Help with IRA investing

B

Bob111

Hi! one simple question-how to start?
i have some cash,sitting on IRA account,but have no idea how to start.
right now,at VIX sitting on multi years low, and every type of securities are at high(both bonds and stocks) i'm not sure,where and how to invest,using vanguard funds.
just put all money into some balanced fund? but what if market dips 10-20% -30% right after that? would take forever to reach break-even point. divide cash into equal portions and invest them every month or so?

Any advise\suggestion is appreciated.

Thank you!
 
Quote from Bob111:

Hi! one simple question-how to start?
i have some cash,sitting on IRA account,but have no idea how to start.
right now,at VIX sitting on multi years low, and every type of securities are at high(both bonds and stocks) i'm not sure,where and how to invest,using vanguard funds.
just put all money into some balanced fund? but what if market dips 10-20% -30% right after that? would take forever to reach break-even point. divide cash into equal portions and invest them every month or so?

Any advise\suggestion is appreciated.

Thank you!
More...
just wait for the next correction. it will come.
 
Quote from Bob111:

Hi! one simple question-how to start?
i have some cash,sitting on IRA account,but have no idea how to start.

Thank you!
More...

Do NOT put your money into a fund. Expenses are a ripoff and completely unnecessary with the great number of other alternatives.

My advice is to build a watch list of very high quality, high yielding stocks, AND WAIT for pullbacks. Be sure to set up your IRA for dividend reinvestment when dividends are paid. Look at stocks like VZ, T, MO, SO, Etc. Plenty of information available on good yielding stocks from which to build a portfolio. Over time, good quality high yielding stocks clearly outperform the overall market. The key is to buy right...then let them ride.
 
Quote from lindq:

Do NOT put your money into a fund. Expenses are a ripoff and completely unnecessary with the great number of other alternatives.

My advice is to build a watch list of very high quality, high yielding stocks, AND WAIT for pullbacks. Be sure to set up your IRA for dividend reinvestment when dividends are paid. Look at stocks like VZ, T, MO, SO, Etc. Plenty of information available on good yielding stocks from which to build a portfolio. Over time, good quality high yielding stocks clearly outperform the overall market. The key is to buy right...then let them ride.
More...
Excellent advice, especially on the mutual funds.
For dividend stocks, I suggest you use Dividata.com as an easy way to research dividend paying stocks (nice free site). This will uncover a lot of companies that typically fly under your radar which have been paying and increasing dividends for years (or decades).

As far as timing, I'd probably initiate a position (say 25%) and then start to wait for pullbacks or average in the remainder at fixed intervals. If you get a big run, at least you get some exposure to it and if you get the big pullback, you can take advantage of it.

Also, there are some broker specific items that you may be able to take advantage of. For example, my wife's work IRA is with Fidelity and they have commission-free trading on a good selection of iShare ETFs.
I built up a diversified portfolio (AGG, EEM, EFA, EMB, HYG, IDV, IWM, IYR, & TIP) that can be purchased in lots of as little as 1 share without commission. So I roll in to work each Monday, throw in a limit order to by 1 or two shares of each and just let it roll.
 
Quote from Bob111:

Thank you for solid advise on high dividend stocks!
what about less active,lazy option..something like this-

https://personal.vanguard.com/us/funds/snapshot?FundId=0021&FundIntExt=INT


https://personal.vanguard.com/us/funds/snapshot?FundId=0521&FundIntExt=INT

the expense ratio is pretty low,long history,decent performance. balanced,paying some interest. kind of set and forget . like in post above-put 25-30% into it and then invest the rest automatically in certain time intervals?

Thank you!
More...
I'm assuming that you have this IRA through Vanguard itself rather than self-directed at a brokerage?
You may want to see how their ETF compare to the mutual funds. For example, the one you show lists an expense ratio of 0.27%, but if you examine the top 10 holdings, it's basically the big established companies and if you look at a similar Vanguard ETF (say MGC), it has an expense ratio of about 0.12% and you get a lot of similar names.

If you are just going to "set and forget" for 30 years, I'd probably diversify a bit more: add a real-estate component also some international/emerging market exposure (the one you showed looks purely domestic). Obviously these are more speculative in nature, but over the long haul and averaging in to limit your exposure at any one time, I think some additional risk is warranted.

If you are not familiar with the concept, you may want to look up "value averaging" as well.
 
Quote from Bob111:

Hi! one simple question-how to start?
i have some cash,sitting on IRA account,but have no idea how to start.
right now,at VIX sitting on multi years low, and every type of securities are at high(both bonds and stocks) i'm not sure,where and how to invest,using vanguard funds.
just put all money into some balanced fund? but what if market dips 10-20% -30% right after that? would take forever to reach break-even point. divide cash into equal portions and invest them every month or so?

Any advise\suggestion is appreciated.

Thank you!
More...

Nothing wrong with Vanguard funds they are low cost and indexing makes sense for most market participants.
Vanguard also usually has matching etf's for their funds so you can decide which is best (cheapest) for your brokerage situation.

As far as timing goes and fear of a market correction:
1) The best time to lump sum invest is always now.

2) If you are afraid of a pullback (and quite frankly a low vix is not an indicator of a crash) invest in a lower risk fund, balanced or s&p 500.
2b) If the market crash you are anticipating happens switch to the riskiest fund they have for example emerging markets in order to take advantage of the upside.
2c) Where people fail is thinking they can sidestep the downside, you can't on a consistent basis don't even try.

3) Remember if the market crashes it has effectively realized the downside risk and left you with almost exclusively upside risk.
That's when you should load up on risk and make your money.

4) Don't make the mistake of sitting on the sidelines waiting for a crash.
It indeed eventually will come but probably higher than you could have gotten earlier with going ahead and taking the plunge.


5) Only use margin after a crash or not at all and then you can survive any market environment short of armageddon.

you are on the right rack stay on it or visit
http://www.bogleheads.org/forum/index.php
 
Thank you for all your comments and advises.
appreciate the idea on using Vanguard EFT's,rather than their mutual funds.
any comments on an old idea,that one should divide his savings between fixed income and stocks? something like 40/60 ratio?
does this work in reality?
 
Quote from Bob111:

Thank you for all your comments and advises.
appreciate the idea on using Vanguard EFT's,rather than their mutual funds.
any comments on an old idea,that one should divide his savings between fixed income and stocks? something like 40/60 ratio?
does this work in reality?
More...

unless you are buying actual individual bonds its a poor time to purchase fixed income funds.
 
very true. like i said above-feels like it's too late to buy ANYTHING. every single asset is gone thru the roof. thanks to Heli Ben.
this is why i believe that we have no choice,but invest. Cause it is absolutely clear that they will do anything to prop up the markets.
to keep 'average joe' happy and got themselves elected again.

https://personal.vanguard.com/us/funds/etf/ETFTableView

bonds -1 year performance- from 10 to 43(!)%

This is precisely why i'm looking for advise-what one should do,if he have some cash to invest? wait, invest some of the money now and then go with averaging or something else..
 
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