Author Topic: Making a first investment plunge  (Read 8635 times)

Agent88

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Making a first investment plunge
« on: July 16, 2013, 01:02:31 PM »
Hey all! As the title indicates, I'm just beginning to chase financial independence.

I'm in a good starting spot: college degree with no debt, I own an efficient VW Jetta, have an incredibly cheap housing situation and am able to save almost half my paycheck (I'll get better with practice, too!).

Hitch is, the paycheck isn't too much so it takes a while to save up enough to take the next step, which I feel is investing in either the Vanguard index fund or doing some dividend growth investing. I have $1,400 saved up to play with... any advice on how best to make it work for me?

Thanks!

Agent88

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Re: Making a first investment plunge
« Reply #1 on: July 16, 2013, 01:12:48 PM »
To clarify, my job pays a smidgen less than $30k (but I absolutely love it) and my expenses over the year so far average about $1,300 per month. I'm working on that though, this is the first month I've focused on really cutting back and it's made a big difference!

kyleaaa

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Re: Making a first investment plunge
« Reply #2 on: July 16, 2013, 01:15:48 PM »
Do you have a 401k through work? Start there. If not, there are plenty of funds with <$1000 minimums, including some Vanguard offerings.

Honest Abe

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Re: Making a first investment plunge
« Reply #3 on: July 16, 2013, 01:19:36 PM »
We could get into your expenses in another thread....if you're looking into investing for the first time I would reccommend Betterment. It's a simple way to "buy the market" with fees that are quite low (and worth it, in my opinion.)

Your other option would be to open a Vanguard account and do the work yourself, but I'm not sure if you can buy any single fund with a $1400 initial investment. 

** Edit, I guess there are some funds **

matchewed

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Re: Making a first investment plunge
« Reply #4 on: July 16, 2013, 01:31:18 PM »
You could also start a Roth IRA with another company that has a small initial entry and roll it over to someone later.

But kyleaaa is right the general advice is 401k to match, Roth IRA, finish maxing 401k, "other investments".

Agent88

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Re: Making a first investment plunge
« Reply #5 on: July 16, 2013, 01:41:52 PM »
Kyleaaa, I do have a 401k through work. Doing solidly there and have $5,100 saved up so far.

I did a little cursory looking into Betterment, Hoenst Abe. Looks pretty solid! I'm definitely gonna start there with my money and try to get those dollars building on one another

Nyarlathotep

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Re: Making a first investment plunge
« Reply #6 on: July 16, 2013, 09:05:12 PM »
I just took the plunge myself by investing with vanguard. I opened up one of their target retirement funds as well as a stock index fund. It took an initial investment of $1,000 for the retirement fund and a $3,000 to open the stock index fund.

Looks like you are off to a good start. Just ride the wave.

Freeyourchains2

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Re: Making a first investment plunge
« Reply #7 on: July 17, 2013, 12:46:21 PM »
You don't absolutely have to invest in an IRA or 401k to max.
If you do the above, and you don't make over $90k/ year; you won't ever get to experience the beauty of Capital Gains, Dividend Growth Investing, Real estate land lording, or entrepreneurship (without extreme loans). Because most of your money will be locked in someone else's funds/accounts, following very Fed and Big Business strict policies, and few exceptions to withdraw before age 59.5 as they play with your votes and money.

Yes you'll pay a little more in taxes now, but then can retire also when you are ready too under your own time and control. Then once FI, taxes can be near 0% or negative through these "other investments" also.

Back in the 1980's, Real Estate and Bonds where booming with 18% returns per year. A hand full of people retired extremely early without putting a single dollar into a 401k/IRA until after they were retired. (They did it too keep their taxes at 0% or negative.)

There are other work-arounds, and the general guidance on these investor forums is only one way.

matchewed

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Re: Making a first investment plunge
« Reply #8 on: July 17, 2013, 01:19:27 PM »
You don't absolutely have to invest in an IRA or 401k to max.
If you do the above, and you don't make over $90k/ year; you won't ever get to experience the beauty of Capital Gains, Dividend Growth Investing, Real estate land lording, or entrepreneurship (without extreme loans). Because most of your money will be locked in someone else's funds/accounts, following very Fed and Big Business strict policies, and few exceptions to withdraw before age 59.5 as they play with your votes and money.

Yes you'll pay a little more in taxes now, but then can retire also when you are ready too under your own time and control. Then once FI, taxes can be near 0% or negative through these "other investments" also.

Back in the 1980's, Real Estate and Bonds where booming with 18% returns per year. A hand full of people retired extremely early without putting a single dollar into a 401k/IRA until after they were retired. (They did it too keep their taxes at 0% or negative.)

There are other work-arounds, and the general guidance on these investor forums is only one way.

Please stop giving misinformation. I make less than 90k per year and I get capital gains and dividend growth within my 401k and my Roth IRA. I'm fairly certain there are others on this board who invest in real estate and/or are landlords but make less than 90k per year. Entrepreneurship doesn't require that income level either.

Your money will be in your account. A 401k or IRA will not, with current rules, affect your time to FIRE. And you can also get to 0% taxes with 401k and IRA's in fact it's probably easier as you can draw down and be flexible with multiple investment vehicles instead of one.

CompLB15

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Re: Making a first investment plunge
« Reply #9 on: July 17, 2013, 02:23:21 PM »
Vanguard S&P 500

Once you have 10K Vanguard admiral shares.
https://personal.vanguard.com/us/content/Funds/FundsAdmiralSharesOverviewJSP.jsp

GreenGuava

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Re: Making a first investment plunge
« Reply #10 on: July 17, 2013, 03:58:45 PM »
Echoing the "please ignore freeyourchains2".  He or she regularly trolls these topics with misinformation.

Vanguard S&P 500

This is a fine fund for the domestic stock portion of one's portfolio, but (1) other than legacy purposes, there isn't really a reason to have this instead of the total stock market, especially for a new investment, and (2) one should balance this with other asset classes as well.  Being entirely in domestic large companies is unrewarded risk.

CompLB15

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Re: Making a first investment plunge
« Reply #11 on: July 17, 2013, 07:38:09 PM »
Echoing the "please ignore freeyourchains2".  He or she regularly trolls these topics with misinformation.

Vanguard S&P 500

This is a fine fund for the domestic stock portion of one's portfolio, but (1) other than legacy purposes, there isn't really a reason to have this instead of the total stock market, especially for a new investment, and (2) one should balance this with other asset classes as well.  Being entirely in domestic large companies is unrewarded risk.

Its likely a non-issue but I recommending what the greatest investor (Warren Buffett) of our time bet on. (And he is winning)

http://www.cnbc.com/id/100405142
http://finance.fortune.cnn.com/2013/01/24/buffett-hedge-fund-bet/

2.  Why balance with other asset classes? 500 companies in the S&P is way more diversification than one needs.  By buying the S&P 500 you basically betting on America's future.  If of course your recommending non-domestic companies then you have introduced other risks.  Currency risk comes to mind. 


matchewed

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Re: Making a first investment plunge
« Reply #12 on: July 17, 2013, 07:49:00 PM »
By betting on the total US market you're also betting on America's future and not just the future of the largest publicly traded companies but also the smallest and medium(est?).

Having international investment provides diversification, having bonds provides stability...etc.

Point being I think even Warren Buffett would smack his head to hear of a common investor relying on his bet with wall street hedge funds as investing advice.

CompLB15

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Re: Making a first investment plunge
« Reply #13 on: July 17, 2013, 08:14:35 PM »
By betting on the total US market you're also betting on America's future and not just the future of the largest publicly traded companies but also the smallest and medium(est?).

Having international investment provides diversification, having bonds provides stability...etc.

Point being I think even Warren Buffett would smack his head to hear of a common investor relying on his bet with wall street hedge funds as investing advice.

As I mentioned before its a non-issue the S&P 500 index or total market index, the two are basically the same.
When you buy an index the companies in it are not weighted equally.
For example the Vanguards Total Market index the top 10 holding account for almost 15% of investments.  So when you get to 3554th company, the amount that is invested is almost meaningless. 
 

US bond market at the peak, enough said.
International investment...you have currency risk, political risk, accounting fraud risk, etc.  I will never see the point of needing more diversification beyond 500 US companies.

No he wouldn't smack his head, he has been advising the novice investor to buy a low cost index fund that tracks the S&P 500 since the 90's or earlier. 

Will

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Re: Making a first investment plunge
« Reply #14 on: July 17, 2013, 11:58:43 PM »
With only $1000, you could open a Vanguard STAR fund and be 60% stock and 40% bond.  Contribute to that, and when it gets a higher balance you can switch over to something you might like better.

matchewed

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Re: Making a first investment plunge
« Reply #15 on: July 18, 2013, 04:07:38 AM »
By betting on the total US market you're also betting on America's future and not just the future of the largest publicly traded companies but also the smallest and medium(est?).

Having international investment provides diversification, having bonds provides stability...etc.

Point being I think even Warren Buffett would smack his head to hear of a common investor relying on his bet with wall street hedge funds as investing advice.

As I mentioned before its a non-issue the S&P 500 index or total market index, the two are basically the same.
When you buy an index the companies in it are not weighted equally.
For example the Vanguards Total Market index the top 10 holding account for almost 15% of investments.  So when you get to 3554th company, the amount that is invested is almost meaningless. 

That almost meaningless amount seems to make a meaningful difference.

Vanguard Total 10yr Average Annual Return - 8.06%
Vanguard S&P 500 10yr Average Annual Return - 7.28%

Vanguard Total Since Inception (2000) Average Annual Return - 4.2%
Vanguard S&P 500 Since Inception (2000) Average Annual Return - 3.35%

Spartan Total 10yr Performance Average Annual Return - 7.98%
Spartan S&P 500 10yr Performance - 7.22%

The point being you get the S&P Index and more. And those extra stocks do have an impact.

Agent88

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Re: Making a first investment plunge
« Reply #16 on: July 18, 2013, 06:57:46 AM »
I just wanted to say this is all excellent advice. I didn't check to see if I had gotten any responses after a couple days and, lo and behold, I find all this. F'ing awesome.

I'm going to look at getting into the Vanguard STAR fund for $1,000, as Will suggested. It seems like the best way to have the money earn more than the 0.12% interest it collects in a savings account.

What does everyone think would be a smart move from there? I'm thinking of reinvesting all returns that come of it, and adding to it of course with income money saved, until it reaches $3,000. Then I'd look at putting it into another Vanguard index fund and potentially starting a similar process again to invest in a growing variety of funds and such.

jawisco

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Re: Making a first investment plunge
« Reply #17 on: July 18, 2013, 07:19:37 AM »
First save an emergency fund of 3-6 months - you don't want to have to raid your investments at the wrong time.

Make sure you are maxing your 401K to achieve the most employer match.

Then I would go with a target retirement fund with something like 80-90% stocks and the rest bonds - with Vanguard of course.  Keep putting some in each month and hope for a bear market.  You could do this in an IRA with Vanguard as well - Roth or Traditional depending on what you plan to do with your future. 

Good luck and keep saving.

Freeyourchains2

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Re: Making a first investment plunge
« Reply #18 on: July 18, 2013, 08:33:52 AM »
Echoing the "please ignore freeyourchains2".  He or she regularly trolls these topics with misinformation.

Vanguard S&P 500

This is a fine fund for the domestic stock portion of one's portfolio, but (1) other than legacy purposes, there isn't really a reason to have this instead of the total stock market, especially for a new investment, and (2) one should balance this with other asset classes as well.  Being entirely in domestic large companies is unrewarded risk.

MMM himself didn't max out 401k's his entire life before FI now did he.
I also believe in matching employer given amounts in your 401k. But only to the match.  Maxing it is is taking a serious risk with your money. It's locking up all your eggs in Some Company and Fed's controlled area of interest, not fully under your control, with some serious Age restrictive policies that currently will let you retire early aftter jumping through 3-5 loopholes and a 5 year "waiting" period, but may not in the future, if they even shut one of these gates permanently. And the current president's party agenda is just that. But this is just my view point on the risks of Maxing 401k/IRAs.
« Last Edit: July 18, 2013, 08:42:40 AM by Freeyourchains2 »

Freeyourchains2

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Re: Making a first investment plunge
« Reply #19 on: July 18, 2013, 08:46:37 AM »
You don't absolutely have to invest in an IRA or 401k to max.
If you do the above, and you don't make over $90k/ year; you won't ever get to experience the beauty of Capital Gains, Dividend Growth Investing, Real estate land lording, or entrepreneurship (without extreme loans). Because most of your money will be locked in someone else's funds/accounts, following very Fed and Big Business strict policies, and few exceptions to withdraw before age 59.5 as they play with your votes and money.

Yes you'll pay a little more in taxes now, but then can retire also when you are ready too under your own time and control. Then once FI, taxes can be near 0% or negative through these "other investments" also.

Back in the 1980's, Real Estate and Bonds where booming with 18% returns per year. A hand full of people retired extremely early without putting a single dollar into a 401k/IRA until after they were retired. (They did it too keep their taxes at 0% or negative.)

There are other work-arounds, and the general guidance on these investor forums is only one way.

Please stop giving misinformation. I make less than 90k per year and I get capital gains and dividend growth within my 401k and my Roth IRA. I'm fairly certain there are others on this board who invest in real estate and/or are landlords but make less than 90k per year. Entrepreneurship doesn't require that income level either.

Your money will be in your account. A 401k or IRA will not, with current rules, affect your time to FIRE. And you can also get to 0% taxes with 401k and IRA's in fact it's probably easier as you can draw down and be flexible with multiple investment vehicles instead of one.

Your earnings on Capital Gains and Dividends are locked up until you are age 59.5, or until you die. So have fun with that.


matchewed

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Re: Making a first investment plunge
« Reply #20 on: July 18, 2013, 08:53:04 AM »
You don't absolutely have to invest in an IRA or 401k to max.
If you do the above, and you don't make over $90k/ year; you won't ever get to experience the beauty of Capital Gains, Dividend Growth Investing, Real estate land lording, or entrepreneurship (without extreme loans). Because most of your money will be locked in someone else's funds/accounts, following very Fed and Big Business strict policies, and few exceptions to withdraw before age 59.5 as they play with your votes and money.

Yes you'll pay a little more in taxes now, but then can retire also when you are ready too under your own time and control. Then once FI, taxes can be near 0% or negative through these "other investments" also.

Back in the 1980's, Real Estate and Bonds where booming with 18% returns per year. A hand full of people retired extremely early without putting a single dollar into a 401k/IRA until after they were retired. (They did it too keep their taxes at 0% or negative.)

There are other work-arounds, and the general guidance on these investor forums is only one way.

Please stop giving misinformation. I make less than 90k per year and I get capital gains and dividend growth within my 401k and my Roth IRA. I'm fairly certain there are others on this board who invest in real estate and/or are landlords but make less than 90k per year. Entrepreneurship doesn't require that income level either.

Your money will be in your account. A 401k or IRA will not, with current rules, affect your time to FIRE. And you can also get to 0% taxes with 401k and IRA's in fact it's probably easier as you can draw down and be flexible with multiple investment vehicles instead of one.

Your earnings on Capital Gains and Dividends are locked up until you are age 59.5, or until you die. So have fun with that.

I've gone over this with you before. You're wrong on this and don't seem to understand investment vehicles at all. Again please stop spreading misinformation. At the very least just promote the positives of your viewpoint and let the strategies speak for themselves instead of trying to undercut another view with lies.

kyleaaa

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Re: Making a first investment plunge
« Reply #21 on: July 18, 2013, 09:17:52 AM »
You don't absolutely have to invest in an IRA or 401k to max.
If you do the above, and you don't make over $90k/ year; you won't ever get to experience the beauty of Capital Gains, Dividend Growth Investing, Real estate land lording, or entrepreneurship (without extreme loans). Because most of your money will be locked in someone else's funds/accounts, following very Fed and Big Business strict policies, and few exceptions to withdraw before age 59.5 as they play with your votes and money.

Yes you'll pay a little more in taxes now, but then can retire also when you are ready too under your own time and control. Then once FI, taxes can be near 0% or negative through these "other investments" also.

Back in the 1980's, Real Estate and Bonds where booming with 18% returns per year. A hand full of people retired extremely early without putting a single dollar into a 401k/IRA until after they were retired. (They did it too keep their taxes at 0% or negative.)

There are other work-arounds, and the general guidance on these investor forums is only one way.

Please stop giving misinformation. I make less than 90k per year and I get capital gains and dividend growth within my 401k and my Roth IRA. I'm fairly certain there are others on this board who invest in real estate and/or are landlords but make less than 90k per year. Entrepreneurship doesn't require that income level either.

Your money will be in your account. A 401k or IRA will not, with current rules, affect your time to FIRE. And you can also get to 0% taxes with 401k and IRA's in fact it's probably easier as you can draw down and be flexible with multiple investment vehicles instead of one.

Your earnings on Capital Gains and Dividends are locked up until you are age 59.5, or until you die. So have fun with that.

Not true. It's easy to get your money out before age 59.5 without penalty.

GreenGuava

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Re: Making a first investment plunge
« Reply #22 on: July 18, 2013, 11:55:24 AM »
Its likely a non-issue but I recommending what the greatest investor (Warren Buffett) of our time bet on. (And he is winning)

Look up the details of that bet.  He's betting that it will do better than various forms of active management.

2.  Why balance with other asset classes? 500 companies in the S&P is way more diversification than one needs.  By buying the S&P 500 you basically betting on America's future.  If of course your recommending non-domestic companies then you have introduced other risks.  Currency risk comes to mind.

You're already exposed to currency risk in the S&P 500: most (if not all) of those companies do lots of business overseas.   A broad market index - S&P 500 or total U.S. - is good diversification for the domestic stock portion of your portfolio.  It doesn't cover, say, bonds.

I'm going to look at getting into the Vanguard STAR fund for $1,000, as Will suggested. It seems like the best way to have the money earn more than the 0.12% interest it collects in a savings account.

STAR is a fine fund.  If this is in a tax-advantaged account, such as a Roth IRA, I'd suggest a target date fund instead.  But STAR is fine.  I do suggest re-investing dividends, at least for while it's all in one fund.

Keep in mind:  when it gets to $3000, some of that will be gains.  If this is in taxable, be aware that some of the gains will be taxed - it having a value of $3000 doesn't mean you can exchange it directly for another fund with that minimum.

Freeyourchains2

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Re: Making a first investment plunge
« Reply #23 on: July 18, 2013, 12:12:18 PM »
[quote author=Freeyourchains2 link=topic=7175.msg110448#msg110448 date=1374158797

Your earnings on Capital Gains and Dividends are locked up until you are age 59.5, or until you die. So have fun with that.

I've gone over this with you before. You're wrong on this and don't seem to understand investment vehicles at all. Again please stop spreading misinformation. At the very least just promote the positives of your viewpoint and let the strategies speak for themselves instead of trying to undercut another view with lies.
[/quote]

http://en.wikipedia.org/wiki/401(k)
OR
http://www.irs.gov/Retirement-Plans/Plan-Sponsor/401(k)-Resource-Guide---Plan-Sponsors---General-Distribution-Rules

"Risk

Unlike defined benefit ERISA plans or banking institution savings accounts, there is no government insurance for assets held in 401(k) accounts. Plans of sponsors experiencing financial difficulties, sometimes have funding problems. Fortunately, the bankruptcy laws give a high priority to sponsor funding liability. In moving between jobs, this should be a consideration by a plan participant in whether to leave assets in the old plan or roll over the assets to a new employer plan.

Traditional to Roth Rollover

Beginning in 2013 the IRS has begun allowing conversions of existing Traditional 401(k) contributions(not earnings) to Roth 401k. In order to do so an employee's company plan must offer both a Traditional and Roth option, and explicitly permit such a conversion.[29]Choosing the IRA option provides you with even more expenditure options to pick from, this particular naturally means greater results. An additional benefit is you can pull away your money without needing to be billed with charges.

Withdrawal of funds[edit]

Virtually all employers impose severe restrictions on withdrawals of pre-tax or Roth contributions(not earnings) while a person remains in service with the company and is under the age of 59. Any withdrawal that is permitted before the age of 59 is subject to an excise tax equal to ten percent of the amount distributed (on top of the ordinary income tax that has to be paid), including withdrawals to pay expenses due to a hardship, except to the extent the distribution does not exceed the amount allowable as a deduction under Internal Revenue Code section 213 to the employee for amounts paid during the taxable year for medical care (determined without regard to whether the employee itemizes deductions for such taxable year).
In any event any amounts are subject to normal taxation as ordinary income. Some employers may disallow one, several, or all of the previous hardship causes. Someone wishing to withdraw from such a 401(k) plan would have to resign from their employer. To maintain the tax advantage for income deferred into a 401(k), the law stipulates the restriction that unless an exception applies, money must be kept in the plan or an equivalent tax deferred plan until the employee reaches 59 years of age. Money that is withdrawn prior to the age of 59 typically incurs a 10% penalty tax unless a further exception applies.[9] This penalty is on top of the "ordinary income" tax that has to be paid on such a withdrawal. The exceptions to the 10% penalty include: the employee's death, the employee's total and permanent disability, separation from service in or after the year the employee reached age 55, substantially equal periodic payments under section 72(t), a qualified domestic relations order, and for deductible medical expenses (exceeding the 7.5% floor). This does not apply to the similar 457 plan.

Many plans also allow employees to take loans from their 401(k) to be repaid with after-tax funds at pre-defined interest rates. The interest proceeds then become part of the 401(k) balance. The loan itself is not taxable income nor subject to the 10% penalty as long as it is paid back in accordance with section 72(p) of the Internal Revenue Code. This section requires, among other things, that the loan be for a term no longer than 5 years (except for the purchase of a primary residence), that a "reasonable" rate of interest be charged, and that substantially equal payments (with payments made at least every calendar quarter) be made over the life of the loan. Employers, of course, have the option to make their plan's loan provisions more restrictive. When an employee does not make payments in accordance with the plan or IRS regulations, the outstanding loan balance will be declared in "default". A defaulted loan, and possibly accrued interest on the loan balance, becomes a taxable distribution to the employee in the year of default with all the same tax penalties and implications of a withdrawal.
These loans have been described[by whom?] as tax-disadvantaged, on the theory that the 401(k) contains before-tax dollars, but the loan is repaid with after-tax dollars. While this is precisely correct, the analysis is fundamentally flawed with regard to the loan principal amounts. From your perspective as the borrower, this is identical to a standard loan where you are not taxed when you get the loan, but you have to pay it back with taxed dollars. However, the interest portion of the loan repayments, which are essentially additional contributions to the 401k, are made with after-tax funds but they do not increase the after-tax basis in the 401k. Therefore, upon distribution/conversion of those funds the owner will have to pay taxes on those funds a second time."
« Last Edit: July 18, 2013, 12:29:35 PM by Freeyourchains2 »

CompLB15

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Re: Making a first investment plunge
« Reply #24 on: July 18, 2013, 01:18:38 PM »
By betting on the total US market you're also betting on America's future and not just the future of the largest publicly traded companies but also the smallest and medium(est?).

Having international investment provides diversification, having bonds provides stability...etc.

Point being I think even Warren Buffett would smack his head to hear of a common investor relying on his bet with wall street hedge funds as investing advice.

Jolly good you proved you point of a less than 1% difference in this ONE 13 year instance.


As I mentioned before its a non-issue the S&P 500 index or total market index, the two are basically the same.
When you buy an index the companies in it are not weighted equally.
For example the Vanguards Total Market index the top 10 holding account for almost 15% of investments.  So when you get to 3554th company, the amount that is invested is almost meaningless. 

That almost meaningless amount seems to make a meaningful difference.

Vanguard Total 10yr Average Annual Return - 8.06%
Vanguard S&P 500 10yr Average Annual Return - 7.28%

Vanguard Total Since Inception (2000) Average Annual Return - 4.2%
Vanguard S&P 500 Since Inception (2000) Average Annual Return - 3.35%

Spartan Total 10yr Performance Average Annual Return - 7.98%
Spartan S&P 500 10yr Performance - 7.22%

The point being you get the S&P Index and more. And those extra stocks do have an impact.

Jolly good you proved your point of less than 1% difference over this one business cycle. 

matchewed

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Re: Making a first investment plunge
« Reply #25 on: July 18, 2013, 02:49:13 PM »
By betting on the total US market you're also betting on America's future and not just the future of the largest publicly traded companies but also the smallest and medium(est?).

Having international investment provides diversification, having bonds provides stability...etc.

Point being I think even Warren Buffett would smack his head to hear of a common investor relying on his bet with wall street hedge funds as investing advice.

Jolly good you proved you point of a less than 1% difference in this ONE 13 year instance.


As I mentioned before its a non-issue the S&P 500 index or total market index, the two are basically the same.
When you buy an index the companies in it are not weighted equally.
For example the Vanguards Total Market index the top 10 holding account for almost 15% of investments.  So when you get to 3554th company, the amount that is invested is almost meaningless. 

That almost meaningless amount seems to make a meaningful difference.

Vanguard Total 10yr Average Annual Return - 8.06%
Vanguard S&P 500 10yr Average Annual Return - 7.28%

Vanguard Total Since Inception (2000) Average Annual Return - 4.2%
Vanguard S&P 500 Since Inception (2000) Average Annual Return - 3.35%

Spartan Total 10yr Performance Average Annual Return - 7.98%
Spartan S&P 500 10yr Performance - 7.22%

The point being you get the S&P Index and more. And those extra stocks do have an impact.

Jolly good you proved your point of less than 1% difference over this one business cycle. 

I'm sorry do you have a counter point or just a complaint about 1% difference. Because a 1% annual difference over sixty years is big. If you have something to back up you point I'm all ears.

matchewed

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  • Location: CT
Re: Making a first investment plunge
« Reply #26 on: July 18, 2013, 03:05:07 PM »

Your earnings on Capital Gains and Dividends are locked up until you are age 59.5, or until you die. So have fun with that.

I've gone over this with you before. You're wrong on this and don't seem to understand investment vehicles at all. Again please stop spreading misinformation. At the very least just promote the positives of your viewpoint and let the strategies speak for themselves instead of trying to undercut another view with lies.

http://en.wikipedia.org/wiki/401(k)
OR
http://www.irs.gov/Retirement-Plans/Plan-Sponsor/401(k)-Resource-Guide---Plan-Sponsors---General-Distribution-Rules

*Snip for brevity*


1) Risk - Doesn't an account w/ a brokerage firm have the same risk factor of not being insured?

2) Your point about Traditional to Roth roll over only applies to a conversion within a 401k. From your current 401k's traditional side to the Roth. It does not apply to the Roth IRA pipeline.

3) You start by having a direct quote about the inability to withdraw the money if you are employed by the company and are younger than 59.5. There is the "and" word in there. If you are FIRE you are no longer an employee of the company.

4) The final paragraph is about 401k loans and is irrelevant to the discussion.

*Edit* Quote formatting fix
« Last Edit: July 18, 2013, 05:13:27 PM by matchewed »

Freeyourchains2

  • Guest
Re: Making a first investment plunge
« Reply #27 on: July 19, 2013, 11:26:28 AM »

Your earnings on Capital Gains and Dividends are locked up until you are age 59.5, or until you die. So have fun with that.

I've gone over this with you before. You're wrong on this and don't seem to understand investment vehicles at all. Again please stop spreading misinformation. At the very least just promote the positives of your viewpoint and let the strategies speak for themselves instead of trying to undercut another view with lies.

http://en.wikipedia.org/wiki/401(k)
OR
http://www.irs.gov/Retirement-Plans/Plan-Sponsor/401(k)-Resource-Guide---Plan-Sponsors---General-Distribution-Rules

*Snip for brevity*


1) Risk - Doesn't an account w/ a brokerage firm have the same risk factor of not being insured?

2) Your point about Traditional to Roth roll over only applies to a conversion within a 401k. From your current 401k's traditional side to the Roth. It does not apply to the Roth IRA pipeline.

3) You start by having a direct quote about the inability to withdraw the money if you are employed by the company and are younger than 59.5. There is the "and" word in there. If you are FIRE you are no longer an employee of the company.

4) The final paragraph is about 401k loans and is irrelevant to the discussion.

*Edit* Quote formatting fix

Yet, my point on how earnings inside of a 401k/IRA pipeline are locked up until your dead or age 59.5 is true (without activating the 10% penalty).

I understand how the Roth IRA pipeline for contributions withdraw penalty is tax free after retirement (aka only withdrawal of your investment holdings that make you earnings). But once these are all withdrawn and you haven't contributed anything more, your previous earnings inside your Roth IRA which make you more locked up earnings, are locked up until you die or are age 59.5 (aka Government's chosen "early retirement age"). You can never access them without penalty.

Dividends, outside of a 401k you receive, are taxed based on your tax bracket if you don't re-invest. Yet you get more freedom of liquidity with these earnings. Especially if you are using them for FI, and these earnings cover your expenses at any age of FI you determine.

Is it such a stretch to acknowledge the chains placed upon your investment money earnings' freedom by contributing to the 401k/IRA?

I mean I can see some of it, being worth it; but only if you are willing to risk it.

Like only contributing to the employer's match (if any anymore in this generation).

I personally rather invest in high quality dividend growth investing, where i can withdraw my excess earnings beyond the covering of my expenses at will and use it for a business, real estate, collectibles, inventions, etc no matter what my given age is.

It's almost as if the Government is waiting for it's citizens to panic in mass histeria at the next market/global crash! Then they collect all the 10% penalties from every person trying to withdraw huge amounts from their 401k/IRA's all at once. This way the government survives off of the 10% penalties of this enormous treasury chest of collective investor wealth during such an extreme emergency.
(but that leads into a whole other topic.)








GreenGuava

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Re: Making a first investment plunge
« Reply #28 on: July 19, 2013, 11:36:18 AM »
Yet, my point on how earnings inside of a 401k/IRA pipeline are locked up until your dead or age 59.5 is true (without activating the 10% penalty).

False.  Anything you convert from a pre-tax account to a Roth IRA is considered a contribution after five years.  That's how the pipeline works.

I'm not going to bother going point by point.  Didn't one of the moderators ask you to stop posting your ignorance in investing topics a while back?

Maybe we should have a master "counteracting the anti-401(k) troll" thread.  Instead of answering your crap each time, we could just link to that thread.

matchewed

  • Magnum Stache
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  • Posts: 4335
  • Location: CT
Re: Making a first investment plunge
« Reply #29 on: July 19, 2013, 11:42:25 AM »

Your earnings on Capital Gains and Dividends are locked up until you are age 59.5, or until you die. So have fun with that.

I've gone over this with you before. You're wrong on this and don't seem to understand investment vehicles at all. Again please stop spreading misinformation. At the very least just promote the positives of your viewpoint and let the strategies speak for themselves instead of trying to undercut another view with lies.

http://en.wikipedia.org/wiki/401(k)
OR
http://www.irs.gov/Retirement-Plans/Plan-Sponsor/401(k)-Resource-Guide---Plan-Sponsors---General-Distribution-Rules

*Snip for brevity*


1) Risk - Doesn't an account w/ a brokerage firm have the same risk factor of not being insured?

2) Your point about Traditional to Roth roll over only applies to a conversion within a 401k. From your current 401k's traditional side to the Roth. It does not apply to the Roth IRA pipeline.

3) You start by having a direct quote about the inability to withdraw the money if you are employed by the company and are younger than 59.5. There is the "and" word in there. If you are FIRE you are no longer an employee of the company.

4) The final paragraph is about 401k loans and is irrelevant to the discussion.

*Edit* Quote formatting fix

Yet, my point on how earnings inside of a 401k/IRA pipeline are locked up until your dead or age 59.5 is true (without activating the 10% penalty).

I understand how the Roth IRA pipeline for contributions withdraw penalty is tax free after retirement (aka only withdrawal of your investment holdings that make you earnings). But once these are all withdrawn and you haven't contributed anything more, your previous earnings inside your Roth IRA which make you more locked up earnings, are locked up until you die or are age 59.5 (aka Government's chosen "early retirement age"). You can never access them without penalty.

Dividends, outside of a 401k you receive, are taxed based on your tax bracket if you don't re-invest. Yet you get more freedom of liquidity with these earnings. Especially if you are using them for FI, and these earnings cover your expenses at any age of FI you determine.

Is it such a stretch to acknowledge the chains placed upon your investment money earnings' freedom by contributing to the 401k/IRA?

I mean I can see some of it, being worth it; but only if you are willing to risk it.

Like only contributing to the employer's match (if any anymore in this generation).

I personally rather invest in high quality dividend growth investing, where i can withdraw my excess earnings beyond the covering of my expenses at will and use it for a business, real estate, collectibles, inventions, etc no matter what my given age is.

It's almost as if the Government is waiting for it's citizens to panic in mass histeria at the next market/global crash! Then they collect all the 10% penalties from every person trying to withdraw huge amounts from their 401k/IRA's all at once. This way the government survives off of the 10% penalties of this enormous treasury chest of collective investor wealth during such an extreme emergency.
(but that leads into a whole other topic.)

Again it is the difference between the Roth Pipeline and what you are referring to which is a Roth conversion within a 401k. Contrary to what you are saying they are in fact two different things.

I acknowledge any rule that you can actually read and dirive from the IRS publications (if you want to call rules chains which seems to be in your wheelhouse).

Quote
It's almost as if the Government is waiting for it's citizens to panic in mass histeria at the next market/global crash! Then they collect all the 10% penalties from every person trying to withdraw huge amounts from their 401k/IRA's all at once. This way the government survives off of the 10% penalties of this enormous treasury chest of collective investor wealth during such an extreme emergency. (but that leads into a whole other topic.)

And then you start breaking out the cray cray.

Reepekg

  • Bristles
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Re: Making a first investment plunge
« Reply #30 on: July 20, 2013, 12:32:49 AM »
Step 1) Ignore the noise (above)
Step 2) Get into the Vanguard and index fund stuff people are always championing here
Step 3) Just do it. Like yesterday! I made tons of "mistakes" starting out and you likely will too, but you learn what works pretty quickly. Take heart that although it seems like a lot of money now, you are just starting out so losses won't end up being that costly in the grand scheme of things.

We're rooting for you. Go save some money and watch it grow.