I am a HUGE fan of JL Collins, your advice sounded so similar so I started watching your videos. I see why now. :) Thank you for sharing that you read his book and I look forward to more of your content.
My current 3.25% $250k 4 year bank CD comes due at the end of this month. I'm renewing it at the same bank for 59 mos. at 4.85%. That's 4.85% with no market risk FDIC monthly income of $1k per month I'll add to cover my living expenses in early retirement. This represents 15% my conservative\bond\cash portion of my portfolio. I'll take a FDIC bank CD's near 5% any day of the week over a bond fund.
@eby6114 this question always bewilders me. That amount makes up part of my 40% fixed investments. The other 60% of my portfolio is in stock mutual funds. I'm 59 and sure hope others understand the extremely important aspect of diversification, especially past 40.
Excellent content, early 60s 1-2 years from retirement. 60% VTSAX, 20% VBTLX, 20% FMFXX money market fund. I know that is a lot for MMF but the bond funds did not provide the stability recently that I'm looking for.
Tae, thanks so much for this. I decided to come back and watch this, and I had forgotten that you had included "phase of life" investment mix recommendations. 75/25 looks right for our situation now. Thanks, again! NB
VBTLX has negative returns over the 5 years. How exactly does VBTLX work? Are you supposed to just get dividends, or do you eventually sell the shares?
You might consider a high yield online savings account for the cash portion of your portfolio. Ally Bank just raised the interest they are paying on savings to 3.25%. You won't get rich, but every little bit helps.
Thank you for the video. I started investing back in the 1970s. Two months ago I liquidated my ½ million-dollar stock/bond portfolio to buy my second dream home. I must now start a new investment/savings program. Your two-fund portfolio is a good way to start.
Excellent this is the way to go, start young and buy these funds monthly. It took me 40 years to figure this out after investing in all kinds of assets and stocks. This way you don't have to think you just dollar cost average in to the funds and forget about it. Thanks great video I wish knew this when I was 20.
Great video. The biggest mystery to me is still international. You make a sound explanation on VTSAX giving International exposure indirectly, yet almost all financial books have a different take on this and strongly advise investors to include international funds. Which is it?
Direct international exposure would obviously be stronger than indirect exposure. The problem is the s&p 500 has outperformed international funds but a substantial amount for 30 some years. Some people think international is somewhat "due" to outperform domestic stocks, and the us market if inflated. While others, like myself, just don't believe that will be the case for any significant period of time. International funds just seem to always underperform. There seems to be no use for them.
IMO.... you could pick anything that's broad and stick with it....even SCV. You'll get times where one is doing better than the other but will do ok. Gotta watch for Japan like bubbles though but hard to do on large market like US and when it does bubble it grows out of it after several years.
SCHD if you invest in that your entire working life, by the time you are ready to retire you should be able to live in the dividends, assuming you are putting 60% of your earnings into investments like you should.
Great insight Tae. Can you create a video of the best value Funds in light of the current banking crisis? Would you use a position in a precious metal fund as a hedge?
Hi Tae, Question. What is the equivalent of VTSAX and VBLTX in TIAA? That is the plan my employer works with. I do have a separate Roth IRA that has funds invested in VTSAX and VBLTX but would like to replicate the funds in TIAA.
I’m 23 and I work at vanguard and this is pretty much how our 401k works, we offer the target retirement plan in 5 years intervals (2025,2030 and so on) and it transitions from more of a stock at a younger age to more bonds as we get closer to retirement. The balance for me being 23( 90 stock & 10 bonds). That will change as I age
Great video, Tae. Ever since learning about John Bogle and the loyal boglehead family, I've been a huge fan of Vanguard's index funds. All my retirement savings (IRA and 401K) are in Vanguard index funds. Simply the best!
@Rachel Dufresne Coincidentally my 403b is invested in what the OP suggested...VTSAX (80%), VBTLX (10%) except I wanted a bit more international exposure so I added VTIAX (10%) = total portfolio. Depends on what financial investment companies your school district selected and whether those vendors sold you mutual funds or annuities. Unfortunately, teachers have been exploited for years! State and local unions have allowed these well known financial companies, who are not fiduciaries (i.e. supposed to act in our best interest), to come into our schools and sell us products to fatten their wallets not ours. Most teachers don't realize this. I was lucky enough to have a father, an average blue collar worker, who was interested in finances and building wealth, to educate me. I started saving for my own retirement and opened a ROTH IRA that I fully funded yearly. The measly limitations the government allowed was better than investing in high cost mutual funds or annuities. So for years I maxed out a ROTH IRA and refrained from investing in a 403b to avoid exploitation until my school district selected a vendor who offered low cost Vanguard mutual funds (hence portfolio above). This, along with my pension, SS, Roth IRA, and stock portfolio I started decades ago thanks to my father, I'm confident about retirement when the time comes. My suggestion...carefully look at what you're invested in before leaving as many of these vultures sold products with astronomical closed end fees. Another suggestion..look up 403b wise. It's a nonprofit organization, helping K-12 teachers since 2000. Hope this helps!
Hello. What do you think about interest rates going up in the near and distant future? How will this impact the stock market? Are we heading toward a crash any time soon? Thank you.
He would tell you that no one can predict a stock market crash. In act he has told us this in prior videos. Don't try to time the market, it is a waste of time.
Not sure I follow the Netflix example for the index fund? it wasn't a top 500 company for the 20 yrs you mention it had 23,000% growth? thus it wasn't in in the index fund until it already soared?
Really enjoyed your vlog..I have an old 401k from work…thinkin about opening an IRA in my Schwab acct…and using you Schwab recommendations… I’m 74 and I only take out RMD’s…..$607,000
Bond funds were never meant for zero interest rates. Bonds that were bought before 2008, had ever increasing market values as interest rates went down to zero. People that bought bond funds before 2008 were getting interest plus capital gains, but had to sell in 2021 to lock in gains. People that were buying bond funds in recent years were buying funds that contained bonds with inflated market values, much higher than bond payoff value. They were buying future loss. Most people had no idea of the market values of bonds in their funds. You have to follow the 10yr interest rate to know when to buy & sell bond funds. You cannot blindly buy bond funds and you cannot count on them for security.
Bond funds, in my opinion, is "old school" Instead of investing in a product that continues to slowly LOSE money, put that same money in CD's at different institutions to take advantage of FDIC insurance. Guaranteed to make at least SOMETHING and not lose anything. Again just my opinion but bond funds are NOT what they used to be.
@@dougturk7116 Maybe you are looking at CD's wrong. A person needs multiple streams of income and CD, Bonds, Closed End Funds, Dividend Stocks, all do that. We all need income and income investments are the only things I invest in. CD's are just a part of the picture. The key is having enough diversified income to cover your living expenses plus extra income to reinvest for the future. As long as my investments cover my expenses and still growing, I am OK with that.
Hi Tae, Thank you for putting this video together! I prefer to keep it simple as well, and VTSAX is my main holding, since I’m still in the wealth accumulation phase. I would be 100% VTSAX, but the 401(k) doesn’t have that as an option, or a total stock market fund in general. For that account, I’m 100% in a mutual fund that tracks the S&P 500, and I believe the expense ratio is 0.02%.
I've always avoided bonds because they are somewhat complicated to trade. With interest rates going up a little more before we expect the Fed to lower rates would it make sense to invest in bond funds now by dollar cost averaging for when they start to go down. Once the Fed lowers rates would the value of the bond fund increase because they hold bonds at a higher rate than currently available?
The simplest portfolio is a target date fund. Your portfolio is highly concentrated in the US market. According to Vanguard, the US market is forecasted to return only 4.7%-6.7%, while non-US markets are expected to return 7%-9%. Every investor's equity should have around 40% exposure to non-US markets.
I prefer a Global Balanced Fund of Funds that does NOT adjust its allocation over time to get more conservative. That is the simplest and most perfect portfolio for me and my tolerance.
I have had a Vanguard 500 Index and Vanguard Primecap Funds for many years. The problem I have now is how to withdraw from an index fund in the most tax efficient way. My financial advisor and my accountant can't give me an answer. Vanguard has no idea because their records don't go back far enough. But fund shares are taxed differently depending on how long they are/were held. I don't want to trigger an audit because I just closed my eyes and hit the withdraw button. Withdrawing from mature index funds might be a good subject for a new video. Thanks for this video it was very well done.
@@ThhVkk The real benefit to bonds, and treasuries in particular, is the negative correlation to the returns of stocks. So when one is up, the other is down, making for a somewhat smoother ride. Since 2008 rates have been extremally low, making bonds look like horrible options. But up until 2008, treasuries were paying 5-6% for 10 yrs and were viable options to counter weight your stock portfolio. If you are young bonds probably shouldn't be in your portfolio. If you are near retirement or in retirement they may serve a more limited purpose than they once did. Also, rates are up right now so bonds can be more attractive, but most likely that will be gone in a couple years and we will be back to low rates.
This is especially true for people in mid 30s such as myself, the best portfolio is the simplest one you can have, so many people think it's so simple that they are having doubts if that simple portfolio is enough for retirement, but let me tell you from my experience in the market for 15 years. I have tried all sorts of investment / trading, from options, swing, day trade, you name it I quit all those in 2016 and i went full 3 fund portfolio and have been investing in 3 fund portfolio ever since, and yes, though returns may not be crazy, but i have been the happiest ever since i did that, i don't stress, i don't get overworked! i enjoy my life more with such simple portfolio and knowing that i own the total stock market, i am just at peace
I am unaccustomed to your accent (and therefore miss an occasional word). Voila! I turned on captions and everything is perfectly transcribed. Good video. Thank you.
@@franwex that’s kind of the point, why would someone want to manually change it each year? Especially if you want to help friends or family who aren’t interested in learning to manage it themselves. The video title said “world’s simplest” but I’m proposing something that seems simpler.
Fine for tax deferred accounts (401, IRA, Roth IRA, etc.). Not great for taxable ("brokerage") accounts due to potential tax surprise from distributions.
As a couple we became fully retired one year ago 2021. October 2020 my husband wanted to go to 8 years of cash, incase the world went into a repeat of the Great Depression. I was absolutely in agreement, I love the mix of cash, stocks, bonds, and CDs etc. Since going to about 1/5 of our retirement funds to cash, I would often read that cash was a mistake by the TV and internet professionals. Of course I did not agree with them, some portion of cash is King in our minds. By spring of 2021 the professionals were advocating cash for a coming recession. A little late in my mind. I just found Mr Kim, love his thought. Keep it simple and save!!! Ree
In Sept of 2015. I put 10K in each of these funds: VBTLX (bond fund), VTSAX (total market fund) and VTIAX (Total international Stock fund). Today, my VBTLX holding is worth $10,696. VTSAX is worth $23,200, and VTIAX is worth $15,000. I sure wish I had put it all in VTSAX!
I did something very similar to this, and my result is same. It even outperforms others despite the stock taking beatings over the last year. To me, you don't need to put too much on Bond and International. Just stick to US market. You'll do good.
That's entirely the wrong investing mentality. Don't chase returns - decide on what your risk tolerance is, and diversify to try and capture market risk as a whole. Why were you 33% bonds, and 50/50 US/International? Was there a good reason for that split, or did you just decide to evenly split your contributions between them because you didn't know what you wanted to do?
Great sharing...For roboadvisor managed funds (Wahed for my case), so I should set up two funds based on risk profiling - 1st for aggressive funds (equity, ETF's)and the 2nd for conservative type funds (bonds/ sukuks). As for cash, I have been investing in Malaysian government managed unit trust funds with guaranteed capital preservation and also in Employee Provident Fund (EPF) with guaranteed min 2.5% yearly dividend.
You can also put your cash in certificate deposits and treasury bills. This gives you the opportunity to get your cash to grow. Using a CD ladder, you can choose CDs that mature every 3 months.
I am pretty sure he already addressed this in this video, if not he addressed it in another video. If you are in the total stock market fund, you are plenty exposed to the international market.
Intermediate bonds are a no go for me. I'll only hold tbills, less them 3 years, at this point because we didn't really know what's going to happen with interest rates.
Could you please clarify why one would need cash? Bonds can serve the same purpose as a cushion while earning something. If you need money for emergency expenses pay them with a Credit Card, order the sale of the bonds (may take a week or two to actually get cash). Then pay back the Credit Card debt in full before the grace period lapses. Wouldn't it be better to keep your one year worth of expenses in bonds rather than in cash?
I’m wondering why you would by a total stock index fund over the S&P 500 index fund. I’ve always believed the 500 was better but I don’t know why or why not.
The Total Market fund is 80% S&P 500 and also includes a component that mimics the other 20% of the market. The returns of the two funds have historically been pretty much the same so either would work, however, the Total Market fund is more diversified.
@@ld4974 yep Bogle's little red book showed that it was a fraction of a percentage better with an S&P 500 fund over the Total Market at around 9% over 80 years, BUT he did mention in that book from 5 or so years ago that he expected Much lower returns over the 2020s, like 6%
Agree . I'm 100% in vtsax in my late 40s. I Won't add bonds until late 50s and it'll be 5 percent every 5 years and stop 15% . 85/15 will be my retirement balance
I watch my share of UA-cam videos but rarely comment. Been investing > 20 yrs. and have done well with the KISS (Keep it Simple Stupid) method. This is a fantastic video that emphasizes this point. Great job, Tae.
why just the USA i know USA has been performing really good and is about 60% of a global stock market index, USA is still one country and therefore makes it a risk to just own one country?
Big fan of your videos. What about those of us that have pensions in relation to bonds? Can pensions take the place of bonds? Those of us that have pensions should be not invest in bonds at all?
I have a modest GE pension and I treat it like Social Security and that is it doesn't impact my investment mix. My company recently moved their 401K from Merrill Lynch to Vanguard and I chose Target Date funds for it and a Roth IRA and I use my pre-existing Vanguard brokerage account for proven dividend stocks and some speculation. I wouldn't consider a pension as a substitute for the bond portion of my portfolio. Different animals entirely.
Isn’t the point of investing for long term? If you’re putting money in a CD that means you know what you’re going to use the money. It’s essentially already spent.
Shiiiiiit, when the 20s i was rich AF but really broke AF. Took a lot of saving in 30s to get back. Best pay is 40 and 50s. If you can remain employed.
So glad I found your channel . You made personal finance so simple!
I am a HUGE fan of JL Collins, your advice sounded so similar so I started watching your videos. I see why now. :) Thank you for sharing that you read his book and I look forward to more of your content.
This seems like the most straight forward honest way to approach a portfolio. I really need this simplicity. Thanks so much for sharing!
I liked your opening quote “greatest enemy of a good plan is a dream of a perfect plan” so much, I subscribed.
My current 3.25% $250k 4 year bank CD comes due at the end of this month. I'm renewing it at the same bank for 59 mos. at 4.85%. That's 4.85% with no market risk FDIC monthly income of $1k per month I'll add to cover my living expenses in early retirement. This represents 15% my conservative\bond\cash portion of my portfolio. I'll take a FDIC bank CD's near 5% any day of the week over a bond fund.
Synchrony 5.15%
Except you pay taxes on CDs.
So your going to let inflation overwhelm your safe investment
@eby6114 this question always bewilders me. That amount makes up part of my 40% fixed investments. The other 60% of my portfolio is in stock mutual funds. I'm 59 and sure hope others understand the extremely important aspect of diversification, especially past 40.
Do you have a video on the transition period? That is, is there a strategy for selling stocks to buy bonds and adjust your portfolio when it’s time?
This sounds like JL Collins - The Simple Path to Wealth
Man your videos are really the best I’ve seen !! Thank you !
Excellent content, early 60s 1-2 years from retirement. 60% VTSAX, 20% VBTLX, 20% FMFXX money market fund. I know that is a lot for MMF but the bond funds did not provide the stability recently that I'm looking for.
For your Roth buy SCHD and reinvest dividends.
Thanks for this. I’m in my 30s and I think I’m going to go 100% in VTSAX for the next decade, then reallocate when I get to my late 40s.
100%. No no no. Grab sp500 index funds in as well. Look up warren buffets outlook on this. If you want to get rich. Sp500
@@_Delta_P_ why is SPY better than VTSAX?
@@_Delta_P_ vtsax is 99% made up of the S&P 500.
@@_Delta_P_ there’s very little difference between the two but Vanguard also offers an index fund and etf that mirrors the S&P
Thanks!
Your welcome! Thank you!
How did _bonds smooth out a rough ride in stocks,_ 2022? How about speaking to how long it will take to recover from 2022 bond losses.
Thanks Tae, I’m still conflicted about purchasing bond funds. Wouldn’t you do better just buying short-term T-Bills directly from the government?
Tae, thanks so much for this. I decided to come back and watch this, and I had forgotten that you had included "phase of life" investment mix recommendations. 75/25 looks right for our situation now. Thanks, again! NB
Great video. Simple is best.
Do you like Balanced Index fund at all, if 60/40 is the right mix for an investor?
VBTLX has negative returns over the 5 years. How exactly does VBTLX work? Are you supposed to just get dividends, or do you eventually sell the shares?
Makes sense - there are two big classes -stocks, bond (of course cash reserve)...
You might consider a high yield online savings account for the cash portion of your portfolio. Ally Bank just raised the interest they are paying on savings to 3.25%. You won't get rich, but every little bit helps.
And Vanguard US Treasury MM Fund is at 3.98%. Their Federal MMF is 4.3%. Check writing is available.
How about gold ETF / precious metals or REITS? Any place for them in the portfolio? Great video by the way
Alarmingly informative. Bravo!!!
Thank you for the video.
I started investing back in the 1970s. Two months ago I liquidated my ½ million-dollar stock/bond portfolio to buy my second dream home. I must now start a new investment/savings program. Your two-fund portfolio is a good way to start.
Is VTI and VTSAX the same type of ETF? What is the difference? Asking due to my VTI holdings.
Why use mutual funds vs ETFs? Sometimes mutual funds generate capital gains in a down market due to sales of shares.
why a mutual fund instead of voo etf?
Excellent this is the way to go, start young and buy these funds monthly. It took me 40 years to figure this out after investing in all kinds of assets and stocks. This way you don't have to think you just dollar cost average in to the funds and forget about it. Thanks great video I wish knew this when I was 20.
Great video. The biggest mystery to me is still international. You make a sound explanation on VTSAX giving International exposure indirectly, yet almost all financial books have a different take on this and strongly advise investors to include international funds. Which is it?
VTIAX
VTSAX international sibling.
Remember - most of the S&P500 companies are multinational so investing in international/emerging market funds is often not an advantage. 🤔
@@MTtroutfisher406 my thoughts exactly. Yet many experts don’t fully buy into this notion.
Direct international exposure would obviously be stronger than indirect exposure.
The problem is the s&p 500 has outperformed international funds but a substantial amount for 30 some years. Some people think international is somewhat "due" to outperform domestic stocks, and the us market if inflated. While others, like myself, just don't believe that will be the case for any significant period of time. International funds just seem to always underperform. There seems to be no use for them.
IMO.... you could pick anything that's broad and stick with it....even SCV. You'll get times where one is doing better than the other but will do ok. Gotta watch for Japan like bubbles though but hard to do on large market like US and when it does bubble it grows out of it after several years.
Please, what are the equivalents on Trading212? Thanks
I have a simpler 1-fund portfolio. It's the best because I'm young, risk tolerant, and extremely lazy
Tbh a 1 fund portfolio with an s&p 500 index fund will outperform 90% of investors
All in on AMC let's go boyz
SCHD if you invest in that your entire working life, by the time you are ready to retire you should be able to live in the dividends, assuming you are putting 60% of your earnings into investments like you should.
Qqq
Covid can stop you in your tracks and make you an old man in a matter of days...never take anything for granted...
Great insight Tae. Can you create a video of the best value Funds in light of the current banking crisis? Would you use a position in a precious metal fund as a hedge?
Thanks Tae, very helpful
That video is so spot on, I just ordered the "Simple path to wealth" by JL Collins 😁
I have started with SCHD & Voo to go long run. Should i consider add SWTSX or vtsax?
Is there an ETF version to this approach vive mutual funds?
Hi Tae, Question. What is the equivalent of VTSAX and VBLTX in TIAA? That is the plan my employer works with. I do have a separate Roth IRA that has funds invested in VTSAX and VBLTX but would like to replicate the funds in TIAA.
This is great advice but what if you’re Canadian? What to do?
I’m 23 and I work at vanguard and this is pretty much how our 401k works, we offer the target retirement plan in 5 years intervals (2025,2030 and so on) and it transitions from more of a stock at a younger age to more bonds as we get closer to retirement. The balance for me being 23( 90 stock & 10 bonds). That will change as I age
What is the point of VTSAX transaction costs vs. VTI???
Great video, Tae. Ever since learning about John Bogle and the loyal boglehead family, I've been a huge fan of Vanguard's index funds. All my retirement savings (IRA and 401K) are in Vanguard index funds. Simply the best!
I invest with webull and the 2 ticker symbol is not avilable.. help
Can't believe you joined the LIV Tour
I’m retired so what do I do with my 403b? Am I stuck leaving it there or is there anyway to take that money and invest it in index funds?
@Rachel Dufresne Coincidentally my 403b is invested in what the OP suggested...VTSAX (80%), VBTLX (10%) except I wanted a bit more international exposure so I added VTIAX (10%) = total portfolio. Depends on what financial investment companies your school district selected and whether those vendors sold you mutual funds or annuities. Unfortunately, teachers have been exploited for years! State and local unions have allowed these well known financial companies, who are not fiduciaries (i.e. supposed to act in our best interest), to come into our schools and sell us products to fatten their wallets not ours. Most teachers don't realize this. I was lucky enough to have a father, an average blue collar worker, who was interested in finances and building wealth, to educate me. I started saving for my own retirement and opened a ROTH IRA that I fully funded yearly. The measly limitations the government allowed was better than investing in high cost mutual funds or annuities. So for years I maxed out a ROTH IRA and refrained from investing in a 403b to avoid exploitation until my school district selected a vendor who offered low cost Vanguard mutual funds (hence portfolio above). This, along with my pension, SS, Roth IRA, and stock portfolio I started decades ago thanks to my father, I'm confident about retirement when the time comes. My suggestion...carefully look at what you're invested in before leaving as many of these vultures sold products with astronomical closed end fees. Another suggestion..look up 403b wise. It's a nonprofit organization, helping K-12 teachers since 2000. Hope this helps!
@@jaycee4528 thanks
Hello. What do you think about interest rates going up in the near and distant future? How will this impact the stock market? Are we heading toward a crash any time soon? Thank you.
He would tell you that no one can predict a stock market crash. In act he has told us this in prior videos. Don't try to time the market, it is a waste of time.
Not sure I follow the Netflix example for the index fund? it wasn't a top 500 company for the 20 yrs you mention it had 23,000% growth? thus it wasn't in in the index fund until it already soared?
Tae, what's your thoughts on VTABX?
How much do you need to start one of these, and how much to actually make money on it every year?
Really enjoyed your vlog..I have an old 401k from work…thinkin about opening an IRA in my Schwab acct…and using you Schwab recommendations… I’m 74 and I only take out RMD’s…..$607,000
Bond funds were never meant for zero interest rates. Bonds that were bought before 2008, had ever increasing market values as interest rates went down to zero. People that bought bond funds before 2008 were getting interest plus capital gains, but had to sell in 2021 to lock in gains. People that were buying bond funds in recent years were buying funds that contained bonds with inflated market values, much higher than bond payoff value. They were buying future loss. Most people had no idea of the market values of bonds in their funds. You have to follow the 10yr interest rate to know when to buy & sell bond funds. You cannot blindly buy bond funds and you cannot count on them for security.
Bond funds, in my opinion, is "old school" Instead of investing in a product that continues to slowly LOSE money, put that same money in CD's at different institutions to take advantage of FDIC insurance. Guaranteed to make at least SOMETHING and not lose anything. Again just my opinion but bond funds are NOT what they used to be.
You cannot make money with any CD as they are always less than inflation. You can only reduce the loss of true value.
@@dougturk7116 Maybe you are looking at CD's wrong. A person needs multiple streams of income and CD, Bonds, Closed End Funds, Dividend Stocks, all do that. We all need income and income investments are the only things I invest in. CD's are just a part of the picture. The key is having enough diversified income to cover your living expenses plus extra income to reinvest for the future. As long as my investments cover my expenses and still growing, I am OK with that.
@@miken7629 Hey, it’s your money so if you’re happy with investing in CDs to beat inflation that’s all that matters!
@@hankhamelin329 you don’t know what you’re talking about
I have been researching for months on how to invest, and this was the most valuable piece of information yet. Fantastic. Thank you
Hi Tae,
Thank you for putting this video together! I prefer to keep it simple as well, and VTSAX is my main holding, since I’m still in the wealth accumulation phase. I would be 100% VTSAX, but the 401(k) doesn’t have that as an option, or a total stock market fund in general. For that account, I’m 100% in a mutual fund that tracks the S&P 500, and I believe the expense ratio is 0.02%.
I've always avoided bonds because they are somewhat complicated to trade. With interest rates going up a little more before we expect the Fed to lower rates would it make sense to invest in bond funds now by dollar cost averaging for when they start to go down. Once the Fed lowers rates would the value of the bond fund increase because they hold bonds at a higher rate than currently available?
What about ETF equivalents?
Of course.
The simplest portfolio is a target date fund. Your portfolio is highly concentrated in the US market. According to Vanguard, the US market is forecasted to return only 4.7%-6.7%, while non-US markets are expected to return 7%-9%. Every investor's equity should have around 40% exposure to non-US markets.
Vanguard has been saying this for years. Nobody, not even Vanguard, knows what the future holds. Just pick a strategy and stick to it
I prefer a Global Balanced Fund of Funds that does NOT adjust its allocation over time to get more conservative. That is the simplest and most perfect portfolio for me and my tolerance.
I have had a Vanguard 500 Index and Vanguard Primecap Funds for many years. The problem I have now is how to withdraw from an index fund in the most tax efficient way. My financial advisor and my accountant can't give me an answer. Vanguard has no idea because their records don't go back far enough. But fund shares are taxed differently depending on how long they are/were held. I don't want to trigger an audit because I just closed my eyes and hit the withdraw button. Withdrawing from mature index funds might be a good subject for a new video. Thanks for this video it was very well done.
Might look into this
thank u for emphasizing cash the good old way cash is always king like u said gives u peace of mind luv it Tae
This may be a stupid, question, but what good does having 10-20% in bonds do for your portfolio? It doesn't seem to offer much safety
You could live a couple of years off that if the market crashes.
@@ThhVkk The real benefit to bonds, and treasuries in particular, is the negative correlation to the returns of stocks. So when one is up, the other is down, making for a somewhat smoother ride. Since 2008 rates have been extremally low, making bonds look like horrible options. But up until 2008, treasuries were paying 5-6% for 10 yrs and were viable options to counter weight your stock portfolio. If you are young bonds probably shouldn't be in your portfolio. If you are near retirement or in retirement they may serve a more limited purpose than they once did.
Also, rates are up right now so bonds can be more attractive, but most likely that will be gone in a couple years and we will be back to low rates.
This is especially true for people in mid 30s such as myself, the best portfolio is the simplest one you can have, so many people think it's so simple that they are having doubts if that simple portfolio is enough for retirement, but let me tell you from my experience in the market for 15 years. I have tried all sorts of investment / trading, from options, swing, day trade, you name it
I quit all those in 2016 and i went full 3 fund portfolio and have been investing in 3 fund portfolio ever since, and yes, though returns may not be crazy, but i have been the happiest ever since i did that, i don't stress, i don't get overworked! i enjoy my life more with such simple portfolio and knowing that i own the total stock market, i am just at peace
I am unaccustomed to your accent (and therefore miss an occasional word). Voila! I turned on captions and everything is perfectly transcribed. Good video. Thank you.
WTF kind of accent is that? He speaks fluent and unaccented English. Get a hearing aid.
What about a vanguard target date for even simpler investing? Only .08 expense ratio vs .04-.05 for the funds recommended here
Why not just move the fund allocation each year yourself?
@@franwex that’s kind of the point, why would someone want to manually change it each year? Especially if you want to help friends or family who aren’t interested in learning to manage it themselves. The video title said “world’s simplest” but I’m proposing something that seems simpler.
@@TheKev507 then in that case-it is better to have a target date fund. The price difference is rather small and worth it for that person.
Fine for tax deferred accounts (401, IRA, Roth IRA, etc.). Not great for taxable ("brokerage") accounts due to potential tax surprise from distributions.
@@groberts1780 I assumed we were talking retirement accounts too. That’s a really good point, haha.
You doing great job!!!
My new 401k is with Principal…what do you recommend for them? I’m not sure what the equivalent would be. Any help is appreciated!
I have my 401k with Principal. I’m invested primarily in the Fidelity S&P 500 fund.
@@Polostar79 I didn’t realize you could get Fidelity funds with Principal…thanks for the info.
Why be in stocks and bonds at the same time?
Depends on the interest rates
Sounds like John Bogle- great advice
As a couple we became fully retired one year ago 2021. October 2020 my husband wanted to go to 8 years of cash, incase the world went into a repeat of the Great Depression. I was absolutely in agreement, I love the mix of cash, stocks, bonds, and CDs etc. Since going to about 1/5 of our retirement funds to cash, I would often read that cash was a mistake by the TV and internet professionals. Of course I did not agree with them, some portion of cash is King in our minds. By spring of 2021 the professionals were advocating cash for a coming recession. A little late in my mind. I just found Mr Kim, love his thought. Keep it simple and save!!! Ree
That worked out great for you both, as cash is paying quite well these days.
In Sept of 2015. I put 10K in each of these funds: VBTLX (bond fund), VTSAX (total market fund) and VTIAX (Total international Stock fund). Today, my VBTLX holding is worth $10,696. VTSAX is worth $23,200, and VTIAX is worth $15,000. I sure wish I had put it all in VTSAX!
I did something very similar to this, and my result is same. It even outperforms others despite the stock taking beatings over the last year.
To me, you don't need to put too much on Bond and International. Just stick to US market. You'll do good.
That's entirely the wrong investing mentality. Don't chase returns - decide on what your risk tolerance is, and diversify to try and capture market risk as a whole. Why were you 33% bonds, and 50/50 US/International? Was there a good reason for that split, or did you just decide to evenly split your contributions between them because you didn't know what you wanted to do?
Great sharing...For roboadvisor managed funds (Wahed for my case), so I should set up two funds based on risk profiling - 1st for aggressive funds (equity, ETF's)and the 2nd for conservative type funds (bonds/ sukuks). As for cash, I have been investing in Malaysian government managed unit trust funds with guaranteed capital preservation and also in Employee Provident Fund (EPF) with guaranteed min 2.5% yearly dividend.
Great advice. I have been doing almost exactly this for many years and it has proven to be a solid strategy.
You can also put your cash in certificate deposits and treasury bills. This gives you the opportunity to get your cash to grow. Using a CD ladder, you can choose CDs that mature every 3 months.
Interest rates on them have improved in the past year but they were very poor for more than a decade.
CDs are taxed by the state?
@@blockaderunner If your state has an income tax, yes.
In june 2024 some stocks experts are saying stocks that will skyrocket by year end 2024. Stocks like MRNA. BBY. UPST. PARA, SQQQ. TDOC.❤❤
What about international exposure?
I am pretty sure he already addressed this in this video, if not he addressed it in another video. If you are in the total stock market fund, you are plenty exposed to the international market.
how about instead of total bond, buy tbills ladder
Hmm. Wouldn’t you be better off with duration for long term? Tbills are good for a couple of years.
What about a 2 fund portfolio of VTSAX and VTIAX?
90/10
The most important thing is low fees. Most funds dont outperform the index fund. Just biy a index fund
Occam’s Razor, good stuff.
Excellent content...
Intermediate bonds are a no go for me. I'll only hold tbills, less them 3 years, at this point because we didn't really know what's going to happen with interest rates.
Could you please clarify why one would need cash? Bonds can serve the same purpose as a cushion while earning something. If you need money for emergency expenses pay them with a Credit Card, order the sale of the bonds (may take a week or two to actually get cash). Then pay back the Credit Card debt in full before the grace period lapses. Wouldn't it be better to keep your one year worth of expenses in bonds rather than in cash?
Some expenses may be too great to pay with a credit card or would not accept credit cards at all.🤔
Did u just read the Simplest Path to Wealth? That's exactly what this book recommends :-)
I’m wondering why you would by a total stock index fund over the S&P 500 index fund. I’ve always believed the 500 was better but I don’t know why or why not.
The Total Market fund is 80% S&P 500 and also includes a component that mimics the other 20% of the market. The returns of the two funds have historically been pretty much the same so either would work, however, the Total Market fund is more diversified.
@@ld4974 yep Bogle's little red book showed that it was a fraction of a percentage better with an S&P 500 fund over the Total Market at around 9% over 80 years, BUT he did mention in that book from 5 or so years ago that he expected Much lower returns over the 2020s, like 6%
Index Bubble ....true/false...your thoughts?
Great video!
Under 40? Bonds not necessary. Also, why not etf versions?
Agree . I'm 100% in vtsax in my late 40s. I Won't add bonds until late 50s and it'll be 5 percent every 5 years and stop 15% .
85/15 will be my retirement balance
Great content 😃
What about ETF'S
I watch my share of UA-cam videos but rarely comment. Been investing > 20 yrs. and have done well with the KISS (Keep it Simple Stupid) method.
This is a fantastic video that emphasizes this point. Great job, Tae.
why just the USA i know USA has been performing really good and is about 60% of a global stock market index, USA is still one country and therefore makes it a risk to just own one country?
anyone have the fidelity equivelent to these?
He tells you in the video.
Big fan of your videos. What about those of us that have pensions in relation to bonds? Can pensions take the place of bonds? Those of us that have pensions should be not invest in bonds at all?
I completely agree!
I have a modest GE pension and I treat it like Social Security and that is it doesn't impact my investment mix.
My company recently moved their 401K from Merrill Lynch to Vanguard and I chose Target Date funds for it and a Roth IRA and I use my pre-existing Vanguard brokerage account for proven dividend stocks and some speculation.
I wouldn't consider a pension as a substitute for the bond portion of my portfolio. Different animals entirely.
Excellent details
Love it!
Great video! Is there a good ETF that tracks the US stock market, but only the dividend paying companies? Thanks
Yes. SCHD. It’s doing very well.
You shouldn't have to ask when Google is at your finger tips.
@@franwex I think SCHD is a better place to start than a total stock market. Over-diversification is real.
Both VTSAX and VTBLX are available as ETF’S (BND & VTI). Is there a reason why you prefer the mutual funds? 15:06
The person who replied to you is probably a scammer.
Excellent advice
I love your videos
What is your opinion of Vanguard balanced fund?
FYI, one year bank cd has higher return than those fund this year.
Isn’t the point of investing for long term? If you’re putting money in a CD that means you know what you’re going to use the money. It’s essentially already spent.
So what?
This video is phenomenal. Fucking bravo.
Need international exposure!
Shiiiiiit, when the 20s i was rich AF but really broke AF.
Took a lot of saving in 30s to get back.
Best pay is 40 and 50s. If you can remain employed.