Where to begin when establishing a retirement portfolio?

[mrpaseo]

Again... I am re-approaching this topic as I have yet to affirm a proper Retirement portfolio.

I am interested in learning how to build the portfolio, chose the funds and know what funds I need to chose. Every time I do a little research I keep being pushed in different directions trying to figure out at each step what I am trying to do... It is frustrating to say the least.

Where does one begin when choosing which funds? How many funds? Types of funds?

Anyone?

[Petunia 100]

Again... I am re-approaching this topic as I have yet to affirm a proper Retirement portfolio.

I am interested in learning how to build the portfolio, chose the funds and know what funds I need to chose. Every time I do a little research I keep being pushed in different directions trying to figure out at each step what I am trying to do... It is frustrating to say the least.

Where does one begin when choosing which funds? How many funds? Types of funds?

Anyone?

The big decision is stocks/bonds/cash. This decision impacts your returns much more than which stock fund, which bond fund, etc. So make a reasonable decision based on your age, risk tolerance, and need to take risk.

Always choose low-cost funds whenever possible. Costs are a much bigger predictor of future returns than are past returns. Costs are your enemy as they compound against you year after year.

I like to keep my investments as simple as possible. Complicated does not equal better.

Opt for index funds whenever possible. Over time, index funds outperform the majority of managed funds. An index fund is guaranteed to give you market returns less expenses. There are few guarantees in investing, but this is one of them.

A single well-chosen fund is all you need IF that fund is well diversified and is low-cost. Vanguard's Target Retirement and LifeStrategy funds come to mind.

If you don't want to go that route, you can still build an excellent portfolio with just a few funds. Here is what I do:

Traditional IRA:
35% VG Total Stock Market Index ETF
10% VG Small Value Index ETF
25% VG Total International ETF
20% VG Total Bond Market ETF
10% iShares TIPS ETF

Roth IRA:
100% VG Target Retirement 2025 Fund

Employer Plan:
100% VG Target Retirement 2030 Fund

[mrpaseo]

The big decision is stocks/bonds/cash. This decision impacts your returns much more than which stock fund, which bond fund, etc. So make a reasonable decision based on your age, risk tolerance, and need to take risk.

Age 39: Guidance I received from a CPA (On the fly).
Domestic Equity: 40%
Foreign Equity: 30%
Hard Assets: 20%
Bonds: 10%

Always choose low-cost funds whenever possible. Costs are a much bigger predictor of future returns than are past returns. Costs are your enemy as they compound against you year after year.

I like to keep my investments as simple as possible. Complicated does not equal better.

Opt for index funds whenever possible. Over time, index funds outperform the majority of managed funds. An index fund is guaranteed to give you market returns less expenses. There are few guarantees in investing, but this is one of them.

A single well-chosen fund is all you need IF that fund is well diversified and is low-cost. Vanguard's Target Retirement and LifeStrategy funds come to mind.

Ironically, with the little bit of research and advice that I have received over the years I am invested in:

Vanguard 500 Index Fund
Vanguard Intermediate-Term Bond Index fund

Janus Venture Fund
Janus Growth Allocation Fund

Fidelity International Discovery Fund

So as you can see, I have index and allocation funds. Is this enough or should I diversify more? My percentages are off so I could balance them to my goals and stick with what I have.

If you don't want to go that route, you can still build an excellent portfolio with just a few funds. Here is what I do:

Traditional IRA:
35% VG Total Stock Market Index ETF
10% VG Small Value Index ETF
25% VG Total International ETF
20% VG Total Bond Market ETF
10% iShares TIPS ETF

Roth IRA:
100% VG Target Retirement 2025 Fund

Employer Plan:
100% VG Target Retirement 2030 Fund

1. What is VG? Value Growth?

2. What is iShares? Is that individual Stocks? (Not that I am going to go that route)

[disneysteve]

Age 39: Guidance I received from a CPA (On the fly).
Domestic Equity: 40%
Foreign Equity: 30%
Hard Assets: 20%
Bonds: 10%

If by "hard assets" he means precious metals I'd find a new CPA. Well, actually I wouldn't if he's a good CPA but I'd make a mental note not to ask him for investment advice anymore.

1. What is VG? Value Growth?

2. What is iShares? Is that individual Stocks? (Not that I am going to go that route)

VG is Vanguard

iShares is a company name also (ishares.com). All of the funds in that IRA are ETFs, exchange traded funds, not mutual funds. The two have a lot of similarities but also some significant differences which we can discuss if you aren't familiar with them.

[mrpaseo]

If by "hard assets" he means precious metals I'd find a new CPA. Well, actually I wouldn't if he's a good CPA but I'd make a mental note not to ask him for investment advice anymore.

I met this guy by happenstance via a friend. He wasn't exactly giving me advice rather than just answering a few questions off the top of his head.

His examples of hard assets were:
*Natural Resources
*Gold
*Oil
*Lumber
*Real Estate

It just so happens that I do own my house and a few pieces of Gold, Platinum and Silver but I do not plan on using these in my retirement portfolio since I do not intend to liquidate my house.

VG is Vanguard

iShares is a company name also (ishares.com). All of the funds in that IRA are ETFs, exchange traded funds, not mutual funds. The two have a lot of similarities but also some significant differences which we can discuss if you aren't familiar with them.

I do not know the difference in ETFs an MFs... Though I just googled it and have somewhat of an understanding of it.

What is your take on iShares?

[Petunia 100]

Ironically, with the little bit of research and advice that I have received over the years I am invested in:

Vanguard 500 Index Fund
Vanguard Intermediate-Term Bond Index fund

Janus Venture Fund
Janus Growth Allocation Fund

Fidelity International Discovery Fund

So as you can see, I have index and allocation funds. Is this enough or should I diversify more? My percentages are off so I could balance them to my goals and stick with what I have.

The Vanguard funds are both excellent choices for US large cap and US bonds.

The Fidelity fund is classified as a foreign large blend, which is a what you want for a core international holding. Morningstar says it is 75% large 25% mid/small, and has 9% in emerging markets. That is the good news. It has an expense ratio of .92, which is on the high side. Perhaps this is an employer plan and there aren't any less expensive choices?

Janus Venture is classified as US small growth. It has an expense ratio of 1.03. Again, a bit high.

Janus Growth Allocation is a fund of funds. I assume it is a "go anywhere" fund? It has an expense ratio of 1.12%.

Are you familiar with Morningstar's x-ray tool? I suggest you plug in your portfolio and look at the results. Some of Morningstar's tools require a premium membership, but T. Rowe Price offers them free of charge on their website.

If it were me, I would ditch the Growth Allocation fund. It doesn't add anything new, it holds mainly US large, foreign large, and US bonds. You already have those. It is also your most expensive fund.

[JoeP]

I had done our finances for years, and we did "ok" by most measures, but did not have adequate diversity to weather the dips. My wife and I talked about it, and we ended up getting a financial adviser through a locally owned firm that has a long and successful track record. We're very happy, and have been seeing very good gains since we started using them 4 years ago.

Not saying this is the right solution for you, but the peace of mind has been well worth it for us.

[scubatim84]

I would recommend buying some investing books, honestly, before you started to play with a portfolio.

Recommended readings are as follows:

The Intelligent Asset Allocator by William Bernstein
The Intelligent Investor by Benjamin Graham
The Little Book of Common Sense Investing by John Bogle