If you had 30,000 dollars to invest in your future, how would you do it?

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TrevorDW
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If you had 30,000 dollars to invest in your future, how would you do it?

Post by TrevorDW »

Hey Bogleheads!
This is my very first post on these forums, though i have read them for quite some time now. Let me cut to the chase. I am 19 years old. I have worked 40 hour weeks since the day I turned 16. Alongside this income, I have flipped a few cars and flipped items on craigslist/ebay as well. I have managed to save just about 30k of disposable income. Yes, i have 6 to 12 months of bills saved up. This 30,000 is safe to invest.

I have always been very smart with my money, and am scared to death of losing my savings on a stupid business plan or investment. I have search hundreds of hours of forums and i am still stumped on what exactly i should do with the money. I want to take action soon though as I am very young and i know that is a huge benefit to investing. The idea of owning a business has always appealed to me, but I dont know if 30k is enough, or if that would bring me the income i desire.

Passive income is also something that has always appealed to me. I like to be able to spend the money i make, not working 80 hours a week. I want to be able to live comfortable for the rest of my life, and many people have told me this is possible with even 30k as an investment, if i do it right. I started working at a diner when i turned 16, and slowly grew to be manager of the place. RIght now I am making about 800 a week after taxes, working 45 to 50 hours.

By no means am i rich, but I bring in enough to pay my bills and save just a bit each week. I am single, and dont have many expenses. I live on my own. I have considered many different investment methods i.e Opening a business, investing in mutual funds/stocks, real estate, franchising, E-tailing. I actually used to E-tail for about a year. And while it was decent money, I just dont know if it is enough to be sustainable. Or maybe I wasnt doing it right. Is franchising actually a viable way to earn a living? Is the stock market really a good idea at my day and age? Is 30k enough to invest in real estate? or open a business? these are just a few questions i have.... I know i could shove that 30k in a index fund and i wouldnt be disappointed, but there has to be a better way to grow my wealth than that. I want to invest it in a way that i will be set for the near and distant future.

I guess my real question here is, investors and business owners; If you had 30,000 dollars at 19 years old, what would you do with it?
Thanks in advance!
NewbieBogle007
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by NewbieBogle007 »

I would say education would be one of the best investments for a young person such as yourself.
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Pajamas
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by Pajamas »

I would definitely agree with education being the best investment you could make

Seems like you have an entrepreneurial bent. You might be interested learning about business. You can start doing that with something as simple as basic accounting and economics classes at a community college, along with psychology, sociology, English, public speaking, computer courses, and similar classes that will help you no matter what you do later in life. Choose a major that will lead to a good-paying job if you want one, and after you get your bachelor's degree, consider getting an MBA.

The other thing I would suggest that you do is watch episodes of "Shark Tank" on YouTube. I just discovered that show last week and I must say that I am impressed with the business plans that the people present as well as the criticism of them by the investors. It's a great way to learn critical thinking about business.

There are other shows like "Kitchen Nightmares" that appear to be pure entertainment at first, but like "Shark Tank", you can learn a lot about running a business from watching them.
High Income Parent
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by High Income Parent »

I agree with education. There is a list of best value colleges but the average college graduate makes $17500 more than the average high school graduate per year.
Second choice is start a business.
Don't go ino debt though.
You could definitely improve your earning potential with education.

You obviously have the work ethic. Keep up the good work.
Children are not a distraction from more important work. They are the most important work. | | C. S. Lewis
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jafcorrea
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by jafcorrea »

Go to Vanguard.com and open your Roth IRA and contribute $5500 for the year 2017 ... VTSMX fund ( every year you can contribute max $5500 for this fund)

Go to Ally.com and open a saving account with the remain balance @ 1%, next year 2018 / 2019 send another $5500 to the same fund
Thanks JC
HIinvestor
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by HIinvestor »

You may wish to check your local community college and instate public U for any courses in fields that may be if interest. A degree and/or license can help you qualify for better-paying jobs with opportunities for promotions and raises
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brother7
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by brother7 »

jafcorrea wrote:Go to Vanguard.com and open your Roth IRA and contribute $5500 for the year 2017 ... VTSMX fund ( every year you can contribute max $5500 for this fund)

Go to Ally.com and open a saving account with the remain balance @ 1%, next year 2018 / 2019 send another $5500 to the same fund
I agree with jafcorrea. In my opinion, aside from an emergency fund and other near-term buckets like saving for a car, house or education, everyone should direct as much as possible into tax-deferred and tax-free (Roth) accounts as possible.
PartIrish
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by PartIrish »

Education, hands down. It will bring you a higher salary throughout your life, more interesting work, and no one can take it away from you. In economic downturns, those with more education always have a lower unemployment rate than those with less.

You sound like a hard worker who is careful with your money. Invest in yourself.
dad2000
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by dad2000 »

Agree with previous posters.

Maximize your human capital. Continue your education.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by Jack FFR1846 »

Many years ago, I had $10k in cash, a van, a car, a snowmobile and some other random things. Sold everything and went to college. Ran out of money and did a co-op to get the money to finish college. Best decision in my entire life.
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hightower
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by hightower »

jafcorrea wrote:Go to Vanguard.com and open your Roth IRA and contribute $5500 for the year 2017 ... VTSMX fund ( every year you can contribute max $5500 for this fund)

Go to Ally.com and open a saving account with the remain balance @ 1%, next year 2018 / 2019 send another $5500 to the same fund
I second this. If I had that kind of cash at 19 and knew what I know now , I would put it in a Roth and invest in a low cost Total Stock Market index fund like VTI or similar.
Just for fun using a backtest portfolio calculator, if I had bought 5500k of VTI in 2001 when I was 19 years old and kept adding 5500 per year to it for the next 16 years, it would be worth $229,000 today! Pretty freaking sweet. And then just let that 229k ride until you're 65 gaining an average of just 6% interest and never adding another dime to it, it will be worth $1.3 million dollars. Not bad for just 16 years of contributing to a Roth. That's the magic of compounding interest when you give it lots of time. So, if you want to be set up for life, that's the way to go.

Save that money in a Roth. It will take you roughly 5-6 years to get it all in there. Then, if you can afford to keep contributing to your Roth each year after that, continue to do it.
As to funding an education..>I'm a big supporter of higher education, but 30k is not enough to fund an education, so I don't think that would be wise to just go throw 30k at college tuition. IF you're interested in going to college, look into getting scholarships, grants, and part time jobs to help pay for it first. Protect that nice little nest egg now. It will grow immensely if you're smart with it. And keep coming back here and asking questions. Bogleheads will guide you in the right direction.

And I have to comment on what you said here " I know i could shove that 30k in a index fund and i wouldnt be disappointed, but there has to be a better way to grow my wealth than that. I want to invest it in a way that i will be set for the near and distant future." Unless you have a crystal ball or just happen to get incredibly lucky, you will not be able to do better than the S&P500 when it comes to investing that cash. Sure, you could try to invest in a single business start up or real estate, but that is incredibly risky and has a high likelihood of failure. The low cost index fund will guarantee you get what the stock market returns, which is historically very good over many years. Also, compounding interest is absolutely incredible when you give it lots of time as illustrated above. And since you're so young, you've got lots of time. Starting to invest regularly each year in low cost index funds right now until you're in your retirement years will virtually guarantee a very nice retirement (unless the US economy crashes and burns and never recovers, which is highly unlikely). I would recommend you read some of the recommended books in the boglehead wiki. Do not take big risks with that money.
TheJoker
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by TheJoker »

In addition to investing in a Roth in the 500 index at Vanguard that other have noted, you may consider employment with either Home Depot or Costco. They both have employee investment programs in their stock for employees, promote from within and encourage education. I am not sure about the education programs and possible assistance from the employers but they may help with that. Congrats on your $30K, that is great for your age.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by pkcrafter »

I have always been very smart with my money, and am scared to death of losing my savings on a stupid business plan or investment.
This indicates you have some aversion to investing risk, i.e. stock market risk. Until you fully understand risk and volatility, I would not recommend you hold anything even close to 100% stock. Having said that, a Roth is a good idea because assets can grow tax-free and you can remove contributions (not gains) anytime. As to what to put in the Roth, a little more discussion on how much risk you want to take would be helpful. The first thing to learn is market volatility goes on all the time, but by definition volatility is the down and up movement of the market, and it goes on all the time. Having your assets drop simply means the price went down, but you still own all the shares.

Yes, 100% total market would be a good idea, but not if you are going to sell at the bottom of a market plunge.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
rzk96
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by rzk96 »

I'm an IT Recruiter... and I'll say this: Folks who have said education is a solid investment are spot on. 15-20 years ago, people can get by with no degree due to awesome work experience. BUT now in 2017, the younger generation folks are expected to have at least a Bachelor's degree. Hate to say this: but the younger folks who have had decent experience (~3-4 years) but lack a degree get passed on quite easily. It sucks for them because they feel it's a tiny factor. In reality, it means a lot.
MotoTrojan
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by MotoTrojan »

Why is everyone suggesting DCA'ing into Roth over 6 years?!? Fill Roth, then continue that AA in a taxable account, no?

Read the wiki and focus on asset allocation and tax efficient asset placement.
aristotelian
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by aristotelian »

I agree, unless you have a plan for a degree of some kind, my plan would be to use the $30K to fund Roth IRA contributions for the next 5+ years. Invest $5500 in the IRA in Total Stock Market. With the balance, invest in a brokerage account, 50% Vanguard Short Term Corporate Bond (VCSH), 50% Total Stock Market (VTI).

If stocks go up, you can cash in VTI and pay 0% capital gains if you are currently in the 15% tax bracket.

If stocks go down, make your contributions out of VCSH until the market goes up.

VCSH can also be a 2nd tier emergency fund.
MotoTrojan
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by MotoTrojan »

aristotelian wrote:I agree, unless you have a plan for a degree of some kind, my plan would be to use the $30K to fund Roth IRA contributions for the next 5+ years. Invest $5500 in the IRA in Total Stock Market. With the balance, invest in a brokerage account, 50% Vanguard Short Term Corporate Bond (VCSH), 50% Total Stock Market (VTI).

If stocks go up, you can cash in VTI and pay 0% capital gains if you are currently in the 15% tax bracket.

If stocks go down, make your contributions out of VCSH until the market goes up.

VCSH can also be a 2nd tier emergency fund.
This is better advice. Although I would hope the OP, at 19 years old plans to continue working, and could come up with the $5500/yr on their own eventually.

OP another rule of thumb to help you out with your big-picture planning: 4% is a good rule of thumb for the safe withdrawal amount for retirement, although many use 3-3.5% to be safe (and some feel the current landscape won't even safely support that). So if you were to "retire" today with this $30K, you'd be able to safely spend $1200/yr. Not going to get you too far.
CedarWaxWing
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by CedarWaxWing »

HIinvestor wrote:You may wish to check your local community college and instate public U for any courses in fields that may be if interest. A degree and/or license can help you qualify for better-paying jobs with opportunities for promotions and raises
1+ Try a course or two at night, and keep the job while exploring higher education.
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TrevorDW
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by TrevorDW »

Wow, thank you all so much for the replies. Never have I met a more experienced and knowledgeable group of people for this type of question. My parents actually have a decent amount of money saved for me to go to college. School has just never been my thing so I have been holding off. However, if thats what it will truly take to get a good paying job then i will work my hardest for it. I think im going to go to school, for mechanical engineering. How things work has always been something that fascinated me, and i hear there is good money with this degree. Plus my college has a program to get your masters in only 5 years. With all that being said, investing in my education and all, I still have the 30,000 to invest. I have decided against real estate and other risky types of investment. I want to invest in a Roth IRA as well as some mutual funds, or some other investment. I have used Vanguard from time to time to compare funds, but I am really new to this whole investment thing. How should i go about getting a Roth IRA and mutual funds set up? Which ones do i buy? Does vanguard charge you for their services? How much should I plan to save annually for these contributions? i just need to be pointed in the right direction. Thank you guys again.
Byrdseed
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by Byrdseed »

Definitely read through the wiki's getting started page https://www.bogleheads.org/wiki/Getting_started
MotoTrojan
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by MotoTrojan »

TrevorDW wrote:Wow, thank you all so much for the replies. Never have I met a more experienced and knowledgeable group of people for this type of question. My parents actually have a decent amount of money saved for me to go to college. School has just never been my thing so I have been holding off. However, if thats what it will truly take to get a good paying job then i will work my hardest for it. I think im going to go to school, for mechanical engineering. How things work has always been something that fascinated me, and i hear there is good money with this degree. Plus my college has a program to get your masters in only 5 years. With all that being said, investing in my education and all, I still have the 30,000 to invest. I have decided against real estate and other risky types of investment. I want to invest in a Roth IRA as well as some mutual funds, or some other investment. I have used Vanguard from time to time to compare funds, but I am really new to this whole investment thing. How should i go about getting a Roth IRA and mutual funds set up? Which ones do i buy? Does vanguard charge you for their services? How much should I plan to save annually for these contributions? i just need to be pointed in the right direction. Thank you guys again.
Roth is just an account type that is tax free. You can invest in any asset within it, or your taxable account. I'd pick an asset allocation of Total Stock Market and Total International Mutual Funds. Somewhere between 20-40% International. Invest $5500 per year in Roth, and maybe toss $10K in taxable now too; rest could go in a high yield savings account, if you think you'll need this to reach your $5500 Roth throughout college years; if you can make more for that yearly contribution, put all remaining in taxable at same overall asset allocation (unless you need an emergency fund). Read up on tax-efficient placement, but in this case, both are equally good in either.

Mech. engineer is a great degree; I'm in Aerospace. Money is decent, but you make the big bucks through company equity, connections, and a little luck :).
Enriched Expat
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by Enriched Expat »

It's clear that you want to get into investing. And that's great, especially considering how young you are. However, as others have mentioned, your education is incredibly important right now.

An interesting way to look at work is the recent research of psychologists of breaking it into three classifications: job, career, and calling. Simply put, a job is just something we do (a means to an end), a career has a possible upward path (career ladder), and a calling is an integral part of one's life (something you'd do even if you weren't paid). See article link for more details.

https://www.psychologytoday.com/blog/ca ... aning-work

While investing is important, at this point in your life you may want to put more emphasis on how you will spend your life earning money (be it a job, career, or calling) instead of how to invest.
aqan
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by aqan »

If I were you I'd allocate some money to a futuristic investment like TSLA. I understand its a bit risky but in 20-30 years EV technology is going to be the most growing & profitable technology. Since Tesla is the leader and most advanced, chances are that you're going to come out ahead.
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CyclingDuo
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by CyclingDuo »

TrevorDW wrote:Hey Bogleheads!Let me cut to the chase. I am 19 years old. I have worked 40 hour weeks since the day I turned 16. Alongside this income, I have flipped a few cars and flipped items on craigslist/ebay as well. I have managed to save just about 30k of disposable income. Yes, i have 6 to 12 months of bills saved up. This 30,000 is safe to invest.

I want to be able to live comfortable for the rest of my life, and many people have told me this is possible with even 30k as an investment, if i do it right. I started working at a diner when i turned 16, and slowly grew to be manager of the place. RIght now I am making about 800 a week after taxes, working 45 to 50 hours.

I guess my real question here is, investors and business owners; If you had 30,000 dollars at 19 years old, what would you do with it?
Worry more about where the next $30K is going to come from, and how long it will take you to save another $30K. Wash, rinse, repeat. Invest as much as you can of your savings year in and year out for the next several decades as the power of time and compounding is in your favor.

That being said, your human capital is what will keep bringing in the income year in and year out. Invest in that so that a career path includes a job with benefits (health insurance, 401K plan, life-insurance/disability, etc...). Most have mentioned seeking a college degree and we would concur with that. Your passions will start to emerge in college as you are introduced to various subjects that direct you to your calling in life for a career.

Where to invest now - at your age?

Obviously, you have several ways you could go.

A two fund or three fund passive index route would not be questioned by any of us. https://www.bogleheads.org/wiki/Three-fund_portfolio

We have encouraged our own children to follow that in their own ROTH IRA's which we established before they finished college. In their cases, they use the Blackrock iShares ETF's of the Three Fund Portfolio.

Based on your young age, the more aggressive blended route of funds mixed with individual stocks to go would be to consider an aggressive portfolio with established, durable industry leaders, and some index ETF's. Put an equal amount ($2700 or as close as you can) into each stock and Index Exchange Traded Fund. You'll learn the value of following quarterly earnings reports, reinvesting the dividends, as well as how investing for the long term leads to return on capital.

Example Blend (Could be made up of plenty of other similar sector choices that are leaders):

Apple
Facebook
Alphabet
Amazon
Salesforce.com
Home Depot
United Healthcare
QQQ - Nasdaq 100 ETF
VXUS - Vanguard Total International Stock Market ETF
VTI - Vanguard Total Stock Market ETF
BND - Vanguard Total Bond Market ETF

It's nice to dream about passive income, franchises, flipping cars, e-tailing, opening a business, real estate and on and on. Working in the diner 45-50 hours a week has taught you the value of a good hard earned buck, and the tired back/legs/neck that come along with that. Kudos to you for busting your back to make ends meet. That's a very valuable lesson in life to learn.

As everyone has mentioned in this thread, only you can decide if you want to get a quality education that helps you find a clear career path - which in turn brings in the income month in and month out, year after year. We would encourage you to lean in that direction sooner, rather than later. No worries, all of us with college degrees bust our backsides on a daily basis to earn a buck as well in whatever it is we all do. It's just that there can be even more financial benefits if you find your passion and true career path.
"Save like a pessimist, invest like an optimist." - Morgan Housel
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Toons
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by Toons »

NewbieBogle007 wrote:I would say education would be one of the best investments for a young person such as yourself.

:thumbsup :thumbsup
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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BL
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by BL »

Toons wrote:
NewbieBogle007 wrote:I would say education would be one of the best investments for a young person such as yourself.

:thumbsup :thumbsup
Yes. Education helps you make a great start. Consider intern/coop jobs in Summer or whenever to get some practical experience or at least see how the company suits you (and you suit the company).

You need to have earned $5500 from work in order to put the max into a Roth IRA.
You can set it up at Vanguard and agree to get e-statements to avoid low-account fees. Then it should all be free if you buy V funds. A Total Stock Market fund, or a Target Date fund would work.

Here is a pdf with good advice for a new investor:https://www.etf.com/docs/IfYouCan.pdf
rzk96
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by rzk96 »

TrevorDW wrote:Wow, thank you all so much for the replies. Never have I met a more experienced and knowledgeable group of people for this type of question. My parents actually have a decent amount of money saved for me to go to college. School has just never been my thing so I have been holding off. However, if thats what it will truly take to get a good paying job then i will work my hardest for it. I think im going to go to school, for mechanical engineering. How things work has always been something that fascinated me, and i hear there is good money with this degree. Plus my college has a program to get your masters in only 5 years. With all that being said, investing in my education and all, I still have the 30,000 to invest. I have decided against real estate and other risky types of investment. I want to invest in a Roth IRA as well as some mutual funds, or some other investment. I have used Vanguard from time to time to compare funds, but I am really new to this whole investment thing. How should i go about getting a Roth IRA and mutual funds set up? Which ones do i buy? Does vanguard charge you for their services? How much should I plan to save annually for these contributions? i just need to be pointed in the right direction. Thank you guys again.
Take a gander at Computer Science too :) I've seen several M.E.s go into the programming field somehow due to a CS Minor/got bored of M.E.
foodstamp
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by foodstamp »

take up programming. figure out a cool social media business that's like snap, but better. then get lots of users and monetize your base. take your business public and laugh as you are another newly minted <25 year old billionaire.

if you are not entrepreneurial, then put 100% in amazon and google. no brainer these are the best companies around today.

good luck.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by pkcrafter »

TrevorDW wrote:I want to invest in a Roth IRA as well as some mutual funds, or some other investment. I have used Vanguard from time to time to compare funds, but I am really new to this whole investment thing. How should i go about getting a Roth IRA and mutual funds set up? Which ones do i buy? Does vanguard charge you for their services? How much should I plan to save annually for these contributions? i just need to be pointed in the right direction. Thank you guys again.
You can contact Vanguard and set up the Roth. It doesn't appear that you are emotionally ready to go too high in equity allocation (some investors never are), so consider a moderate allocation like maybe 60% stock/40% bond. Anyway think about it. It's better to start with less risk and not sell low than to go high risk and sell at the bottom of a crash. For starting out maybe you would like an all in one fund like target retirement or Lifestrategy fund. Don't choose by date or time horizon, choose by the asset allocation you want.

Target date funds -

https://investor.vanguard.com/mutual-fu ... #/?lang=en

Lifestrategy funds -

https://investor.vanguard.com/mutual-fu ... #/?lang=en

The difference is LS funds have fixed allocations, TR funds will automatically reduce stocks over time. TR fund minimum is 1k, LS is 3k like most all other Vanguard funds.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Alto Astral
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by Alto Astral »

TrevorDW wrote:My parents actually have a decent amount of money saved for me to go to college. School has just never been my thing so I have been holding off. However, if thats what it will truly take to get a good paying job then i will work my hardest for it. I think im going to go to school, for mechanical engineering. How things work has always been something that fascinated me, and i hear there is good money with this degree. Plus my college has a program to get your masters in only 5 years.
Good to hear that tuition is not a big concern. Go get the degree. Mech Engg is great if that interests you. I have a few ME friends and they are doing well. Try a few programming courses in school. If you like it, you may be able to transfer credits and go that way. After high school I was a bit lost on which engineering to do. But I always liked computers and did programming starting around middle school. So it was an easier decision to go into IT/programming.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by dexter74 »

Got to college WHEN YOU"RE READY. That's another conversation and it's fantastic your folks will help, allowing you not to drown in student debt like so many of us.

As far as investing, I'd say open a Roth and get a 60/40 fund [since it seems you're not too keen on risk] 60/40 is considered "moderate" risk. There's other options if that's too much risk for you. Max it out every yr [$5500] If the fund you choose avg 6% return and you hold it until your FRA [full retirement age] you'll have over 1.5 million. Nice nest egg :wink:
MotoTrojan
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by MotoTrojan »

dexter74 wrote:Got to college WHEN YOU"RE READY. That's another conversation and it's fantastic your folks will help, allowing you not to drown in student debt like so many of us.

As far as investing, I'd say open a Roth and get a 60/40 fund [since it seems you're not too keen on risk] 60/40 is considered "moderate" risk. There's other options if that's too much risk for you. Max it out every yr [$5500] If the fund you choose avg 6% return and you hold it until your FRA [full retirement age] you'll have over 1.5 million. Nice nest egg :wink:

Good point was mentioned above that OP cannot add to a Roth in years that they didn't net $5500 of taxable income.

If you can't stomach 100% equities I agree to hold significant bonds, but you really should train yourself to see a market crash as a good opportunity at your age. I would go 100% equities personally, maybe 20% bonds MAX to give you the mental pleasure of rebalancing during a crash. That extra even 1-2% return is immensely powerful and with a 40-60 year horizon you can easily stomach a downturn. Don't forget some international exposure too.
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BL
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by BL »

The If You Can pdf by Dr. William Bernstein, Boglehead, suggests new investors start with 1/3 each of Total Stock Market, Total International, and Total Bond Market. After living through a severe downturn, if you didn't panic, you could increase Total Stock Market a bit and decrease bond fund if you choose. There is no exact ratio that anyone can say is perfect.

Bogleheads generally don't recommend individual stocks. The Wiki has suggestions for the 3-fund portfolio at various brokerages. That is a good place to start or stick with forever. https://www.bogleheads.org/wiki/Three-fund_portfolio
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by dexter74 »

MotoTrojan wrote:
dexter74 wrote:Got to college WHEN YOU"RE READY. That's another conversation and it's fantastic your folks will help, allowing you not to drown in student debt like so many of us.

As far as investing, I'd say open a Roth and get a 60/40 fund [since it seems you're not too keen on risk] 60/40 is considered "moderate" risk. There's other options if that's too much risk for you. Max it out every yr [$5500] If the fund you choose avg 6% return and you hold it until your FRA [full retirement age] you'll have over 1.5 million. Nice nest egg :wink:

Good point was mentioned above that OP cannot add to a Roth in years that they didn't net $5500 of taxable income.

If you can't stomach 100% equities I agree to hold significant bonds, but you really should train yourself to see a market crash as a good opportunity at your age. I would go 100% equities personally, maybe 20% bonds MAX to give you the mental pleasure of rebalancing during a crash. That extra even 1-2% return is immensely powerful and with a 40-60 year horizon you can easily stomach a downturn. Don't forget some international exposure too.
Oops. Didn't see that about the Roth. Thanks for the catch.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by t3chiman »

TrevorDW wrote:... i am still stumped on what exactly i should do with the money....
I want to be able to live comfortable for the rest of my life,...
I want to invest it in a way that i will be set for the near and distant future...
...If you had 30,000 dollars at 19 years old, what would you do with it?..
Hi Trevor-
I have been in this situation (modest inheritance). I split it between "Vanguard Health Care Fund Investor Shares (VGHCX)" and "Vanguard Consumer Staples ETF (VDC)". Looking back, their average 10-year returns have been 10.6% and 10.5%, respectively. In your situation, your 30 grand would be a million in 36 years!
I would not shop outside of the Vanguard fund family. They play the game straight.
Hope this helps.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by InvestorNewb »

dexter74 wrote:Got to college WHEN YOU"RE READY. That's another conversation and it's fantastic your folks will help, allowing you not to drown in student debt like so many of us.
Nobody wants to be in their 30s or 40s in a class with teenagers. Better to go sooner than later for that reason alone.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by zuma »

t3chiman wrote:
TrevorDW wrote:... i am still stumped on what exactly i should do with the money....
I want to be able to live comfortable for the rest of my life,...
I want to invest it in a way that i will be set for the near and distant future...
...If you had 30,000 dollars at 19 years old, what would you do with it?..
Hi Trevor-
I have been in this situation (modest inheritance). I split it between "Vanguard Health Care Fund Investor Shares (VGHCX)" and "Vanguard Consumer Staples ETF (VDC)". Looking back, their average 10-year returns have been 10.6% and 10.5%, respectively. In your situation, your 30 grand would be a million in 36 years!
I would not shop outside of the Vanguard fund family. They play the game straight.
Hope this helps.
Owning sector funds is like owning individual stocks. Great that it's worked out for you, but as they say, "forget the needle, buy the haystack."
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by dexter74 »

InvestorNewb wrote:
dexter74 wrote:Got to college WHEN YOU"RE READY. That's another conversation and it's fantastic your folks will help, allowing you not to drown in student debt like so many of us.
Nobody wants to be in their 30s or 40s in a class with teenagers. Better to go sooner than later for that reason alone.
Respectfully disagree. I went to college at 18 and bombed miserably. Went back at 36 and made Deans list. I know plenty of folks that did the same. My point was that certain folks are ready for college right out of high school.... and many aren't. But I do agree that sooner rather than later is ideal.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by Earl Lemongrab »

InvestorNewb wrote:Nobody wants to be in their 30s or 40s in a class with teenagers. Better to go sooner than later for that reason alone.
I did it. Didn't bother me.
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TrevorDW
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by TrevorDW »

So ive decided I am going to open the Roth IRA, and contribute the maximum amount yearly. I should be able to deposit 5500 each year, as I will still be working while going to school. That being said, I think I could handle a little bit of risk. I mean, I am going to have these funds invested for 40 ish years without touching them, so I feel as if a little risk might be the best decision for someone as young as me. Should i Invest 80/20 in both my roth IRA as well as my taxable investing account? Should I pretty much just invest the in the same funds, in both accounts? Sorry if I sound like I dont know whats going on, because I dont. I have read the above links and am beginning to understand however. I will be putting my remaining funds into my taxable brokerage account, and make any contributions of my savings that i can yearly (above 5500, of course) to it. I've come to the conclusion that Total Stock Market is the smartest fund to invest in. Is this the sole and smartest one? How do I allocate the 80/20 preference? Does that just mean contributing 80 percent of the 5500 to the Total Stock Market and 20 to the Total International Bond fund? I am just a little bit lost still. I am using Vanguard as an investment tool if that helps to explain it to me. I am still waiting for them to approve my account via snail mail, so I dont have all the options unlocked yet. Thats probably why I am so confused. Thanks again guys! Sorry I am a noob at investing...

P.S. to those concerned about my taxable income, it is roughly 26k a year so that wont be a problem as far as contributions go.

P.S.S. Equities are the same as stocks correct?
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by MotoTrojan »

:sharebeer
TrevorDW wrote:So ive decided I am going to open the Roth IRA, and contribute the maximum amount yearly. I should be able to deposit 5500 each year, as I will still be working while going to school. That being said, I think I could handle a little bit of risk. I mean, I am going to have these funds invested for 40 ish years without touching them, so I feel as if a little risk might be the best decision for someone as young as me. Should i Invest 80/20 in both my roth IRA as well as my taxable investing account? Should I pretty much just invest the in the same funds, in both accounts? Sorry if I sound like I dont know whats going on, because I dont. I have read the above links and am beginning to understand however. I will be putting my remaining funds into my taxable brokerage account, and make any contributions of my savings that i can yearly (above 5500, of course) to it. I've come to the conclusion that Total Stock Market is the smartest fund to invest in. Is this the sole and smartest one? How do I allocate the 80/20 preference? Does that just mean contributing 80 percent of the 5500 to the Total Stock Market and 20 to the Total International Bond fund? I am just a little bit lost still. I am using Vanguard as an investment tool if that helps to explain it to me. I am still waiting for them to approve my account via snail mail, so I dont have all the options unlocked yet. Thats probably why I am so confused. Thanks again guys! Sorry I am a noob at investing...

P.S. to those concerned about my taxable income, it is roughly 26k a year so that wont be a problem as far as contributions go.

P.S.S. Equities are the same as stocks correct?
Equities are stocks. I would invest in Total Stock Market and then 20-40% in Total International (stocks NOT bonds) but you will need to be prepared for a 50% downturn. If you want bonds too, don't do International. Just do the three fund portfolio (total US, total Int, total bond). Bonds are best in tax-advantaged, like Roth. The other two are tax efficient and do well anywhere. I'd advice looking at your Total portfolio as one allocation but some prefer to look at each account differently.

Make a spreadsheet to track your total allocation of each asset class across both accounts.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by TrevorDW »

I've read that I should be doing 100 percent equities at my age. So by that logic I should be putting 30 percent of my 30k into the total internation stock and the other 70 percent into the total stock market? Then worry about bonds when I am a little older. And I just have to make sure that 5500 of the 30k is used for my Roth ira because it isn't taxed.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by MotoTrojan »

TrevorDW wrote:I've read that I should be doing 100 percent equities at my age. So by that logic I should be putting 30 percent of my 30k into the total internation stock and the other 70 percent into the total stock market? Then worry about bonds when I am a little older. And I just have to make sure that 5500 of the 30k is used for my Roth ira because it isn't taxed.
This sounds like a great plan. I would also recommend you make an Investment Planning Document that states what you are going to do; perhaps have it expire on your 25th birthday, and then make a new one every 5 years. I think you are okay to ignore bonds until 30 years old, that is when my IPS expires :). Just make sure you understand the risks of the market going down 50% when you are all equities, and tell yourself this is a good thing and that every dollar going in now is a much better value. It'll bounce back long before you retire or buy a home and actually need the funds. The WORST thing you can do is freak out and sell, or even just stop buying, should the market drop.

With your above plan, the only thing you'll have to do is rebalance. This would be done 2 ways for you:

1: Gradual rebalancing will occur weekly/monthly/whenever you add additional funds to either account; you'll calculate allocation, and if one is underweighted, you'll buy more/only that to get things back to 70/30.

2: If things get too far out of whack to fix this way, you can do a sell/buy rebalance. Most recommend only doing this once a year, and only if you are more than 5% off. You should buy some Total Stock and some Total Int in your Roth, that way you can sell & buy to get back into balance within the Roth, and not create any taxable events.

Eventually you'll want to learn about tax-loss harvesting, if you have sizable taxable assets, but give this some time. It isn't a big part of your lifetime returns, and isn't applicable at all to your Roth.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by Dottie57 »

Education which leads to a better job.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by Helo80 »

In your case, I'd throw the $30K in education for a degree program that interests you AND has the potential to deliver an in-demand job on graduation (e.g. engineering, computer science, etc.)

Another great option is picking up a blue collar trade that is needed and use that $30K to (maybe) start a business once you get some experience under your belt.

In terms of using the $30K to start a business right now, it's a risk unless you have a business plan that is fulfilling something needed in your community/state/internet.

Another option is to invest that $30K in a mid-cap index fund and join the military. Your healthcare, food, and living expenses will be taken care of, you'll hopefully be in a decent field, and you can use your GI money upon graduation.
Thank God for Wall Street Bets.
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TrevorDW
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by TrevorDW »

Awesome, I actually feel like I know what's going on now. I do have one last dumb question though. If I am going it have both the IRA and a taxable account, using a 70/30 domestic/international total stock profile, do I split that 70/30 within my roth ira contribution as well? Or just with my starting capital of 30k? Does it really matter? And if I don't split it within my roth ira, do I use the 5500 for domestic or international bonds? Noob in progress here bear with me...
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by MotoTrojan »

TrevorDW wrote:Awesome, I actually feel like I know what's going on now. I do have one last dumb question though. If I am going it have both the IRA and a taxable account, using a 70/30 domestic/international total stock profile, do I split that 70/30 within my roth ira contribution as well? Or just with my starting capital of 30k? Does it really matter? And if I don't split it within my roth ira, do I use the 5500 for domestic or international bonds? Noob in progress here bear with me...
No worries, you're learning and getting closer; Re-read my above posts. Recommend getting in the habit (before you add more funds later in life, 401Ks, etc...) of looking at your portfolio as one global account. There are certain assets which are best in certain accounts, but between Total US Market & Total Int., they are both very tax-efficient. Thus, it doesn't really matter how you split things up, but I would recommend getting a mix of both (either 50/50, or just match the 70/30) in your Roth, purely for the purpose of tax-free rebalancing once a year, since selling gains in your taxable account will incur capital gains.
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by TrevorDW »

Awesome. I actually understand what were saying now haha. Couple more questions... What is the purpose of messing with your asset allocation every 5 or 10 years? If all my assets are in equities, and I never change my assets allocation, what would this really mean for me? Also, I plan on investing the 5500 yearly to my ira, and probably putting around 15k into my taxable account at the same 100 percent equity (70/30 domestic/intl) until I am 25 or 30, is this smart? I am going to shove any extra savings in their yearly, is this also smart? Or should I wait until I rebalance at 25 to 30 to add funds? How should I change assett allocation at 25-30? And how much will my money realistically grow by the years with only 15k in a taxable account if I plan on not withdrawing any of it? And how much would I realistically pay in taxes for funds in this account?
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by Toons »

Vanguard Balanced index Fund.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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Re: If you had 30,000 dollars to invest in your future, how would you do it?

Post by MotoTrojan »

TrevorDW wrote:Awesome. I actually understand what were saying now haha. Couple more questions... What is the purpose of messing with your asset allocation every 5 or 10 years? If all my assets are in equities, and I never change my assets allocation, what would this really mean for me? Also, I plan on investing the 5500 yearly to my ira, and probably putting around 15k into my taxable account at the same 100 percent equity (70/30 domestic/intl) until I am 25 or 30, is this smart? I am going to shove any extra savings in their yearly, is this also smart? Or should I wait until I rebalance at 25 to 30 to add funds? How should I change assett allocation at 25-30? And how much will my money realistically grow by the years with only 15k in a taxable account if I plan on not withdrawing any of it? And how much would I realistically pay in taxes for funds in this account?
Your split between domestic/intl is something you should probably decide, and barring interesting circumstances, more-or-less keep consistent throughout your life. The main change to your asset allocation would be starting to incorporate bonds as you get older, to reduce your risk in a market-downturn. You are probably fine to stay 100% equities until 30 while you research things, if you can stomach a large downturn. Other moves you could look at would be incorporating additional indexes/funds such as a REIT, tilting to Emerging Markets or Small-cap Value, etc... These are all more complicated moves that have a lot of risk and not a ton of upside, so no reason to do that until you have a much larger portfolio.

You will pay taxes on capital gains & dividends. Capital gains for the most part are paid only when you sell, and depend on your income level, but likely to be 0-15%. Re-invested dividends will be taxed depending on whether they are qualified or not, but expect to pay ~1% of your taxable portfolio value a year and you should be covered there. Bonds return most of their income via dividends, so they would be taxed higher, thus why they should be in tax-advantaged accounts, when you do opt to hold them.

Growth is tough to say. Historically closer to 6-7% real (after-inflation), but Jack Bogle believes the next 10 years will only see 4% nominal (pre-inflation). Of course the market could still double next year, or cut in half (and in doing so, increase the expected 10 year returns), you can map long-term expectations, but nobody knows what will happen next week, month, or year. You can use an investment calculator, or the rule of 72 to determine growth for a different return, but nobody really knows what you'll get.

Based on your questions, I would probably not go all-in with the taxable right now. Why don't you invest 70/30 in your Roth, and then read a few books.

A Random Walk Down Wallstreet

The Bogleheads Guide to Investing

If you read both of those, you'll have 100X more knowledge. Then you can decide what to do with the extra ~$15K, and in the meantime watch your Roth dance around to get an idea of how the market behaves.
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