Author Topic: Dealing with beginning investing and account minimums  (Read 4585 times)

FIPurpose

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Dealing with beginning investing and account minimums
« on: May 17, 2014, 09:23:15 AM »
I've been trying to develop a more thought out investment strategy and something that I feel keeps holding me back is that I don't have enough money in my accounts at the moment to create a good strategy for both balancing and diversifying between accounts.

At the moment I have

IRA -         $3000 - VTSMX
Roth IRA - $5000 - VTSMX
401k -       $6000 - split evenly four ways in
                             Intl Equity Index
                             Large Cap Eq Index
                             Core Bond Index
                             Sm/Mid Cap Index

I plan to eventually max out my IRA for the year and start one for my wife as well, but how do I start diversifying inside these accounts. Most Vanguard funds require a large minimum that I just don't have at the moment. My initial thoughts have been to dump everything into VTSMX until I have a nominal amount where I can begin diversifying.

I also eventually want to have a taxable account.

My goal is to have a portfolio that overall looks like this:
50% total US market
22% international
20% bond
8% REIT

How do you deal with the fact that at the end of the year you want to rebalance but you can't change money from one account to another? How do I begin diversifying if most index minimums are around $3000?

Maybe my main question is how do I get from what I have to what I want.

Another Reader

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Re: Dealing with beginning investing and account minimums
« Reply #1 on: May 17, 2014, 09:34:17 AM »
In your shoes I would just throw more money at the existing investments.  Once you have closer to $15k in the IRA's, you can start looking at expanding the portfolio.  However, if you are putting more dollars in the 401k than the IRA's, over time your diversification will increase because of the investments you have chosen. 

SDREMNGR

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Re: Dealing with beginning investing and account minimums
« Reply #2 on: May 17, 2014, 10:12:35 AM »
It looks like you have Vanguard.  Buy etfs.  No minimums and low fees.

RapmasterD

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Re: Dealing with beginning investing and account minimums
« Reply #3 on: May 17, 2014, 11:40:21 AM »
It looks like you have Vanguard.  Buy etfs.  No minimums and low fees.

Agreed. Index mutual funds are so yesterday. Buy the ETF index fund equivalents.

Also, keep it simple. if you're under 30, keep pourin' it in to your domestic index funds with some BND to the extent it helps you sleep at night. You can diversify over time if/as you'd like and as your honeypot grows.

And most importantly, have fun and prepare for an awesome future! Save your message and look at it in a few years when you no longer think about minimums...

Gin1984

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Re: Dealing with beginning investing and account minimums
« Reply #4 on: May 17, 2014, 11:59:29 AM »
You can also use target date funds until you have enough for the minimums in each fund.

t-rymz

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Re: Dealing with beginning investing and account minimums
« Reply #5 on: May 17, 2014, 12:31:54 PM »
You're right to think about diversifying and your asset allocation looks good. But at this point, you're just getting started. You have decades of investing ahead of you. Start out by buying 100% of Total Stock Index. Remember that US Index include hundreds of multinational corporations and overseas companies on US stock exchanges. You're still buying international exposure.  Don't worry about bonds and international yet. Add international when you pass 6 figures. Add bonds when you have a reason you might want to tap your investments - such as approaching retirement.

You might head over to jlcollinsnh and read his blog about allocations and their purposes. Read what he recommends for his daughter.

RapmasterD

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Re: Dealing with beginning investing and account minimums
« Reply #6 on: May 17, 2014, 01:58:00 PM »
You're right to think about diversifying and your asset allocation looks good. But at this point, you're just getting started. You have decades of investing ahead of you. Start out by buying 100% of Total Stock Index. Remember that US Index include hundreds of multinational corporations and overseas companies on US stock exchanges. You're still buying international exposure.  Don't worry about bonds and international yet. Add international when you pass 6 figures. Add bonds when you have a reason you might want to tap your investments - such as approaching retirement.

You might head over to jlcollinsnh and read his blog about allocations and their purposes. Read what he recommends for his daughter.

Sage advice. Follow it. I work at a publicly held company. Trust me that you get plenty of int'l exposure with a U.S. total stock market index, and even more so if you concentrate on the S&P 500. I'd spend more time sweatin' on the frugality thing, and stockpiling as much $$ as possible. Word.

rmendpara

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Re: Dealing with beginning investing and account minimums
« Reply #7 on: May 17, 2014, 02:52:39 PM »
It is indeed tough when you're starting out. If you're not careful, account minimums and fees will eat up your earnings!

That said, how much you save is more important than how much you earn on your investments.

For now, I would invest into broad market funds (Total US fund, Intl index, etc), until you reach enough to get into more specific geographic/industry/mkt cap funds.

My sister just started her first job last year and had this "problem", so I just advised her to put all IRA money into a Target retirement 2055 fund. As her balance reaches $6k, I'll break off a piece and put it into another area (i.e. Intl index fund, REIT, etc) and within 1-2 years, she'll have enough different funds to start investing in all of them.

It takes time, so don't feel the need to rush. Even a mountain is made up of a bunch of tiny rocks.

FIPurpose

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Re: Dealing with beginning investing and account minimums
« Reply #8 on: May 17, 2014, 04:17:29 PM »
Thanks all for the advice. I haven't read much on the difference between ETFs and other mutual funds. I think by the time I got to it I was burnt out on reading investment books and information.

I am in the first year of working after college. So this is about 5 months worth of savings. In that time, I'll just continue educating myself. And loading up on VTSMX in my IRA. I'll start looking into ETF knowledge soon, but I think for now I can hold off on making any changes immediately. I wish my 401k had slightly better options, but by the end of the year it definitely will be the largest account I have by far. I'll be getting into taxable accounts for the first time probably around August/September time frame. I've heard from several people on this site and others to pick wisely what investments to place in taxable vs. tax advantaged accounts.

Sounds like I have a good 6 month goal and a good 2-3 year goal. Thanks for the input everyone. I wanted to make sure I wasn't losing out by not diversifying immediately out of the barrel.

SDREMNGR

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Re: Dealing with beginning investing and account minimums
« Reply #9 on: May 18, 2014, 01:53:49 PM »
In a sentence, the difference between etfs and the Admiral shares vanguard funds.....

"not much and not worth worrying about"

There you have it.  The fees are the same right now for most equivalent ones (VTI - 0.05%, VTSAX - 0.05%).  The tax treatment is almost the same with etfs being slightly better.  The tracking is also very close.  I looked back and most years they were within 0.1% of each other and the total returns are also very very close.

I personally like ETFs because you can trade them middle of day.  But they can trade slightly off their NAV, so keep an eye on that.

funds are fine if you don't trade much because they only can be bought at the close of day NAV.  So you can't trade out of them.  So for that reason, I think ETFs are superior.

Bbqmustache

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Re: Dealing with beginning investing and account minimums
« Reply #10 on: May 19, 2014, 07:02:34 AM »
Before being forced to move my IRA to a different broker because of my wife's new job, we were very happy with our Charles Schwab account.


No account fees, low minimum initial investment ($100.00), and the ability to buy Schwab index ETFs commission free made this account the right choice for me.