money market question

Money you need in the short term should be in bonds not stocks.

Why not money to Vanguard? They have plenty alternatives and one brokerage is more simple.

This is a reasonable allocation for a conservative investor but remember by failing to invest in stocks, you may trade risk of loss in the short term for risk of running out of money in the long term.

I don't know these funds but I would avoid any mutal funds that have front end fees.

You can get resonable diversity with three stock index funds such as large cap, mid cap and small cap. Don't confuse diversity of brokerages with diversity of stock holdings.

Odd. Your subject speaks of a "money market" question, but those funds are balanced bond/stock funds. Why are you considering them?

Wellesley (VWINX) currently is split 60%/39% bond/stock, more conservative than the allocation of your other holdings.

But Wellington (VWELX) is split 33%/65% bond/stock. If you are "VERY conservative", you definitely want to steer clear of Wellington.

In any case, I see no point in considering any loaded fund of such general character. There are plenty of good quality no-load funds with the same styles.

But if you truly want to put the money into a money market fund, you should be looking at the many MMFs available from Vanguard and others. For Vanguard funds, go to

Like the previous Gentleman/Lady said I would put money in 3-4 Vangaurd Index funds like Vangaurd Total Stock market Index and Total Bond Market index if you really want to keep things simple. If you want to get a little fancy I would put some money in International Stock like may be 5%. But the key is to invest money that incurs low cost and low tax burden.

I would stay away from any of the mutual funds they have various types of loads and due to frequent churning of portfolio they are not tax efficient.

Good luck

Why do you think these are load funds? They're not.

I didn't realise these funds were loaded? You know they aren't, right?

Which is where you'll also find the aforementioned Wellington and similarly named Wellesly

If you really want to simplify, I would suggest looking in to a target retirement fund. These funds are great for someone who wants to keep their retirement assets simple and not actively manage them. Here's the list from Vanguard:

- In order to really capitalize on the auto-balancing feature of these funds, you should really consider putting ALL of your retirement assets in. That can be a scary prospect, but the alternative is balancing your assets yourself, which sort of defeats the purpose of investing in such a fund.

- Personally, I think these funds are conservative to begin with. For example, the 2045 fund (for people age 24-28) is invested 10% in bonds. I think it's ridiculous for someone under 30 to put any of their retirement money in bonds.

- That being said, if you want a more conservative or more aggressive mix, you can always choose the "wrong" fund. You said you're semi- retired, so maybe that puts you in the 2005 fund (45% stock). But if that's too aggressive for you, you could pick the income fund, instead (30% stock).

--Bill

Just because you have invested only via a couple of funds doesnt mean your investment itself isn't diversified. The holdings within either of those funds themselves are spread out pretty well. They are, respectively, 60/40 bonds/stocks and

You might get greater diversification by simply investing in, say, a pair of index funds - one a Lehman Agg bond index and one a total stock market index, but the marginal difference in diversification wouldn't be particularly big.

In general, in this kind of conversation, "diversification" means "exposure to various market segments and sectors", not necessarily "investing via more than one fund or more than one fund company". Which makes sense given the types risks that one generally intends to reduce through that diversification.

Both of those Vanguard funds are pretty well respected and long established funds. Both also have very low expense ratios, and both throw off some income as well as investing for some moderate capital appreciation. One's just a little more conservative (and throws off a somewhat higher current yield) than the other.

If you're investing for the long term - even if during that long term you need current income - you probably need to put much of that cash to harder work than just sitting in a money market fund. Either of those two funds could be a very reasonable alternative.

They're not loaded. They may or may not be the right asset allocation for our Original Poster (though at present, she seems to be about 50% cash, 25% stocks and 25% bonds overall - is that really where she wants to be?).

Until she figures out how she actually wants to allocate, it'd probably make sense to roll that money into one of the Vanguard money market funds - inasmuch as she already has investments with Vanguard and wouldn't have to start from scratch opening another account somewhere - and Vanguards MMFs are quite good anyway.

Those are all good points. At Vanguard there's also the Balanced Index Fund and the LifeStrategy funds.

-Tad

OK. Now I'm confused. I thought Vangaurd funds were no load, but you are the second person who said they were loaded. As it happens I already have money in the V. Total Stock and V Total Bond in my other

Thanks

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to

You are absolutely right. I don't know why I said "Money Market" when I meant "Mutual Fund". Sorry.

As for the Vanguard funds, they are all no load funds.

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Great advice.

Thank you all!

My mistake. I misread a word on the overview pages, and I was unable to access the prospectus due some problem with my browser configuration.

There are a lot of words on the web page. I was pointing the OP to the MMFs.

You're right and they're wrong when you say that Vanguard funds are no load.

It is not quite true that there are "no management costs" for index funds; someone still has to arrange for the fund to track the index. However, the costs are very low compared with actively managed funds. For example, Vanguard's total stock market index fund has an expense ratio of 0.19% and their total bond market index fund has an expense ratio of 0.2%.

In the long run, your money market funds will only just keep up with inflation (and worse than that after tax).

Be wary of that. I would say in your situation you need at least

To be honest, I would split it in 2. 1/2 in each fund. You would be roughly 1/2 in bonds, and 1/2 in stocks at that point.

This has the advantage of simplicity, and of roughly achieving your goals. In a very bad year, you might lose 20% of your portfolio value. In a good year, you might gain 20%. On an ongoing basis, you should get a 3-4% yield, (plus capital return of 0-5%), which rises along with inflation (or a little faster).

Would you mind explaining what expense ration means? Sorry, but I'm clearly not well educated in investing. I assume the lower the better.

I see for the Wellsley fund it's .25 and for Wellington .3

It's the fraction of the fund's earnings that go into fees. Usually what happens is that it's deducted from dividend payments, so you don't actually see it. So, for example, if you look at VFINX, the Vanguard S&P 500 index fund, its 0.18% expense ratio means that over the long term, you should expect its performance to be 0.18% (per year) worse than the actual S&P 500 index.

If you have $100,000 or more to invest, you can buy VFIAX instead of VFINX. That fund also tracks the S&P 500, but it has an expense ratio of 0.09% because its larger customers means that it spends less money per customer on maintenance. So you would expect VFIAX to outperform VFINX by 0.09%, the difference between the expense ratios of the two funds.

And indeed, if you look at the funds' performance, you will find that in

All other things being equal, low expense ratios are good.

Note that it is a proportion of assets, not earnings. If only the fees were based on earnings (though I think a few are).

-Will

Right you are; sorry about that.

Actually, because it's not a fee in the ordinary sense, it's not "based on" anything, really -- it's just what the fund costs to run divided by the total assets. And at least for Vanguard funds, it's not explicitly charged as a fee -- it's just deducted from the dividends that are credited to fundholders (or maybe sometimes used to adjust the NAV).