Author Topic: New Mustachio - Basic Investing Setup  (Read 1647 times)

SansPappagiorgio

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New Mustachio - Basic Investing Setup
« on: February 21, 2017, 08:46:21 AM »
Hey there,

I'm brand new to this blog/forum by way of The Tim Ferriss Podcast.  I'm really enjoying the No BS approach that MMM evokes.  So far, I've read the "Getting Rich: from Zero to Hero in One Blog Post", and "How to make Money in the Stock Market". 

The 1st one really struck a chord with me because this is the type of lifestyle I'd like to lead.  In the 2nd article I mentioned, MMM explains to use "The Vanguard Total Stock Market Index Fund".  In layman's terms, can someone please walk me through the setup process (including a direct link, as there are a few different variations).  I currently have a TD Ameritrade Roth IRA w/ $500 in it, that is just sitting there.  Would it be wise to move this over to Vanguard?

Any & all advice is great appreciated :)

Sans Out.

« Last Edit: February 21, 2017, 09:00:16 AM by SansPappagiorgio »

With This Herring

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Re: New Mustachio - Basic Investing Setup
« Reply #1 on: February 21, 2017, 12:55:13 PM »
Vanguard - How to Open an IRA
Vanguard - How to Transfer Your IRA to Vanguard

Or, just call Vanguard:
Quote
We’re here to help

Talk with an experienced investment professional.

Call 800-416-5827

Monday through Friday
8 a.m. to 8 p.m., Eastern time

You might need an additional $500 contribution to get the $1000 minimum, but Vanguard reps should be able to walk you through this on the phone.

SansPappagiorgio

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Re: New Mustachio - Basic Investing Setup
« Reply #2 on: February 21, 2017, 01:37:34 PM »
Thanks for the advice @With This Herring.  However, my main concern is investing in stock index funds.  MMM suggests "The Vanguard Total Stock Market Index Fund".  Total newbie here, but isn't an IRA & index funds two different things? Thanks again for your help :)

nexus

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Re: New Mustachio - Basic Investing Setup
« Reply #3 on: February 22, 2017, 02:29:51 PM »
An IRA, in its various forms (Traditional, Roth) is just a vehicle with special rules that you 'house' your investments in. These investments can be in the form of index funds (VTSAX), individual stocks, mutual funds, ETFS, Bonds, cash, and so forth. Think of it as choosing what kind of basket you're choosing to put your eggs in (eggs being VTSAX).

The rules for IRAs consist of many flavors, including annual contribution limits, early withdrawal penalties, and tax advantages/disadvantages. I don't happen to have any useful links handy, but I suggest doing some Google searches to get a better understanding of the nuances between a Traditional IRA and a ROTH IRA.

The common strategy I hear is to max out your tax advantaged investment accounts such as your 401k ($18,000 if you have one) and IRA ($5,500). The benefit of maxing out a 401k is that you will not be taxed on that money at the end of the year since it is deducted prior to payroll tax from your check. A portion of your post-tax IRA contributions can also be tax-deductible. After you've filled up these accounts (or baskets, as I've nicknamed them) each year, you can pour money into a taxable brokerage account.

Also, it is smart to at least contribute up to the amount that your employer will match in your 401k. That's free money.

Oh, and don't forget about HSA's. Those are funded with pre-tax dollars from your paycheck as well if your employer offers it. Health Savings Accounts are exactly what they sound like -- pre-tax money you set aside to cover health expenses. It's pretty broad and covers things like medical, vision, and dental expenses. I hear it can even cover the cost of Band-Aids, cold and flu meds, and contacts. Why put money into it? Essentially a HSA gives you greater purchasing power. You're using money that wasn't taxed rather than money out of your paycheck, which was taxed. Plus, the brilliant folks around here know how to access that money in other legitimate, creative ways too.

Separately, you can open a brokerage account and purchase VTSAX through it. I have a taxable brokerage account with Vanguard and do not pay any commission fees when I purchase shares of VTSAX. My previous financial institution was charging me $35 each time I bought VTSAX, so make sure to do your research on fees & commissions. Because (this portion of) my holdings are not in a tax sheltered account like an IRA or 401k, I pay taxes on the dividends and capital gains each year.

I suggest poking around Vanguard.com
« Last Edit: February 22, 2017, 02:34:49 PM by nexus »

With This Herring

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Re: New Mustachio - Basic Investing Setup
« Reply #4 on: February 22, 2017, 08:46:17 PM »
Yup, nexus has it on the nose.  At Vanguard, you can set up your IRA and you can set up a taxable investment account for all that extra money you will be saving.  In the IRA, you can use your contributions to buy that Vanguard Total Stock Market Index Fund and other index funds.  In your taxable investment account, you can use the money you put in to buy those same index funds.

An IRA account is the nest, and index funds are the eggs you use to fill it.  :)