Etf Portfolio In A Roth Ira

[the207life]

Under two years of actual investment experience so looking to get some insight on to any issues with my strategy along with things that I can do to improve.

All funds are invested in a Roth IRA which was chosen due to the amount of untaxed income I receive being forward deployed active duty. I'm aged 24.

To be honest I lost a lot of money in the first year or so blindly investing in individual stocks. For the last year or so I closed all positions and really spent a few months reading reading and reading. This is what I have:

Vanguard Total Stock Market Index Fund ETF Shares (VTI): 18 Shares
Vanguard Total International Stock Index Fund ETF Shares (VXUS): 14 Shares
Vanguard Total Bond Market Index Fund ETF Shares (BND): 11 Shares
Vanguard Total International Bond Index Fund ETF Shares (BNDX): 4 Shares

I have two main questions now.. is completely investing in one fund family a bad practice? I have read nothing but good things about the Vanguard family and after talking with a few trusted individuals I was sold on them. What are you two cents on having all funds in one family of ETF's?

Second.. distribution of deposits. What is the best way to add funds to these funds? I have read a few well written papers on the pros and cons of DCA vs LSI but I'm looking to deposit a set amount each month from my check so DCA seems like the route to take.

I think that's all the questions I have right now but if I have more I'll bring them up. Have a good one everyone.

 

[Mac1958]

Under two years of actual investment experience so looking to get some insight on to any issues with my strategy along with things that I can do to improve.

All funds are invested in a Roth IRA which was chosen due to the amount of untaxed income I receive being forward deployed active duty. I'm aged 24.

To be honest I lost a lot of money in the first year or so blindly investing in individual stocks. For the last year or so I closed all positions and really spent a few months reading reading and reading. This is what I have:

Vanguard Total Stock Market Index Fund ETF Shares (VTI): 18 Shares
Vanguard Total International Stock Index Fund ETF Shares (VXUS): 14 Shares
Vanguard Total Bond Market Index Fund ETF Shares (BND): 11 Shares
Vanguard Total International Bond Index Fund ETF Shares (BNDX): 4 Shares

I have two main questions now.. is completely investing in one fund family a bad practice? I have read nothing but good things about the Vanguard family and after talking with a few trusted individuals I was sold on them. What are you two cents on having all funds in one family of ETF's?

Second.. distribution of deposits. What is the best way to add funds to these funds? I have read a few well written papers on the pros and cons of DCA vs LSI but I'm looking to deposit a set amount each month from my check so DCA seems like the route to take.

I think that's all the questions I have right now but if I have more I'll bring them up. Have a good one everyone.

I'm a financial advisor, and here are some thoughts:

First, bravo for getting away from individual stocks. Unless you have a zillion hours a week to do good research, it's just not usually worth it. Over the last 20 years, the average "active investor" has made only a 3.49% return (DALBAR study). That's less than half the market. All those people who like to brag about the killing they made on a stock, if they're being honest anyway, DON'T tell you about the stocks with which they LOST a ton. Be patient and smart and humble, have a good plan, STICK to it.

Second, if you're doing your own investing, especially long term index investing, Vanguard is just fine. Low fees, good returns. Could you possibly do better elsewhere? Sure, maybe, but maybe not. Their index funds are just fine, don't get into the weeds with alternatives or sector funds or commodities, all that crap.

Finally, at 24, you're a LONG term investor, and that means you have plenty of time to rebound from bear markets. Go for growth and just keep putting money in. So, at your age I see no reason to put any money in bond funds unless you have a real aversion to ups and downs, risk. If I were 24 and just starting out with Vanguard, my portfolio would look something like this, leaning towards mid-cap funds and emerging markets. This WILL be an ape shit wild ride, but I'd stick with this mix for probably 15-20 years before I added bonds to calm things down, and just a bit.

VTI - Total Stock Market: 60%
VO - Mid Cap: 20%
VXUS - Total International Stock: 10%
VWO - Emerging Markets: 10%

If you have aversion to risk, then drop in some percentage of those bond index funds and decrease the others proportionately. Absolutely no reason at your age to be more than 20% in bonds, total, if at all.

My two cents.

No pun intended.

.

 

[SteadyMercury]

1. Yup you're fine with one fund family and it doesn't get much better than Vanguard.
2. DCA is fine, in fact if you're adding to the Roth regularly for retirement and doing buy and hold I don't see where LSI even fits into the picture for you

For what mac said about your portfolio I'd agree with that too, at your age most recommendations on asset allocation would be anywhere from 80/20 to 100% stocks. Volatility shmolatility unless you're one of those cats dual purposing their Roth as an emergency fund with some of the contributions I can't imagine any reason to be higher on bond funds.

I'm about 1/3 of my assets in bond fund but I'm retiring in a few months, and most of that isn't even in bond funds it is temporarily parked in a Stable Value fund returning 2% until the other shoe drops on fed and interest rates.

Good luck!

 

[william the wie]

I largely agree with the above. Modigliani's balanced portfolio or Browne's bullet-proof portfolio tend to be both less risky and show somewhat higher returns. I am not thrilled with GLD as a proxy for commodities, I definitely prefer the FTSE 100 as a better substitute and you can get it as an ETF. Underdiversification and lack of rebalancing can kill your nestegg.

 

[jwoodie]

One problem with long term investment projections is that they assume ideal withdrawal dates (i.e., peak of the market). In real life, investors are most likely to need money during economic downturns. Thus, 10 years of steady gains can be wiped out by a six month bear market. If you can stand the headaches of being a landlord, investment into income producing real estate is probably the best strategy.

 

[SteadyMercury]

One problem with long term investment projections is that they assume ideal withdrawal dates (i.e., peak of the market).

Who's projections?

It seems most estimators these days are based on Trinity Study type scenarios, where you get the bad years right along with the good ones to determine historical chances of success or fail for a given amount and asset allocation over time.

 

[william the wie]

One problem with long term investment projections is that they assume ideal withdrawal dates (i.e., peak of the market).

Who's projections?

It seems most estimators these days are based on Trinity Study type scenarios, where you get the bad years right along with the good ones to determine historical chances of success or fail for a given amount and asset allocation over time.

How is that different from a Monte Carlo simulation and how well has it been backtested?

 

[SteadyMercury]

A Monte Carlo simulation uses input parameters (like mean, std dev, correlation) to generate a spread of random results to get an answer, Trinity uses rolling historical returns over 30 year periods.

I don't know that either one is better or worse.

 

[william the wie]

Trinity could be more accurate. At least it isn't imposing normal curve assumptions on power law distributed distributed data.