First Vanguard fund choice?

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First Vanguard fund choice?

Postby keanwood » Sat Mar 16, 2013 3:53 am

Hi.

So i am looking to purchase my first vanguard fund and i have narrowed it down to four choices.

Here is some info about me and my goals.

Emergency funds: Over one year cash.
Debt: zero.
Tax Filing Status: Single
Tax Rate: I don't know. I don't have a REAL job so i don't actually file taxes
State of Residence: Western half of the united states. (I would rather not say for privacy reasons.)
Age: 20
Desired Asset allocation: 100% stock?
Desired International allocation: ?
Job: I am a full time student in college and i work part time "kind of".

Current Assets:

Taxable:
30% $4500 at Scottrade (individual stocks not an ETF or mutual fund)
3% $500 cash at Scottrade
66% $ 10,000 cash at regular bank (looking to put this into a vanguard fund)



I can't open a Roth IRA because all of my money is poker winnings so i have not payed taxes on it. I have built up more than i can reasonably use(invest) at the tables. So i am looking to purchase one of the four following funds:

1. 500 Index admiral shares. VFIAX
2. Total Stock Market Index admiral VTSAX
3. REIT Index admiral VGSLX
4. Small cap index admiral VSMAX

They all have $10,000 minimums. I am looking to hold on to this investment for like 40+ years.

Question one:
Which one of these funds do you think is best to pick.

Question two:
Also which would you pick as a second choice because i believe in 6 months to a year i will have another 10K to invest.

Question three:
Do you believe it would be better to have 10k in two funds or 20k in one fund?


Thank you all very much I really appreciate all of your answers?
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Re: First Vanguard fund choice?

Postby JPH » Sat Mar 16, 2013 10:53 am

I think those are all very personal, value-laden questions. I would not accept anyone's choices in place of your own. You need to learn more and develop a personal investment philosophy. Take your time. Go to the Wiki and read a few of the recommended books on investing. Then you'll know what you want to do.
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Re: First Vanguard fund choice?

Postby sscritic » Sat Mar 16, 2013 10:58 am

Gambling is a real job.
Gambling winnings are fully taxable and must be reported on your tax return.
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Re: First Vanguard fund choice?

Postby sscritic » Sat Mar 16, 2013 11:01 am

Gamblers contribute to Roth and traditional IRAs.
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Re: First Vanguard fund choice?

Postby YDNAL » Sat Mar 16, 2013 11:12 am

keanwood wrote:State of Residence: Western half of the united states. (I would rather not say for privacy reasons.)
Age: 20
Desired Asset allocation: 100% stock?
Desired International allocation: ?

I can't open a Roth IRA because all of my money is poker winnings so i have not payed taxes on it. I have built up more than i can reasonably use(invest) at the tables. So i am looking to purchase one of the four following funds:

1. 500 Index admiral shares. VFIAX
2. Total Stock Market Index admiral VTSAX
3. REIT Index admiral VGSLX
4. Small cap index admiral VSMAX

They all have $10,000 minimums. I am looking to hold on to this investment for like 40+ years.

Welcome, keanwood.

First, I must say that you should file a tax return.

Second, congratulation for thinking to invest now "for like 40+ years."

Third, the best choice IMO in a Taxable account with a 1 fund solution would be Vanguard Total World (VTWSX) or the ETF (cheaper, about 1/2 the cost). In a Roth IRA it would be Target Retirement 2060.
https://personal.vanguard.com/us/funds/ ... IntExt=INT
https://personal.vanguard.com/us/funds/ ... IntExt=INT
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Re: First Vanguard fund choice?

Postby CyberBob » Sat Mar 16, 2013 11:52 am

YDNAL wrote:In a Roth IRA it would be Target Retirement 2060.

I agree. Target Retirement 2060 (VTTSX) will get you the major asset classes all in one fund and with only a $1,000 minimum. It could be not only your first Vanguard fund, but your only Vanguard fund.

Bob
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Re: First Vanguard fund choice?

Postby Rainier » Sat Mar 16, 2013 12:21 pm

More importantly, you owe taxes on your gambling winnings. $100 from your friends, nobody cares. But enough to cover your living expenses and we should all care.
- Bill
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Re: First Vanguard fund choice?

Postby keanwood » Sat Mar 16, 2013 1:20 pm

Thank you all for your advice. I have one question about my taxes(or lack their of). If I start paying taxes on my winnings is that going to be standard income tax rates or is it a capital gains tax rate?

Thank you.
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Re: First Vanguard fund choice?

Postby nisiprius » Sat Mar 16, 2013 2:03 pm

I vote for Target Retirement 2060.

If you already have done a little studying on investments and you are sure, for your personal investing reasons, that you

a) Want to be 100% in stocks, nothing but stocks, nothing else, and

b) Want your stocks to be 100% U.S. stocks, nothing but U.S. stocks, no international at all, then,
of the four you listed,

Total Stock Market Index admiral VTSAX, because it is the most normal, neutral, plain vanilla of the four. It is a "core fund." The Index 500 is basically an outmoded total stock market fund, while the others are sauces, seasonings, to be mixed in or not depending on your investing strategy, but not to be used as entire holdings in themselves.

If you want to be 100% in stocks, nothing but stocks, but you don't want it to be 100% U.S. then you might want to consider the Vanguard Total World Stock Market Index Fund, VTWSX.

500 Index is the S&P 500. It is, basically, an old index and old fund that were normally purchased because people wanted "the whole stock market," and for a long time the S&P 500 was considered a good proxy for the whole stock market. Actually, it still is, but the newer total stock market indexes are closer and more accurate. So, for most people, given a free choice, the reason for wanting the 500 Index says they should have a slightly preference for Total Stock Market.

VGSLX is, in my opinion a "specialty." It is supposed to fluctuate somewhat differently from the stock market as a whole, though it hasn't been doing that lately, and therefore, according to one theory, adding a controlled amount of VGSLX to the total market should improve the overall portfolio. But you don't invest JUST in VGSLX.

Exactly the same thing is true of VSMAX. If you use it, you mix it in, you use it as flavoring or seasoning, you make it your whole portfolio, use it as a "tilt." There is the additional wrinkle: the people who advocate a "tilt" to small-company stocks tend to think that "small value" is better. That would mean using Vanguard Small-Cap Value Index Fund (VSIAX).
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Re: First Vanguard fund choice?

Postby stan1 » Sat Mar 16, 2013 3:14 pm

keanwood wrote:Thank you all for your advice. I have one question about my taxes(or lack their of). If I start paying taxes on my winnings is that going to be standard income tax rates or is it a capital gains tax rate?

Thank you.


Here's my public service google query for the day:
http://www.irs.gov/taxtopics/tc419.html

And if you think you qualify as a "professional gambler" you can file a Schedule C (I'm not going to vouch for the correctness of this site, but it appears to have relevant information for you):
http://professionalgamblerstatus.com/pr ... ambler.htm
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Re: First Vanguard fund choice?

Postby robertalpert » Sat Mar 16, 2013 9:00 pm

With $10k, I would vote in favor of $10k intermediate term tax exempt VWITX. It will earn some interest while (perhaps in a small way) balance your financial risk-taking. Until you have alternative means of more reliable income, equity should not be on the proverbial table.

If you have $20K, then I would vote in favor of $20K intermediate term tax exempt VWITX. It will earn some interest while (perhaps in a small way) balance your financial risk-taking. Until you have alternative means of more reliable income, equity should not be on the proverbial table.


But .... If you have $50K+, then I would vote in favor of 50K+ intermediate term tax exempt - admiral VWIUX. It will earn some interest while (perhaps in a small way) balance your financial risk-taking. Until you have alternative means of more reliable income, equity should not be on the proverbial table.
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Re: First Vanguard fund choice?

Postby keanwood » Mon Mar 18, 2013 3:17 am

robertalpert wrote: Until you have alternative means of more reliable income, equity should not be on the proverbial table.


Thank for your advice.

I do like the idea of bonds because they provide a stable source of income. But I curious why you think my income is not reliable? I know it sounds risky but in the last two and a half years I have been able to consistently pay all of my living expenses and my tuition ( both of which are very low) for college and also build up a years worth of living expenses. So i don't understand why equity should not be an option for the 10,000 that is not apart of my emergency fund.

thank you.

P.S

I am very happy to have found this forum. My uncle bought me the book "The Bogleheads Guide to Investing" and I liked it very much.
Spend half of your money: for you may die, save half of your money: for you may live.
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Re: First Vanguard fund choice?

Postby nisiprius » Mon Mar 18, 2013 6:38 am

keanwood wrote:But I curious why you think my income is not reliable? I know it sounds risky but in the last two and a half years I have been able to consistently pay all of my living expenses and my tuition ( both of which are very low) for college and also build up a years worth of living expenses.
All I know about poker comes from novels and movies, i.e. I know nothing about it, and if this is silly or wrong I'm certainly interested in hearing more about what you do. It seems to me that:

Poker is a zero-sum game--all the money you makes is made by taking it away from other players. In order to do this consistently and make a regular living at it, it seems to me that:

  1. you need to be more skillful than the other players you are playing with;
  2. you need to be able to convince less skillful players to play with you;
  3. you need to be able to convince them to keep playing the game, after they have discovered that you are more skillful than them, long enough for you to win enough money to amount to a decent hourly wage for you;
  4. you need to be sure that the players who lose to you do not take your winnings back by force sometime after the game;
  5. you need to be sure that you never play with players who are more skillful than you.
In the novels and movies, the problem is usually point #5. You are able to take money away from other players; sooner or later you will find yourself in a game with someone who is able to take money away from you.

However, if that's all wrong I'm certainly interested in learning more. How do you find yourself a reliable supply of well-heeled players, less skillful than you, yet willing to play with you? Have you played and lost to players more skillful than yourself, how often does that happen, and how does that factor into your personal statistics?
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Re: First Vanguard fund choice?

Postby dbr » Mon Mar 18, 2013 9:30 am

I would suggest that investing is not about picking funds but rather about devising an asset allocation suitable to your objectives and then selecting funds that suit the purpose. Things are driven by such principles as diversification, low cost, tax efficiency and so on.

I think some reading is in order and maybe also a glance here:

viewtopic.php?f=10&t=88005
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Re: First Vanguard fund choice?

Postby robertalpert » Mon Mar 18, 2013 6:06 pm

keanwood wrote:
But I curious why you think my income is not reliable? I know it sounds risky but in the last two and a half years I have been able to consistently pay all of my living expenses and my tuition ( both of which are very low) for college and also build up a years worth of living expenses. So i don't understand why equity should not be an option for the 10,000 that is not apart of my emergency fund.

thank you.

P.S

I am very happy to have found this forum. My uncle bought me the book " boogleheads guide to investing" and i liked it very much.




I realize that what i wrote sounded too harsh. But (as Nisiprius mentioned), gambling in the movies is a zero sum game. Movies is also my only frame of reference. There also are other individual gamblers whose game is the stock market: {option traders, commodity traders, momentum traders}. These are things i know nothing about, but have heard that the professionals (consistent winners) on the other end of those trades are people who are not primarily in the business of trading. But rather in the business of owning a production commodity business {like owning a farm, owning a mine, owning a natural resource} and they are correctly hedging the natural unpredictability when owning that business. Perhaps a casino owner may have a business need to play a related options game of some sort.

I'm glad your uncle has the good instinct to buy the "bogleheads guide to investing", and that you have the good instinct to read it. I have not read that particular one, but am sure it discussed buying the whole total market in index-fund format along with establishing a suitable stock / bond ratio for your risk comfort level.

May I ask: what was the result of your college tuition payments, that is, what major (etc)?
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Re: First Vanguard fund choice?

Postby keanwood » Mon Mar 18, 2013 7:27 pm

You guys are correct in that poker is a zero sum game( actually it is worse because the casino takes a cut). In most movies you see poker as a tournament where you have to actually beat everybody but most poker is played as a cash game; this means that you can start and stop at any time. Tournaments have a much higher luck factor because blinds(forced bets) are scaled up as time goes on. In a cash game on the other hand a better player over time will always beat a lesser skilled player. In my experience i have found there are only three types of people who play poker though.

94% People on vacation( lots of 18 and 21 years olds celebrating birthdays) where they have no real poker experience and are there just to have fun whether they win or lose.
5%. People who are genuinely addicted and can't help themselves. They just throw money away be it slot machines or lottery etc.
1%. people who study the game and are good at it. ( either college kids or people past the age of 40)

The good news if you sit down with another really good player ( shark) generally there is a non verbal understanding that the two of you don't need to duke it out. the other eight people at the table are enough to share.


For college i did my first two years at a community college and i am currently doing my second two years online at Western Governors Union. It is very cheap like $3500/6mo. You pay per six month period. If you only finish 6 units than you payed a lot but if you really buckle down and finish 20+ units than it is really great. My major is Computer Science and i want to get a second major in applied Mathematics but WGU dose not offer that.


P.S I decided to go with the Total Stock Market Index admiral VTSAX


P.P.S If you guys want to know more i would be happy to share with with you. The game is very math intensive.
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Re: First Vanguard fund choice?

Postby careytilden » Tue Mar 19, 2013 12:42 am

keanwood wrote:I decided to go with the Total Stock Market Index admiral VTSAX


Sounds like a fine choice, but I would like to reiterate dbr's advice. You wrote you want 100% stocks, but with a question mark. I take it that means you aren't sure if that's right for you. I would suggest you be satisfied with your decision for now, but keep thinking about what allocation you want going forward. Once you feel more comfortable with it in the abstract, choosing specific funds will be a lot easier.
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