Author Topic: Put $1000 into a Vanguard Taxable Account -- Limited Options  (Read 3758 times)

OneCoolCat

  • Bristles
  • ***
  • Posts: 439
  • Age: 33
  • Location: SoFla
I put in $1000 into a Vanguard taxable account and don't have a lot of investment options yet.  It's just the STAR fund or the targeted retirement funds.  Should I put it into either of these funds, ETFs (if I can even do that), or wait one month and buy the $3000 funds? 

MDM

  • Walrus Stache
  • *******
  • Posts: 9891
Re: Put $1000 into a Vanguard Taxable Account -- Limited Options
« Reply #1 on: June 17, 2015, 10:17:10 PM »
I put in $1000 into a Vanguard taxable account and don't have a lot of investment options yet.  It's just the STAR fund or the targeted retirement funds.  Should I put it into either of these funds, ETFs (if I can even do that), or wait one month and buy the $3000 funds?
Any of those would be fine.  Note that VTTSX (the 2060 target date fund) is worth considering no matter how much you have available.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5208
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Put $1000 into a Vanguard Taxable Account -- Limited Options
« Reply #2 on: June 17, 2015, 10:29:10 PM »
You should be aware that the target retirement fund contains bonds, which may be better off in your retirement account for tax reasons (http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement). If you don't want to hold the target retirement fund in your taxable account for the long term, you may just want to wait until next month for simplicity's sake. No sense messing around with capital gains taxes just to have $1,000 invested for an extra month.

Singularity

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Put $1000 into a Vanguard Taxable Account -- Limited Options
« Reply #3 on: June 17, 2015, 10:37:19 PM »
How about using the Vanguard ETF Funds with no minimums.  Just buy in whole numbers of shares.

Perhaps VTI Total Market and VXUS All world Market EX-US?  No fees in Vanguard account.
If you don't already have your account setup it is easy to do the trivial upgrade to Vanguard's Brokerage account.

P.S. Capital Gains for one month on $1k is likely rather small.  1%-5% move fund change either up or down? multiplied by your tax rate only if moves up.

P.S.S.  One important indicator of success is the amount of time you have in the market, so weekly or bi-weekly deposits do help over monthly and especially help over idle cash.
« Last Edit: June 18, 2015, 06:45:31 AM by Singularity »

OneCoolCat

  • Bristles
  • ***
  • Posts: 439
  • Age: 33
  • Location: SoFla
Re: Put $1000 into a Vanguard Taxable Account -- Limited Options
« Reply #4 on: June 17, 2015, 10:38:53 PM »
You should be aware that the target retirement fund contains bonds, which may be better off in your retirement account for tax reasons (http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement). If you don't want to hold the target retirement fund in your taxable account for the long term, you may just want to wait until next month for simplicity's sake. No sense messing around with capital gains taxes just to have $1,000 invested for an extra month.

That's precisely the reason I was hesitant about jumping right in, whether there would be additional taxable events if I ended up selling my shares to buy into what I really want to own.

GGNoob

  • Pencil Stache
  • ****
  • Posts: 726
  • Age: 33
  • Location: Colorado
Re: Put $1000 into a Vanguard Taxable Account -- Limited Options
« Reply #5 on: June 18, 2015, 11:46:42 AM »
You should be aware that the target retirement fund contains bonds, which may be better off in your retirement account for tax reasons (http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement). If you don't want to hold the target retirement fund in your taxable account for the long term, you may just want to wait until next month for simplicity's sake. No sense messing around with capital gains taxes just to have $1,000 invested for an extra month.

That's precisely the reason I was hesitant about jumping right in, whether there would be additional taxable events if I ended up selling my shares to buy into what I really want to own.

If you really want Total Stock Market and/or Total International Stock market mutual funds, just wait and buy those. Otherwise, the ETFs work. Your right, no point in selling when you hit $3k to switch funds.

forummm

  • Walrus Stache
  • *******
  • Posts: 7389
  • Senior Mustachian
Re: Put $1000 into a Vanguard Taxable Account -- Limited Options
« Reply #6 on: June 18, 2015, 01:01:20 PM »
It's such a small amount of money, whatever you do isn't going to matter much. Maybe wait a month until you are certain in your plan and then have the money to do that.

The 2060 fund does have bonds, but it's such a small percentage of bonds (and such a small amount invested) that it's not going to be much of an issue for you for the next decade or two. And if you've RE'd by that point, you will have more flexibility to exchange for another fund without paying a lot (or maybe even any) tax on the capital gains.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5208
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Put $1000 into a Vanguard Taxable Account -- Limited Options
« Reply #7 on: June 18, 2015, 01:39:10 PM »
The issue is that the OP seems to be trying to build up a taxable account over time. Sure, $1,000 is a very small amount, but this is just the start. Once you get the account balance up to $100k or $200k you might regret putting money into a fund where you're paying tax on non-qualified dividends. So the OP can either invest $1,000 in the Target Retirement fund now, keep investing new money into that fund, and be paying that extra tax from now until retirement when it's cheaper to make the exchange, or they can just wait a month until they have enough money to get started with a more tax-efficient fund.

forummm

  • Walrus Stache
  • *******
  • Posts: 7389
  • Senior Mustachian
Re: Put $1000 into a Vanguard Taxable Account -- Limited Options
« Reply #8 on: June 18, 2015, 02:18:22 PM »
The issue is that the OP seems to be trying to build up a taxable account over time. Sure, $1,000 is a very small amount, but this is just the start. Once you get the account balance up to $100k or $200k you might regret putting money into a fund where you're paying tax on non-qualified dividends. So the OP can either invest $1,000 in the Target Retirement fund now, keep investing new money into that fund, and be paying that extra tax from now until retirement when it's cheaper to make the exchange, or they can just wait a month until they have enough money to get started with a more tax-efficient fund.

Those are very good points. What I was suggesting is that even if OP wanted to start now and not wait a month, the amount invested would be small and that it could later be changed to another fund with minimal costs. You are correct that if the OP added another 6 figures to this same fund, the stipulations I made would no longer apply.