Author Topic: Index Fund Investing Beginner  (Read 3158 times)

Mr_Muscle_Mustache

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Index Fund Investing Beginner
« on: August 11, 2015, 06:24:44 PM »
22 year old male, I have $1000-$3000 to dump into a vanguard index fund. Hopefully someone can offer some advice on which specific index fund would be the best for me? Around a 3-5 year total investment time period. Since I'm young, I want to do more in stocks than in bonds, but not crazy risky. Also, should I pick a fund that is currently on the decline (a big dip down) or one that has been pretty steadily on the rise?

Specific funds and why you would go with that specify fund would be very helpful!!

-Mr. Muscle Mustache

fb132

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Re: Index Fund Investing Beginner
« Reply #1 on: August 11, 2015, 07:09:54 PM »
You shouldn't invest in stocks if you are planning to withdraw in under 5 years.

forummm

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Re: Index Fund Investing Beginner
« Reply #2 on: August 11, 2015, 07:35:21 PM »
You say 3-5 year investment time period. What's the need to pull it out? If it's a flexible time period, you could definitely put it in stocks if you're OK with it fluctuating. But it also sounds like you don't have any experience and are somewhat risk adverse.

https://personal.vanguard.com/us/FundsInvQuestionnaire
https://personal.vanguard.com/us/funds/tools/recommendation
https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-risk
http://www.bogleheads.org/wiki/investment_policy_statement

StockBeard

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Re: Index Fund Investing Beginner
« Reply #3 on: August 12, 2015, 03:33:06 PM »
Look at the three funds portfolio on bolgeheads, which has a list of recommended funds for simplicity:
https://www.bogleheads.org/wiki/Three-fund_portfolio

But as others mentioned above, I'm not sure your 3~5 years target is realistic for stock investment. The return is great on average, but it could be terrible over such a short period

stlbrah

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Re: Index Fund Investing Beginner
« Reply #4 on: August 12, 2015, 04:52:28 PM »
I like the Vanguard VASGX blended index fund. I read about it in a mutual funds book a few years ago and have liked it since.

 It basically is balanced how I would do it if I were to choose the funds myself ~ 80/20 stock to bond. Blend of US and International. Everything in it is an index fund - no rip off fund manager. 0.17 expense ratio. Also good if you only have $3k, because you would need $10-12k to buy similar funds individually (unless you used ETFs and wanted to pay a fee to deposit).


Mr_Muscle_Mustache

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Re: Index Fund Investing Beginner
« Reply #5 on: August 14, 2015, 08:02:35 AM »
You guys are right, I am inexperienced in investing. This will be my first time, which is why I'm looking for some guidance! I suppose there is no need to cash out within 5 years, I just like the idea of having flexibility with my money. I suppose at least 10 years is optimal? Taxes on my withdrawal are another concern, what is the tax % if I withdrawal some of the earned dividends?

How does something like a 60/40 stock/bond fund seem?
The VASGX seems a tad risky due to its 80/20 split, maybe I'm wrong though.

The other thing I would like to know is if it is better to invest in an index fund that is declining in value right now, or one that has been on a steady incline.

MsPeacock

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Re: Index Fund Investing Beginner
« Reply #6 on: August 14, 2015, 08:33:12 AM »
I think first figure out what this money is for - e.g. is it for a downpayment on a house in 5 years, for tuition in a couple years, savings for retirement, general savings for whatever, etc. So what are you plans w/ this money?

And, yes - if you have capital gains from selling in a few years you will need to pay taxes on those gains (basically you buy $1k worth of stock and it increased to 2k and you sell, you owe tax on the 1k gain - which is like 20% or something right now.)

Then consider what investment would make sense given your goals.

I would not recommend investing this money and spending dividends - they won't amount to much (most increase in value is going to come from the value of the stocks increasing over time). Better to set w/ automatic reinvestment of the dividends. If you need the money from the dividends then probably financially you shouldn't be looking to put your money in the stock market.

slugline

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Re: Index Fund Investing Beginner
« Reply #7 on: August 14, 2015, 08:39:15 AM »
Yes, generally a time horizon of 10+ years is best for stock investments. This is money you put away and almost forget it's there for a while. Historically, some shorter time periods have shown rocky results. So they're not ideal short-term saving/investing.

This is related to your other question: When you are asking about judging an index fund's performance "right now" what time period are you looking at? If the answer is -- let's say, even the past five years or less, then you might still be thinking short-term, and likely no stock index fund is appropriate, because there's no good way of predicting what the stock market will do in the next five years or less.