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Greetings, espo, and welcome to Fooldom.

<<my wife and i are in our 30's and we're building our portfolios. of our money most is in 401(k) rollovers - brandywine & vanguard index growth. i am thinking of putting my wife's 401(k) rollover (we've moved to md. & left our previous employers) into vanguard int'l index. any thoughts as to this. (her money accounts for about 10% of our holdings) next question is since we are going to be self employed in the next year, is it smart to put money into these funds or should we start new ira's for next year. obv
iously the ira's are a tax benefit ... is there any benefit to just putting future savings into a mutual fund that is not an ira. thanks for the help.>>

Putting 10% of your equity holdings into the international market doesn't seem unreasonable to me. The international market is down in comparison to ours, and has been for a few years now. In theory, the domestic and foreign markets don't move in lockstep with each other. As one is up, the other is down, and vice versa. While our market is riding high right now, have no doubt that sooner or later it will fall again. At that point, in theory, the international market will be higher than ours. Therefore, again in theory, by having part of your stash in international holdings you lessen the pain of a drop in our market. The flip side of that is you don't get the full benefit of the highs, either. Nevertheless, it is a suggested means to dampen risk in equities that has been supported by a number of studies.

Now that you are about to embark on a voyage into the world of the self-employed, you may want to pick up a copy of IRS Pub 560, Retirement Plans for the Self-Employed. That booklet covers tax-deductible retirement plans available to the self-employed that will allow you to contribute up to the lesser of 25% of your earnings or $30K annually to a retirement plan on a tax deferred basis. It will give you much food for thought. To get a copy, just call 1-800-TAX-FORM or visit the IRS website at

If both options earn the same rate of return, then the major advantage of using a taxable versus a tax deferred investment is, IMHO, the fact you can get at that money before age 59 1/2 without worrying about any tax penalties. Otherwise, again assuming both options earn the same rate of return, you're better off taking the tax deferred investment every time. That's because the untaxed compounding causes the ultimate value to far surpass that obtained in the taxable investment.

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