Author Topic: Brand New To Investing..  (Read 3744 times)

MisterOwl

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Brand New To Investing..
« on: March 29, 2016, 11:27:01 AM »
Hey everyone, sorry if this is post is like beating a dead horse, but I didn't see a recent thread with my question.

I'm in my early 20s and want to get a head start on investing. I'm looking at going through Vanguard and have a little under 4k to invest. My main question is, how do I know what a solid index fund would be to invest in?  Do I put my lump sum in one and let it grow, or should I spread it out across a few different ones? Any tips to picking a solid high yielding fund for the long term?

Thanks!

neo von retorch

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Re: Brand New To Investing..
« Reply #1 on: March 29, 2016, 11:38:15 AM »
If you are investing for the long-term, you only need 1-3 funds. Since you only have $4k, you're over the $3000 limit many Vanguard funds have, but not high enough to spread into other funds. For now, you could simply drop it in VTSAX and be done with it. As you build funds, you should determine your personal preference for asset allocation, and spread your investments into 2-3 funds (i.e. 80 domestic stocks, 20 domestic funds is simply VTSAX and VBMFX - but also consider international stock and bond funds.)

BarkyardBQ

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Re: Brand New To Investing..
« Reply #2 on: March 29, 2016, 11:42:39 AM »
How to use the Stock Market. Start Here, http://jlcollinsnh.com/stock-series/

Lump Sum vs DCA, https://www.bogleheads.org/forum/viewtopic.php?t=101965

Tax & Mathematical Advantage
http://www.madfientist.com/retire-even-earlier/
http://rootofgood.com/make-six-figure-income-pay-no-tax/

If you're in your early 20's, you might want to assess your personal risk tolerance, and determine if you need bond funds or if you can stomach the volatility of 100% stocks during the accumulation phase. Make an Investment Policy Statement, your tool kit for how to make investment decisions. https://www.bogleheads.org/wiki/Investment_policy_statement
« Last Edit: March 29, 2016, 11:45:26 AM by BackyarBQ »

SuperSecretName

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Re: Brand New To Investing..
« Reply #3 on: March 29, 2016, 12:23:48 PM »
Just put the 4K in at once.  DCA doesn't really work.

I'd put it in a target retirement fund.  You'll get international diversification without having to add another fund.

GrOW

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Re: Brand New To Investing..
« Reply #4 on: March 29, 2016, 07:28:49 PM »
Hey everyone, sorry if this is post is like beating a dead horse, but I didn't see a recent thread with my question.

I'm in my early 20s and want to get a head start on investing. I'm looking at going through Vanguard and have a little under 4k to invest. My main question is, how do I know what a solid index fund would be to invest in?  Do I put my lump sum in one and let it grow, or should I spread it out across a few different ones? Any tips to picking a solid high yielding fund for the long term?

Thanks!

Early 20s and focused on investing. Congrats.

Let's be honest. Beating a dead horse is a great way to early retirement.  Really. Save more, spend less, invest in diversified index funds. Those concepts are in a majority of the posts here. Talk about beating a dead horse. Why? Because it works! 

To your point of DCA, it's a wonderful way to invest via paycheck contribution. It's not a wonderful way to invest a lump sum.

To your main question, how do you define a solid index fund? I bet dollars AND donuts that my version of solid is different from yours. Point is that you need to stop and create your own personal risk profile. You say the term long term so I have to guess that you are focused on your net worth in your 30s, 40s, and beyond. If so, research boglehead lazy portfolios and pick one that matches your risk feeling.

When you feel overwhelmed, and you will at a few points in your journey to financial independence, remember it's your savings rate that matters. Your have decades ahead of you. Don't get too wrapped up in S&P500 vs Dividend Appreciation vs Russell 1000 funds.

mrpercentage

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Re: Brand New To Investing..
« Reply #5 on: March 29, 2016, 07:36:52 PM »
Due to this rally I would contribute the minimum for the mutual fund. Then DCA the rest. A thousand a month would be smart. Just my opinion. The minimum might be 3k for vanguard. We just had a huge rally. Honestly I would wait until it drops at least 5%

If you really commit to not touching it then go ahead and throw it in. You are young an the time should cover you
« Last Edit: March 29, 2016, 07:38:41 PM by mrpercentage »

neo von retorch

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Re: Brand New To Investing..
« Reply #6 on: March 30, 2016, 07:21:37 AM »
Due to this rally I would contribute the minimum for the mutual fund. Then DCA the rest. A thousand a month would be smart. Just my opinion. The minimum might be 3k for vanguard. We just had a huge rally. Honestly I would wait until it drops at least 5%

If you really commit to not touching it then go ahead and throw it in. You are young an the time should cover you

If you have a few decades experience successfully timing the market, pay close to attention to the advice above (which you wouldn't need anyway if that was the case.)

Cycling Stache

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Re: Brand New To Investing..
« Reply #7 on: March 30, 2016, 06:02:20 PM »
Due to this rally I would contribute the minimum for the mutual fund. Then DCA the rest. A thousand a month would be smart. Just my opinion. The minimum might be 3k for vanguard. We just had a huge rally. Honestly I would wait until it drops at least 5%

If you really commit to not touching it then go ahead and throw it in. You are young an the time should cover you

Notwithstanding Mr. Percentage's advice and investment pedigree, I just elected to put my $180,000 rollover directly back into the market.  And another $100,000 is on the way.

MisterOwl, good job on investing early.  Easiest recommendation is VTSMX (which is Vanguard's Total Stock Market Index), also known as VTSAX, which is just the Admiral version with lower fees once you hit $10,000.  That will get you going, and if you feel the need to fine tune after that (I do not), you can do so.  But the decision where to invest to start can be an easy one.  Choices between general index funds at this point makes a lot less difference than getting in the market, saving and contributing more, and just getting going.

Also, do not consider market timing or stock picking until you have spent enough time to realize that it almost never works over the long term for the average investor.  Behavioral economics is a tough thing to overcome.

Good luck!
« Last Edit: March 31, 2016, 05:22:40 AM by Cycling Stache »

wienerdog

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Re: Brand New To Investing..
« Reply #8 on: March 30, 2016, 08:17:17 PM »
I agree with the others above put it all in and use the suggested Vanguard fund (or similar low fee fund).  In the long run it won't matter besides being in the market.

Read the stock series that BackyarBQ linked to.  Once you are done with the series read them again. 

I have also read Paul Merrimans stuff (free ebooks) and enjoy his podcasts.

http://paulmerriman.com/first-time-investors/

From above:
1. The much-publicized “magic of compound interest” dictates that every dollar that you invest for 40 years will inevitably be worth much more than a dollar you invest for only 30 years or 20 years.  (Backing up the thought of getting your money in now)

2. Every beginning investor makes mistakes. You can learn just as much from a $1,000 mistake when you’re young as you can from a $50,000 mistake when you’re older. And the price of the lesson is much lower.  (You're ahead of the game on this one)

3. The early years are the time you form the habits and attitudes that separate the most successful investors from the also-rans.  (Again you are ahead of the game on this also)

You're doing great starting this early.  Learn as much as you can and keep up the good work!


MisterOwl

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Re: Brand New To Investing..
« Reply #9 on: March 31, 2016, 06:25:12 AM »
Thank you to everyone who replied! This place is such a wealth of knowledge. I'm going to hit the books some more and get into VTSMX.
Lastly I'm reading about people maxing out their IRAs/RIRAs Which would be more important to focus on? Maxing out your savings accounts or contributing more into index funds?

NoStacheOhio

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Re: Brand New To Investing..
« Reply #10 on: March 31, 2016, 06:43:37 AM »
Lastly I'm reading about people maxing out their IRAs/RIRAs Which would be more important to focus on? Maxing out your savings accounts or contributing more into index funds?

It depends on your needs, spending and personality. If your expenses are low, having a small emergency fund probably isn't a problem. That may change as your life changes. If having a small emergency fund gives you anxiety and trouble sleeping, then put more money into it before you invest. If you have a predictable large expense coming up (moving, buying a house, buying a car, whatever), then you don't want that money invested in a volatile asset.

You income and tax situation can also influence where you invest. Low income/low tax? Roth may be the best bet. Need to reduce your AGI? Traditional does that (just be mindful of the income limits).