Author Topic: How does a minor start with getting invested? (Investing Questions Also)  (Read 3126 times)

precrime3

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Hey guys,

As the title states, I would like to know how I (17 years old), could start with investing. From what I've learned in another thread that I posted it seems to me:

  • Roth IRA is the way to go
  • VTSAX 100% , Might change this to 90/10% however.
  • Do it yourself, betterment eats fees

All good, sound, info which I've done outside research to come to a similar conclusion. A Roth IRA is advantageous because I'll be in a higher tax bracket for sure when I retire, a VTSAX is an ideal combination of all 3k+ stocks in the US, and the 15-35 BPS Betterment charges can eat a sizeable chunk of income.

BUT...
Most companies require you to be 18. WiseBanyan requires you to be 18. I'll probably need parent supervision or approval to open a Vanguard account. Every turn I take is met with being restricted, simply because I was born in '99 and not '98. I understand this is temporary in the grand scheme of things, but I want to start NOW, and take advantage of my greatest ally right now: time.

And now for the questions:
1. Should I add anything in my portfolio besides VTSAX? I'm pretty risk-averse, and I think I could mentally handle a 100% allocation in stock, maybe 90/10 (it seems from what I've read it's beneficial sometimes to have bonds in your allocation). VTSAX from what I've read is domestic stocks, but what about international exposure? I understand some of the bigger companies involved in this fund (sorry if wrong term) have international presence, but still. Is it enough?
1a. What's the difference between all the different "versions" of VTSAX? If you go to the website it also says "available at an ETF and an investor share". Which one should I go with? Why?
1b. Is there a minimum account balance/ deposit required to start a vanguard account and start buying VTSAX?

2. What are some short-term goals that are good to have on the road to FI/FIRE?
3. What are some good Financial Independence/ personal finance books/resources to read? I've read most of MMMs blog, and the JCOLLIN Stock series, and taking a dip into madfientist as is.


More questions will be added as I come up with more. Thanks as usual.

mxt0133

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Reference this in order to open up a Roth IRA with Vanguard for minors.

https://personal.vanguard.com/us/insights/article/yil-kids-finance-082014

Use this to compare between Vanguard EFTs and funds.

https://personal.vanguard.com/us/faces/JSP/Funds/Tools/FundsToolsEtfCostSelectionContent.jsp

ETFs let you buy shares, so you can literally just buy one share at the bid price plus transactions costs.  Where as mutual funds have minimums of $3000 but after that you can add any amount you want be it $1, $5, $100, ect.  There some differences in fees, but my advice if you have the minimum for the fund is to just go with the fund.  You can always switch between the fund or ETF.

MMMWannaBe

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You have asked some questions and I will give you one person's opinion.

If your time horizon is 10 years or greater, I see no reason to deviate outside of VTSAX (100% equity).  I can see the point of having bonds to smooth the ride and have some funds available if the market takes a big dump.  But I don't believe in timing the market so if you can stomach the ride and you have a long time horizon I see nothing wrong with 100% VTSAX.  For most of my working years I have been 100% equity.  I have tried to pick my own stocks - I would have been better off owning an index fund. 

As far as International funds, there will be advocates on both sides.  As you have probably ready many large companies that are part of VTSAX have global exposure.  Jack Bogle does not see a need for International stocks and that is a good enough endorsement for me.

precrime3

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You have asked some questions and I will give you one person's opinion.

If your time horizon is 10 years or greater, I see no reason to deviate outside of VTSAX (100% equity).  I can see the point of having bonds to smooth the ride and have some funds available if the market takes a big dump.  But I don't believe in timing the market so if you can stomach the ride and you have a long time horizon I see nothing wrong with 100% VTSAX.  For most of my working years I have been 100% equity.  I have tried to pick my own stocks - I would have been better off owning an index fund. 

As far as International funds, there will be advocates on both sides.  As you have probably ready many large companies that are part of VTSAX have global exposure.  Jack Bogle does not see a need for International stocks and that is a good enough endorsement for me.

Gotcha. Is there a downside for opting for international exposure, or is it just a matter of preference?

MMMWannaBe

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Gotcha. Is there a downside for opting for international exposure, or is it just a matter of preference?

Some will maintain that international exposure adds another layer of risk - currency/ exchange rate.  Also, International tends to have higher expense ratios.  The advantage could be if International has a negative correlation with U.S. equities....but due to the global economy not so sure that typically holds true.    This may be a stretch, but those in the United States tend to work longer hours than our European counterparts.  Perhaps this leads to higher productivity in the United States - I had a professor who locked onto this when comparing the United States average equity returns in comparison with other developed countries..  Of course, emerging economies may have higher returns - but it is the old risk/ return mantra.   This is not my area of expertise.  I have had International exposure and it always disappointed - like everything else given the right year it will have its time to shine.  I currently have no International exposure and that is what makes me comfortable.  Since I am uncomfortable with International I know that I am likely to sell at the wrong time.  It is better for me to not have that kind of insecurity in my portfolio.

MMMWannaBe

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And if Jack Bogle's stance on International is not enough to feel good about ignoring International, I turned to one of the greatest investors of our time, Warren Buffett.  In his Will the funds he leaves behind for his wife are to be invested 90% S&P 500/ 10% short-term bond (or something of that ilk).  No nod to International. 

Radagast

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You have asked some questions and I will give you one person's opinion.

If your time horizon is 10 years or greater, I see no reason to deviate outside of VTSAX (100% equity).  I can see the point of having bonds to smooth the ride and have some funds available if the market takes a big dump.  But I don't believe in timing the market so if you can stomach the ride and you have a long time horizon I see nothing wrong with 100% VTSAX.  For most of my working years I have been 100% equity.  I have tried to pick my own stocks - I would have been better off owning an index fund. 

As far as International funds, there will be advocates on both sides.  As you have probably ready many large companies that are part of VTSAX have global exposure.  Jack Bogle does not see a need for International stocks and that is a good enough endorsement for me.

Gotcha. Is there a downside for opting for international exposure, or is it just a matter of preference?
Rationally, there is on average no downside but many upsides to investing both outside and inside the US. Some people prefer not to for personal/emotional reasons. In fact I might recommend the Vanguard all-world stock fund VTWSX for a young investor, but the expense ratio is a little higher. Either way bonds are not necessary, and there is probably also no reason to have more than a single stock fund at this point or at most two, either VTWSX, or VTSAX + maybe VTIAX.

precrime3

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You have asked some questions and I will give you one person's opinion.

If your time horizon is 10 years or greater, I see no reason to deviate outside of VTSAX (100% equity).  I can see the point of having bonds to smooth the ride and have some funds available if the market takes a big dump.  But I don't believe in timing the market so if you can stomach the ride and you have a long time horizon I see nothing wrong with 100% VTSAX.  For most of my working years I have been 100% equity.  I have tried to pick my own stocks - I would have been better off owning an index fund. 

As far as International funds, there will be advocates on both sides.  As you have probably ready many large companies that are part of VTSAX have global exposure.  Jack Bogle does not see a need for International stocks and that is a good enough endorsement for me.

Gotcha. Is there a downside for opting for international exposure, or is it just a matter of preference?
Rationally, there is on average no downside but many upsides to investing both outside and inside the US. Some people prefer not to for personal/emotional reasons. In fact I might recommend the Vanguard all-world stock fund VTWSX for a young investor, but the expense ratio is a little higher. Either way bonds are not necessary, and there is probably also no reason to have more than a single stock fund at this point or at most two, either VTWSX, or VTSAX + maybe VTIAX.

How is the yield compared to VTSAX? I've been recommended frequently to just 100% allocate and it is a sound idea since fewer funds to work with, and with a long-term outlook, it provides consistent returns.

Radagast

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VTIAX 2.75% (VXUS) Total International
VTWSX 2.26% (VT) Total World
VTSAX 1.93% (VTI) Total US

VTWSX Total-World Index is also available as an ETF called VT which might be worth considering. It has an expense ratio of 0.14% which is better than 0.25%, though ETF's require a little more work than mutual funds. If I could have only 1 fund I would chose that one.

rockstache

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Have you read jlcollins stock series yet? If not, I would start there.

http://jlcollinsnh.com/stock-series/



precrime3

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Have you read jlcollins stock series yet? If not, I would start there.

http://jlcollinsnh.com/stock-series/

I have indeed. It was a good read.