Author Topic: New to investing starting with only $500-$1000  (Read 3304 times)

Tahoefirefighter

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New to investing starting with only $500-$1000
« on: June 29, 2015, 11:07:35 PM »
Hi I'm new to investing, I can't afford the $3000 min for investing with Vanguard. Should i go ahead and do the Vanguard Star with the $1000 min? If i do go with the Vanguard Star account what index fund should I buy? With the Vanguard regular account I was going to do as MMM suggested and buy the VTSMX or the VFINX. Is there someone else i should use instead of Vanguard since i have so little money? If so what index funds would you suggest? Im looking for something that would pay dividends. Also are these accounts able to be automated where they can take $50 a month out of my checking account?
Thanks,
Aaron

nereo

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Re: New to investing starting with only $500-$1000
« Reply #1 on: June 30, 2015, 07:21:30 AM »
Hello Aaron, and welcome to the forums

You've packed a lot of questions into your OP - here's a few answers.
First, are you talking about investing in a IRA account or in a normal taxable account.  I'd strongly recommend opening an IRA if at all possible with your economic situation.
If you have $1000 I'd recommend putting it into a Target Retirement Fund - basically you get a mixture of stocks and bonds which matches your risk tolerance.  Personally I'd recommend the VFFVX (Retirement 2055) or VTTSX (Retirement 2060) since they currently have a 90/10 and 95/5 stocks/bonds ratio.  If you want more bonds and less stocks, go with an earlier retirement date (e.g. the VTTVX is 70/30).  These funds will gradually become more 'conservative' holding more bonds than stocks.  Many choose to make this their only holding and that can be a very good strategy.  However, if you want to have just an equities fund (which is what I have), when you've accumulated $3,000 or more you can have Vanguard switch your holdings to the VFINX or VTSMX as an in-kind transfer (no taxes).
Yes, you can have $50 automatically withdrawn from your account and invested at whatever frequency you like (weekly, bi-weekly, monthly, quarterly). You can do this with any of Vanguards funds.  Having automatic contributions is an excellent way of investing.

Finally, Vanguard is not the only game in town, although it tends to have the lowest fees and is very popular around here.  But you might want to check out other brokerages like Fidelity, Charles Shwabb, etc. some of whom may allow you to invest in an index fund for <$1000.  Whatever you choose, make sure the annual fee is low (under 0.2%/year is good).  You can buy an index fund in just about anything these days, but good places to start are ones that track the SP500 (that's the VFINX for vanguard) or the total market (that's the VTSMX for vanguard).  The ticker symbol will be different for other brokers like Fidelity, but it should mirror the index the exact same way.

hope that helps, let e know if you have questions.

CmFtns

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Re: New to investing starting with only $500-$1000
« Reply #2 on: June 30, 2015, 07:58:17 AM »
I'm new to investing, I can't afford the $3000 min for investing with Vanguard.

If you really want access to the Vangaurd Total Stock Market and have a small amount to invest why not grab the Vangaurd Total Stock Market ETF (Exchange Traded Fund) Ticker: VTI

The minimum buy in would be the price of 1 share.
If you make a brokerage account with Vangaurd they don't charge brokerage fees for buying their own stocks.

https://personal.vanguard.com/us/funds/snapshot?FundId=0970&FundIntExt=INT

How to buy:
https://investor.vanguard.com/etf/how-to-buy
« Last Edit: June 30, 2015, 08:01:15 AM by comfyfutons »

hyla

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Re: New to investing starting with only $500-$1000
« Reply #3 on: June 30, 2015, 10:45:25 AM »
Another vote for a vanguard target retirement fund ($1000 minimum).  It's what I started with, and still have, and the diversification, automatic rebalancing, and low fees are great.  And yes, you can easily set up automatic deposits, and pick the amount deposited and frequency.  I have one set up to send money from my checking to my vanguard target fund every month a few days after I get paid.

Tahoefirefighter

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Re: New to investing starting with only $500-$1000
« Reply #4 on: June 30, 2015, 10:40:44 PM »
Thanks nereo, hyla, and comfyfutons for your comments.

nereo, i forgot to specify i wanted to start an equities fund, i already have a tsp(its the federal employees version of a 401k) with 2050 retirement stocks.  I'm gonna shop around brokerages but i might just do the vanguard star and then switch it when i have the $3000 min, which was my main idea i just didn't know if i could switch the accounts.

Comfyfutons thanks for the links I'm defiantly going to look into the EFT as well, I'm a total newbie so i kinda just wanted a couple of ideas from people as where to start.

Thanks again

Frankies Girl

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Re: New to investing starting with only $500-$1000
« Reply #5 on: June 30, 2015, 11:25:30 PM »
Thanks nereo, hyla, and comfyfutons for your comments.

nereo, i forgot to specify i wanted to start an equities fund, i already have a tsp(its the federal employees version of a 401k) with 2050 retirement stocks.  I'm gonna shop around brokerages but i might just do the vanguard star and then switch it when i have the $3000 min, which was my main idea i just didn't know if i could switch the accounts.

Comfyfutons thanks for the links I'm defiantly going to look into the EFT as well, I'm a total newbie so i kinda just wanted a couple of ideas from people as where to start.

Thanks again

You really don't need to shop around; Vanguard account makes it easy to buy Vanguard funds. Anywhere else is going to charge you to buy Vanguard funds, and many places will charge you just for having an account with them... why bother, when you know you want Vanguard?

And saying you want an "equities fund" - that's not what Nereo was saying. "Equities" are a type of investment; he was meaning the account type you're going to put your investment into. You have a TSP account, so you need another account in which to invest other funds outside of the TSP, which means you could open a Roth or Traditional IRA or a taxable brokerage account (presumably at Vanguard). You would then put equities (or bonds, or whatever) inside that account. Basically, you need another "bucket" to fill. So decide which one works best for you (either a Roth or Traditional IRA) create that over at Vanguard, and then put money into it and invest it in your fund of choice. You can put in up to $5,500 a year in either one (not both). And you really shouldn't have a taxable account until you've maxed out your IRA, your TSP and any other possible tax deferred accounts (do you have the option for an HSA?), only then do you move to invest in a taxable account... because they are taxable and could mean paying out more of your money to invest inside those type of accounts. :)

You seem set on the Vanguard star fund. This is a balanced fund that is 60% stocks and 40% bonds, which is pretty conservative. It has an expense ratio of 0.34%, which is decent, but not super low compared to the Vanguard target funds. Unless you're in your 50s or up, I really don't see why you'd go this conservative? Cause it's conservative for anyone below 50... just my opinion.

Vanguard Target Retirement 2050 Fund (VFIFX) for instance, has a mix of 90% stock/10% bonds, and an expense ratio of 0.18% with a buy in of $1k minimum. MUCH less bonds that the Star fund. Because bonds are a drag on growth, this fund has it set to a pretty small ratio right now, because you want growth now, and eventually a smoother more stable run as you near the goal date, so this fund will slowly rebalance over the next couple of decades to have more bonds and less stocks. It does it all automatically for you and you technically never have to think about it again, or until you do more research and feel more comfortable handling things yourself (but it's still a very decent fund and you couldn't do wrong really choosing it and just putting your contributions on autopilot to this one).

http://jlcollinsnh.com/stock-series/
^read this series to learn about how it all works - it is excellent

http://www.bogleheads.org/wiki/Asset_allocation
You really need to figure this out before investing too, as it's your blueprint for how you will invest.

http://www.bogleheads.org/wiki/Investment_policy_statement
And this is why you're investing and what your goals are that help you figure out what your AA should be...

« Last Edit: June 30, 2015, 11:27:47 PM by Frankies Girl »

Dicey

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Re: New to investing starting with only $500-$1000
« Reply #6 on: July 01, 2015, 12:24:45 AM »
What Frankies Girl said, plus this: most firefighters in NorCal are fairly well compensated. You say you have $1k but you don't have $3k to invest. Could you treat this llike a (temporary) hair-on-fire emergency and try to scrape up the additional $2k needed to open the type of account you prefer?

Tahoefirefighter

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Re: New to investing starting with only $500-$1000
« Reply #7 on: July 02, 2015, 11:36:24 PM »
Frankies Girl Thanks for breaking it down for me ! Im only 34 so the Vanguard VFIFX sounds like it would suit me better, i was just looking into the Vanguard star as a place to start basically cause i had to start somewhere. I do have both a tsp and a tsp roth. but from what I've been learning the roth doesn't seem like the right place for my money. ill look into those links. Im doing a ton of research to figure this all out, and your post has been very helpful thanks for the advice.

Diane C Im a federal firefighter so that means ill break $50k a year IF I get 500hours of overtime, so no I'm not compensated that well. Better than some, so I'm thankful but not like a typical city firefighter that will easily pull double my salary. But it is the fire season, so maybe ill just wait till i can scrounge up 3k. Thanks for the input.