Is an investment account the best choice for me (new guy)

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randydimera
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Joined: Mon Nov 06, 2017 9:28 pm

Is an investment account the best choice for me (new guy)

Post by randydimera » Thu Nov 09, 2017 8:46 am

Hello all, thank you for taking the time to read this. I am stuck and need a little advice on what to do. I am a full time college student who is 23 years old and I have like 15-20k just sitting in a checking account in the bank and my mom told me I need to do something with it because its not doing anything. So I have been doing tons of research and found bogleheads and have read books and watched videos etc because I didnt know a darn thing about finances or any of that. My only interaction with it is 10 years ago my grandma got me 100 shares of a stock through edward jones that I get a dividend check from every 3 months. (btw I called the financial adviser from there recently and he says i pay no fees on the individual stock, only to buy and sell). Anyways I really wanted to start a roth IRA because i heard that was super good, but I currently have no taxable income. So my idea was to start a vanguard account and learn to get a diversified portfolio of 3 or 4 stocks with like 5k and just let it sit to see what it will do. Im trying to learn how to do this really well because my mom has over a million in stocks with edward jones and i want to learn so i can help get her out of there because i know for a fact she is paying fees out the wazoo. So I am trying to learn and this was my idea. I need to do something with the money I have, i just hope i dont mess up and lose it all since the market is so high right now lol. I know the boglehead idea is to buy and hold and safe for retirement, but is it a bad idea since im still young to try and make some money potentially while I learn how to do this well?

Any advice would be greatly apprecied. Thanks!!

Nyc10036
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Re: Is an investment account the best choice for me (new guy)

Post by Nyc10036 » Thu Nov 09, 2017 11:48 am

Bogleheads do not worry about where the market "is at".
viewtopic.php?f=1&t=6211

How much are the shares in this unknown company worth right now?

chevca
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Re: Is an investment account the best choice for me (new guy)

Post by chevca » Thu Nov 09, 2017 12:12 pm

What are your plans after college... moving, need a car, etc.? With whatever unknowns might be around the corner that way, I would just leave it in a savings account if I were you. Have you looked into the online accounts like Ally? They pay something at least. Not much at 1.20% or so, but it's better than the 0.05% or whatever the big banks pay.

I would say a Roth IRA, but with no income now you can't open that.

Not all money has to be doing something, IMO. It can do a perfectly good job of just sitting there and being ready to handle whatever might come up in a young person's life.

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ruralavalon
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Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Thu Nov 09, 2017 12:25 pm

Welcome to the forum :) .

It's great that you are starting young, and intend investing for the long-term.

randydimera wrote:
Thu Nov 09, 2017 8:46 am
Hello all, thank you for taking the time to read this. I am stuck and need a little advice on what to do. I am a full time college student who is 23 years old and I have like 15-20k just sitting in a checking account in the bank and my mom told me I need to do something with it because its not doing anything. So I have been doing tons of research and found bogleheads and have read books and watched videos etc because I didnt know a darn thing about finances or any of that. My only interaction with it is 10 years ago my grandma got me 100 shares of a stock through edward jones that I get a dividend check from every 3 months. (btw I called the financial adviser from there recently and he says i pay no fees on the individual stock, only to buy and sell). Anyways I really wanted to start a roth IRA because i heard that was super good, but I currently have no taxable income. So my idea was to start a vanguard account and learn to get a diversified portfolio of 3 or 4 stocks with like 5k and just let it sit to see what it will do. Im trying to learn how to do this really well because my mom has over a million in stocks with edward jones and i want to learn so i can help get her out of there because i know for a fact she is paying fees out the wazoo. So I am trying to learn and this was my idea. I need to do something with the money I have, i just hope i dont mess up and lose it all since the market is so high right now lol. I know the boglehead idea is to buy and hold and safe for retirement, but is it a bad idea since im still young to try and make some money potentially while I learn how to do this well?

Any advice would be greatly apprecied. Thanks!!
With no income you are not eligible to contribute to an IRA, Roth or traditional.

Your mom is right, $15-20k just sitting in a bank account is doing nothing, is worse than nothing because giving a negative real return net of inflation.

You can start an individual taxable account at Vanguard.

Instead of 4-5 stocks, for the $5k consider something much more diversified. Consider simply using a single balanced fund like:
1) Vanguard Balanced Index Fund Investor Shares (VBINX) ER 0.19%;
2) Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%; or
3) Vanguard zone LifeStrategy Moderate Growth Fund (VSMGX) ER 0.14%.

For better rates for the rest, see www.bankrate.com .

. . . . .

Keep reading and doing research. Please see the wiki article "books: recommendations and reviews".

If you haven't looked at our wiki so far, you could begin with the "getting started" link below.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

randydimera
Posts: 59
Joined: Mon Nov 06, 2017 9:28 pm

Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Thu Nov 09, 2017 1:56 pm

chevca wrote:
Thu Nov 09, 2017 12:12 pm
What are your plans after college... moving, need a car, etc.? With whatever unknowns might be around the corner that way, I would just leave it in a savings account if I were you. Have you looked into the online accounts like Ally? They pay something at least. Not much at 1.20% or so, but it's better than the 0.05% or whatever the big banks pay.

I would say a Roth IRA, but with no income now you can't open that.

Not all money has to be doing something, IMO. It can do a perfectly good job of just sitting there and being ready to handle whatever might come up in a young person's life.
My plans after college are potentially to move depending on if I get a job in a new location. I'm getting a masters degree and I should have that by the end of 2019. I have a car already, I'm not doing bad financially wise and I'll be in no debt so I've decided I wanted to learn to invest and all that. I have 100 shares of Pepsi with Edward Jones and that's worth quite a bit of money if I sold it but I'm just gonna hold on to it because I'm not paying any fees on it I was told. I appreciate your input Ty.

randydimera
Posts: 59
Joined: Mon Nov 06, 2017 9:28 pm

Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Thu Nov 09, 2017 1:59 pm

ruralavalon wrote:
Thu Nov 09, 2017 12:25 pm
Welcome to the forum :) .

It's great that you are starting young, and intend investing for the long-term.

randydimera wrote:
Thu Nov 09, 2017 8:46 am
Hello all, thank you for taking the time to read this. I am stuck and need a little advice on what to do. I am a full time college student who is 23 years old and I have like 15-20k just sitting in a checking account in the bank and my mom told me I need to do something with it because its not doing anything. So I have been doing tons of research and found bogleheads and have read books and watched videos etc because I didnt know a darn thing about finances or any of that. My only interaction with it is 10 years ago my grandma got me 100 shares of a stock through edward jones that I get a dividend check from every 3 months. (btw I called the financial adviser from there recently and he says i pay no fees on the individual stock, only to buy and sell). Anyways I really wanted to start a roth IRA because i heard that was super good, but I currently have no taxable income. So my idea was to start a vanguard account and learn to get a diversified portfolio of 3 or 4 stocks with like 5k and just let it sit to see what it will do. Im trying to learn how to do this really well because my mom has over a million in stocks with edward jones and i want to learn so i can help get her out of there because i know for a fact she is paying fees out the wazoo. So I am trying to learn and this was my idea. I need to do something with the money I have, i just hope i dont mess up and lose it all since the market is so high right now lol. I know the boglehead idea is to buy and hold and safe for retirement, but is it a bad idea since im still young to try and make some money potentially while I learn how to do this well?

Any advice would be greatly apprecied. Thanks!!
With no income you are not eligible to contribute to an IRA, Roth or traditional.

Your mom is right, $15-20k just sitting in a bank account is doing nothing, is worse than nothing because giving a negative real return net of inflation.

You can start an individual taxable account at Vanguard.

Instead of 4-5 stocks, for the $5k consider something much more diversified. Consider simply using a single balanced fund like:
1) Vanguard Balanced Index Fund Investor Shares (VBINX) ER 0.19%;
2) Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%; or
3) Vanguard zone LifeStrategy Moderate Growth Fund (VSMGX) ER 0.14%.

For better rates for the rest, see www.bankrate.com .

. . . . .

Keep reading and doing research. Please see the wiki article "books: recommendations and reviews".

If you haven't looked at our wiki so far, you could begin with the "getting started" link below.
Okay this is very informative I really appreciate it. So what you listed, would that be a 4 fund portfolio? Like would it be I put the 5k in those funds and put them at the percentages you listed and I'd be at the ddiversified 100% I need? Like are those international, American and bonds? Because I read that I needed all three for diversity because diversity makes sure if one market goes down not all your money will right? Also I'm sorry, what so you mean by balanced rates?
Thank you again for you time.

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ruralavalon
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Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Thu Nov 09, 2017 2:39 pm

randydimera wrote:
Thu Nov 09, 2017 1:59 pm
ruralavalon wrote:
Thu Nov 09, 2017 12:25 pm
. . . . .
You can start an individual taxable account at Vanguard.

Instead of 4-5 stocks, for the $5k consider something much more diversified. Consider simply using a single balanced fund like:
1) Vanguard Balanced Index Fund Investor Shares (VBINX) ER 0.19%;
2) Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%; or
3) Vanguard zone LifeStrategy Moderate Growth Fund (VSMGX) ER 0.14%.
. . . . .
Okay this is very informative I really appreciate it. So what you listed, would that be a 4 fund portfolio? Like would it be I put the 5k in those funds and put them at the percentages you listed and I'd be at the ddiversified 100% I need? Like are those international, American and bonds? Because I read that I needed all three for diversity because diversity makes sure if one market goes down not all your money will right? Also I'm sorry, what so you mean by balanced rates?
Thank you again for you time.
No, just pick one of the three funds. Each fund is a well diversified portfolio all by itself. Keep it simple to start.

At Morningstar enter the ticker symbol in the "quote" box, you can see what each invests in.
1) Vanguard Balanced Index Fund Investor Shares (VBINX), both U.S. stocks and U.S. bonds, 60/40 asset allocation.
2) Vanguard LifeStrategy Growth Fund (VASGX), both U.S. stocks and bonds, both international stocks and bonds, 80/20 asset allocation.
3) Vanguard LifeStrategy Moderate Growth Fund (VSMGX), both U.S. stocks and bonds, both international stocks and bonds, 60/40 asset allocation.
Click the "portfolio" tab for more details on the investments in each fund.

The percentages are the annual expense ratio (ER) for each fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

randydimera
Posts: 59
Joined: Mon Nov 06, 2017 9:28 pm

Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Thu Nov 09, 2017 3:37 pm

ruralavalon wrote:
Thu Nov 09, 2017 2:39 pm
randydimera wrote:
Thu Nov 09, 2017 1:59 pm
ruralavalon wrote:
Thu Nov 09, 2017 12:25 pm
. . . . .
You can start an individual taxable account at Vanguard.

Instead of 4-5 stocks, for the $5k consider something much more diversified. Consider simply using a single balanced fund like:
1) Vanguard Balanced Index Fund Investor Shares (VBINX) ER 0.19%;
2) Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%; or
3) Vanguard zone LifeStrategy Moderate Growth Fund (VSMGX) ER 0.14%.
. . . . .
Okay this is very informative I really appreciate it. So what you listed, would that be a 4 fund portfolio? Like would it be I put the 5k in those funds and put them at the percentages you listed and I'd be at the ddiversified 100% I need? Like are those international, American and bonds? Because I read that I needed all three for diversity because diversity makes sure if one market goes down not all your money will right? Also I'm sorry, what so you mean by balanced rates?
Thank you again for you time.
No, just pick one of the three funds. Each fund is a well diversified portfolio all by itself. Keep it simple to start.

At Morningstar enter the ticker symbol in the "quote" box, you can see what each invests in.
1) Vanguard Balanced Index Fund Investor Shares (VBINX), both U.S. stocks and U.S. bonds, 60/40 asset allocation.
2) Vanguard LifeStrategy Growth Fund (VASGX), both U.S. stocks and bonds, both international stocks and bonds, 80/20 asset allocation.
3) Vanguard LifeStrategy Moderate Growth Fund (VSMGX), both U.S. stocks and bonds, both international stocks and bonds, 60/40 asset allocation.
Click the "portfolio" tab for more details on the investments in each fund.

The percentages are the annual expense ratio (ER) for each fund.
Is the ER the money I pay Vanguard yearly for the portfolio? Like for Edward Jones there is a 1.35% fee for something on funds. Just wanna make sure the fees I pay are the ones I'm thinking about lol

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ruralavalon
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Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Thu Nov 09, 2017 4:01 pm

randydimera wrote:
Thu Nov 09, 2017 3:37 pm
Is the ER the money I pay Vanguard yearly for the portfolio? Like for Edward Jones there is a 1.35% fee for something on funds. Just wanna make sure the fees I pay are the ones I'm thinking about lol
The expense ratio is what is automatically paid to the fund company annually to operate the fund.

For more detail see Morningstar, "Expense Ratio" defined.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

dbr
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Re: Is an investment account the best choice for me (new guy)

Post by dbr » Thu Nov 09, 2017 5:40 pm

ruralavalon wrote:
Thu Nov 09, 2017 4:01 pm
randydimera wrote:
Thu Nov 09, 2017 3:37 pm
Is the ER the money I pay Vanguard yearly for the portfolio? Like for Edward Jones there is a 1.35% fee for something on funds. Just wanna make sure the fees I pay are the ones I'm thinking about lol
The expense ratio is what is automatically paid to the fund company annually to operate the fund.

For more detail see Morningstar, "Expense Ratio" defined.
And Vanguard does not steal 1.35% of your money. That fee at Vanguard is zero.

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Sandtrap
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Re: Is an investment account the best choice for me (new guy)

Post by Sandtrap » Thu Nov 09, 2017 5:51 pm


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oldcomputerguy
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Re: Is an investment account the best choice for me (new guy)

Post by oldcomputerguy » Thu Nov 09, 2017 5:55 pm

randydimera wrote:
Thu Nov 09, 2017 3:37 pm
Is the ER the money I pay Vanguard yearly for the portfolio?
All mutual funds, whether at Vanguard, Fidelity, Schwab, Dodge & Cox, American Funds, or whoever, incur at least some operating expenses. Typically these include the overhead expenses such as generating reports to the IRS, tracking who owns what shares, etc. The mutual fund also pays the manager to manage the fund. These payments are covered by the "expense ratio". That money is paid directly to the fund company, and comes out of the returns before they are paid out to the fund shareholders (in a good year) or are taken out of the shareholders' principal (in a bad year).
Like for Edward Jones there is a 1.35% fee for something on funds.
The 1.35% fee you pay to Edward Jones is a fee to them just for holding your hand and helping you pick which funds to invest in. It's the fee charged by their Guided Solutions program. It has nothing to do with the expenses of the funds, it's a fee that EJ tacks on in addition.
[/quote]
Anybody know why there's a 20-pound frozen turkey up in the light grid?

randydimera
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Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Thu Nov 09, 2017 5:56 pm

ruralavalon wrote:
Thu Nov 09, 2017 2:39 pm
randydimera wrote:
Thu Nov 09, 2017 1:59 pm
ruralavalon wrote:
Thu Nov 09, 2017 12:25 pm
. . . . .
You can start an individual taxable account at Vanguard.

Instead of 4-5 stocks, for the $5k consider something much more diversified. Consider simply using a single balanced fund like:
1) Vanguard Balanced Index Fund Investor Shares (VBINX) ER 0.19%;
2) Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%; or
3) Vanguard zone LifeStrategy Moderate Growth Fund (VSMGX) ER 0.14%.
. . . . .
Okay this is very informative I really appreciate it. So what you listed, would that be a 4 fund portfolio? Like would it be I put the 5k in those funds and put them at the percentages you listed and I'd be at the ddiversified 100% I need? Like are those international, American and bonds? Because I read that I needed all three for diversity because diversity makes sure if one market goes down not all your money will right? Also I'm sorry, what so you mean by balanced rates?
Thank you again for you time.
No, just pick one of the three funds. Each fund is a well diversified portfolio all by itself. Keep it simple to start.

At Morningstar enter the ticker symbol in the "quote" box, you can see what each invests in.
1) Vanguard Balanced Index Fund Investor Shares (VBINX), both U.S. stocks and U.S. bonds, 60/40 asset allocation.
2) Vanguard LifeStrategy Growth Fund (VASGX), both U.S. stocks and bonds, both international stocks and bonds, 80/20 asset allocation.
3) Vanguard LifeStrategy Moderate Growth Fund (VSMGX), both U.S. stocks and bonds, both international stocks and bonds, 60/40 asset allocation.
Click the "portfolio" tab for more details on the investments in each fund.

The percentages are the annual expense ratio (ER) for each fund.
I really like the second one you listed, the VASGX. I looked that up and it looked like it has some really well and probably will continue to do well because a lot of its equity is in technology and stuff like that. So that is like 80% stocks and 20% bonds roughly? Isnt that super good for someone my age because I can afford to be a bit more aggressive and take higher risk right? This is all really exciting lol thank you so much.

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ruralavalon
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Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Thu Nov 09, 2017 6:03 pm

At age 23 an asset allocation of 80/20 is reasonable in my opinion.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

randydimera
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Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Thu Nov 09, 2017 6:44 pm

ruralavalon wrote:
Thu Nov 09, 2017 6:03 pm
At age 23 an asset allocation of 80/20 is reasonable in my opinion.
So if i decide to pick that, what should I do from there? Just put 5k down on it and let it sit? Do I switch allocations ever? Or wait till i get my degree to transfer money to a roth or what do you think?

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ruralavalon
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Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Thu Nov 09, 2017 9:06 pm

randydimera wrote:
Thu Nov 09, 2017 6:44 pm
ruralavalon wrote:
Thu Nov 09, 2017 6:03 pm
At age 23 an asset allocation of 80/20 is reasonable in my opinion.
So if i decide to pick that, what should I do from there? Just put 5k down on it and let it sit? Do I switch allocations ever? Or wait till i get my degree to transfer money to a roth or what do you think?
About how long until graduation and full-time employment?

Ordinarily investors change asset allocation as they age, shift to less risk and use more bonds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

randydimera
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Joined: Mon Nov 06, 2017 9:28 pm

Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Thu Nov 09, 2017 9:16 pm

ruralavalon wrote:
Thu Nov 09, 2017 9:06 pm
randydimera wrote:
Thu Nov 09, 2017 6:44 pm
ruralavalon wrote:
Thu Nov 09, 2017 6:03 pm
At age 23 an asset allocation of 80/20 is reasonable in my opinion.
So if i decide to pick that, what should I do from there? Just put 5k down on it and let it sit? Do I switch allocations ever? Or wait till i get my degree to transfer money to a roth or what do you think?
About how long until graduation and full-time employment?

Ordinarily investors change asset allocation as they age, shift to less risk and use more bonds.
I will get my bachelors at the end of next year, and my masters at the end of 2019 because my masters will only take a year so by the beginning of 2020, (ill be 25-26) ill be in employment. Perhaps sooner because ill be in an internship this summer so thatll be cool.

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ruralavalon
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Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Thu Nov 09, 2017 9:23 pm

randydimera wrote:
Thu Nov 09, 2017 9:16 pm
ruralavalon wrote:
Thu Nov 09, 2017 9:06 pm
randydimera wrote:
Thu Nov 09, 2017 6:44 pm
ruralavalon wrote:
Thu Nov 09, 2017 6:03 pm
At age 23 an asset allocation of 80/20 is reasonable in my opinion.
So if i decide to pick that, what should I do from there? Just put 5k down on it and let it sit? Do I switch allocations ever? Or wait till i get my degree to transfer money to a roth or what do you think?
About how long until graduation and full-time employment?

Ordinarily investors change asset allocation as they age, shift to less risk and use more bonds.
I will get my bachelors at the end of next year, and my masters at the end of 2019 because my masters will only take a year so by the beginning of 2020, (ill be 25-26) ill be in employment. Perhaps sooner because ill be in an internship this summer so thatll be cool.
A paid internship? Would the pay be more than $5.5k?

If you held back from the $15-20k to cover moving expense expenses and emergencies as suggested by chevca, how much would you hold back and how
much would you want to invest?
Last edited by ruralavalon on Thu Nov 09, 2017 9:29 pm, edited 3 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

randydimera
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Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Thu Nov 09, 2017 9:25 pm

ruralavalon wrote:
Thu Nov 09, 2017 9:23 pm
randydimera wrote:
Thu Nov 09, 2017 9:16 pm
ruralavalon wrote:
Thu Nov 09, 2017 9:06 pm
randydimera wrote:
Thu Nov 09, 2017 6:44 pm
ruralavalon wrote:
Thu Nov 09, 2017 6:03 pm
At age 23 an asset allocation of 80/20 is reasonable in my opinion.
So if i decide to pick that, what should I do from there? Just put 5k down on it and let it sit? Do I switch allocations ever? Or wait till i get my degree to transfer money to a roth or what do you think?
About how long until graduation and full-time employment?

Ordinarily investors change asset allocation as they age, shift to less risk and use more bonds.
I will get my bachelors at the end of next year, and my masters at the end of 2019 because my masters will only take a year so by the beginning of 2020, (ill be 25-26) ill be in employment. Perhaps sooner because ill be in an internship this summer so thatll be cool.
A paid internship? Would the pay be more than $5.5k?
Probably not, its like 480 hours and I might get a very small stipend if im lucky. But if I did it would be probably like 100 bucks a week or so

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ruralavalon
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Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Thu Nov 09, 2017 9:32 pm

You will not be eligible to contribute to an IRA without earned income, and then only up to the amount of the income. I am not sure a stipend qualifies.

What sort of company or institution will you be working for next summer? What services will you have to perform for the stipend?

If you held back from the $15-20k for moving expenses and emergencies as suggested by chevca, then about how much would you hold back and about how much would you want to invest?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

billfromct
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Re: Is an investment account the best choice for me (new guy)

Post by billfromct » Thu Nov 09, 2017 10:20 pm

Stipends are generally considered earned income & you will receive a W2 from the university. If that is the case, that earned income will allow you to open a Roth IRA. That's the way it works for my daughter who is in graduate school & receives a taxable stipend. Vanguard requires $1,000 to open a Target Retirement Mutual Fund, so you will have to have at least $1,000 in earned income to open a Vanguard Roth IRA.

Since you have no or very little income (probably only the stock dividends), you should sell your Pepsi stock to take your long term capital gains which will be Federal tax free because long term capital gains & qualified dividends are Federal tax free if you are in the 15% or lower Federal tax bracket.

The 15% Federal tax bracket for a single person is taxable income under $37,950. You can earn about $48,000 & still be in the 15% Federal tax bracket because your standard deduction ($6,350) & personal exemption ($4,050) would be subtracted from your income to calculate your taxable income.

You may have to pay state income tax on the long term capital gains.

You can reinvest the proceeds from the sale of the Pepsi stock, $11,111 (100 shares x $111/shares) & buy Pepsi stock or put the money into a Vanguard mutual fund. If you buy a mutual fund be sure to have the dividends & capital gains reinvested in new shares of the mutual fund.

Once you start working, you will probably never be in the 15% Federal tax bracket again in your working career & will not be able to take advantage of the tax free capital gains provision again.

bill

randydimera
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Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Thu Nov 09, 2017 10:55 pm

ruralavalon wrote:
Thu Nov 09, 2017 9:32 pm
You will not be eligible to contribute to an IRA without earned income, and then only up to the amount of the income. I am not sure a stipend qualifies.

What sort of company or institution will you be working for next summer? What services will you have to perform for the stipend?

If you held back from the $15-20k for moving expenses and emergencies as suggested by chevca, then about how much would you hold back and about how much would you want to invest?
I believe it will be a hotel because the plan is for me to be a manager and eventually a really high up manager of a large chain hotel (hopefully). The internship will be a good opportunity and I say I might get a stipend because some are paid and some are not, I have no idea yet but theres no way ill make the 5500 I need for the roth. I have everything paid off and my mom helps me a lot so i am not worried about moving expenses or emergencies as of right now, she is such a great woman and I am blessed and I am lucky to have her. I will be keeping atleast 5k maybe 10k as an emergency fund in my checking account. So I would put maybe 10k possibly 12-15 in the market since I have like 21k in a checking right now

randydimera
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Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Thu Nov 09, 2017 11:01 pm

billfromct wrote:
Thu Nov 09, 2017 10:20 pm
Stipends are generally considered earned income & you will receive a W2 from the university. If that is the case, that earned income will allow you to open a Roth IRA. That's the way it works for my daughter who is in graduate school & receives a taxable stipend. Vanguard requires $1,000 to open a Target Retirement Mutual Fund, so you will have to have at least $1,000 in earned income to open a Vanguard Roth IRA.

Since you have no or very little income (probably only the stock dividends), you should sell your Pepsi stock to take your long term capital gains which will be Federal tax free because long term capital gains & qualified dividends are Federal tax free if you are in the 15% or lower Federal tax bracket.

The 15% Federal tax bracket for a single person is taxable income under $37,950. You can earn about $48,000 & still be in the 15% Federal tax bracket because your standard deduction ($6,350) & personal exemption ($4,050) would be subtracted from your income to calculate your taxable income.

You may have to pay state income tax on the long term capital gains.

You can reinvest the proceeds from the sale of the Pepsi stock, $11,111 (100 shares x $111/shares) & buy Pepsi stock or put the money into a Vanguard mutual fund. If you buy a mutual fund be sure to have the dividends & capital gains reinvested in new shares of the mutual fund.

Once you start working, you will probably never be in the 15% Federal tax bracket again in your working career & will not be able to take advantage of the tax free capital gains provision again.

bill
This is very interesting. So if I wait to sell my pepsi stock until after I make 45-50k a year which i imagine myself making (minimum) the first year of work, I will have to pay a higher tax on selling it? Should I hold off on selling it as long as possible to get maximum gains? The only fee I should pay for selling is like 250 bucks at edward jones for selling it and thats no biggie since we are looking at like 11 grand like you said. I am wondering though, if i sell it will the 11 grand count against me when I do my fafsfa for the 2018-19 school year? Will I have to say that I have gained 11 grand? Idk if that makes any sense, im trying to make sense of it myself. I wonder how much money of the 11k would be saved by selling before I get into a new tax bracket. Is there a way to calculate that?

Thank you sir.

randydimera
Posts: 59
Joined: Mon Nov 06, 2017 9:28 pm

Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Fri Nov 10, 2017 12:05 am

ruralavalon wrote:
Thu Nov 09, 2017 6:03 pm
At age 23 an asset allocation of 80/20 is reasonable in my opinion.
Also what is the difference in the mutual funds you listed and something like VOO? I read something about passive and active management. Just trying to figure out the right option for me

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ruralavalon
Posts: 11700
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Location: Illinois

Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Fri Nov 10, 2017 6:56 am

randydimera wrote:
Fri Nov 10, 2017 12:05 am
ruralavalon wrote:
Thu Nov 09, 2017 6:03 pm
At age 23 an asset allocation of 80/20 is reasonable in my opinion.
Also what is the difference in the mutual funds you listed and something like VOO? I read something about passive and active management. Just trying to figure out the right option for me
Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15% is a regular mutual fund. This particular fund is meant to be an all-in-one investment, that's used by itself as a complete investing portfolio, because it invests in both stocks and bonds, both in the U.S. and internationally. It does that by investing in 4 very diversified index funds, you see them listed on the Vanguard website.

Vanguard 500 Index ETF (VOO) ER 0.04% is an ETF. That's a type of mutual fund. ETF = Exchange Traded Fund. This particular ETF invests only in stocks of larger U.S. companies. It's most often used along with other funds, for bonds and international stocks, to make up a more diversified comprehensive portfolio. This particular ETF is a share class of Vanguard 500 Index Fund, with Investor Shares (VFINX) ER 0.14% and Admiral Shares (VTSAX) ER 0.04%.

I think that Vanguard LifeStrategy Growth Fund (VASGX) is the best way for you to start because it's so very diversified and comprehensive. That is what I suggest for you. A Target Retirement fund is also a possible choice.

. . . . .

Still to be determined is the type of account to use, a taxable account or Roth IRA, or perhaps both, depending on the "stipend as income" issue.

. . . . .

At Vanguard regular index funds are just as tax-efficient as ETFs, because they are just different share classes of the same fund. That's not true for any other fund company. Mutual funds are easier to use in my opinion, because trading mechanics are simpler. Wiki article, "ETFs vs Mutual Funds". This wiki article outlines some pros and cons of each type of fund.

For the most people it seems to come down to personal preference. For what it's worth I use only regular index mutual funds, not ETFs.
Last edited by ruralavalon on Fri Nov 10, 2017 7:39 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

randydimera
Posts: 59
Joined: Mon Nov 06, 2017 9:28 pm

Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Fri Nov 10, 2017 7:39 am

ruralavalon wrote:
Fri Nov 10, 2017 6:56 am
randydimera wrote:
Fri Nov 10, 2017 12:05 am
ruralavalon wrote:
Thu Nov 09, 2017 6:03 pm
At age 23 an asset allocation of 80/20 is reasonable in my opinion.
Also what is the difference in the mutual funds you listed and something like VOO? I read something about passive and active management. Just trying to figure out the right option for me
Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15% is a regular mutual fund. This particular fund is meant to be an all-in-one investment, that's used by itself as a complete investing portfolio, because it invest in both stocks and bonds, both in the U.S. and internationally. It does that by investing in 4 very diversified index funds, you see them listed on the Vanguard website.

Vanguard 500 Index ETF (VOO) ER 0.04% is an ETF. That's a type of mutual fund. ETF = Exchange Traded Fund. This particular ETF invests only in stocks of larger U.S. companies. It's most often used along with other funds, for bonds and international stocks, to make up a more diversified comprehensive portfolio. This particular ETF is a share class of Vanguard 500 Index Fund, with Investor Shares (VFINX) ER 0.14% and Admiral Shares (VTSAX) ER 0.04%.

I think that Vanguard LifeStrategy Growth Fund (VASGX) is the best way for you to start because it's so very diversified and comprehensive. That is what I suggest for you. A Target Retirement fund is also a possible choice.

. . . . .

Still to be determined is the type of account to use, a taxable account or Roth IRA, or perhaps both, depending on the "stipend as income" issue.

. . . . .

At Vanguard regular index funds are just as tax-efficient as ETFs, because they are just different share classes of the same fund. That's not true for any other fund company. Mutual funds are easier to use in my opinion, because trading mechanics are simpler. Wiki article, "ETFs vs Mutual Funds". This wiki article outlines some pros and cons of each type of fund. For the most people it seems to come down to personal preference. For what it's worth I use only regular index mutual funds, not ETFs.
This is very informative, thank you. I am reading the wiki page as we speak here. And yeah the stipend is objective, it isnt guaranteed because idk what place ill be interning at either, and if i get a stipend it will be incredibly small. My university is trying to hook me up with a more exotic position meaning send me somewhere else in the U.S and they give me free room and board and food but I wont get paid. Its a way for me to see a different part of the country in the hospitality industry. Either that or ill just stay where I am and work at a hotel here. Its all still to be determined. So when I make an account at Vanguard, I just pick the individual account option right and look into VASGX? Just want to make sure im not missing anything

student
Posts: 1336
Joined: Fri Apr 03, 2015 6:58 am

Re: Is an investment account the best choice for me (new guy)

Post by student » Fri Nov 10, 2017 7:50 am

billfromct wrote:
Thu Nov 09, 2017 10:20 pm
Stipends are generally considered earned income & you will receive a W2 from the university. If that is the case, that earned income will allow you to open a Roth IRA. That's the way it works for my daughter who is in graduate school & receives a taxable stipend. Vanguard requires $1,000 to open a Target Retirement Mutual Fund, so you will have to have at least $1,000 in earned income to open a Vanguard Roth IRA.

Since you have no or very little income (probably only the stock dividends), you should sell your Pepsi stock to take your long term capital gains which will be Federal tax free because long term capital gains & qualified dividends are Federal tax free if you are in the 15% or lower Federal tax bracket.

The 15% Federal tax bracket for a single person is taxable income under $37,950. You can earn about $48,000 & still be in the 15% Federal tax bracket because your standard deduction ($6,350) & personal exemption ($4,050) would be subtracted from your income to calculate your taxable income.

You may have to pay state income tax on the long term capital gains.

You can reinvest the proceeds from the sale of the Pepsi stock, $11,111 (100 shares x $111/shares) & buy Pepsi stock or put the money into a Vanguard mutual fund. If you buy a mutual fund be sure to have the dividends & capital gains reinvested in new shares of the mutual fund.

Once you start working, you will probably never be in the 15% Federal tax bracket again in your working career & will not be able to take advantage of the tax free capital gains provision again.

bill
+1. Since you may need not be able to take all the capital gains in one year without paying federal tax on it, I suggest you transfer it to Etrade, get $100 from them for opening an account with over $10,000 as your Pepsi shares meet the criterion. The $100 maybe be able to pay for the closing fee which you eventually have to pay anyway. Etrade also give you some free trades in the first few months. So this save you money as well.

You can use Etrade or other brokerage firms to buy Vanguard ETF's rather than mutual funds. Merrill Edge is also good. You may want to read the following threads.
viewtopic.php?t=196884
viewtopic.php?t=150033

randydimera
Posts: 59
Joined: Mon Nov 06, 2017 9:28 pm

Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Fri Nov 10, 2017 8:06 am

student wrote:
Fri Nov 10, 2017 7:50 am
billfromct wrote:
Thu Nov 09, 2017 10:20 pm
Stipends are generally considered earned income & you will receive a W2 from the university. If that is the case, that earned income will allow you to open a Roth IRA. That's the way it works for my daughter who is in graduate school & receives a taxable stipend. Vanguard requires $1,000 to open a Target Retirement Mutual Fund, so you will have to have at least $1,000 in earned income to open a Vanguard Roth IRA.

Since you have no or very little income (probably only the stock dividends), you should sell your Pepsi stock to take your long term capital gains which will be Federal tax free because long term capital gains & qualified dividends are Federal tax free if you are in the 15% or lower Federal tax bracket.

The 15% Federal tax bracket for a single person is taxable income under $37,950. You can earn about $48,000 & still be in the 15% Federal tax bracket because your standard deduction ($6,350) & personal exemption ($4,050) would be subtracted from your income to calculate your taxable income.

You may have to pay state income tax on the long term capital gains.

You can reinvest the proceeds from the sale of the Pepsi stock, $11,111 (100 shares x $111/shares) & buy Pepsi stock or put the money into a Vanguard mutual fund. If you buy a mutual fund be sure to have the dividends & capital gains reinvested in new shares of the mutual fund.

Once you start working, you will probably never be in the 15% Federal tax bracket again in your working career & will not be able to take advantage of the tax free capital gains provision again.

bill
+1. Since you may need not be able to take all the capital gains in one year without paying federal tax on it, I suggest you transfer it to Etrade, get $100 from them for opening an account with over $10,000 as your Pepsi shares meet the criterion. The $100 maybe be able to pay for the closing fee which you eventually have to pay anyway. Etrade also give you some free trades in the first few months. So this save you money as well.

You can use Etrade or other brokerage firms to buy Vanguard ETF's rather than mutual funds. Merrill Edge is also good. You may want to read the following threads.
viewtopic.php?t=196884
viewtopic.php?t=150033
Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very? I was just gonna call edward jones in the next several months and sell all my shares and just move on to straight Vanguard. Also I wonder if Vanguard has a bonus for transfering, because I could do that in theory. But if I was to sell Pepsi today it would be a 250 dollar EDJ fee for commission I guess is what I was told.

dbr
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Re: Is an investment account the best choice for me (new guy)

Post by dbr » Fri Nov 10, 2017 8:20 am

randydimera wrote:
Fri Nov 10, 2017 8:06 am


Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very? I was just gonna call edward jones in the next several months and sell all my shares and just move on to straight Vanguard. Also I wonder if Vanguard has a bonus for transfering, because I could do that in theory. But if I was to sell Pepsi today it would be a 250 dollar EDJ fee for commission I guess is what I was told.
If you really want to know what your tax might be you have to fill out a dummy tax return for your anticipated income in the year you want to plan for. Some people here mention a program called Taxcaster for that. I sometimes just use my existing version of Turbo Tax for estimates.

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ruralavalon
Posts: 11700
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Location: Illinois

Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Fri Nov 10, 2017 8:24 am

randydimera wrote:
Thu Nov 09, 2017 9:25 pm
I will get my bachelors at the end of next year, and my masters at the end of 2019 because my masters will only take a year so by the beginning of 2020, (ill be 25-26) ill be in employment. Perhaps sooner because ill be in an internship this summer so thatll be cool.
. . . . .
Probably not [$5.5k or more from internship next summer] , its like 480 hours and I might get a very small stipend if im lucky. But if I did it would be probably like 100 bucks a week or so [emphasis added]
randydimera wrote:
Thu Nov 09, 2017 10:55 pm
I believe it [internship work next summer] will be a hotel because the plan is for me to be a manager and eventually a really high up manager of a large chain hotel (hopefully). The internship will be a good opportunity and I say I might get a stipend because some are paid and some are not, I have no idea yet but theres no way ill make the 5500 I need for the roth. [emphasi added] I have everything paid off and my mom helps me a lot so i am not worried about moving expenses or emergencies as of right now, she is such a great woman and I am blessed and I am lucky to have her. I will be keeping atleast 5k maybe 10k as an emergency fund in my checking account. So I would put maybe 10k possibly 12-15 in the market [emphasis added] since I have like 21k in a checking right now
randydimera wrote:
Fri Nov 10, 2017 7:39 am
This is very informative, thank you. I am reading the wiki page as we speak here. And yeah the stipend is objective, it isnt guaranteed because idk what place ill be interning at either, and if i get a stipend it will be incredibly small. My university is trying to hook me up with a more exotic position meaning send me somewhere else in the U.S [emphasis added] and they give me free room and board and food but I wont get paid. Its a way for me to see a different part of the country in the hospitality industry. Either that or ill just stay where I am and work at a hotel here. Its all still to be determined. So when I make an account at Vanguard, I just pick the individual account option right and look into VASGX? Just want to make sure im not missing anything [emphasis added]
Some things are necessarily up in the air about the paid internship next summer, so I think it's good to be flexible.

Instead of investing "maybe 10k possibly 12-15 in the market" hold back another $5k so you can do a Roth IRA contribution next year if that turns out to be feasible. It's important in long-term investing to make full use of tax-advantaged accounts when possible. So make the amount to invest now in the range $5k - 10k. You decide.

I suggest that you open a regular individual account at Vanguard and invest around $5k - 10k now. Just call Vanguard and they will help you do this. Or you can set it upon-line. I suggest that you simply invest it all in just one comprehensive fund, specifically Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%. The asset allocation of 80/20 stocks/bonds is suitable for your age (23) in my opinion.

If next summer turns out to be a paid internship with W-2 income, then next year open a Roth IRA at Vanguard, contribute up to $5.5k but no more than the amount of the W-2 income, and simply invest it all in Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%.

If it turns out that you can't contribute to a Roth IRA next year, then reevaluate whether you want to contribute more to the individual taxable account.

. . . . .

I suggest that you read one or two books on general investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the basics Morningstar, "Investing Classroom".

If you have any questions just ask.

I hope that this helps.
Last edited by ruralavalon on Fri Nov 10, 2017 8:35 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

student
Posts: 1336
Joined: Fri Apr 03, 2015 6:58 am

Re: Is an investment account the best choice for me (new guy)

Post by student » Fri Nov 10, 2017 8:33 am

randydimera wrote:
Fri Nov 10, 2017 8:06 am
student wrote:
Fri Nov 10, 2017 7:50 am
billfromct wrote:
Thu Nov 09, 2017 10:20 pm
Stipends are generally considered earned income & you will receive a W2 from the university. If that is the case, that earned income will allow you to open a Roth IRA. That's the way it works for my daughter who is in graduate school & receives a taxable stipend. Vanguard requires $1,000 to open a Target Retirement Mutual Fund, so you will have to have at least $1,000 in earned income to open a Vanguard Roth IRA.

Since you have no or very little income (probably only the stock dividends), you should sell your Pepsi stock to take your long term capital gains which will be Federal tax free because long term capital gains & qualified dividends are Federal tax free if you are in the 15% or lower Federal tax bracket.

The 15% Federal tax bracket for a single person is taxable income under $37,950. You can earn about $48,000 & still be in the 15% Federal tax bracket because your standard deduction ($6,350) & personal exemption ($4,050) would be subtracted from your income to calculate your taxable income.

You may have to pay state income tax on the long term capital gains.

You can reinvest the proceeds from the sale of the Pepsi stock, $11,111 (100 shares x $111/shares) & buy Pepsi stock or put the money into a Vanguard mutual fund. If you buy a mutual fund be sure to have the dividends & capital gains reinvested in new shares of the mutual fund.

Once you start working, you will probably never be in the 15% Federal tax bracket again in your working career & will not be able to take advantage of the tax free capital gains provision again.

bill
+1. Since you may need not be able to take all the capital gains in one year without paying federal tax on it, I suggest you transfer it to Etrade, get $100 from them for opening an account with over $10,000 as your Pepsi shares meet the criterion. The $100 maybe be able to pay for the closing fee which you eventually have to pay anyway. Etrade also give you some free trades in the first few months. So this save you money as well.

You can use Etrade or other brokerage firms to buy Vanguard ETF's rather than mutual funds. Merrill Edge is also good. You may want to read the following threads.
viewtopic.php?t=196884
viewtopic.php?t=150033
Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very? I was just gonna call edward jones in the next several months and sell all my shares and just move on to straight Vanguard. Also I wonder if Vanguard has a bonus for transfering, because I could do that in theory. But if I was to sell Pepsi today it would be a 250 dollar EDJ fee for commission I guess is what I was told.
At 15% bracket, you do not have to pay federal tax on capital gain. I do not know whether selling all of them will push you over. Is so, do it in two years. $250 is a lot to pay for commission. If you transfer first, and then sell, it will be cheaper.

randydimera
Posts: 59
Joined: Mon Nov 06, 2017 9:28 pm

Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Fri Nov 10, 2017 8:38 am

dbr wrote:
Fri Nov 10, 2017 8:20 am
randydimera wrote:
Fri Nov 10, 2017 8:06 am


Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very? I was just gonna call edward jones in the next several months and sell all my shares and just move on to straight Vanguard. Also I wonder if Vanguard has a bonus for transfering, because I could do that in theory. But if I was to sell Pepsi today it would be a 250 dollar EDJ fee for commission I guess is what I was told.
If you really want to know what your tax might be you have to fill out a dummy tax return for your anticipated income in the year you want to plan for. Some people here mention a program called Taxcaster for that. I sometimes just use my existing version of Turbo Tax for estimates.
Well until 2019 my income will be practically nothing, so what does that mean for me?

randydimera
Posts: 59
Joined: Mon Nov 06, 2017 9:28 pm

Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Fri Nov 10, 2017 8:41 am

student wrote:
Fri Nov 10, 2017 8:33 am
randydimera wrote:
Fri Nov 10, 2017 8:06 am
student wrote:
Fri Nov 10, 2017 7:50 am
billfromct wrote:
Thu Nov 09, 2017 10:20 pm
Stipends are generally considered earned income & you will receive a W2 from the university. If that is the case, that earned income will allow you to open a Roth IRA. That's the way it works for my daughter who is in graduate school & receives a taxable stipend. Vanguard requires $1,000 to open a Target Retirement Mutual Fund, so you will have to have at least $1,000 in earned income to open a Vanguard Roth IRA.

Since you have no or very little income (probably only the stock dividends), you should sell your Pepsi stock to take your long term capital gains which will be Federal tax free because long term capital gains & qualified dividends are Federal tax free if you are in the 15% or lower Federal tax bracket.

The 15% Federal tax bracket for a single person is taxable income under $37,950. You can earn about $48,000 & still be in the 15% Federal tax bracket because your standard deduction ($6,350) & personal exemption ($4,050) would be subtracted from your income to calculate your taxable income.

You may have to pay state income tax on the long term capital gains.

You can reinvest the proceeds from the sale of the Pepsi stock, $11,111 (100 shares x $111/shares) & buy Pepsi stock or put the money into a Vanguard mutual fund. If you buy a mutual fund be sure to have the dividends & capital gains reinvested in new shares of the mutual fund.

Once you start working, you will probably never be in the 15% Federal tax bracket again in your working career & will not be able to take advantage of the tax free capital gains provision again.

bill
+1. Since you may need not be able to take all the capital gains in one year without paying federal tax on it, I suggest you transfer it to Etrade, get $100 from them for opening an account with over $10,000 as your Pepsi shares meet the criterion. The $100 maybe be able to pay for the closing fee which you eventually have to pay anyway. Etrade also give you some free trades in the first few months. So this save you money as well.

You can use Etrade or other brokerage firms to buy Vanguard ETF's rather than mutual funds. Merrill Edge is also good. You may want to read the following threads.
viewtopic.php?t=196884
viewtopic.php?t=150033
Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very? I was just gonna call edward jones in the next several months and sell all my shares and just move on to straight Vanguard. Also I wonder if Vanguard has a bonus for transfering, because I could do that in theory. But if I was to sell Pepsi today it would be a 250 dollar EDJ fee for commission I guess is what I was told.
At 15% bracket, you do not have to pay federal tax on capital gain. I do not know whether selling all of them will push you over. Is so, do it in two years. $250 is a lot to pay for commission. If you transfer first, and then sell, it will be cheaper.
Well since I have no income currently and wont till 2019, I doubt ill have any issue moving tax brackets aslong as i sell it before 2019 right? And oh so if I transfer to something like vanguard, it would be cheaper then just outright selling from edward jones? Yeah i dont know a way out of selling it at edj unless i transfer it but i never considered that before. So transfer then cancel might save me a few bucks?

User avatar
ruralavalon
Posts: 11700
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Fri Nov 10, 2017 8:45 am

randydimera wrote:
Fri Nov 10, 2017 8:38 am
dbr wrote:
Fri Nov 10, 2017 8:20 am
randydimera wrote:
Fri Nov 10, 2017 8:06 am


Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very? I was just gonna call edward jones in the next several months and sell all my shares and just move on to straight Vanguard. Also I wonder if Vanguard has a bonus for transfering, because I could do that in theory. But if I was to sell Pepsi today it would be a 250 dollar EDJ fee for commission I guess is what I was told.
If you really want to know what your tax might be you have to fill out a dummy tax return for your anticipated income in the year you want to plan for. Some people here mention a program called Taxcaster for that. I sometimes just use my existing version of Turbo Tax for estimates.
Well until 2019 my income will be practically nothing, so what does that mean for me?
You will owe no income tax until you start earning more income, but will owe for Social Security and Medicare taxes.

Here are calculators you can use to determine your federal tax bracket. First determine your "taxable income". money chimp, "Tax Calculator". Then use your "taxable income" to determine your "tax bracket". moneychimp, "Federal Tax Brackets".

When you sell stock with long-term capital gains you pay a lower tax rate, sometimes zero. So you want to sell your stocks during the years when you have very low or no earned income. So you could do this some in 2017 and 2018, perhaps also in 2019.
Last edited by ruralavalon on Fri Nov 10, 2017 8:54 am, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

student
Posts: 1336
Joined: Fri Apr 03, 2015 6:58 am

Re: Is an investment account the best choice for me (new guy)

Post by student » Fri Nov 10, 2017 8:47 am

randydimera wrote:
Fri Nov 10, 2017 8:41 am
student wrote:
Fri Nov 10, 2017 8:33 am
randydimera wrote:
Fri Nov 10, 2017 8:06 am
student wrote:
Fri Nov 10, 2017 7:50 am
billfromct wrote:
Thu Nov 09, 2017 10:20 pm
Stipends are generally considered earned income & you will receive a W2 from the university. If that is the case, that earned income will allow you to open a Roth IRA. That's the way it works for my daughter who is in graduate school & receives a taxable stipend. Vanguard requires $1,000 to open a Target Retirement Mutual Fund, so you will have to have at least $1,000 in earned income to open a Vanguard Roth IRA.

Since you have no or very little income (probably only the stock dividends), you should sell your Pepsi stock to take your long term capital gains which will be Federal tax free because long term capital gains & qualified dividends are Federal tax free if you are in the 15% or lower Federal tax bracket.

The 15% Federal tax bracket for a single person is taxable income under $37,950. You can earn about $48,000 & still be in the 15% Federal tax bracket because your standard deduction ($6,350) & personal exemption ($4,050) would be subtracted from your income to calculate your taxable income.

You may have to pay state income tax on the long term capital gains.

You can reinvest the proceeds from the sale of the Pepsi stock, $11,111 (100 shares x $111/shares) & buy Pepsi stock or put the money into a Vanguard mutual fund. If you buy a mutual fund be sure to have the dividends & capital gains reinvested in new shares of the mutual fund.

Once you start working, you will probably never be in the 15% Federal tax bracket again in your working career & will not be able to take advantage of the tax free capital gains provision again.

bill
+1. Since you may need not be able to take all the capital gains in one year without paying federal tax on it, I suggest you transfer it to Etrade, get $100 from them for opening an account with over $10,000 as your Pepsi shares meet the criterion. The $100 maybe be able to pay for the closing fee which you eventually have to pay anyway. Etrade also give you some free trades in the first few months. So this save you money as well.

You can use Etrade or other brokerage firms to buy Vanguard ETF's rather than mutual funds. Merrill Edge is also good. You may want to read the following threads.
viewtopic.php?t=196884
viewtopic.php?t=150033
Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very? I was just gonna call edward jones in the next several months and sell all my shares and just move on to straight Vanguard. Also I wonder if Vanguard has a bonus for transfering, because I could do that in theory. But if I was to sell Pepsi today it would be a 250 dollar EDJ fee for commission I guess is what I was told.
At 15% bracket, you do not have to pay federal tax on capital gain. I do not know whether selling all of them will push you over. Is so, do it in two years. $250 is a lot to pay for commission. If you transfer first, and then sell, it will be cheaper.
Well since I have no income currently and wont till 2019, I doubt ill have any issue moving tax brackets aslong as i sell it before 2019 right? And oh so if I transfer to something like vanguard, it would be cheaper then just outright selling from edward jones? Yeah i dont know a way out of selling it at edj unless i transfer it but i never considered that before. So transfer then cancel might save me a few bucks?
If you have no income, then you can sell them all at once. I still recommend that you transfer to Etrade, get the $100, sell the shares with no commission as they give you few to start with. Then buy Vanguard ETF with no commission again. Make sure to do all this within the free commission period.

randydimera
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Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Fri Nov 10, 2017 8:51 am

ruralavalon wrote:
Fri Nov 10, 2017 8:45 am
randydimera wrote:
Fri Nov 10, 2017 8:38 am
dbr wrote:
Fri Nov 10, 2017 8:20 am
randydimera wrote:
Fri Nov 10, 2017 8:06 am


Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very? I was just gonna call edward jones in the next several months and sell all my shares and just move on to straight Vanguard. Also I wonder if Vanguard has a bonus for transfering, because I could do that in theory. But if I was to sell Pepsi today it would be a 250 dollar EDJ fee for commission I guess is what I was told.
If you really want to know what your tax might be you have to fill out a dummy tax return for your anticipated income in the year you want to plan for. Some people here mention a program called Taxcaster for that. I sometimes just use my existing version of Turbo Tax for estimates.
Well until 2019 my income will be practically nothing, so what does that mean for me?
You will owe no income tax until you start earning more income, but will owe for Social Security and Medicare taxes.

Here are calculators you can use to determine your federal tax bracket. First determine your "taxable income". money chimp, "Tax Calculator". Then use your "taxable income" to determine your "tax bracket". moneychimp, "Federal Tax Brackets".

When you sell stock with long-term capital gains you pay a lower tax rate, sometimes zero. So you want to sell your stocks during the years when you have very low or no earned income.
Is there an argument on just keeping my pepsi stock at all or no?

randydimera
Posts: 59
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Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Fri Nov 10, 2017 8:52 am

student wrote:
Fri Nov 10, 2017 8:47 am
randydimera wrote:
Fri Nov 10, 2017 8:41 am
student wrote:
Fri Nov 10, 2017 8:33 am
randydimera wrote:
Fri Nov 10, 2017 8:06 am
student wrote:
Fri Nov 10, 2017 7:50 am


+1. Since you may need not be able to take all the capital gains in one year without paying federal tax on it, I suggest you transfer it to Etrade, get $100 from them for opening an account with over $10,000 as your Pepsi shares meet the criterion. The $100 maybe be able to pay for the closing fee which you eventually have to pay anyway. Etrade also give you some free trades in the first few months. So this save you money as well.

You can use Etrade or other brokerage firms to buy Vanguard ETF's rather than mutual funds. Merrill Edge is also good. You may want to read the following threads.
viewtopic.php?t=196884
viewtopic.php?t=150033
Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very? I was just gonna call edward jones in the next several months and sell all my shares and just move on to straight Vanguard. Also I wonder if Vanguard has a bonus for transfering, because I could do that in theory. But if I was to sell Pepsi today it would be a 250 dollar EDJ fee for commission I guess is what I was told.
At 15% bracket, you do not have to pay federal tax on capital gain. I do not know whether selling all of them will push you over. Is so, do it in two years. $250 is a lot to pay for commission. If you transfer first, and then sell, it will be cheaper.
Well since I have no income currently and wont till 2019, I doubt ill have any issue moving tax brackets aslong as i sell it before 2019 right? And oh so if I transfer to something like vanguard, it would be cheaper then just outright selling from edward jones? Yeah i dont know a way out of selling it at edj unless i transfer it but i never considered that before. So transfer then cancel might save me a few bucks?
If you have no income, then you can sell them all at once. I still recommend that you transfer to Etrade, get the $100, sell the shares with no commission as they give you few to start with. Then buy Vanguard ETF with no commission again. Make sure to do all this within the free commission period.
So you recomend to buy Vanguard ETF through etrade instead of through vanguard itself? That just saves like the .15% ER of something like (VASGX)?

dbr
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Re: Is an investment account the best choice for me (new guy)

Post by dbr » Fri Nov 10, 2017 8:52 am

randydimera wrote:
Fri Nov 10, 2017 8:38 am
dbr wrote:
Fri Nov 10, 2017 8:20 am
randydimera wrote:
Fri Nov 10, 2017 8:06 am


Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very? I was just gonna call edward jones in the next several months and sell all my shares and just move on to straight Vanguard. Also I wonder if Vanguard has a bonus for transfering, because I could do that in theory. But if I was to sell Pepsi today it would be a 250 dollar EDJ fee for commission I guess is what I was told.
If you really want to know what your tax might be you have to fill out a dummy tax return for your anticipated income in the year you want to plan for. Some people here mention a program called Taxcaster for that. I sometimes just use my existing version of Turbo Tax for estimates.
Well until 2019 my income will be practically nothing, so what does that mean for me?
It means that when you fill out a hypothetical tax return the result you get with or without selling the assets will be that you have no tax cost. It is still true that the only way to know for sure that you have "practically no income" is to plug the numbers into a tax return and find out. It could be that you have a running tax return in your head and the answer is obvious, but if that is the case you wouldn't be asking. This is probably not a bad opportunity to find out what does go into an income tax computation so that you know.

dbr
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Re: Is an investment account the best choice for me (new guy)

Post by dbr » Fri Nov 10, 2017 8:56 am

randydimera wrote:
Fri Nov 10, 2017 8:51 am


Is there an argument on just keeping my pepsi stock at all or no?
The argument is to never hold a large position in one single company stock because the risk is too high relative to the expected return. This is called diversifiable risk that can be eliminated at no loss of return by holding many stocks instead of one. If the position is small it doesn't matter. The argument for getting rid of such things now is that it is highly likely you can do it at no tax cost. People sometime hold onto things for a long time and find out later that they don't want them and then it costs a lot to change investments.

student
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Re: Is an investment account the best choice for me (new guy)

Post by student » Fri Nov 10, 2017 8:58 am

randydimera wrote:
Fri Nov 10, 2017 8:52 am
student wrote:
Fri Nov 10, 2017 8:47 am
randydimera wrote:
Fri Nov 10, 2017 8:41 am
student wrote:
Fri Nov 10, 2017 8:33 am
randydimera wrote:
Fri Nov 10, 2017 8:06 am


Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very? I was just gonna call edward jones in the next several months and sell all my shares and just move on to straight Vanguard. Also I wonder if Vanguard has a bonus for transfering, because I could do that in theory. But if I was to sell Pepsi today it would be a 250 dollar EDJ fee for commission I guess is what I was told.
At 15% bracket, you do not have to pay federal tax on capital gain. I do not know whether selling all of them will push you over. Is so, do it in two years. $250 is a lot to pay for commission. If you transfer first, and then sell, it will be cheaper.
Well since I have no income currently and wont till 2019, I doubt ill have any issue moving tax brackets aslong as i sell it before 2019 right? And oh so if I transfer to something like vanguard, it would be cheaper then just outright selling from edward jones? Yeah i dont know a way out of selling it at edj unless i transfer it but i never considered that before. So transfer then cancel might save me a few bucks?
If you have no income, then you can sell them all at once. I still recommend that you transfer to Etrade, get the $100, sell the shares with no commission as they give you few to start with. Then buy Vanguard ETF with no commission again. Make sure to do all this within the free commission period.
So you recomend to buy Vanguard ETF through etrade instead of through vanguard itself? That just saves like the .15% ER of something like (VASGX)?
The ER for Vanguard ETF is the same as Admiral shares mutual funds. However, VASGX does not have ETF equivalent. I guess that depends on your decision, if you want one fund that covers all, then there is no ETF option. If you want to do a 3-fund portfolio that many like to do, then there is an ETF option.

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Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Fri Nov 10, 2017 9:15 am

randydimera wrote:
Fri Nov 10, 2017 8:52 am
So you recomend to buy Vanguard ETF through etrade instead of through vanguard itself? That just saves like the .15% ER of something like (VASGX)?
You would not save the 0.15%, There are expense ratios on any ETF. If the ER difference is 0.10%, then if you have invested $5,000, then the impact on your account from the "savings" is just $5 per year. So don't let just $5 per year in "savings" control or even influence the decision.

Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15% is not an ETF. You cannot buy that fund commission free at E*Trade or anywhere else other than Vanguard. If you buy Vanguard ETFs at E*Trade or any where else, you will have to buy several different ETFs to match the very broad diversification of Vanguard LifeStrategy Growth Fund (VASGX).

Broad diversification is very important in long-term investing, it helps to reduce volatility (risk). At age 23, suggest about 20% in bonds. This is expected to substantially reduce volatility (risk), with only a relatively slight decrease in return. Graph, "An Efficient Frontier: the power of diversification". Please see the wiki articles Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk", and "Asset allocation".

So I think its better to start with an account at Vanguard, not E*Trade or any other brokerage, and simply use a single very diversified mutual fund, Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%, rather than ETFs.
Last edited by ruralavalon on Fri Nov 10, 2017 9:16 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

cas
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Re: Is an investment account the best choice for me (new guy)

Post by cas » Fri Nov 10, 2017 9:16 am

dbr wrote:
Fri Nov 10, 2017 8:52 am
randydimera wrote:
Fri Nov 10, 2017 8:38 am
dbr wrote:
Fri Nov 10, 2017 8:20 am
randydimera wrote:
Fri Nov 10, 2017 8:06 am


Even in my tax bracket ill still have to pay federal tax on my pepsi stock? Or we just dont know that? Does it very?
If you really want to know what your tax might be you have to fill out a dummy tax return for your anticipated income in the year you want to plan for.
Well until 2019 my income will be practically nothing, so what does that mean for me?
It means that when you fill out a hypothetical tax return the result you get with or without selling the assets will be that you have no tax cost. It is still true that the only way to know for sure that you have "practically no income" is to plug the numbers into a tax return and find out.
I am completely and utterly NOT familiar with the "kiddie tax," but ...

Is the "kiddie tax" a potential issue here with OP selling the stock and realizing capital gains?

The Bogleheads wiki on "Kiddie Tax" (https://www.bogleheads.org/wiki/Kiddie_tax):
  • [Kiddie tax] applies if child is <24, still a dependent, and has >$2100 in unearned income (limit for 2017 and 2018)
  • Anything over $2100 in unearned income is taxed at the parent's rate
Again, I'm basically completely ignorant about the ins and outs of the kiddie tax, so I could be completely off base. But since OP is less than 24 and I don't think has said whether he/she is still a dependent, maybe a bit of head's up is warranted?

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Re: Is an investment account the best choice for me (new guy)

Post by grabiner » Fri Nov 10, 2017 10:49 am

cas wrote:
Fri Nov 10, 2017 9:16 am
I am completely and utterly NOT familiar with the "kiddie tax," but ...

Is the "kiddie tax" a potential issue here with OP selling the stock and realizing capital gains?

The Bogleheads wiki on "Kiddie Tax" (https://www.bogleheads.org/wiki/Kiddie_tax):
  • [Kiddie tax] applies if child is <24, still a dependent, and has >$2100 in unearned income (limit for 2017 and 2018)
  • Anything over $2100 in unearned income is taxed at the parent's rate
Again, I'm basically completely ignorant about the ins and outs of the kiddie tax, so I could be completely off base. But since OP is less than 24 and I don't think has said whether he/she is still a dependent, maybe a bit of head's up is warranted?
This is correct. If the OP is 23 in 2017, and is a dependent (which he likely is if his parents are paying his college tuition), then he can only take $2100 of capital gains tax-free; anything beyond that will be taxed at 15% if his parents are in a higher tax bracket.

Therefore, it makes sense to wait until 2018, when he will be 24 and exempt from the kiddie tax. (For most tax purposes, your age on December 31 of the tax year is what matters, not your age when you do the transaction.)
David Grabiner

randydimera
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Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Fri Nov 10, 2017 11:37 am

grabiner wrote:
Fri Nov 10, 2017 10:49 am
cas wrote:
Fri Nov 10, 2017 9:16 am
I am completely and utterly NOT familiar with the "kiddie tax," but ...

Is the "kiddie tax" a potential issue here with OP selling the stock and realizing capital gains?

The Bogleheads wiki on "Kiddie Tax" (https://www.bogleheads.org/wiki/Kiddie_tax):
  • [Kiddie tax] applies if child is <24, still a dependent, and has >$2100 in unearned income (limit for 2017 and 2018)
  • Anything over $2100 in unearned income is taxed at the parent's rate
Again, I'm basically completely ignorant about the ins and outs of the kiddie tax, so I could be completely off base. But since OP is less than 24 and I don't think has said whether he/she is still a dependent, maybe a bit of head's up is warranted?
This is correct. If the OP is 23 in 2017, and is a dependent (which he likely is if his parents are paying his college tuition), then he can only take $2100 of capital gains tax-free; anything beyond that will be taxed at 15% if his parents are in a higher tax bracket.

Therefore, it makes sense to wait until 2018, when he will be 24 and exempt from the kiddie tax. (For most tax purposes, your age on December 31 of the tax year is what matters, not your age when you do the transaction.)
Oh wow this is very interesting and I had no idea about it. So if I turn 24 in march of 2018 then It would be better to sell Pepsi then? Wow I had no idea of the kiddie tax. So once I turn 24, ill be able to take all of the 11 thousand of the capital gains tax free because im now longer in the "kiddie" category? Also would that 11k be considered 11k of income that I have to put on taxes when the time comes? I am wondering if it would be smarter to just keep the pepsi and transfer it over to Vanguard instead of Edward jones because im getting charged like 250 bucks to sell it anyway.

randydimera
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Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Fri Nov 10, 2017 1:54 pm

ruralavalon wrote:
Fri Nov 10, 2017 6:56 am
randydimera wrote:
Fri Nov 10, 2017 12:05 am
ruralavalon wrote:
Thu Nov 09, 2017 6:03 pm
At age 23 an asset allocation of 80/20 is reasonable in my opinion.
Also what is the difference in the mutual funds you listed and something like VOO? I read something about passive and active management. Just trying to figure out the right option for me
Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15% is a regular mutual fund. This particular fund is meant to be an all-in-one investment, that's used by itself as a complete investing portfolio, because it invests in both stocks and bonds, both in the U.S. and internationally. It does that by investing in 4 very diversified index funds, you see them listed on the Vanguard website.

Vanguard 500 Index ETF (VOO) ER 0.04% is an ETF. That's a type of mutual fund. ETF = Exchange Traded Fund. This particular ETF invests only in stocks of larger U.S. companies. It's most often used along with other funds, for bonds and international stocks, to make up a more diversified comprehensive portfolio. This particular ETF is a share class of Vanguard 500 Index Fund, with Investor Shares (VFINX) ER 0.14% and Admiral Shares (VTSAX) ER 0.04%.

I think that Vanguard LifeStrategy Growth Fund (VASGX) is the best way for you to start because it's so very diversified and comprehensive. That is what I suggest for you. A Target Retirement fund is also a possible choice.

. . . . .

Still to be determined is the type of account to use, a taxable account or Roth IRA, or perhaps both, depending on the "stipend as income" issue.

. . . . .

At Vanguard regular index funds are just as tax-efficient as ETFs, because they are just different share classes of the same fund. That's not true for any other fund company. Mutual funds are easier to use in my opinion, because trading mechanics are simpler. Wiki article, "ETFs vs Mutual Funds". This wiki article outlines some pros and cons of each type of fund.

For the most people it seems to come down to personal preference. For what it's worth I use only regular index mutual funds, not ETFs.
Awesome, a little update I went through and made the vanguard account and put 5,000 in it to start. I imagine I can up that to 10k once i get moving, I just wanted to start with 5k to make sure im comfortable using the website and everything and it is going find so far. So when I want to buy VASGX, do i buy shares? Or since it is a mutual fund are they not called shares? Do I just look it up and spend 5k on it? I want to make sure I do it right. I think I have to wait till they verify my bank but maybe not. I could get started today, but i imagine if they wont let me ill have to wait till moday because thats the next business day

student
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Re: Is an investment account the best choice for me (new guy)

Post by student » Fri Nov 10, 2017 4:00 pm

randydimera wrote:
Fri Nov 10, 2017 1:54 pm
ruralavalon wrote:
Fri Nov 10, 2017 6:56 am
randydimera wrote:
Fri Nov 10, 2017 12:05 am
ruralavalon wrote:
Thu Nov 09, 2017 6:03 pm
At age 23 an asset allocation of 80/20 is reasonable in my opinion.
Also what is the difference in the mutual funds you listed and something like VOO? I read something about passive and active management. Just trying to figure out the right option for me
Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15% is a regular mutual fund. This particular fund is meant to be an all-in-one investment, that's used by itself as a complete investing portfolio, because it invests in both stocks and bonds, both in the U.S. and internationally. It does that by investing in 4 very diversified index funds, you see them listed on the Vanguard website.

Vanguard 500 Index ETF (VOO) ER 0.04% is an ETF. That's a type of mutual fund. ETF = Exchange Traded Fund. This particular ETF invests only in stocks of larger U.S. companies. It's most often used along with other funds, for bonds and international stocks, to make up a more diversified comprehensive portfolio. This particular ETF is a share class of Vanguard 500 Index Fund, with Investor Shares (VFINX) ER 0.14% and Admiral Shares (VTSAX) ER 0.04%.

I think that Vanguard LifeStrategy Growth Fund (VASGX) is the best way for you to start because it's so very diversified and comprehensive. That is what I suggest for you. A Target Retirement fund is also a possible choice.

. . . . .

Still to be determined is the type of account to use, a taxable account or Roth IRA, or perhaps both, depending on the "stipend as income" issue.

. . . . .

At Vanguard regular index funds are just as tax-efficient as ETFs, because they are just different share classes of the same fund. That's not true for any other fund company. Mutual funds are easier to use in my opinion, because trading mechanics are simpler. Wiki article, "ETFs vs Mutual Funds". This wiki article outlines some pros and cons of each type of fund.

For the most people it seems to come down to personal preference. For what it's worth I use only regular index mutual funds, not ETFs.
Awesome, a little update I went through and made the vanguard account and put 5,000 in it to start. I imagine I can up that to 10k once i get moving, I just wanted to start with 5k to make sure im comfortable using the website and everything and it is going find so far. So when I want to buy VASGX, do i buy shares? Or since it is a mutual fund are they not called shares? Do I just look it up and spend 5k on it? I want to make sure I do it right. I think I have to wait till they verify my bank but maybe not. I could get started today, but i imagine if they wont let me ill have to wait till moday because thats the next business day
For mutual fund, you can buy dollar amount. You enter $5,000 and they will purchase the correct number of fractional shares based on the closing price.

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Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Fri Nov 10, 2017 8:52 pm

Can someone tell me about the federal money market on my account? It keeps giving me the option to send money to it, do I need to do this?

randydimera
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Re: Is an investment account the best choice for me (new guy)

Post by randydimera » Fri Nov 10, 2017 11:57 pm

ruralavalon wrote:
Fri Nov 10, 2017 8:24 am
randydimera wrote:
Thu Nov 09, 2017 9:25 pm
I will get my bachelors at the end of next year, and my masters at the end of 2019 because my masters will only take a year so by the beginning of 2020, (ill be 25-26) ill be in employment. Perhaps sooner because ill be in an internship this summer so thatll be cool.
. . . . .
Probably not [$5.5k or more from internship next summer] , its like 480 hours and I might get a very small stipend if im lucky. But if I did it would be probably like 100 bucks a week or so [emphasis added]
randydimera wrote:
Thu Nov 09, 2017 10:55 pm
I believe it [internship work next summer] will be a hotel because the plan is for me to be a manager and eventually a really high up manager of a large chain hotel (hopefully). The internship will be a good opportunity and I say I might get a stipend because some are paid and some are not, I have no idea yet but theres no way ill make the 5500 I need for the roth. [emphasi added] I have everything paid off and my mom helps me a lot so i am not worried about moving expenses or emergencies as of right now, she is such a great woman and I am blessed and I am lucky to have her. I will be keeping atleast 5k maybe 10k as an emergency fund in my checking account. So I would put maybe 10k possibly 12-15 in the market [emphasis added] since I have like 21k in a checking right now
randydimera wrote:
Fri Nov 10, 2017 7:39 am
This is very informative, thank you. I am reading the wiki page as we speak here. And yeah the stipend is objective, it isnt guaranteed because idk what place ill be interning at either, and if i get a stipend it will be incredibly small. My university is trying to hook me up with a more exotic position meaning send me somewhere else in the U.S [emphasis added] and they give me free room and board and food but I wont get paid. Its a way for me to see a different part of the country in the hospitality industry. Either that or ill just stay where I am and work at a hotel here. Its all still to be determined. So when I make an account at Vanguard, I just pick the individual account option right and look into VASGX? Just want to make sure im not missing anything [emphasis added]
Some things are necessarily up in the air about the paid internship next summer, so I think it's good to be flexible.

Instead of investing "maybe 10k possibly 12-15 in the market" hold back another $5k so you can do a Roth IRA contribution next year if that turns out to be feasible. It's important in long-term investing to make full use of tax-advantaged accounts when possible. So make the amount to invest now in the range $5k - 10k. You decide.

I suggest that you open a regular individual account at Vanguard and invest around $5k - 10k now. Just call Vanguard and they will help you do this. Or you can set it upon-line. I suggest that you simply invest it all in just one comprehensive fund, specifically Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%. The asset allocation of 80/20 stocks/bonds is suitable for your age (23) in my opinion.

If next summer turns out to be a paid internship with W-2 income, then next year open a Roth IRA at Vanguard, contribute up to $5.5k but no more than the amount of the W-2 income, and simply invest it all in Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%.

If it turns out that you can't contribute to a Roth IRA next year, then reevaluate whether you want to contribute more to the individual taxable account.

. . . . .

I suggest that you read one or two books on general investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the basics Morningstar, "Investing Classroom".

If you have any questions just ask.

I hope that this helps.
Can I just put down 5k right now and maybe next week put another 5k in? Or is it better to go all in off the bat?

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BL
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Re: Is an investment account the best choice for me (new guy)

Post by BL » Sat Nov 11, 2017 12:39 am

randydimera wrote:
Fri Nov 10, 2017 8:52 pm
Can someone tell me about the federal money market on my account? It keeps giving me the option to send money to it, do I need to do this?
I have the mutual fund division, not the newer brokerage that all new investors are given. However, I do believe you have it go to their default mm and when you see it there online, you can do a transfer (sell and buy) to the desired fund or funds.

Once you have it in the desired fund (be sure you choose online statements so you don't get charged for low account numbers), then perhaps it is time to have Vanguard pull your entire investment from EJ (transfer in kind). Once you have it there, you can sell when you have figured out when it is the best time. Now that you have some clues, you need to research Kiddie tax as well as how income affects you college funding, etc. Always double check what we tell you, so you know it for sure. We are just a bunch of folks who have learned a lot, but may not always be correct, even though we like to pay it back since we have benefited so much from Bogleheads.

I also recommend you get a tax program and play "what-if" games with it with various Capital Gains, etc. You really learn a lot about taxes by doing your own, even if you should decide to have someone prepare it for you. Doing it by paper with forms and Pub 17 or page instructions from IRS.gov is an even better way to learn it.

I suggest you get a recommended book or two such as Boglehead's Guide to Investing and share it with your mother when you have finished it. Here is a free pdf booklet you can start with:
https://www.etf.com/docs/IfYouCan.pdf

Although I like the simplicity of an all-in-one fund such as Life Strategy, it may not be ideal in taxable for the long haul. Perhaps one or 2 stock funds (that would be 3k in each of Total Stock and total international) would be a permanent start, and either bonds or bank CDs for the 20% fixed income would be suitable. That is basically the 3-fund portfolio as is LS. Selling PEPSI when the time is right and buying a total US stock fund would be exchanging a single un-diversified fund for a fund made up of several thousand US companies.

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Re: Is an investment account the best choice for me (new guy)

Post by ruralavalon » Sat Nov 11, 2017 7:31 am

randydimera wrote:
Fri Nov 10, 2017 11:57 pm
Can I just put down 5k right now and maybe next week put another 5k in? Or is it better to go all in off the bat?
It probably makes no difference.

It was always my policy to invest whenever I had extra money to invest, rather than wait around for a possible better time.

Just go ahead and invest all at once, get it over with and get on with life.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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