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I have put all my money into VFIAX (Warren Buffet's favorite). Is it a good idea?

#1
What do you guys think about this?
 
Please let me know your opinions?
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#2
I always tell others:

If you don't want to bother with stock selections on your own but want to be in the market, then the Vanguard 500 index is the way to go. With that assumption, your doing OK.
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#3
I really am having a problem with the "all my money" part of this.  You all do realize that, even for an index fund, there will be a certain amount of buying, selling and dividends within the fund . . ..  thereby creating a tax liability.  If all your money is in the fund (with, presumably, gain and dividend reinvestment triggered), then what assets are you going to use to pay the tax burden this one-fund portfolio is going to generate?
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#4
(11-22-2018, 01:24 AM)tbcg12 Wrote: I really am having a problem with the "all my money" part of this.  You all do realize that, even for an index fund, there will be a certain amount of buying, selling and dividends within the fund . . ..  thereby creating a tax liability.  If all your money is in the fund (with, presumably, gain and dividend reinvestment triggered), then what assets are you going to use to pay the tax burden this one-fund portfolio is going to generate?

Agree, I didn't say it, but I was assuming he meant "all the money he wanted to invest" there should always be a cash reserve of somewhere min of 1-3 yrs
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#5
I like VFIAX because of the low expense ratio and the ease of having a simple portfolio of quality investments. I use ETF's for my grandchildren's UTMA accounts, because I think there are opportunities for dividend growth and exposure to a broader spectrum of the market. However, VFIAX is another one I would consider for a good base in accounts I manage for family members and a few friends.
 
For more market exposure you might want to consider adding some:
VIG - Vanguard Dividend Appreciation Fund
DVY - for some dividend growth and midcap exposure. This does have a larger exposure to energy and utilities, but I am in it for the dividend growth and am not as concerned about interest-rate pressures because this is a long term holding with dividends reinvested.
ITOT. (iShares Core S&P Total U.S. Stock Market ETF)

   
   
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#6
The ONLY time it is "okay" to put 100% of your money into any one fund, stock, group, etc. is if there is ZERO chance you will want to spend any of it. If there is a major market correction, and they DO happen, I have lived through 3 of them, then you are best to have some diversification because there are many good, stable stocks that will fall much less than this fund. There is a common mistake out there that having a fund is being diversified. ONE fund is ONE investment. I don't have a problem with funds. I have 30 stocks and about 20 funds. If you wish to play funds only, you should have at least 5 with very different objectives. That is more diversified. Then, if you need some cash during a 5-year downturn, you will be able to draw from the one that is doing the best.
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#7
(11-28-2018, 03:27 AM)yandz Wrote: The ONLY time it is "okay" to put 100% of your money into any one fund, stock, group, etc. is if there is ZERO chance you will want to spend any of it. If there is a major market correction, and they DO happen, I have lived through 3 of them, then you are best to have some diversification because there are many good, stable stocks that will fall much less than this fund. There is a common mistake out there that having a fund is being diversified. ONE fund is ONE investment. I don't have a problem with funds. I have 30 stocks and about 20 funds. If you wish to play funds only, you should have at least 5 with very different objectives. That is more diversified. Then, if you need some cash during a 5-year downturn, you will be able to draw from the one that is doing the best.

With regard to your statement about not being diversified when investing in one fund, I disagree , with respect. If you purchased every stock in the sp500 most would consider that diversified. The vanguard 500 does that in one fund. The only possible argument, IMHO against this is that one fund, one company - they could go belly up - if that is your concern - ok - but aside from that (which realistically I would assign a near zero probability) the mentioned fund is very suitable for his need, given the assumptions stated.
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#8
Kwill
The problem is, you cannot in any way, shape, or form, sell just ONE or TWO of the stocks in that fund at any one time, such as a major market slump. You can ONLY sell the fund at whatever price it is. You do not have any opportunity to choose from some investments that are less affected by a down market when you need money. When someone is truly diversified, you will possibly even have some stocks or funds that go UP when others are fall. One fund, of any kind, will never be proper diversification. Yes, this fund, and many others, give you a broad group of stocks in your basket. That is great while the market is rising. But when it drops for a long period, if you want to liquidate a little for some cash, ONE fund will only give you ONE set of losses or profits to sell. Thus, there is absolutely no diversification there.

Like I said before, it's okay as long as "there is ZERO chance you will want to spend any of it." But, it is still not diversification. No investor should ever be 100% into any one fund, stock, commodity, etc.
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#9
I still don't get it. If I own 500 stocks and some go down and I choose to sell those to raise cash, vs vanguard 500 goes down and I sell some of the fund to raise cash.
 
I don't see the difference. in fact, by selling some of the 500 stocks you will be less diversified. By selling some of the vanguard, your diversification remains the same.
 
I concede your point if you are thinking that you can outperform the market by selling the losers and buying the new winners, or perhaps some capital gains tax advantage, but then we are no longer following the original posters question and assumptions stated, i.e. being in the market w/o the bother of having to do stock selection.
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