Let’s Play “Invest Lazy Man’s Money” |
16 Comments |
The deposit for my Tax Year 2006 Roth IRA just went through. So now I have $4000 sitting an account waiting to be invested. I’m looking for an ETF to invest in. I have $8000 in Vanguard Small Cap ETF (VB). I have another $8000 in Vanguard Total Market Index (VTI) and another $4000 in Amex Technology Spiders (XLK).
I’ve been thinking about iShares MSCI EAFE Index Fund (EFA). I feel the economy getting more and more global every day. If people overseas can do the same job as Americans for 1/10th the money, then business will follow. The American economy will either suffer or those countries will have great wage inflation. Perhaps I’m wrong about this, but I can’t see how the wage difference can go on forever. I’m also thinking about Vanguard Health Care (VHT). America has more aging people than ever - and they are living longer. Everyone will need more medications, more health care. That means more dollars going to the companies that provide solutions. Lastly, I wouldn’t be opposed to expanding the small company or total market portions of my portfolio either.
I like to be diversified in ETFs. They generally have low expenses and allow for easy diversification. What would you suggest?
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April 17th, 2008 at 9:30 am
[...] year, around this time, I asked readers to invest my money. I’ve decided to turn this into an annual post - at least as long as I qualify for a Roth [...]
February 4th, 2007 at 7:11 pm
I’m not very bullish on international health care. I’m just not that knowledgeable in that area. I think you are right with the EAF staggering. I’ll probably put a VB in there for the second EAF, because I don’t want to be more than 25% international at this point.
February 4th, 2007 at 6:42 pm
Clarifying that you don’t have broad exposure to international in other investment accounts make the choice a no brainer. I’d say alternate EAFA, healthcare, EAFA, emergingr, EAFA, etc. for the next few years to get the international allocation boosted up. Considering all the fundamentals point to the dollar losting value compared to the euro/rmb/etc over the long term, 45%-50% of equities overseas may very well be the optimal portfolio. You may want to think about IXJ instead of VHT for healthcare — 35% of holdings overseas would give you a double shot in both the categories you’re bullish about.
February 4th, 2007 at 11:15 am
Yes, it’s always difficult to make recommendations without knowing the rest of my investment portfolio. For reference my 401k plans are as diversified as most. I don’t want to get into exact percentages, but I ran the funds through Morningstar’s Instant X-Ray (there’s a post on it), to make sure that I’m weighted pretty equally throughout value and growth, small and large, as well and international exposure.
For the amount of money that I have in my Roth IRA account the small amount of cash coming from dividends isn’t going to be significant. I’ll invest that money next year when I make the next contribution.
February 4th, 2007 at 7:54 am
I really don’t have broad international exposure in my other retirement vehicles. I think that EEM is interesting, but I don’t know if I want to make a long-term Latin America bet right now. I think I’ll go with EFA for this 2006 Roth IRA and in a couple of months when I have 2007’s contribution saved up, I’ll go with VHT. The Travelin’ Man shares my view on being bullish on both and it’s really not worth my time to try to figure out which one is going to do better in the next 30 years.
February 4th, 2007 at 1:54 am
It’s hard to recommend something without knowing the full allocation is across all investment accounts. If I was looking at the Roth IRA in isolation, then I’d say you’re overweight in both domestic and growth (tech). #1 priority would be to add international, #2 value, #3 emerging markets, #4 reit.
If healthcare interests you, Vanguard Health Care (VHT) will have the lowest expenses, iShares Global Healthcare (IXJ) will give you the industry beyond the U.S. and Rydex Equal Weight Healthcare will avoid a few large companies being your major stakes in the sector.
If commodities interests you, Powershares DB Commodity Index (DBC) is the only choice at the moment for broad and balanced coverage of the various commodity sectors. Past studies have shown commodities have roughly the same return as stocks but are totally uncorrelated so about 5%-10% of your total portfolio can effectively reduce volatility without decreasing returns.
VB versus IWM — different indexes, different expense ratios. Looks like VB’s MSCI index has beaten IWM’s Russell 2000 index by just a slight amount over the past 2 years. In addition, it’s 0.10% cheaper per year so no brainer to pick VB for the small cap blend category.
You should see if your broker offers Dividend DRIPs. I’ve got all my ETFs enrolled in Etrade’s program so dividends issued buy more partial shares instead of sitting in the account collecting sweep interest.