i fear you have an underdeveloped idea of how "retirement" works. a few grand a year into an employee-provided pension ain't gonna get it done.

but it's a good start! so let's start there.

basically you want to make one of these: http://www.bogleheads.org/wiki/Three-fund_portfolio

by far the best fund available is that Vanguard fund -- look at that expense ratio! that's a suitable candidate for the Total US Stock Market portion of your portfolio. (exactly how suitable is hard to say without knowing whether this is Vanguard's S&P 500 fund or Large Cap fund, but given the rest of your situation i'd say it's close enough.)

for the Bonds portion, i'd use PIMCO Total Return.

for Total International, looks like your only choice is American Funds EuroPacific.

determining your Asset Allocation -- the ratio of these funds to one another in your portfolio -- is one of the most important decisions you need to make. you'll need to do some homework (or provide more info and ask us more questions). however, a reasonable starting point might be:

20% Bonds
30% Intl Stock
50% US Stock

age-27
country-usa
income-past 6 months 150k
risk-high
other info:

I just moved to the USA from europe. I play poker for a living (10/20+). So far I've just lumped all my money together and considered it like a total net worth bankroll. Most of it is in cash/chips at various safe deposit boxes. I figure I'm starting to get older and should start being more responsible and saving some of my income into seperate retirement account/saving accounts/etc.

1. Poker bankroll - most of my future income will be added to here to keep being able to play bigger games
2. Retirement account - save 10%? of my net income monthly. I figure some type of vanguard retirement by age fund with low costs.
3. Saving account - save 20% of my net income monthly (house dp down the road, nicer car, business idea pops up, etc)
4. Checking account - to pay expenses (keep 6 months expenses here and keep depositing as I spend to keep it at 6 months?) I spend like 4-5k monthly on expenses.

What do you think? Any suggestions or changes you think I should make?

Allin,

The first consideration you need to make is taxes. If you haven't been reporting your income (which is the case with most players who just leave it in casino boxes) then you can't invest it.

Once everything is squared away on that front, I would suggest the following:

Checking account: No more than a couple grand is needed. There's no reason to have six months expenses in checking (earning zero) if you have the money available in your savings account. Use a bank that has a lot of ATMs wherever you are and just deposit money as you need to pay rent/bills/whatever.

Savings account: Get a high-yield savings account at an online bank and link it to your checking account so that you can freely transfer money between them. I use Discover bank, but there are some options with higher yields at the moment. Figure out the maximum amount of money you see yourself needing for poker, and then put more than that into the savings account. Live 10/20 can require a massive buffer. If you want to start saving for a house or car or whatever, you can put even more here.

Cash: Whatever you need on a weekly basis for the games you play. Since it takes about a week to get more from your savings account, you don't want to be left out of action if you have a couple bad days. If you take shots at higher games or play super deep in some spots, then have extra cash in your box obviously.

Investing: Everything else. Standard 3-fund portfolio.

You're in the same boat I was in six months ago, before I finally got my act together financially. PM me if you'd like a more detailed breakdown with numbers.

Is the 3 fund portfolio as per the above wiki valid for non US guys as well?
From a total newb's perspective shouldn't I put a higher %age into "International" than an US guy?

Or is ~50% US not because you're in the US at all but simply because it's a "better" investment than international?

FWIW I'm an Euro but living in Asia if it matters

europa,

a fine question. thoughts on this vary. i'll start with the american perspective, since that's what i'm most familiar with.

some people believe that you should overweight your home country because that's where you live and that's where you'll be drawing down your retirement savings in the future. some also believe that the us is in fact a "special case" since it is the only world superpower left and since the global economy is intimately tied to what the us is doing anyway.

there are others who see this kind of home country bias as too risky. much as how owning your company's stock is poor diversification (the kinds of events that affect the stock price correlate strongly with the kinds of events that affect your paycheck and continued employment), they argue that you want to keep more eggs outside your home basket.

vanguard's TR funds only hold 30% of equities in international. they have a paper where they justify this number. basically, international markets are more volatile than the us market, and they calculated that the best risk-adjusted roi ("bang for the buck") happens around 70/30 us/intl.

i don't know who's right, so i look at it pragmatically: the total market weight of us stocks vs intl stocks is about 45/55[1], and 50/50 is very simple to manage. hence, i go 50/50 us/intl.

now, what about non-americans?

most folks i've seen do weight their home country a little extra. i think the arguments pro and con are basically the same as what i've laid out above.

there's an article in the bogleheads wiki about this but i can't find it right now.


[1] in fact, if you like the market weight solution, you can simply purchase Vanguard Total World Index (VTWSX or VT) and let them handle it. the downsides are a slightly higher ER, less flexibility, and the inability to concentrate international holdings in taxable space to take maximum advantage of the (small) foreign tax credit.

Thanks for the quick and detailed answer!

Another upside for the all in one fund is that it's less transactions if I want to buy regularly - transaction costs are higher for me than for US guys, I'll check and see how that compares to the higher ER.

Meh, OTOH even you as US already do 50/50 and 70% US just doesn't feel right for me (I already have too much exposure to USD so to say anyway), I'll probably do 50/50 as well or 45/55, won't matter that much in the long run anyway I hope.

*I'm not advocating tax evasion, this is a hypothetical (I'm employed and pay taxes).

If you predict social security ending in the next 10-20 years, wouldn't it be smart if you were self-employed to just not pay taxes if you were at no risk of being audited (i.e. a professional poker player)? It would suck to pay into social security all those years and then when retirement comes up the program is completely eliminated.

I know Dan Harrington said it's probably +ev to just pay your taxes and invest which would total up to being bigger than the money you'd save from not paying taxes due to loss from inflation. But he never really factored in social security being done away with.

1. i think you overestimate how much of your tax bill is "for" social security.

2. i have a hard time imagining how inviting an audit could ever be considered "smart".

3. even if the downside is rare, it is very severe. i'm kind of a troublemaker but i generally believe in not ****ing with feds (even TSA and immigration, though obv both of those groups tend to be real asshats) because of their outsized ability to ruin my day/week/life.

4. i don't really know how to approach this hypothetical but i suspect this thread is not the right place to have a discussion about it.

.

1) Poker players definitely get audited.

2) You will come out WAY ahead in the long run by paying taxes and smartly investing your money, plus you can actually do things with your money (buy a house, buy a nice car, whatever).

3) The IRS can completely **** up your life. Saving some money in taxes is not worth the risk. You live one life, don't spend some of it in jail.

Hi guys
USA
$56k/yr gross income full time/stable job
$80k to invest
15% of paycheck already goes to 401k. $70k in 401k so far
31 yrs old.
No debt.
Excellent credit 790~
Moderate to high risk.
Would prefer something more short term. 5~years.
Was thinking about getting a rental property or two. But not sure really. Wanted to get some advice.

for a 5 year timeframe you're looking at high-yield savings, i bonds, and CDs. even with "high" risk tolerance i wouldn't gamble on equities with that short a horizon.

rental property is an even worse idea (super illiquid) for that timeline.

Hey all, hoping someone might be able to give me some basic advice and talk to me like I'm 10 years old.

I just started a job as an assistant professor with a salary approximately 60k (most likely another 10k if I teach two summer classes)
My current consolidated school loans are around 50k
CC debt around 3k
5% of my paycheck goes to my retirement with the school matching 5%
Currently my only other monthly bills is rent ($800) and cable/utilities (~$100)
I have a pretty low cost of living, but my goal is to set aside $400 a month which can serve as my play money for traveling/backpacking

Should I be aggressively paying off my school loans and cc debt, or should some of that money be going back into the market into some type of vanguard account?

And lastly, someone told me I was eligible for a 403b as a university employee but I really don't know much about the process. Is that something I want to pursue?

Thanks in advance!

what is the interest rate on your debt?

Pay off your credit card debt immediately. As in yesterday.

Depends on the rate on the school loans. Definitely pay off cc asap. Depending on the rate, I would probably start putting money into an IRA and just keep paying on the student loan.

Also, what's your field and what kind of school are you at? If you're new, I wouldn't necessarily count on the summer classes. That's the kind of thing schools put in front of people during the search process but then never materializes. If it's there, then great, but don't count on it. Always count overload money as extra windfall money. Never budget it.

Also, don't let overloads get in the way of research and publishing and the tenure clock. The money might be nice now, but you have to think of your career long term as well.

Thanks for the responses. I figured the CC was the first that needed to go and will hammer that first while my school loans (at approximatelly 5.4% interest) are in forbearance.

@dalterobk2 you are right that summer classes are not a guarantee. I'm in sport management and we are a small department of 4 people. Since our Masters classes only need 5 people to make (undergrad 12 I believe) and we offer both in person and online, the likelihood is hopefully pretty high.

In regards to tenure obligations, "luckily" I ended up getting a job in an area where I have no friends or social life, so I have nothing to do in my spare time besides work on my research. (Hence my desire to put away money for travel)

do you know what forbearance means? do you see why it's bad?

Yep, brain fart. Meant deferment, not forbearance. Now you see why I'm a professor in sport management and not finance.

whether you think you can or you think you can't, you're right.

Our business savings account 2.5% rate is ending this December, been looking at other options but are going to struggle to find anything >1.5% (and a lot of them at that level have crappy rules)

Is it a dumb idea to drop 50% of our cash into something like Vanguard Total Stock Market ETF and keeping the other 50% in a bank for easy access? Don't need access to this cash for forseeable future (>1 year, highly likely considerably longer). That ETF seems to pay ~1.5% in dividends per year and has good growth.

Can someone help me with a P/E question?

Company X had revenue of $100 year 0. The profit margin was 8%. CAPM = 10%. The profit for year 0 $10per/stock. Re (return on own capital) = 15% and solidity = 55%.

What is P/E?

No clue what the answer is, but pretty sure Re and solidity does not need to be used. Can anyone give me a hint?

TSM is going to be volatile and should be used as a long-term investment in a diversified portfolio. In a short timeframe you could easily lose a large portion of your principle. In 2008 alone, TSM lost 40%.

You could use something like total bond fund, which is going to have a higher yield and less volatility, but even there you could lose a good chunk of your principle in the short term (it's just less likely with smaller swings than TSM).

gull,

TANSTAAFL. i wouldn't be looking at equities for anything less than, say, a 10 year horizon.

this is a dangerously misinformed observation; ducy?

jiske,

i think you'll get better responses in the "general questions megathread".

but, uh, i would expect google and/or your economics textbook to have this answer. also don't try to trick people into doing your homework for you.