I'm 20 and I need some huge advice

[kasingerd1]

So I would like to start off and say hello to everyone. I'm brand-spanking-new here as of the day this is submitted. A little background. I started at 19 with $0 in my stash and now, coming up on the end of 20 I have around $12,000. While I'm sure most wouldn't think it very intelligent, I did get married incredibly early and I am very dedicated to keeping my wife safe and secure while she is working towards finishing her degree and beyond. That being said, in the limited amount of time I've been around, both on this world and this blog/forum, I have come across the recommendation to invest with Vanguard and several of their index funds. The problem I'm facing, is that I don't have the minimum investment necessary($10,000) to start to invest with Vanguard and still continue to provide for what I see as the safety and security I have dedicated to provide for my wife. My strategy for the moment is singularly just continuing to save until we reach our minimum safety net of $20,000. The question I would like to posit is this; Where can I go to invest smaller amounts of money, around $200 for the time being, monthly where I can still achieve the low fees found at vanguard and the performance of their index funds. With that resource, I would still be able to save more than enough to continue to provide for our security and start early with investing now so that I can utilize the great tool that is time in conjunction with compound interest.

Thank anyone/everyone so much for your time and consideration and I apologize if there has already been a similar thread posted. I just don't feel like I have the time to wade through the substantial number of threads and replies on this outstanding forum.

[Paul der Krake]

Welcome!

Nowadays, Vanguard has some funds that allow you to open an account with as little as $1,000; see the last paragraph over here:
https://investor.vanguard.com/mutual-funds/fees

The fact that you and your wife are even researching this and have 5 figures saved up already puts you well above the majority of people your age. Rock on!

[windypig]

Have a look here: https://www.bogleheads.org/wiki/Three-fund_portfolio#Other_than_Vanguard.2C_Boglehead-style

These are non-vanguard index options.

I am surprised to hear you cannot invest in vanguard with under $10,000. Are you sure that is correct? Some of their funds have a $3,000 minimum investment. possibly some lower too, not sure.

The Vanguard "Admiral" branded funds (min: $10,000) typically have a corresponding fund "Investor" share which is identical in allocation. The difference being that the admiral fund has lower fees and a higher minimum to invest.

For instance:
VTSMX  - Vanguard Total Stock Market Index Fund Investor Shares - Minimum Investment: $3,000 - Fees: 0.17%
VTSAX - Vanguard Total Stock Market Index Fund Admiral Shares - Minimum Investment: $10,000 - Fees: 0.05%

Worth note is that if you have VTSMX and your balance goes over 10,000 it "converts" to VTSAX so you get the lower fees and dont incur a taxable event.

Same thing goes with fidelity and the rest of 'em

[Cornbread OMalley]

The fact that you and your wife are even researching this and have 5 figures saved up already puts you well above the majority of people your age. Rock on!

I totally agree on this!

kasingerd1, my hat is off to you for starting so young!  I wish I had done the same!  My advice is self-educate yourself so you are armed with the knowledge to make good financial decisions.  Along with Paul der Krake's advice, I highly recommend you read three books to form a solid foundation:

1)  The Bogleheads' Guide to Investing by Larimore, Lindauer, and LeBoeuf.  You will love this book.
2)  The Millionaire Next Door by Stanley and Danko.  You will LOVE this book.
3)  A Random Walk Down Wall Street by Burton G. Malkiel.  A drier read but has important concepts you want to understand.

[MDM]

Nowadays, Vanguard has some funds that allow you to open an account with as little as $1,000; see the last paragraph over here:
https://investor.vanguard.com/mutual-funds/fees

+1

Not only is the minimum only $1K, but VTTSX is a very defensible choice for any new investor, even one with much larger sums to invest.

[branman42]

Worth note is that if you have VTSMX and your balance goes over 10,000 it "converts" to VTSAX so you get the lower fees and dont incur a taxable event.

That's good to know, Thanks!

[ooeei]

I use Schwab, it has a minimum of $1000 to open an account, and the minimum for most funds is $100.

http://www.schwab.com/public/schwab/investing/pricing_services/fees_minimums

[Tjat]

I also believe you can invest in Vanguard ETFs with as little as $50. VTI is the ETF version of the popular VTSAX/VTMSX (Total Stock Market Index)

[ShoulderThingThatGoesUp]

I use Schwab, it has a minimum of $1000 to open an account, and the minimum for most funds is $100.

http://www.schwab.com/public/schwab/investing/pricing_services/fees_minimums

Schwab, put it all in SCHB. No commission on buying or selling their ETFs.

[Bob W]

 

So let's say you leave 20K sitting in checking your whole life at near zero---- In 40 years that would be worth about 7K inflation adjusted.
Keep on saving and investing my friend!   You are rocking it and I love your attitude.

Huge advice --

You should invest every penny asap.   You don't seem like the sort of person who needs a cash emergency fund.  You're saving 1K per month.

Now let's say you invest it and average 8%.  In 40 years you'll have about 200K inflation adjusted.

In the short term,  if you should have a real emergency you simply drawn down from you investments.   It really is that simple.

People will try to confuse you with "well, what if the market goes down 30% all of sudden and you need the cash?"   The answer to this is to put 30% more in initially.   

Now if you have some planned expenses coming up such as tuition,  car purchase etc.. It is fine to set aside that money for a few months.   The best time to buy investments is now.   The second best time is 20 years ago.   

 

[kasingerd1]

Thanks so much everyone for the information and advice. I didn't know that at $10,000 funds will turn into their corresponding admiral fund. I'm really grateful for the efforts everyone has made to help secure my family for the future.

[Landslave]

 

So let's say you leave 20K sitting in checking your whole life at near zero---- In 40 years that would be worth about 7K inflation adjusted.
Keep on saving and investing my friend!   You are rocking it and I love your attitude.

Huge advice --

You should invest every penny asap.   You don't seem like the sort of person who needs a cash emergency fund.  You're saving 1K per month.

Now let's say you invest it and average 8%.  In 40 years you'll have about 200K inflation adjusted.

In the short term,  if you should have a real emergency you simply drawn down from you investments.   It really is that simple.

People will try to confuse you with "well, what if the market goes down 30% all of sudden and you need the cash?"   The answer to this is to put 30% more in initially.   

Now if you have some planned expenses coming up such as tuition,  car purchase etc.. It is fine to set aside that money for a few months.   The best time to buy investments is now.   The second best time is 20 years ago.   

 

This, above, is ABSOLUTELY, the right answer.  The emergency fund you propose is taking risk sitting in a checking or savings or money market or CD account.  The opportunity cost of this is just too much.  PUT THAT MONEY IN THE STOCK MARKET THIS AFTERNOON!!!!!!!

You should only have one real fear.....not putting enough in the stock market now, before you are 25.  The ONLY variable that matters in the stock market is TIME. 

If you really want to secure your family's future and security, and to protect your family, get a second job for the next 5 years and put every dime you make into the lowest cost stock index fund you can find.  And, then, when your wife finishes that degree, and she is working, you can cut down to one job and start saving every dime she brings home.  You will be wondering what the poor people are doing when you're 50.

Don't believe me that only ONLY ONLY TIME matters?  Run a compound savings calculator for 35 years vs 45 years (the difference between starting to save for retirement at age 18 vs age 28).  The difference should motivate you to get that second job!!!

Good luck.  We all wish we could be standing right where you are right now, because TIME will make you rich.

[Ftao93]

I'm going to say a few things:

1) congrats on saving early.  If I had gotten into that mindset 15 years earlier, I would be better off

2) I wouldn't worry about having 20k cash safety.  almost no one does.  if it's just the two of you, having a couple of months in cash at your age...well...again...no one does that.  You will be more than fine.  Don't overthink it!

3) if you have even 5k sitting around, keep a couple stashed and put the rest to work.  maybe conservatively put $500/mo into it.  market is doing fine right now.  it might go up and up and up, or it might fall on it's face.  you have nothing but time.  Ignore it.  delete the statement.  only look at it on July 4th and NY day.  it will grow.

4) once you guys get established working, just have your own 401ks, and put in at least enough to get an employer match if available.    live below your means.

you're doing amazing!  keep doing what you're doing.  Getting married young didn't work out for me, but I hope it works out for you.   Marriage is a tough gig, but if you have similar goals and always work to 'serve' the other person  before yourself, you'll be laughing all the way to the bank by the time you're 40.

[JZinCO]

Don't believe me that only ONLY ONLY TIME matters?  Run a compound savings calculator for 35 years vs 45 years (the difference between starting to save for retirement at age 18 vs age 28).  The difference should motivate you to get that second job!!!

As someone who is 28 and only got serious about investing in the past year.. heed those words.
Also, I am glad to hear advocates for investing emergency money. It's a controversial position, even here and at bogleheads.

[Fi(re) on the Farm]

Congratulations!  you started 2 years ago at 0 and now have 12k, it's time to start checking into minimizing your taxes. I'm no expert on Roth conversions so you might want to check that out but you might want to throw some into an IRA to lower your tax burden. If your agi is more than $38400, any income over that is taxed at  15%, if you put up to $11,000 into an IRA you've automatically got a 15% return.

[CientoUno]

Just wanted to chime in and say best of luck to the OP! I'm in a somewhat similar position-- except I'm 25, and I've got about 15K to my name, which I plan on investing as soon as I move back to the US in 6 months (so frustrating I can't open a Vanguard account in Thailand now, otherwise I would!). Always good to see other young folks starting on their journey, and you'll even have 5 years ahead of me!

Not that I know much about this all yet, but from everything I've read and researched, it sounds like VTSAX is the way to go. And the biggest concern I had was also related to withdrawing-- I had this notion in my head that once the money was invested you couldn't access it easily. But a buddy of mine who's invested before says it's really not tough, just sell some of the stock! You lose out on potential earnings on that particular money, but it's not like it's impossible to do in an emergency. So go for it! Dump 10K in, maybe hold a few thousands outside just for security (that's what I'll likely do), add to it consistently as you work, and you'll (we'll?!) be golden!