Updated on 03.27.07

A Look At My Own Mutual Fund Portfolio

Trent Hamm

As an example of the mutual fund topics we’ve discussed thus far this week, I thought I would mention my exact mutual fund investments and how I plan to grow them in the near future.

First of all, I have two separate goals with my investments. The first is for buying a second home roughly fifteen years from now. Our first home, which we are in the process of buying, is going to be on the small side and both my wife and I want a larger home than the ones we are looking at so that we can have an invasion of grandchildren when we’re older. The second goal is an early retirement, targeting roughly twenty five to thirty years from now, so that I can be retired or very close to it when my grandchildren are born. These goals, as you can tell, have one big thing in common: family. My family is central to my life and thus my investments are geared toward them.

So, here’s my entire investment portfolio, using approximate numbers for values.

I have about $45,000 spread out between two separate 403(b) programs (for those unaware, 403(b)s are basically 401(k)s for people who work for a non-profit or for an educational institution). In both cases, this money is in that program’s version of the Vanguard Target Retirement 2040. When I establish my Roth IRA this year, I will be directly investing in that fund as well. Since my retirement goal is singular – I want to retire in roughly 2038 – I realized that I would basically be balancing my own fund with this retirement date as a target anyway, so why not just let them balance it for me? These funds have returned very well for me so far, and I anticipate watching them grow over time. I may make a small withdrawal from one of them, as it is allowed to aid with the purchase of a first home, but it will be less than 30% of the total amount I have in the funds.

As for that second house fund, I have about $5,000 in the Vanguard 500, which I selected because it is highly regarded, it has a very low expense ratio, it has a very long history of solid returns, and it is very easy to track and follow the holdings. I put in a specific amount each month that should have me on track to reach $10,000 in the account by the end of the year, at which point I will reduce my contributions. Why $10,000? It is a round target amount that puts me on a healthy pace, and at that dollar level, Vanguard eliminates a quarterly $2.50 fee on your balance.

Next year, I will complement this fund by buying into a much more aggressive fund, the Vanguard International Growth Fund. This one will basically determine how nice of a house we’ll buy when we’re 42. I feel strongly that globalization is just beginning, but I also feel that this is an event that can lift America’s boat if we place ourselves well – I intend to ride it a little.

Why Vanguard? In a nutshell, Vanguard treated me very well as a beginning investor and they have fund solutions for everything I want to do. I agree with their investment philosophies, their customer service is stellar, and I see no reason at all to jump to another investment house.

So, this is exactly where I stand in the middle of my twenty eighth year. Hopefully, a picture of one person’s real investments might give you an idea of what you could be doing with your money.

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  1. Nishant says:

    Vanguard funds are the best investments, in my opinion. I have picked the international and emerging market funds to take a more aggressive approach with our money.

  2. Brett McKay says:

    I’m with American Funds right now. I have three mutual funds. The Growth Fund of America is in my wife’s mutual fund. We contribute to that monthly. We then have American Funds European Pacific fund and AMCAP fund. I alternate months when contributing to these. It has been alright so far. What do you all think? Is this a good mix?

  3. lorax says:

    re: target retirement funds

    Some theorists (such as Bodie of _Worry Free Investing_) say that target retirement funds miss the target because they rebalance toward bonds automatically. Bodie says to rebalance to lower risk, based on how much you have, how much you need, and your risk factor. So you might let a portfolio of mostly stocks appreciate to a point, then rebalance. Or you might switch to a risky job and need to rebalance.

    It would be interesting to read your review of this book.

    (I should also note that Bodie recommends investing primarily in TIPS, not stocks.)

    All that said, I believe target retirement funds are probably a good idea, especially since you don’t have a huge chunk there yet.

  4. mjcarrabine says:

    I have read in several places recently that recommend the following:

    Put money into your 401(k) up to the contribution limit, then…
    put money into a Roth IRA, then…
    max out the rest of your 401(k)

    I am currently maxing out my 401(k) and saving a little into an emergency fund. I’m just curious what your thoughts on the above are. Does it make any sense to move some of the $15,500 per year money into a Roth IRA?

    I assume it has something to do with balancing out tax exemption and exposure because who konws what taxes will be in the future.

  5. Mike says:

    If you are interested in an international fund, I’m a big fan of Dodge and Cox. They only run a couple of funds, but they consistantly have great returns, and charge fairly low expense fees. They do tend to close their funds, as they have with their main stock funds, but the international fund (DODFX) is still open.

  6. Tushar says:

    Vangaurd’s philosophy regarding investing is what I believe in too. Good job.

  7. Duane says:

    You may be interested to know that many states have a companion 457 plan which effectively allows you to contribute double the amount of pre-tax funds into retirement accounts. If you are maxing out your 403(b) ($15,500 for 2007) then you may want to look into this option to defer more taxes.

  8. 3bean says:

    Trent- what’s your timeline for a home purchase? Is the bulk of your downpayment savings in the Vanguard 500? We’re saving for a house down payment, too– hoefully in the next 4-5 years. I’ve been advised to keep the money “safe”. I understand the logic but my nature I’m a risk taker and have been contemplating money some of it to Vanguard 500.

  9. 3bean says:

    Doh! I was reading entries in reverse order! My questions are answered in this post! Sorry!

  10. 3bean says:

    As long as I’m monopolizing the comments- here’s another question:

    You’ve previosuly mentioned that you and your wife don’t “share” money 100%. Does she have her own 401K and non-retirement investments?

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