Author Topic: Where should I start investing?  (Read 2413 times)

KittyCat

  • Stubble
  • **
  • Posts: 242
  • Age: 29
  • Location: CA, USA
Where should I start investing?
« on: July 29, 2015, 01:21:55 PM »
Hey, I just joined- I found this place by looking up Betterment, and there is so much information here! I occasionally read articles regarding money, investing, and retirement accounts, but I have yet to start investing. I know that it's best to start sooner rather than later, but due to my lack of knowledge in this area and the resulting overflow of information, I have hesitated on investing thus far, but I am now ready to start! Betterment seemed like just the thing for me, and I was going to learn more about it and open an account, but after reading about the fees and learning the existence of Wisebanyan and whatnot, I am again paused on my road to investing. Furthermore, I have other questions that I hope someone would be able to answer.

Background info:

I am 25, and live in California. I left my permanent job to pursue other opportunities, and as such, there are money decisions I will have to make. In my current position, I am making $80k a year, but it's just a temporary position that is set to end in 2 more months. I averaged $672 per month in expenditures in 2014 and I am averaging $693 per month this year, most of it is going to rent, and I don't have any outstanding debt.

Company Stock:

I participated in my previous company's ESPP, and have around 20k sitting in the E*Trade account that was set up for it. I have to take action on it within 2 years- I can choose to sell the shares or transfer them to a personal account. It pays out dividends at around 5.4%, which I have elected to reinvest. Should I just sell these shares now, move them into another account, or do something else with them?

401k and IRA:

I contributed towards the company's 401k, and have around 16k in the account- 100% of which is put towards Vanguard's 2050 Retirement Fund. Should I leave it sitting it its current account, roll it over to a traditional/Roth IRA, or wait until I am employed as a permanent employee and roll it over to the new 401k? Furthermore, I have yet to start putting money away in an IRA account myself. If I rollover the 401k to an IRA, can I still contribute?

Investing:

Lastly, I keep a balance of $0 in my checking account and I have around 85k sitting in my CapitalOne360 savings account. Originally, I was going to buy a property after getting enough for a downpayment and rent it out at the advice of my parents, but now that I don't have a predictable income to make house payments, I'll have to put that money to use another way. After reading the posts here, I have concluded that my top choices are: Betterment (0.25% fee for me), Wisebanyan, or a Vanguard account. I plan on doing a lump-sum deposit of around $80k or so, and I probably won't interact with the account very often except for manually depositing more funds into the account. I've read about different allocations, and right now I'm planning on going with around 55% domestic, 35% international, and 10% bonds, but not sure which index yet. I plan on always leaving around 5-10k for emergencies, and I don't plan on touching the investment for many years.

Accounts:

I see that some places offer bonus money to start an investment or IRA account with them, but I assume that I will lose more than I gain in the long run due to fees for some of them. If I can have my 401k, IRA, and investment accounts in one place, that'd be ideal. I am probably better off just opening an account and just funding it instead of fretting about which account and which index, but being picky with open accounts is just how I am, and that's why it's taken me this long to get my feet wet with it.

What do you think I should do? Is more information needed? Thanks for reading!
« Last Edit: July 29, 2015, 09:14:26 PM by KittyCat »

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: Starting Investing and IRA
« Reply #1 on: July 29, 2015, 01:53:53 PM »
Generally, I recommend against holding a single stock. Ideally, you would be very diversified in your holdings. But whether you keep it is up to you. I always recommend Vanguard for investing--they have the lowest fees and lots of good funds. Looks like you have a great low spending rate, especially for CA. You'll save lots of money if you can stay employed.
« Last Edit: July 29, 2015, 01:55:39 PM by forummm »

KittyCat

  • Stubble
  • **
  • Posts: 242
  • Age: 29
  • Location: CA, USA
Re: Starting Investing and IRA
« Reply #2 on: July 29, 2015, 02:20:19 PM »
Generally, I recommend against holding a single stock. Ideally, you would be very diversified in your holdings. But whether you keep it is up to you. I always recommend Vanguard for investing--they have the lowest fees and lots of good funds. Looks like you have a great low spending rate, especially for CA. You'll save lots of money if you can stay employed.
Oops, I had meant to put this in "Ask a Mustachian". I wonder if I can get this topic moved.
Edit: Thanks for the move!

I plan on diversifying my stocks when I use the money in my savings account. At the moment, I am indeed leaning towards Vanguard and Wisebanyan, and just waiting to hear a little more from others before deciding. Thanks for your response!
« Last Edit: July 29, 2015, 02:58:45 PM by KittyCat »

tdogz

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Re: Where should I start investing?
« Reply #3 on: July 30, 2015, 10:21:40 AM »
401k and IRA:

I would roll it over to a Vanguard Traditional IRA (assuming this isn't coming from a Roth 401k). You can keep it in the same fund, but most likely you'll have fewer fees coming out. Most 401ks have record keeping and/or administrative fees that are passed on to the participants one way or another. If your next employer has a great 401k, you should be able to roll your IRA over into it. Most plans won't turn away additional funds. However, if you won't have the need to do a backdoor Roth in the future, you'll probably be better off leaving it in the IRA.
Rollovers into accounts (IRAs, 401Ks, HSAs) don't impact your ability to contribute. Just remember, the IRA limit is a COMBINED limit between all your IRAs, regardless of type (Roth v. Traditional) or where they are held (Vanguard, Fidelity, etc.).

KittyCat

  • Stubble
  • **
  • Posts: 242
  • Age: 29
  • Location: CA, USA
Re: Where should I start investing?
« Reply #4 on: July 30, 2015, 02:42:19 PM »
401k and IRA:

I would roll it over to a Vanguard Traditional IRA (assuming this isn't coming from a Roth 401k). You can keep it in the same fund, but most likely you'll have fewer fees coming out. Most 401ks have record keeping and/or administrative fees that are passed on to the participants one way or another. If your next employer has a great 401k, you should be able to roll your IRA over into it. Most plans won't turn away additional funds. However, if you won't have the need to do a backdoor Roth in the future, you'll probably be better off leaving it in the IRA.
Rollovers into accounts (IRAs, 401Ks, HSAs) don't impact your ability to contribute. Just remember, the IRA limit is a COMBINED limit between all your IRAs, regardless of type (Roth v. Traditional) or where they are held (Vanguard, Fidelity, etc.).
It's coming from a traditional 401k. I guess I'll have to read up again on backdoor Roth when that time comes (I understand the gist of it after reading a wiki) when I can make that choice.

After doing some more reading, it seems that having tax-advantaged accounts in Vanguard and having non-tax-advantaged accounts in Betterment or WiseBanyan would be the best solution for me in terms of optimizing time, effort, and returns. I still desire for all accounts to be managed in one place, but it has less of an impact on my decision now.

Thanks for the clarification and suggestions!

KittyCat

  • Stubble
  • **
  • Posts: 242
  • Age: 29
  • Location: CA, USA
Re: Where should I start investing?
« Reply #5 on: August 04, 2015, 05:25:11 PM »
Update:
  • I have opened up a Roth IRA account with Vanguard and deposited $5.5k which is 100% towards the 2055 Target Retirement Fund at the moment.
  • I sold off around $6.2k of company stock today, and waiting for it to transfer to my savings account
  • I have around $81.5k left in my savings after the Roth IRA deposit, and I plan on investing $76k or so of it
  • Still waiting for the 401k account password to come through the mail so that I can roll it over to Vanguard
I have yet to open a nonretirement account, but will likely go with Vanguard. I'm waffling between sticking with the Target Retirement Funds and picking a few index/mutual funds at the moment. I like the idea of not having to do anything further than just putting more money into the account, but I qualify for admiral shares and the possible lower expense ratio is tempting. I realize that there are as many different allocations as there are people, but I'd still like some advice regarding this. Thanks for reading!