The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Apocalyptica602 on November 28, 2013, 09:25:13 AM
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Hi everyone - wasn't sure if I should post here or in Investor Alley but I figure there's enough overlap to get the answers I need.
So I recently came into a windfall in the form of a personal injury settlement from nearly 4 years ago that's finally done with.
Approximately $32,000 after all was said and done.
Little bit about me:
I'm 25, a Mechanical Engineer, make approx $70,000/year. Debt-free
Already maxing my 401k and Roth IRA.
Allocations are as follows:
401k - $45,000
60% S&P 500 Index
20% Mid cap Index
20% International Equity
Roth IRA - $12,000
100% VTSMX (Just made a 3k order to bring the balance from 9k-12k, so it'll be converting to admiral shares soon)
So the next step likely to open a taxable account with Vanguard at this time: I'm not at a point in my life right now where I'm considering buying real estate or investing in a rental property.
I'm a bit unsure of how I should invest my taxable money, I've read a little about tax efficient fund placement and I want to increase my international exposure a little. Does anyone recommend International Vanguard funds / ETFs that qualify for the Foreign Tax Credit? Do people feel that this is worth it or am I needlessly complicating things for tax time?
What are some other funds I should consider?
I know I probably can't go wrong with another chunk of VTSMX and I'm already way ahead of my peers that would undoubtedly run to the nearest BMW dealership and drive off with a new 3 series - but I wanted some Mustachian opinions.
Thanks for any and all advice.
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I don't have much advice as far as choices, as I am going pretty simple and have the Fid equivalent of VTSAX as my sole holding in my taxable account...
But you're debt free, already saving a hefty chunk in your retirement accounts and investing a windfall? I wish I'd been half as smart at 25 as you are. :)
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I don't have much advice as far as choices, as I am going pretty simple and have the Fid equivalent of VTSAX as my sole holding in my taxable account...
but you're debt free, already saving a hefty chunk in your retirement accounts and investing a windfall? I wish I'd been half as smart at 25 as you are. :)
That means a lot, I do appreciate the compliment.
However, if it wasn't for this website over the past ~2 years I honestly might have ran out and bought a brand new car (when I have a beautiful 'brand new' 2006 Camry paid for with less than 90k miles on it) and thought I was being SMART with my money because I used my windfall to buy it with cash instead of financing.
*shudder* I have a lot to be thankful for, ironically on this day in the US specified for recounting such things, haha.
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the way I understand it, even in the U.S. market there is plenty of international exposure since many companies based in the U.S. also deal globally. Not that going into international funds wouldn't be a good move, just that it's sort of up to you on what you feel comfortable with. You do want to put the most tax efficient funds in the taxable account to minimize the cost to you.
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Hope everyone had a good Thanksgiving!
Anyone have any other advice?
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I'm a bit unsure of how I should invest my taxable money, I've read a little about tax efficient fund placement and I want to increase my international exposure a little. Does anyone recommend International Vanguard funds / ETFs that qualify for the Foreign Tax Credit? Do people feel that this is worth it or am I needlessly complicating things for tax time?
VEA is the typical Vanguard International ETF for developed countries, and VWO is the one for emerging countries. Both are index funds, with very low fees, and yes, this would indeed give you a bit of a tax break on dividends. I hold both on a taxable account as key components of my portfolio. Such international diversification does tend to be worth it if you stick to the course (rocky road ahead, but should come with solid returns on the long run).
Before rushing to do something though, you may want to read a bit more about Asset Allocation and Passive Investing, so that you can be a bit more systematic for your future investments. Buy a good book from W. Bernstein or Rick Ferri or somebody like that, and do take the time to truly internalize what you read. *THIS* will be your best investment ever.