Author Topic: New to investing - Where do I start?  (Read 1756 times)

And!ru7

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New to investing - Where do I start?
« on: May 27, 2017, 09:16:22 PM »
Hello,

I decided to post as much info as I could about my finances and not worry about what others think.  I dont understand investing yet, since Im not around a lot of people that talk about money.  But I want to learn and Im hoping someone might lend some advice where to start. I got behind in life financially as well as developing skills, but I've been doing my best the last several years getting out of debt, saving and learning a trade. Ive completed an education and am working in a trade that within 4 years Ill have an annual income of roughly 70,000.  If I retire at 55 Ill have a nice pension; however I want to retire before then.  Im 33 years old.  I dont know anything about my 401K, and Ive never put anything into it (Im working on that now).  Also, Im curious about vanguards individual account.  Vanguard states that the money you make will be taxed quite a bit https://investor.vanguard.com/investing/joint-account-individual-account .  But if I want to retire early, wouldnt this be the kind of account to open as well?

Also, Im a little nervous about investing in the stock market.  By word of mouth it sounds like its doing really good which concerns me.  Ive heard that construction will peak in two years and so Im thinking on allocating as much money as I can into an index fund.  I think that construction gives a good indication on the economy.  However, in 1.5 years Im thinking on gradually putting more money towards bonds until the market peaks and goes down once again and prices are low.  Then sell my bonds and invest in more index funds once again. 

I can see implementing the game plan I mentioned above in the Vanguard Roth IRA account, but what about the individual account through vanguard.  From what Ive read it sounds like Index funds are only for that kind of account because they are more tax efficient.  So my game plan above would not work in an individual account https://investor.vanguard.com/investing/joint-account-individual-account. I know nobody can predict the market, but what's up must come down and it seems wise to invest in index funds when the market is low.

 What do I do?

   Annual income as of now: 28,800
   Annual income in 4 years:  70,000 +
   Monthly expenses: 1,200
   Monthly income: 2,400
   E-fund: 10,000
   Vanguard Roth IRA: 1,555.03 (100% of funds placed in VTTHX)
   401K: 116.56 (Just started)
   Pension: 1.13 (Just started)
   Vacation: 553.03
   No debt
Monthly Expenses:
   Rent: 400
   Gas: 140
   Food: 200
   Insurance: 59
   Other: 160
   Tithe: 200
   Phone: 27

Total = approximately 1,200

Thanks everyone!


MDM

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Re: New to investing - Where do I start?
« Reply #1 on: May 27, 2017, 09:46:04 PM »
And!ru7, 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.

Good luck!

SubL stache

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Re: New to investing - Where do I start?
« Reply #2 on: May 27, 2017, 10:44:25 PM »
Second JLcollins reading.

Mrtreasuretoupee

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Re: New to investing - Where do I start?
« Reply #3 on: May 28, 2017, 12:56:49 AM »
   401K: 116.56 (Just started)

My first inclination was that this was 116.56 thousand dollars but going out 2 decimals and the "(just started)"makes me think you might actually mean $116.56 .  In either case make sure to take advantage of full company match.
After that I would make sure to stay as debt free as possible and try to keep expenses down as much as possible. After that I'd get a discount brokerage account.  (Scottrade, etrade, ect) Don't buy until you have at least 2000 to offset the trade fee and stick to trusted companies or index funds.

Last but not least I'd loose the "   Tithe: 200" I know that may not be a popular suggestion, but I'd wager that money will actually do you a ton more good than it will do God.

MDM

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Re: New to investing - Where do I start?
« Reply #4 on: May 28, 2017, 01:50:25 AM »
After that I'd get a discount brokerage account.  (Scottrade, etrade, ect) Don't buy until you have at least 2000 to offset the trade fee and stick to trusted companies or index funds.
One can purchase index funds / ETFs at Fidelity, Schwab, and Vanguard for no fee at all.  $1000 minimums are common enough at those firms.

AlmstRtrd

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Re: New to investing - Where do I start?
« Reply #5 on: May 28, 2017, 06:09:11 AM »
A couple of things....

Pensions are never guaranteed. Some are a lot safer than others but it's best not to count on a pension paying you 100% of what you have been promised. You are only 33 now but you'd be looking to have that pension fund part of your retirement expenses from, say, 55 to 90. Will the pension fund really be well managed/funded for 57 years? Even at 58 years old I don't count on getting 100% of what I am "promised" from Social Security. The number I use for SS when running projections is 75%. That's just a made up figure but, hopefully, you get my point.

I would use the next four years to not only learn about investing but also to learn about your own tolerance for risk. You are not yet putting away a lot of money so maybe run a portfolio that is 50% stocks (TSM would be fine) and 50% bonds (TBM). Very few investors can really stomach a 40% to 50% decline in their net worth if/when stocks go south. If it turns out you are one of the few who can stand losing that much, then you haven't lost a ton by holding a big whack of bonds in the early going.

Spend a bit of time on portfoliocharts.com if you want to see several good passive investing strategies. Examine the timeframes when certain allocations have struggled and keep in mind that when the stock market tanks, lots of people lose their jobs. I'm clearly not as optimistic about stocks as some on this board but some of the people who advocate a 100% stock allocation have likely not lived through a huge drop (2000-2002 and 2008-2009 are only the most recent examples).

Also, I used to have 55 as my target retirement age but I've found that I still like having some income. Look at it this way... even if I only have $10,000 a year in income, that's equivalent to withdrawing 5% annually on $200,000 of investments. And maybe you'll be one of the lucky ones and discover that you love your work and want to keep going even if it's only part time.

Just my two cents worth, obviously. Good luck with your journey and don't be obsessed with financial independence. If you are frugal and keep working, that will come easily.

ENT Doc

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Re: New to investing - Where do I start?
« Reply #6 on: May 28, 2017, 01:04:45 PM »
Make sure there are no upcoming major expenses that you can foresee.  If there are, save for that.  I second the investing order suggestion.  I think you'll find yourself focusing on the Roth at your income level, may change when you start making $70k.  Now for the real challenge - see if you can keep your spending at the same level when your income increases!  :)