Author Topic: 21 year old starting to invest - NEED advice!!!  (Read 8677 times)

Gatzbie

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21 year old starting to invest - NEED advice!!!
« on: May 09, 2016, 10:12:08 AM »
I have no experience with investing would appreciate all of your advice greatly.
Me:

Age: 21
Money Saved Up:  around 25k
Currently looking to invest:  5k  (just to get something started)
Debt:   None
College:  1 more year left, Major will be Accounting!
Expenses:  No major expenses (Not having to pay for rent/school)
Job:  Summer jobs and paid internships ( No full-time job yet) 
Long-term Career:  I have no idea, (trying to figure this out still) 

My Situation:  Currently filling out application on Vanguard to set up an account to invest 5k.   I have no idea what to invest it in. I want it to be for retirement.  Should I start off with a Roth IRA?  I was thinking about putting my money in the Vanguard 500 Index Fund Investor Shares (VFINX).  I have no experience with investing.  Supposedly I should take more risk in stocks over bonds because I'm younger?  Whatever long-term career I choose to do, I plan on saving large amounts of money and investing whatever I can (would like to retire as soon as possible.) 

Any recommendations, or things I should maybe do differently? Anything you might have done differently when you started out investing?


« Last Edit: May 17, 2016, 12:25:39 PM by Gatzbie »

Frankies Girl

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #1 on: May 09, 2016, 10:31:13 AM »
Fantastic job saving up that much money and already thinking about investing! :D

Read this for a pretty complete education (and an entertaining read): http://jlcollinsnh.com/stock-series/

As you are young, I think following this advice is probably best:
http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/


And as far as what type of account to open, that is going to be either a Roth or traditional IRA, and currently you can fund it up to $5,500 per year. Which type of account is best is dependent on lots of different things (usually your current income vs what you expect to draw in retirement and tax brackets and such). Hopefully someone more knowledgeable about the advantages can chime in and help.

Gatzbie

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #2 on: May 09, 2016, 10:39:02 AM »
Awsome, thank you.  For some reason on my Vanguard application, I have it on general savings.  I will switch it to retirement (still need to decide if Roth or traditional is best for me) .  I will check out those links you posted right now!

zephyr911

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #3 on: May 09, 2016, 10:40:47 AM »
Yes, a Roth is great while you're presumably in a low tax bracket (and maybe later too - it depends). VFINX isn't a bad choice.
Taking more risk when young and dialing it back over time is the common wisdom, yes. Only you can say if it's your thing. If you save enough, your exact allocation becomes less crucial as you overshoot your needs.
I'm 37 and my allocation is roughly equal between broad indexes, safe boring stocks, more speculative stocks, and rentals. All have their pros and cons. My personal approach is to line up enough income streams that one or more could fail and I'd still be getting more than I spend. Note that this means I will probably work longer than is strictly necessary, but is likely to produce large surpluses that my future self can employ in the service of perceived greater good, and for me, that's a big part of why I got on the FIRE track. Because of that, the work I do now essentially has acquired a secondary purpose that adds to present satisfaction and makes it easier to deal with any frustrations I experience. But I digress.
Start simple. You're on the right track. Over time, read the investing and real estate sections for more ideas.

Gatzbie

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #4 on: May 09, 2016, 10:51:50 AM »
Yea, that's why I was kind of leaning towards the Roth.  Yea I'm okay with taking more risk right now because i'm younger.  I plan on saving a great amount of my future income so hopefully that overshoots my needs.  My allocation plans as of now are strictly in indexes and possibly rentals (still doing research on this).  Thanks for the post man, I appreciate it.

zephyr911

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #5 on: May 09, 2016, 11:05:37 AM »
This is also a good place to learn about rentals. I'm not a pro yet myself, though I'm working on it. I have a few, and all but one are profitable. There are many different approaches, depending on your skills and preferences.

Gatzbie

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #6 on: May 09, 2016, 11:20:15 AM »
For a career, one path I am  considering is majoring in real estate and to then possibly work for a property management company to get some experience dealing with rental properties (then maybe buy some properties for myself to rent out in the future).  I'm currently just listening to audiobooks about rental properties and reading stuff on here, but this is a path I'm considering right now for sure!
« Last Edit: May 09, 2016, 11:26:39 AM by Gatzbie »

zephyr911

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #7 on: May 09, 2016, 12:07:53 PM »
What's worked out great for me was getting licensed in real estate and co-founding a rental investing company... integrating a licensed agent into the acquisition process makes us faster and more efficient (no coordinating with a third party; I/we are always my #1 priority client, etc), and then there's the commission obviously.

Gatzbie

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #8 on: May 09, 2016, 01:01:56 PM »
Where do you get the money to own multiple properties?  Savings and buying in cash?  Or putting a certain amount down on them?  I've always wondered about this.  Thank you for sharing your experience, this website  is pretty cool. 

Update:  just got off phone with a guy from Vanguard.  My account is set up (retirement, Roth IRA) and has also been funded.  I can put my money into indexes now if I wanted to.  They have funds where if you know your target retirement years, they automatically adjust your stocks to bonds ratio as you get older which was interesting.  He also said I could do the S&P 500 one if I wanted too (this is 100% stocks which is riskier but I'm pretty young) and then manually move it over to funds that have a higher bond ratio as I get older.



« Last Edit: May 09, 2016, 01:31:18 PM by Gatzbie »

mcj

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #9 on: May 09, 2016, 02:11:47 PM »
Hopefully you are already aware, but you can only contribute taxable earned (wage) income to an IRA. To contribute $5000 you need to have $5000 in wage income.

from https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits

"For 2015 and 2016, your total contributions to all of your traditional and Roth IRAs cannot be more than:

$5,500 ($6,500 if you’re age 50 or older), or
your taxable compensation for the year
, if your compensation was less than this dollar limit."

Not a problem for most working people, I only mention it because you are in college, and I had to stop contributing one year while I went back to school and didn't have earned income.
« Last Edit: May 09, 2016, 02:14:46 PM by mcj »

zephyr911

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #10 on: May 09, 2016, 02:30:06 PM »
Where do you get the money to own multiple properties?  Savings and buying in cash?  Or putting a certain amount down on them?  I've always wondered about this.  Thank you for sharing your experience, this website  is pretty cool. 
As long as interest rates on real estate remain this low, financing is mathematically superior for growing a portfolio faster. It does add some risk, since extended vacancies or major expenses can make it hard to service debt, but that can be mitigated through planning, keeping a cash cushion, and maintaining good credit. Oh, and of course, by not overpaying.
It's easy to look at all debt as bad (an understandable overreaction to the profusion of crippling high-rate consumer debt) until you realize that by borrowing at 3-5% and investing in things that earn 6-8%, you can push your total returns well into double digits. Look at my company (3 partners): we put in a paltry $10k each to start with, and another $10K over 2 years, and would have just reached the point of being able to pay cash for (looking at current listings) one small duplex rented for $425 a side today. Instead, by taking advantage of all available financing, we've each earned several thousand in equity over those two years, and are now growing our stake at almost $1k/mo per partner, on a total asset value of near half a million. Gross rent is almost $6K/mo and should surpass $10K this year if we continue at this pace. And all the difference came from giving a financial institution a small return at low risk via our good credit profiles.

'Grats on the IRA. I'm about to start pushing Roth money in for the year too. Two years into trying to be Mustachian, I have finally gotten ahead of cash flow to the point where I can avoid cramming it all in at the end of the year. ;)

Gatzbie

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #11 on: May 09, 2016, 03:12:29 PM »
Hopefully you are already aware, but you can only contribute taxable earned (wage) income to an IRA. To contribute $5000 you need to have $5000 in wage income.

from https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits

"For 2015 and 2016, your total contributions to all of your traditional and Roth IRAs cannot be more than:

$5,500 ($6,500 if you’re age 50 or older), or
your taxable compensation for the year
, if your compensation was less than this dollar limit."

Not a problem for most working people, I only mention it because you are in college, and I had to stop contributing one year while I went back to school and didn't have earned income.

Crap, I did not know this.  I've probably made like 2,500 this year from an internship , I haven't earned over 5,000 from wage income this year alone.   From previous years, yes I have.  Thanks for making me aware.

Gatzbie

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #12 on: May 09, 2016, 03:34:06 PM »
Where do you get the money to own multiple properties?  Savings and buying in cash?  Or putting a certain amount down on them?  I've always wondered about this.  Thank you for sharing your experience, this website  is pretty cool. 
As long as interest rates on real estate remain this low, financing is mathematically superior for growing a portfolio faster. It does add some risk, since extended vacancies or major expenses can make it hard to service debt, but that can be mitigated through planning, keeping a cash cushion, and maintaining good credit. Oh, and of course, by not overpaying.
It's easy to look at all debt as bad (an understandable overreaction to the profusion of crippling high-rate consumer debt) until you realize that by borrowing at 3-5% and investing in things that earn 6-8%, you can push your total returns well into double digits. Look at my company (3 partners): we put in a paltry $10k each to start with, and another $10K over 2 years, and would have just reached the point of being able to pay cash for (looking at current listings) one small duplex rented for $425 a side today. Instead, by taking advantage of all available financing, we've each earned several thousand in equity over those two years, and are now growing our stake at almost $1k/mo per partner, on a total asset value of near half a million. Gross rent is almost $6K/mo and should surpass $10K this year if we continue at this pace. And all the difference came from giving a financial institution a small return at low risk via our good credit profiles.

'Grats on the IRA. I'm about to start pushing Roth money in for the year too. Two years into trying to be Mustachian, I have finally gotten ahead of cash flow to the point where I can avoid cramming it all in at the end of the year. ;)

Wow, thats a cool story. I enjoyed the read, and thank you!

PhysicianOnFIRE

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #13 on: May 14, 2016, 09:26:35 PM »
Congrats on your upcoming graduation and keen interest in getting started at a young age!

If you don't have wage income for an IRA, you can always buy funds straight up in a "taxable" account. Don't worry, you won't be taxed at all now, and very little once you start making money.

I wrote a 20 step guide linking out to many quality resources. The jlcollinsnh stock series mentioned earlier is great for gaining an understanding of what investing in stocks means.

Dragonstrike

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #14 on: May 16, 2016, 11:09:51 PM »
So here's a question to the stock series and Vanguard.  Jpcollins suggests that you do the VTSAX, but is that the VTSAX Roth or is that the Taxable VTSAX where you can live off the dividends of interest earned?

thedayisbrave

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #15 on: May 17, 2016, 06:13:16 AM »
Good job on getting started early.

Depending on your local real estate market, it might make sense to do what I did.  My first property was a 4 bedroom/4 bath 'university style' condo.  I lived in one bedroom and rented out the 3 others.  My tenants covered all expenses with the property plus I cash flowed about $50 each month and lived rent-free for 3 years.

Then I moved and I did it again, and completely rented out the first place.  Living rent-free meant much lower overhead.  Saving for the down payment on the first one will be the hardest, and then it starts snowballing from there.  I have 3 now, and still live in my 2nd one.  Things are booming in my area now so I'm not in active buying mode, but rather just paying down loans with cash flow and stockpiling cash for buying opportunities down the road (if another 2008 or correction happens).

If you're interested in real estate investing, check out BiggerPockets (www.biggerpockets.com). 

Gatzbie

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #16 on: May 20, 2016, 06:11:41 PM »
UPDATE: Thank you all for the posts.  I think I''m taking on too much at one time so I will direct my focus to index funds now instead of rental homes (maybe when I'm older I'll get into these more)

In regard to my plan:

To keep things as simple as possible right now, I would like to only get started in a Vanguard Total Stock Market Index Fund and Total Bond Market Index Fund as Bogle Himself recommends. I don't plan on rebalancing (is this technique even effective?) or investing internationally directly to keep things simple.

Should I slowly add my $5,000 to my Roth IRA over this year or just throw 5,000 into it to get things started off, then add increments to it over time as I start working? (starting summer job next week) 

My chosen index fund for my Roth IRA is the Vanguard Total Stock Market Index Fund because the returns here are expected to be highest (compared to bonds) which will be most efficient for tax reasons supposedly. (I would like to max this out this year)

This would be 100% stocks, but as I make some more money working, I would like to create a tax-deferred account and put money into the Total US Bond Index Fund to get something started there.

Last of all, I would like to make a taxable account where I will put more money into a Vanguard Total Stock Market Index Fund and possibly an international one.
 

What do you all think?
« Last Edit: May 20, 2016, 06:24:54 PM by Gatzbie »

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #17 on: May 21, 2016, 02:07:44 PM »
UPDATE: Thank you all for the posts.  I think I''m taking on too much at one time so I will direct my focus to index funds now instead of rental homes (maybe when I'm older I'll get into these more)

In regard to my plan:

To keep things as simple as possible right now, I would like to only get started in a Vanguard Total Stock Market Index Fund and Total Bond Market Index Fund as Bogle Himself recommends. I don't plan on rebalancing (is this technique even effective?) or investing internationally directly to keep things simple.

Should I slowly add my $5,000 to my Roth IRA over this year or just throw 5,000 into it to get things started off, then add increments to it over time as I start working? (starting summer job next week) 

My chosen index fund for my Roth IRA is the Vanguard Total Stock Market Index Fund because the returns here are expected to be highest (compared to bonds) which will be most efficient for tax reasons supposedly. (I would like to max this out this year)

This would be 100% stocks, but as I make some more money working, I would like to create a tax-deferred account and put money into the Total US Bond Index Fund to get something started there.

Last of all, I would like to make a taxable account where I will put more money into a Vanguard Total Stock Market Index Fund and possibly an international one.
 

What do you all think?

Sounds about right.  Make sure you read up on tax efficient asset allocation.  Also don't focus so much on simplification that you shoot yourself in the foot... there is a lot of be said about proper diversification.  For example, I hold 30% of my stock allocation in international. 

K-ice

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #18 on: May 22, 2016, 11:26:29 PM »
UPDATE: Thank you all for the posts.  I think I''m taking on too much at one time so I will direct my focus to index funds now instead of rental homes (maybe when I'm older I'll get into these more)

In regard to my plan:

...

Should I slowly add my $5,000 to my Roth IRA over this year or just throw 5,000 into it to get things started off, then add increments to it over time as I start working? (starting summer job next week) 

My chosen index fund for my Roth IRA is the Vanguard Total Stock Market Index Fund because the returns here are expected to be highest (compared to bonds) which will be most efficient for tax reasons supposedly. (I would like to max this out this year)

This would be 100% stocks, but as I make some more money working, I would like to create a tax-deferred account and put money into the Total US Bond Index Fund to get something started there.

Last of all, I would like to make a taxable account where I will put more money into a Vanguard Total Stock Market Index Fund and possibly an international one.
 
What do you all think?

Since you said you have $25K total and want to start with $5K I would just invest it all right now.

I would put it all in your Roth Vanguard Stocks.

Read up on location as mentioned above. I would add Bonds in a tax deferred once you start making a good paycheck.  I do not see the need to have anything in taxable until the Roth and tax deferred are maxed.





Gatzbie

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #19 on: May 23, 2016, 11:33:20 AM »
UPDATE: Thank you all for the posts.  I think I''m taking on too much at one time so I will direct my focus to index funds now instead of rental homes (maybe when I'm older I'll get into these more)

In regard to my plan:

...

Should I slowly add my $5,000 to my Roth IRA over this year or just throw 5,000 into it to get things started off, then add increments to it over time as I start working? (starting summer job next week) 

My chosen index fund for my Roth IRA is the Vanguard Total Stock Market Index Fund because the returns here are expected to be highest (compared to bonds) which will be most efficient for tax reasons supposedly. (I would like to max this out this year)

This would be 100% stocks, but as I make some more money working, I would like to create a tax-deferred account and put money into the Total US Bond Index Fund to get something started there.

Last of all, I would like to make a taxable account where I will put more money into a Vanguard Total Stock Market Index Fund and possibly an international one.
 
What do you all think?

Since you said you have $25K total and want to start with $5K I would just invest it all right now.

I would put it all in your Roth Vanguard Stocks.

Read up on location as mentioned above. I would add Bonds in a tax deferred once you start making a good paycheck.  I do not see the need to have anything in taxable until the Roth and tax deferred are maxed.


I'm very new and am finding new things as I go a long here.  For starters,  I only have the ability to put $5,500 into a single IRA (you can't put $5,500 both into a Roth and a traditional IRA account as I thought). I also learned that I can't create my own 401k and I probably won't have one of these until I get a full-time career going (1-2 years before this happens).  I also learned about the minimum investment policies at Vanguard (they would only liquidate my holdings if they fell to $100 or less) and some things about taxes.

Heres what I found off the Boglehead website in regard to taxes which I'm going to go off of:  "In general, the international fund should go into a taxable account, the bond fund should go into a tax-advantaged account, and the domestic equity fund should fill in the remaining space."

Another big thing,  I found out that I had big CD from 2012 doing nothing so I'm going to take it out and start using it for this.

With all of this said...I can invest up to 10k if I want instead of the original 5k just to get something started.

I don't have the option to have a tax-deffered 401k account. IDK if I should do bonds now... So I was thinking of just using my Roth IRA and a taxable general savings account for now?  I could simply max out the Roth IRA with stocks and put the rest into stocks in a taxable general savings account?

Or.... invest enough to max out Roth IRA and save the rest of my money for later? (max out Roth again next year, wait until I can have a 401k etc...)
« Last Edit: May 23, 2016, 11:36:09 AM by Gatzbie »

AdrianC

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #20 on: May 23, 2016, 11:45:35 AM »
I just came across this booklet by Bernstein and thought it was excellent:

If You Can
How Millennials Can Get Rich Slowly
William J. Bernstein (2014)

https://dl.dropboxusercontent.com/u/29031758/If%20You%20Can.pdf

Well worth an hour of your time.

MustacheAndaHalf

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #21 on: May 23, 2016, 12:02:39 PM »
"I've probably made like 2,500 this year from an internship , I haven't earned over 5,000 from wage income this year alone."

Seems like you forgot that when you later posted:
"Should I slowly add my $5,000 to my Roth IRA over this year ..."

Your limit to Roth contributions is your income, since it's less than the Roth limit.  Get a copy of your pay stub, and that's how much you can contribute to a Roth account.  But don't let "Roth or nothing" be your approach: building up assets in taxable can be tax efficient.

Vanguard Total Stock market generates dividends that receive a lower tax rate.  In your $2500/year income bracket, your lower tax rate is 0% on qualified dividends.  So it won't be that big a deal to have this money in a stock index fund in a taxable account.

Gatzbie

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #22 on: May 23, 2016, 12:14:34 PM »
"I've probably made like 2,500 this year from an internship , I haven't earned over 5,000 from wage income this year alone."

Seems like you forgot that when you later posted:
"Should I slowly add my $5,000 to my Roth IRA over this year ..."

Your limit to Roth contributions is your income, since it's less than the Roth limit.  Get a copy of your pay stub, and that's how much you can contribute to a Roth account.  But don't let "Roth or nothing" be your approach: building up assets in taxable can be tax efficient.

Vanguard Total Stock market generates dividends that receive a lower tax rate.  In your $2500/year income bracket, your lower tax rate is 0% on qualified dividends.  So it won't be that big a deal to have this money in a stock index fund in a taxable account.

Yea I didn't forget, I'm just highly confident that I will make over 5,500 in wage income this year (by this summer actually, starting my summer job this week!). I have succeeded making more than this every year since high school!  (I believe that I can max out Roth now even though I haven't made the 5,500 this year just yet correct me if I'm wrong)

That's what I was kind of thinking.  Start up Roth and general savings taxable account for now with just the Vanguard Total Stock market fund and then add bonds when I get a tax-deferred account someday. Then add international someday as well once I have over 50k invested overall someday!

Sound pretty good?


P.S.  thanks for post Adrian, good reinforcement from what I listened in his audiobook.


 
« Last Edit: May 23, 2016, 12:20:31 PM by Gatzbie »

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #23 on: May 23, 2016, 01:01:52 PM »
I think your plan sounds like a good one. At 21 you should be in no rush to start buying bond funds. Your own risk tolerance matters a lot, naturally, but if you are disciplined enough to not panic at the first sign of a downturn, investing 100% stocks is totally appropriate at your age. Heck, we are 95% stocks and we are 34/35 and there are others (GoCurryCracker, for example) who are 100% equities in retirement. Bonds are for stability and income; stocks are for growth. If you are truly investing for the long-term, then stocks are the place to be.

Take all of that advice with the BIG asterisk that it depends on your risk tolerance. Again, if you think you will panic and want to sell once the market inevitably starts going south, then you are better off putting your dough in a savings account or bond funds, or some more conservative asset allocation to avoid the losses you would take from selling at the bottom. More stocks will get you where you want to go faster, but it will be a bumpier ride.

Gatzbie

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #24 on: May 23, 2016, 01:37:50 PM »
I think your plan sounds like a good one. At 21 you should be in no rush to start buying bond funds. Your own risk tolerance matters a lot, naturally, but if you are disciplined enough to not panic at the first sign of a downturn, investing 100% stocks is totally appropriate at your age. Heck, we are 95% stocks and we are 34/35 and there are others (GoCurryCracker, for example) who are 100% equities in retirement. Bonds are for stability and income; stocks are for growth. If you are truly investing for the long-term, then stocks are the place to be.

Take all of that advice with the BIG asterisk that it depends on your risk tolerance. Again, if you think you will panic and want to sell once the market inevitably starts going south, then you are better off putting your dough in a savings account or bond funds, or some more conservative asset allocation to avoid the losses you would take from selling at the bottom. More stocks will get you where you want to go faster, but it will be a bumpier ride.

Awesome, I would say that I have a big risk tolerance because I'm young, I would look at a market crash strictly as a buying opportunity (buy in increments as it goes down) if something huge happened, and I strictly don't want to take this money out until I retire (this is extra money, have plenty to live comfortably right now). Being aware of how bad the market can crash, having a plan for it, and knowing that it will rebound eventually doesn't make me worry much.  Thank you for the post!
« Last Edit: May 23, 2016, 01:40:44 PM by Gatzbie »

HydroJim

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #25 on: May 25, 2016, 08:58:33 AM »
Hopefully I'm not too late to chime in. I skimmed the comments so hopefully I'm not repeating anything. Not sure if you setup your Vanguard account yet or not. I'm 19 and I just finished up sophomore year so I'm about a year behind you. Similar situation though.

Few comments:
-While you haven't yet made $5,500 this year, I think it's safe to assume you'll make that over the course of this year from a summer internship or other part time work. The income/contribution limit only matters when you file your 2016 tax return next spring. For now, Vanguard has no idea what you have made.

-I've been maxing out my Roth IRA with 100% VTSMX/VTSAX. While there are other options, I personally think that's the best for people in our situation (young, low income, relatively low investment amount)

-If your internship employers offer 401k with match, be sure to contribute to the 401k to get the match at least. This somewhat depends on quality of 401k, quality of funds available, and if there are stupid fees. My employer uses fidelity which is decent. They have account "maintenance fees" in addition to the funds fees but the expense ratio is only .02% for vanguard total market institutional fund. Also, the 3% match works out to about $350(-$30 annual account fee). "Free" money! If I stick with the company, I'll keep this 401k. If I don't I'll just roll it over into an IRA.

TheMoneyWizard

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Re: 21 year old starting to invest - NEED advice!!!
« Reply #26 on: May 26, 2016, 01:19:26 PM »
Awesome, I would say that I have a big risk tolerance because I'm young, I would look at a market crash strictly as a buying opportunity (buy in increments as it goes down) if something huge happened, and I strictly don't want to take this money out until I retire (this is extra money, have plenty to live comfortably right now). Being aware of how bad the market can crash, having a plan for it, and knowing that it will rebound eventually doesn't make me worry much.  Thank you for the post!
Good attitude, and as long as you stick to it I'd recommend 100% stocks right now. When I was your age with a similar amount to invest, I went nearly 100% stocks and do not regret it at all. I do regret not utilizing my Roth IRA though. At the time, I didn't because I held onto a romanticized idea of needing that money at the drop of a hat in case a "can't miss" business opportunity came across. That's just isn't unlikely, and in the end I made enough money while I waited that I wouldn't have ever missed $5,500 anyway.

Personally, I'd put $5,500 into the Roth IRA and invest the remaining $5K into a Vanguard index fund, VTSAX or something similar. I'd look into investing more and more of the remaining amount into VTSAX as you feel more comfortable.

This is basically what I did for the past few years. I now have over $50K in VTSAX and feeling plenty diversified.
« Last Edit: May 26, 2016, 01:21:49 PM by TheMoneyWizard »