Hello good folks,
I am 43 Years old male with wife and a 10 year old.
When I lost about 30K or so in the year 2008 in my 401k, I got concerned and went into cash and never invested. Just maxing out on 401k with a great employer contributions.
Right now I have 430K in my retiremnt account. Invested about 40K about 3 months ago in 3 funds (amanx, mindx and goodx). Sometimes I feel I shouldn't have gone into cash in 2008.
Don't know what to invest in especially when the market is at peak.
I wish I could make atleast 3-4% per year in safe funds. But don't know what those funds are.
Any suggestions or advise or suggestions are greatly appreciated.
thanks much
nath
Comments
I'm not a financial planner or anything, but I'd almost think that you'd start with determining what you need rather than what you prefer. Will the combination of your current assets, future contributions and 3-4% appreciation get you where you need to be? That 3-4% would, of necessity, have been be deflated by the rate of inflation so you might be asking "will 0.5 - 2.0% real returns be enough, all things considered, for me to meet my goals and obligations?"
I guess if I were wondering about that, I'd start by running a Monte Carlo analysis using T. Rowe Price's Retirement Income Calculator. We've got a link and explanation in the "Best of" tab. The Monte Carlo thing simply means that they run a thousand simultaneous what-ifs on your portfolio for the period from now to when you retire. They give you two outputs, one is a comparison of where you're likely to be versus where you need to be. The other is a tool for tweaking your contributions, asset allocation, retirement date and so on to see what you might do to better align things.
They also have a newer version called Clear Future, but I haven't checked to see if that's available to non-customers.
Finally, the general answer to your original question might be a cheap, well-diversified conservative allocation, strategic income or retirement income fund: something that might be 20% stocks, 40% short term fixed income and 40% other fixed income. I suspect we could rustle up some suspects for you if you decide that's where best to go.
For what it's worth,
David
"I wish I could make atleast 3-4% per year in safe funds. But don't know what those funds are."
Merger Arbitage funds may get around 2-5% a year pretty consistently, but like anything else, that's not guaranteed. Any more than 5% would be a very good year.
I don't expect anything going forward and think the market is getting ahead of itself for a number of reasons, but if an opportunity presents itself in some of the stocks I plan to hold for the foreseeable future, I would add a bit here-and-there.
In terms of worries, maybe invest in a few companies you know? Have a big cell phone bill? Invest in a Verizon or AT & T and get a very nice dividend every quarter.
If the house is paid off with no other debt, how much income do we need during retirment for a couple? It is a very generic question.
But, quite a few folks on this forum are already retired/semi-retired. so I thought I will ask and see. We live in California.
Is 6K per month (including social security) enough? We don't eat out much or we probably travel twice a year.
Thanks & Regards
nath
Also, your 401K provider should have some stats and hand holding available to the participants. Take any help you can get. Equity markets go down, bond markets go down, real estate investments go down -- there is no guarantee. but if you stay in cash, it is guaranteed that your principal will be loosing purchasing power as time goes on.
best of luck.
regards
nath
"A recent television advertisement for
Prudential that is intended to encourage
you to save for retirement is on point with
my life. “If you could do anything you
wanted and be paid for it, what would that
be?” the narrator asks viewers. “That is
what retirement is supposed to be about,”
he goes on." Ron Baron Sept.30,2013 Baron Funds Shareholder Report http://www.baronfunds.com/BaronFunds/media/Quarterly-Reports/Baron-Funds-Quarterly-093013.pdf
From Mutual Fund Observer's David Snowball's October 1,2013 Commentary http://www.mutualfundobserver.com/2013/10/october-1-2013/
RSIVX represents the next step out on the risk-return continuum. David Sherman believes that this strategy might be reasonably expected to double the returns of RPHYX. While volatility will be higher,Mr. Sherman is absolutely adamant about risk-management. He intends this to be a “sleep well at night” fund in which his mother will be invested. He refuses to be driven by the temptation to shoot for “the best” total returns; he would far rather sacrifice returns to protect against loss of principal. Morty Schaja affirms the commitment to “a very conservative credit posture.”
One notch up in the risk/reward equation from the aforementioned Merger Arbitrage Fund(s) would be Berwyn Income BERIX. Often mentioned on this board as a good choice for risk adverse investors. A Morning* 15 year standard deviation of 6.02 and 15 year annual return of 8.23% would seem a good choice for you.
I like BERIX.
Regards
nath
Oh, and *of course* you should not have gone to cash 5 years ago. Absolutely not. Do you want to hear from each person here what he or she should not have done then, or 4 years ago, or 3, or since? Including last month? Hindsight etc.
bnath, have a plan for yourself, even a general one can serve you well. Most of the time, the thing to do is to sit on your hands and avoid the temptation to micromanage your stuff.
Despite bonds being out of favor, I'm heavy in PREMX, an Emerg Mkts. bond fund. NOT a good year. I'm deliberately reinvesting all pay-outs to buy new shares at lower prices than when it was on the way up and all the rage. It would drive me crazy if I focused solely on the actual daily value, because it's going nowhere fast, lately. Since I want to grow the size of my dividend each month from that fund, I'm less worried about what it's doing yesterday or today or two weeks from now. And if I never cash-out and my wife gets it all, that's just as well for me. You ought to think about that prospect and decide one way or the other about it.
As for dumb investor tricks: I'm seriously underweight in US equities. I was never bothered by the typical domestic, home-country bias. So I'm growing my MAPOX and MSCFX (small-cap) with quarterly and year-end pay-outs. And of course, I bought-into domestic bonds just at the wrong time, at a market-top......Yet I don't lose sleep about it; prior to that time, I didn't have the money to invest in domestic US bonds. Priorto that, I was intent upon covering all the OTHER bases.
If it is realistic, set yourself a dollar goal. Or else you might aim for a certain percentage profit each year. Kinda hard to be consistent THAT way, EACH year. as for me, my plan is to watch my well-researched selections do their thing, realizing there will be periods of time in the doldrums. Like right now. The US Markets are all go-go and full-steam-ahead, but I am woefully underweight in the USA. Yet, I have made a decision and will take steps to grow my US stake. Getting in or out at just the right time is not a thing I've been good at. I leave those moves to the Fund Managers, while maintaining my vague, but deliberate strategy. Sorry this is so long. "Break a leg."
You should start off by tracking your current spending by line items.
Then add and subtract items to get to your retirement budget and project that into the future.
I highly recommend the book "How to retire happy, wild and free"
...except, you appear to be very risk adverse. Why MINDX? Is this because you have family ties to India? Single country EM funds are very volatile and, if you are risk adverse, will drive you crazy. And 10 years down the road you won't have made any more than a more diversified Mathews Asia fund with less volatility. If you want to hold some India or Asian stocks, MACSX might be a better choice for you.
Good luck to you.
Given your age and current retirement account you should be well on your way to a good retirement. This is because the power of compounding will be working in your favor. The "rule of 72" is useful to figure the effect of compounding: Divide 72 by the interest rate (APR) to determine the approximate number years to double your money.
In investing you should first select a strategy. I prefer an Asset Allocation strategy, but there are other strategies, e.g. "Moneyball Investing". Moneyball investing is interesting to me because it emphasizes how all your investments work together to produce a desired result given the uncertainty of the future. Some interesting links:
http://nautil.us/issue/4/the-unlikely/revisiting-moneyball-with-paul-depodesta
http://www.mutualfundobserver.com/discussions-3/#/discussion/7421
I personally use an Asset Allocation strategy. This scheme will probably not beat the market in the short-term; its purpose is to provide a consistent return over the long-term. You may say that you could make more money over the short-term, then again you could lose more money over the short-term. The major concept in this strategy is to split your investments into a ratio of stocks to bonds. The typical recommended ratio is 60% stocks to 40% bonds (and cash). (I prefer the categories Risky and Conservative that are essentially the equivalent of stocks and bonds.) Most proponents of Asset Allocation recommend investing in low-cost index funds. Examples of this strategy:
http://www.marketwatch.com/lazyportfolio
http://www.bogleheads.org/wiki/Lazy_portfolios
Because you currently have a large amount of cash consider Dollar Cost Averaging into your eventual allocation by setting a duration for the investment in months and investing equal portions each month. This smooths out the buy prices to reasonable amounts. Too short a duration risks buying at a high, too long a duration risks losing out on a market rally.
Another concept is to rebalance the portfolio periodically. Rebalance should occur as a calendar event, not a market event. Rebalancing periods of six months or yearly are common.
Some general advice:
1. MISS A KISS (Make It Simple Stupid And Keep It Simple Stupid). (For humor, MFO participants are not stupid.)
2. For a long-term investor the best way to listen to CNBC is to press the mute button, look at the tickers, then quickly move on to something else.
3. Don't plan on how much it takes to live in retirement, plan to have a good retirement where you can benefit from the savings you have accumulated during your working career. I and my wife are both retired and live in California. We enjoy the culture (LA Phil, LA Opera, etc.), the gardens {Huntington, Descanso), and much much more. Retirement should not be merely an existence, it should be a time of exploration and adventures. A good strategy for investing can yield that result. Good luck.
I hope you folks live a long and healthy life and please continue to give such a great suggestions and advise and education. For Immigrants like me, who has no elders to guide thru in our investments for retirement, this forum is gift and boon in life.
Regards
NATH
David,
The Trow price calculator is great. It says I will have 8.5K per month when I 60 years old for me and my wife. that's more than enough for both of us (especially if we pay off our house).
regards
nath
I can't call I am living decently. it is because I drive a 1998 old honda accord still. bought it for 5K, 6 years ago.
Not a big spender. we maximize in 401k accounts and adjust with the rest. Never used credit cards. only debit cards or cash. Never took loans for buying cars. saved up and bought them. dont' take too many vacations. because i have to support parents in india.
(1) There have been a number of creative ways some have deployed cash during this dismal interest rate environment. So, I'd be most interested in knowing how your 100% cash position was invested. Was it all, for example, in insured bank deposits and money market funds? If that's the case, than you've lagged inflation considerably over the past 5 years (not good). On the other hand, David and others have used RPHYX quite effectively as a cash substitute. I myself have some, but not all, invested in short and intermediate term bond funds. And, lastly, Catch22 for many years wrote an excellent column (The Fund Boat) at both Fund Alarm and than later here in which he aptly documented the phenominal bull market many types of fixed income investments enjoyed over the lengthy time you apparently sat in cash. I'm curious as to whether or not you followed the lead of Catch and other like-minded cautious investors by deploying at least some of your money into a diversified mix of bonds, bond funds, or other similar assets? If not, I'd certainly like to hear why not and what your reasoning was at the time? These products have likely lagged equities over the more recent past, but the conservative use of bonds and related products over the 2008 - 2013 time period (which Catch and many others employed and wrote about) was certainly preferable to leaving everything sitting in cash at near 0%.
(2) Your related question about how much you will need for retirement is crucial, but also a bit telling. I suspect you may not yet have developed the habit of constructing, following, and monitoring a yearly household budget. That's a separate area which I won't go into, except to say that from experience when my wife and I finally figured out how to do that, it made all our financial decisions much easier. It's a simple thing, and yet it made a profound difference in our lives. When it came time to contemplate retirement we already had several years of budget experience behind us. This was invaluable in doing the calculations to adjust for the different financial experiences retirement brings. In addition, we had confidence from past experience that we'd be able to continue to follow a budget (with some refinements) after we retired. Everything else came easier too. After an initial two or three "lean" years, we found we had more money for important things like leisure, travel, and charitable and gift giving - yet, curiously, were at the same time able to save more. Perhaps I've mis-read your post, but I think not, and so I encourage you to research and give some thought to the budget issue. An added thought: many sources, including T. Rowe Price, make retirement calculators available on the web. Once you have a handle on the "needs & budget" considerations, those resources will be of value in determining required initial assets, draw-down rates, life expectancy, and related mathematical calculations.
(3) Unfortunately, your post raises an age-old paradox. We as humans tend to run away from equities when they are cheap, yet desire to buy when they're much more costly. Would we pass-up a new coat at $50 and than buy the same one a few years later for $100 or $150? Probably not. Yet, on March 9, 2009 here's where the three major U.S. stock indexes stood. The Dow Jones closed at 6,547. The S&P 500 stood at 677. And the NASDAQ was at 1269. Please compare these numbers to today's. You'll likely see what I'm getting at. I don't know whether the market is cheap today or not. There's a number of interesting threads now trying to answer that. However, I do know that I'd much rather buy the same new coat for $50 than for $125 or $150. FWIW - Thanks for the provocative question. Regards