New Invester age 23

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ERZ80
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New Invester age 23

Post by ERZ80 » Thu Feb 27, 2014 3:49 pm

New guy here. Im 23 and just landed a full-time job that I will be starting in about 2 weeks or so. The company matches the first 3%-100% and the next 2%-50%. I am going to contribute the full match every paycheck(5%). Based on the options they give me, I'm think they should have some target date funds. I have looked at the Vanguard 2055, and the T. Rowe 2055 retirement funds briefly. Any suggestions about those? Also opened a Roth IRA through Scottrade and I am going to put 5% of paycheck in that to start. Any suggestions on Mutual funds to start with? I am young so I'm looking be aggressive...anywhere from 80/20 and up. Any suggestions or opinions and things I should do as I am trying to get the ball rolling. Thanks.

Day9
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Re: New Invester age 23

Post by Day9 » Thu Feb 27, 2014 5:03 pm

Target date funds are great. So are Vanguard's Total Stock Market and Total International Market index funds.

As a new accumulator, savings rate is much more important than fund selection. Focus your energy on increasing your income and reducing your expenses!
I'm just a fan of the person I got my user name from

ERZ80
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Re: New Invester age 23

Post by ERZ80 » Thu Feb 27, 2014 5:06 pm

Thanks for the reply! Any suggestions on a fund for the Roth to start out? Also, I just like to invest with intelligence if possible haha. thanks again

Rodc
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Re: New Invester age 23

Post by Rodc » Thu Feb 27, 2014 5:18 pm

Day9 wrote:Target date funds are great. So are Vanguard's Total Stock Market and Total International Market index funds.

As a new accumulator, savings rate is much more important than fund selection. Focus your energy on increasing your income and reducing your expenses!


Absolutely.

Vanguard's target date retirement funds are a fine funds, I don't know anything about TR Price or others (But Fidelities is a mess of high cost funds).

No reason not to just use that for now in any account.

More sophisticated investing may or may not be of some use when your portfolio is significantly larger, say returns start to be about the size of you new money for investments (and for emphasis, may not be of some use) . Or when you start having a significant amount in taxable accounts and you have to worry about managing for to reduce taxes.

But for now there is no real value in getting more fancy than a basis.

Best of luck in your new job and your new investing career.
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Chadnudj
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Re: New Invester age 23

Post by Chadnudj » Thu Feb 27, 2014 5:18 pm

Let me echo the other poster. Set the 401k on Target Date funds (preferably Vanguard, and if not, in whatever one you have available that has the lowest expense ratio), and forget it for now.

Worry mainly about getting as much into the accounts as possible, with priority for the first 5% into the 401k, then maxing out the Roth IRA, then back to the 401k until it hurts (or, just ALMOST hurts).

As for investments in the Roth, may I suggest another "set it and forget it" fund: Vanguard LifeStrategy Growth Fund, which has a competitively low expense ratio and and 80-20 stocks to bond split (with international built-in). You may need to hit a certain account minimum to get in, though, so just park as much in the Roth IRA into cash until you hit the minimum, then buy the LifeStrategy Growth Fund, forget it, and keep buying it.

(Others will give you more complicated portfolios that might shave less than a tenth of a percentage point off the expense ratio of LifeStrategy Growth or a target date fund. Those posters are, of course, correct mathematically. But the low pain in the @s$ factor of LifeStrategy/target date are worth it, in my humble experience.....)

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yatesd
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Re: New Invester age 23

Post by yatesd » Thu Feb 27, 2014 5:19 pm

Target funds are diversified already. So it would be OK to invest in the same Target fund for the 401K and ROTH. Hard to beat Vanguard TD funds.


Once the balance grows above $50K you can consider mimicking the same allocation with Admiral shares to get the slightly lower expense ratio.

ERZ80
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Re: New Invester age 23

Post by ERZ80 » Thu Feb 27, 2014 5:48 pm

Thanks guys I really appreciate the help. I started Interning at Scottrade a about 2 months ago before I was offered this new job which has really helped me out a lot too. Whether I manage my own or get somebody to help down the road, I def want to know whats going on and be able to watch it. Thanks again

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LadyGeek
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Re: New Invester age 23

Post by LadyGeek » Thu Feb 27, 2014 6:50 pm

This thread is now in the Investing - Help with Personal Investments forum (help with fund selection).

When selecting a Target Date Retirement Fund, be sure to go by the asset allocation, not the date. See: Vanguard target retirement funds

There's nothing wrong with T. Rowe Price Target Date Funds if they are available. The idea is to check the expense ratios and pick the lowest cost fund that matches your desired asset allocation.

See: Expense ratios, note the effect of expenses shown by the graph on the right.
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Re: New Invester age 23

Post by Laura » Thu Feb 27, 2014 7:24 pm

I would use the Vanguard Target Retirement fund in the company retirement plan and then use the same one in your roth. You can hold the roth directly at Vanguard to make it easy and no cost.

Laura
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ERZ80
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Re: New Invester age 23

Post by ERZ80 » Thu Feb 27, 2014 9:22 pm

Awesome thank you! I appreciate all the help...Vanguard def has a lower expense cost from my research...only difference is the cost to get into the fund. vanguard is 100 and T Rowe is 100.

Laura
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Re: New Invester age 23

Post by Laura » Thu Feb 27, 2014 10:26 pm

Why do you need to pay $100 to get in? Are you charged a fee inside the 401k? There is no fee in the roth. Are you using a fund window of some sort rather than the standard funds available in the 401k? If yes, you don't want to do that. $100 is too costly. Please post the 401k options that are standard with expense ratio and we can help you pick the best option.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

ERZ80
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Re: New Invester age 23

Post by ERZ80 » Thu Feb 27, 2014 10:30 pm

not for the 401k, sorry I should have been more clear. For the mutual fund in the Roth there are minimum fees to get started...most T Rowe funds are 100 minimum investment, however the Vanguard one is 1000 minimum investment.

ERZ80
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Re: New Invester age 23

Post by ERZ80 » Thu Feb 27, 2014 10:33 pm

Also what do you think about and idex fund or the vanguard growth fund

Laura
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Re: New Invester age 23

Post by Laura » Thu Feb 27, 2014 11:40 pm

Go with the index fund. You will track the market. Growth fund is a managed fund so you have additional risk from the manager.

Don't let the minimum stop you from beginning to invest with a great firm, Vanguard. Morningstar recently wrote this article Vanguard Dominates the Fund Industry Again which shows that more and more people are realizing the benefit of low cost investing through Vanguard. Start with $1k in the Target Retirement fund and you will start on an excellent path.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

dharrythomas
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Re: New Invester age 23

Post by dharrythomas » Fri Feb 28, 2014 4:57 am

Vanguard Target Retirement in both is the cheap easy way to go. I'd move the Roth directly to Vanguard to avoid fees. Good you started early. The options and contribution limits are much better than when I was in my 20s.

Welcome and good luck!

Harry

ERZ80
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Re: New Invester age 23

Post by ERZ80 » Sat Mar 01, 2014 4:36 pm

Ok thanks guys sorry for the late response. Also, I was looking into the target 2055 fund through vanguard andI believe its really close to 90/10. Do you think that is about the right set up? Probably going to start out by doing target funds in Roth and 401k and then maybe the Vanguard growth or the Vanguard 500 Index fund. Thanks for all the support I really appreciate it!

Laura
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Re: New Invester age 23

Post by Laura » Sat Mar 01, 2014 4:41 pm

You can pick a Target Retirement fund based on the asset allocation and not the date. The 90/10 for the 2055 fund is fine for someone your age at the beginning of your investing lifecycle. You don't need the Vanguard Growth or Vanguard 500 index because you will have all the companies in both of those inside the Target Retirement fund. They will be covered by the Total Stock Market component of the Target Retirement fund.

Look inside that one fund and you find the Total Stock Market index fund, Total Intl Stock Market index fund, Total US bond market, and Total Intl bond market. You really will never need anything else. Yes, it really is that simple.

Laura
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ERZ80
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Re: New Invester age 23

Post by ERZ80 » Sat Mar 01, 2014 4:50 pm

Haha thanks! Its just weird things are so simple sometimes. Also can anybody recommend me some good information or articles/books around here free or paid? Really looking to just learn and learn and learn more about investing and the market.

ERZ80
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Re: New Invester age 23

Post by ERZ80 » Sat Mar 01, 2014 4:52 pm

Also I fogot...I currently have the Roth through scottrade. It would be 2 dollars extra for every time I want to add more more money to the actual vanguard fund...is it worth it to switch to vanguard directly or just stay at scottrade? I have not made any contribution yet what so ever. Just opened it last week.

Laura
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Re: New Invester age 23

Post by Laura » Sat Mar 01, 2014 5:12 pm

Don't waste $2 dollars on a trade like that when you can do it for free at Vanguard. Invest that $2 for your benefit every time you add money rather than losing it to a broker. So, go ahead and move the account to Vanguard. For books, look at this page on the wiki. I also enjoyed Personal Finance for Dummies or Mutual Funds for Dummies.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

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