Author Topic: Where do I put after tax investment money?  (Read 1087 times)

JGalt137

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Where do I put after tax investment money?
« on: March 22, 2018, 12:33:04 PM »
Hello!  New member here :)

I'm opening an after tax brokerage account to invest some of the emergency fund as well as to build after tax savings that would be available in the event of a major life change/emergency.

I see a lot of talk of Index Funds, specifically vanguard and looking for low ER's.  I'm wondering if there is a post that breaks down a good list of these and how to weight each one, or if people are simply using Vanguard total market?

Sorry if this was asked and answered previously or worded poorly.

Me:
HSA maxed
401(K)s approaching max
Looking to start after tax investing to allow funds to be accessed

Rob_bob

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Re: Where do I put after tax investment money?
« Reply #1 on: March 22, 2018, 04:38:51 PM »
Is this shorter term money or long term retirement money?  If it's not short term need it soon money invest it in the same asset allocation you are using in your retirement accounts.  Leaning towards the more tax efficient capital gains versus dividend/ordinary taxable income funds.

Stubbler

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Re: Where do I put after tax investment money?
« Reply #2 on: March 22, 2018, 06:46:24 PM »
Different people have different risk aversion. So you need to find an allocation that works for you.
Standard advice is to go read something like https://www.bogleheads.org/wiki/Asset_allocation first.

When one talks about "life emergencies" there are broadly speaking 2 categories:
major life emergency: high amount needed, very low probability of happening. eg: unexpected, expensive heart surgery
minor/normal emergencies: small amounts needed, higher probability of happening. eg: car breaks down - need down payment for new (economical) car. lost job - need 6 months living expenses.

Here's how a hypothetical person (eg: me) could go about it: I could decide the following allocation suits my risk tolerances: 80% US total market index (VTI) 20% bond index (BND).

I would make sure all my bonds are in my tax deferred accounts. Then in taxable accounts:
Choose to keep the minor emergency fund in a savings account (eg: 3-6 months living expenses)
Invest the rest in VTI . My "high amount needed but low probability its needed" emergency fund would also be invested here.

 Any of the funds listed here would suit the job for the second type: https://www.feex.com/funds/Equity-US/VTI


I went through a phase of following more complicated DIY asset allocation using futureadvisor.com and hence am stuck with capital gains. But if I had to do it all over again, I would just go with 60% VTSAX (or VTI), 30% VFWAX/VEU, 10%VBTLX/BND across my total net worth (other than my minor emergencies fund) and be done with it except for rebalancing once a year.