Hi,
I am looking to get your opinion on a Roth IRA that would be diversified equally within the following Vanguard Index Funds:
The Roth is worth approximately $20,000.
VFINX - Vanguard 500 Index
NAESX - Vanguard Small Cap Index
VEURX - Vanguard Eurpoean Stock Index
VEIEX - Vanguard Emerging Markets Stock Index
and I may also put some in the bond index
VBMFX - Vanguard Total Bond Market Index
Specifically I am looking for your answer to three questions:
1) What do you think of Index Funds in general for a Roth Retirement Account? (I have about 28 years until retirement, also this is supplemental savings to my 401k, my wife's 403b, and both our pensions)
2) What do you think of these Vanguard Funds specifically?
3) Are there any other Vanguard funds that you would recommend?
4) Any other miscellaneous advice or comments.
Thanks for taking the time...I'm more inclined to select a best answer who cites sources to back up their opinions. Dollar cost averaging into Vanguard Funds is a great way for the newbie to go. They're low cost & overtime will prove to be a great investing move.
Take the time (as these funds grow) and learn investing. Concentrate on "Asset Allocation" to start. If you continue to learn...... you'll do great over the years (with, I admit some pain at times).
Having said that........ you're asking for investing advice from strangers, whose qualifications and motives can never be known. The best advice would be read books like "Retirement Investing For Dummies". "Mutual Funds for Dummies" and any other books on investing that are not HYPE books (ie, Cramer). Do not use message boards, talking heads, magazines or newspapers to pick your investments.
Only you know your risk tolorence, time horizon & goals. These books will show you it's much easier than you think to be successful in the long term.
Make your own choices. Don't chase last years winners. Don't take tips. Understand "position sizing" and "asset allocation". Read. Learn. (I guess that sums it up!). Mutual Funds are liable to have a difficult 2008 - increasing inflation, slow economy can create a very slow growth rate to most mutual funds. There are some sectors that will do well, health care for instance - but it's becoming cheaper and because of that, there are a couple of funds who invest in this sector that might be worth watching.
To your questions:
1) since you are so far from retirement if you're prudent and don't let the fund sit there even if it turns out to be losing money, you may want to invest a portion of your account there.
2) Vanguard Funds overall are strong funds that are well managed. The ones that you selected offer a nice rounded approach to a diversified portfolio, and since we're currently in a slightly bear market, this may be a good time to consider these as these particular funds seem to do well after a down market (see links below)
3) No person who is not licensed to sell mutual funds should be recommending any to you - instead use some of the message boards that folks use to talk about their investments and experience with various funds (links below)
4) Do not accept advise from anyone whom you do not know or implicitly trust understands your investment objectives!
Good luck! Vanguard is a great company with low fees. Index funds are a good conservative investment for an IRA. The small cap and emerging market funds offset that conservativeness, as they carry a good deal more risk. You need to have some of your portfolio in fixed income, so I strongly suggest the bond fund. Hi,
This is a very well thought out question(s). My suggestion is to direct you to sites that are dedicated to invesments. Moneyrec.com is one and there are both novices and professionals that know much about mutual funds. Free to user and captures demographics of users- ask questions and see what others hold and think about the funds you mention. The other site is Morningstar. Has a board for questions-- rest is a pay for research info site. FYI, Vanguard is a very good fund family and these are good funds. You just need allocation guidance.
Good Luck
Bunny
Good luck to you These sound pretty good to me, except for the bond index. I'd avoid that like the plague. Interest rates can't go below zero, so it's not like bonds can go up much. That is if I understand them correctly.
If it's a long time to retirement, I think it's pretty important to have value small caps or at least value mid-caps. They just grow more. This year, in 2008, they may do very badly, but over the long haul, they do well, better than the small cap index. You could consider watching the small caps index to see when it starts to recover. Excellent choice.
With index funds you want to know three things: what are the fees (extremely low with Vanguard), do they closely follow the selected index (yes for Vanguard), and is the management company conservatively managed (extremely so, for Vanguard).
All of the funds you have highlighted are excellent. However, I would suggest you put all your money in the target fund for your retirement year (2040?). This fund will invest in a properly diversified portfolio (including the funds you have listed above) and rebalance the funds regularly.
As an advisor, I have two small problems with the approach you are suggesting (which my suggestion mitigates): Most people who try to manage their own diversification (1) lean too heavily on what has worked in the recent past and not enough on tested financial theory. Your plan show this bias: too much in small caps and emerging markets...over weighting Europe, missing east and Japan. (2) Most folks cannot foresee their own difficulty executing their own plan. Rebalancing is very difficult to do in wild markets...as is staying invested in a fund when it goes down 20% in a couple of wacks. |
