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Subject:  Re: Roth Investing Help... Date:  4/14/2002  11:06 PM
Author:  bigcaat Number:  34207 of 100959

Hi jin.

Sounds like a good seedling of a plan.

A few thoughts. My first suggestion would be to read Mutual Funds for Dummies and/or Personal Finance for Dummies. Both are by Eric Tyson and both give an excellent foundation of knowledge.

2. Whether or not your asset allocation plan will be 100% stocks, or 70% stocks/30% bonds depends on your risk tolerance. You're young, so 100% stocks is a reasonable allocation UNLESS you are squeamish and will lose sleep at night during a bear market. Only you can assess that. If you call Vanguard and ask them to send you their "Facts on Funds" booklet, there's a little allocation planner quiz you can take that might help. (They might also have it on their website, but I don't know.)

3. If you decide to go with 100% stocks, VFINX is a good choice for a core fund. On the other hand, for your perusal, you might look into the "Total Stock Market Index Fund" (VTSMX). What's nice about this fund, especially if it will be your only stock fund, is that it covers the broad market. In otherwords, you will not only have what is in VFINX, you will also have exposure to mid and small cap stocks as well. It's more diversified.

4. VFIIX. If you go with the bond fund, I hear that GNMA funds are very good, but I'm not familiar with their ups and downs. The other nice choice in the bond category is VBMFX -- Vanguard's Total Bond Market Index. That will give you coverage in corporate and government bonds as well as mortgage-backed bonds.

5. I'm thinking, either 100% in VFINX or 70% in VFINX and 30% in VFIIX. I'm leaning more towards 100% VFINX because, in the long run, VFINX overperformed VFIIX.

This is like comparing apples and oranges as far as which performs better. Try not to base your allocation on the past performance of a fund. Decide what allocation is best for you and then run with it.

Hope this helps. Good Luck,
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