Help understanding Vanguard.com - possibly dumb questions

[Zarakava]

Hey all! I'm just starting my journey towards understanding investing and all this fun jazz, and I think I need a bit of help, because I'm not really understanding Vanguard's interface, or really what I need to be looking at.

To start with, I put $10k into Vanguard, and bought $10k worth of the VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares). It's in a Brokerage Account - is a Brokerage Account just a collection of things I've bought (because this isn't 401k or any IRA, just a normal account?)

So this is an index fund, which is basically just stocks? I'm 23, and I think I'd like to go either 100-0 or 90-10 in stocks:bonds. Right now I think I'm at 100-0. If I were to change this to 90-10, how do I do this? Do I need to sell some of the VTSAX and buy something else? Is there a good video or wiki on how to actually use this site? All kinda brand new to me for now.

Thanks for any help.

[TheAnonOne]

VTSAX is every US stock weighted by market cap, so your 10k will be split up more into large companies than small ones.

It's the main stock purchase here on MMM


If you wanted to change allocation you could sell to buy bonds (sell 1k) or just add new money and buy bonds. Selling of course is subject to tax on any gains.


Generally speaking a brokerage account is your taxable account, not your IRA or 401k, though I guess I never really did a lot of homework on the nomenclature.

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[trashmanz]

Yes the brokerage account is just a holder of investments.  If you haven't already setup a IRA that would be good, typically you want to fill an IRA for up to your limit before going for a std taxable account.

To get 10% bonds you can buy a bond fund from Amazon. 

[TheAnonOne]

Yes the brokerage account is just a holder of investments.  If you haven't already setup a IRA that would be good, typically you want to fill an IRA for up to your limit before going for a std taxable account.

To get 10% bonds you can buy a bond fund from Amazon.

Vanguard has total bond market funds. Assuming he is using this already, why would he go elsewhere? Am I missing something?

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[TheAnonOne]

You probably also want to max your 401k and IRA before having a taxable account.

The 401k max is 18k and the IRA is 5.5k for 2017

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[Zarakava]

401k is maxed, working on looking at traditional IRA. $10k was from my grandfather, who was always big into investing, so I figured I should start learning.

[FIPurpose]

Hey all! I'm just starting my journey towards understanding investing and all this fun jazz, and I think I need a bit of help, because I'm not really understanding Vanguard's interface, or really what I need to be looking at.

To start with, I put $10k into Vanguard, and bought $10k worth of the VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares). It's in a Brokerage Account - is a Brokerage Account just a collection of things I've bought (because this isn't 401k or any IRA, just a normal account?)

So this is an index fund, which is basically just stocks? I'm 23, and I think I'd like to go either 100-0 or 90-10 in stocks:bonds. Right now I think I'm at 100-0. If I were to change this to 90-10, how do I do this? Do I need to sell some of the VTSAX and buy something else? Is there a good video or wiki on how to actually use this site? All kinda brand new to me for now.

Thanks for any help.

From what I understand, Vanguard has started opening all new accounts as "Brokerage Accounts" whether that is IRA or taxable. But from your overview page, it will be labeled as IRA or whatnot. If there is no special name, then it is just a normal investment account.

[Zarakava]

Another silly question - how do compounding returns work on the VTSAX - do we get dividends? Maybe I'm not understanding how this is supposed to work.

[FIPurpose]

Another silly question - how do compounding returns work on the VTSAX - do we get dividends? Maybe I'm not understanding how this is supposed to work.

VTSAX does pay dividends. There should be an option in your settings to either autoreinvest or not. If you dont, it will just sit as cash in your account. I think this is also the rule for return of capital but I'm not sure. I've seen my vanguard accounts all reinvest return of capital automatically.

Compounding returns is more than just dividends. Compounding returns is the idea that an investment that can consistently grow. Compounds on the previous years earnings as well. This is true for all forms of return: dividends and capital gains.

[PhysicianOnFIRE]

Another term for this account is a "taxable account."

You may pay taxes on dividends or if you sell, depending on your tax bracket (if it is > 15%).

Congrats on getting started!
-PoF

[MustacheAndaHalf]

Zarakava - Total Stock Market's "Admiral" shares have a $10,000 minimum.  So if you sell $1,000 worth those shares will be converted to "Individual" shares.  An alternative is to use your next ~$1k of contributions to purchase Vanguard Total Bond Market.

Compounding works a little differently today now that a number of companies don't pay dividends.  There isn't really "compounding" without a dividend, but the price appreciation tends to be enough.  So an old idea of compounding might not be the most accurate description of the current stock market.  Especially because your annual contributions are likely to be far greater than the dividends.

For example, VTSAX has 2% dividends now.  That mean your $10,000 investment will give you $200 worth of dividends.  Most likely, you'll contribute a lot more than $200 next year, outpacing the dividends.

[Zarakava]

But we're talking "compounding" because for example, it goes up 7% this year, 7%, next year, that's 1.07*1.07?

[FIPurpose]

But we're talking "compounding" because for example, it goes up 7% this year, 7%, next year, that's 1.07*1.07?

Yes, mustacheandahalf is incorrect about compounding. You have the basic idea right.

[NeoGenMike]

Also, if you arnt making a lot of money I would focus on a Roth IRA over a traditional one, as well.
You can only contribute 5500 out of pocket every year, but ONLY that much a year, so every year missed out is bad since the income of a ROTH is tax-free.

[Zarakava]

One final question for now - will Vanguard get me the right tax forms/information at end of year, or do I need to do stuff about that myself?

[FIPurpose]

One final question for now - will Vanguard get me the right tax forms/information at end of year, or do I need to do stuff about that myself?

Yes Vanguard gives you all the forms you need.

[Cwadda]

Didn't even read the actual forum post but wanted to chime in and say there's no such thing as stupid questions. Ask away!