18 Year old Wants To Start Investing in Roth IRA

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futureducator19
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Joined: Mon Nov 13, 2017 9:52 am

18 Year old Wants To Start Investing in Roth IRA

Post by futureducator19 » Wed Dec 06, 2017 9:54 pm

Hello,

I was wondering how to best explain the benefits of VSTMX. For example the low expense ratio, the turnover rate, and capital gains. Also how to explain a high stock asset allocation and benefits of a Roth. How would you explain Index funds to a beginning investor who has college paid for? What are the best ways of explaining the benefits of Total Market Index funds vs. single stocks, ext. Any insight would be greatly appreciated!
Last edited by futureducator19 on Thu Dec 07, 2017 9:49 am, edited 1 time in total.

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dougger5
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Location: Not far from Malvern

Re: 18 Year Old Wants To Start Investing In Roth IRA

Post by dougger5 » Wed Dec 06, 2017 10:13 pm

It is said (was it Markowitz who first coined it?) that diversification is the one free lunch in investing. It mitigates the risk of individual stock and exposure to too few sectors.

The most efficient means of diversification is by owning low-cost, broad market index funds.

And while it is difficult-to-impossible to consistently beat the market, then at least you can own the market.
"I've been ionized, but I'm okay now." -Buckaroo Banzai

mega317
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Re: 18 Year Old Wants To Start Investing In Roth IRA

Post by mega317 » Wed Dec 06, 2017 10:37 pm

100% stock may not be the best way to go for an 18 year old. He will likely have some large short-term expenses such as car and traveling, even if college is covered. Might as well fill a Roth if he can, contributions can be withdrawn without penalty, but it could be reasonable to have a much more conservative allocation.

To answer your question, I think if he asked specifically about a total stock index fund then he is well on his way and won't require too much hand-holding. Just point him to the forum and a couple books.

MotoTrojan
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Joined: Wed Feb 01, 2017 8:39 pm

Re: 18 Year Old Wants To Start Investing In Roth IRA

Post by MotoTrojan » Wed Dec 06, 2017 11:11 pm

Can only contribute as much as you made in taxable wages that year, don't forget.

At 18 I see nothing wrong with 100% stock. Eventually perhaps add some International and learn about maintaining your AA that way.

blastoff
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Joined: Thu Jan 19, 2012 12:04 pm

Re: 18 Year Old Wants To Start Investing In Roth IRA

Post by blastoff » Wed Dec 06, 2017 11:20 pm

Could have them post here if they are interested. They might really enjoy it.

TravelforFun
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Joined: Tue Dec 04, 2012 11:05 pm

Re: 18 Year Old Wants To Start Investing In Roth IRA

Post by TravelforFun » Wed Dec 06, 2017 11:34 pm

mega317 wrote:
Wed Dec 06, 2017 10:37 pm
100% stock may not be the best way to go for an 18 year old. He will likely have some large short-term expenses such as car and traveling, even if college is covered. Might as well fill a Roth if he can, contributions can be withdrawn without penalty, but it could be reasonable to have a much more conservative allocation.

To answer your question, I think if he asked specifically about a total stock index fund then he is well on his way and won't require too much hand-holding. Just point him to the forum and a couple books.
I would have to disagree. 100% equity in a Roth for an 18-year-old person is not unreasonable at all. I would recommend it. One would hope once you put money in a Roth, you would leave it alone. How can you beat a 50 years of tax-free growth?

TravelforFun

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