Tuesday, October 9, 2012

Part I: What I invest in

There is a reason I know what Blake Lively’s engagement/wedding ring looks like.  And that Chris Brown just broke up with his girlfriend and has been hanging out with Rihanna BUT his ex just spent the night. Or that Danny DeVito and his wife of 30+ years are splitting (oh noes).  It’s because I find reading celebrity gossip to be a great way to de-stress (and I like to make thinking a challenge by cluttering my mind with useless factoids – one day I will vindicate myself at trivia night!).  I also enjoy looking at my 401K and all of the shiny, shiny graphs on my plan administrator’s website.  I get that in general, looking at your money or bank balances really sucks when you don’t know what to expect, but it’s actually very calming when you’ve got things set up to run automatically, as I do.

Because you don’t miss money you never really have, I automatically deduct a monthly contribution from my paycheck (I first I put in $416 because that seemed like a lot, and now I max that baby out with $1,800/month).  What’s crazy is that the amount I now have in my account is 1.86X what I put in!  Of that 86% growth, only 16% of it is actually due to my investments (which I’ll get to in my next-ish post).  The rest is of it due to the magic of employer contribution.  In my case, my company automatically puts fully-vested money in every month, rather than matching my contribution up to a percentage.  Since my company’s contribution is fully vested, this means that as soon as they contribute money to my 401K, it belongs to me (rather than only belonging to me after a certain period of time, as a partially vested contribution would).  
My Roth IRA is significantly simpler than my 401K, which is divided across 8 funds that my financial advisor and I selected.  My Roth only has two holdings – Vanguard Total Bond Market Index Fund (VBMFX) and Vanguard Total Stock Market Index Fund (VTSMX).  They both have amazing expense ratios, as most of Vanguard’s funds do -- .22% and .18% respectively.  This means that for every 1K that I have invested, I pay about 2 dollars every year.  I’ve got a 30% allocation for bonds, and a 70% allocation to the stocks.  Obviously I view my portfolio as a whole (401K plus Roth), but when I when I think about my portfolio in the far future, when I won’t work for a company (but rather for myself or not at all), I’ll keep things simple.  I’d probably throw in some REITS (trusts that use invested capital to purchase and manage income properties or mortgage loans), and foreign stocks/bonds, but I love the idea of a Vanguard-only index-heavy portfolio.
The hardest part of writing about personal finance (guys, life is hard) – is honestly the fact that I don’t have to do anything on a daily or even weekly basis.  I might glance over my 401K and Roth accounts through Mint every month or so as I pay my credit card bills, but that’s about it.  Investing is for the long haul, and the good news is it’s pretty easy – just save early and save lots and save often, and don’t fuck things up too badly.

On the other hand – I’ve been attempting to switch over to a different bank for checking for about ... 6 months.  I even opened up an account at Schwab, but never quite managed to get it funded or to change my direct deposit.  HSBC (my high-yield account for liquid savings) too has turned evil – my returns got halved to .4% and they want me to pay a fee every time I transfer money to/from another bank.  Still, I’ve managed to save & invest a respectable amount, and I haven’t fucked things up terribly, so I’ll call it a win. 


  1. Just starting out with the Roth, I thought it was a good idea to put everything in one fund to get up to $10K to qualify for lower cost Vanguard Admiral Shares, then diversify from there. I guess an advantage of your approach is that you can automate it from the get-go. What do you think?

    1. You have a good point -- love me the lower expense ratio of the Admiral Shares. Even with the funds I'm in, you need to put in a minimum contribution of 3K, so I think getting set up with Vanguard can be a little tricky. I think in the end it doesn't matter what your initial strategy is: as long as you consistently put in money over a long period of time, you win with Vanguard by eliminating the big expenses of actively managed funds. But given that you probably have a 401K, there's nothing wrong with putting everything in one Vanguard fund (to take advantage of the Admiral Shares), as long as the rest of your portfolio has the other pieces you want.