Author Topic: Account choice and Volatility  (Read 1090 times)

Texan

  • 5 O'Clock Shadow
  • *
  • Posts: 32
Account choice and Volatility
« on: May 19, 2015, 04:48:34 AM »
This summer, as an engineering intern I will make over 10,000$ I plan on investing the bulk of it. I am not sure if I should max out my Roth IRA again with vanguard or put most in my taxable account with vanguard.

I have short term goals, thus I might want access to the money in a decade or so. With that said, assuming I figure out where to invest.

QUESTION:

Is investing VTSAX (Total Stock Fund) in a taxable account good? I like simple investing, and this would be my only fund. See the picture below. VTSAX is a tax efficient fund, no?

Should I add a total bond fund and total international stock fund? This way to offset the volatility of the stocks for the short term? Because I plan on taking some money out in a decade or so?

Thanks
« Last Edit: May 19, 2015, 04:53:25 AM by Texan »

rmendpara

  • Pencil Stache
  • ****
  • Posts: 602
Re: Account choice and Volatility
« Reply #1 on: May 19, 2015, 09:08:12 AM »
What are you investing for?

Only put inside a retirement account if you don't plan to touch it until age 60+. Given it is very early in your life and career (I'm assuming based on your internship), it's not as important to diversify at this time. Your best bet is to choose a broadly diversified fund (VTSAX is fine for total stock market). Over time, you can continue to add and then diversify into other areas (intl stocks, us bonds, intl bonds, etc).

Given that you mentioned you'd like to withdraw in 10 years, there are ways to do this if you invest in a Roth, but only up to the 10k that you put in (remember than the annual limit is 5.5k for 2015, so you'll have to split between 2015 and 2016). Search "withdraw early from Roth" online and you'll find a lot of specifics. It's very tax efficient, given VTSAX only has a little in dividends.

Investing carries risk, so there are no guarantees. The market could tank in 8 yrs, or it could double by the 10th year. Timing is very difficult, but the long time horizon is on your side.

Without more details, that's my best general advice
« Last Edit: May 19, 2015, 09:10:57 AM by rmendpara »

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: Account choice and Volatility
« Reply #2 on: May 19, 2015, 09:14:14 AM »
If this $10k is your only income for the year, and you don't need the money for a decade, I'd definitely contribute the maximum to your Roth. And you can definitely put the rest into a taxable account. VTSAX (or VTSMX for <$10k balance) is a great fund for taxable accounts too.

You could add an international fund. But for the small balance you have I wouldn't worry about it just yet.