- Oct 24, 2000
- 29,767
- 33
- 81
2008 Roth IRA Contribution: Where should I invest it?
- Thread starter GTaudiophile
- Start date
Impossible to give decent advice without knowing age, risk tolerance, debt (if any), and what other investments you have.
Babbles
Diamond Member
- Jan 4, 2001
- 8,253
- 14
- 81
Well that's a million dollar question, isn't it!
My IRAs, both Roth and traditional, have lost tons of money so I don't have any clear advice. I suppose the generic advice is to put it into an index fund, watch it go down for a few quarters then hopefully it will bounce back.
An almost absurd idea could be just to pay the penalties for cashing it out and stick it a high-interest savings account. At least any change there would be in the positive direction.
My IRAs, both Roth and traditional, have lost tons of money so I don't have any clear advice. I suppose the generic advice is to put it into an index fund, watch it go down for a few quarters then hopefully it will bounce back.
An almost absurd idea could be just to pay the penalties for cashing it out and stick it a high-interest savings account. At least any change there would be in the positive direction.
- Oct 24, 2000
- 29,767
- 33
- 81
Age:29
Risk Tolerance: Moderate
Debt: Zero
Investments: Fairly balanced and mixed portfolio with stocks, bonds, mutual funds, metals.
Babbles
Diamond Member
- Jan 4, 2001
- 8,253
- 14
- 81
At the most my funds lost ~45% of their value since 2007, and so far are down 9% for this year. However over the past couple of weeks they have been making some gains, albeit small.
I think my funds are recovering and as such I have been thinking about just letting them sit where they are. I should have probably rolled them over into something else prior to them totally tanking, but I am beyond that point.
What's your desired domestic stock/international stock/bond ratio? Probably something like 50/30/20 would be good for your age, but it's all a personal choice. Once you figure out what ratio you'd like and what area you lack, you could invest in:
Domestic: Vanguard Total Stock Market (as mentioned)
International: Vanguard Total International
Bond: Vanguard Intermediate Term Treasuries or Total Bond Index
Lots of good (and bad choices out there). The key (for me) is figuring out the ratio I want and investing accordingly. Everyone's investing philosophy is a little different though.
That's fine. I just wanted to point out you don't need to incur penalties or withdraw from your IRAs to put your money in safe investments.
- Oct 24, 2000
- 29,767
- 33
- 81
Always invest in growth(3/4ish) and international(1/4ish) mutual funds regardless of age. The growth stuff can be like aggressive or growth and income funds if you wish to vary it up a bit.
My advice would be to post your question on the Boglehead's Forum. There are lots of experienced people there to help you out.
In defense of VTSMX, particularly in a taxable account: http://www.nytimes.com/2009/02...ds/22stra.html?_r=1&em
In defense of actively managed mutual funds with disciplined, experienced managers with an investment strategy proven over time and many types of different markets with knowledgeable shareholders that won't pull their money when the best investment opportunities going forward are just presenting themselves: http://selectedfunds.com/pdf/SFSuccInv4Q08.pdf
That being said, if you are truly investing for retirement, I think you are leaving a lot of money on the table by not having a strategic asset allocation of 100% stocks till say about age 50 (yes, I realize you said you have a moderate risk tolerance, but tolerance for stock market and investment volatility is very different from risk of permanent loss of capital). Over the long term, stocks >> bonds > cash. Intermediate term bonds can dampen overall portfolio volatility, but are going to drag your total portfolio return down slightly over time. Gold may do spectacularly for a while if concerns about hyper-inflation start to trump concerns about inflation, but that seems like an insurance policy where you have to take profits at the right times to make money over time.
In terms of increasing your tolerance for stock market and investment volatility, I'd recommend reading 1) Eric Tyson's "Personal Finance for Dummies, 2) John Bogle's "Common Sense on Mutual Funds", and 3) getting a premium subscription at Morningstar.com so you can read up to date analysis of mutual funds you are considering.
Good luck!
In defense of actively managed mutual funds with disciplined, experienced managers with an investment strategy proven over time and many types of different markets with knowledgeable shareholders that won't pull their money when the best investment opportunities going forward are just presenting themselves: http://selectedfunds.com/pdf/SFSuccInv4Q08.pdf
That being said, if you are truly investing for retirement, I think you are leaving a lot of money on the table by not having a strategic asset allocation of 100% stocks till say about age 50 (yes, I realize you said you have a moderate risk tolerance, but tolerance for stock market and investment volatility is very different from risk of permanent loss of capital). Over the long term, stocks >> bonds > cash. Intermediate term bonds can dampen overall portfolio volatility, but are going to drag your total portfolio return down slightly over time. Gold may do spectacularly for a while if concerns about hyper-inflation start to trump concerns about inflation, but that seems like an insurance policy where you have to take profits at the right times to make money over time.
In terms of increasing your tolerance for stock market and investment volatility, I'd recommend reading 1) Eric Tyson's "Personal Finance for Dummies, 2) John Bogle's "Common Sense on Mutual Funds", and 3) getting a premium subscription at Morningstar.com so you can read up to date analysis of mutual funds you are considering.
Good luck!
IHateMyJob2004
Lifer
- Sep 29, 2004
- 18,656
- 68
- 91
Better than an index. But diversified at the same time. I second this vote. Especially at current quotation. It's undervalued.
IHateMyJob2004
Lifer
- Sep 29, 2004
- 18,656
- 68
- 91
I love how people throw this hype down people throats. The sad thing is that people know so little about investment, that it is a relevant topic.
VFINX is a traditional but reliable investment. It tracks the S&P 500. Domestic Large Caps this fund is.
IHateMyJob2004
Lifer
- Sep 29, 2004
- 18,656
- 68
- 91
i just checked my acct. i'm up 15% in 2 months on BRK-B
the OP could put ~$3000 in BRK-B
and the rest in an index of some sort.
IHateMyJob2004
Lifer
- Sep 29, 2004
- 18,656
- 68
- 91
So, it is like an S&P index fund with the exception that you don't make as much because the fund managers need to take their cut?
Because over a long time period (which is accurate for retirement investment) your return in the market will be closest to the market's historical average of 12%. If you invest in things like bonds, sure they are "safer" but your return is lower and really when we are talking about 10+ years, your money is safe anyway. 100% of the 10-year periods in the stock market have made money.
If you are already of retirement age or really close, you are not "investing" anymore. You are "saving" and so the rules are a little different. I'd still save in the same funds but I'd also keep more of my money in the bank or maybe (maybe) a cod or something like that.
This being said, you should still be sufficiently diversified.
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