i'm 23 and am glad that 10% of my portfolio is in bonds, and i'm hoping to bring that up to 20% within the next year or so.
also, from what i understand, vanguards ftse ex-us is a better international fund, especially in a taxable acct, since you get exposure to canada and also get to receive the "foreign tax credit", whatever that is...
Foreign tax credit stops the double taxation. If you've (the fund that is) already paid taxes to the foreign goverment, you can deduct those taxes from your US income tax so as to prevent double taxation. Of course, this only matters if you were slated to pay taxes on the appreciation or dividend due to the fund in a taxable account. The other International Fund (not FTSE all world ex Us) is a fund of funds, and fund of funds doesn't qualify for the tax credit. If you're holding international fund in a Roth, buy the International Fund for the lower expense ratio.
By the way, you're 23. Wow, I took you to be much, much older. Maybe it's the gray hair.
I've read this a million times; I was just curious. My [traditional] IRA is currently 100% cash due to rolling over a 401(a) and another pre-tax retirement plan into it, and this Friday, I'll make the final contribution to max it out for 2007 (FINALLY!!! YES! 😀 ), but the plan is to transfer the traditional IRA to Vanguard (or possibly Fidelity) and then convert to a Roth. So so far I haven't "reacted" to anything, nor do I think it's wise to freak out and let short-term bumps dictate my long-term AA. So you're absolutely right, and thanks for the reminder.
You know the amount you roll over does not count towards your maximum for the year. I somewhat got the impression that you think it is.
I plan on doing 100% no-load stock index funds with low expense ratios. No bonds until I'm 40. Since Vanguard funds require $3000 minimums, I'm limited to choosing one fund to begin with, so I might go with the Total Stock Market Index... but for 2008 would like to go with Total International Stock or something. Not sure...
Nothing wrong with a 100% equity allocation if you're sure you can handle the daily/monthly fluctuation (noise) of such an account. I know I keep 5% in bonds (TIPS actually) just to have a different asset class that is not highly correlated to stocks.
If you're concerned about hitting the minimum on the funds you want, hold the money in a Target Retirement (20XX) until you have enough money to exchange the funds for the ones you desire. The Target funds can come close to your asset allocation, and not have you overweight one class until you have sufficient money. (On second thought, Target might be too conservative for you. The 2050, I believe, is 10% bonds.)
Good idea. I'm not a trader at this point, and it's dumb to play with retirement money. Once I start having some more disposable cash, I'll have more dough to play with. But yeah, it's amusing how some people are obsessed with trying to time or predict the market.
My dad day trades, and even trades penny stock. I do sit in the background and chuckle to myself.
Everybody has to choose the asset allocation that they are comfortable with, no matter their age. While I am comfortable with only 10% bonds for the foreseeable future no matter how the market is, there will be others my age who want 20-50% bonds in their portfolio. You have to individually decide what your risk tolerance is for your situation.
Agreed. If ETF is comfortable with his asset allocation, then kudos to him.
I took a class in undergrad that dealt with efficient frontier, and I'm convinced that 100% stock is not the most efficient risk/reward allocation. The math did not include reinvestment and only tracked different allocations over a long period. If my memory serves me correct, a 80/20 actually came out on top.
Maybe in a few years when I analyze my portfolio performance, I'll decide to change my allocation.
