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Question about Vanguard Mutual Funds
Posted on 1/28/16 at 1:55 pm
Posted on 1/28/16 at 1:55 pm
Let's say that on top of a 401k and IRA I want to save more money for retirement. I'm very green with all of this stuff, so I choose to simply put some extra money into a mutual fund. Is there any concern as to how much money you should keep in a single mutual fund? For instance, should I limit my contributions to a certain mutual fund to say 50K? Sorry if this question doesn't make a lot of sense. As I said, I am very new to this stuff.
3
Posted on 1/28/16 at 2:11 pm to UpToPar
If you have over $50k to invest over and above your retirement funds, and are a "green" investor, you should talk to an advisor and make a comprehensive financial plan.
Posted on 1/28/16 at 2:19 pm to jeepfreak
I'm not saying I have 50K to throw in a mutual fund right now. I'm saying if I continue to place money I have saved over and above my 401k savings and I reach 50k in a single mutual fund 10, 15, or 20 years from now. I'm asking if there is a limit on what you should keep in a single fund. Assuming that such a limit exists, it may be much higher or much lower than 50K. That was just a number I threw out there.
Posted on 1/28/16 at 2:30 pm to UpToPar
There is no limit, but diversification has it's advantages.
Posted on 1/28/16 at 2:39 pm to Janky
Right, I didn't think there was an actual limit. Im wondering if there are any guidelines that you should live by. Let's assume I am able to put an extra $200-500/month into a mutual fund. At what point would you suggest putting the money into a second/third/fourth mutual fund?
Posted on 1/28/16 at 2:42 pm to UpToPar
Me personally, I would say every $5k-$10k would be a decent number until you reach 4-5 funds then start layering. Some here will say less and that can be argued if you start with something like a total market fund. My suggestions were based more on style box investing.
Posted on 1/28/16 at 3:04 pm to Janky
Thanks. I'm going to do some reading on it.
Posted on 1/28/16 at 5:07 pm to UpToPar
I'd say it depends on the fund. A well balanced fund like Wellesley I'd feel more comfortable with than a narrower focused fund.
Posted on 1/28/16 at 5:11 pm to UpToPar
Vanguard has an excellent tutorial on their website. The financial advisor suggestion is not a bad one but be careful. They will try to sell you something. If you want to choose a single fund for your U.S. stock investments, Vanguard's S&P 500 or Total Stock Market Index will work just fine. You will have complete diversification, especially with the latter.
Posted on 1/28/16 at 6:35 pm to geauxpurple
quote:
You will have complete diversification, especially with the latter.
I would not say complete as it is only domestic. Complete would include international in a perfect world. I would also question the allocation of asset classes for "complete" diversification.
Posted on 1/28/16 at 6:40 pm to Janky
True. That's why I said the one fund is fine for his U.S. stock investments.
Posted on 1/28/16 at 11:07 pm to jeepfreak
quote:I do a bit of both. Maxed out IRAs and 401k. I have a financial planner that helps with 529bs for the kids, equities, and mutual funds. I still have excess cash, and I don't want to put it all with the FA and his 1% fee. So, I set up an individual brokerage account to buy index funds as well as broad domestic and international funds.
If you have over $50k to invest over and above your retirement funds, and are a "green" investor, you should talk to an advisor and make a comprehensive financial plan.
The FA has me well situated for different macroeconomic events and is looking after our long term goals. But with excess cash, why not throw $50-100k at some low fee vanguard funds?
This is a serious question, since I am not a financial whizz and want to put my money to good work.
Posted on 1/29/16 at 10:50 pm to Spirit of Dunson
quote:
I still have excess cash, and I don't want to put it all with the FA and his 1% fee.
Assuming this is a wrap fee, you're also buying I-shares with no sales fee and very low (less than 1%) admin/12b-1 fees. If you're buying A-shares in an individual brokerage account, you're paying a sales fee (4-5%) upfront. C-shares you skip the sales fee, but the yearly admin/12b-1 fees are usually over 2%.
quote:
The FA has me well situated for different macroeconomic events and is looking after our long term goals. But with excess cash, why not throw $50-100k at some low fee vanguard funds?
That's all great, but are you also properly-insured? i.e. enough life, property & casualty, and long-term care. Do you have a plan to minimize taxes as you take money out of your tax-deferred accounts in retirement? Do you have (or need) a personal succession plan for transitioning into retirement? An estate plan? These are all important considerations that a broad-based Advisor can help with.
Most firms these days will meet with you, gather information, and put a proposal/plan together for you with no commitment. You can interview as many as you like and pick the plan you feel is best suited for your personal needs. It's time consuming, but we are talking about your money. Best to be thorough and have peace of mind.
Posted on 1/31/16 at 11:01 am to UpToPar
quote:
Is there any concern as to how much money you should keep in a single mutual fund? For instance, should I limit my contributions to a certain mutual fund to say 50K? Sorry if this question doesn't make a lot of sense. As I said, I am very new to this stuff.
Nope, no reason to impose a limit until you get to 500k when SIPC insurance limits come into play. At that point you could consider splitting money between two firms.
If you're willing to read and learn on your own, there is no reason to see a financial adviser. Now, if you have no desire to do it yourself then sure, but then I'd say just stick it in one of those target date retirement funds.
Fees from the funds and especially advisers can add up over 20-30 years and significantly reduce your nest egg. Once you're a few years from retirement then getting some advice might be useful as you switch from the accumulation phase to the preservation phase of your investment journey.
For people wanting to learn I always tell them to go here:
https://www.bogleheads.org/wiki/Getting_started
Even if you don't become a Boglehead there is plenty of good info on the wiki and the forums.
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