Need advice on setting up first Investment account

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Topic Author
Faisal
Posts: 103
Joined: Sun Dec 18, 2016 6:37 pm

Need advice on setting up first Investment account

Post by Faisal » Sat Feb 11, 2017 10:17 am

I had posted earlier about deciding whether to purchase a home or set up an investment account. I found the advice provided here extremely useful and after discussions with our bank and other related financial institutions I have decided to set up a small investment account with Vanguard.

Background information:
Early 30s married couple with a 5 month old.
Taxable income for 2016 200,000 plus.
Investing 12,000 dollars in Vanguard. That is the money we are getting back on our security deposit for our last apartment.

Edit: Additional information.
Savings: 250k.
NO Investment of any kind. No 401k no 403. No IRAs etc.

Further information on reason for not including UN Pension in calculation is below but its basically issues of solvency when i retire.

UN Pension fund at age of retirement 81k per year.
UN pension fund rate of return 2.02% for 2017.
UN Pension fund rate of return 5.04% for 2016

No home or other physical assets. No funds other than savings account.

The aim is to make money so i am willing to take some risk.

The advice I need is two fold:

1. What type of account should I set up? Also if someone in line with that can explain if they are taxable or not taxable as well that would be greatly appreciated. From my understanding there are the two IRA accounts and a standard investment account. If there is anything else I could potentially use for our benefit that would be great.

2. I am going with Vanguard as it is online i have some independence on what I can choose and I can play around with the ETFs that Vanguard has. Any advice for someone starting out with Vanguard funds and what would be safe bets and what would be risky for someone starting out would be greatly appreciated.

Please note I will not at any point accuse any of you of giving bad advice. Any financial decisions are my own and any profit or loss thus is based on what I decide. So honest and direct advice would be greatly appreciated.
Last edited by Faisal on Sat Feb 11, 2017 12:57 pm, edited 2 times in total.

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slayed
Posts: 270
Joined: Wed Feb 01, 2012 3:07 pm

Re: Need advice on setting up first Investment account

Post by slayed » Sat Feb 11, 2017 11:30 am

when you say first investment account - does that mean you currently have no IRAs, 401ks, etc? without knowledge of your current portfolio it is hard to give any actionable advice.

btenny
Posts: 5222
Joined: Sun Oct 07, 2007 6:47 pm

Re: Need advice on setting up first Investment account

Post by btenny » Sat Feb 11, 2017 11:38 am

Please tell us if you or your wife have a 401K or IRA at work? Did you ever have a Roth IRA or similar things at any of your previous jobs? If so please describe how much you contribute and how much your employer contributes or if nothing tell us that to.

Good Luck.

Topic Author
Faisal
Posts: 103
Joined: Sun Dec 18, 2016 6:37 pm

Re: Need advice on setting up first Investment account

Post by Faisal » Sat Feb 11, 2017 11:51 am

Thanks for the response. No investment accounts at all.

I work for the UN so they manage our pension and its nothing I have control over. I contribute to month to the tune of 12,000 a year roughly. The UN doubles that yearly in contribution, so from their end its 24k yearly. Our pension fund functions differently than the traditional US IRA's and 401ks. So its not comparable. I can only cash out my pension if i leave or if I retire early at 55 or at 65 which is the current age of retirement. It is expected to increase to 70 by 2030.

I also do not want to include the UN pension in my calculations as it is a pension fund for over 200,000 people and I have serious concerns of its liquidity and its management by the time i retire in 30 years. Its a concern our senior management and staff unions have as well and well lets just say that is the reason I am taking things into my own hands for my families future.

My wife works but does not have a IRA or a 401lk. She opted out to have more cash on hand.

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Sandtrap
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Location: Hawaii No Ka Oi , N. Arizona

Re: Need advice on setting up first Investment account

Post by Sandtrap » Sat Feb 11, 2017 11:54 am

Savings account?
1 year income in cd's, etc?
Home down payment savings fund?
Wiki Bogleheads Wiki: Everything You Need to Know

kenner
Posts: 3129
Joined: Sat Mar 01, 2008 8:45 am

Re: Need advice on setting up first Investment account

Post by kenner » Sat Feb 11, 2017 11:58 am

Faisal wrote:
My wife works but does not have a IRA or a 401lk. She opted out to have more cash on hand.
Can she opt back in at some point?

Topic Author
Faisal
Posts: 103
Joined: Sun Dec 18, 2016 6:37 pm

Re: Need advice on setting up first Investment account

Post by Faisal » Sat Feb 11, 2017 12:34 pm

No CDs. No bonds. No investments.

Total savings combined is 250k approximately. No fund for saving for a home. Just cash in savings account.

Just to give additional information the UN subsidies my insurance coverage so that is take from my salary straight so I don't have to pay for anything. I get reimbursed 75% of all education expenses. They also cover life insurance for myself which is also taken straight for salary.

Yes she can opt in if need be. But she is taking a sabbatical from work to be with our son.

kenner
Posts: 3129
Joined: Sat Mar 01, 2008 8:45 am

Re: Need advice on setting up first Investment account

Post by kenner » Sat Feb 11, 2017 12:45 pm

Faisal wrote:
Yes she can opt in if need be. But she is taking a sabbatical from work to be with our son.
At some point, it will be helpful to know the investment options provided in her 401k, including expense ratios, ticker symbols, etc. It is generally best to evaluate a family's total asset allocation as comprising one whole investment portfolio. It may turn out that investments in her 401k may be superior and more cost-effective than your family's other options.

No way to know without exploring all options.

Topic Author
Faisal
Posts: 103
Joined: Sun Dec 18, 2016 6:37 pm

Re: Need advice on setting up first Investment account

Post by Faisal » Sat Feb 11, 2017 12:52 pm

I apologies for nothing having this information on hand at the start and should have provide the information up front.

This is the market value of our fund. As you can see the nominal rate of return is 2.02%
http://imd.unjspf.org/marketvalue/marketvalue.pdf

Secondly I looked at our pension estimate for when i retire its 81,000 dollars a year. Give or take a few thousand.

I will look into my wife's 401k plan on Monday and see what information is available.

btenny
Posts: 5222
Joined: Sun Oct 07, 2007 6:47 pm

Re: Need advice on setting up first Investment account

Post by btenny » Sat Feb 11, 2017 12:55 pm

You need to ask the UN or somebody at your work to see if you are eligible to invest in a IRA or Roth IRA because of the pension they offer. Some of the pension plans limit other investment options you can use under US tax laws. So I do not know what you can invest in tax free. Do this ASAP. You and your wife may both also be eligible for a standard IRA outside of work.

Then start studying about investing by reading the wiki on stocks mutual funds and bond mutual funds and asset allocations and related investing stuff. It is not hard but it does take some study. .

I am sure you can open a standard brokerage investment account at Wells Fargo (Wells Trade only) or Fidelity or Scottrade or Vanguard for standard investments. Go to one of these places and fill out the paperwork to set up a "brokerage account". Deposit maybe $20K of your savings account in this new brokerage account. This account will let you self direct investments and buy stocks and bonds and CDs and stock mutual funds and bond mutual funds and other financial investments. This account is NOT FDIC insured. So be careful. If you screw up and buy bad stuff you can loose your money. So study and read the wiki and learn about investing. Then buy some funds and set up you asset allocation with this small amount to start. Go slowly at first. Learn before you put much of your savings into the account.

Good Luck.

kenner
Posts: 3129
Joined: Sat Mar 01, 2008 8:45 am

Re: Need advice on setting up first Investment account

Post by kenner » Sat Feb 11, 2017 1:12 pm

Faisal wrote:I apologies for nothing having this information on hand at the start and should have provide the information up front.

This is the market value of our fund. As you can see the nominal rate of return is 2.02%
http://imd.unjspf.org/marketvalue/marketvalue.pdf

Secondly I looked at our pension estimate for when i retire its 81,000 dollars a year. Give or take a few thousand.

I will look into my wife's 401k plan on Monday and see what information is available.
That will be great. By the way, apologies are never necessary on this forum - we are all here to try to help and learn together.

For example, the UN's investment portfolio seems to have performed well since the financial crisis of 2008-2009. It would be interesting to see how that money is invested.

Topic Author
Faisal
Posts: 103
Joined: Sun Dec 18, 2016 6:37 pm

Re: Need advice on setting up first Investment account

Post by Faisal » Sat Feb 11, 2017 3:09 pm

kenner wrote:
Faisal wrote:I apologies for nothing having this information on hand at the start and should have provide the information up front.

This is the market value of our fund. As you can see the nominal rate of return is 2.02%
http://imd.unjspf.org/marketvalue/marketvalue.pdf

Secondly I looked at our pension estimate for when i retire its 81,000 dollars a year. Give or take a few thousand.

I will look into my wife's 401k plan on Monday and see what information is available.
That will be great. By the way, apologies are never necessary on this forum - we are all here to try to help and learn together.

For example, the UN's investment portfolio seems to have performed well since the financial crisis of 2008-2009. It would be interesting to see how that money is invested.
I will try to find that information but I don't think they have it on their website. I would also take that graph with a grain of salt as it includes contributions from staff members that join the UN after 2008. Each staff member that joins adds from their income monthly to the pension fund.

Topic Author
Faisal
Posts: 103
Joined: Sun Dec 18, 2016 6:37 pm

Re: Need advice on setting up first Investment account

Post by Faisal » Sat Feb 11, 2017 3:15 pm

btenny wrote:You need to ask the UN or somebody at your work to see if you are eligible to invest in a IRA or Roth IRA because of the pension they offer. Some of the pension plans limit other investment options you can use under US tax laws. So I do not know what you can invest in tax free. Do this ASAP. You and your wife may both also be eligible for a standard IRA outside of work.

Then start studying about investing by reading the wiki on stocks mutual funds and bond mutual funds and asset allocations and related investing stuff. It is not hard but it does take some study. .

I am sure you can open a standard brokerage investment account at Wells Fargo (Wells Trade only) or Fidelity or Scottrade or Vanguard for standard investments. Go to one of these places and fill out the paperwork to set up a "brokerage account". Deposit maybe $20K of your savings account in this new brokerage account. This account will let you self direct investments and buy stocks and bonds and CDs and stock mutual funds and bond mutual funds and other financial investments. This account is NOT FDIC insured. So be careful. If you screw up and buy bad stuff you can loose your money. So study and read the wiki and learn about investing. Then buy some funds and set up you asset allocation with this small amount to start. Go slowly at first. Learn before you put much of your savings into the account.

Good Luck.
Thank you. I am pretty sure i can open up an IRA as my other american colleagues have done so while having a UN Pension fund. But I will confirm just for piece of mind. I have read up on the various US based brokerage firms and settled on Vanguard. They have a solid reputation and seem to have enough diverse ETFs for me to start off with.

I need more advice on what type of standard account I can set up. Would going for a brokerage account be the best options for flexibility or should I look at an IRA.

I didn't know there was a wiki for this website but i will read up what is available there.

kenner
Posts: 3129
Joined: Sat Mar 01, 2008 8:45 am

Re: Need advice on setting up first Investment account

Post by kenner » Sat Feb 11, 2017 3:27 pm

Faisal wrote: I will try to find that information but I don't think they have it on their website. I would also take that graph with a grain of salt as it includes contributions from staff members that join the UN after 2008. Each staff member that joins adds from their income monthly to the pension fund.
Your points are important and need further analysis. I also briefly searched their website and saw no definitive explanation as to how they arrived at the investment return indicated, even though the indicated performance may not be inconsistent with recent US stock market increases.

Even though you may have little to no choice regarding UN financial benefits, it may still be important to know as many details as possible when it comes to constructing an efficient investment portfolio for your family's long-term financial success.

Topic Author
Faisal
Posts: 103
Joined: Sun Dec 18, 2016 6:37 pm

Re: Need advice on setting up first Investment account

Post by Faisal » Mon Feb 13, 2017 10:48 am

So did some digging at work. I can open up an IRA without any problems. Second they will not share the investment portfolio with me for the pension fund. They said they are not authorized to do so.

So I have looked at vanguard and will be using their services with a brockerage account.

Would you all recommend i place all my cash 12,000 US dollars in a single fund - say their 2040 retirement fund or diversifying in company and sector ETFs?

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