First timer... Very unsure of what I am doing...

[vasaq]

Hello Everyone,

I am very new to investing and I am embarrassed by my lack of knowledge. The information out there is overwhelming. I am turning to you folks to help me out. I hope you will not judge my ignorance

Some background about me - I am a 33 year old female, married with one child (4 years old). My husband and I are in academia, so our jobs are relatively stable. We are debt free and the next biggest expense would be for a house (within the next 3 or 4 years).
I contribute to my 401K plan matched by my employer.
Most of my savings are in mutual funds (managed by Vanguard, TIAA CREF and Metlife). I plan to move everything to Vanguard very soon. Here is my VG portfolio and I was wondering if you folks would give me your opinion on the spread. Right now, the funds are almost equally distributed between the first 5 and there is about 3% in the last.

1) Vanguard Emerging Markets Stock Index Fund Admiral Shares
2) Vanguard REIT Index Fund Admiral Shares
3) Vanguard Small-Cap Growth Index Fund Admiral
4) Vanguard Total Stock Market Index Fund Admiral Shares
5) Vanguard U.S. Growth Fund Investor Shares
6) VANGUARD HEALTH CARE ETF

Please let me know what you think. Is this portfolio appropriate? If I move funds from TIAA-CREF and Metlife, would you recommend spreading it among these?

Thanks in advance...

Cheers
Vasaq

[Petunia 100]

Don't be embarrassed. No one is born knowing this stuff, we all start out in the same place and have to learn.

You have already figured out that investment costs matter and have opted for quality, low-cost index funds. Good job.

Your portfolio is too aggressive for my tastes, but that doesn't mean it isn't right for you. Do you and your husband have pensions? If you both do, then a reasonable case can be made for investing aggressively.

[humandraydel]

What are your fund options - any Vanguard fund? Otherwise, please post all your options.

My recommendation for a 33 year old (I'm 32) would be:

15-25% Total Bond Market Index
20-25% International Stock Index
35-45% Total US Stock Market Index
15-20% Small Cap Index
5% REIT Index (if you want - I don't have any - the Total Market fund already has a small amount of REIT)

[disneysteve]

1) Vanguard Emerging Markets Stock Index Fund Admiral Shares
2) Vanguard REIT Index Fund Admiral Shares
3) Vanguard Small-Cap Growth Index Fund Admiral
4) Vanguard Total Stock Market Index Fund Admiral Shares
5) Vanguard U.S. Growth Fund Investor Shares
6) VANGUARD HEALTH CARE ETF

Funds 3, 4, and 5 probably all own the same stocks so you aren't getting diversification, just duplication.

Fund 1 isn't a bad choice but I'd prefer a broader International index like their Total International Stock Index.

Nothing wrong with having some REIT exposure if you'd like but it shouldn't be more than 5-10% of your portfolio, not nearly 20% like it is now.

The Health Care fund is a good one. It's actually one of my largest holdings (the fund, not the ETF) and it has a great track record. But again, keep it to a small portion of your portfolio as it is currently.

[feh]

I would echo what humandraydel and Steve say above; I like humandraydel's suggested portfolio, although I'd use a small-value fund instead (like VBR) of just small cap.

20% in EM and 20% in REITs is pretty dicey, and you should own bonds.

[vasaq]

Don't be embarrassed. No one is born knowing this stuff, we all start out in the same place and have to learn.

You have already figured out that investment costs matter and have opted for quality, low-cost index funds. Good job.

Your portfolio is too aggressive for my tastes, but that doesn't mean it isn't right for you. Do you and your husband have pensions? If you both do, then a reasonable case can be made for investing aggressively.

Thanks for your feedback. I understand what you are saying about the portfolio being aggressive. I will have to tone it down soon. We do not have pensions but a retirement plan (we invest with TIAA-CREF). The company was recommended by the HR folks.

[vasaq]

What are your fund options - any Vanguard fund? Otherwise, please post all your options.

My recommendation for a 33 year old (I'm 32) would be:

15-25% Total Bond Market Index
20-25% International Stock Index
35-45% Total US Stock Market Index
15-20% Small Cap Index
5% REIT Index (if you want - I don't have any - the Total Market fund already has a small amount of REIT)

Thanks for your feedback, Humandraydel. I do not understand what you mean by "What are your fund options - any Vanguard fund?" All of the ones I listed are VG funds.
I will take a look at your recommendation and revisit my portfolio.
Another question - Is it okay to pick 5 or 6 funds and invest most of my money there? Is that a good enough diversification. More specifically - Once I find my optimum funds in VG, should I close out the metlife and tiaa-cref mutual funds? Am I making sense?

Thanks !

[vasaq]

Funds 3, 4, and 5 probably all own the same stocks so you aren't getting diversification, just duplication.

Fund 1 isn't a bad choice but I'd prefer a broader International index like their Total International Stock Index.

Nothing wrong with having some REIT exposure if you'd like but it shouldn't be more than 5-10% of your portfolio, not nearly 20% like it is now.

The Health Care fund is a good one. It's actually one of my largest holdings (the fund, not the ETF) and it has a great track record. But again, keep it to a small portion of your portfolio as it is currently.

Thank you ! i will revisit my portfolio within the next few days and get all of your blessings !

[Petunia 100]

Thanks for your feedback, Humandraydel. I do not understand what you mean by "What are your fund options - any Vanguard fund?" All of the ones I listed are VG funds.
I will take a look at your recommendation and revisit my portfolio.
Another question - Is it okay to pick 5 or 6 funds and invest most of my money there? Is that a good enough diversification. More specifically - Once I find my optimum funds in VG, should I close out the metlife and tiaa-cref mutual funds? Am I making sense?

Thanks !

Not trying to speak for Humanraydel, but here is some general info.

If you own a total market fund, then you already own every stock in US Growth Fund. So by adding the US Growth Fund, you do not increase diversification. Instead, you are over-weighting large growth stocks. You are giving them greater weight in your portfolio than they represent in the market. This is not necessarily bad, but it is risky, and you should understand this is what you are doing. I can say the same for your small cap fund and your healthcare fund.

Reits are included in your total market fund, but there is a good deal of debate as to whether the market adequately represents them, as most reits are privately owned. I personally view holding a reit fund as additional diversification, but there are those who do not.

The emerging markets fund unquestionably adds diversification, because it owns stocks not already included in your total market fund.

What I don't see represented in your portfolio at all are foreign developed market stocks and bonds of any kind. These are generally considered major asset classes which should be represented in a well-diversified portfolio.

[humandraydel]

Not trying to speak for Humanraydel, but here is some general info.

If you own a total market fund, then you already own every stock in US Growth Fund. So by adding the US Growth Fund, you do not increase diversification. Instead, you are over-weighting large growth stocks. You are giving them greater weight in your portfolio than they represent in the market. This is not necessarily bad, but it is risky, and you should understand this is what you are doing. I can say the same for your small cap fund and your healthcare fund.

This answers the question of diversification.

The other question was what I mean by "What are your options?" - some 401k plans only have a limited number of funds to choose from - usually just 1 or 2 per asset class. How is your 401k set up - can you choose from ANY of Vanguards funds?