Thoughts on this beginner strategy?

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Topic Author
Brydge
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Joined: Tue Jan 23, 2018 8:07 pm

Thoughts on this beginner strategy?

Post by Brydge »

Hello,

I am a newbie investor about to open my first Roth IRA. Because there are minimum purchases on most index funds, and because I am limited in my funds available to invest, I am considering purchasing Target Date Funds initially in order to keep my account diversified. Once I reach a substantial amount (for me), such as $8-10k, then selling the target date fund and purchasing the individual stock and bond index funds.

Does this make sense? Or should I forego the target date fund and start immediately with a stock index, and when I save enough money buy a bond index, and so on?

Thanks in advance!!
Silverado
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Joined: Fri Oct 18, 2013 6:07 pm

Re: Thoughts on this beginner strategy?

Post by Silverado »

Sure, at this point that is fine. Getting started is the important part. Keep reading and learning as you get that balance moving up.

Good luck, and don't worry about anything else but saving.
John Laurens
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Re: Thoughts on this beginner strategy?

Post by John Laurens »

Fine for now? It’s fine forever.

Regards,
John
ThrustVectoring
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Re: Thoughts on this beginner strategy?

Post by ThrustVectoring »

Brydge wrote: Tue Jan 30, 2018 5:47 pm Does this make sense? Or should I forego the target date fund and start immediately with a stock index, and when I save enough money buy a bond index, and so on?
Either works great. With only $5k of your total retirement portfolio invested, what you're invested in doesn't particularly matter. Do whatever strategy gets you started, saving, and working on things.
Current portfolio: 60% VTI / 40% VXUS
Olemiss540
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Re: Thoughts on this beginner strategy?

Post by Olemiss540 »

Not to brag, but I have hundreds of dollars more than you :moneybag :moneybag :moneybag and I am still in target date funds!

Target date funds are not only an effective approach, but minimizes potential mental mistakes on my part thinking I should shift/tilt/slice/time my investments. Hands off makes it even easier to stay the course which is the one biggest reason investors return less than market index on average.

"The enemy of a good plan is a perfect one" or something like that....
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
3funder
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Re: Thoughts on this beginner strategy?

Post by 3funder »

John Laurens wrote: Tue Jan 30, 2018 5:56 pm Fine for now? It’s fine forever.

Regards,
John
+1
Global stocks, US bonds, and time.
Northern Flicker
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Re: Thoughts on this beginner strategy?

Post by Northern Flicker »

Brydge wrote: Tue Jan 30, 2018 5:47 pm Hello,

I am a newbie investor about to open my first Roth IRA. Because there are minimum purchases on most index funds, and because I am limited in my funds available to invest, I am considering purchasing Target Date Funds initially in order to keep my account diversified. Once I reach a substantial amount (for me), such as $8-10k, then selling the target date fund and purchasing the individual stock and bond index funds.

Does this make sense?
Excellent plan. Don't be in a hurry to leave the TR funds. They provide very inexpensive professional management, which is worth alot more than it costs.
stimulacra
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Location: Houston

Re: Thoughts on this beginner strategy?

Post by stimulacra »

Either method works. You'll be able to diversify to Admiral funds before you know it :)
Caduceus
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Re: Thoughts on this beginner strategy?

Post by Caduceus »

Welcome to the board and good luck starting on your investment journey! Yes, your plan is sound. The most important thing as you are starting out is to save as much as you can and to invest in your own skills and education. Please keep asking questions! :D
Topic Author
Brydge
Posts: 12
Joined: Tue Jan 23, 2018 8:07 pm

Re: Thoughts on this beginner strategy?

Post by Brydge »

Thank you guys for the helpful responses. It's great that newbies like me can ask newbie questions here and not get dismissed.
mortfree
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Re: Thoughts on this beginner strategy?

Post by mortfree »

If you met the requirements in 2017, make this Roth IRA contribution count towards 2017. you have until April 15 (or tax day) to do so.

Invest in VTI ITOT (Total US Stock) no minimum... target date fund or life strategy funds is good too (assuming account is with Vanguard).

Edit knowing OP is choosing Fidelity
Last edited by mortfree on Wed Jan 31, 2018 9:50 am, edited 1 time in total.
Mid-40’s
radiowave
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Re: Thoughts on this beginner strategy?

Post by radiowave »

Agree with the above, Target Date INDEX funds are excellent for the long haul. Note some companies like Fidelity have an actively managed Target Date suite of funds at a much higher expense ratio. The index TD funds typically have an ER .14-.16.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page
Topic Author
Brydge
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Joined: Tue Jan 23, 2018 8:07 pm

Re: Thoughts on this beginner strategy?

Post by Brydge »

I was specifically looking at Fidelity Freedom Index 2050 Fund - Investor Class (FIPFX). It has a net expense ratio of 0.15

I was going back and forth between Fidelity and Vanguard, but I really like the research tools available through Fidelity. It also seems like Fidelity has matched many Vanguard funds in terms of makeup and fees. Am I wrong?
Northern Flicker
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Re: Thoughts on this beginner strategy?

Post by Northern Flicker »

Brydge wrote: Wed Jan 31, 2018 9:42 am I was specifically looking at Fidelity Freedom Index 2050 Fund - Investor Class (FIPFX). It has a net expense ratio of 0.15

I was going back and forth between Fidelity and Vanguard, but I really like the research tools available through Fidelity. It also seems like Fidelity has matched many Vanguard funds in terms of makeup and fees. Am I wrong?
That's a fine choice. The choice of Fidelity vs Vanguard index funds is not significant. Vanguard has cheaper actively managed funds, and many Vanguard bond funds are cheaper than their Fidelity counterparts. It is not hard to do a direct transfer of Roth assets from one fund provider to another, so it's not like the decision is cast in stone forever.
Dynasty90
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Re: Thoughts on this beginner strategy?

Post by Dynasty90 »

mortfree wrote: Wed Jan 31, 2018 9:22 am If you met the requirements in 2017, make this Roth IRA contribution count towards 2017. you have until April 15 (or tax day) to do so.

Invest in VTI ITOT (Total US Stock) no minimum... target date fund or life strategy funds is good too (assuming account is with Vanguard).

Edit knowing OP is choosing Fidelity
Please excuse my silly question (I'm fairly new to investing too and still learning), but what would be the advantage of doing that? Is it so you can max out the Roth IRA in tax year 2017 while technically in calendar year 2018? That way tax year 2018 is still open to max out the Roth IRA again?
Silverado
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Joined: Fri Oct 18, 2013 6:07 pm

Re: Thoughts on this beginner strategy?

Post by Silverado »

Dynasty90 wrote: Wed Jan 31, 2018 9:31 pm
mortfree wrote: Wed Jan 31, 2018 9:22 am If you met the requirements in 2017, make this Roth IRA contribution count towards 2017. you have until April 15 (or tax day) to do so.

Invest in VTI ITOT (Total US Stock) no minimum... target date fund or life strategy funds is good too (assuming account is with Vanguard).

Edit knowing OP is choosing Fidelity
Please excuse my silly question (I'm fairly new to investing too and still learning), but what would be the advantage of doing that? Is it so you can max out the Roth IRA in tax year 2017 while technically in calendar year 2018? That way tax year 2018 is still open to max out the Roth IRA again?
That's correct.
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Taylor Larimore
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Re: Thoughts on this beginner strategy?

Post by Taylor Larimore »

Brydge wrote: Wed Jan 31, 2018 8:12 am Thank you guys for the helpful responses. It's great that newbies like me can ask newbie questions here and not get dismissed.
Brydge:

We were all "newbies." Learn from our successes and disappointments.

Best wishes.
Time
"Simplicity is the master key to financial success." -- Jack Bogle
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