Author Topic: Vanguard for Beginners  (Read 2778 times)

tootz

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Vanguard for Beginners
« on: September 27, 2017, 08:50:22 AM »
Hello.

I've been reading MMM, and one line he said was " go to Vanguard.com and start an account to buy some units of the VFINX fund, or if you have a brokerage account you can buy SPY shares."


I currently opened a Traditional IRA account on vanguard, but is this where I buy shares of the VFINX fund? Am I supposed to be opening up a new account, that's a mutual fund account to buy shares of the VFINX fund?


dandarc

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Re: Vanguard for Beginners
« Reply #1 on: September 27, 2017, 08:53:03 AM »
You can buy VFINX within a traditional IRA.  You can buy it in a Roth IRA or a taxable account as well.

Do you want an S&P 500 fund?  Do you want to fund a traditional IRA?

nereo

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Re: Vanguard for Beginners
« Reply #2 on: September 27, 2017, 08:54:13 AM »
Hello.

I've been reading MMM, and one line he said was " go to Vanguard.com and start an account to buy some units of the VFINX fund, or if you have a brokerage account you can buy SPY shares."


I currently opened a Traditional IRA account on vanguard, but is this where I buy shares of the VFINX fund? Am I supposed to be opening up a new account, that's a mutual fund account to buy shares of the VFINX fund?

IRAs and taxable accounts are just buckets to put money into. Funds like VFINX are the vehicles (or investments) that you put into each bucket.
If you have a tIRA account you can buy shares of VFINX and keep them there.  You can ALSO open up a taxable account to put additional money into.  If you like that can ALSO be shares of VFINX (allowing you to keep a one-fund portfolio while still garnering the tax-advantages of the IRA accounts).

OR you can add shares of other vanguard funds into either 'bucket'.

To sum: Most mustachians will have BOTH taxable and IRA accounts with a brokerage like Vanguard. IN both of these accoutns you can invest in whatever funds satisfies your AA (asset allocation).

Let me know if this is clear, happy to provide further details.

Cwadda

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Re: Vanguard for Beginners
« Reply #3 on: September 27, 2017, 08:55:50 AM »
IRAs = tax-advantaged accounts
Brokerage = taxable

Mutual funds/index funds can be purchased with either account type.

Many people recommend the Total Stock Market Index, which is:
VTSMX ($3,000 minimum)
VTSAX ($10,000 minimum)

VFINX is a good choice, too.

tootz

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Re: Vanguard for Beginners
« Reply #4 on: September 27, 2017, 09:49:16 AM »
You can buy VFINX within a traditional IRA.  You can buy it in a Roth IRA or a taxable account as well.

Do you want an S&P 500 fund?  Do you want to fund a traditional IRA?

I think I want to fund a traditional IRA, however I don't know what the advantages are between a tIRA and a taxable account


Embarassingly, I don't know enough to make an educated decision. At this moment I am following what MMM is suggesting.


Hello.

I've been reading MMM, and one line he said was " go to Vanguard.com and start an account to buy some units of the VFINX fund, or if you have a brokerage account you can buy SPY shares."


I currently opened a Traditional IRA account on vanguard, but is this where I buy shares of the VFINX fund? Am I supposed to be opening up a new account, that's a mutual fund account to buy shares of the VFINX fund?

IRAs and taxable accounts are just buckets to put money into. Funds like VFINX are the vehicles (or investments) that you put into each bucket.
If you have a tIRA account you can buy shares of VFINX and keep them there.  You can ALSO open up a taxable account to put additional money into.  If you like that can ALSO be shares of VFINX (allowing you to keep a one-fund portfolio while still garnering the tax-advantages of the IRA accounts).

OR you can add shares of other vanguard funds into either 'bucket'.

To sum: Most mustachians will have BOTH taxable and IRA accounts with a brokerage like Vanguard. IN both of these accoutns you can invest in whatever funds satisfies your AA (asset allocation).

Let me know if this is clear, happy to provide further details.

What's the advantages of a taxable account as opposed to a tIRA?
If most mustachians have both, what are the goals for each account ? I know that an IRA can be maxed to 5500 a year, however I know nothing about taxable accounts.
 ( I've been advised in this order: 401k to matching % / pay debts/ tIRA/savings in online bank acc).
The goal of tIRA was to convert into Roth over time, when my income becomes lower towards fire. 
« Last Edit: September 27, 2017, 09:52:51 AM by tootz »

dandarc

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Re: Vanguard for Beginners
« Reply #5 on: September 27, 2017, 10:14:07 AM »
Say you've got $30,000 you're going to invest in a given year.

You max your 401K to the tune of $18K.

You max your tIRA for another $5.5K.

You still have $6.5K left to invest.  You put that into your taxable account, because you're out of tax-advantaged space but you still want to invest more.

If you're only looking to invest $5K per year, you probably won't fund a taxable account.

dandarc

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Re: Vanguard for Beginners
« Reply #6 on: September 27, 2017, 10:16:21 AM »
Are you sure that you're eligible to deduct your tIRA contributions?

Related Questions:
Are you covered by a retirement plan at work?

What is your income?  Filing Status?

Cwadda

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robartsd

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Re: Vanguard for Beginners
« Reply #8 on: September 27, 2017, 10:19:26 AM »
Best guide for US investors is MDM's Investment Order post.

Looks like Cwadda beat me to it.

tootz

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Re: Vanguard for Beginners
« Reply #9 on: September 27, 2017, 10:33:16 AM »
Are you sure that you're eligible to deduct your tIRA contributions?

Related Questions:
Are you covered by a retirement plan at work?

What is your income?  Filing Status?

independent, not head of household. (think of fresh grad moved out)


income:70k , after tax prob 50 ?
401k - vanguard large/med/small cap at 70/20/10
hsa-maxed at 3400

edit: 28k in school loans, all under 5% ( i paid off all above 5%)
« Last Edit: September 27, 2017, 10:35:12 AM by tootz »

dandarc

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Re: Vanguard for Beginners
« Reply #10 on: September 27, 2017, 10:37:36 AM »
Are you sure that you're eligible to deduct your tIRA contributions?

Related Questions:
Are you covered by a retirement plan at work?

What is your income?  Filing Status?

independent, not head of household. (think of fresh grad moved out)


income:70k , after tax prob 50 ?
401k - vanguard large/med/small cap at 70/20/10
hsa-maxed at 3400
So you're filing Single then?  See the limits here.  At 70K as a single person, with funding an HSA and 401K, you're probably under the limit for your MAGI, but you'd want to check.  If this is your first year at the higher salary and it hasn't been the whole year, almost certainly nothing to worry about.  But still run your own numbers.

https://www.irs.gov/retirement-plans/2017-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work

You may want to check out the Case Study spreadsheet from the "How to Write a Case Study" sticky in the "Case Studies" sub-forum.  Has a lot of these basic tax questions built in.

Cwadda

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Re: Vanguard for Beginners
« Reply #11 on: September 27, 2017, 11:00:39 AM »
Best guide for US investors is MDM's Investment Order post.

Looks like Cwadda beat me to it.

Ninja'd!

nereo

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Re: Vanguard for Beginners
« Reply #12 on: September 27, 2017, 11:04:20 AM »
cwadda, dandarc and others have stepped in to offer you some solid advice (including MDM's investment order).

To understand personal investing a bit better, I highly recommend you read through JL Collins' stock series
http://jlcollinsnh.com/stock-series/

The first 10 posts will give you the background to understand many of the questions you are asking.  Later posts are a bit more specific but still worthwhile information.