(PUB) Investing 2015

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The Independent Adviser for Vanguard Investors • April 2015 • 3 FOR CUSTOMER SERVICE, PLEASE CALL 800-211-7641
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RETIREMENT FROM PAGE 1 >
they’re probably more interested in
watching paint dry or grass grow.
But that shouldn’t stop you from try-
ing to pique their interest in the basics
of personal finance, and yes, even per-
sonal financial responsibility. A couple
of years ago, I helped a number of
25-year-old friends of my daughter
with some fundamental financial and
investment planning. They needed it;
they knew they needed it; and they were
very appreciative of the help. In fact,
one of them wrote a blog post about it,
then went on to put her money to work
for her future. I’ve been asked by more
of these 20-somethings to do it again,
and to broaden the audience.
It’s too bad more people don’t help
the young get started early on their
investment careers, because the perfect
time to learn about saving and investing
is when your portfolio is small enough
that your mistakes won’t kill you. Also,
it’s a time when a new investor can
begin to develop lifelong habits that
will stand them in good stead as they
pass through their 30s, 40s and beyond.
Time is on a kid’s side, and by help-
ing them start to build a Roth IRA with
earnings from summer and part-time
jobs, you may be able to make a mean-
ingful impression on him or her. Then,
next March and April, you can tote up
what Mr. or Ms. Millennial earned in
2015 and fund that IRA account before
the April 15 deadline.
I know that it would be nice if junior
spenders could take on this chore them-
selves, but how many teens do you
know who read investment newsletters?
And if they did, where would they get
the money to stash in an IRA? Most
spend what they make, and then some.
That’s one reason I believe parents (and
grandparents) were invented.
When I first opened an IRA for my
then-teenaged son, both he and my wife
looked at me like I’d just announced my
intention to run for President. My daugh-
ter just smiled and kept reading her book.
The joke is on them, of course. Thanks
to me matching my son’s summer earn-
ings and putting the money away in a
Roth IRA, the now married 30-year-old
has already built up a tidy sum that will
continue to grow for many years to
come. It won’t pay for a nursing home
just yet, but then again, he’s got a few
years before that becomes an issue. And
he’s learned the value of early and long-
term investing and compounding. With a
good job, he’s already saving outside
MODEL PORTFOLIOS
Moving More Overseas
AS RECOMMENDED in the Mar. 19 Hotline, we added to our holdings in foreign equities by
selling a small portion of our U.S. equity assets. We’ve been discussing this trade for some
time, and my feeling was that with the dollar as strong as it is now, this was as opportune a
moment as any to take a few of those dollars off the table here and use them to buy better-
valued stocks denominated in weaker, non-dollar currencies.
To that end, on Friday, Mar. 20 in the Growth Model Portfolio, we sold one-fifth of our shares
in S&P MidCap 400 Growth ETF at $106.57 and one-fifth of our shares in Selected Value
at $29.17. Now, because it often takes three days to settle ETF trades, I waited until all the
proceeds were in and added to International Growth at $23.09, its closing price on Tuesday,
Mar. 24. This brought our allocation to International Growth to 12% from 3%.
To try to match those trades in the Growth Index Model Portfolio, we sold one-sixth of our
shares in S&P MidCap 400 Growth ETF at $106.57 as well as one-sixth of our shares in
S&P MidCap 400 Value ETF at $100.06 and, again, because of settlement times, I used the
proceeds to add to Total International Stock ETF at its $51.59 closing price on Tuesday, Mar.
24, likewise bringing that fund’s allocation up to about 12% from 3%.
In the Conservative Growth Model Portfolio we sold one-fifth of our shares in S&P MidCap
400 ETF at $103.55 and added the proceeds to International Growth on Tuesday at $23.09,
bringing our allocation from about 6% to around 9%.
Finally, in the Income Model Portfolio, we sold half of our shares in MidCap Index at
$35.55 and used the proceeds to purchase more shares of International Growth at its Friday
price of $23.06, bringing that allocation up to about 6% from 4%.
Again, in pricing trades in the Model Portfolios I am acting like the investor I am, rather than
ignoring the settlement times that some investment advisers might. In the cases I’ve cited, we
paid slightly higher prices waiting three days, but the impact was fractional and should make
absolutely no difference in our long-term returns.
As noted in the Hotline, this is the first trade recommended in any of our Model Portfolios
since August 2013. Our strategy is to buy and hold a diversified selection of funds for the long
term, and quite frankly, it seems to be working just fine.
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