Direction needed! Which vanguard funds for my brokerage account? (VGSLX, VIGAX, VFIAX, MGK)

Investing
#1

Hello, I am hoping to get your advice.

My background: I am 32-year-old military pilot that started off as an enlisted firefighter for the first 9 years and been a pilot for only 4. Currently, I have $160k saved with no debt of any kind except for a house. My income is $9.5k a month before taxes and $7.8k a month after taxes. My bills/house mortgage I split with my brother and streaming services/phone bills total about $1.8k a month leaving me with $6k a month to invest/save/live on. I plan to save $3k a month and live off $3k a month. I am trying to play catch up as I feel I am behind the curve for where I should be. I had some bad luck/decision but that totaled $60k but I am working to get in where I should be.

The $160k is broken down in the following:
$45k in emergency funds
$32k in military Roth IRA
$52k in vanguard Roth IRA
$25k in 4 vanguard index funds
$5k in vanguard money market fund sitting for opportunity investments

I recently bought these 4 index funds and plan to invest every month in each. Do I need to make any changes so I am not redundant in my investments or is it diversified enough? Do I need to have fewer funds or more?? Should I invest more that 1k out of the 3k a month in the index funds? The other $2k will be divided between my ROTH Ira ($6k max), Military IRA ($19.5k max), and Emergency fund. Do I need to invest/save more? I retire from the military in 6.8 years from now and should receive 50% of my base pay at that time each month of retirement. I can’t help but feeling like I am very far behind the curve. I would like to set myself up with the right funds, invest automatically, and not pay much attention to it anymore and make my money work for me.

Vanguard Funds totaling $25k (plan to invest $250 dollars a month in each):
VGSLX - Vanguard Real Estate Index Fund
VIGAX - Vanguard Growth Index Fund Admiral Shares
VFIAX - Vanguard 500 Index Fund Admiral Shares
MGK - Vanguard Mega Cap Growth ETF

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#2

Hey Zaid!

Man… the last question I answered was about a 70 year old who is still working with nothing invested and what should he do. I was kind of at a loss, and your question stands in stark contrast. You’re killing it dude. PFC is all about helping 32 years olds get in your position so 70 year olds aren’t in his.

That said, for some context, if you invest the $160K you have right now and get a 7% return and you NEVER INVEST ANOTHER PENNY, at 65 you’ll have about $1.6M. When you add in your future investments and military pension, the position of financial strength you will be in gets ridiculous. Very nice work. You’re killing it on following the two rules. Keep it up.

Regarding your investments. Broad strokes, they’re great and if you do nothing else you’ll be very wealthy. That said I don’t particularly LOVE the allocation. Let’s look at what you’ve got:

  • VGSLX: Real estate. I don’t hate it. 25% might be a little high. A critique of real estate index funds is that they track closely with the stock market so you’re adding complexity but not growth. But it’s fine (especially if your TSP/other investments don’t have a real estate component)
  • VIGAX: This fund invests in large US stocks (e.g. Microsoft, Apple, Amazon, Google)
  • FVIAX: This fund invests in large US stocks (e.g. Microsoft, Apple, Amazon, Google)
  • MGK: This fund invests in large US stocks (e.g. Microsoft, Apple, Amazon, Google)

So those last three are very similar. Legit those 4 stocks (and many more) are held in every one. And in there you’re missing smaller US stocks, international stocks and bonds. I might suggest something like this to you if you want to go with an all-US, no bond portfolio:

  • VGSLX: 25%
  • VTSAX: 75% (simpler, more comprehensive and cheaper than the other three combined)

Or, you can do something like this:

Or you could do 25% real estate, 75% TDIF if you want the real estate component.

I tend to think simplicity has a real positive financial value, so I might go with the 100% TDIF route. All that said, we’re fine tuning here. You’ve done the important things extremely well (live below your means, invest early and often in low cost index funds). Keep it up.

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#3

Thank you so much for the encouragement and for giving me solid advice. It made me feel better and reading the other post you were talking about does put things into perspective. But what I did take from his post is that its better to get started late than never. I was stressed out about starting at 25, I thought I was late to the game.

I also do not care about the real estate index fund. I will follow your advice and get rid of the Real Estate fund and invest it into 1 or 2 index funds total to make it simple.

VIGAX looks very appealing compared to VTSAX based on the return history but I am honestly not sure what I am looking at or if I’m missing the important component. I am guessing the point is VTSAX is more diverse and minimizes risk in economic uncertainty? Would it be logical to invest in both as a 75/25% so I can hit everything?

Right now the plan is to move the VGSLX Real Estate Index and MGK ETF into VIGAX/VTSAX? Just not sure on the allocation or if it once again doesn’t make sense to have both. I am honestly only looking at the returns of VIGAX compared to VTSAX.

Currently the $52k Roth IRA with Vanguard is invested all in 2055 TDIF VFFVX, and I max out the 6k a year for that. :smiley:

Thank you for all of your advice and help so far! It help me realize how redundant my current allocation is.

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#4

I just realized something.

Since I have VFFVX as my Roth, then me investing all in VIGAX will give me all the diversity/allocation I need right and keep it super simple?

#5

Yeah… VIGAX has done great the last few years. But you don’t care about that. You want to buy the thing that is going to do great the NEXT few years. (VIGAX follows a “growth” index which covers more high potential growth stocks which have done awesome lately… like Microsoft, Amazon, Tesla, etc. But by buying that, you’re not buying “value” stocks which are companies that are likely undervalued at their current prices. Historically, growth and value indexes perform about the same, although they oscillate between which does better at any given time)

So basically, I’m accusing you of chasing past performance. You’re trying to buy the thing that JUST did good, instead of investing humbly and admitting you don’t know what’s ABOUT to do good, so the only way to maximize your own wealth is to diversify and minimize costs.

I stand by my original recommendations. Fill up every account with VFFVX :slight_smile:

And if you’re super in love with VIGAX, limit it to at most 10% of your total portfolio. I promise to feign shock and surprise when you post here in a few years asking if you should drop it because it has been underperforming the market. :wink:

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What is the number 1 vanguard fund you would advise a 29 year old to invest in? I am currently putting money into the target date index fund 2060 but someone told me I should move it to the vanguard US growth fund. What do you think is smarter?
Common advice here is to invest in index funds that track the S&P500, but NASDAQ seems to perform better. Why the favoritism towards S&P over NASDAQ?
Is this ETF FTEC
#6

You’re right, I’m guilty of chasing the past performance and looking at the currently best performing numbers. It’s a bad habit I’m trying to see past and look more towards long term gains.

I will follow your original advice so I won’t have to ask again in a few years and think more towards long term. :slight_smile:

Thank you again!

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#7

Hi, I’d like to piggy back off of this and ask what the difference is between VFFVX and VIVLX. Looking at their portfolio comparison, it looks like they’re more or less the same. It seems like VIVLX has the word “Institutional” meaning you can only invest in this through an institution (employer) vs. through a brokerage account or Roth IRA? I tried to google but would love confirmation to be sure I’m understanding this correctly. Thank you for all this info you’re sharing!

#8

Welcome @ashfrica!

Yes, exactly. They’re basically identical, just differ in who buys them. VFFVX is for individual investors with a minimum investment of $1,000, and carries an expense ratio of 0.15% (very low). VIVLX is for large institutions carries an expense ratio of 0.09% (even lower!) But in order to qualify for that slight discount VIVLX has a minimum investment of $100,000,000. OUCH. If you have that much, please give us advice on building wealth!

But seriously, you got it exactly right. Huge company 401k plans, pensions, hospitals, who knows invests in the big one. But VFFVX is perfect and still very cheap for individual investors! :slight_smile:

#9

Say I have about 10k just sitting in a money market account, is it better to invest that 10k over the year to buy at different prices or to invest it in one lump sum?

#10

Thank you for the clarification! I really appreciate your content as a few years ago I had uninvested money sitting in a Roth IRA and had no idea what I was doing with my 403b (it was sitting in annuities gaining nearly nothing).

Wow that’s a large minimum investment for the VIVLX! I can barely say numbers that big “a hundred thousand thousand… a thousand thousand is a million…a hundred million”. Anyway I definitely do not have that much but for some reason can buy VIVLX through my school’s 403b. Confusing, but it works for me! I was considering this TDIF vs. VFIAX (Vanguard 500 Index Admiral) to chase the even lower 0.04% expense ratio but it seems like the TDIF will be a good set it and forget it one fund portfolio. Thanks for sharing your wealth of knowledge!

#11

Yeah, you’re basically participating in the group discount through your school. And I think the target date fund is a wise, choice, although an S&P 500 fund would be fine too. I have a video on the difference!

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