0%.

Javelin
Javelin GRM+ Memberand MegaDork
2/20/19 8:35 p.m.

In reply to Dr. Hess :

Hmmm, now that is interesting, and I'm not even a boomstick guy.

Javelin
Javelin GRM+ Memberand MegaDork
2/20/19 8:36 p.m.

In reply to 1988RedT2 :

I bank with a credit union, and they have 3.0% on a 5-year CD. I do not have one currently.

Javelin
Javelin GRM+ Memberand MegaDork
2/20/19 8:46 p.m.
STM317 said:
Javelin said:
I'm in 2 different index funds, and they just aren't doing that hot, plus I see signs of another great recession coming so I kind of want to stay out of there anyways.

Which ones? What made you pick those two? Would you be open to switching if there were a more optimal option?

2018 was a bit of a down year for the markets thanks mostly to December. But 2017 was crazy good, and 2019 is starting off gangbusters too. If your index funds follow the market, they should be doing fairly well overall. There have been a ton of things that could've been interpreted as market killers during that timeframe, and yet it's raging ahead. My point is that the market will do what it's going to do. Predicting it is a bit of a fool's errand. The key is to keep buying and acquiring assets until you've reached your predetermined sell down point.

I understand why you'd be concerned about a recession or economic downturn, but unless your investment timeline is just a couple of years, a recession shouldn't concern you (assuming you're investing into funds that follow the market as a whole). You could always dollar cost average the money a bit at a time to reduce some of the worry. It might even allow you to catch a small sale if prices dip. However, It is very likely that buying now (with the full amount) will turn out better than holding the cash and trying to pick the right time to jump back in. Personally, I look at market drops as sales that allow me to acquire more shares for my money. But that's not an easy frame of mind to keep when you see your balance dropping precipitously.

I am wary of dropping serious coin into a fund only to have a repeat of Dec 18 and immediately lose a large % (or conversely, that is that many more shares I could have gotten had I waited) of my investment, even if it is for a long-term. (I also watched the last 18 months of growth in both of my kid's 529's basically disappear that month). I suspect that I may need up to half of the amount in about 2 years to buy property/house to live at, so I don't want to tie everything up into one thing. It's 50K, so I can spread around say 5 good investments?

I'm in FDVV, UCEQX, and USATX.

I did buy $50 of the PUFXF because of this thread and already lost $2.50! laugh

I have TSLA, AMZN, and GMN individually among a bunch of others. Some are not doing great (F, GE, FWONA), others are doing well (PLNT, TGT, VZ). I haven't sold anything since I started investing 5 years ago. I'm looking at retiring in 2039.

sevenracer
sevenracer Reader
2/20/19 9:40 p.m.

Ally bank is offering 2.75% on a 12 month CD, and I think 2.3% on a standard savings account.  Everything is handled online.

That's not really working for you like an index fund should (over time), but you mentioned a 5yr CD for 3%, I'd lean heavily towards a 1 year term and give up the .25% in interest.  May be good for parking funds you will need for housing, etc.

Javelin
Javelin GRM+ Memberand MegaDork
2/20/19 10:17 p.m.

In reply to sevenracer :

Great idea!

STM317
STM317 SuperDork
2/21/19 5:15 a.m.
Javelin said:

I am wary of dropping serious coin into a fund only to have a repeat of Dec 18 and immediately lose a large % (or conversely, that is that many more shares I could have gotten had I waited) of my investment, even if it is for a long-term. (I also watched the last 18 months of growth in both of my kid's 529's basically disappear that month). I suspect that I may need up to half of the amount in about 2 years to buy property/house to live at, so I don't want to tie everything up into one thing. It's 50K, so I can spread around say 5 good investments?

I'm in FDVV, UCEQX, and USATX.

I did buy $50 of the PUFXF because of this thread and already lost $2.50! laugh

I have TSLA, AMZN, and GMN individually among a bunch of others. Some are not doing great (F, GE, FWONA), others are doing well (PLNT, TGT, VZ). I haven't sold anything since I started investing 5 years ago. I'm looking at retiring in 2039.

The markets have now regained all of Dec 2018s losses, so yeah losses suck to see, but historically the markets always come back. I wouldn't put any of the money that you think you'll need in the next 24 months into a stock-heavy investment, but that may/may not be more conservative than you. I always lean towards guaranteed investments when it comes to things like downpayments, so I'd probably stick that portion of the money into something like a CD, or back to back CDs depending on timing.

 

As for your indexes, I know that you didn't specifically ask for feedback, but here's what I see in a quick glance over:

FDVV is 93% US stocks/6.95% international stock. Expense ratio is high 0.29%. It's up 19.6% since it's inception in Sept of 2016. It seems to have a lot of turnover/churning which explains some of the fees.

UCEQX is a blend of 54% US stocks and 43% international stock (Seems like there's some overlap with FDVV here which may create more exposure to the US or international market than you realize). Expense ratio is way high @ 0.85%. It's up 10% since Sept of 2016.

USATX is a bond fund. It's conservative, but should be less volatile than the others. More security means slower growth of course. Expense ratio is 0.51% which can be a pretty big chunk of any gains you might see here. It's down 3.5% since Sept 2016.

These funds all have higher than necessary fees which are negatively impacting your returns. I think you could get similar or better performance with other funds, and pay lower fees too.

VTSAX would be a good replacement for your FDVV holdings. VTSAX invests 98% in the US market, has very low turnover (3%) which allows an expense ratio of just 0.04%. It's up 30% since Sept 2016 when FDVV was started. So it holds most of the same stuff that FDVV does, but it's outgained FDVV by about 11%, and done it while charging you less in fees. It also has a much longer track record for comparison.

I don't see much reason to own the UCEQX, unless it's there because you want international exposure. If that's the case, then simplifying to something like Vanguard's new VGTSX will give you 96% international stocks with an expense ratio of just 0.17%. This would eliminate any overlap with your US stock funds and would make it more clear just how much of your portfolio is held domestically vs internationally which means you can set your asset allocation more easily. VGTSX is new, but has returned 7.5% thus far.

For your bond fund, VBMFX holds 98.6% US Bonds. It's expense ratio is much lower than UCEQX at 0.15. It's down 4.45% since Sept of 2016. So, similar bond exposure, similar performance, much lower fees.

So, if you converted your current FDVV (mostly US, some international), UCEQX (about half US, half international) and USATX (All bonds) holding to VTSAX (US stocks), VGTSX (International), and VBMFX (All bonds) respectively, you'd have similar/better performance with lower fees all around, and a more clear idea of where your money is going.

 

 

 

Flynlow
Flynlow HalfDork
2/21/19 8:52 a.m.
Javelin said:

I'm in 2 different index funds, and they just aren't doing that hot, plus I see signs of another great recession coming so I kind of want to stay out of there anyways.

Not all index funds are created equal.  If you are paying more than 0.1-0.2% in fees, you are paying too much.  They are indicies, there is not much managment required, just occasional rebalancing.  The yearly fees of 1%+, whether the fund is making money or not, really eat into your gains.

From what you've said (money needed in 2 years for down payment, Dec '18 made you uncomfortable), your risk tolerance doesnt sound like you should use the money for stocks.   That 2.75% CD is guaranteed money in your pocket, I would park it there for two years.  If you need it for a house, it's there, if the stock market takes a dive, you could reassess then and possibly buy stocks instead of the house, etc.

Javelin
Javelin GRM+ Memberand MegaDork
2/21/19 9:02 a.m.

In reply to STM317 :

Thank you!!! That is both highly useful and very timely. I didn't realize that I had that overlap. My investments are through USAA at the moment and I'm not happy with their fees or their sellout to another company, so switching all three funds while switching providers should be easily doable. Who do you use or recommend to manage your funds?

mtn
mtn MegaDork
2/21/19 9:13 a.m.

Vanguard. 

stroker
stroker UltraDork
2/21/19 9:43 a.m.

Okay, take this with a huge dose of salt.  I'm not schooled on finances in any way.  All I know is that I have two young kids, no job, and an inheritance in the pipeline.  The current financial situation nationwide scares the E36M3 out of me.  I genuinely fear we're treading into Weimar Republic hyperinflation territory with the national debt and the debt levels of several states.  There are those who know more about financial matters than I ever will who tut-tut the whole thing but my concern is that we're wandering into completely uncharted territory economically AND legally.  I don't think that statement can seriously be contested.  I'm not going to get into the political stuff for obvious reasons, but I'm sincerely concerned that if Illinois (or worse, California) defaults on its obligations it could start a domino effect.   Holding cash is useless if it devalues.  Holding stocks is useless in another serious stock market crash and I think the signs are clear that if another 2008 stock market crash happens, it's going to be far, far worse this time.  

I've been listening to some interviews with a guy named John Rubino on Youtube (example here) and I'm leaning more into the philosophy of trying to do what I can to minimize my losses rather than to maximize my gains.  I'm thinking a small farm property and some gold and silver coins as a substantial start.

YMMV and just my uninformed $.02.

ProDarwin
ProDarwin UltimaDork
2/21/19 9:50 a.m.

I don't think I could stomach living in fear like that.

mtn
mtn MegaDork
2/21/19 9:54 a.m.

stroker, folks have been predicting this doomsday for the past 80 years. 

GameboyRMH
GameboyRMH GRM+ Memberand MegaDork
2/21/19 10:00 a.m.
stroker said:

Okay, take this with a huge dose of salt.  I'm not schooled on finances in any way.  All I know is that I have two young kids, no job, and an inheritance in the pipeline.  The current financial situation nationwide scares the E36M3 out of me.  I genuinely fear we're treading into Weimar Republic hyperinflation territory with the national debt and the debt levels of several states.  There are those who know more about financial matters than I ever will who tut-tut the whole thing but my concern is that we're wandering into completely uncharted territory economically AND legally.  I don't think that statement can seriously be contested.  I'm not going to get into the political stuff for obvious reasons, but I'm sincerely concerned that if Illinois (or worse, California) defaults on its obligations it could start a domino effect.   Holding cash is useless if it devalues.  Holding stocks is useless in another serious stock market crash and I think the signs are clear that if another 2008 stock market crash happens, it's going to be far, far worse this time.  

I've been listening to some interviews with a guy named John Rubino on Youtube (example here) and I'm leaning more into the philosophy of trying to do what I can to minimize my losses rather than to maximize my gains.  I'm thinking a small farm property and some gold and silver coins as a substantial start.

YMMV and just my uninformed $.02.

When national debt becomes unmanageable it doesn't cause hyperinflation, it leads to extreme austerity. And the US national debt is safely far from unmanageable...for now.

Hyperinflation usually happens when a smaller country that relies heavily on exports falls into a nasty recession and their currency essentially becomes useless play money (Recent examples include Zimbabwe and Venezuela). So the US is arguably the country safest in the world from hyperinflation.

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