Comments on my prospective portfolio?

[She]

Nevermind, I was just informed that the expense ratio does include the trading expenses from the portfolio turnover.

[Jeff W]

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Are you saying that actively managed funds generally don't do as well as index funds because of the expense ratios, or are there other reasons as well?

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Yes. Costs are the second biggest determinant of portfolio returns after the proportions of equities vs. bonds.

Also, with the small starting capital you're investing, I think you should worry more about implementing a long term diversification plan and less about being diversified at the moment.

[She]

[ QUOTE ]
Also, with the small starting capital you're investing, I think you should worry more about implementing a long term diversification plan and less about being diversified at the moment.

[/ QUOTE ]

I'm not sure exactly what you mean. How would I go about accomplishing this?

[Jeff W]

1. Your investment capital is low($7500 right?) compared to your future earnings, so any losses you take because of inadequate diversification are likely to be small in terms of your investing lifetime.

2. Your goal should be to have a diversified AA EVENTUALLY. So buy one asset this year, one next year, etc into the future. For a tax deferred account, the best two funds to start with are probably the Fidelity Total Market and Total International Indexes. You'll have to do some homework to see if the minimum ($10,000) applies for Roth IRAs. Otherwise, Vanguard funds are fine(but higher ER).

[She]

[ QUOTE ]
1. Your investment capital is low($7500 right?) compared to your future earnings, so any losses you take because of inadequate diversification are likely to be small in terms of your investing lifetime.

[/ QUOTE ]

I was thinking that this was the most important time because the interest would be compounding over the longest period of time, but perhaps you're right. Current capital is $3k, this was my tenative year-end goal. I'll look into the funds you suggested, thank you. Also, what is an AA and ER?

[BeL0wMe]

She, how did you pick these funds, because besides UMBIX, which David Williams is leaving soon btw, they all are pretty terrible.

[img]/images/graemlins/heart.gif[/img] BeL0wMe

[She]

lol.. Thank you for the honesty. I appreciate it. AGTHX was a mistake. I picked the other funds mostly using the Schwab comparison chart (selecting from their no-load, no fee funds) and looking for the lowest expense ratio, portfolio turnover and standard deviation, and the highest sharpe ratio. I also tried to find funds w/ the lowest risk / highest reward ratings, and a smaller % in the top 10 holdings.

What would you recommend looking at?

[IdealFugacity]

Index Funds, and only index funds, are all you really need. Especially with the amount of money you're talking. Figure out what kind of domestic/international split you want, (then within domestic at least, small cap / large cap allocation, value/blend splits for each will come later as more money pours in)

Then find an index fund and send the appropriate money into each. Vanguard example because I know the tickers for them, you'd send

20% of your cash to VGTSX (total internat'l index),

50% to VTSMX or VFINX (total stock market index or large blend index, respectively; each are technically listed as "large blend" due to the market weighting, but VFINX does not contain much if any mid/small whereas VTSMX, as the name implies, owns every stock in the market),

and 30% to NAESX (small cap index)


Not saying that is perfect, but you certainly wouldn't be going anywhere near wrong doing that. (Based on my 2p2 and google, books from library opinion)

[IdealFugacity]

Keep in mind you might have to stick with only 2 of the above, or 2 of any funds for that matter, for now, due to minimum purchases. But that's ok, you've got 40 years to diversify.