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Old 11-04-2016, 08:32 AM
 
2,446 posts, read 2,080,440 times
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Quote:
Originally Posted by mathjak107 View Post
just realize you would be making the riskiest bet of all .

fully 1/3 of all time frames the last 45 years had cd's losing money in purchasing power . saving 100k and eventually being able to buy only 50k worth of stuff will be a loss . you need a balance of things working for you .
OK let's say John Doe invests 10K a year in the market with goal of 100k+ as savings nest egg for retirement. Things go great majority of the years and then a 9/11 or 2008 happens and boom your nest egg is clobbered and takes years to recover and he has to wait for a recovery to withdraw funds without taking a loss..

Jane Doe takes conservative, safe route and puts 10K a year into CD's and savings account and has over 100K after 10 years and can withdraw amounts anytime without waiting for a recovery to happen.

Which one has more buying power?

I am all for stocks and bonds and do have a balance of things working for me with the entire portfolio. I just think a no risk savings account is not a bad idea. Perhaps 100K is too much and 50K is wiser.
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Old 11-04-2016, 08:38 AM
 
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first off you have to match investments to time frames . you don't take short term money for eating today or the near term and invest it in long term investments . by the same token you have money you will not use to eat with even at 65 for another 20 to 30 years . that money belongs in those long term investments .

we have two years cash for eating now . we have less volatile bond funds for eating in the intermediate term , then we have our equity's for eating decades from now .

this is how you want to think of things
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Old 11-04-2016, 08:41 AM
 
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Quote:
Originally Posted by mathjak107 View Post
first off you have to match investments to time frames . you don't take short term money for eating today or the near term and invest it in long term investments . by the same token you have money you will not use to eat with even at 65 for another 20 to 30 years . that money belongs in those long term investments .
Good points. Thanks
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Old 11-04-2016, 04:53 PM
 
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How about a Vanguard Target Retirement fund? Tgt 2025 . it does all the work for you : of choosing the starting allocation, then rebalancing each year, all this for a low cost... This is what I do.
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Old 11-04-2016, 05:01 PM
 
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the question is does it match one's risk tolerance ,goal and what is happening in the world ?

going bond heavy as an example because it is time with disregard for the fact that we may be in a long term up trend in rates would make that target fund a bad choice
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Old 11-04-2016, 05:36 PM
 
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^ but if investors expect rising rates, they will have already acted to protect themselves, driving the market to equilibrium based on future expectations. That's how the more transparent parts of our markets work. IOW, today's price for a security incorporates all public information about the future.

This is why market timing does not work. Surely you're not advocating market timing?
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Old 11-04-2016, 11:15 PM
 
3,460 posts, read 2,209,181 times
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Quote:
Originally Posted by jasperhobbs View Post
I am 55 years old and have 10 to 12 years to go until retirement and have below listed goals to accomplish before retirement. Some have already been accomplished.

1) Have house and vehicles paid for. Done
2) Build up 401K - working on it
3) Build up Roth IRA -working on it
4) Have 100K available upon retirement in very accessible account. Needs work

#4 is the one I am not sure where to park the money. A savings account or CD's won't yield much but is safe.

I am batting around the idea of adding to already started Roth IRA and add to that aggressively to reach the 100K mark. The fund I am considering is T Rowe Capital Appreciation. Fairly moderate risk and some growth potential.

Am I better off to contribute to a savings account or CD's which are very safe or go with a Roth in the T Rowe account or open another low risk fund? As always the original money contributed to a Roth is accessible.

Thoughts appreciated.
You have to be more specific with the details. What does "working on it" mean for #2 & #3? Regardless, what you should be doing is maxing out your 401(k) which for over 50 is $24K a year. And to max out your Roth IRA it is $6500 a year. I know this sounds like a lot of money if you aren't doing this, but the sooner you do this and continue to do this, the better your retirement will go for you. What people easily forget is the vast majority of the money that is going to be available to you in retirement comes from your own contributions to these accounts, not so much on some wild great consistent returns.

In the book the Automatic Millionaire it explains how you can achieve your goal by trying to max things out, see how you can live on what is left over and them make adjustments if needed. The problem many people do, is that they are waiting for the golden moment in time when they have more money to invest and years go by and the accounts are underfunded. Even if you only think you can max out those accounts for one year and then adjust it the following years, you will be better off doing that larger contribution now than waiting until later.
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Old 11-05-2016, 02:50 AM
 
71,953 posts, read 71,997,171 times
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Quote:
Originally Posted by bigbear99 View Post
^ but if investors expect rising rates, they will have already acted to protect themselves, driving the market to equilibrium based on future expectations. That's how the more transparent parts of our markets work. IOW, today's price for a security incorporates all public information about the future.

This is why market timing does not work. Surely you're not advocating market timing?
target funds are designed to be stand alone investments . anything else you buy or do defeats the actions a target fund takes .

a target fund moves more and more in to bonds regardless of the fact that bonds are in a rising rate trend that can last a very very long time and can sustain losses on a new retiree in the early stages of retirement .

any hits early on do not have to be steep to do damage . they can be quite modest like bonds taking a hit for an extended period of time .

you want more control over things in my opinion than the robotics of a target fund . i would sooner see a balanced fund used rather than a target fund which may push me to heavy one way or another since it is strictly by date .

also keep in mind target fund allocations are all over the place . just because you bought a particular year does not mean it is right for you .
the same 2010 target date fund from wells fargo in 2008-2009 lost 11.5% while the t.rowe price 2010 target fund lost 26.5%. that is a target fund that had 2 years to go before retirement. in fact the t.rowe target date fund didn't fall to below 45% equities until 5 years after the target date.

to make things worse after the downfall instead of buying more equities over the next 5 years as good investing tactics would dictate target funds actually shed their holdings further as they reduced down by design the equity side and sold while they really should be buying.

personally i give them a fail for quite a few reasons . in fact the worst way to utilize them is to dollar cost average in and that is pretty much how they are used . .

since markets are up almost 2/3's of the time and down only 1/3 you end up buying less and less shares over time at the same time by design the target fund is cutting back on stocks . that can leave growth in some of them short of their intended mark .

Last edited by mathjak107; 11-05-2016 at 03:45 AM..
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Old 11-05-2016, 07:40 AM
 
2,446 posts, read 2,080,440 times
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Quote:
Originally Posted by mathjak107 View Post
target funds are designed to be stand alone investments . anything else you buy or do defeats the actions a target fund takes .

a target fund moves more and more in to bonds regardless of the fact that bonds are in a rising rate trend that can last a very very long time and can sustain losses on a new retiree in the early stages of retirement .

any hits early on do not have to be steep to do damage . they can be quite modest like bonds taking a hit for an extended period of time .

you want more control over things in my opinion than the robotics of a target fund . i would sooner see a balanced fund
used rather than a target fund which may push me to heavy one way or another since it is strictly by date .

also keep in mind target fund allocations are all over the place . just because you bought a particular year does not mean it is right for you .
the same 2010 target date fund from wells fargo in 2008-2009 lost 11.5% while the t.rowe price 2010 target fund lost 26.5%. that is a target fund that had 2 years to go before retirement. in fact the t.rowe target date fund didn't fall to below 45% equities until 5 years after the target date.

to make things worse after the downfall instead of buying more equities over the next 5 years as good investing tactics would dictate target funds actually shed their holdings further as they reduced down by design the equity side and sold while they really should be buying.

personally i give them a fail for quite a few reasons . in fact the worst way to utilize them is to dollar cost average in and that is pretty much how they are used . .

since markets are up almost 2/3's of the time and down only 1/3 you end up buying less and less shares over time
at the same time by design the target fund is cutting back on stocks . that can leave growth in some of them short of their intended mark .
Wouldn't a balanced fund be in bonds at a time bonds are not a good buy?

So you say timing the market is the best way to invest?
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Old 11-05-2016, 07:55 AM
 
Location: Charleston, SC
1,369 posts, read 772,256 times
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There's a distinction between Market Timing and Common Sense Investing. Did anyone here place a big bet on the Euro based on the Polls just before the Brexit vote ?? I don't think so.

With the constant blather from the Fed about raising Interest Rates.....why would a large Allocation of Bonds be attractive in the current Zero Interest Rate environment ??

You're not just voting for a President next week. You're getting a whole new Administration -- who will be the new Treasury Secretary ?? The new Fed Chairman ?? Heck.....the DOJ will likely be turned inside out. All of these Cabinet approvals may take months after the Inauguration.

Keep some powder dry.
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