Please advice - Fresh graduate starting investments

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dundee
Posts: 40
Joined: Mon Mar 21, 2016 2:27 pm

Please advice - Fresh graduate starting investments

Post by dundee » Thu Sep 13, 2018 1:07 pm

Dear Friends,

My daughter graduated from college and has been working for over a year now. Her job pays well that would place her in 22% tax bracket. She lives a boglehead lifestyle, shares an apartment, does not plan to own a car. She has been managing her expenses well.Has a modest emergency fund. She has following 3 accounts that she has been asking my help with. The current allocation is as follows:

401k account through Security Benefit:
40% in Vanguard S&P 500 Index fund VFIAX
30% in Vanguard MidCap Index Fund VIMSX
30% in Vanguard SmallCap Index Fund NAESX
all other funds in the 401K account are actively managed. T Row Price 2060 Target date retirement fund has an expenses ratio of 0.74%.
None of the other choices in 401k account are boglehead options.

Roth IRA account with Fidelity
100% in iShares Core S&P 500 fund (IVV)

Vanguard brokerage account
100% in Target Retirement 2060 Fund (VTTSX)

Additional notes:
    Of the above, 401K account has slightly over 10k in it. Other two accounts have much less than 10k. This is the beginning of hopefully long years of saving and investing for her, so, I want her to start right and set her on a path that she doesn't have to change.
      With 401k, there are limited options. And I am satisfied with the way it is currently invested.


      The questions I have are as follows:

      1. Roth account is with Fidelity and Brokerage account in Vanguard. This just kind of happened, but, they can easily be moved into one institution. Is it better to have them separate? or is it better to keep in under one roof?

      2. Roth IRA is primarily for retirement. So, that is a real long term plan. What should be the investment choices there? Currently it is a clean slate and the little money in the existing account can be moved anywhere.

      3. Brokerage account is money kept for potential graduate school (after 3 years) or Future home purchase (after 5 years). It is not clear if she will go to grad school. I don't want her to keep the money in CD's or T-Bills. She is willing to take risk, so, would like to invest in the market. What would be the best investment choices there?

      Thank you for your advice.

      mhalley
      Posts: 6076
      Joined: Tue Nov 20, 2007 6:02 am

      Re: Please advice - Fresh graduate starting investments

      Post by mhalley » Thu Sep 13, 2018 1:55 pm

      Single or multiple brokerages is a personal decision. Simplicity of rebalancing with one brokerage vs (probably more emotional than actual) decreased risk of losing money due to account takeover, hacking, etc. I like multiple brokerages myself.
      The new no fee fidelity total stock market fund would be great for the Ira.
      Money needed within 5 years should be saved, not invested. A cd ladder would be best, if she wants to take some risk, maybe 30% in total stock market.

      tesuzuki2002
      Posts: 523
      Joined: Fri Dec 11, 2015 12:40 pm

      Re: Please advice - Fresh graduate starting investments

      Post by tesuzuki2002 » Thu Sep 13, 2018 4:52 pm

      dundee wrote:
      Thu Sep 13, 2018 1:07 pm
      Dear Friends,

      My daughter graduated from college and has been working for over a year now. Her job pays well that would place her in 22% tax bracket. She lives a boglehead lifestyle, shares an apartment, does not plan to own a car. She has been managing her expenses well.Has a modest emergency fund. She has following 3 accounts that she has been asking my help with. The current allocation is as follows:

      401k account through Security Benefit:
      40% in Vanguard S&P 500 Index fund VFIAX
      30% in Vanguard MidCap Index Fund VIMSX
      30% in Vanguard SmallCap Index Fund NAESX
      all other funds in the 401K account are actively managed. T Row Price 2060 Target date retirement fund has an expenses ratio of 0.74%.
      None of the other choices in 401k account are boglehead options.

      Roth IRA account with Fidelity
      100% in iShares Core S&P 500 fund (IVV)

      Vanguard brokerage account
      100% in Target Retirement 2060 Fund (VTTSX)

      Additional notes:
        Of the above, 401K account has slightly over 10k in it. Other two accounts have much less than 10k. This is the beginning of hopefully long years of saving and investing for her, so, I want her to start right and set her on a path that she doesn't have to change.
          With 401k, there are limited options. And I am satisfied with the way it is currently invested.


          The questions I have are as follows:

          1. Roth account is with Fidelity and Brokerage account in Vanguard. This just kind of happened, but, they can easily be moved into one institution. Is it better to have them separate? or is it better to keep in under one roof?

          2. Roth IRA is primarily for retirement. So, that is a real long term plan. What should be the investment choices there? Currently it is a clean slate and the little money in the existing account can be moved anywhere.

          3. Brokerage account is money kept for potential graduate school (after 3 years) or Future home purchase (after 5 years). It is not clear if she will go to grad school. I don't want her to keep the money in CD's or T-Bills. She is willing to take risk, so, would like to invest in the market. What would be the best investment choices there?

          Thank you for your advice.
          I highly encourage keeping it simple!!!! I complicated things myself... and have spent the last 3 years trying to simplify things and not pay too much in gains taxes...

          LOW COST high savings rate.... and balance it in the total market.. with that strategy... when she's 35 she can easily considering a career change pivot, or retirement all together.

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