Author Topic: Vanguard Fund Roth IRA  (Read 1401 times)

tootz

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Vanguard Fund Roth IRA
« on: March 30, 2018, 03:26:39 PM »
Hello fellow Mustachians,

I've finally started making tangible steps to set up my investment vehicles, and seek some advice.

Currently have low expenses - no rent, no bills besides lunch/ entertainment.
Earn 70,000 per year.

comany matches up to 6%, so I contribute 6%. Allocation is 52 large, 15 mid, 7 small, 18 company stock, 8% schwaab retirement fund.

Currently opening up a Roth IRA, and not sure which fund to choose. Reading MMM, he suggests the VFINX fund, while JlCollins suggests VTSAX fund.

Which do you guys recommend?

Phoenix_Fire

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Re: Vanguard Fund Roth IRA
« Reply #1 on: March 30, 2018, 03:54:36 PM »
I set mine up a few months ago and went with VTSAX.  I feel like JLCollins has really thought out and explained the reasoning behind it. 

I would recommend that you look at maxing your 401k as well.  Based on what you are saying about your low expenses you should be able to do the max. 

robartsd

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Re: Vanguard Fund Roth IRA
« Reply #2 on: March 30, 2018, 05:35:46 PM »
Allocation is 52 large, 15 mid, 7 small, 18 company stock, 8% schwaab retirement fund.
Why did you choose this allocation (particularly the 18% company stock and what is the 8% schwaab retirement fund).

Reading MMM, he suggests the VFINX fund, while JlCollins suggests VTSAX fund.
Vanguard Total Stock Market (investor: VTSMX, admiral: VTSAX), a market cap weighted fund of virtually all US stocks, is recommended the most on the forums. Vanguard 500 (investor: VFINX, admiral: VFIAX) is a market cap weighted fund of the largest 500 companies. Both funds have very similar performance and expense ratios; however, comparing VFINX to VTSAX is not a fair comparison because they are not the same class of shares but both funds offer both classes (as well as ETF versions).

tootz

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Re: Vanguard Fund Roth IRA
« Reply #3 on: April 02, 2018, 07:34:13 AM »
Allocation is 52 large, 15 mid, 7 small, 18 company stock, 8% schwaab retirement fund.
Why did you choose this allocation (particularly the 18% company stock and what is the 8% schwaab retirement fund).


I believe I am misinformed. That allocation is the "current allocation", where as future allocation I've set is 70/20/10 percent for large/mid/small cap vanguard funds.

The company is from the match, and the schwaab is the default fund when I first set up the 401k and didn't read any forums.






Reading MMM, he suggests the VFINX fund, while JlCollins suggests VTSAX fund.
Vanguard Total Stock Market (investor: VTSMX, admiral: VTSAX), a market cap weighted fund of virtually all US stocks, is recommended the most on the forums. Vanguard 500 (investor: VFINX, admiral: VFIAX) is a market cap weighted fund of the largest 500 companies. Both funds have very similar performance and expense ratios; however, comparing VFINX to VTSAX is not a fair comparison because they are not the same class of shares but both funds offer both classes (as well as ETF versions).

Could you elaborate on the same class of shares, but offering both classes? I didn't understand that part of your statement.

What defining factors make one the fund to choose over the other ?

robartsd

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Re: Vanguard Fund Roth IRA
« Reply #4 on: April 02, 2018, 02:27:49 PM »
Vanguard Total Stock Market buys every US stock, Vanguard 500 buys the 500 largest US companies. In either fund, the share of holdings is proportional to the market capitalization of the stock (the total value of all issued stock), so the top 500 holdings of Vanguard Total Stock Market matches the holdings of Vanguard 500 making little difference in their performance. Both funds offer Investor class shares ($3,000 minimum initial investment) and Admiral class shares ($10,000 minimum initial investment). The expense ratio for Investor class shares is higher than the expense ratio of Admiral class shares. Choosing between VTSAX and VFIAX is a choice between total stock market or just the 500 largest companies. The only reason to choose VTSMX or VFIAX is if you don't have enough that you want to invest to purchase Admiral class shares.

tootz

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Re: Vanguard Fund Roth IRA
« Reply #5 on: April 09, 2018, 03:08:18 PM »
Vanguard Total Stock Market buys every US stock, Vanguard 500 buys the 500 largest US companies. In either fund, the share of holdings is proportional to the market capitalization of the stock (the total value of all issued stock), so the top 500 holdings of Vanguard Total Stock Market matches the holdings of Vanguard 500 making little difference in their performance. Both funds offer Investor class shares ($3,000 minimum initial investment) and Admiral class shares ($10,000 minimum initial investment). The expense ratio for Investor class shares is higher than the expense ratio of Admiral class shares. Choosing between VTSAX and VFIAX is a choice between total stock market or just the 500 largest companies. The only reason to choose VTSMX or VFIAX is if you don't have enough that you want to invest to purchase Admiral class shares.

If I'm understanding your post correctly, I am looking for investor class shares since I do not have 10k. However, since the expense ratio of admiral class shares are lower, I should want to save to get Admiral shares first. Am I able to get investor class shares, then convert to Admiral?

500 largest companies seems like a more logical decision over every US stock, however I would like to hear your thoughts on this.



Raenia

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Re: Vanguard Fund Roth IRA
« Reply #6 on: April 11, 2018, 06:23:52 AM »
If I'm understanding your post correctly, I am looking for investor class shares since I do not have 10k. However, since the expense ratio of admiral class shares are lower, I should want to save to get Admiral shares first. Am I able to get investor class shares, then convert to Admiral?

Yes, if you start out with Investor class shares, and then later the balance rises above 10k, Vanguard will give you the option to convert to Admiral shares.  I did that last year, it was very easy.

jlcnuke

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Re: Vanguard Fund Roth IRA
« Reply #7 on: April 11, 2018, 09:24:51 AM »
I prefer the total market myself over just the biggest.

robartsd

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Re: Vanguard Fund Roth IRA
« Reply #8 on: April 11, 2018, 10:18:57 AM »
500 largest companies seems like a more logical decision over every US stock, however I would like to hear your thoughts on this.
While the smaller stocks have more risk of going out of business, they also have more upside potential too. Since the 500 index makes up about 75% of the total market index, there isn't a big difference between the two. The total market index is slightly more volatile, but also tends to be slightly higher performing. I lean towards the total market index myself, but would probably choose the 500 index if it had the lowest fees (many employer sponsored retirement plans have a good 500 index fund but no good option for TSM).

https://forum.mrmoneymustache.com/investor-alley/vfinx-vs-vtsmx/

Telecaster

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Re: Vanguard Fund Roth IRA
« Reply #9 on: April 11, 2018, 10:40:38 AM »

If I'm understanding your post correctly, I am looking for investor class shares since I do not have 10k. However, since the expense ratio of admiral class shares are lower, I should want to save to get Admiral shares first. Am I able to get investor class shares, then convert to Admiral?

500 largest companies seems like a more logical decision over every US stock, however I would like to hear your thoughts on this.

Nope, get the investor shares.   Vanguard will convert them to Admiral shares when the balance is large enough. 

Re:  VTSAX vs. VFIAX.   It doesn't matter much.   Because of the way the funds are structured, their performance is very similar and will always be very similar.

Personally, I'd go with VFIAX and then add a small cap fund later to get small cap exposure that way, but it doesn't matter much. 





tootz

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Re: Vanguard Fund Roth IRA
« Reply #10 on: April 15, 2018, 04:59:26 PM »
I appreciate all of your responses, was able to learn more about what I'd do in my situation. Since they both perform around the same, I will just chose one since time is fleeting.

Thank you all