DenverStache: Congratulations on deciding to dedicate your ESPP sales to proactively fund your retirement! This is a lifelong habit and it's great that you want to start young. BlackRock the world's largest private asset manager has excellent educational material here
http://www.blackrock.com/investing-for-a-new-world and
http://www2.blackrock.com/us/individual-investors/retirement/20s-30s-starting-outHere are some some questions to consider before taking action:
1a) Does your company offer the Roth401k option? If yes, strongly consider it since you are young your income is at the lowest point in your career. You will be taxed now but the earnings growth will not be taxed again. Just something to consider.
1b) Also if you make too much or if your company doesn't offer the Roth401k option consider separately opening and funding through a discount brokerage (e.g. Vanguard, Fidelity, Scottrade, etc) an individual Roth IRA account. If you have this you can contribute $5,500 to this in 2013 and $17,500 in your 401k too (pre-tax or post-tax).
1c) You may want to consider blending best of both options tax deferred and Roth options in your 401k. Doing so will help you lower your taxable income and at the same time allowing your Roth portion to receive favorable tax advantaged growth.
2a) Instead of opening yet another account elsewhere you may want to consider using Fidelity and open a separate IRA, tax-deferred or the Roth. I'd recommend this b/c of consolidated tracking benefits. Also Fidelity has a good amount of ETF, iShares, and no load mutuals, in addition to a good amount of educational materials and resources. Have you taken the Fidelity website for a test drive to see the Vanguard mutual funds offered? You might be surprised. Btw, I am not affiliated with the company and do not receive any compensation. Ha!
2b) If you open a new account like an IRA or roll over funds from a previous employer you may qualify for free trades. See here:
https://scs.fidelity.com/other/offers/registration_200freetrades.shtmlAlso even if you don't meet the full 50k requirement to get 100 trades or 100k to get one year worth of free trades, you can still negotiate with the reps and ask for something. It does work!
3) ETFs v. indexed funds? Depends on what your comfort level is and what are your individual hopes and dreams. What are your retirement goals? What is your risk tolerence? Do you have a time horizon for this do not touch and let it grow retirement money? BlackRock's iShares may be worth researching.
http://us.ishares.com/home.htm and "understanding ETFs"
http://us.ishares.com/understand_etf/index.htm ETFs are a good way to spread out your money and get the best of different sectors at comparatively lower costs compared to other mutual funds. MMM lists in his older posts some of the m/f he prefers which can be priced even lower but be mindful of your goals and timeline. Costs are important but so is creating a comprehensive strategy that suits your individual needs.
Also have you looked into the ETFs and indexed funds currently offered on the Fidelity site?
https://www.fidelity.com/etfs/overviewYou can do quite a bit of research before even opening a separate IRA, brokerage, or even rolling over a monies from a previous employer. See here
https://screener.fidelity.com/ftgw/etf/evaluator/goto/landing4) Allocation IMO depends on your goals and risk tolerence. So you may want to examine what it is that you really want before determining your allocation. If you are in your 20s or early 30s you have some time and can use the Rule of 100 to get a basic idea of your suggested asset allocation. To test ideas
http://personal.fidelity.com/planning/retirement/ise.shtml?refpr=ig0017 and
http://www.fidelity.com/products/funds/fundpicks/overview.shtml and
http://us.ishares.com/tools/tools.htm?investorType=RIA&toolId=108&c=FIPBLaunch#trg_1085) What amount or percentage of your money are you comfortable losing? Have you considered what is your exit plan/strategy if you start losing money quickly? I found creating plans to get out helped me have more peace of mind. Also do you lose sleep over individual investments rollercoasting? If so you may wish to stick with ETFs and paper trade until you feel comfortable with your selections. You can gradually make purchases through your 401k and set up the purchasing percentage and future allocation. One thing I found helpful was learning you can adjust the percentage and strategies over time. Don't feel the pressure that you need to get it right immediately.
Hope this helps, it is a lot of information so pace yourself. Keep on growing your stache! Looking forward to reading about your experiences.
Cheers!