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I'm about to open an IRA with Vanguard starting with about $3,500. I am 32, and have over $10,000 in my employer's 401(k), mostly in aggressive funds. My question is how should I allocate my new IRA? I will be contibuting about $100 monthly to it. I am tempted to just put it in one fund, probably VFINX. But reading previous posts, I am thinking about putting 20-25% in the REIT fund. Any thoughts?

Dozer
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I'm about to open an IRA with Vanguard starting with about $3,500. I am 32

The annual contribution limit was $2,000 for 2001 and increases to $3,000 in 2002. Those over 50 years of age can make larger catch-up contributions. You might ask Vanguard if there's any way you can still make a year 2001 contribution before April 15th, otherwise you can only contribute $3,000 now, and wait 'till next year for the rest.

I am tempted to just put it in one fund, probably VFINX. But reading previous posts, I am thinking about putting 20-25% in the REIT fund. Any thoughts?

Vanguard has additional fees for fund balances below a certain amount, so it might make sense to contribute solely to VFINX for a few years until you reach the point where you are no longer subject to that fee.

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I don't think you'll get a consensus here that a REIT should be part of your portfolio. I would start with the VFINX, diversifying at some point into small/mid-caps and international funds.

Thanks!
Joe
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Dozer,

Take a look at Vanguard's LifeStrategy ("LS") funds. Each one is a "fund of funds," meaning that rather than holding a series of stocks and bonds, each holds several funds which, in turn, hold the stocks and bonds. It's a great way to diversify. It's simple. It's got a great (i.e., very low) expense ratio.

There are LS funds for your preferred asset allocation, too. For example, the LS Growth fund is 80% equity/20% bond, while the LS Moderate Growth fund is 60%/40%. There are two others, I think, that have an even greater allocation to bond. Each of the four LS funds invests in (1) Vanguard total stock market index fund, (2) Vanguard total bond market index fund, (3) Vanguard Asset Allocation fund, and (4) Vanguard total international stock index fund.

I think the LS funds are a great place to start. Once you have a lot more money in the account, you can diversify yourself (for example, if you'd rather have an 85/15 split, or if you'd prefer not to have the asset allocation fund, etc.). In the meantime, having just the one LS fund keeps your annual expenses low (I think it's $10/yr until your account balance reaches $10,000).

Good luck (from a guy who owns one of the LS funds),

Bagginses
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In the meantime, having just the one LS fund keeps your annual expenses low (I think it's $10/yr until your account balance reaches

Vanguard charges a $10 annual fee per each fund in your IRA where the fund balance is below $5000. This can be paid with money from outside the account.

[If you're in one of the pure index funds, there is an additional $2.50 quarterly fee until the fund balance is above $10,000. The LifeStrategy funds are not subject to this fee.]
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