I humbly seek advice

[Helterskelter]

I am 25 years old and set up my Roth IRA last month. I have contributed $1000 dollars over the course of that time in 3 $300 installments and 1 $100 installment. My investments have been in the following Schwab no load no transaction fee mutual funds.

• Schwab S&P 500 Index
• Schwab Small Cap Index
• Schwab Large Cap International

I recently moved $200 into my cash account in preparation for the next buy. I plan on purchasing $100 worth of the Schwab S&P index if the market still looks as weak at the close Monday. If it takes another drubbing I may purchase $200 shares spread between the Schwab S&P and Small Cap funds.

I really want to take advantage of the sell offs each month. I suppose this a form of market timing. In any case please critique my strategy.

Since I have a less than modest income I will look to stick with no load/transaction fee mutual funds until my income improves. I hope to move to some stock picking at that point in time via a traditional brokerage account.

Obviously, I have no prior experience other than what I have read and heard from knowledgeable people from all sides.

Thanks

[creditcardfree]

Yes, you are trying to time the market. Just pick a day each month for the rest of your life to make a purchase. This is called dollar cost averaging, because you will buy some high and some low and it all averages out.

No load/transaction fee mutual funds are an excellent way to go. Most of us here would point you in that direction!

[jIM_Ohio]

I am 25 years old and set up my Roth IRA last month. I have contributed $1000 dollars over the course of that time in 3 $300 installments and 1 $100 installment. My investments have been in the following Shwab no load no transaction fee mutual funds.

• Schwab S&P 500 Index
• Schwab Small Cap Index
• Schwab Large Cap International

I recently moved $200 into my cash account in preparation for the next buy. I plan on purchasing $100 worth of the Schwab S&P index if the market still looks as week at the close Monday. If it takes another drubbing I may purchase $200 shares spread between the Schwab S&P and Small Cap funds.

I really want to take advantage of the sell offs each month. I suppose this a form of market timing. In any case please critique my strategy.

Since I have a less than modest income I will look to stick with no load/transaction fee mutual funds until my income improves. I hope to move to some stock picking at that point in time via a traditional brokerage account.

Obviously, I have no prior experience other than what I have read and heard from knowledgeable people from all sides.

Thanks

I have some simple comments

the funds you picked look decent
how you are choosing what to purchase needs lots of work.

Try to do this-
keep 40% of the assets in the S&P 500 index
keep 30% of the assets in the small cap index
keep 30% of the assets in the international fund

and use those percentages to determine what to buy (not the market performance).

As you learn more, add the following to the portfolio:

1) Bonds or money market (inside the Roth)
2) REITS
3) Emerging Markets
4) Small Cap International
5) Commodities

Do not be in a hurry to add those (you may not want bonds until you are in late 30's or commodities until you are in your 40's).

You are doing well setting money aside... just try to avoid using market performance (and emotions) to pick your investments. The market performance will indirectly affect the 40-30-30 allocation I suggested... it will have you buying what is performing the worst, not what is performing the best... which should help you buy low.

Remember to buy low, sell high

[Helterskelter]

First of all thank you both

Jim_Ohio and Creditcardfree you both helped me realize what I was beginning to do. Now that I have what appears to be exposure to the broad market I will look at asset allocation.

• Large Cap SWPPX 33.4%
• Small Cap SWSSX 26.3%
• International Equity SWISX 23.6%

From this point forward I should purchase to keep my asset allocation at 40/30/30? Secondly I would like to purchase shares on the 15th and 30th of every month. I will probably only be able to contribute $100-$200 each time.

My short-term plan is to max out my Roth for the year? I am not eligible to receive a 401K so I obviously have no match to take advantage of.

Thanks

[creditcardfree]

From this point forward I should purchase to keep my asset allocation at 40/30/30? Secondly I would like to purchase shares on the 15th and 30th of every month. I will probably only be able to contribute $100-$200 each time.

My short-term plan is to max out my Roth for the year? I am not eligible to receive a 401K so I obviously have no match to take advantage of.

If you contribute $200...put $80/$60/$60 into each fund, if allowed. Once or twice a year you can rebalance your entire portfolio to bring it back into the 40/30/30 balance, if you prefer, but no more frequently than than simply because of market fluctuation.

Great plan on maxing out your Roth IRA! I wish I was doing that at your age.

[Slug]

And set the dividends to reinvest on those funds if you haven't already.

[Helterskelter]

Yes, I set all shares for reinvesting capital gains and dividends.

Thanks

[jIM_Ohio]

Jim_Ohio and Creditcardfree you both helped me realize what I was beginning to do. Now that I have what appears to be exposure to the broad market I will look at asset allocation.

• Large Cap SWPPX 33.4%
• Small Cap SWSSX 26.3%
• International Equity SWISX 23.6%

From this point forward I should purchase to keep my asset allocation at 40/30/30? Secondly I would like to purchase shares on the 15th and 30th of every month. I will probably only be able to contribute $100-$200 each time.

My short-term plan is to max out my Roth for the year? I am not eligible to receive a 401K so I obviously have no match to take advantage of.

Thanks

LOL I pulled 40-30-30 out of my rear when posting... make sure that makes sense (for 3 funds, there are only so many ways to slice and dice, 40-30-30 looked about as middle of the road with those 3 fund choices.

If you are charged a transaction fee, buy 4 times per year, leaving money in a money market before making investment.

If you have no transaction fees, I would do 40-30-30 every month. Because you have such a small amount invested (the $4800 you contribute each year is probably higher than the gains of the whole portfolio each year) just stay the course and add 40-30-30. I would not rebalance by selling for next 3-4 years... if large caps shoot up, just change new money going in away from large caps (like 10-45-45) until you actually have assets at 40-30-30. This will teach you patience when investing (it is a learned trait- I speak from experience).

[Hector]

A lot of people are talking about diversification. I dont think diversification helps when we are talking about diversifying everything into stock and bond. At 3k, I would not buy more than two securities. If OP is interested in trading, then she can follow same stock/mutual fund and try to do buying/selling.

[buildmybudget]

I recommend you focus not on market timing, but on how you can carve out some sustainable amount you can invest each month. You'll need way more than $1k to retire, so focus on maximizing the amount you can invest each month and put it in Index funds until you are ready for more advanced investing.