Author Topic: Low income version of Total Stock Market?  (Read 2798 times)

Travis

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Low income version of Total Stock Market?
« on: December 27, 2016, 06:21:27 PM »
My nephew (20 years old, earning slightly above minimum wage) is getting started with investing and he's understanding the theory and principles, but I'm drawing a blank on what fund to get him going.  He's still living at home and working/going to school, and is saving quite a bit of his income.  He's sitting on a fair amount of savings, but he doesn't have $3k yet for the VTMSX initial buy-in.  Does Vanguard have something comparable that he can build up to? Or is he better off just saving up the $3k and getting VTMSX when he's ready? 

sol

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Re: Low income version of Total Stock Market?
« Reply #1 on: December 27, 2016, 06:25:58 PM »
He can buy individual shares of VTI, the ETF version of VTSMX.  Just have to invest a lump sum multiple of whatever today's share price is.

$116.71 today.

So he could open a brokerage account to contribute to regularly, and then convert to VTI or whatever other ETF he wants whenever the account has enough.

Paul der Krake

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Re: Low income version of Total Stock Market?
« Reply #2 on: December 27, 2016, 06:27:53 PM »
He could also do target retirement funds- they have a $1,000 minimum. Just have him buy an appropriate flavor for his age and goals, like target date 2060 or whatever.

Tjat

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Re: Low income version of Total Stock Market?
« Reply #3 on: December 28, 2016, 05:01:48 AM »
I'd wait until he has 3000. Waiting for multiples with the etf is annoying and can't do automatic investments.




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mgarf

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Re: Low income version of Total Stock Market?
« Reply #4 on: December 28, 2016, 11:13:24 PM »
First off I think you should talk to him about what his goals are... does he want this money for school or a car in a few years? If he wants this money in <5 years... stocks are way too risky... I'd just advise ultra-short bond fund, but even easier -> a high interest bank saving's account.

If this is for retirement... I agree with above: wait until he hits 3k and go vanguard mutual fund. While you're waiting put it all in a HISA.

gerardc

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Re: Low income version of Total Stock Market?
« Reply #5 on: December 28, 2016, 11:44:08 PM »
When you have that little savings, the best investment you can do is in yourself, i.e. increasing your earning power. Not worth dealing with stocks under $50k IMO.

ETA: Stocks give a false sense of "compound interest", growing capital, but the truth is under 50k you'll make negligible interest for the hassle. Working harder is literally easier and gives a better bang for your buck (time). I started investing around 80k, now at 470k, and my returns are starting to be worth the time.
« Last Edit: December 28, 2016, 11:47:26 PM by gerardc »

Travis

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Re: Low income version of Total Stock Market?
« Reply #6 on: December 29, 2016, 10:36:17 AM »
First off I think you should talk to him about what his goals are... does he want this money for school or a car in a few years? If he wants this money in <5 years... stocks are way too risky... I'd just advise ultra-short bond fund, but even easier -> a high interest bank saving's account.

If this is for retirement... I agree with above: wait until he hits 3k and go vanguard mutual fund. While you're waiting put it all in a HISA.

I'm pretty sure he's looking to start retirement savings, but I do need to finish my budgeting discussion with him. He may still have some work to do on his e-fund first and short-term goals. Thanks for the tips everyone.

NoStacheOhio

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Re: Low income version of Total Stock Market?
« Reply #7 on: December 29, 2016, 11:34:15 AM »
When you have that little savings, the best investment you can do is in yourself, i.e. increasing your earning power. Not worth dealing with stocks under $50k IMO.

ETA: Stocks give a false sense of "compound interest", growing capital, but the truth is under 50k you'll make negligible interest for the hassle. Working harder is literally easier and gives a better bang for your buck (time). I started investing around 80k, now at 470k, and my returns are starting to be worth the time.

This is terrible advice. Investing in yourself is great, but sitting on cash until you hit $50k is counterproductive.

Highbeam

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Re: Low income version of Total Stock Market?
« Reply #8 on: December 29, 2016, 11:39:08 AM »
At this age it's about establishing habits. Saving. And sending those savings in to vanguard as soon as he has the minimum. When just starting out I did the low minimum target funds which are fine. Then he might decide to move to VTSAX or he might not but he will have developed a habit.

caffeine

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Re: Low income version of Total Stock Market?
« Reply #9 on: December 29, 2016, 02:20:26 PM »
Let him build a savings account first. He needs $3k to open the account and needs some padding for life. He shouldn't open the account till he has something like $5k so he isn't tempted to take out the investment. He's just starting out.

At this age it's about establishing habits. Saving. And sending those savings in to vanguard as soon as he has the minimum. When just starting out I did the low minimum target funds which are fine. Then he might decide to move to VTSAX or he might not but he will have developed a habit.

I agree with this 100%. Let him set a goal of opening the account some time in the future. Set a target date to open the account to get him motivated, but he needs to simply save and be content.

stashgrower

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Re: Low income version of Total Stock Market?
« Reply #10 on: December 30, 2016, 12:59:27 AM »
I find the variety of responses here interesting. I'd suggest the savings habit.

zazpowered

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Re: Low income version of Total Stock Market?
« Reply #11 on: December 30, 2016, 02:00:45 AM »
When you have that little savings, the best investment you can do is in yourself, i.e. increasing your earning power. Not worth dealing with stocks under $50k IMO.

ETA: Stocks give a false sense of "compound interest", growing capital, but the truth is under 50k you'll make negligible interest for the hassle. Working harder is literally easier and gives a better bang for your buck (time). I started investing around 80k, now at 470k, and my returns are starting to be worth the time.

ETF portfolios are very passive so not a lot of time required. I think it's smart to invest as early as possible. It's just math. If you had invested early you would most likely have more than 470k today.


OP: Are you referring to VTSAX? VTMX is small cap. I would recommend either getting a vanguard target retirement fund, or using this https://personal.vanguard.com/us/funds/etf/tools/recommendation or using a free robo-advisor.