Author Topic: New to investing!  (Read 1861 times)

mmoneygirl99

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New to investing!
« on: May 26, 2017, 07:06:00 PM »
Hi everyone,
This is my first post here! I'm 18 years old and just started my first "adult" job. I'm extremely frugal and love money lol. I love saving and hope to be financially independent by making responsible choices while I'm young. I want to save $500 a month and invest it in a Roth IRA. I was planning on using Betterment, but I wanted to check and see if anyone had any other suggestions?
Any other general advice regarding my situation would be welcome!

MDM

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Re: New to investing!
« Reply #1 on: May 26, 2017, 07:22:05 PM »
mmoneygirl99, welcome to the forum.

Some shorter "getting started" reading material (note that these may not give identical advice, but if you follow any of it you will likely do well):
www.etf.com/docs/IfYouCan.pdf
http://jlcollinsnh.com/stock-series/
http://www.bogleheads.org/wiki/Category:Getting_started

See also Investment Order.  Roth may indeed be correct for you, but depending on your income traditional might be better.

Mighty-Dollar

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Re: New to investing!
« Reply #2 on: May 27, 2017, 02:46:30 AM »
I want to save $500 a month and invest it in a Roth IRA. I was planning on using Betterment, but I wanted to check and see if anyone had any other suggestions?
Is this $500 per month coming from pay check from a company that is matching with 10% or something like that? Remember that a tax deferred account results in being taxed at a higher rate later. If the company isn't throwing an extra bone then I'd rather pay taxes now and enjoy the LOWER capital gains tax rate later.
I like E Trade and Ameritrade for investing. Invest in an S&P 500 index fund and a total bond market index fund as you get older (age appropriate diversification).

MustacheAndaHalf

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Re: New to investing!
« Reply #3 on: May 27, 2017, 03:18:11 AM »
Check if your job offers "401(k) with matching".  That means to motivate you to put money in a 401(k), some employers match your money with their own.  Getting that free money is the best thing you can do, if it's available.

Betterment's main idea, that they will do loss harvesting, only works when the market drops so far that your investments have a loss.  So at first, it can work.  But after several years of stock market gains, even a -20% drop isn't enough to wipe out the prior gains.  Over time, loss harvesting no longer works for the money you've invested more than a few years.  The expense, though, 0.35% is applied on all of your investments - even the ones that are no longer able to harvest a loss.

I'd favor Vanguard, Fidelity or Schwab over Betterment.  But if you feel intimidated by changing choices, it's better to start at Betterment and figure that out later.  The worst decision is sitting in cash, rather than investing in mutual funds.  Even funds that charge 1.00% expense ratios are better than cash.

SeattleCPA

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Re: New to investing!
« Reply #4 on: May 27, 2017, 07:52:19 AM »
mmoneygirl, you might be interested, too, in grabbing the free, downloadable e-book we give away:

http://evergreensmallbusiness.com/the-thirteen-word-retirement-plan/


MDM

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Re: New to investing!
« Reply #5 on: May 27, 2017, 11:56:09 AM »
Remember that a tax deferred account results in being taxed at a higher rate later.
That statement is not categorically correct.

See https://www.bogleheads.org/wiki/Traditional_versus_Roth, among others, for thoughts on how one should evaluate account types.

mmoneygirl99

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Re: New to investing!
« Reply #6 on: May 27, 2017, 12:36:00 PM »
Thanks for the advice everyone. I only work part time so I don't have the option for a 401k. I plan on maxing my roth ira out each year. I definitely prefer a roth over traditional because I'd rather pay taxes on my income now than the deferred interest on my future earnings (which will hopefully be much more than what I put in.) I think I'll check out Vanguard as they appear to have higher return percentages.

MDM

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Re: New to investing!
« Reply #7 on: May 27, 2017, 01:20:46 PM »
I definitely prefer a roth over traditional because I'd rather pay taxes on my income now than the deferred interest on my future earnings (which will hopefully be much more than what I put in.)
You may have picked the correct choice, but that reasoning is not the way to make the choice.

What matters is the tax rate at which you save now, vs. the tax rate at which you will pay on withdrawal.  The absolute amount of tax paid is, believe it or not, irrelevant.

See the part about "commutative property of multiplication" in Traditional versus Roth - Bogleheads.

Eligibility for credits such as saver's, child tax, and earned income is the most common exception to the "rule" that low earners should use a Roth.