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Originally Posted by Dunit35
First off. I’m not a big investor. I have a separate police retirement growing but started a Roth IRA in December. I don’t put much in it, $100/every two weeks. I noticed it’s been dropping all week. Should I continue putting money in it or save my money since it’s tanking? I’m not negative yet but should be next week when this continues.
I only buy two mutual funds through Charles Schwab. SWTSX and SWISX. Mainly because I have no idea what I’m doing and just saw these on other forums.
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Few things. You're doing the right thing.
I don't know what all you know, so if you already know it, accept my apologies.
What you have is a ROTH IRA. Understanding how it works impacts how you view it.
A ROTH IRA is a retirement account, meaning there are penalties if you pull it out before 59.5 years old That gives you a long term approach. The other component of ROTH that is important to know is that contributions go in after tax. Meaning you have paid tax on all contributions...BUT everything that comes out is tax free. So presuming there are capital gains, that is tax free. So the perspective to adopt here you are accumulating as many shares as possible because you have a long time for those shares to appreciate and capture the tax free gain.
Look up Dollar Cost Averaging. That prevents trying to time the market (and potentially being catestrophically wrong). Since you have time, I'd just buy it every 2 weeks and not even look at the balance. Just let it go.
Here is a 90 year graph of the S&P 500. At any point in history, if you have a 30 year time window, it will appreciate. Plus, if you're dollar cost averaging, you're buying more shares as the price goes down, so if it takes off, you're growing a bigger position. One way to think about it is when the market goes down, you're buying on sale. Same asset, cheaper price.
NOTE: I'm not licensed. I can't advise you, this is just what I'd do.
As far as the funds, I'm not a big International fund guy. There hasn't been a big time when International has outperformed American ones. But almost every fiduciary or CFP will tell you international is important to a diversified portfolio. They're probably correct. I just disagree.
I'm also a big S&P500 guy. But I ran a quick backtest of Schwabs S&P500 Index fund (SWPPX) to your SWTSX, and there isn't much of a difference so I think you're good there.
Backtest Link
If it's me (and it's not - it's very much you. We may have different risk tolerances), I'd switch it up a bit. What you have is about as diversified as you can be. Which is fine if that's what you're after. Since you have your pension, you have the base covered as essentially a risk free return, so I think you can be a little less conservative with your IRA. If it's me, I switch the funds up a little bit, and shoot for a little higher return and pull off some diversification. If it's my account I put 50% in SWPPX (S&P 500 Index Fund) and SCHG (Schwab Growth fund).
I ran a backtest on it, and the more aggressive approach yielded 4% better. Those haven't been around too long, so the test only goes back to 2010, so it doesn't look that much different, but it will over time as compounding happens.
Backtest link.
I feel pretty confident about the DCA comments, but probably less so about picking funds. I can be pretty wrong on that, but given what you described, this is what I'd do.