)I need to prepare a ROTH IRA portafolio
Create a Roth IRA retirement portfolio with an investment of $6,000
STEP TWO Create a Roth IRA portfolio
Invest the $6,000 you have in your Roth IRA using ONLY the funds or Exchange Traded Funds on the Vanguard Select Funds list and complete the Google sheet portfolio.
You can set your risk tolerance and asset allocation using any of these tools:
[ Vanguard Questionnaire https://personal.vanguard.com/us/funds/tools/recommendation
Here is Schwab’s Questionnaire:
Schwab InvestorProfileQuestionnaire 2021.pdf Download Schwab InvestorProfileQuestionnaire 2021.pdf
also,
http://www.schwabmoneywise.com/public/file/P-4038840/InvestorProfileQuestionnaire.pdf (Links to an external site.)
Investopedia: Weighted Average https://personal.vanguard.com/us/insights/saving-investing/model
How to calculate a weighted average : https://www.wikihow.com/Calculate-Weighted-Average
Weighted Average Calculatorhttps: //www.rapidtables.com/calc/math/weighted-average-calculator.html
2. Use only the funds from the Vanguard Select Funds list: (and don’t worry about the minimum investment for this assignment.)
https://investor.vanguard.com/mutual-funds/list#/select-funds/asset-class/month-end-returns (Links to an external site.)
3. How to fill out the Portfolio Template
The Google Sheet template on Google Drive is here (Links to an external site.)
You have $6,000 to invest: all your holdings must total $6,000. All the percentages must equal 100%
To calculate the dollar amount in each fund, multiply $6,000 by the percentage you will hold.
For example, if you want to hold 80% of your portfolio in stocks, multiple $6,000 x 80% (0.8), for $4,800. This is your total stock allocation.
If you are going to hold only one stock fund with a NAV of $25, then $4,800 divided by $25, gives you 192 shares
Look up the fund’s statistics on Vanguard.com
There are some definitions on the Google spreadsheet explaining the columns.
The bottom row “Total Portfolio” needs some explanation: Columns (8)-(11) totals should be weighted averages of the funds held where the weight is the “% of Total Portfolio”.
You guys know this as class grades are calculated using weighted averages, though here is some information for you.
Investopedia: Weighted Average (https://www.investopedia.com/terms/w/weightedaverage.asp
How to calculate a weighted average (https://www.wikihow.com/Calculate-Weighted-Average)
Weighted Average Calculator (Links to an external site.)
The weighted average will give you an average accounting for the fact that you may be holding more of one fund than another.
STEP THREE: Write up how and why you created the portfolio.
As a guide, give brief answers to these questions in order. This should be less than one page, but show me you understand the material. Link to Google doc (Links to an external site.)
What is the purpose of this investment? When will these funds be needed?
What type of account are you putting these funds into?
What mutual fund company are you using for your Roth IRA
What is the minimum investment on your funds?
What is your investment objective? (growth, balanced or income)
What is your risk tolerance? How comfortable are you withstanding market volatility? (Hint: you can comment on the results of the questionnaire)
What is your asset allocation?
Given your asset allocation, what is your expected long-term return (nominal)? (Hint: Use the Allocation, Returns and Risk.pptx) Download Allocation, Returns and Risk.pptx)
For your entire portfolio, what is the expense ratio? In other words what will it cost in percentage terms to hold this portfolio? (Hint: It is the weighted average expense ratio on your portfolio)
How will you evaluate the performance of your portfolio over time? Hint: What benchmark or index will you compare it to?
Investopedia: Benchmark (Links to an external site.)
How will you manage your portfolio over time?
Hint 1. : Will you use dollar cost averaging to routinely deposit funds into the account?
Suze Orman, p.233
Investopedia: Dollar Cost Averaging (Links to an external site.)
Hint 2: Will you rebalance your portfolio on a regular basis?
Investopedia: Rebalancing