invest everything in VTSAX if you have a cash balance/401k already in place?

finalpsychyear

2+ Year Member
Nov 3, 2015
582
247
Status
Resident [Any Field]
Need to make some big decisions by end of year. Met with a few different financial advisers recently they are all trying to charge via asset management fee models.

I spoke about how I plan to do a cash balance which in 10 years would be worth at least 1.2m and I have been told its like the "bond" portion of your portfolio in terms of allocation purposes and risk. I then said I may want to just dump everything into the VTSAX total stock market/international stock market via a 75/25 split and they said it was very risky to do such then tried to show me their version of dozens of funds they would have me invest.

I am on the young side mid 30s but plan to work 10 years full time minimum then part time indefinitely but must have significant financial milestones before I would do the switch to part time and I know the decisions I make now will be paramount to the outcome of this plan.

Is my plan really that risky given the cash balance serves as a pretty safe portion of the total investments?
 

Mman

Senior Member
10+ Year Member
Mar 22, 2005
5,208
3,066
Status
Attending Physician
Need to make some big decisions by end of year. Met with a few different financial advisers recently they are all trying to charge via asset management fee models.

I spoke about how I plan to do a cash balance which in 10 years would be worth at least 1.2m and I have been told its like the "bond" portion of your portfolio in terms of allocation purposes and risk. I then said I may want to just dump everything into the VTSAX total stock market/international stock market via a 75/25 split and they said it was very risky to do such then tried to show me their version of dozens of funds they would have me invest.

I am on the young side mid 30s but plan to work 10 years full time minimum then part time indefinitely but must have significant financial milestones before I would do the switch to part time and I know the decisions I make now will be paramount to the outcome of this plan.

Is my plan really that risky given the cash balance serves as a pretty safe portion of the total investments?
you should not seek financial advice from anyone charging a fee based on a % of AUM. Their interests lie in improving their money made from you, not in improving your investment returns.
 

sliceofbread136

7+ Year Member
Nov 5, 2011
4,889
2,807
I would not advocate for their active trading single stock plans. From what I’ve heard they rarely beat the market, have high fees and low diversification which increase risk.

Index funds themselves may have more risk than is traditionally thought. If you see the latest Burry article he raises concern that the index fund value may not actually match its index due to derivatives and non liquid junk companies that will drop like a stone when people start wanting to liquidate their index funds and no active traders want to buy the sold shares. While I think the comparison to CDOs is a bit far fetched he still raises some interesting points to think about.

So you can’t assume that just because you are in it for the long term that 100% stock allocation isn’t risky. In your 30s I think some should put in bonds, atleast 10%. If you are using a tax break account you could also use some of your funds in an REIT.

I’m certainly a Newbee at this but my prospective plan is to do most of my investing my 20s into vtsax and vtwax and start putting some into bonds early to mid thirties probably around 20%. I am however going into this with the realization that there is some risk involved.
 
About the Ads

Mman

Senior Member
10+ Year Member
Mar 22, 2005
5,208
3,066
Status
Attending Physician
those advisers are probably correct in that a 100% allocation to stocks, even with a split to international, is too risky depending on your tolerance. There is almost no benefit to going anywhere past about 75-80% stock allocation. You just don't improve the returns enough by going 100% stocks. Simplify and go something like 80/20 and you can split that 80% of stocks into some international if you want further diversification.
 
OP
F

finalpsychyear

2+ Year Member
Nov 3, 2015
582
247
Status
Resident [Any Field]
those advisers are probably correct in that a 100% allocation to stocks, even with a split to international, is too risky depending on your tolerance. There is almost no benefit to going anywhere past about 75-80% stock allocation. You just don't improve the returns enough by going 100% stocks. Simplify and go something like 80/20 and you can split that 80% of stocks into some international if you want further diversification.
Hi,

Does having a cash balance which in 10 years would be worth 1.2m or slightly higher change that 80/20 suggestion at all?
 

Mman

Senior Member
10+ Year Member
Mar 22, 2005
5,208
3,066
Status
Attending Physician
Hi,

Does having a cash balance which in 10 years would be worth 1.2m or slightly higher change that 80/20 suggestion at all?
I do consider cash balance money to be bond like, although I still probably wouldn't go all in on stocks with the rest, but that's just me. I feel in investing you should take the risks you need to, but when you don't need to you shouldn't take additional risk. Make some low cost intelligent allocations today and then reassess periodically (annually?) to tweak what you need to.

Some people find it helpful to actually write out an investing statement about your goals and risk tolerances that you can refer to when tempted to make a change.
 
Last edited:

Baron Samedi

7+ Year Member
May 30, 2010
682
414
Hell
Status
Attending Physician
Just to chime in a bit, bonds aren't risk free and you certainly can lose capital with them. Even cash isn't risk free. A big question when investing is -- when will you need this money?

It's gonna hurt bigtime if in 10 years you are trying to buy your dream house in a market dip but because of that same dip you have to sell at a 30% loss all tied up in equities. If this is "side money" that you can let sit and marinate through a bad storm, then your risk tolerance could be a bit higher.
 

Mman

Senior Member
10+ Year Member
Mar 22, 2005
5,208
3,066
Status
Attending Physician
Just to chime in a bit, bonds aren't risk free and you certainly can lose capital with them. Even cash isn't risk free. A big question when investing is -- when will you need this money?

loss all tied up in equities. If this is "side money" that you can let sit and marinate through a bad storm, then your risk tolerance could be a bit higher.
I don't think there was anything stating bonds were risk free. The closest approximation to risk free return you can get is US Treasuries.
 

Baron Samedi

7+ Year Member
May 30, 2010
682
414
Hell
Status
Attending Physician
I don't think there was anything stating bonds were risk free. The closest approximation to risk free return you can get is US Treasuries.
There wasn't, but I just wanted to clarify your post a little bit since the people who are reading this thread are likely very new to investing.
 
  • Like
Reactions: braineddetermined
Apr 10, 2018
433
141
Status
Non-Student
Keep like 35% cash and dump it all into stocks. That is what berkshire and trump is doing right now. You should aim for like 2.5 net worth plus at retirement.
 
About the Ads