Need advice on how to start investing when scared to death of risk

[disneysteve]

The minimums on ETFs is "zero" at etrade, and all the Vanguard ETFs are there without a transaction fee. Lower minimums to start.

I have to check but with a Vanguard brokerage account there may not be any minimum either. I’m honestly not sure since we have a large portfolio there.

[Jluke]

I believe the minimum is the cost of one share of the ETF.

right now VTI is just under $170 per share.

assumption: investing with a firm where partial shares are not a choice.


VTI is Total us stock index (VTSAX is mutual fund equivalent)

[Like2Plan]

I think I am pretty risk adverse, so I will tell you what I did (eventually).

First, it is important to understand when you need the money. Everyone talks about their number. Let's say it is a million dollars. Even if you are retiring today, you are not going to spend your million dollars in 1 year. It will be spread out over your retirement of 20, 30 or 40 years. Some would be needed sooner than later. Money you need later doesn't necessarily have to be in bonds.

There are a couple of important risks to consider. One is sequence of returns. Folks who retired say in 2008 ish would have experienced quite a drop at that time. They would have had to take out a higher percentage of their portfolio (until the market recovered) to cover their retirement expenses.

On the other end of the spectrum is inflation. It sneaks up on you. You might not notice right away, but over time it erodes your buying power.

I have seen a figure of at least 30% equities in the monte carlo simulations--for a good chance at a portfolio lasting through retirement. Otherwise, the chance of success goes way down over time due to the inflation factor.

https://retirementplans.vanguard.com...estEggCalc.jsf

https://www.bogleheads.org/forum/viewtopic.php?t=272332

https://www.bogleheads.org/wiki/Reti...s_and_spending

Basically my plan is to pull my expenses from a CD bond ladder (keeping 2 years of expenses in it). If the market tanks it will not impact our ability to cover our expenses in the near term. In the long term it would give our other retirement savings a chance to recover before we needed to spend it. It probably all comes out the same in the wash, but it gives me a little bit of comfort/confidence in my plan. We currently have about 55% equities and 45% bond allocation. I may go to 50-50.

In addition to our bond ladder, our investments are mostly broad market index funds with low expenses. We have the total US stock market, bond fund and international. I've written down my plan so that it is almost mechanical to buy whatever category in the allocation that we are low on (percentage wise).

[Like2Plan]

Here is another resource that might be helpful. It is a template for How to Create a Retirement Policy Statement

https://www.morningstar.com/articles/808697/how-to-create-a-retirement-policy-statement

It is dated from 2017 so some of the info on RMDs is dated, but the concepts are the same.

[Like2Plan]

Xmascarolmarie,
Any updates? Did you implement a plan that you can live with? (This past week would have been a pretty good test to see if you have the correct allocation for your comfort level.)

[Xmascarolmarie]

Xmascarolmarie,
Any updates? Did you implement a plan that you can live with? (This past week would have been a pretty good test to see if you have the correct allocation for your comfort level.)

I did get started. I moved most into the high yield savings account. I also, opened a Roth IRA at Vanguard in the Wellington fund. The $7000 IRA is already down $160 so this is a good test for me! I am going back and forth between being anxious about the quick loss and considering dumping more in while the market is down.
Thank you for checking on me!

[kork13]

I did get started. I moved most into the high yield savings account. I also, opened a Roth IRA at Vanguard in the Wellington fund. The $7000 IRA is already down $160 so this is a good test for me! I am going back and forth between being anxious about the quick loss and considering dumping more in while the market is down.
Thank you for checking on me!

For what it's worth, investing as the market is down actually is of benefit for you -- you're effectively buying shares on sale, and when they come back up, you get to enjoy the benefit of extra growth. BUT ...... it does take some bravery to do that, especially for a relatively novice investor such as yourself.

All of that said...Congrats on getting started!! That's a big, excellent first step! Getting started is always the hardest. Keep at it, stick to it, and you'll do great!

[Xmascarolmarie]

I appreciate everyone’s help! I need you again!
So, I ended up investing the $7000 IRA. Then when it started losing I dumped $44,000 more into managed funds. Well, it immediately lost several thousand dollars.
Today it is back up to my initial investment.
My husband is planning on retiring in 3 years. Last night our life circumstances changed a bit. Besides being in this health crisis in Washington state, my husband suffered a mild heart attack. We will know more after his angiogram, but I am panicking about our finances. Wonderingly if I should jump ship at Vanguard or try to ride it out.
Thanks for any advice at this stressful time!
Carol

[rennigade]

Do not risk more than you're willing to lose.

Nothing wrong with jumping ship, or staying for the ride. Only you know what your risk tolerance is. Its easy for us to tell you what to do with your money. Good luck to you.

[Like2Plan]

Carol,
I am so sorry your husband suffered a heart attack. I wish him a speedy recovery. I think we are in for a lot of volatility. No one can tell exactly what is going to happen next with the market--miracle cure and all of the sudden the market goes wild. Or, (more likely) it could take a while for this to resolve which would might take a while for things to normalize. Has your time horizon for when you are going to start needing your funds changed? If you need to use the money sooner, you might not have the leeway to stay in the market for the long haul. The bottom line is you need to make a decision that matches your comfort level.

[cypher1]

With you being closer to retirement, serious health issues with family, and very volatile market (gonna be awhile), its pretty understandable wanting to get out and cut your losses. I don't think anyone would argue with going that route.

As Like2Plan pointed, with your money tied to the market, is that going to be needed in the next couple of years? Or do you have an adequate EF in cash for the next 6-12 months? Depending on your answers and comfort level, it may not be a bad idea to slowly sell some funds throughout the coming months, instead of all at once for potentially larger capital losses. That way if you do change your mind, you've still got funds still invested. Just a suggestion...

[LivingAlmostLarge]

good luck and speedy recovery for your husband.