Just a quick note to wish you all a Happy New Year! No major resolutions for me this year. Just a couple of things that we have to get in order… First off, we still need to put together an estate plan. We’re currently living with wills tha…

Part of the allure of reading a personal finance blog is reading about the personal experiences of other regular people struggling with the same issues you’re dealing with. This week, some of my favorite bloggers have been writing about their exp…

Klauss, I opened up a Sharebuilder account to take advantage of a free $50 offer. I’m just letting it sit (there are no inactivity fees) and (hopefully) grow. I’ll let “compounding” do its job and I’ll worry about fees for selling when that’s an option. Hopefully, at that time, the fee for selling will not eliminate gains.

As you all know, I’ve been posting my 2006 financial resolutions here Free Money Finance, but I’m not the only one doing that from around the blogosphere. Here are a few others you should check out: All Things Financial

I relaize you just opened an account at sharbuilder, but I just ran accros a company called tradeking http://www.tradeking.com. It is a small company, but its platform is nice. $4.95 limit orders, no minimums. Here is there fee schedule. What do you think. The only thing I worry about with Sharebuilder is that to transfer out securities it is $50 and I would almost rather dollar cost every quarter rather than month to reduce commisions (after the $50 bonus) and I don’t think they will let you do it in those increments.
https://www.tradeking.com/PublicView/services/Services/commissionsPUB.tmpl

Also, my broker told me to stay away from TIAA-CREF, not sure why though.

Moreover, rabhison above had a point: Vanguard will charge you $10 a year and has minimums of 3,000 to 10,000 just to get into most of their funds.

If anyone has a way to get a low cost Roth IRA besides Vanguard or Fidelity or using a fund like TCEIX (which does not have a minimum investment as long as one pays automatically but with the disadvantage of high expense ratio) without paying expensive commissions or service charges please post a comment.

I used Morningstar’s portfolio X-ray tool to look at your allocation. Here’s what it reported (you probably knew this), rounded up, excluding company stock:

US stocks 78%
Foreign stocks 18%
Cash 3%
Bonds
LV 27 LC 25 LG 22
MV 6 MC 6 MG 9
SV 2 SC 2 SG 1

OK, so here are my two cents:

1. You most definitely are overexposed to large caps, to the exclusion of midcaps and smallcaps. Now, mids and smalls may underperform in the near future simply because they have overperformed recently, but when you create a stable asset allocation, you’re trying to get out of the guessing game. My understanding of your earlier comment is that your company does not offer a decent small cap fund (not even an index fund?) – not surprising for a 401k. Which is why I’d plough your Roth money into a small cap fund. I prefer an index fund, but that’s my bias, because when I advise friends on passively managed portfolios, I want it to be passively managed, not just by me.

2. Your exposure to foreign stocks seems a little skimpy. I don’t know what your country exposure is. Foreign stocks includes Europe and Emerging Market. My preference would be 15% to Europe, 10% to emerging markets.

3. Yes, yes, I’ve heard that at 29, you should be in an all-stock portfolio. I just don’t buy it. Ben Graham, the father of Intelligent Investing, argued that you should always have 25% of each stocks or bonds, for insurance. Yes, much has been made of how great stocks are compared to bonds, but that’s easy to claim at the end of one of the greatest bull markets in history. If you were an investor in the 20s, you could have made the same mistake, only to suffer a horrendous crash and decades of mediocre stock performance.

4. You’ve got a phenomenal amount of your money in company stock. When the opportunity presents itself, I’d suggest offloading some of that stock. Your financial future is already significantly tied to that company, since hard times could put your earnings power in question. You don’t need to be too much more tied to your company than you already are. Of course, make some judgements about the relative value of the company stock and your qualifications to make such a judgement (can you sell us on the basis of fundamentals why we should buy the stock, for example). But even if these criteria seem extremely positive, I’d prefer to trim my position if I were you.

Well, those were my lengthy two cents! Finally, great job being aggresive enough to save so much at 29, and to have the humility to ask for advice!

Cheers,
Karthik

Also, I’ve heard that TIAA-CREF has been trying to increase management fees (see for example this Morningstar article. I don’t know if your index fund is one of those targeted for an expense hike, but if it is and the hike is significant, you may want to consider transfering to a Vanguard or Fidelity IRA. (Incidentally, Vanguard charges an extra $10 a year for their index funds if the balance is below $10k, thus conceivably wiping out any cost advantage due to a lower expense ratio.)

Thanks for sharing your portfolio with us!

The only thing I’d do different is, at 29, perhaps you put a higher percentage is small/mid cap or emerging mkt funds. Overall it seems like a high percentage of your retirement savings is in large cap funds. I’d also buy a ton of google. :)