Hello,
I am 27 and still trying hard to understand investing and what to do vs what not to do. I set myself up 4 years ago with Edward Jones with a ROTH and SIMPLE IRA. I max my ROTH and have 3% match for simple through employer.
I am not so familiar with IRA (Roth or simple) being Canadian. But what I can tell is, if you have employer match, maximize your contribution in order to get the full employer contribution as this is free money. Let's say that if you put 3%, the employer puts 3%, well that's 100% return on your 3% investment right there (+ the return on the total 6% depending on the investment product you chose). But basically, even if the return was 0% or negative, you would still be winning.
The balance of the money you were investing with Edward Jones is what you are going to stop investing with them. You didn't mention the management fees they are charging you and I encourage you to look at them in details, but they most likely are very high (2%+) and are a big part of the reason why there's less money in your pocket. Please read this for more details on this subject :
https://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/So far Jones has gotten me 4% return on investments. I'm not happy with that. Friend of mine uses Vanguard and last year he earned 12% back. I just signed up for Vanguard and am investing $5,000 of my cash into a non retirement savings account, and reinvesting in what I earn with them. I was going to monitor for a few months and then transfer Jones accounts to Vanguard if I'm happy with them.
I decided to do the non retirement account because from what I understand I can pull money out if needed. Currently I have housing through my employer, but I may be changing careers in the next 12 months and will need money for down payment and closing costs.
Am I doing it "right"? Should I invest more with them? I am also thinking about doing a power account with my credit union, which is only .35% interest, but at least I know the money is there.
Thanks
First, you have to understand the difference between investment and saving. The philosophy of investments through products like what Vanguard proposes (generally ETF's) is for long term goals / buy and hold philosophy. As you can read in the article I linked earlier, we know that historically the market always goes up in the long run, but can be quite risky in the short term. So if you plan of needing the money you are investing soon, then that's called saving.
I don't know all the products Vanguard offers, but you
should not be saving through stock or bonds ETF's. You should save this money in an account with guaranteed return (generally pretty low, but better than nothing). I am sure someone here is going to give good advices on these kind of products since I'm personnaly not in this market. If you also have money you are ready to invest long term and ''forget'' about it, then take a look at ETF's (Vanguard or others) with low MER's.
Also keep in mind that comparing your investment return with your friend is not ideal, because you probably have a very different profile than he has. Yes, 12% vs. 4% is attractive, but what are the products you guys are invested in? What is the goal (investment or saving)? What is the risk? What happens in there's a crisis tomorrow? Is your 4% going to become -10% and his 12% become -30%? Each and every person has is own ''profile'' and asset allocation (AA%). There are many great posts on this subject on the forum.
Also, investing for the long term / buy and hold strategy, you won't have to monitor the return and take any decision based on the short term results. All you are interested to know is, long term, it is going up (around 7%/year historically), that's what you should be aiming at and planning with.
I suggest you do a little more reading before making a move. You are at the right place and don't hesitate to ask questions, but don't stress things out to make a move.
A good place to start is by going through the MMM Classics articles, you'll learn a lot :
http://www.mrmoneymustache.com/category/mmm-classics/Max
