Author Topic: Do I need to add money monthly to Vanguard account?  (Read 1071 times)

bebegirl

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Do I need to add money monthly to Vanguard account?
« on: July 15, 2021, 01:11:54 PM »
Dear Mustachians, sorry to ask silly questions but I never did this before and it is hard to find information on details online.

I accumulated some cash and decided I need to open Vanguard account and buy index fund to keep it long term. If I buy index fund and add there like 20K for example, do I need to add money every month?

Also, when filing taxes how do I report index fund? Do I receive some tax form from Vanguard?

Thank you!

RWD

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Re: Do I need to add money monthly to Vanguard account?
« Reply #1 on: July 15, 2021, 01:32:03 PM »
No, you do not need to add money ever after an initial purchase. You will receive a combined 1099 form from Vanguard so you can file your taxes.

EvenSteven

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Re: Do I need to add money monthly to Vanguard account?
« Reply #2 on: July 15, 2021, 01:33:10 PM »
No need to add money monthly. You can add money whenever you feel like it.

Depending on what index funds you buy, you might receive dividends each quarter, and a capital gains distribution at the end of the year. They will send you a 1099-div form at tax time indicating the dividends and capital gains you had for the year, and you report those numbers and pay taxes on them when you do your taxes.

MDM

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Re: Do I need to add money monthly to Vanguard account?
« Reply #3 on: July 15, 2021, 01:34:55 PM »
No requirement to contribute monthly or any other frequency.

See Vanguard tax forms for what you might receive.  The individual forms (1099-DIV, 1099-INT, etc.) may be combined in a "consolidated 1099" document.

bebegirl

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Re: Do I need to add money monthly to Vanguard account?
« Reply #4 on: July 15, 2021, 01:43:27 PM »
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you might receive dividends each quarter,

Thank you very much for reply!

Is there an option to reinvest dividends automatically?

bebegirl

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Re: Do I need to add money monthly to Vanguard account?
« Reply #5 on: July 15, 2021, 01:45:25 PM »
Thank you, everyone, for replying. It is getting more clear for me!

MDM

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Re: Do I need to add money monthly to Vanguard account?
« Reply #6 on: July 15, 2021, 01:46:23 PM »

EvenSteven

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Re: Do I need to add money monthly to Vanguard account?
« Reply #7 on: July 15, 2021, 01:47:10 PM »
Quote
you might receive dividends each quarter,

Thank you very much for reply!

Is there an option to reinvest dividends automatically?

Yes. I think it asks you when you first buy a fund, but you can change back and forth if you ever want to change it.

bacchi

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Re: Do I need to add money monthly to Vanguard account?
« Reply #8 on: July 15, 2021, 01:53:51 PM »
Do you need to add money monthly? No.

Should you add money monthly? Definitely.

bebegirl

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Re: Do I need to add money monthly to Vanguard account?
« Reply #9 on: July 15, 2021, 02:54:28 PM »
Wonderful! Understood.

Now I guess I need to make decision which index fund to buy. I am 43 years old. Will it be risky to buy VTSAX? This is only fund I know because a lot of people like it! Ha-ha!

MDM

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Re: Do I need to add money monthly to Vanguard account?
« Reply #10 on: July 15, 2021, 03:02:13 PM »
Will it be risky to buy VTSAX?
Yes if you might need to withdraw the money within several years.  Probably not if you won't need to withdraw until at least 10 years have gone by.

bebegirl

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Re: Do I need to add money monthly to Vanguard account?
« Reply #11 on: July 15, 2021, 03:35:46 PM »
Will it be risky to buy VTSAX?
Yes if you might need to withdraw the money within several years.  Probably not if you won't need to withdraw until at least 10 years have gone by.

I won't need. I am aiming at a longer period. Thank you very much!

MustacheAndaHalf

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Re: Do I need to add money monthly to Vanguard account?
« Reply #12 on: July 16, 2021, 11:52:04 AM »
If I buy index fund and add there like 20K for example, do I need to add money every month?

Also, when filing taxes how do I report index fund? Do I receive some tax form from Vanguard?
While some people may suggest you contribute regularly, it's not required.  But it's a good way to make investing a habit, so you don't have to put as much effort into it.

The IRS taxes you on gains, when you sell.  If you invest $20k and sell for $30k, you have $10k of gains.

The stocks in a fund will also issue dividends, which you'll receive quarterly.  I think Vanguard Total Stock Market has about 1.2% dividend.  So if you invested $20k, you might receive $240 in dividends, which are typically taxed at 15% (maybe 0%).  So that would be about $36 in tax to hold $20,000 worth of investments.

bebegirl

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Re: Do I need to add money monthly to Vanguard account?
« Reply #13 on: July 16, 2021, 02:35:32 PM »

While some people may suggest you contribute regularly, it's not required.  But it's a good way to make investing a habit, so you don't have to put as much effort into it.

The IRS taxes you on gains, when you sell.  If you invest $20k and sell for $30k, you have $10k of gains.

The stocks in a fund will also issue dividends, which you'll receive quarterly.  I think Vanguard Total Stock Market has about 1.2% dividend.  So if you invested $20k, you might receive $240 in dividends, which are typically taxed at 15% (maybe 0%).  So that would be about $36 in tax to hold $20,000 worth of investments.
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Thank you very much!