Author Topic: New to Vanguard  (Read 9215 times)

GreenSheep

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New to Vanguard
« on: December 14, 2015, 02:45:04 PM »
Please forgive my ignorance. I work in a science field, and I'm trying to increase my financial intelligence! Please speak slowly and use small words. :-)

I recently moved my SEP IRA from Chase to Vanguard to take advantage of lower fees. I've seen the Vanguard Total Stock Market ETF mentioned on the MMM forums, and I'm really not sure what that is or whether it's something I should be looking into...? (If it doesn't apply to a SEP IRA, I also plan to move another pile of money to Vanguard that is not "officially" a retirement fund but is earmarked for that in my mind.)

I also see the little pie chart with the target asset mix information in my account summary. My current asset mix is not very different from what Vanguard recommends... however, Vanguard is probably assuming that I won't retire for another 30 years. (Currently 80.4% stocks, 17.5% bonds, 2.1% short term reserves) I wonder if I need to change that.

And finally... what is all this about rebalancing? Is that something that happens automatically with Vanguard?

My goal is to retire in 8 years. I suspect that spending some time and money on a Vanguard advisor would probably be worthwhile, but I thought I'd check here first since these seem to be pretty basic questions. Thank you all so much for any help!

matchewed

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Re: New to Vanguard
« Reply #1 on: December 14, 2015, 03:33:45 PM »
Reading material for you.

Stock Series

Given the above information craft an asset allocation and Investment Policy Statement. Rebalancing is when you (annually or maybe biannually) rebalance your chosen asset allocation via either buying more of one or selling some and rebuying of a different one, many ways to skin the cat on that.

An ETF is no different than the index fund except for a few things; https://investor.vanguard.com/etf/etf-vs-mutual-fund Look there. I personally go with Index Funds instead of ETF's because I see no advantage for choosing ETF's with my current strategy.

Remember your AA (asset allocation) is not for the 8 years until FIRE, it is something you should consider for life and how you adjust it as you move from life stage to life stage. You actually probably won't gain information you can't learn for yourself by paying an advisor. Read, ask questions, learn... profit w/out money spending.

BarkyardBQ

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GreenSheep

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Re: New to Vanguard
« Reply #3 on: December 14, 2015, 04:52:11 PM »
Thank you!! I'm reading through the Stock Series now, and it's not only reinforcing the few things I knew, it's answering a lot of questions I didn't know enough to ask.

Dragonstrike

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Re: New to Vanguard
« Reply #4 on: December 15, 2015, 06:54:01 PM »
I'm in the same boat as you Greensheep.

I'm still going over the Stock Series that was suggested to me before I get into Vanguard this coming year once my student loans are paid off.

I just literally wish someone would make an outline, as dumbed down as possible, that could help me invest in the right fund without consulting an investor. The Stock Series can do that I think, but even so its still pretty hard even for me to decipher some parts. 

My goal is to retire in 10 years once I get out of the Army in 2 years.

matchewed

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Re: New to Vanguard
« Reply #5 on: December 15, 2015, 07:22:27 PM »
So ask some questions about the parts you don't get.

MDM

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Re: New to Vanguard
« Reply #6 on: December 15, 2015, 07:28:47 PM »
I just literally wish someone would make an outline, as dumbed down as possible

1.  Find your favorite coin.
2.  Flip it.
3.  If it is heads, put everything into VTSMX.
4.  If it is tails, put everything into VTTSX.

Either way you win.

Dragonstrike

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Re: New to Vanguard
« Reply #7 on: December 16, 2015, 03:50:32 AM »
XD touche.

I'm still trying to finish the Stock series, then I can ask questions later.

NoStacheOhio

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Re: New to Vanguard
« Reply #8 on: December 16, 2015, 06:32:05 AM »
I'm in the same boat as you Greensheep.

I'm still going over the Stock Series that was suggested to me before I get into Vanguard this coming year once my student loans are paid off.

I just literally wish someone would make an outline, as dumbed down as possible, that could help me invest in the right fund without consulting an investor. The Stock Series can do that I think, but even so its still pretty hard even for me to decipher some parts. 

My goal is to retire in 10 years once I get out of the Army in 2 years.

Maybe make some notes for questions that pop into your mind while you're reading through it. Then come back and try to get answers. Rinse, repeat. :)

GreenSheep

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Re: New to Vanguard
« Reply #9 on: December 16, 2015, 11:36:03 PM »
I read the parts of the Stock Series that were relevant to me and skipped those that aren't (debt, company 401K, etc.). I'm in the process of changing my investments over to Vanguard index funds. (Sold everything yesterday, waiting for it to clear so I can buy Vanguard funds.)

I was very surprised to see that BOTH of my financial advisors (one of whom I just cut ties with a few months ago... the other is next) had some of my "investments" in cash. They both knew that I had cash sitting in the bank and that I'm not a spendypants, so I have no idea why they felt the need to set aside cash rather than put it into something that would earn interest. Must've been something in it for them, I assume -- or maybe they're used to dealing with people who can't seem to keep a penny in their savings account.

I feel like I'm on more stable ground now. Still lots to learn, but making progress. Thank you!

NoStacheOhio

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Re: New to Vanguard
« Reply #10 on: December 18, 2015, 06:01:10 AM »
I was very surprised to see that BOTH of my financial advisors (one of whom I just cut ties with a few months ago... the other is next) had some of my "investments" in cash. They both knew that I had cash sitting in the bank and that I'm not a spendypants, so I have no idea why they felt the need to set aside cash rather than put it into something that would earn interest. Must've been something in it for them, I assume -- or maybe they're used to dealing with people who can't seem to keep a penny in their savings account.

It could have something to do with their assessment of appropriate risk for you. They probably don't like getting calls from clients wondering why they just "lost" 15% of their money when the market has a bad quarter. Keeping money in cash will temper unrealized losses (and gains).

matchewed

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Re: New to Vanguard
« Reply #11 on: December 18, 2015, 07:01:46 AM »
I feel like I'm on more stable ground now. Still lots to learn, but making progress. Thank you!

Don't worry too much about feeling unsure, a little bit of that is a good thing. It means you're learning. :) and YW,

TomTX

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Re: New to Vanguard
« Reply #12 on: December 18, 2015, 11:01:37 AM »
I'm in the same boat as you Greensheep.

I'm still going over the Stock Series that was suggested to me before I get into Vanguard this coming year once my student loans are paid off.

I just literally wish someone would make an outline, as dumbed down as possible, that could help me invest in the right fund without consulting an investor. The Stock Series can do that I think, but even so its still pretty hard even for me to decipher some parts. 

My goal is to retire in 10 years once I get out of the Army in 2 years.

Sure thing.

1) Put 100% in VTSAX until you are in the $50k-$250k range.

2) Keep learning and don't panic.

3) You might consider diversifying to a second fund once you are in the $50k to $250k range. Maybe International. Maybe bonds.


Way too many people get caught up in analysis paralysis or scattershot their investments all over the place. They sit in cash while trying to guess the right move or splatter nickels across the cosmos.

Greenroller

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Re: New to Vanguard
« Reply #13 on: December 22, 2015, 11:25:01 PM »
Subbing, great info and links

svndezafrohman

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Re: New to Vanguard
« Reply #14 on: December 29, 2015, 11:55:49 AM »
VTSAX - my money all in

TomTX

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Re: New to Vanguard
« Reply #15 on: December 31, 2015, 08:38:58 AM »
VTSAX - my money all in

Good for you! Keep adding to it. When the market crashes (and it WILL crash!) - that's great. Stocks are on sale, so your next addition will be more shares for less $$.

Keep learning in the meantime.

Dragonstrike

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Re: New to Vanguard
« Reply #16 on: February 18, 2016, 08:10:36 PM »
Update:

So I just opened a Vanguard account today.  I had about $9,200 in my ICM-ARC Roth IRA.  I am going through the transfer now to have it rolled over into my Vanguard fund account.

So guys, with an additional $800, I'll have enough for VTSAX; which needs at a minimum of $10,000 for admiral shares.

And, I'll still have about $7k in my savings account alone.  By the next month, I should roughly have around $3k to put into another account. 

Was it bad that I am putting all this money into a VTSAX fund, and how should I go about diversifying this portfolio now? Should I open a Vanguard Roth account with the $3k I'll have to spend?  Or look into bonds?  Other opinions?

MDM

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Re: New to Vanguard
« Reply #17 on: February 18, 2016, 08:39:06 PM »
Was it bad that I am putting all this money into a VTSAX fund
No.  I take it the coin flip result was heads?

Quote
and how should I go about diversifying this portfolio now?
3728 different stocks not diversified enough?  See https://www.bogleheads.org/wiki/Three-fund_portfolio for some thoughts.  Or reflip until you get tails and use VTTSX, which includes VTSMX and three other funds.

Quote
Should I open a Vanguard Roth account with the $3k I'll have to spend?  Or look into bonds?  Other opinions?
Roth vs. bonds is apples vs. oranges.  You might look through http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/ and post your own for more detailed responses.

Dragonstrike

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Re: New to Vanguard
« Reply #18 on: February 18, 2016, 08:59:42 PM »
It was just that I had the $10k and I really wanted to invest in that.  Yes, that fund is diversified I know that.  But like those other two options you gave me, I'm just trying to cover my bases. 

I have a good emergency account for rainy days. I own my car.  My student loans are now paid off.  I have some extra income this starting year now.  And I'm accomplishing tasks which I once thought were overwhelming.  I just want to be on my way to early retirement and financial freedom.  The amount of research I'm tackling right now just feels like the hard part of course.


MDM

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Re: New to Vanguard
« Reply #19 on: February 18, 2016, 09:08:31 PM »
It was just that I had the $10k and I really wanted to invest in that.  Yes, that fund is diversified I know that.  But like those other two options you gave me, I'm just trying to cover my bases. 

I have a good emergency account for rainy days. I own my car.  My student loans are now paid off.  I have some extra income this starting year now.  And I'm accomplishing tasks which I once thought were overwhelming.  I just want to be on my way to early retirement and financial freedom.  The amount of research I'm tackling right now just feels like the hard part of course.
You are doing great!  Not sure if you realize, but you did pick the first of the two options suggested in December. :)

Keep up the good work!

NoStacheOhio

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Re: New to Vanguard
« Reply #20 on: February 19, 2016, 05:57:52 AM »
It was just that I had the $10k and I really wanted to invest in that.  Yes, that fund is diversified I know that.  But like those other two options you gave me, I'm just trying to cover my bases. 

First, figure out what you really want your long-term asset allocation to be. Decide how much (if any) you want to allocate to bonds and international, then rebalance from there. Personally, I would just keep pouring money into VTSAX until there's a little bit more to play with.

matchewed

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Re: New to Vanguard
« Reply #21 on: February 19, 2016, 06:18:47 AM »
Remember that it's a long term asset allocation. It may take some time to get there. Don't let perfect get in the way of good.

RedmondStash

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Re: New to Vanguard
« Reply #22 on: February 19, 2016, 09:02:55 AM »
Like the OP, I am relatively new to Vanguard. I spent much of the past 3 months ferociously researching investing, retirement accounts, etc., so it's still new to me, but I know way more than I did.

Here's what we did:

1. Figured out our risk tolerance. We're good with about 85% stocks and 15% bonds, even though we're relatively close to retirement age. We're both still working and can absorb some roller-coaster swings.
2. Created a plan based on our current ages, expected retirement ages, current portfolio amount, risk tolerance, current mortgage amount, mortgage interest rate, and home equity. Our plan is 85/15 stocks/bonds while we're working, and then reassess when we're not, possibly changing to 80/20.
3. Put most of the 85% into VTSAX, which, because it is an index fund that has all the stocks, is extremely diversified.
4. Put the rest of the 85% into a few other funds I gleaned from scanning both MMM posts & comments and from Googling "Vanguard index funds": VIGAX, VSMAX, VIMAX, VMGRX. That last isn't an index fund, but its performance looked interesting, so we took a chance.
5. Put the 15% into VBTLX, which, as an index fund with all the bonds, is also extremely diversified.

Remember: Roth IRA, traditional IRA, SEP, SEP-IRA, 401k, non-retirement -- these are all labels for types of accounts, which has to do with how much you can put into them each year, how and when you can access the funds, and how the profits are taxed.

Bonds, stocks, ETFs, index funds, mutual funds, REITs -- these are types of investments, which has to do with what you're actually buying. These are the things that go inside the type of accounts you choose. I think of it like stocks = 1 company, most mutual funds = several companies, index funds = lots of companies, and VTSAX = all the (U.S.) companies.

It is seriously worth researching the tax advantages and restrictions on retirement accounts. Six months ago, I didn't understand that it made sense to shovel as much money into those accounts as possible. (Our case is unusual, in that spouse is old enough to tap retirement accounts now, and I will be in a few years.) Basically, you want to keep enough money outside retirement accounts to live on until you can easily tap those accounts, and put the rest in to take advantage of the tax breaks you get.

Good luck.

Dragonstrike

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Re: New to Vanguard
« Reply #23 on: February 19, 2016, 02:04:27 PM »
For the tax part, where should I begin first to research that stuff?  I'm just a basic turbo tax guy, and don't really even understand the simple articles of it.  Hence, why I may need to spend a few hundred bucks to get some time with a financial consultant in order to understand it.

MDM

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Re: New to Vanguard
« Reply #24 on: February 19, 2016, 07:02:15 PM »
For the tax part, where should I begin first to research that stuff?  I'm just a basic turbo tax guy, and don't really even understand the simple articles of it.  Hence, why I may need to spend a few hundred bucks to get some time with a financial consultant in order to understand it.

The basic concept: when you make a given amount of money, the less you pay in taxes the more you get to keep.

What tax parts are you interested in - income tax, Roth vs. traditional, tax-efficient fund placement, ...?

RedmondStash

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Re: New to Vanguard
« Reply #25 on: February 19, 2016, 07:21:12 PM »
For the tax part, where should I begin first to research that stuff?  I'm just a basic turbo tax guy, and don't really even understand the simple articles of it.  Hence, why I may need to spend a few hundred bucks to get some time with a financial consultant in order to understand it.

Here's a place to start:

http://jlcollinsnh.com/2015/06/02/stocks-part-viii-the-401k-403b-tsp-ira-roth-buckets/

You might want to scan the MMM blog posts for tax-related info too.

I know this stuff can seem overwhelming, and I'm still refining my own understanding of the broad strokes, let alone the subtleties, but you can get yourself a good education about retirement account by Googling. If you have specific questions, you can ask them here. You may want to ask them in the forum area devoted to taxes. :)

TomTX

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Re: New to Vanguard
« Reply #26 on: February 21, 2016, 10:03:56 AM »
It was just that I had the $10k and I really wanted to invest in that.  Yes, that fund is diversified I know that.  But like those other two options you gave me, I'm just trying to cover my bases. 

I have a good emergency account for rainy days. I own my car.  My student loans are now paid off.  I have some extra income this starting year now.  And I'm accomplishing tasks which I once thought were overwhelming.  I just want to be on my way to early retirement and financial freedom.  The amount of research I'm tackling right now just feels like the hard part of course.

Having a single broad US stock fund like VTSAX is plenty diversified until you get to at least $50,000. It's still fine @ $250,000 for most people.

There's just not enough difference to spend the time on it and risk going down a trading rabbit hole.

GreenSheep

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Re: New to Vanguard
« Reply #27 on: February 24, 2016, 12:13:05 PM »
Having a single broad US stock fund like VTSAX is plenty diversified until you get to at least $50,000. It's still fine @ $250,000 for most people.

What would you recommend after that point? I was under the impression that VTSAX is fine no matter how much you have invested.

(Side note: I remember being in an unrelated class one day when the lecturer started giving some advice on personal finances, beginning with the present, when we were all broke and in debt, and continuing on past the day when we'd have over $100K to invest. Everyone but me put down their pens when he started talking about 6 digits, and later they told me that was just too far in the future and they couldn't imagine having that much money. But just a few years later, I hit that mark, and given our career path, all of them are capable of the same, so I hope they all are in the same boat. It's amazing what people don't think they can do and how short-sighted people are.)