Emergency fund should be what you expect your expenses to be in the future since you are planning on making some changes (maybe move out, maybe go to school). Do you really only spend a total of $500/month and put all of the rest into your savings account?!?

I wouldn't stress over the car loan. The interest rate is low.

Well no but if I lost my job tomorrow it would only be $500 a month, I wouldn't move out and non necessary expenses would be cut. The shelter, utilities, and most of the food is taken care of by my parents. I am pretty frugal in general.

Of course if I did move it would probably be over $1500/month so round up and that's 10k. Is it even worth moving to a higher yielding savings account since interest rates are so low anyway?

Age: 27
Country you live in: Italy
Income: €40k-60k
Risk Tolerance: high
Timeframe for investment: long
Debt: 0
Any other information you might have that would help us:

I'd like to save as much as i can and put it in an aggressive portfolio with the goal to growth in a long timeframe (could be 20 years, could be 30, i could own it forever)
I was thinking to go with something like 50% US stocks, 30% international and 20% bonds.
1) Should bonds be US or international (and why)? I was thinking that they should be US in order to 'rebalance' the fact that the major part of my stocks are US, does it make sense?
2) Would you prefer index funds or ETFs (given that they're taxed the same) and why?
3) About the US stocks, is it too risky/not worth the risk/result oriented to go for small cap funds instead of 'total US stock market'?
4) About international stocks, emerging markets or europe? what about commodities?

I have no debts (actually i still have an 8k€ credit that i'm gonna get in the next 2 years) and quite low life expenses (i spend about 500€/month when i'm at home but even 0 if i really want, 1500 in average when i'm not).
Also as long as i'm in Europe i don't think i need a big emergency fund considered that i can always go back home and healt care's for free; do you think 3k€ is too low or reasonable?

Many thanks to anyone willing to help, if you need more info just ask

i think you mean "mutual funds or ETFs" (an etf that tracks an index is an "index fund").

http://www.bogleheads.org/wiki/ETFs_vs_mutual_funds

i mostly use mutual funds because they are simpler. i own one etf (vbr) because i don't have enough in that account for the Admiral Share version (vsiax). the etf has a slightly lower expense ratio, so i put up with the extra complexity to save myself a few bucks a year .

short answer: no one knows.

based on my reading, i believe there is extra risk and therefore extra reward in small cap and value stocks. is this effect real? if so, will it make enough of a difference to make up for the extra expense and portfolio complexity? i hope so!

all of it! a good total international index has everything in its market weight. diversification ftw.

controversial. i don't hold commodities except as they manifest in total market index funds.

this question is complicated.

first, let's talk about the US vs non-US ratio generally. take a look at this question from europa and my reply.

vanguard only recently started its total international bond fund, so i haven't done a ton of research about the pros and cons. for now i've decided to wait and see.

i *think* that you would want some exposure to debt in your home country or at least in your home currency, but i know little about how these things all interact.

i have no idea how much 500e/mo is, but if that's a realistic number then 6 months of expenses is a fair emergency fund. i agree that being young with no dependents, a low monthly nut, and fallback housing means you can be less conservative with your emergency savings.

It takes <60 minutes of your time and it's free money. Yes.

ETA: Plus you will presumably have more money in the future to move there, so might as well just set it up now.

"all of it! a good total international index has everything in its market weight. diversification ftw."

What would you recommend for this? My whole portfolio is tied up in US, but I'm selling some soon and I just want to get decent international exposure. I'm pretty risk prone fwiw

Can someone help me out on which of these POS funds I should choose from in my 401k? All the ERs are obviously lol, so I'm thinking just dump most into the JPM Equity Index and then a bit into the Oppenheimer Developing Markets one or something...

Jake,

I would just go 100% into the appropriate Fid Freedom Fund. Most of them are .70-.75% ER. Not great, but far from horrible for a 401k plan. They're ridiculously over complicated, but they get it all done. It's the best option, imo (for a diversified portfolio).

thanks, my only issue is that the ERs start to creep back up to ~1.00% for any of them that have <30% bonds. I didn't really envision being anywhere >20% but if it makes sense I'll do it.

i own vanguard total intl (vtiax / vss).

for the total bond market and total us stock market portions of a three-fund portfolio, the brand usually doesn't matter much. all the discount brokers have a fund that tracks some index at very low cost, so you just use whichever one you can trade for free at your brokerage.

for total international, however, vanguard stands out imo. it contains emerging markets and small caps, whereas many funds do not. e.g. contrast fidelity's low-cost passive international index fund with vanguard's and note the market cap and world regions percentages:

http://portfolios.morningstar.com/fu...&culture=en-US
http://portfolios.morningstar.com/fu...&culture=en-US

this probably doesn't matter much and could even be a drag on the vanguard fund's return in the long run -- who knows? but i buy into the extra diversification story, as well as the additional risk-adjusted return story, so i really like vtiax.

btw you can get all this with other companies' offerings, e.g. by holding a "developed market large-and-mid-cap" international index fund (like fsivx) as a base and then "completing" it with an intl small cap fund and/or emerging markets fund.

jake,

do you have any other investments or retirement accounts?

how long do you think you will stay with this company?

this game will be easier if you post the net expense ratios of those stock funds. but probably just pick the cheapest one. i would probably just pick the cheapest large cap us stock and large cap intl stock and call it a day.

bond-wise, pimco total return is well-regarded and not that expensive. that stable value fund might be another option -- how often does the guaranteed yield change, and is that 0.84% net of expenses?

some people like gnmas so that could be a third option, but i don't know much about them except that they are rather complicated.

fwiw the fidelity 2055 fund is approx 80/20 equity/bonds. but dale, note that his janky 401k is getting like the worst "fidelity freedom" fund class so the ER is over 1% . FDEEX, available in my very good 401k, is only .82.

Thanks. I mean I'm not very risk averse (I have only one mutual fund and it's small cap) but want to invest some internationally.

No other retirement accounts, but I do have other assets and investments so being a bit aggro here isn't a problem.

I expect to be with this company <5 years.

My main issue with all these funds is that all of them pretty much except for the blended one we were talking about and the JPM Equity are >1.00% ER. The international ones are by far the most egregious with that Oppenheimer Develeoping Markets one being the worst at 1.36% ER. The diversified International is 1.35% ER and the Janus fund has a really poor performance relative to EAFE. There's basically no European exposure options in these funds and the other international funds are really meh.

I think I'm leaning towards the JPM Equity at >50% which is only .45% net ER and then maybe some chunk of that blended one to get a little bond and international exposure and then a real small piece of Blackrock large Cap and FA Small Cap both of which are ~1.00% ER and maybe a tiny piece of the Oppenheimer just because it's done so well?

Even with the Freedom funds being ridiculous at 1.0% ER, I still think it's your best bet with the options you describe. You're make it less diversified and more complex to save a net 20 basis points or something. Especially since you're planning on being there less than 5 years, I'd still just dump it in the appropriate target fund.

With a 401k plan you just have to choose the least ****ty.

My sister and I recently got an inheritance. It is mostly in IRAs, but we are also getting about 70K each cash. I know what I'm doing with mine, but not sure what the recommend to her.

She is mid-20s living in NYC making ~40k a year. She manages to save a very small amount of money, but obviously not much. She currently has no knowledge of investment and I don't think she has much interest in doing research or anything high maintenance.

I'm encouraging her to only take the required minimum distribution from the IRAs (which I had her put entirely in target retirement funds), but not entirely sure what to suggest with the 70K cash. Just putting it in online savings somewhere is simplest, but obviously doesn't maximize return. Maybe split it up between online savings and some mutual funds at Vanguard where the IRAs are? She doesn't necessarily have any big planned expenses coming up.

hoya,

sorry for your loss. congrats on your windfall.

i agree that online savings is simplest, but likely the worst ROI.

the best thing would be to make a three-fund portfolio across the IRAs and a new taxable account which would hold the $70k in cash. however this is a little complicated for an uninterested beginner.

a compromise would be to shove the $70k into a target retirement fund in taxable space. the bond portion of the TR is not tax-efficient so this is not ideal, but given your sister's age, i assume she's in a TR with a fairly aggressive equity/FI split. thus, she has few tax-inefficient bonds, and bond returns are quite low ATM, so the tax burden is minimal for now. i think this presents a good trade-off between maximal efficiency and ease of management.

as she learns more and becomes more comfortable with managing investments (or advances in her career and gets her own IRAs and 401ks), you could nudge her toward more efficient asset allocations.

I have been recommending betterment.com to this sort of person (my brothers).

I know it's slightly more expensive than Vanguard but the slick interface and shiny stuff made them actually pull the trigger.

wealthfront is a similar service which has been discussed itt.

Age: 26
Country you live in: United States
Income: $40,000
Risk Tolerance: high
Timeframe for investment: long
Debt: $5k (car loan, 2.5 interest rate)
Any other information you might have that would help us:

My current assets.. 10k in individual stocks, 24k in 401k, 2k roth ira, 13k cash in savings/checking account.

Just would like some advice from the more experienced.. I don't have many monthly expenses so I think I could be doing something more with my cash. Do I get more aggressive with my roth (only putting in a small amount every month) or buy more stocks? I am a bit worried about stocks at this time, because it's been such a great year for the market. I know it's damn near impossible to time things, but at some point there has to be a correction. Paying off my car loan would only save me 100 bucks, so I think that's out of the question and unnecessary.

As for my 401k, I am maxed to company match and then another 3% on top of that. I could adjust that some. I am actually not sure what the max is but positive I am not there yet.

Really appreciate any responses!

Country you live in: Germany
Income: Just enough to cover the expenses atm
Risk Tolerance: Low
Timeframe for investment: Long
Debt: 0
Any other information:

I am currently a student and won't earn any money for the next 2-3 years. But im happy being busto for now. After that I am gonna earn money.
Looking to invest 50.000 Euros.

Appreciate your help Tyler. I don't think she has much of an emergency fund at the moment, so I'll probably suggest she put a portion of the 70k in online savings, and the rest in target retirement in Vanguard. The latter shouldn't be too much of a stretch for her since thats where the inherited IRA is anyway.

Not an advisor, only an investor, I have a large risk level and did before I could afford it. below are some things I have learned.


get out of individual stocks asap, they are for later and deeper pockets.
you do not have to much cash
if you plan to stay in the general area of where you currently live save to buy a duplex and rent half to support your mortgage (IMO this is huge for young new investors) eventually it becomes and income producer when you move on.
continue 401 savings
figure out a way to continue to push income higher, new job, new business or industry or promotions - whatever - to invest the way you write you need to make more money.

false dichotomy here; you could buy stocks in your roth!

there is no conclusion to this sentence that wouldn't be ridiculous, ducy?


the general strategy is to fund things in this order (ignoring your debt since it's low vig and doesn't seem to bother you, which is fine):

- emergency savings -- figure out how much of that $13k in the bank is for emergencies and don't touch it
- 401k up to company match -- done!
- fully fund roth ira
- 401k up to max ($17.5k, not including employer contributions)

i do not believe in holding individual stocks, so i'd look to get out of those, tax situation permitting.

what do you hold in your retirement accounts? why?

first, set aside what you need for emergency savings. you can invest the rest.

if you were an american, i'd recommend an individual retirement account (IRA). i'm sure germany has a similar vehicle. you probably want to max this out.

if you were an american, i'd recommend filling your investment accounts with a target retirement fund. i don't think those are available to european investors, but it's only a little more work to build the equivalent: http://www.bogleheads.org/wiki/Three-fund_portfolio. i think you're forced to use index fund ETFs rather than mutual funds, but again they're equivalent.

same here.

(and this is a good spot for my semi-regular disclaimer! i am but an interested amateur, not a professional financial advisor. i offer suggestions here with good intentions but no warranty. never put your money in something you don't understand.)

now that's out of the way, i wanted to weigh in on strike-3's advice:

yes

no

yes, though beware emergencies

highly dubious. buy vs rent is a complex decision encompassing many factors. becoming a landlord is not a decision to be made lightly. real estate is guaranteed neither to increase in value nor to provide a revenue stream.

yes

huge yes. as someone early in his accumulation phase, op's decisions about whether to max out a roth or a 401k and what asset allocation are almost inconsequential compared to how much he can save every year.