Author Topic: Investing and retirement advice for a relatively recent college graduate  (Read 399 times)

ashaw

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Hello all, I am new to this forum, so I apologize if this should be in the Case Study section, however I didn't feel I have a super long story to summarize. Also, I realized I posted twice...that was an accident. I am seeking advice on investing in the stock market and how to start out, and retirement plans. I will get into that more below. But first...

Background:
I am a fairly recent college graduate (BA, September 2018). I am 24 years old. I have been working full time at law firms just to see if the legal field is right for me. Almost a year into working full time now, I've decided to pursue another route and much stronger passion/interests. That means I'll be leaving to a different city soon across the country and won't be living at home anymore (I've been living at home for about 4 months, the other months I stayed near my collegetown for a little while working). By the time I move out in a few months from now, I'll have saved close to approximately 8k. My future potential job will have a salary of approximately 45k, maybe more but that's highly unlikely.

Investing inquiry:
I have read The Intelligent Investor by Benjamin Graham (quite dry!) and may buy A Random Walk On Wall Street as well to get more insight. I've also researched online a lot, asked my brother for advice/questions (he's a finance guy), and try to listen to Wall Street Breakfast podcast. This week I will begin reading articles online here as well.
I'm currently investing a few hundred in one stock right now (that my brother advised me of) but want to actually start getting into it. By that I mean I am going to put money into an ETF or index fund like VTI, S&P 500 (but that's very expensive right now for my income), or another not mentioned. My idea behind this is that it's a good route for a beginner to get his/her foot in the door sorta speak, while I continue research/learning over the next year or so. What do you think about this? More importantly, which one/s should I start building in and why? How much should I put aside into the index fund? How much woudl you put aside? Furthermore, after say 6 months or a year from now, I want to invest more elsewhere. What step would you take next if you were in my position?

I haven't started a 401k through my work yet as I feel I don't make enough right now to make it worth it to put towards that, plus I'll be leaving jobs shortly. Also, my company does not match. With that, another question I have is when should I start a Roth IRA and/or Roth 401k? How much should I put into retirement account/s if my salary will be between 42k to roughly 60k over the next two or three years? Retirement planning regarding 401k and similar things is more new to me than stock market investing so any advice here is very much appreciated.

Lastly, do you recommend apps or companies I should start using? I use to use Robinhood but ditched that for a bank/investment company so I can have my few finances in one institution for now. Also, I've heard of Wealthfront but know little about them besides that they're a robo advisor investment service. When would I use services like that?

That's all for now but I will likely have more questions.

Thanks so much! Excited to be a part of the community here!
« Last Edit: July 09, 2019, 04:04:00 PM by ashaw »

FI45RE

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Hi, and welcome to the forums!

I didn't see you mention it, but have you read all of the MMM posts? If not, that's a great place to start. Otherwise, for a better handle on stocks and the market in general, read https://jlcollinsnh.com/stock-series/. You say you are invested in "one stock," but you would be better off investing in a broad-based index fund, especially at your age. You can't beat the market. Don't try.

You say you haven't started a 401k through work as of yet. Does your employer offer a matching program? If so, and you are not contributing to your 401k, you are leaving free money on the table.

Also, the Investment Order (https://forum.mrmoneymustache.com/investor-alley/investment-order/) is helpful. Sorry, I've forgotten how to imbed links in text on the forum (anyone want to remind me? :) )

secondcor521

  • Handlebar Stache
  • *****
  • Posts: 2165
  • Age: 50
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Starting to invest in a low-cost, broad-based index fund or ETF is an excellent idea.  Over the long run the total market and S&P 500 provide very similar returns.  VTI and SPY, which are ETFs, and VTSMX, VFINX, SWTSX, and similar funds are all fine.  Pick one of those and start.

You should start a Roth IRA or Roth 401(k) yesterday.  ASAP.  Decide how long you want to work, then look at the shockingly simple math to early retirement post here on MMM, and set aside that percentage.  So if you want to work for 19 years, set aside 45% of your salary and live on the rest:

https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement

Good luck!

MDM

  • Walrus Stache
  • *******
  • Posts: 9411
Also, the Investment Order (https://forum.mrmoneymustache.com/investor-alley/investment-order/) is helpful. Sorry, I've forgotten how to imbed links in text on the forum (anyone want to remind me? :) )
Like this: Investment Order?

The syntax is [url=https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153]Investment Order[/url]

If you find yourself wanting to imbed links often, there are browser add-ins to facilitate it.  E.g., see this post.  It does work, despite the skepticism exhibited in that thread. ;)

tawyer

  • Stubble
  • **
  • Posts: 125
  • Location: SF Bay Area
  • JFDI
Great advice so far. I recommend "A Random Walk Down Wall Street", but let's borrow it from the library. While you are waiting, set up your 401k and buy some VTSAX.

Joel

  • Pencil Stache
  • ****
  • Posts: 773
  • Location: California
The main piece of advice I give to recent college graduates is to invest in your future with each raise/bonus. I funneled each raise directly into my 401k until I was maxing out. Once that was on auto pilot, then and only then was I willing to increase my spending in other areas.

FI45RE

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Also, the Investment Order (https://forum.mrmoneymustache.com/investor-alley/investment-order/) is helpful. Sorry, I've forgotten how to imbed links in text on the forum (anyone want to remind me? :) )
Like this: Investment Order?

The syntax is [url=https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153]Investment Order[/url]

If you find yourself wanting to imbed links often, there are browser add-ins to facilitate it.  E.g., see this post.  It does work, despite the skepticism exhibited in that thread. ;)

Thanks, MDM!

ashaw

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Starting to invest in a low-cost, broad-based index fund or ETF is an excellent idea.  Over the long run the total market and S&P 500 provide very similar returns.  VTI and SPY, which are ETFs, and VTSMX, VFINX, SWTSX, and similar funds are all fine.  Pick one of those and start.

You should start a Roth IRA or Roth 401(k) yesterday.  ASAP.  Decide how long you want to work, then look at the shockingly simple math to early retirement post here on MMM, and set aside that percentage.  So if you want to work for 19 years, set aside 45% of your salary and live on the rest:

https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement

Good luck!

Thanks! The article is helpful. I'll be working for several decades I'd say lol...
So since I'm leaving my job shortly, I won't be starting a Roth 401K yet. I want to start fresh, if I can at my new future job...
However, should I start a Roth IRA with a broker right now? If so, what broker is recommended? Is Schwab fine?

Thanks everyone for the advice so far. I'm going to keep checking here incase others chime in!!

MDM

  • Walrus Stache
  • *******
  • Posts: 9411
However, should I start a Roth IRA with a broker right now? If so, what broker is recommended? Is Schwab fine?
In alphabetical order, Fidelity, Schwab, and Vanguard are the "usual suspects" when brokerages are recommended.

A Roth IRA is probably appropriate, but if you happen to be close to one of the saver's credit tiers a traditional IRA might be even better.  You can make a Roth IRA contribution now, and recharacterize to traditional if favorable when you know your 2019 filing situation.

Freedomin5

  • Handlebar Stache
  • *****
  • Posts: 1922
  • Location: China
I kind of feel like youíre putting the horse before the cart a little bit, unless Iíve misread your original post. Do you have a job lined up in the new city, as in a firm job offer?

The reason Iím asking is because, if there is a chance that you may need to live off the $8k in savings while you look for a new job in the new city and settle in, then you probably should not be investing those funds in your Roth or 401k or whatever. However, if you already have a job lined up (aka a steady salary in new city), and this $8k is truly retirement savings, then go ahead and follow the above advice regarding retirement investments.
« Last Edit: July 11, 2019, 06:54:41 AM by Freedomin5 »

Car Jack

  • Handlebar Stache
  • *****
  • Posts: 1127
Sell whatever stock you bought and stop listening to your brother.  Sorry, but that's speculating, not investing.  As others have said, if you have access to a 401k.....especially if there's a company match, invest in that.  Choose a low cost index fund within the 401k.  If there's nothing low cost, then open either a traditional IRA or Roth IRA with one of the low cost providers out there (Fidelity, Vanguard, Schwab, TDAmeritrade).  You can invest in ETFs with very little money.  All of these places have both mutual funds and ETFs available.  With mutual funds (for example, FZROX at Fidelity), you get diversified funds at extreme low cost and you can buy fractional shares.  You can literally buy 0.1 share of FZROX if you want to.  Or buy by $$ and buy 50 cents worth of FZROX.

Chances are, your tax rate is very low, so stick with a Roth.  That way, when you do pull the money out and you're at a higher tax rate, you don't pay any tax on the way out.