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Participant ○

Re: Portfolio Critique: New Roth IRA for a 15-year old

Great to hear that your daughter is starting a Roth at age 15!  If she sticks with it, she'll have a substantial nest egg when she retires.

At her age, I'd go 100% stocks/100% index and stay with that strategy until she is at least 40 and then maybe start adding some bonds.  Schwab Total U. S. Market and Schwab Total International Market are all she needs.

As for buying gold, here's what William Bernstein says in The Investor's Manifesto (2010): "The long-term, real return [counting inflation] of the yellow metal itself is zero--an ounce of it bought a fine man's suit in Shakespeare's time, and it still does today."

Aquinas

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Explorer ○○○

Re: Portfolio Critique: New Roth IRA for a 15-year old

R48, I will ramble through this....Increasing deficits cause decreased investments & higher interest rates. Increasing proprtions of available savings go towards bonds therefore access to capital is reduced with less invested in private ventures and factories, making the workforce less productive eventually lowering wages. Ultimatley lowering our nations growth. As our gov't allocates more of its budget towards interest costs, it will crowd out needed gov't services. IOW's a company stock can't be successful w/o roads to transport their goods. The gov't will have less $ for the roads. Entrepreneurs and start ups face higher borrowing costs stifling innovation and technology that positively affect our lives. As rates rise and debt levels, investors begin to doubt our gov't ability to pay back the interest so investors will demand higher interest rates further affecting borrowing costs. Higher rates make it harder for home ownership. College costs soar reducing education levels and therefore corporations ability to hire talent. Lower worker incomes leads to reduce tax receipts again having a compounding negetive affect on the Federal budget. Businesses will be hesitant to invest if they fear higher tax increases down the road to finance the debt. If we are bailed out by importing foreigners buying our treasuries more of our future earnings will be taxed at higher rates to pay interest to foreign owners of our debt. Less of the budget would be available for national security and military. On and on and on. But nobody wants to hear this. Nobody believes it will ever happen. But the OP needs a solution for the next 50 year life of a portfolio which IMHO will produce greater risks than the last 50 years.

Therefore, to answer your question....I believe all the above has the ability to affect stock prices and standard of living. 

Recovering from recessions and always increasing gov't debt levels are comparing two different things. 

5-10% allocation to gold bullion as a hedge is seen as an insurance policy. Gold is a good hedge as a non correlated asset to stocks. It is good in any form of geopolitical turmoil. Gold is good in the world of shadow banking unknowns.  Gold is good in a world of leverage. Gold is good regarding derivatives contracts not well understood. Gold is good with cybersecurity threats. Nuclear threats. Gold is generally good in a world of excessive greed.

Federal Debt began escalating around 2001. The gold ETF GLD inception date was 11/2004. During the 4Q2018 Christmas Eve correction it is surprising to see that GLD total return since 11/2004 was 170% vs S&P500 163% including dividends according to stockcharts. Long term gold has underperformed, but hedges are not expected to produce "growth" returns.   

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Frequent Contributor

Re: Portfolio Critique: New Roth IRA for a 15-year old


@shipwreckdalone wrote:

R48, I will ramble through this....Increasing deficits cause decreased investments & higher interest rates. Increasing proprtions of available savings go towards bonds therefore access to capital is reduced with less invested in private ventures and factories, making the workforce less productive eventually lowering wages. Ultimatley lowering our nations growth. As our gov't allocates more of its budget towards interest costs, it will crowd out needed gov't services. IOW's a company stock can't be successful w/o roads to transport their goods. The gov't will have less $ for the roads. Entrepreneurs and start ups face higher borrowing costs stifling innovation and technology that positively affect our lives. As rates rise and debt levels, investors begin to doubt our gov't ability to pay back the interest so investors will demand higher interest rates further affecting borrowing costs. Higher rates make it harder for home ownership. College costs soar reducing education levels and therefore corporations ability to hire talent. Lower worker incomes leads to reduce tax receipts again having a compounding negetive affect on the Federal budget. Businesses will be hesitant to invest if they fear higher tax increases down the road to finance the debt. If we are bailed out by importing foreigners buying our treasuries more of our future earnings will be taxed at higher rates to pay interest to foreign owners of our debt. Less of the budget would be available for national security and military. On and on and on. But nobody wants to hear this. Nobody believes it will ever happen. But the OP needs a solution for the next 50 year life of a portfolio which IMHO will produce greater risks than the last 50 years.

R48 reply in bold...All you are doing is reciting classic monetary theory.  Let's say all you said is true.  Then, it even applies to simple recessions, no.  That is in economic downturns, the "hair-on-fire" reporting makes it seem the country will never get back on track; except it always does.  Just as stocks always do.  Just think, there is no one in history who has bought and held a collection of USA stocks, that is losing today (with markets at new highs).  And many are millionaires; some even retired a bit early!

Secondly, you are ingnoring that in this huge expansion of gvt debt time in last decade, none of this dire stuff has occurred...no high interest rates/no high inflation/record low unemployment.  The classic Phillips curve did not work.  PHD Economists set on their heads.  By default we got a look at interest rates at zero or negative, and guess what, no disaster.  I don't want to hijack this thread into things like MMT (modern monetary theory), so will stop for now.  What I do advise is come hell or high water, either way, I will own the means of production, aka businesses, aka companies, aka stocks, aka stock mutual funds/ETFs.

Therefore, to answer your question....I believe all the above has the ability to affect stock prices and standard of living. 

Sure.  We can surely have another down 50% to down 70% market...then what?  It recovers.  Do not be a slave to stock prices...it is wealth ownership that counts. What else is the real alternative...like under your disaster scenario, who pays the corporate bond interest rates?

FRecovering from recessions and always increasing gov't debt levels are comparing two different things. 

5-10% allocation to gold bullion as a hedge is seen as an insurance policy. Gold is a good hedge as a non correlated asset to stocks. It is good in any form of geopolitical turmoil. Gold is good in the world of shadow banking unknowns.  Gold is good in a world of leverage. Gold is good regarding derivatives contracts not well understood. Gold is good with cybersecurity threats. Nuclear threats. Gold is generally good in a world of excessive greed.

Long term charts clearly show gold is a terrible long term investment.   As I stated below, gold earns no income along the way, and THERE IS NO INTRINSIC GROWTH.

Federal Debt began escalating around 2001. The gold ETF GLD inception date was 11/2004. During the 4Q2018 Christmas Eve correction it is surprising to see that GLD total return since 11/2004 was 170% vs S&P500 163% including dividends according to stockcharts. Long term gold has underperformed, but hedges are not expected to produce "growth" returns. 

In previous posts, I stated gold can have a purpose.  I own some myself.  But IMO gold should not be used by a teenager starting a Roth IRA. 

R48 in bold.


 

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Explorer ○○○

Re: Portfolio Critique: New Roth IRA for a 15-year old

 Aub, I have thought about this many years and I agree 100% with you physical bullion is superior to GLD.   A piece of paper vs real deal bullion.  Confiscation years ago from citizens was based on the honor system on who owned what. Now much different. 

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Frequent Contributor

Re: Portfolio Critique: New Roth IRA for a 15-year old

First off, Congratulations to your daughter! Very smart move for her. I started investing at age 14, and now (age 60) have accumulated a very large nest egg (>several million). Shows the value of "time in the market", which is the single best "asset" your daughter has. 

I would go with about 70% US stocks (Large cap index about 2/3, about 1/3 in small cap index). The rest (30%), I would put in the International Index fund. I agree with the others about avoiding bonds for a while- have her wait at least until age 40+ or so before starting to add bonds. 

I also would NOT put any money in Gold. If she does, it might be worth while buying some gold coins- but keep them in a safe deposit box. I've held gold krugerrands for decades, but they have really not done nearly as well as stock indexes. Gold has had TERRIBLE returns long term, occasional "spurts up' followed by decades of poor performance. 

Win
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Participant ○

Re: Portfolio Critique: New Roth IRA for a 15-year old

In 2010, William Bernstein (author of Four Pillars of Investing, The Intelligent Assest Investor, The Investor’s Manifesto, etc.) wrote this about buying gold:

“[G]old and gold stocks have become the asset class du jour, with high recent returns and a good deal of publicity.  Unless you are going on the lam, buying gold bullion itself, gold coins, or an ETF that invests in these is rarely a good idea.  The long-term, real return on the yellow metal itself is zero—an ounce of it bought a fine men’s suit in Shakespeare’s time, and still does today.  In addition, gold yields no dividend and incurs storage costs.”
 
In another book (don’t recall title), the author suggests that rather than buying gold bullion or gold coins, it’s better to buy bags of silver dimes or quarters.  In a catastrophic economic collapse, you at least might be able to buy a loaf of bread, a quart of milk or a gallon of gas with a silver coin.  On the other hand, a gold bar or a one-ounce gold coin would be pretty useless, or at best impractical.
 
Aquinas
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Explorer ○

Re: Portfolio Critique: New Roth IRA for a 15-year old

Happy Mothers Day Blue Chip Mom,

Our 18 year old son's Roth IRA contains:

TBCIX 25%

DSEEX 25%

PCI 50%

I don't care about fund expenses, just total returns.  I also don't care about volatility because of our son's time frame.  I'll change a fund if it underperform peers total returns over a trailing 3 years.

Good luck!

John

 

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Frequent Contributor

Re: Portfolio Critique: New Roth IRA for a 15-year old


@Aquinas wrote:

In 2010, William Bernstein (author of Four Pillars of Investing, The Intelligent Assest Investor, The Investor’s Manifesto, etc.) wrote this about buying gold:

“[G]old and gold stocks have become the asset class du jour, with high recent returns and a good deal of publicity.  Unless you are going on the lam, buying gold bullion itself, gold coins, or an ETF that invests in these is rarely a good idea.  The long-term, real return on the yellow metal itself is zero—an ounce of it bought a fine men’s suit in Shakespeare’s time, and still does today.  In addition, gold yields no dividend and incurs storage costs.”
 
In another book (don’t recall title), the author suggests that rather than buying gold bullion or gold coins, it’s better to buy bags of silver dimes or quarters.  In a catastrophic economic collapse, you at least might be able to buy a loaf of bread, a quart of milk or a gallon of gas with a silver coin.  On the other hand, a gold bar or a one-ounce gold coin would be pretty useless, or at best impractical.
 
Aquinas

-----------------------------------------------------------------------------------------

+1.

I own both gold and silver coins, in my possession, for the purposes you state.

During the 1970's gasoline crisis at the pump (no gas), a local gas station owner offered about eight gallons of gas, in exchange for a junk silver dollar.  I tested this, taking a silver dollar in and buying gas.  Sure enough, the bartering worked.

But as I posted earlier, recommend gold NOT be in IRAs or in any young peoples portfolio.

R48

 

 

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Frequent Contributor

Re: Portfolio Critique: New Roth IRA for a 15-year old

 

So BlueChipMom, you have a number of new posts here.  

Any thoughts on the posts, or plans you see taking shape with your 15 yr old?

R48

 

 

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Explorer ○○

Re: Portfolio Critique: New Roth IRA for a 15-year old

Schwab has a great line-up of no-commission ETF funds with very low expense ratios.  SCHB (total US market) or SCHD (dividend), SCHM (mid cap), and so on.  ETFs have no minimum investment so it is easier to keep a small portfolio diversified.

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Follower ○○○

Re: Portfolio Critique: New Roth IRA for a 15-year old

Thanks so much to you and everyone for this great thread filled with excellent advice and so much to think about it.  We do have things up and running!  For better or worse, here's what we did.  

We had already opened up a Charles Schwab account when I made the original post, so we stuck with that.  (She didn't have quite enough money to meet the minimums on most of the Vanguard funds.) Schwab had a lot of options for her that fit her needs - no transaction fees, no loads, low $ amount required to get in the fund, low $ amount allowed for subsequent contributions to fund.

After MUCH discussion she decided to allocate things this way:

SWPPX - Schwab S&P 500 Index - 40%

SWSSX - Schwab Small Cap Index - 30%

SWISX - Schwab International Index - 20%

SFREX - Schwab Global Real Estate Index - 10%

Her initial investment was allocated that way and her monthly contributions will be allocated that way.  It puts her at about 70% domestic, 30% international.  

I was very interested in the discussion of precious metals as I had a WONDERFUL great aunt/uncle who invested primarily in silver/rare coins and Italian art.  They had no children and when they passed, my siblings and I were each given a giant bag of silver including Civil War era coins and a small truckload of art.  I've never really thought about their value or selling them as I think of them as mementos.  I imagine these things will eventually be passed down to our daughter.

Can I share a story?  This particular aunt had such a wonderful life.  She grew up very, very poor.  She talked about being made fun of at school because she only had one dress to wear.  To earn money during the summers she went out to the country to pick fruit.  Everyday she walked past a mansion that was owned by one of the lumber barons in the town.  She would walk up the driveway, pretending that it was her house.  She worked hard, saved every penny, opened a grocery store with my uncle and ran it while he was fighting in World War II.  In her 40's she bought that house!  She threw so many amazing parties there, funded the college educations of many kids (including mine), and was just magical.  I learned so much from her about hard work, careful decision-making, and the idea of leaving a legacy.  I feel lucky to have had someone like that in my life.

Thanks again everyone!  

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Frequent Contributor

Re: Portfolio Critique: New Roth IRA for a 15-year old


@BlueChipMom wrote:

Thanks so much to you and everyone for this great thread filled with excellent advice and so much to think about it.  We do have things up and running!  For better or worse, here's what we did.  

We had already opened up a Charles Schwab account when I made the original post, so we stuck with that.  (She didn't have quite enough money to meet the minimums on most of the Vanguard funds.)

R48 reply in bold:  Schwab is fine.  But I point out that Vanguard has many, many ETFs that do not require any minimum to buy...and with very low expense ratios...and zero to negligible fees to buy.

Another point.  When your daughter gets to an age where serious investing/learning on her part is desirable, I suggest switching to either Vanguard or Fidelity.  I consider these two fund families are unmatched in terms of providing continuous general investment info to clients...in all aspects of living life, saving and investing.

Schwab had a lot of options for her that fit her needs - no transaction fees, no loads, low $ amount required to get in the fund, low $ amount allowed for subsequent contributions to fund.

After MUCH discussion she decided to allocate things this way:

SWPPX - Schwab S&P 500 Index - 40%

SWSSX - Schwab Small Cap Index - 30%

SWISX - Schwab International Index - 20%

SFREX - Schwab Global Real Estate Index - 10%

Her initial investment was allocated that way and her monthly contributions will be allocated that way.  It puts her at about 70% domestic, 30% international.  

I like it!

BTW I consider that early age investments, starting out, should focus as much on the LEARNING EXPERIENCE (such as a 15 y/o) will get, as well as investment returns.  In this regard how about spin off a thousand dollars for your daughter to invest on her own?  But insist she use an asset allocation strategy using ETFs (small dollar buys), and make investments accordingly.  Then compare her performance to your selection choices.  Make investing fun.  Someday she will be investing big money, right?  So learn now.

Best wishes...

R48

 

 

 

 

 

Thanks again everyone!  


 

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Follower ○○○

Re: Portfolio Critique: New Roth IRA for a 15-year old

I love that idea R48!  ($1000 spinoff to invest in ETF's and comparing performance)

You are SO right that at this age the value is not just in compounding interest -- it's education, getting excited about investing, and building a habit of saving/investing.

Thanks again very much for your input and interest.  What a great community forum this is!    

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Re: Portfolio Critique: New Roth IRA for a 15-year old


@BlueChipMom wrote:

I love that idea R48!  ($1000 spinoff to invest in ETF's and comparing performance)

You are SO right that at this age the value is not just in compounding interest -- it's education, getting excited about investing, and building a habit of saving/investing.

Thanks again very much for your input and interest.  What a great community forum this is!    


OK BlueChipMom...this is bonus day.

Bonus, as in:  Consider copying and keeping the following previous posting, for you and your daughter in determining the type of investor she becomes, and how to adapt ones investing to their style.  It is a ROADMAP to follow...and applies to all investors.  And perhaps one day she can be financially independent at an early age...maybe even age 48!

-------------------------------------------------------------------------------------------------------

 

 

R48's ROADMAP...Part I...Getting Started 


I have been providing guidance on the PD/M Forum to young accumulators, or to anyone with lets say from $3000 to $20,000 to invest, or simply just starting from zero. But my discussions with this group has altered even my way of thinking on the approach they should take. And a few things have changed in the brokerage world, all for the betterment of young investors.

I have concluded that the most important thing for young investors is that the learning experience trumps everything...from maximizing performance, to safe performance. And now I think that learning can be done at zero cost, nor with any serious harm to the portfolio results. Let me explain.

Until recently, young investors were hamstrung with minimum initial mutual fund investment amounts (often $3000 and up). So the standard advice was to perhaps go into target retirement funds, or total stock market, or perhaps one or two actively managed funds. I think those times are past.

We know from various studies and analysis of successful portfolios is that things like asset allocation, determining stock/bond mix, percent international, and choices among the nine Morningstar style boxes are much greater determinants of success, than fund selection. Arguable, yes.

But here's what's new. First, we have tremendous education and literature on selecting the asset allocations. Second, we have computers, tax deferred investing spaces and recently, exchange traded funds where commissions are zero. IN FACT, FIDELITY HAS NOW MADE AN ASSET CLASS SPECTRUM OF iSHARES ETF's AVAILABLE WITH ZERO COMMISSION. DITTO FOR VANGUARD FOR ALL IT'S VANGUARD ETFs. My personal selection would be to start with Vanguard.

So the last hurdle for young investors is now removed.

Thus, an investor with $10,000 can easily get a full asset allocation plan underway, putting $1000 into etfs, and some mutual funds if desired, and start on day one watching, managing and learning about their portfolio and investing. Ditto for adding new money. 

If such an investor makes a mistake, such as a 30% loss in one of his/her selections, so what. You are only out $300. A great way to learn about investing. And if you get a bear market, you will experience it with a much smaller amount, and can thus calibrate your real tolerance for losses, or risk, and adjust the bond percentage, or your style, accordingly.

Furthermore, I have come to conclude young people really can adjust much faster to things like investing in ETFs, and asset allocation models. They understand computers, electronics, gadgets, buying on-line, etc. I think they grasp ETFs very quickly. So I am optimistic you can now start at a very early age and come up with an approach to investing that fits your personality, or psyche, or whatever you call it, but we know what it means. With experience, you can eventually graduate into buying some Closed End Funds, especially for fixed income boosts.

So to the young investors and smaller dollar accumulators, you can ponder these approaches. But do some homework and reading on the newer developments in the fields of portfolio management and theory. Get familiar with term like the "efficient frontier of portfolio makeup." 

For me personally, I lean towards the academics on portfolio design, and towards the risk mitigators in portfolio management (discussed on the PD/M Forum). Some lean towards mostly actively managed funds. Some lean toward no actively managed funds; others mostly buy and hold with rebalancing. 

Thus, consider going to Vanguard (or Fidelity) and get started.

Part II


Roadmap...Determining Your Investing Style, Approach and Techniques.

Here's some guidance for you going forward on coming to terms with a strategic investment plan geared to you. It was posted for another young accumulator in your similar situation. Try to follow this strategic outline, focusing your reading/education towards these goals, and you will end up with a personalized investment style, plan and approach:

There are four main elements of investing:

Asset Allocation...determining a percent stock/bond/other split, in percentages. The percent equity side is the controversial one. Requires knowing thyself in terms of need, willingness and ability to take risks, and where one is in life...from young accumulator to retiree. I tend to favor more aggressiveness here...that, for example, accumulators with up to $150,000 should have 100% equity as a goal, market conditions permitting.

Determine whether or not to "slice and dice" the portfolio into any or all of Morningstar nine style boxes (such as small cap-value). Requires some knowledge here. Determine if sector fund investing fits any needs...like energy funds, providing some dividend returns, and a hedge against inflation and currency devaluations (oil dominated pricing). Lastly, determine an international share percentage. I feel the trend now should be towards more international holdings, not less. Aggressively, up to 33% for young accumulators.


What to buy/sell...Sort out the actively managed fund versus index fund debate. You may conclude to use index funds for core holdings, active ones for trying to enhance returns. Much written about these features. Also, your 401.K may not have index funds, thus your strategy may require partly selecting active funds. Buy and Holders should focus on using Index funds and Exchange Traded Funds, since no need to follow things like manager changes; and these spaces will not go "bankrupt." 

If you will be moderately involved in investing, what are called allocation and/or balanced funds can play a major role. Here, you let the investment managers make most decisions for you. But it does require time to identify, select and follow such funds. And you need more than one to cover investment spaces...and learn of the potential pitfalls of tying your stock/bond investments into one holding.

You can also choose to invest by focusing more on asset allocation and sectors in which to invest, and to what extent. Focuses on portfolio management; lesser on fund selection. Tailored for those still working, yet wanting to closely follow their investments. The M* Portfolio Design/Management Forum is geared to this. It is also my approach.

Other strategic approaches are: using momentum to your advantage, in things like fund selection. I do. Come to terms with this. Here is a link:

socialize.morningstar.com/NewSocialize/ViewPost.aspx?apptype=0&PostID=2839187


Lastly, you may want to develop a "valuations matter" strategy. I use it. Here, many use historical return data and info to give a probability of future returns. One then adjusts their portfolio by taking some off the table if valuations seem high, adding if valuations seem good. Many financial sites/guru's etc provide valuation models. Again, some education required here. When is something over or under-valued, you ask? Here is an article I wrote/posted on this matter of valuations: 

socialize.morningstar.com/NewSocialize/forums/p/234768/2630152.aspx#2630152


When to buy/sell...Sort out whether to be a buy and hold investor, which translates into a buy and hold, forever, investor, with some rebalancing, or one who more actively manages their portfolio with some allocation shifts and mutual fund sells. Some disparagingly call this market timing. The proper terms are strategic and tactical asset allocation.

One aspect is called technical analysis, whereby one can have tactical buys/sells based on these technicals. Sort out whether to pursue any. I rely on one, the 200 day moving average indicator. That is, mutual fund movements above/below 200 day MAs will result in my taking some monies off the table, or adding to positions. That is my strategy, discussed here:

socialize.morningstar.com/NewSocialize/forums/p/253696/2771305.aspx#PageIndex=5
socialize.morningstar.com/NewSocialize/forums/p/263259/2860250.aspx#2860250

and in great detail, here: www.bogleheads.org/forum/viewtopic.php?t=27460&postdays=0&postorder=asc&start=0
and here:

socialize.morningstar.com/NewSocialize/forums/p/253696/2771305.aspx#PageIndex=1 

There are specialty investing techniques. I use one I labeled Pyramiding Up buying. I incorporate it into all of my buying/selling activity. A summary is here:

socialize.morningstar.com/NewSocialize/forums/p/269209/2920919.aspx#2920919 

Lastly, 401.K and other periodic investing requires an understanding of dollar cost averaging, volatility and strategic approaches that make sense. I offer more insights here in a posting titled: 

"Five Creative Ways to Improve Your 401.K Investing Performance," here:

news.morningstar.com/articlenet/article.aspx?postId=2681250#page=0&part=1

Lastly a buy and hold investor needs to determine how and when to rebalance. Various ways exist. Then follow that strategy. An assumption is such investor is adding new money immediately "when available" into the market...another strategy not necessarily easy to follow. Rebalancing should not be viewed as adding to performance, but in maintaining desired risk exposure.


Bonds...require an understanding...Investing in the bond half requires determining the "sweet spot" in terms of yields versus maturities, and safety risks. Read a good bond book, such as Larry Swedroe's, THE ONLY GUIDE TO A WINNING BOND STRATEGY YOU'LL EVER NEED.

For young accumulators, bond investing is a lower priority. For those with substantial sums, or nearing retirement, learning fixed income investments is a major theme. I recommend using bond funds, mostly actively managed, especially if buying any TIPs BOND Fund. Even Vanguard has chosen to actively manage their TIPs fund versus an indexing approach. For more advanced investors, Closed End Funds, international bond funds and actively managed "do anything" (unconstrained) bond funds can play a role.  For certain investors, leveraged fixed income Closed End Funds can play a role...but requires some learning about them.  (I own several).

The final piece is to structure a portfolio with the placement of funds that best utilizes tax free spaces such as 401.Ks, IRAs and 529 Plans, and that allows for potential tax-loss harvesting. 

And to tie this all together, I recommend reading, twice, an investment book titled The Four Pillars of Investing, by William Bernstein.

Lastly, surf the M* Forums to gain further insights. I hang mostly on the Portfolio Design & Management Forum.
 

Part III A Bonus...A Real-Life Example Investment Style

Here is an example of developing an investment style....mine. I consider myself a Boglehead with Four Twists, defined briefly as this:




The Boglehead part means investing only in no-load, low cost mutual funds/ETFs (no stocks); index funds permitted; longer term holdings; and an asset allocation approach.

 

The twists: 

First, I incorporate a "valuations matter" approach, especially when markets are hitting new highs. 
That is, if I am investing in REIT Funds, then the historical valuation parameters such as yields and price history, are important. 

Second, I use 200 day moving average controls for both the market and specific mutual funds as guidance to adding or taking some off the table. Net Asset Values (NAVs) trending above the 200 day MA's are favorable uptrend times; trending below certainly means no new buying, and usually some withdrawing from the fund. This was especially useful in yr 2008, as most NAVs fell below 200 day MAs for the entire year. 


Third, I use a technique called Pyramid Up buying. This approach focuses on mitigating risk while entering the market. It involves dividing the targeted monies to invest into five buckets, investing each bucket only as the fund NAV has increased by a set percentage (let's say 5%). It is the reverse of averaging-down. It keeps me in a positive-gain situation. It enables me to, if desired,  confidently start investing in any fund, at any time, in any type of market. 


Fourth, I use a momentum tilt to my portfolio. It is mostly used in up markets. Current momentum is used to identify the asset classes, sectors, regions AND specific funds in which to invest. Financial sites such as Yahoo Finance and Morningstar have COMPARE Charts enabling a variety of momentum comparisons to be made, over several time periods. Select the current best, with some due diligence (like no 2X funds). 

BTW This approach is the result of 50 years of investing, learning some things the hard way, and adapting to new things such as ETFs, computers, asset allocation theory, etc. It is the "Best I Have" for suggesting an approach for new investors to consider...and it is what I currently do, now.

 

------------------------------------------------

 

Whew!

Best wishes, Mom.

R48

 

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Frequent Contributor

Re: Portfolio Critique: New Roth IRA for a 15-year old

@BlueChipMom . Schwab has been friendly for small investors for years - small account opening min, low fund min for Schwab and non-Schwab funds, tie-in with Schwab Bank free checking with ATM/debit [global; all fees reimbursed] and/or credit card, online BillPay, local branches. When she grows up, your daughter may not want to leave Schwab. My daughter had a Schwab account since a kid, and she didn't want to move out of Schwab until her first financial industry employer forced her to move in-house.

Fidelity only lately is trying to woo small investors.

Vanguard has been snobbish with large min for almost everything and VERY strict rules for trading. 

Disclosure - I have brokerage accounts at Fidelity and Schwab, and fund-accounts at Vanguard.


YBB
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Follower ○○○

Re: Portfolio Critique: New Roth IRA for a 15-year old

This is INCREDIBLE!  I am printing it out and putting it in my daughter's investment binder.  I look forward to sharing it with her and reading the links you provided together.  I can't thank you enough.   

Daughter is graduating from middle school on Thursday and will start high school in the fall.  She will be volunteering at a hospital over the summer.  She completed a mini-medical school class this past semester and is looking forward to learning more about the hospital environment over the next few months.  (She wants to be a dermatologist.)  Math and science are her thing! 

Thanks again to you and everyone for all of the great info.

 

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Re: Portfolio Critique: New Roth IRA for a 15-year old


@BlueChipMom wrote:

This is INCREDIBLE!  I am printing it out and putting it in my daughter's investment binder.  I look forward to sharing it with her and reading the links you provided together.  I can't thank you enough.   

Daughter is graduating from middle school on Thursday and will start high school in the fall.  

 

 


Glad to have helped...

R48

 

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Re: Portfolio Critique: New Roth IRA for a 15-year old

I would stick with low cost index funds.  Something simple like you have would be great or even just a SP500 fund or total stock market fund.

 

Very cool what you are doing!

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Re: Portfolio Critique: New Roth IRA for a 15-year old

Since this May 2019 discussion, Gold has tripled the performance of the S&P500: 40% vs 11%. My point being gold is a good insurance policy/hedge for a small 5% amount of a portfolio. The debt per taxpayer has escalated to $213k from $205 just two months ago. Something tells me this number will never decline.

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