Retirement Investments

[Wolf359]

In Canada we have some newish asset allocation etfs that are literally one ticker, and all you need. They hold 10,000+ stocks (and some bonds if desired) from around the world are simply meant for someone to buy and hold until retirement without having to rebalance different etfs over time.

Vanguard, Blackrock and BMO all have five different etfs varying from 100% equities, to 80/20 equities/bonds, all the way down to 20/80. The MERs are cheap, roughly 0.24%.

Does something like this exist in the US?

Well the Fidelity S&P 500 index has an expense ratio of .015% which is lower than most ETFs, even beats Vanguard's fee of .04%.

FXAIX - Fidelity ® 500 Index Fund | Fidelity Investments

Analyze the Fund Fidelity ® 500 Index Fund having Symbol FXAIX for type mutual-funds and perform research on other mutual funds. Learn more about mutual funds at fidelity.com.

fundresearch.fidelity.com

 

[ArrestMeRedZ]

Be careful with the financial planners attached to the big houses. I have an account executive at Fidelity. He has been of tremendous assistance in helping me consolidate accounts. He has also tried to steer me into a managed account (successfully for a short period of time) and annuities (not successfully).
What I'm trying to say is to watch out for salesmen masquerading as financial planners. They make their money selling you products that profit them. Products that aren't necessarily in your best interest.

 

[Wolf359]

Be careful with the financial planners attached to the big houses. I have an account executive at Fidelity. He has been of tremendous assistance in helping me consolidate accounts. He has also tried to steer me into a managed account (successfully for a short period of time) and annuities (not successfully).
What I'm trying to say is to watch out for salesmen masquerading as financial planners. They make their money selling you products that profit them. Products that aren't necessarily in your best interest.

Yeah, I had them for a little while too. My unmanaged account beat their managed account and after I went to dump it after a couple years he said that I didn't give it enough time, but it went through a down market and up market and it still underperformed. He had nothing to say the next year when he thought of selling to me again as he said my unmanaged account did very well and nothing about their managed accounts. And yes they're handy to have when you want to rebalance as their phone calls go through right away and they're quick.

 

[Jimmy_Russells]

Well the Fidelity S&P 500 index has an expense ratio of .015% which is lower than most ETFs, even beats Vanguard's fee of .04%.

FXAIX - Fidelity ® 500 Index Fund | Fidelity Investments

Analyze the Fund Fidelity ® 500 Index Fund having Symbol FXAIX for type mutual-funds and perform research on other mutual funds. Learn more about mutual funds at fidelity.com.

fundresearch.fidelity.com

Sure, but an S&P500 index fund is not nearly as diversified as an asset allocation fund and does not require any rebalancing.

FWIW the S&P500 makes up about 25% of the funds I mentioned earlier. I'm really surprised these aren't more popular in the US. For DIYers they are pretty much a no brainer.

 

[Wolf359]

Sure, but an S&P500 index fund is not nearly as diversified as an asset allocation fund and does not require any rebalancing.

FWIW the S&P500 makes up about 25% of the funds I mentioned earlier. I'm really surprised these aren't more popular in the US. For DIYers they are pretty much a no brainer.

The S&P adds and removes stocks every quarter. That's how Tesla got in and that's how it gets rebalanced. I rebalanced into a heavier allocation with the S&P 500, I think I'm up to 40% the rest is kinda of a mix of Nasdaq and S&P 500 so performance is actually a tad better than the S&P 500 over the long term but starting to trail a little this year as the Nasdaq isn't doing as well as the S&P 500 lately.

 

[levi]

What I'm trying to say is to watch out for salesmen masquerading as financial planners. They make their money selling you products that profit them. Products that aren't necessarily in your best interest.

This.

 

[Slick3914]

VTI is ultra low risk and should be a core holding.

Calling VTI low risk is disingenuous...low cost yes, low risk no way.

 

[Pablo]

Calling VTI low risk is disingenuous...low cost yes, low risk no way.

Risk is very much a perspective thing.

The OP is young. IMHO for him NOT to buy VTI or FXAIX or the like is extremely risky. Bonds or worse bond funds? NO! Money Market? No? Not saving? NO! Individual stocks? Doesn't sound viable to me.

Yes the stock market has risk. Would I recommend a 70 year old put ALL his $1,317,423 in VTI on Monday? No.

 

[Dave Hess]

I got some VTI in my Vanguard account and it is ultra low risk compared to my other investments.

 

[Pablo]

I got some VTI in my Vanguard account and it is ultra low risk compared to my other investments.

Dave you are an animal.

 

[Slick3914]

Risk is very much a perspective thing.

The OP is young. IMHO for him NOT to buy VTI or FXAIX or the like is extremely risky. Bonds or worse bond funds? NO! Money Market? No? Not saving? NO! Individual stocks? Doesn't sound viable to me.

Yes the stock market has risk. Would I recommend a 70 year old put ALL his $1,317,423 in VTI on Monday? No.

Totally agree, the investing time frame is critical.

 

[Dave Hess]

Dave you are an animal.

More growth requires more risk.
Wolf suggested FXAIX and it’s a great low cost mutual fund.



When I opened Vanguard Roth IRAs for my kids when they turned 18, I funded the first year Max Contribution to get the snowball rolling and I split it up between:

VOO - S&P 500
VTI - Total stock market
VGT - Information Technology
VUG - Large Cap growth

Now they keep contributing to it and their Roth has grown nicely the past 10-12 years. No complex trading, just boring high quality ETFs.

.

 

[JeffKeryk]

Now they keep contributing to it and their Roth has grown nicely the past 10-12 years. No complex trading, just boring high quality ETFs.

.

Dave, you're just being logical again...
On the other hand, everyone looks good the last 10-12 years, right? Just sayin'...

 

[loneryder]

Read my previous post. If you actually look at the numbers, they can under perform the market. 2-6% a year can add up to a lot over 30-40 years.


The real question is did you outperform the market by doing so? There's been analysis of this approach and the main problem is that while some can call the top of the market, they're not good about the bottom so they end up underperforming the market by not knowing when to get back in. The other problem is that while you may be good at it, 99% of the people out there may not be. You mind as well say just do what Jeff Bezos or Bill Gates did, start a successful multibillion dollar company. Much easier said than done. The generic advice is generic and will work for most people. I rode out 2000, 2008 and last year. I'm happy with the returns. 75% of managed funds don't beat the S&P 500. 75% is passing.... When you aim for the home run, you may strike out.

I couldn’t/didn’t want to follow the market. Too much time and effort. I contributed the max and let it ride. It’s all a gamble. The OP is looking at long term investments. All I know is when I started looking at retiring, I had plenty of money. My former brother in law is broke in retirement because he cashed in a substantial 401k and followed the market managing his own investments. Bottom line is a person should no come to bitog for investm advice.

 

[Astro14]

It’s not all a gamble. There are successful approaches, and unsuccessful.

Growing rich slowly, watching expenses, contributing in a disciplined fashion, allocating properly. The hard part is that it takes time and discipline.

Conceptually, it’s not hard.

Index investing, widely derided decades ago, is a successful strategy.

Market timing has been historically unsuccessful.

You might want to start with this book, “Common sense on mutual funds” by John Bogle.

Amazing how much better low cost index funds are than funds managed by “expert” market timers. Those actively managed funds excel at collecting fees that pay their managers handsomely, not at enriching their investors.

 

[doitmyself]

Kudos to the OP for even thinking about this in his mid 20's. Myself and I imagine most of my co-workers at that age checked off a few boxes with our employer supplied 403B plan and went back to concentrating on life's challenges: career, marriage, kids, housing, transportation, health issues and all that these things entail. I attempted for balance, and failed. Any one of these life elements can be all-consuming. Try to live a little bit while planning ahead. The idea of putting life on hold for 20 - 30 years to concentrate on wealth building scares me. Some do this, thinking life starts at retirement.

 

[SwampSurvivor]

I think I'm living in mine.

I have been hitting the 401k hard (employee match limit) since 30.

 

[Davejam]

This makes no sense. Your telling someone there taking unnecessary risk but then you advise them to start buying stocks at the bubble highs.

Again, No I'm not. I'm suggesting they have a balanced portfolio.
In a balanced portfolio with appropriate risk commensurate with your anticipated time-line there is no need to predict bubbles.

 

[PandaBear]

I also hate target funds because over time they morph into a bond fund.

Target fund is only for people who has a finite amount of time and money left on earth. What if you need a bill paid and we are in recession? That's a different need than people who has enough to live off for 50 years and an investment horizon of 300 years.

It is expensive to be poor because worst case protection is expensive.

 

[PandaBear]

Then go ahead and look at the long term. Oh wait, the 2065 fund hasn't been around that long and the S&P 500 index funds have been around a long time. You know why that fund doesn't have a long track record? It's a new fund, hasn't proven itself. Now you advise people to invest in a new unproven fund. Bad funds fold and new ones open up all the time. It's the ones that have been around a long time that tend to have good returns. As others said, bonds and international have been dogs for year. Conventional wisdom has been to have some international exposure, but if the US beats international 9 out of 10 years and international has 1 good year, wouldn't it have been better to just get those 9 good years instead of just chasing after 1 good one and suffering 9 years of bad returns? I'm still waiting for international to beat the US. What China has done to a bunch of their stocks lately is a warning of how volatile foreign stocks can be. I mean you can't trust US stocks either but even less so for foreign ones.

You can pick and choose winners and losers based on timing your examples, but in the long run a lot of the investments are driven by fundamentals and reality isn't always that deterministic, and statistics changes over time and is always a hindsight.

Imagine you are in any of the boom and bust of the past, Tulip, Railroad, Roaring 20s, Industrial Revolution, Dot Com. You can speculate and exit early enough and made it big, or you can get screw if you enter late. One thing for sure is timing the market works for individual investors knowing what they are doing with domain knowledge, but not as a whole for the whole society / population / market. Reality is if everyone are told to buy tech stock it would be time to sell it and it would bust. You cannot use it as a "general" advise for everyone's retirement. The goal is different and that's why they are regulated.

Once upon a time I was told by a seasoned trader, graduated from Oxford with an MBA, that he would typically leverage 10x on a sure fire 5-6% return. Sure he win some and he lose some but overall he did very well with this strategy, along with options underwriting for both call and put. Will you do this? Obviously not. We are all on the same scale between this guy and "pick a fund and sleep on it till retirement".