Author Topic: Withdrew funds in Betterment. Need advice on Vanguard  (Read 2575 times)

xclonexclonex

  • Stubble
  • **
  • Posts: 129
Withdrew funds in Betterment. Need advice on Vanguard
« on: March 17, 2016, 08:19:00 AM »
Hello all,

After the recent small market upswing, I went ahead and withdrew all the funds in my Betterment account - $1566, and now I want to invest in Vanguard directly.

I did this because Betterment also invests in Vanguard funds (I have been told this before by the community, but I was very intimidated by investing), and I thought it would be a better idea for me to learn about investing and do this myself so that I can save on 0.35% fee I have to pay to Betterment on top of the individual fund fees.

Now, I already have a Roth IRA account with Vanguard which is maxed out for 2016, with the following funds -
http://imgur.com/G6gG1Vn

I am also contributing 15% of my income towards 401k, but with the remaining cash that I have, I want to put it to work, and I am wondering if Vanguard would be a good place to open a non-retirement investment account. If not, do you have any recommendations?

Also, can I invest in the exact same funds in the non-investment account as I have in the Roth IRA account? Is there any advantage or disadvantage to this?

Thanks for your help.

ooeei

  • Handlebar Stache
  • *****
  • Posts: 1143
Re: Withdrew funds in Betterment. Need advice on Vanguard
« Reply #1 on: March 17, 2016, 08:28:39 AM »
The taxable account should work the same as the IRA.  You can try to be tax efficient by putting your most tax efficient holdings in the taxable account, and least tax efficient in the IRA (since the IRA is not taxed), but I personally don't worry about that with my accounts. 

I use Schwab, and my taxable, roth IRA, and traditional IRA all have roughly the same allocation.  Just keep in mind investment minimums, since you only have $1500 to invest you may run into those.

neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3340
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: Withdrew funds in Betterment. Need advice on Vanguard
« Reply #2 on: March 17, 2016, 08:32:21 AM »
Right - normally we might recommend an 80/20 split between VTSMX and VBMFX but each have a $3000 minimum. They each do have (reasonably) equivalent ETF shares, though, which do not have a minimum. Click through to the links to see more information. When you invest enough to start hitting the $3000 minimum, I think you can switch over from ETF to the funds, though someone else would have to answer whether you'd pay capital gains at that time. Once you hit $10000 per asset class, you can then switch to Admiral shares, which I think is "automatic" and would not trigger capital gains, and it further reduces your expense ratios!

xclonexclonex

  • Stubble
  • **
  • Posts: 129
Re: Withdrew funds in Betterment. Need advice on Vanguard
« Reply #3 on: March 17, 2016, 03:27:02 PM »
Thank you very much for your reply.

I do not know what tax efficient holdings are...where can I find out more information about this? If you just point me in the right direction, I will read and learn.

I am thinking about investing in the two funds you mentioned. However, vanguard recommended this fund based on some of the answers I gave -
https://personal.vanguard.com/us/funds/snapshot?FundId=0122&FundIntExt=INT

Any opinions on the aforementioned fund?

Thanks a lot!

neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3340
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: Withdrew funds in Betterment. Need advice on Vanguard
« Reply #4 on: March 17, 2016, 04:17:28 PM »
If you take a closer look, you'll see that fund is a combination of four other Vanguard funds:

1   Vanguard Total Stock Market Index Fund Investor Shares        48.5%
2   Vanguard Total International Stock Index Fund Investor Shares   31.7%
3   Vanguard Total Bond Market II Index Fund Investor Shares         13.7%
4   Vanguard Total International Bond Index Fund Investor Shares   6.1%

Basically 80/20 stocks/bonds with a split between U.S. and International stocks and bonds. The expense ratio is 0.15% and the minimum is $3000. Nothing wrong with going with this approach compared to managing your asset allocation manually - maybe in the long-term consider migrating to individual funds so you can take advantage of the Admiral 0.05% expense ratios.

ryan.triguy

  • 5 O'Clock Shadow
  • *
  • Posts: 8
  • Age: 37
  • Location: Washington State
Re: Withdrew funds in Betterment. Need advice on Vanguard
« Reply #5 on: March 18, 2016, 01:44:18 PM »
Good information.  We have been looking at doing almost the same with 20k into the funds.   First time looking into and learning about these things.  What do others recommend for long term investing with vanguard?  I have been looking at the vig and vtsax.  But like I said totally new to me.  Had just been doing Roth and differed comp through work. 


Sent from my iPhone using Tapatalk

neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3340
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: Withdrew funds in Betterment. Need advice on Vanguard
« Reply #6 on: March 18, 2016, 01:59:32 PM »
Each individual should figure out their own ideal asset allocation, but the "easy" way to is go with the example set forth on Bogleheads.
Vanguard Three Fund Portfolio

mxt0133

  • Handlebar Stache
  • *****
  • Posts: 1559
  • Location: San Francisco
Re: Withdrew funds in Betterment. Need advice on Vanguard
« Reply #7 on: March 18, 2016, 03:06:19 PM »
I think others have already address the OP's original question about the mechanics of investing with Vanguard.

Not to complicate things even more for the OP and other's new to investing, but I think new investors not only need to know the mechanics of investing but to be more specific how does investing fit in with your overall financial plans and goals.  Are these investments meant for long term goals such as retirement savings vs short term goals such as a down payment on a house?  How much volatility can you handle, if the fund goes down 20-30% will you sell or hold?  Do you have adequate savings so that when you need the funds you don't have to liquidate your investments?

If you have addressed these goals great, but if you haven't then I would recommend you continue to learn on both fronts.  But no matter what don't stop saving!

xclonexclonex

  • Stubble
  • **
  • Posts: 129
Re: Withdrew funds in Betterment. Need advice on Vanguard
« Reply #8 on: March 21, 2016, 08:22:06 AM »
Thank you very much for the recommendations, it definitely makes sense.

Here are the answers to the questions,

> Are these investments meant for long term goals such as retirement savings vs short term goals such as a down payment on a house? 

- These investments are long term. I already put a 20% down payment on my house, so there are no big purchases planned in the future.

> How much volatility can you handle, if the fund goes down 20-30% will you sell or hold?

- I am fortunately in a situation where I don't have to rely on the stock market for my living at the moment, so I am not terribly concerned about volatility.

> Do you have adequate savings so that when you need the funds you don't have to liquidate your investments?

- Fortunately I do have adequate savings. Even if I decide to pay off the house in full, I have enough to live for 6 months without any income.

The question I have regarding the three fund portfolio is about international funds. I am hesitant to invest in international markets. I would prefer it to be domestic. So I can I just go 80-20 with stocks and bonds? Is there anything wrong with this strategy?