Author Topic: How to start Investing  (Read 2789 times)

historian

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How to start Investing
« on: March 12, 2018, 08:37:31 AM »
I have about $5k in a money market account making .5% interest.  I want to invest it and am looking at Vanguard ETF.  However, I have never made a personal investment (my work 401K is my current investment and they handle that part of it).

So is there a "How to" guide somewhere?

robartsd

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Re: How to start Investing
« Reply #1 on: March 12, 2018, 08:52:08 AM »
Do you want to invest it in a taxable account? If your only investments so far are in a 401k at work, you aren't taking advantage of an IRA yet. You should be able to put the $5k into an IRA for 2017 (assuming you had at least 5k earned income in 2017).

I'd go to vangaurd's website to open the account type you want to use (taxable, Roth IRA, or traditional IRA) - they'll provide you with all the info you need to be able to open an account and purchase investments.

historian

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Re: How to start Investing
« Reply #2 on: March 12, 2018, 09:25:04 AM »
I would like to invest it.  I'm just not sure of the proper way (and I lied it is a 403(b), not a 401(k) account).  I'm just somewhat at a loss when it comes to investing, as there are too many different swirling options.  I was looking at Vanguard (thanks to MMM) and Betterment (again, thanks to MMM).  It just seems like I need a MBA in order to understand how this stuff works.

CorpRaider

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Re: How to start Investing
« Reply #3 on: March 12, 2018, 10:08:16 AM »
What are you struggling with?

You could check out that JL Collins stock series that is linked to all over this site. Or go nose around Bogleheads.

It sounds like you basically want to open a brokerage account (maybe an IRA account) and then buy something. 

One really simple option for you might be an all in one or target date mutual fund.  Here's a link to one of vanguard's pages with some stuff choosing funds:

https://investor.vanguard.com/mutual-funds/fund-types

I wouldn't get analysis paralysis.  It's $5K.  If you bought a total us market fund and decided you wanted to add bonds or international exposure next year, you will probably have another $5K.

Finally, if you spent some time learning about this stuff it might be time well spent, as you may not like how "they are handling" your retirement funds once you become informed.
« Last Edit: March 12, 2018, 10:12:24 AM by CorpRaider »

historian

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Re: How to start Investing
« Reply #4 on: March 12, 2018, 02:13:16 PM »
I think my biggest problem is analysis paralysis.  There are tons of mutual funds and ETFs to choose from and it is very overwhelming. 

Add to that trying to figure out IRAs and Roth IRAs and Taxes, it is making my head spin.

robartsd

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Re: How to start Investing
« Reply #5 on: March 12, 2018, 03:00:18 PM »
There's lots of great places to learn. It doesn't sound like you're familiar with the Investment Order thread that briefly explains what types of accounts you should invest in and why.

The JL Collins stock series is excellent for getting a deeper understanding.

There are tons of mutual funds and ETFs to choose from and it is very overwhelming. 
Lowest cost tends to be best. You can narrow the options quickly by looking at expense ratios.

Add to that trying to figure out IRAs and Roth IRAs and Taxes, it is making my head spin.
Traditional vs. Roth can be confusing. If the answer to each of the following three questions is yes, traditional is almost certainly best:
  • Do you earn at least as much as you expect to spend in retirement?
  • Do you earn enough that you taxes on earned income?
  • Do you expect your future earnings to remain low enough to always qualify to fully deduct traditional contributions?

historian

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Re: How to start Investing
« Reply #6 on: April 17, 2018, 07:32:18 AM »
Sorry for the delay in response.  I've been busy.  I've been nosing around.  I would like to throw it in an IRA, but we want it to be fluid for a while as we don't have much as far as emergency funds go.  I think I'm going with a Vanguard ETF, as I can pay a lower price right now, and once I'm up to 10k, then roll it into the Admiral share Mutual Fund.

Thanks for all the help!

MustacheAndaHalf

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Re: How to start Investing
« Reply #7 on: April 17, 2018, 08:14:10 AM »
I'd recommend "VTI" (Vanguard Total Stock Market ETF).  If you can't decide what to buy - buy it all.  The "total stock market" fund holds over ~3600 stocks at their market weights, and it's expense ratio is just 0.04%.

But you could even pick a Vanguard ETF at random, and likely do better than cash.  Investing 100% in cash will almost certainly delay your retirement.  Cash at best roughly keeps up with inflation, but your money doesn't grow in real terms.  If you have 1000 hamburgers worth of cash today, you likely will have 1000 hamburgers worth of cash years from now.

Besides your 403(b), if your salary is below the IRS limits, you can also open an IRA and contribute to that.

Telecaster

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Re: How to start Investing
« Reply #8 on: April 17, 2018, 08:38:27 AM »
^  This.  There are a bazillion options out there, but most of them can be safely ignored.   Simply buying VTI in a taxable account and you've done about 95% of everything you need to do as far as investing goes.

Below is a good post about how to think about where to put your money.  Putting money in your IRA is a good thing to do for tax reasons, but there are good reasons to have some money in taxable accounts as well.  In other words, you won't be making a mistake by investing in the "wrong" order.  The main thing is to be invested for as long as possible, in an index fund that is as low cost as possible.   Do that, and you are gold. 

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

historian

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Re: How to start Investing
« Reply #9 on: April 17, 2018, 09:50:00 AM »
That is what I'm going for.  VTI in a taxable account.  While I'd like to do an IRA, the fact that it is "stuck" there (unless you want to do some accounting nightmares) is what is worrying me.  Thus a simple investment to get started, build it up to 10k, roll it to a Admiral shares, and then start pumping money into an IRA.

Thanks again.

Telecaster

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Re: How to start Investing
« Reply #10 on: April 17, 2018, 10:55:00 AM »
That is what I'm going for.  VTI in a taxable account.  While I'd like to do an IRA, the fact that it is "stuck" there (unless you want to do some accounting nightmares) is what is worrying me.  Thus a simple investment to get started, build it up to 10k, roll it to a Admiral shares, and then start pumping money into an IRA.

Thanks again.

Actually, it is even easier than that.  Because you are buying an ETF instead of a mutual fund, there are no share classes.  IIRC, the expense ratio of VTI is 0.04%, which is the same as the admiral shares.   There may be a commission if you don't buy it directly from Vanguard, however. 


historian

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Re: How to start Investing
« Reply #11 on: April 17, 2018, 11:10:51 AM »
Actually, it is even easier than that.  Because you are buying an ETF instead of a mutual fund, there are no share classes.  IIRC, the expense ratio of VTI is 0.04%, which is the same as the admiral shares.   There may be a commission if you don't buy it directly from Vanguard, however.

Yeah.  It is the same, so that is why I'm doing it and directly through them.  Save me .11% isn't bad.  I think I will move it to a mutual fund for a few added benefits, but overall, ETF is good for me.

robartsd

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Re: How to start Investing
« Reply #12 on: April 19, 2018, 09:54:48 AM »
Actually, it is even easier than that.  Because you are buying an ETF instead of a mutual fund, there are no share classes.  IIRC, the expense ratio of VTI is 0.04%, which is the same as the admiral shares.   There may be a commission if you don't buy it directly from Vanguard, however.
Yeah.  It is the same, so that is why I'm doing it and directly through them.  Save me .11% isn't bad.  I think I will move it to a mutual fund for a few added benefits, but overall, ETF is good for me.
I like the mutual funds because they allow dollar amount investing and automatic reinvestment of dividends and capitol gains. Easy to set on automatic is really convenient. For me the convenience of putting it on automatic was worth the higher expense ratio of investor class shares while building up to $10k, but I can see how building up to $10k in ETF could be a little more efficient. We aren't talking big money here .11% on $3k-$10k is $3.30-$11.00

historian

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Re: How to start Investing
« Reply #13 on: April 19, 2018, 10:05:15 AM »
I like the mutual funds because they allow dollar amount investing and automatic reinvestment of dividends and capitol gains. Easy to set on automatic is really convenient. For me the convenience of putting it on automatic was worth the higher expense ratio of investor class shares while building up to $10k, but I can see how building up to $10k in ETF could be a little more efficient. We aren't talking big money here .11% on $3k-$10k is $3.30-$11.00

That is where I'm torn, because it would be nicer just to do dollar amounts and have it automatically reinvest.  I wonder if the automatic reinvestment would end up saving me the .11% in the run up to 10k.

robartsd

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Re: How to start Investing
« Reply #14 on: April 19, 2018, 01:43:48 PM »
I like the mutual funds because they allow dollar amount investing and automatic reinvestment of dividends and capitol gains. Easy to set on automatic is really convenient. For me the convenience of putting it on automatic was worth the higher expense ratio of investor class shares while building up to $10k, but I can see how building up to $10k in ETF could be a little more efficient. We aren't talking big money here .11% on $3k-$10k is $3.30-$11.00

That is where I'm torn, because it would be nicer just to do dollar amounts and have it automatically reinvest.  I wonder if the automatic reinvestment would end up saving me the .11% in the run up to 10k.
If you're diligent about buying as many shares as possible whenever you have funds available, on average you'd have about half a share's worth of money sitting waiting to be invested. Current price is about $138. Assuming 6% return on investment that half share's return should be about $4, so it could come out pretty close, especially in the $3-5k invested range.