Author Topic: Buying new funds?  (Read 1520 times)

King Stilts

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Buying new funds?
« on: June 29, 2016, 06:32:14 PM »
Hey guys, Im sure this question will take no time at all for you experts to answer, which I really hope one of you will!  I really appreciate any advice.

So I'm a 24 year old new investor that is taking advantage of my company's 10% match on all investments into my 401k, but I've also already maxed out a recently opened Roth IRA, investing $5500 into Vanguards 2055 Target Retirement Fund. 

I guess my question is, when everybody here is talking about buying up new funds becuase of Brexit and "on sale" stocks, where are they getting that extra money, or what investment account are they using.  My Roth IRA is already maxed out so I can't buy anything with that money, and my 401k is already set at 15% of my paycheck and I can only change that quarterly.  So what gives?  Where can I buy these stocks???  Should I open a new account where I can make small few hundred dollar purchases here and there?

Thanks.

Shor

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Re: Buying new funds?
« Reply #1 on: June 29, 2016, 06:51:02 PM »
The most likely answer to your question is that they either had some extra money available that they had planned to invest, and the Brexit drop provided a reminder to go and do that just that.
The other possibility is that they pulled the money from the emergency fund / buffer account. This usually holds the direct deposit money until it goes off to its target account / credit card. This uses money that you have now, and supposes that future cash flow will fill it back up to target levels.

As for the target account that you move it to, you will sooner or later hit the point where there is no more space for tax-advantaged investments. In these cases, you simply open up a taxable account and add in according to your investment plan. This taxable account has a potential place in the retirement timeline of bridging the gap between RE and the 5 year tIRA -> Roth IRA conversion wait time for it to become a fully qualified non-penalty contribution that can be withdrawn.
At the same time, the longer in RE that you are pulling from the taxable account, the longer the Roth IRA can continue to grow tax free even during your retirement years.

nereo

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Re: Buying new funds?
« Reply #2 on: June 29, 2016, 08:03:49 PM »

I guess my question is, when everybody here is talking about buying up new funds becuase of Brexit and "on sale" stocks, where are they getting that extra money, or what investment account are they using.  My Roth IRA is already maxed out so I can't buy anything with that money, and my 401k is already set at 15% of my paycheck and I can only change that quarterly.  So what gives?  Where can I buy these stocks???  Should I open a new account where I can make small few hundred dollar purchases here and there?

Thanks.
Regarding "where" - most people here have a taxable ("normal") investment account at a low cost brokerage such as Vanguard or Fidelity or Betterment.  Often people are already making weekly or monthly investments into these accounts.  If you've already maxed out your 401(k) and IRA it's a very good idea to have a taxable account where you can invest excess cash.

Regarding "how" - certainly some are using cash-on-hand (e.g. from their e-fund or have been hesitant to put into the market for various reasons), many are simply cheering that the $x,xxx they save each month now buys a few more shares and a few scrambled to sell some unneeded items or make a little money on the side (overtime, part-time gig) to scoop up "stocks on sale". 

King Stilts

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Re: Buying new funds?
« Reply #3 on: June 29, 2016, 08:22:40 PM »
So if I already have a Roth IRA brokerage account with Vanguard, that means I'll have to make a separate brokerage account for my taxable investments?  So instead of selecting retirement accounts from the Vanguard new account page, I instead select 'General Savings'?

nereo

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Re: Buying new funds?
« Reply #4 on: June 30, 2016, 06:29:58 AM »
So if I already have a Roth IRA brokerage account with Vanguard, that means I'll have to make a separate brokerage account for my taxable investments?  So instead of selecting retirement accounts from the Vanguard new account page, I instead select 'General Savings'?

Correct.  With Vanguard (and almost all other brokerages) you can have multiple accounts.  For example, I have a tIRA account, a ROTH IRA account, and a taxable ("normal") account. Each of these accounts can have multiple holdings (for example, your IRA accounts can have money invested in the SP500 as well as an international fund).  Some people will split their taxable accounts up to save for a particular purpose (for example: one account for a down-payment on a home and one for general savings.