Reddit reviews The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk
We found 14 Reddit comments about The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk. Here are the top ones, ranked by their Reddit score.
McGraw-Hill
Dude you are only 33. You have plenty of time to invest and save for retirement. You can actually start withdrawing money at 59 1/2 without penalty, not 70. You are thinking of required minimum distributions which start at 70.
The Roth TSP would be your best bet. After that I'd recommend a Roth IRA with Vanguard. If you dont want to do a lot of research or learn a lot about investing then I'd recommend just dumping the money into a later year lifecycle fund in the TSP (like the 2040) and a target retirement fund of a similar year with Vanguard. These tax advantaged accounts allow you to accrue a lot more money because there is zero tax drag on the investments. I highly recommend maxing these out before doing any after tax investing...assuming you are out of debt and have a 6-12 month emergency fund saved up.
If you dont mind doing a little reading and learning, I'd recommend reading these two books:
http://www.amazon.com/The-Four-Pillars-Investing-Portfolio/dp/0071747052
http://www.amazon.com/The-Intelligent-Asset-Allocator-Portfolio/dp/0071362363/ref=pd_sim_b_1
They will teach you about different asset classes and how to build a portfolio that matches your risk tolerance. If you follow the advice in those books you'll likely do very well...better than the majority of Wall Street money managers.
After you are able to max out your TSP and your Roth IRA you can open up a taxable account. You want to minimize tax drag, so I'd recommend putting the money in broad range index funds (like VTI) so that they wont be dragged down by the tax man. Here's a good read on this:
http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement
I'd also recommend visiting this forum for further help: http://www.bogleheads.org/forum/index.php
There are some really smart and well respected people on there that will be glad to help you out with any questions you may have. Good luck, and you are actually starting well before most people do so give yourself a pat on the back!
In "The Intelligent Asset Allocator" by William Bernstein [1], it's explained that adding a risky asset class to your portfolio will decrease the risk. For example, although bonds may have a lower risk, an 80% bonds/20% stocks portfolio should have a lower overall risk and higher returns. There's probably quite a few articles out there besides this book, sorry I haven't got one on hand!
[1] https://www.amazon.com/Intelligent-Asset-Allocator-Portfolio-Maximize/dp/0071362363
There are a lot of good starting points, but I recommend this book:
http://www.amazon.com/Intelligent-Asset-Allocator-Portfolio-Maximize/dp/0071362363/ref=sr_1_1?s=books&ie=UTF8&qid=1314488130&sr=1-1
The salient points are:
Assuming all debts charging >5% are paid off...
Put it in a Vanguard Roth IRA account if your income is low now. Vangaurd is the only company owned by the users, so the only firm whose goal is not to extract maximum fees from you. They have the lowest fees of any mutual fund company. Start out with 1 stock index fund and one intermediate-term bond fund.
Recommend for 10K
Vanguard 500 Index Fund Investor Shares (VFINX) 75%
Vanguard Intermediate-Term Bond Index Fund Investor Shares (VBIIX) 25%
Read the Intelligent Asset Allocator
http://www.amazon.com/Intelligent-Asset-Allocator-Portfolio-Maximize/dp/0071362363
Then read Investor's Manifesto (the update)
http://www.amazon.com/Investors-Manifesto-Prosperity-Armageddon-Everything/dp/0470505141/ref=pd_bxgy_b_img_b
Then read Value Averaging
http://www.amazon.com/Value-Averaging-Strategy-Investment-Classics/dp/0470049774/ref=sr_1_1?s=books&ie=UTF8&qid=1293563274&sr=1-1
As you save more money, allocate it using Value Averaging (yields about 1% greater return in most markets). Once you have sufficient capital, you can consider further diversification. Try to find sectors with minimal correlation.
As you save more money you could then diversify into additional funds with a percentage that looks like below. Pick your percentages and STICK TO THEM regardless of what the market does. That will force you to buy more low and sell high, instead of the natural tendency to buy high and panic sell.
Below is an one example of what you could shoot for in the future. Numbers are percent allocation of total. Using this many funds really requires 100k minimum. Initially stick with the largest percent ones (500 Index and Intermediate Term Bonds in a 75/25 split assuming you are mid 20s) for your 10k start, and add the others as you save more.
Vanguard 500 Index Fund Investor Shares (VFINX) 17
Vanguard Value Index Fund Investor Shares (VIVAX) 8
Vanguard Small-Cap Value Index Fund (VISVX) 8
Vanguard Precious Metals and Mining Fund (VGPMX) 3
Vanguard Energy Fund Investor Shares (VGENX) 3
Vanguard REIT Index Fund Investor Shares (VGSIX) 5
Vanguard Emerging Markets Stock Index Fund Investor Shares (VEIEX) 5
Vanguard Total International Stock Index Fund Investor Shares 10
Vanguard International Value Fund (VTRIX) 8.5
67.5 Total Equity
Vanguard Intermediate-Term Bond Index Fund Investor Shares (VBIIX) 17.5
Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX) 7.5
Vanguard Long-Term Bond Index Fund (VBLTX) 7.5
32.5 Total Bonds
Alternatively you could get an Interactive Brokers account and put it all into stock options, make a boatload of money and then lose it all, teaching you a valuable lesson, so that you will do the prudent strategy above once you have more money... heh heh...
Remember, the goal is not to get rich, but to not die poor.
Good Luck!
For what it's worth, if anyone's interested in the topic of portfolio diversification, this is the best book I've read in the topic: https://www.amazon.com/Intelligent-Asset-Allocator-Portfolio-Maximize/dp/0071362363.
It's not too long, easy to read, and makes a compelling case for the benefits if diversification via incorrelated assets.
You're off to a great start! Congrats!
Even though you're planning for long-term, I'd suggest a minimum of 10% in government bond funds (and 20% is likely better for starting out since it will help you avoid the temptation to flee the market when Bad Things inevitably happen.). Once you're comfortable with the rebalancing process in a year or so, you can reduce that down to 10% if you want.
One of the best things you can do is learn more. Here are some book suggestions for starting out with investing and asset allocation:
http://www.amazon.com/dp/1576603660/
http://www.amazon.com/dp/0071362363/
http://www.amazon.com/dp/0471730335/
These books describe the way to get a return higher than 60-70% of all investors out there, simply by not trying to beat everyone else... You'll never impress anyone at cocktail parties, but you will make an excellent return over time.
I would highly recommend getting thinkorswim by TD ameritrade. You can get the paper-money version for practice and its free (I don’t think you need to open an account with them either). It is great for technical analysis of stocks, maintaining watchlists, tracking your stocks, comparing your stocks, setting up alerts, etc. However, there is a bit of a learning curve. If you do decide to go deeper into techinical analysis, keep this in mind: evolutionary we are wired to see “patterns” in the world. In the stock market, thinking that you see a pattern can be very dangerous. Invest wisely.
Recommended reading: http://www.amazon.com/The-Intelligent-Asset-Allocator-Portfolio/dp/0071362363/ref=pd_sim_14_1?ie=UTF8&refRID=0FQ1STFGZ3H7CB6DA2N4
You won't successfully time the market without a lot of luck. Periodic rebalancing is a relatively safe way to manage long term investments and can help you ride out the trumpster fires.
Check out this doc from Vanguard (free) https://www.vanguard.com/pdf/icrpr.pdf or this book (not free) https://www.amazon.com/Intelligent-Asset-Allocator-Portfolio-Maximize/dp/0071362363
I would recommend Intelligent Asset Allocator
The book has sound advice for long-term investors - no get-rich-quick schemes here.
Specifically A Random Walk Down Wall Street and The Intelligent Asset Allocator.
Get a head start by getting them from the library or buying a used older edition. Just by reading those two books you'll be miles ahead of the typical worker who only has a vague notion of the difference between a stock and a bond and you'll be capable of avoiding scams and making smart investments. With pensions on the way out and everyone having to manage their own retirements with 401k's you need to know more about investing than your parents did.
Good news is it's not as complicated as it looks.
If you want to actually learn something... and not just pass your tests... then you need to read A Random Walk Down Wall Street, The Four Pillars of Investing, The Intelligent Asset Allocator,
The Only Guide to a Winning Investment Strategy You'll Ever Need, and All About Asset Allocation... to start.
I recommend reading Bill Bernstein's The Intelligent Asset Allocator. How to Build Your Portfolio to Maximize Returns and Minimize Risk.
I suggest reading these books:
"Retire Early, Sleep Well" by Davis
http://www.amazon.com/Retire-Early-Sleep-Well-Retirement/dp/0966343646
"Asset Allocation for Investing Adults" by Bernstein
http://www.amazon.com/Rational-Expectations-Allocation-Investing-Adults-ebook/dp/B00KSPCY24
"Intelligent Asset Allocator" by Bernstein
http://www.amazon.com/Intelligent-Asset-Allocator-Portfolio-Maximize/dp/0071362363
I learned the same lesson by checking a few books out at the library when I was 19.
Edit: Downvoted for reading about investing before I blew thousands of dollars on stupid mistakes. For everyone else, at least read A Random Walk Down Wall Street before you open your brokerage account. The Intelligent Asset Allocator is a good follow-up to it.