Author Topic: Best Index Fund to invest my Windfall in?  (Read 3019 times)

Deleuze

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Best Index Fund to invest my Windfall in?
« on: June 15, 2017, 06:28:43 AM »
Hi Moustacians,

I recently inherited a small windfall of $60k and would like to put it in
an Index Fund. I will also be able to contribute an additional $6-7K a
month to it. I read the Mr M blog post here about the VTSMX

http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/

But since it was written in 2011 i'm wondering if this Index Fund is still a smart
option or if I should be looking into a different fund?

Currently i have zero investments except for a Roth IRA and i am 36 years old.

Thanks in advance!

sokoloff

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Re: Best Index Fund to invest my Windfall in?
« Reply #1 on: June 15, 2017, 07:34:22 AM »
If you invest in VTSMX and your position goes over 10K, my understanding is it will be converted to VTSAX automatically.
That's correct. It's not instantaneous, but it was automatic in my experience.

I'm a red panda

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Re: Best Index Fund to invest my Windfall in?
« Reply #2 on: June 15, 2017, 08:01:16 AM »
I'd split $60k, according to your investment plan among
VTSAX, VTIAX, VTIBX (or whatever the admiral share equivalent is if you have enough to get that), VBTLX

This would give you a balance of stocks and bonds, domestic and international.

sokoloff

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Re: Best Index Fund to invest my Windfall in?
« Reply #3 on: June 15, 2017, 08:17:29 AM »
Contrary to prior advice, I'd invest 100% in stocks (VTSAX).

You are young, and are going to be adding a substantial amount of money in addition to this first windfall. (In fact, you're adding so much additional money that the windfall is almost not important after a couple years... ;) )

There is no single right answer and genuine debate on the topic of asset allocation. I'd be sure to stay away from buying annuities in all cases, and would tend to buy all equities, but if you wanted more stability, adding bonds is a good path (at the expense of absolute return in general).

As for domestic vs international, my view is that US citizens who expect to retire in the US should probably be OK with "only" US equities. US companies inherently have a lot of exposure to international growth already (Apple, Coke, Amazon, etc).

runewell

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dougules

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Re: Best Index Fund to invest my Windfall in?
« Reply #5 on: June 15, 2017, 10:54:23 AM »
What do you have in your Roth?  That needs to be factored in, too.

If it were me, I'd put it in a Vanguard account and split it between VTSAX and VTIAX by market weight.  I think that's something like 53% to 47% at the moment. 

Realistically, though, most of the suggestions are perfectly good options as long as you have low expense ratios and good diversification.  No need to overthink it. 

Deleuze

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Re: Best Index Fund to invest my Windfall in?
« Reply #6 on: June 15, 2017, 08:27:46 PM »
Thanks everyone for all the advice, it is truly appreciated.

@dougules I do not have much in my Roth, just 2-years maxed out.
I'm thinking of switching to a traditional though because I do not care
to keep the roth after the cut off retirement age which tIRA allows
you to withdraw and have no plans carrying over Roth to children
or heirs because I have neither. As well....I could really use some
tax cuts ATM which as you know tIRA will give.

Deleuze

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Re: Best Index Fund to invest my Windfall in?
« Reply #7 on: June 15, 2017, 08:36:36 PM »
I should also note i only expect these kinds of contributions for the next 5 years

Lobo

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Re: Best Index Fund to invest my Windfall in?
« Reply #8 on: June 19, 2017, 03:45:24 PM »
Put it all in VTSAX - the important part is don't plan on touching it for the next 30-40 years.

TomTX

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Re: Best Index Fund to invest my Windfall in?
« Reply #9 on: June 19, 2017, 08:14:52 PM »
Thanks everyone for all the advice, it is truly appreciated.

@dougules I do not have much in my Roth, just 2-years maxed out.
I'm thinking of switching to a traditional though because I do not care
to keep the roth after the cut off retirement age which tIRA allows
you to withdraw and have no plans carrying over Roth to children
or heirs because I have neither. As well....I could really use some
tax cuts ATM which as you know tIRA will give.

You seem confused about the benefits and drawbacks (especially the withdrawal rules) of a Roth IRA versus Traditional IRA.

Roth: You can always withdraw your contributions and pay no tax or penalty. When you are 59.5, you can withdraw as much (or as little) of the gains with no tax or penalty. There is never a requirement to withdraw.

tIRA: You pay a 10% penalty ("additional tax") on anything you withdraw before 59.5. After that, you pay regular income tax on your withdrawals. When you reach age 70.5, you are REQUIRED to withdraw a portion of the balance every year, and the amount increases every year.

In almost all circumstances, it is more beneficial to put money in a Roth, rather than just a regular taxable brokerage account.