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Invisiblememes
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Managing your Retirement Account
    #18871885 - 09/21/13 12:16 PM (10 years, 4 months ago)

Help found, thanks friends


Edited by memes (10/10/13 02:37 AM)


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InvisibleGilgamesh18
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Re: Managing your Retirement Account [Re: memes]
    #18872023 - 09/21/13 12:50 PM (10 years, 4 months ago)

My financial advisor recommends that young earners invest heavily in equities and gradually switch over to bonds and other fixed income sources as they age.


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OfflinegeokillsA
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Re: Managing your Retirement Account [Re: memes]
    #18872111 - 09/21/13 01:15 PM (10 years, 4 months ago)

If I am correct in assuming that you are around 30 years old, I would ditch the Lifecycle Funds portion of your portfolio because you are two young to be sacrificing the risk you can take at this age, for the security you will need later.  If you're not employing an aggressive investment strategy now, you should never consider doing so because the relative risk will increase as you age.  Note that there is nothing inherently wrong with taking a conservative approach if that is in line with your own personal risk tolerance.  But for my part, conservative investments are returning so little that I really wouldn't consider them at this stage in the game.  If monetary policy shows us a sustained increase in interest rates, that's when I would consider switching into things such as the Fixed Income or Treasury options.

Presently, the Fixed Income option appears to yield some ~2% return, which is similar to the S&P 500 but without the tailwind of inflows the S&P is benefiting from due to the artificially low interest rates that are prevalent today.  Money is being driven into risk assets because it has no where else to go with a hope of keeping up with inflation.  That general trend is not going to stop until we see sustained changes in monetary policy, and I suspect that those changes will only ever be fully executed at a time when the equity markets have inflated considerably beyond their current perch.

I can see that you are trying to boost your risk profile by maintaining exposure to the Small Cap Stock Index, which is good, although if we weather another downturn, those will be hit the hardest.  As such, if this were my own retirement portfolio (I am 30 years old), I would structure it as follows:
  • 70% Common Stock Index (S&P)
  • 20% Small Cap Stock Index
  • 10% International Stock Index


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InvisibleLunarEclipse
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Re: Managing your Retirement Account [Re: memes]
    #18872227 - 09/21/13 01:38 PM (10 years, 4 months ago)

Buy the S&P fund 100% on a dollar cost averaged basis.  Hopefully the fees are low and you aren't getting soaked for those. The other two funds are likely losers, where they trade a lot and commissions and their management fees are high.  Buy the S&P 500 check the yearly fee if it's 0.30% like Vanguard then you are OK.  Buy and hold like S&P index funds has proven to be better 80% of the time vs. some manager timing and trading.

And pray this debt balloon doesn't really blow up, but if it does you are better off in equities, index S&P a good choice.

That's my best advice.


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Edited by LunarEclipse (09/21/13 01:45 PM)


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Invisiblememes
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Re: Managing your Retirement Account [Re: LunarEclipse]
    #18873431 - 09/21/13 07:08 PM (10 years, 4 months ago)

Quote:

LunarEclipse said:
The other two funds are likely losers, where they trade a lot and commissions and their management fees are high. 



I just checked the literature.  Administrative fees for all of the funds are the same:  2.7 basis points, or $0.27 for every $1,000.  I didnt see anything mentioned anywhere about any fees on individual transactions.

Is that admin fee good/bad/average?


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Invisiblememes
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Re: Managing your Retirement Account [Re: memes]
    #18873456 - 09/21/13 07:17 PM (10 years, 4 months ago)

Geo:  Thanks for the advice!




Does anyone think it prudent to pull back into Govt securities when the macroenvironment looks less bully on equities?  I mean, as geo said, the fed will eventually start ratcheting up the fed funds rate,  will eventually close off the discount window to everybody-and-their-fucking-mother, and the environment where  everybody piles into the equity markets because that's the only fiscally viable option will be over.

Assume a drop in the market of X.  Even if I miss out on the first 30% of the drop (wanting to ensure it wasn't some intermediary dip), and then miss the bottom by another 20% on the re-buy while ensuring the rally wasn't some short-term rise in the middle of a long-term slide, that's still an avoided 50% loss in unrealized gains. 

Or, as my age is so young, is any substantive drop in the market completely inconsequential?  As any losses are only losses once they're realized, is it completely undesirable so early in my career?  I can see something  like this making sense when I'm 50 or 60, needing to ensure my retirement doesn't melt away just when i'm about to use it... but in my mid 20s?


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Invisiblememes
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Re: Managing your Retirement Account [Re: memes]
    #18873466 - 09/21/13 07:19 PM (10 years, 4 months ago)

disclaimer:  again, i'm ignorant and just thinking out loud


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InvisibleLunarEclipse
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Re: Managing your Retirement Account [Re: memes]
    #18874955 - 09/22/13 07:38 AM (10 years, 4 months ago)

Quote:

memes said:
Quote:

LunarEclipse said:
The other two funds are likely losers, where they trade a lot and commissions and their management fees are high. 



I just checked the literature.  Administrative fees for all of the funds are the same:  2.7 basis points, or $0.27 for every $1,000.  I didnt see anything mentioned anywhere about any fees on individual transactions.

Is that admin fee good/bad/average?




I have no feel for what may be "reasonable" for admin fees, that sounds different from "management" fees however.  Admin fees sound like someone charging you to administer the plan.

Each mutual fund typically has a management fee as well.  With an index fund, their management and trading is nearly nil.  They buy the S&P 500 stocks for instance, hold them until a stock falls off the list and another one or ones come on the list, at which point they make adjustments.  Other funds try to trade and time the market, so the management costs are higher.  Many times multiples higher.  So with a big S&P fund like Vanguard I would guess without doing the search maybe 0.2% a year management fee.  Other mutual funds might be at a percent or two.  It's super hard to make up even a percent or two by trading.


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Offlineqman
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Re: Managing your Retirement Account [Re: LunarEclipse] * 1
    #18879623 - 09/23/13 08:42 AM (10 years, 4 months ago)

Some things to consider-

1. The bond market has been in a 32 year BULL market, no one has lost any money investing in bonds for a very long time. Who would choose to own bonds at (10 year at 2.7%) is beyond me, there is lots of risk and minimal reward in the bond market at this point. If bond yields just traded at a historic average (7% on the 10 year) from this point, bond investors would take substantial losses.

2. Will there be a time to own bonds?  Here's the problem, the Fed can't ever let bond yields rise, mathematically the government will not be able to fund itself, the interest payments will be unaffordable (we have too much debt).

3. The Fed funds rate has been at 0% for over 5 years now, and the Fed says at least until 2016, but I don't think the Fed will ever be able to hike the Fed funds rate. The same problem, we have too much debt (over $20 trillion by 2016).

4. At this point, stocks are doing just great, companies are borrowing money (low interest rates) to buy back their own shares, so reducing the share count enhances EPS, 60% of the earnings growth the past 2 years is from buy back programs. This is not a good long term plan, when it ends it will end badly.


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InvisibleLunarEclipse
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Re: Managing your Retirement Account [Re: memes]
    #18899587 - 09/27/13 05:03 PM (10 years, 4 months ago)

Quote:

memes said:
disclaimer:  again, i'm ignorant and just thinking out loud




Honesty is the best policy.

Better late than never.



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OfflineSteellayes
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Re: Managing your Retirement Account [Re: LunarEclipse]
    #18915687 - 10/01/13 11:23 AM (10 years, 3 months ago)

Everyone should knows this, but not everyone has one or even thinks about it if they do. But growing your retirement account safely is not that difficult and need not spend more time it.


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