Good investment mixes for IRAs?

[xanis]

I currently have three active IRAs: A Roth IRA and two Simple IRAs. The Roth and one of the Simples are with Vanguard, and the other Simple is with Securian (current employer-sponsored). For now I'd like to focus on my Vanguard accounts.

Right now I have my investments split 50/50 between the STAR and Target Retirement 2055 funds. FWIW, I maxed out the Roth for 2013, and when my old Simple IRA from my previous employer is eligible for conversion, I'm going to roll that into the Roth and max out for 2014.

Should I be looking to diversify? Would it make sense to change my high/low risk ratio so I can put more into high-risk? Any suggestions for alternate funds that I might want to consider? I'm 25, if that matters.

 

[Hacp]

Look at your 401k, see what's not there in terms of asset class (small cap, large cap, value, growth, international, emerging marketes, etc). Put your Roth funds in the asset classes that the 401k is missing. Most likely, from experience, you won't have access to emerging markets and small cap value options in your 401k, so I suggest those two asset classes to invest your IRA in.

TLDR: VEIEX and VISVX

 

[dr150]

Let Kramer advise:
http://www.cnbc.com/id/49918951

VYM would be a good high dividend ETF based on his retirement account holding philosophy...

 

[Genx87]

Depends on how on hands you want to be with your investments. The more diversified you go the more hands on it will be to make sure you are making target allocations.

The great news is you are doing this at 25 and not 35 or 45. Time is on your side.

Some general tips I have learned. Don't go more than 10% of your portfolio in sector specific funds(Healthcare, Technology, ect). These funds can rise and fall drastically. You will want some balance of bond funds. Pick the allocation in your portfolio and stick to it. At 25 you can afford bonds to be 10-15% of your portfolio. This generates steady predictable income, and can shield you a somewhat during down turns in the market.

Then look for no fee funds imo. Fee's will eat into your new investment money. If you pick a fee fund make sure to put enough in to limit the % of sale to 1% or under imo. Meaning if you have a 20 dollar transaction fee. Put at least 2000 into the transaction. If for example you put 200 in with a 20 dollar transaction fee that represents 10% of your investment vaporizing from the purchase. That imo would kill the ability to see real growth of your investments. And I think this is where many people get into trouble when doing self directed 401ks. They look at it as 20 bucks. But as a % it is sizeable. And may be why they lag behind the funds within the company plan.

Also look at the expense ratio. This is an expense that needs to be calculated. It eats into your appreciation. If a fund has a higher expense ratio it better be performing better to make up for it imo.

Then look for market based funds like Hacp mentioned. You want to rise with the surge not the waves. Over 40 years you will be better off with a steady 7-9% vs a few years of 15% and others at 3%.

 

[Xonim]

Right now I have my investments split 50/50 between the STAR and Target Retirement 2055 funds.

Target Retirement (TR) funds are already diversified, meaning they are designed to be used for 100% of your portfolio or 0% of your portfolio. Splitting your investments between them and another fund creates a tilt. In this case, you have the TR fund at 90% stock 10% bonds, and are adding to it the STAR fund that's 60% stock and 40% bonds, bringing your overall allocation to be more bond-heavy than it probably should be for someone your age.

Should I be looking to diversify? Would it make sense to change my high/low risk ratio so I can put more into high-risk? Any suggestions for alternate funds that I might want to consider? I'm 25, if that matters.

Like I said above, both of those funds are already diversified, but I would choose one or the other. Between the two, I would go with the TR 2055 because it has a lower expense ratio (.18% vs .34%) and has the higher stock holdings (higher risk higher return) that will gradually move toward more bonds as you age -- all without any interaction from you.

Read here if you don't want to use the TR or STAR fund (or if you have a balance high enough to gain access to Vanguard's admiral shares):
http://www.bogleheads.org/wiki/Three_fund_portfolio

Watch this documentary / Frontline special to see why expense ratios are important:
http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

 

[xanis]

Target Retirement (TR) funds are already diversified, meaning they are designed to be used for 100% of your portfolio or 0% of your portfolio. Splitting your investments between them and another fund creates a tilt. In this case, you have the TR fund at 90% stock 10% bonds, and are adding to it the STAR fund that's 60% stock and 40% bonds, bringing your overall allocation to be more bond-heavy than it probably should be for someone your age.



Like I said above, both of those funds are already diversified, but I would choose one or the other. Between the two, I would go with the TR 2055 because it has a lower expense ratio (.18% vs .34%) and has the higher stock holdings (higher risk higher return) that will gradually move toward more bonds as you age -- all without any interaction from you.

Read here if you don't want to use the TR or STAR fund (or if you have a balance high enough to gain access to Vanguard's admiral shares):
http://www.bogleheads.org/wiki/Three_fund_portfolio

Watch this documentary / Frontline special to see why expense ratios are important:
http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

Awesome stuff, thanks.

 

[velillen]

Awesome stuff, thanks.

I was pretty much going to post what Xonim posted. Im only 26 so about the same as you. Bogleheads can be a great resource to read through. Tax-exempt funds, being tax efficient, ect. Ive spent hours reading around there.

For me I dont want to be hands on with my retirement funds (TSP and a Vanguard Roth) so i have them both set up as Target Retirement funds. TSP is the 2045 and Roth is 2055 (want to be a bit more "safe" with the TSP since it is the main). Then for my just regular account I have the Total International and Total Stock market funds plus then i have a bit of "play" money to invest sector specific. Then i just add up all the funds and make sure my stock to bond percentages are where i want them. If they arent then I'll adjust accordingly to maintain being as tax efficient as possible.