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I have an IRA maturing at a local bank. This IRA earns low CD rates, so I'd like to do a direct transfer to Vanguard (investing in mutual funds). But the stock market is at an all time high, so am I investing at the wrong time? Am I being a complete fool investing when the market is high?

Thanks.
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Compare what you think what the opportunity with cash is to the market over the time between now and when you plan to spend that IRA.

Personally, I think it is an easy choice. Even if you had invested on the worse day last year, you would still be sitting on nice gains today. The market doesn't have to grow at all for you to beat cash for the rest of the year.
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The best time to invest is whenever funds are available.
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But the stock market is at an all time high, so am I investing at the wrong time? Am I being a complete fool investing when the market is high?

How many years will it be until you retire?

Pull up a 30-50 year chart of the S&P500 or the DJIA -- log scale for the correct perspective.
Like this: http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#symbo...

Now go pick any 20 year period where the beginning of the period was an alltime high, and ask youself if at the end of that period you'd have regretted buying at that high.

Can't find any, can you?

And those charts ignore dividends, which over the long term account for half or more of the total return.

FWIW, including reinvested dividends, the LOWEST 20-year-period had an annualized return of 5.7%. The average of all 20-year-periods was 10.3% annualized return.
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IRAs don't mature -- you may have a CD or other investment in an IRA account at your bank.

That said, unless your IRA account is small, you will be better off moving it to a brokerage firm. Vanguard is known for low rates and given the question you asked, probably a good place to start.

Check this out:
https://investor.vanguard.com/what-we-offer/iras/benefits-of...

Gordon
Atlanta
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Vanguard is good and I have a mutual fund IRA there, but although better than they used to be, they're brokerage fees and commissions are still higher than Fidelity's. I have both taxable and IRA brokerage accounts at Fidelity. Besides individual stocks, bonds, etc. I can hold both Fidelity and other mutual funds in the brokerage accounts. Not sure whether Vanguard lets you hold their mutual funds in one of their brokerage accounts now. Used to be they made you keep them seperate.
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Vanguard is good and I have a mutual fund IRA there, but although better than they used to be, they're brokerage fees and commissions are still higher than Fidelity's.

Actually, as someone who doesn't trade a lot, I find Vanguard to be lower for stocks, and for ETFs, it depends on which ones you are buying, as they each have their own selection of 'commission-free' ETFs. For bonds, Fidelity has better commissions.

Fidelity's stock commissions are $7.95/trade. https://www.fidelity.com/trading/commissions-margin-rates

If you have less than $50k at Vanguard, for the first 25 trades each calendar year, they charge $7, and then increase to $20, so it's only if you make more than 26 trades in a year that Fidelity nets out less expensive. If you have more than $50k at Vanguard, you will always get $7 trades, and depending how much you have, you could get $2 trades, or even free trades. https://personal.vanguard.com/us/whatweoffer/stocksbondscds/...

AJ
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I will retire in 10 years.
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These are all excellent comments.
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Thanks everyone. Your suggestions and comments are all very helpful.
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How many years after you retire do you plan on taking withdrawals? I'm guessing more than 20 so in reality, you should be looking at a 30 year investment window with a diversified portfolio. Putting all of your money in cash the day you retire is a sure way to run out of money.

-murray
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20 years is a good estimate of how many years (after retirement) I would take withdrawals. I agree 100% that "putting all money in cash the day you retire is a sure way to run out of money"! And I understand what you are saying about the 30 year investment window. But to be honest I never thought much about investing after retirement. I know the general wisdom is to steer a diversified portfolio toward a more conservative mix as one nears retirement. Can you give me an idea (%) what that investment mix would look like going into retirement, and after retirement? Thanks.

Mike
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myfoolmc,

Can you give me an idea (%) what that investment mix would look like going into retirement, and after retirement?

This is a very individual notion. It really depends on your exact situation. What your retirement income from pension/SSa will be. How much you have saved. What your expenses will look like for your locale. Let's look at a couple different, but simple, scenarios.

1. A person who retires and has 100% of their living expenses covered by pension/SSA. Their reliance on savings for day-to-day living is nil. They might use savings for auto replacement, an annual trip and emergency expenses. They might opt to have a higher amount in stock and keep a small bond portion with a cash position to support their planned expense(auto, etc) and emergencies.

2. A person who has 80% covered by pension/SSA. They require money from savings to pay monthly bills. They need to balance growth of their savings, protect downside and protect expense cash. The last part is important to avoid selling securities when the market takes a breather like 2007-2009. Carefully managing your investments is important.

3. A person who has 10% of expenses covered at retirement which will increase later when SSA kicks in. Again, planning growth and protecting down-side risk is important but having protected cash is critical.

These 3 different people/couples have decidedly different requirements for their savings. They rely on savings at very different levels. Add to that the personality, life-style, locale and investor knowledge differences and the variations can be endless.

There is that "traditional" mix that stocks at (100 - your age) percent. Another is straight 50/50, always.

The trouble with bonds, in particular long-term bonds, in our current environment is yield and a potential loss of value as interest rates rise.

I believe that the yield and growth from the traditional mix may not support a retirement like it did in the past.

You need to look at your expenses and income first. See what your short-fall might be. Plan your coverage cash then make a reasonable balance to your portfolio to support that while managing risk with diversification.

I know this is a non-answer to your direct question, however I do not believe there is any formula or one-size-fits-all percentage that is correct.

Gene
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Can you give me an idea (%) what that investment mix would look like going into retirement, and after retirement?

I agree with Gene. Bonds right now are extremely risky.

If you are new at investing, you are in a precarious situation. You don't know what advice is good and what advice is horse-s**t. Unfortunately, most of the advice you'll read both online and in things like Money Magazine is 90% the latter.

If you do the "safe" thing and put 100-age or 50/50 in bonds, you'll be locked into 2% yield for the next 30 years.

I've been retired for 7 years now, and 90% of our portfolio is in equity(*) portfolios and 10% is in preferred stocks. Exactly 0% is in bonds on purpose.
But good preferreds are hard to find now, so as my good ones are getting called most of that money stays in cash.

(*): All my equity portfolios have some kind of filter that shifts the investment to short-term bonds/fixed-income at the appropriate times. See the papers by Faber & Antonacci.
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If you do the "safe" thing and put 100-age or 50/50 in bonds, you'll be locked into 2% yield for the next 30 years.

I've been retired for 7 years now, and 90% of our portfolio is in equity(*) portfolios and 10% is in preferred stocks. Exactly 0% is in bonds on purpose.


made me look! thanks!

i'm about 5% in two bond (old)funds that i rarely look at.
one paying 4.7% somehow; the other about 1.8% ...
gonna dump some of the latter and buy more pref/divers


But good preferreds are hard to find now, so as my good ones are getting called most of that money stays in cash.



must be better than mine.... mine aren't being called (they're making about 4.4%
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0x6a74 wrote made me look! thanks!

i'm about 5% in two bond (old)funds that i rarely look at.
one paying 4.7% somehow; the other about 1.8% ...
gonna dump some of the latter and buy more pref/divers


Don't have a clue about what bonds you are in - but I think it fair to say higher return bonds have long maturity and/or higher rise. The interest risk increases exponentially with time to maturity -- so maybe you are actually increases your risk by selling the lower yielding product(s).

If you choice was made because you want yield, why not consider something like AT&T - the phone company is not going away. While the stock price will go up and down, the dividend is very secure. I only mention AT&T which I know has a high yield - there are many similar stocks. That said, you need to look at the company and apply some common sense. General Motors paid a very high yield a few years back and it went bankrupt.

Gordon
Atlanta
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Don't have a clue about what bonds you are in - but I think it fair to say higher return bonds have long maturity and/or higher rise. The interest risk increases exponentially with time to maturity -- so maybe you are actually increases your risk by selling the lower yielding product(s).


bond Funds. a mix of maturities I'm sure




If you choice was made because you want yield, why not consider something like AT&T.



(>:
I do have a bunch of T-- been very nice to me (dividends & some up(
also utilities
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