Index Fund Portfolio

[RunningSixes]

Hello everyone,

Bascially I am interested in a very low mantainance portfolio that I can just put money into and not really worry about it. I have read research that claimed that the majority of mutual funds dont beat the index long term so I figured I would just invest in a couple index funds. For US stocks I use the Vanguard 500 fund.

I have a couple questions:

1) What are some good international funds to invest in?
2) What percentage of my investments should be in US stocks/international stocks/bonds?

I am 22 years old.

Thanks

[mwgr5]

I am also young (18) and recently researched similar questions. In my opinion, some mutual funds can beat the market over a number of years. However, I doubt that any fund could outperform an index over 40+ years which is the amount of time until we would retire.

If you want a very low mantainance portfolio I would suggest two options. One you could purchase a moderate allocation fund that holds a series of funds, domestic and international, aswell as bonds in an apporporiate asset allocation. This asset allocation is adjusted by the managers. My favorite fund would be theVanguard LifeStrategy Growth Fund. This fund is 20 percent bonds and about 20 percent foreign. You can find more information at morningstar.com.

The second option for a low mantainance portfolio is to create portfolio composed of index funds. I favor Vanguard funds because of the low expense ratio and fund company quality. Unlike other companies, Vanguard is a non-for profit and not public. Because of this, there is not a conflict of interest between making money for share holders and helping clients. This index fund portolio could be composed simply of the Vanguard Total Stock Market Index and the Vanguard Total Indernational Stock Market Index.

I allocate 30% to international funds. This number may be higher than most, but I feel that Domestic returns will be less than in the past and that International holdings will have higher returns.

[MadTiger]

Exchange-Traded Funds (EFTs)

[wiper]

do a search on the franklin templeton money account, which is just basically a savings account that traditionally earns 4% or so, and the f.t. income fund, which you buy shares of, and pays you dividends at the end of the year...

if you roll your interest from the money fund over to the income fund, and re-invest your interest and dividends from the income fund back into itself, you're looking at a long-term gain of 10% give or take...

it'll all take care of itself...

or, if you want no risk whatsoever, find a tax-sheltered annuity. they'll automatically deduct money from your check so you don't have to worry about it...you put in 40 a check, and your taxes will go down 10 bucks, and 50 total will go in each check...

my math says that if you do this for 30 years, you'll put in 36,000 dollars, and in 30 years, it'll be worth over 150,000...

not mutual funds, but very low maintenance...i'm a teacher, and i have 100 bucks a paycheck (200/month) going into these 3 things, and while i'll never be rich, in 25 years, i'll be well off in the 6 figures...

[jively]

[ QUOTE ]
The second option for a low mantainance portfolio is to create portfolio composed of index funds. I favor Vanguard funds because of the low expense ratio and fund company quality. Unlike other companies, Vanguard is a non-for profit and not public. Because of this, there is not a conflict of interest between making money for share holders and helping clients. This index fund portolio could be composed simply of the Vanguard Total Stock Market Index and the Vanguard Total Indernational Stock Market Index.

I allocate 30% to international funds. This number may be higher than most, but I feel that Domestic returns will be less than in the past and that International holdings will have higher returns.

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I think this is great advice. Vanguard is indeed a very good mutual fund company; Total Stock Market index is more diversified (and more tax efficient) than the 500 fund, and 30% is an excellent allocation to International. If you want just 2 funds, this is a great way to do it.

-Tom

[jively]

[ QUOTE ]
do a search on the franklin templeton money account, which is just basically a savings account that traditionally earns 4% or so, and the f.t. income fund, which you buy shares of, and pays you dividends at the end of the year...

if you roll your interest from the money fund over to the income fund, and re-invest your interest and dividends from the income fund back into itself, you're looking at a long-term gain of 10% give or take...

[/ QUOTE ]
This fund is a "conservative allocation" fund, so the long term returns will probably be a little less than 10%. Someone very young can probably be more aggressive - especially if they won't panic and alter their plan in a down year.

[ QUOTE ]
or, if you want no risk whatsoever, find a tax-sheltered annuity. they'll automatically deduct money from your check so you don't have to worry about it...you put in 40 a check, and your taxes will go down 10 bucks, and 50 total will go in each check...

my math says that if you do this for 30 years, you'll put in 36,000 dollars, and in 30 years, it'll be worth over 150,000...

not mutual funds, but very low maintenance...i'm a teacher, and i have 100 bucks a paycheck (200/month) going into these 3 things, and while i'll never be rich, in 25 years, i'll be well off in the 6 figures...

[/ QUOTE ]
There are 2 different kinds of tax-sheltered annuities. The one you are talking about is a 403(b), which is like a 401(k) for public employees like teachers, police officers, and so on. If the OP is not a public employee, he will not be eligible for a 403(b).

He will not get a tax deduction putting money into an annuity. The normal type of annuity is tax-deferred, but this generally is not used for people unless they are in a very high tax bracket, and are maxing out all available retirement plans. Even then, since long-term capital gains and qualified dividends are taxed at a lower rate than ordinary income, I would not recommend annuities for long-term investors.

Either way, with either of these types of annuities, they still have to be invested in something. If they are fixed annuities, they will be "guaranteed" - no losses, but the returns will be low. If they are variable annuities, they are basically invested in stock or bond mutual funds, and they could have losses in any year just like regular mutual funds. Thus the "tax-sheltered annuity" is not risk-free.

-Tom

[DcifrThs]

[ QUOTE ]

not mutual funds, but very low maintenance...i'm a teacher, and i have 100 bucks a paycheck (200/month) going into these 3 things, and while i'll never be rich, in 25 years, i'll be well off in the 6 figures...

[/ QUOTE ]

if you are going to invest for 25 years, why are you not willing to take on exceedingly small amounts of risk for much larger magnitude of returns. simply investing in an s&p or dow index or a well diversified stock portfolio for 25 years would net you an extra 100k (assuming 8% returns average over 25 years). this estimate is a conservative one based on long term historical data.

Barron

[Indiana]

I usually bet on individual stocks outside of my 401k. With my personal savings I am looking to take my cash and put it into something that will yield 6% or so with small risk. Anybody got any ideas? munibond fund? dunno.

Indy