Gameplan to 100k

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John8496
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Joined: Sun Aug 06, 2017 7:04 pm

Gameplan to 100k

Post by John8496 » Fri Aug 11, 2017 8:35 pm

If I wanted to invest $1500 a month into a taxable account what fund should I use? I want to automate it monthly. My goal is to reach 100k in that account. How long would it take me with this amount monthly? I would prefer to use one fund. Any ideas would be awesome!

ThrustVectoring
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Re: Gameplan to 100k

Post by ThrustVectoring » Fri Aug 11, 2017 9:18 pm

What do you want to use the $100k for? It's hard to say what fund to invest in without a sense of timeframe. Retirement is a different thing than leaving an inheritance or saving for a down payment for a house.

The automatic transfers thing just means you should look at different brokers or investment accounts. Quick Google searches shows that it looks like Vanguard allows you to set up automatic transfers, so that's probably a solid bet. And their funds are often excellent, too.

delamer
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Re: Gameplan to 100k

Post by delamer » Fri Aug 11, 2017 9:31 pm

There are plenty of online calculators that will show you how long until you have $100,000, using different rates of return.

The question is how aggressive you want to be, and how much risk you are willing to take. Based on long-term averages, you'll get there a lot more quickly with a stock fund than a money market fund. But with a stock fund, you also have the risk of losing 50% of the value at some point.

forkhorn
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Re: Gameplan to 100k

Post by forkhorn » Fri Aug 11, 2017 9:31 pm

Depending on your level of risk tolerance, which only you can answer, and goes to the previous poster's question, use either a diversified US stock index fund, a world index stock index fund, or a balanced fund, such as the vanguard lifecycle funds. Unless you are saving for something in the next couple years, in which case you should probably just open a high yield online savings account and take your 1.15% (or whatever the current competitive rate is).

MWormwood
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Re: Gameplan to 100k

Post by MWormwood » Fri Aug 11, 2017 9:45 pm

Welcome! You sound new to investing and that you value simplicity. You can get way more detailed advice and learn a lot about investing here, but if you don't want to, a reasonable default is vanguard's balanced index fund. Vanguard won't rip you off, the fund includes a weighted balance of most us stocks and bonds (aka it's diversified very broadly), and the 60% stock / 40% bond split is a good starting point (without knowing your investment timeline or risk tolerance).

Nobody really knows how long it will take to reach $100K, but investing automatically is a good way to make sure you keep saving.

Good luck!

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arcticpineapplecorp.
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Re: Gameplan to 100k

Post by arcticpineapplecorp. » Fri Aug 11, 2017 10:13 pm

John8496 wrote:If I wanted to invest $1500 a month into a taxable account what fund should I use? I want to automate it monthly. My goal is to reach 100k in that account. How long would it take me with this amount monthly? I would prefer to use one fund. Any ideas would be awesome!
welcome to the forum.

As others have said, we can't tell you that unless we know what rate of return you plan to get. Examples:

Earn 0% and it would take you a little more than 66 months ($100,000 divided by $1500 a month = 66.66 months). So you can get there in 5 1/2 years if you earn absolutely nothing. (these are nominal returns, inflation will eat away at that so even if you have $100,000 in 5 years it may not buy you what $100,000 buys you today. Have you considered that? Inflation is something you always want to consider because you're losing purchasing power over time).

Ally has a 5 year CD that earns 2.25%. At that rate though it would still take you 63 months. Plug the following into excel:
=FV(.0225/12,63,-1500)
(source: http://www.bankrate.com/cd.aspx?ic_id=h ... s_cd-rates). But now that we're talking interest earned in a taxable account, that means the interest earned is taxable so that reduces your return somewhat. Same goes for capital gains (increases in the value of investments) if you invest the money instead of putting it in a CD.


At 8% per year (stock like return) it would take 55 1/2 months:
=FV(.08/12,55.5,-1500)

I wouldn't count on stocks returning 8% a year over the next 5 years though. Over the next 30 years perhaps, but over shorter term periods anything is possible (including losses). Are you prepared to see declines on your investment in the short term? Investments technically are supposed to be for the long term, not short term which is what you're looking to do. How would you feel if you're coming into the home stretch in year 4 and then your investments decline by 20% or more?

the following is historical gains/losses etc based on various mixes of stocks/bonds:
https://personal.vanguard.com/us/insigh ... llocations

Does any of this help you? Is there a reason you're talking taxable? Have you maxed all tax advantaged space already (401ks, Roth IRAs, HSAs, etc.)? Oh, I see your other post says no 401k. Have you considered putting $5500 in a Roth for both you and your Spouse? That would be $11,000 a year? Not quite $1500 a month but it wouldn't be in taxable and it would grow tax free and you'd owe no taxes at all when you withdraw funds.

Understand that compounding is powerful the longer you compound. Now since you're 26 years old (from your other posts) think about if you invest $1500 a month for 40 years and retire at 66. How much would $1500 a month for 480 months (40 years) be if you earned 8% a year (stock like return)?

$5,236,511.75
=FV(.08/12,480,-1500)

just remember, in 40 years $5 million won't buy you what $5 million will buy you today. :annoyed
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

John8496
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Re: Gameplan to 100k

Post by John8496 » Sat Aug 12, 2017 7:03 am

Thank you for all the information. The money would be to buy a house in cash in a low cost of living area in the country. I am a mailman in rural Tennessee. Its a personal thing for me to buy a house outright. I have seen a lot of people lose their homes and it's something I wanted to do since I was a boy. I would sell the house i have mortgaged now i owe 143k (worth 165k). Now that I have the means of doing so I want to put that into action. I have a large back payment coming in to wipe out all of my debt ( cc, student loan, car loan.) I have opened an Roth ira for me and the wife and I'm contributing the max $11000 a year in VTSMX. My risk tolerance would be somewhat low for this particular goal. Maybe a cd ladder would be the way to go? I'm not big on the Internet so hang in there with me until I get this posting format figured out. Any more suggestions since I provided more details? :sharebeer

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welderwannabe
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Re: Gameplan to 100k

Post by welderwannabe » Sat Aug 12, 2017 7:24 am

I congratulate you for being this young and seeming to have it together. Maxxing out your Roth at you age and especially salary is commendable!

I would put the money in a high yield savings account, CD ladder, or if you want to take a little bit of risk maybe Vanguard Ultra Short Bond Fund VUBFX.

ddurrett896
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Re: Gameplan to 100k

Post by ddurrett896 » Sat Aug 12, 2017 7:28 am

John8496 wrote:Thank you for all the information. The money would be to buy a house in cash in a low cost of living area in the country. I am a mailman in rural Tennessee. Its a personal thing for me to buy a house outright. I have seen a lot of people lose their homes and it's something I wanted to do since I was a boy. I would sell the house i have mortgaged now i owe 143k (worth 165k). Now that I have the means of doing so I want to put that into action. I have a large back payment coming in to wipe out all of my debt ( cc, student loan, car loan.) I have opened an Roth ira for me and the wife and I'm contributing the max $11000 a year in VTSMX. My risk tolerance would be somewhat low for this particular goal. Maybe a cd ladder would be the way to go? I'm not big on the Internet so hang in there with me until I get this posting format figured out. Any more suggestions since I provided more details? :sharebeer
I get the personal thing. My suggestion would be to just save $1,500 in a bank account each month. 100,000 / $1,500 = 6.5 years with 0 risk.

If you want another recommendation, I would...
1) sell my current house - netting $20,000.
2) purchase the new house for $100,000 with little down, locking in a ~4% interest rate.
3) Save the remainder of the $20,000 as your cushion to ease the worry you've experience of seeing people lose their home.
4) Whatever access money you have, split between extra house payment and the $20,000 cushion account.

Once your cushion account can pay off the house, you can be done with it.

goingup
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Re: Gameplan to 100k

Post by goingup » Sat Aug 12, 2017 8:25 am

arcticpineapplecorp. wrote:Ally has a 5 year CD that earns 2.25%. At that rate though it would still take you 63 months. Plug the following into excel:
=FV(.0225/12,63,-1500)
(source: http://www.bankrate.com/cd.aspx?ic_id=h ... s_cd-rates). But now that we're talking interest earned in a taxable account, that means the interest earned is taxable so that reduces your return somewhat. Same goes for capital gains (increases in the value of investments) if you invest the money instead of putting it in a CD.
arcticpineapplecorp-
Are there CD's out there that you can add to monthly like a savings account? Admittedly I don't know much about CD's but we have a small CD ladder. I think I can only add to an existing CD as it matures, during the grace period, before rolling it into a new term.

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Watty
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Re: Gameplan to 100k

Post by Watty » Sat Aug 12, 2017 8:45 am

One option would be to just pay down your current mortgage by an extra $1,500 a month. When you sell your current house to buy you next house the money would be freed up again.

If your mortgage is at three or four percent then paying it down would be like buying a CD that was paying the same interest rate.

A potential problem with that would be that the money would be tire up in the house if your plans changed.

It would be good to also build up a separate emergency fund so that a large unexpected expense will not cause you to get into credit card debt again.

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arcticpineapplecorp.
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Re: Gameplan to 100k

Post by arcticpineapplecorp. » Sat Aug 12, 2017 2:19 pm

goingup wrote:
Sat Aug 12, 2017 8:25 am
arcticpineapplecorp. wrote:Ally has a 5 year CD that earns 2.25%. At that rate though it would still take you 63 months. Plug the following into excel:
=FV(.0225/12,63,-1500)
(source: http://www.bankrate.com/cd.aspx?ic_id=h ... s_cd-rates). But now that we're talking interest earned in a taxable account, that means the interest earned is taxable so that reduces your return somewhat. Same goes for capital gains (increases in the value of investments) if you invest the money instead of putting it in a CD.
arcticpineapplecorp-
Are there CD's out there that you can add to monthly like a savings account? Admittedly I don't know much about CD's but we have a small CD ladder. I think I can only add to an existing CD as it matures, during the grace period, before rolling it into a new term.
omg, you're right :oops: what was i thinking? So, yeah. disregard that. I was really trying to illustrate the point that even at different rates (low as in 0% to higher 8%) will still take a few years but the more risk you take the more swings in your investments. And you shouldn't be investing anyway for shorter time periods like 5 or less years. So, sorry. Was just trying to get you to consider some things.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

John8496
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Re: Gameplan to 100k

Post by John8496 » Sat Aug 12, 2017 4:20 pm

All great advice! Thanks

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