19 Years Old, Need some advice

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Topic Author
Ynarto
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Joined: Fri Jul 13, 2018 10:31 am

19 Years Old, Need some advice

Post by Ynarto » Sun Nov 24, 2019 1:28 am

Hello! I am currently 19 almost 20 and I was hoping to get advice on my vanguard brokerage account and my vanguard Roth IRA account.

Currently I have:
-Vanguard Brokerage: 10k (VGT - 50%, VTI- 50%); invest extra money after I max my Roth IRA
-Vanguard Roth IRA: 10k (VTSAX- 100%); i try to max it out every year but I only work part time so not guaranteed every year

I started investing in 2018 at 18 and I live at home with my parents so I don't pay for anything except for wants. I also keep at least $2000 in my bank checking account at all times. I've never had any advice at home so I was just wondering if I could have some pointers especially on what I should do in the future to better my portfolio or things I probably don't know about investing properly(because I don't really know anything except basic knowledge on the internet) but should know. Thank you in advance!

boogiehead
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Joined: Wed Sep 27, 2017 11:45 pm

Re: 19 Years Old, Need some advice

Post by boogiehead » Sun Nov 24, 2019 1:39 am

You are off to a great start, your investments are simple and sound.

Just some general advice off the top of my head

1) Invest in yourself ... I'm assuming you are attending college and if you want a quick start to a career STEM would the way to go.
2) Avoid debt
3) Accumulate assets

HomeStretch
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Re: 19 Years Old, Need some advice

Post by HomeStretch » Sun Nov 24, 2019 1:44 am

+1

Your portfolio is fine. As it grows, you may want to reconsider the heavy weighting to a sector fund (VGT). The more diversified VTI already includes the technology sector.

Do you do your own taxes? It is beneficial to understand your taxes as it will help you in the future when making investing and other financial decisions.

Miriam2
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Re: 19 Years Old, Need some advice

Post by Miriam2 » Sun Nov 24, 2019 2:07 am

Ynarto wrote: Hello! I am currently 19 almost 20 and I was hoping to get advice on my vanguard brokerage account and my vanguard Roth IRA account.

Currently I have:
-Vanguard Brokerage: 10k (VGT - 50%, VTI- 50%); invest extra money after I max my Roth IRA
-Vanguard Roth IRA: 10k (VTSAX- 100%); i try to max it out every year but I only work part time so not guaranteed every year
Hi Ynarto!
My kids are your age (I'm over the hill :mrgreen: ). I suggest that you pack as much money as you can every year into your Roth - and later into your 401k - every possible penny. You will create an unbelievable goldmine in the years to come. You won't believe it. My kids can't believe it. It takes time to realize the importance of steady contributions into your accounts coupled with the magic of compounding. And you're starting so early, it will be incredible :D

My kids use the Total Stock Market fund in their taxable account (very tax efficient) and the Vanguard Target Date Fund 2055 in their Roth IRAs. The Target Date fund is 90% stocks, 10% bonds, appropriate for their age. But there's nothing wrong using Total Stock in your Roth at your young age.

I'm sure other Bogleheads will suggest that you sell the VGT (Vanguard Information Technology) ETF now and put the money into the VTI (Total Stock fund). VGT is called a sector fund or ETF - think, what would happen if that particular sector of the market goes down? Like in 2000-2002? How would you feel losing 50% or more of your money very quickly? Don't take the chance, just put the money into mainstream Total Stock (what Jack Bogle calls the entire haystack).
Ynarto wrote:. . . I was just wondering if I could have some pointers especially on what I should do in the future to better my portfolio or things I probably don't know about investing properly(because I don't really know anything except basic knowledge on the internet) but should know.
Here, read this right now!

"If You Can" by William Bernstein - written for millennials and everyone else :D

You can download the book - it's only 20-some pages long - and it will scare you into proper action immediately.

http://www.etf.com/docs/IfYouCan.pdf

http://efficientfrontier.com/ef/0adhoc/2books.htm

ny_rn
Posts: 469
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Re: 19 Years Old, Need some advice

Post by ny_rn » Sun Nov 24, 2019 4:30 am

Keep doing what you're doing. Focus on growing the income and savings rate. Way to go!

lakpr
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Re: 19 Years Old, Need some advice

Post by lakpr » Sun Nov 24, 2019 4:43 am

Great to see that you started investing at such a young age!

As has been pointed out already, sell VGT and buy VTI soon. First principle of Bogle : buy the entire market, not just slices of it.

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Brianmcg321
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Re: 19 Years Old, Need some advice

Post by Brianmcg321 » Sun Nov 24, 2019 6:30 am

Read this blog: https://jlcollinsnh.com/stock-series/

Your doing great!

Keep it simple!
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.

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Wiggums
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Re: 19 Years Old, Need some advice

Post by Wiggums » Sun Nov 24, 2019 7:29 am

I agree. You are doing great. Congratulations.

I am not a fan of the technology fund.

Your savings rate and time in the market are your two best friends.

Good luck to you...

brent0485
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Joined: Sun Oct 27, 2019 1:53 pm

Re: 19 Years Old, Need some advice

Post by brent0485 » Sun Nov 24, 2019 7:48 am

Wish I could go back to being 18, and start investing. That’s great you’re getting started early. Pick a low cost index fund that tracks the total stock market. Build that up as your base, at least before picking other stocks/funds. Contribute to a 401k once you get an employer that offers one.

Topic Author
Ynarto
Posts: 11
Joined: Fri Jul 13, 2018 10:31 am

Re: 19 Years Old, Need some advice

Post by Ynarto » Sun Nov 24, 2019 1:33 pm

Thank you so much for the responses everyone! I really appreciated I got way more then I expected. Im going to try to respond to everyone but not be redundant in my responses.
boogiehead wrote:
Sun Nov 24, 2019 1:39 am

1) Invest in yourself ... I'm assuming you are attending college and if you want a quick start to a career STEM would the way to go.
2) Avoid debt
3) Accumulate assets
I am currently attending a 4-Year college and I am actually aiming to go to dental school. I currently have no debts because I stay at home with parents. but I pay my credit card off completely every month. I also save 60% of my income every month and I spend the other 40% on mostly food an occasionally wants.
HomeStretch wrote:
Sun Nov 24, 2019 1:44 am
+1

Do you do your own taxes? It is beneficial to understand your taxes as it will help you in the future when making investing and other financial decisions.
I do not do my own taxes. I am still filed as dependent and my dad's accountant does my taxes. I'm not sure when I should become independent or how tax really works.
Miriam2 wrote:
Sun Nov 24, 2019 2:07 am

I'm sure other Bogleheads will suggest that you sell the VGT (Vanguard Information Technology) ETF now and put the money into the VTI (Total Stock fund). VGT is called a sector fund or ETF - think, what would happen if that particular sector of the market goes down? Like in 2000-2002? How would you feel losing 50% or more of your money very quickly? Don't take the chance, just put the money into mainstream Total Stock (what Jack Bogle calls the entire haystack).
Thank you so much for the informational links! I WILL read them. I will also consider selling VGT and transferring it to VTI but I was wondering should I only be investing in VGT? What funds should I look into for future investments?
Brianmcg321 wrote:
Sun Nov 24, 2019 6:30 am
Read this blog: https://jlcollinsnh.com/stock-series/

Your doing great!

Keep it simple!
Thank you! I will read all of it!
Wiggums wrote:
Sun Nov 24, 2019 7:29 am
I agree. You are doing great. Congratulations.

I am not a fan of the technology fund.

Your savings rate and time in the market are your two best friends.

Good luck to you...
How come no one likes the VGT fund? Is it because it's more volatile and and not diverse?

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BL
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Re: 19 Years Old, Need some advice

Post by BL » Sun Nov 24, 2019 1:54 pm

Miriam2 wrote:
Sun Nov 24, 2019 2:07 am
Ynarto wrote: Hello! I am currently 19 almost 20 and I was hoping to get advice on my vanguard brokerage account and my vanguard Roth IRA account.

Currently I have:
-Vanguard Brokerage: 10k (VGT - 50%, VTI- 50%); invest extra money after I max my Roth IRA
-Vanguard Roth IRA: 10k (VTSAX- 100%); i try to max it out every year but I only work part time so not guaranteed every year
Hi Ynarto!
My kids are your age (I'm over the hill :mrgreen: ). I suggest that you pack as much money as you can every year into your Roth - and later into your 401k - every possible penny. You will create an unbelievable goldmine in the years to come. You won't believe it. My kids can't believe it. It takes time to realize the importance of steady contributions into your accounts coupled with the magic of compounding. And you're starting so early, it will be incredible :D

My kids use the Total Stock Market fund in their taxable account (very tax efficient) and the Vanguard Target Date Fund 2055 in their Roth IRAs. The Target Date fund is 90% stocks, 10% bonds, appropriate for their age. But there's nothing wrong using Total Stock in your Roth at your young age.

I'm sure other Bogleheads will suggest that you sell the VGT (Vanguard Information Technology) ETF now and put the money into the VTI (Total Stock fund). VGT is called a sector fund or ETF - think, what would happen if that particular sector of the market goes down? Like in 2000-2002? How would you feel losing 50% or more of your money very quickly? Don't take the chance, just put the money into mainstream Total Stock (what Jack Bogle calls the entire haystack).
Ynarto wrote:. . . I was just wondering if I could have some pointers especially on what I should do in the future to better my portfolio or things I probably don't know about investing properly(because I don't really know anything except basic knowledge on the internet) but should know.
Here, read this right now!

"If You Can" by William Bernstein - written for millennials and everyone else :D

You can download the book - it's only 20-some pages long - and it will scare you into proper action immediately.

http://www.etf.com/docs/IfYouCan.pdf

http://efficientfrontier.com/ef/0adhoc/2books.htm
+1
Agree to reading above free pdf. It is packed with good info and a quick read, and should be read many times.
Many of us consider a target fund to be close enough to the 3-fund total market portfolio.

Stick with total market which includes sectors; don't overweight any particular sector. Look up what happened to technology sector in about year 2000, after doing great for quite a while.

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1789
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Re: 19 Years Old, Need some advice

Post by 1789 » Sun Nov 24, 2019 2:08 pm

Excellent start! Keep adding more funds but make sure you are enjoying your life too. As mentioned tech funds are great until they are not so great anymore (read what happened in last tech bubble (2000-2002).
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

mcraepat9
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Re: 19 Years Old, Need some advice

Post by mcraepat9 » Sun Nov 24, 2019 2:14 pm

Ditch the tech fund. Overweight in a “hot” industry at any one time is usually a recipe for disaster. Stick with total market funds.
Amateur investors are not cool-headed logicians.

Bama12
Posts: 227
Joined: Fri Aug 30, 2019 11:48 pm

Re: 19 Years Old, Need some advice

Post by Bama12 » Sun Nov 24, 2019 2:51 pm

Ynarto wrote:
Sun Nov 24, 2019 1:28 am
Hello! I am currently 19 almost 20 and I was hoping to get advice on my vanguard brokerage account and my vanguard Roth IRA account.

Currently I have:
-Vanguard Brokerage: 10k (VGT - 50%, VTI- 50%); invest extra money after I max my Roth IRA
-Vanguard Roth IRA: 10k (VTSAX- 100%); i try to max it out every year but I only work part time so not guaranteed every year

I started investing in 2018 at 18 and I live at home with my parents so I don't pay for anything except for wants. I also keep at least $2000 in my bank checking account at all times. I've never had any advice at home so I was just wondering if I could have some pointers especially on what I should do in the future to better my portfolio or things I probably don't know about investing properly(because I don't really know anything except basic knowledge on the internet) but should know. Thank you in advance!
Make your Brokerage account your Emergency Fund-Put 10k in Money Market and forgot about it unless you are older and about to lose your house.

Your Roth Ira- I would add Vanguard small cap. 50% VTSAX 20% VTI 10% Small Cap 20% Small Value.
The total stock market is great but you get very little of small cap.

Keep you 2,000 in the bank.

Never get Debt. Save for a car and house.
Save in a money market account or something very safe.

What about college debt? If you have any pay it first.
After college,
Fund Roth.
Have fun you are 19.
Save for house.
Save for Car if needed or for later in life.

retired@50
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Location: Living in the U.S.A.

Re: 19 Years Old, Need some advice

Post by retired@50 » Sun Nov 24, 2019 3:49 pm

HomeStretch wrote:
Sun Nov 24, 2019 1:44 am
+1

Your portfolio is fine. As it grows, you may want to reconsider the heavy weighting to a sector fund (VGT). The more diversified VTI already includes the technology sector.

Do you do your own taxes? It is beneficial to understand your taxes as it will help you in the future when making investing and other financial decisions.
+1
Over exposure (weight) to any sector isn't really the Boglehead approach. Trying to outsmart the market and other investors doesn't typically work, at least not in the long term. You'll be an investor for another 60 years or more... Invest regularly, own the whole market, you'll be fine.

Regards,
This is one person's opinion. Nothing more.

Topic Author
Ynarto
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Joined: Fri Jul 13, 2018 10:31 am

Re: 19 Years Old, Need some advice

Post by Ynarto » Sun Nov 24, 2019 4:59 pm

Thank you everyone for the replies! I have read the free pdf and have researched some more and I have decided to sell my VGT to transfer my funds to VTI. I have no debt currently so I will make my goal in my early 20's, while I'm in college still, to max out my Roth every year. In my Roth, I plan to have 100% VTI for now. I won't forget to have fun too!

HomeStretch
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Re: 19 Years Old, Need some advice

Post by HomeStretch » Sun Nov 24, 2019 5:21 pm

There are tax consequences for selling a Taxable account holding. Before you sell, have you checked the Vanguard “Cost Basis” screen in your online account for the capital gain or loss and whether it is short term or long term?

In the meantime, turn off dividend/capital gain distribution reinvestment so you don’t buy more VGT.

Topic Author
Ynarto
Posts: 11
Joined: Fri Jul 13, 2018 10:31 am

Re: 19 Years Old, Need some advice

Post by Ynarto » Sun Nov 24, 2019 6:23 pm

HomeStretch wrote:
Sun Nov 24, 2019 5:21 pm
There are tax consequences for selling a Taxable account holding. Before you sell, have you checked the Vanguard “Cost Basis” screen in your online account for the capital gain or loss and whether it is short term or long term?

In the meantime, turn off dividend/capital gain distribution reinvestment so you don’t buy more VGT.
I'm confused. So what should I do? My short term gain is 13$ and my long term gain is 1,300$.

lakpr
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Re: 19 Years Old, Need some advice

Post by lakpr » Sun Nov 24, 2019 6:30 pm

Ynarto wrote:
Sun Nov 24, 2019 6:23 pm
HomeStretch wrote:
Sun Nov 24, 2019 5:21 pm
There are tax consequences for selling a Taxable account holding. Before you sell, have you checked the Vanguard “Cost Basis” screen in your online account for the capital gain or loss and whether it is short term or long term?

In the meantime, turn off dividend/capital gain distribution reinvestment so you don’t buy more VGT.
I'm confused. So what should I do? My short term gain is 13$ and my long term gain is 1,300$.
If you are being claimed as a dependent, I would tax gain harvest. SELL NOW. Sell the investment, and buy it again the next day. Gains up to $2200 on a child's taxable account are tax free. If you let them be for longer, you might unnecessarily pay taxes on the gain.

Trader Joe
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Re: 19 Years Old, Need some advice

Post by Trader Joe » Sun Nov 24, 2019 6:36 pm

Ynarto wrote:
Sun Nov 24, 2019 1:28 am
Hello! I am currently 19 almost 20 and I was hoping to get advice on my vanguard brokerage account and my vanguard Roth IRA account.

Currently I have:
-Vanguard Brokerage: 10k (VGT - 50%, VTI- 50%); invest extra money after I max my Roth IRA
-Vanguard Roth IRA: 10k (VTSAX- 100%); i try to max it out every year but I only work part time so not guaranteed every year

I started investing in 2018 at 18 and I live at home with my parents so I don't pay for anything except for wants. I also keep at least $2000 in my bank checking account at all times. I've never had any advice at home so I was just wondering if I could have some pointers especially on what I should do in the future to better my portfolio or things I probably don't know about investing properly(because I don't really know anything except basic knowledge on the internet) but should know. Thank you in advance!
Welcome to the forum. I am a very successful investor with many decades of experience.

If I could go back in time to your age, I would do the following:

1. Invest 100% in VTSAX or VFIAX (both taxable and non-taxable).
2. Never, ever invest in either bonds or international.
3. Tune out the ups and downs of the U.S. Stock Market.
4. Keep my emergency fund in VMMXX.
5. Print out this post and keep it next to your computer.

Ferdinand2014
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Re: 19 Years Old, Need some advice

Post by Ferdinand2014 » Sun Nov 24, 2019 6:47 pm

Agree with Trader Joe.

Keep enough cash so nobody else ever determines your future and put the the rest in a low cost S&P 500 or total U.S. stock market index fund. Keep adding as much as you can and never look back. It took me 20 years of false starts and mistakes to figure this simple truth out.

Warren Buffett’s 2013 shareholder letter (the greatest investor of all time):

“My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.”
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

HomeStretch
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Re: 19 Years Old, Need some advice

Post by HomeStretch » Sun Nov 24, 2019 6:47 pm

Ynarto wrote:
Sun Nov 24, 2019 6:23 pm
HomeStretch wrote:
Sun Nov 24, 2019 5:21 pm
There are tax consequences for selling a Taxable account holding. Before you sell, have you checked the Vanguard “Cost Basis” screen in your online account for the capital gain or loss and whether it is short term or long term?

In the meantime, turn off dividend/capital gain distribution reinvestment so you don’t buy more VGT.
I'm confused. So what should I do? My short term gain is 13$ and my long term gain is 1,300$.
You may not owe any taxes but to be sure you can use the TaxCaster tax calculator app to enter your expected income from wages, interest, dividend and the VGT gains to see whether you will owe taxes or not. Be sure to enter whether you are or could be claimed as a “dependent” on your parents’ return as that affects your taxes.

If there is no significant tax liability from selling, go ahead and sell then reinvest the proceeds in VTI.

As per my earlier post, it is very useful to understand how to project your taxes - for situations like this you can do “what if” scenarios to see the tax impact of proposed transactions.

Lakpr posted about tax gain harvesting. See the BH wiki link below. While you are in college, you may have the opportunity to do this each year and owe no taxes. It will increase your cost basis which reduces your future taxable gain if/when you sell.
https://www.bogleheads.org/wiki/Tax_gain_harvesting
Last edited by HomeStretch on Sun Nov 24, 2019 6:53 pm, edited 1 time in total.

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1789
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Re: 19 Years Old, Need some advice

Post by 1789 » Sun Nov 24, 2019 6:53 pm

Ferdinand2014 wrote:
Sun Nov 24, 2019 6:47 pm
Agree with Trader Joe.

Keep enough cash so nobody else ever determines your future and put the the rest in a low cost S&P 500 or total U.S. stock market index fund. Keep adding as much as you can and never look back. It took me 20 years of false starts and mistakes to figure this simple truth out.

Warren Buffett’s 2013 shareholder letter (the greatest investor of all time):

“My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.”
Yes i also agree with Trader Joe and you. SP500/TSM are actually superior funds. A lot of people use complicated portfolios and they eventually end up underperforming these two top notch funds.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

Chrono Triggered
Posts: 258
Joined: Wed Feb 17, 2016 12:55 pm

Re: 19 Years Old, Need some advice

Post by Chrono Triggered » Sun Nov 24, 2019 7:02 pm

Why are people telling someone who has a 60+ year investing horizon to invest 100% USA? Pretty poor advice that is laden with recency bias.

OP, you seem enamored by VGT. Why are you over-weighting this specifically?

Topic Author
Ynarto
Posts: 11
Joined: Fri Jul 13, 2018 10:31 am

Re: 19 Years Old, Need some advice

Post by Ynarto » Sun Nov 24, 2019 10:23 pm

lakpr wrote:
Sun Nov 24, 2019 6:30 pm

If you are being claimed as a dependent, I would tax gain harvest. SELL NOW. Sell the investment, and buy it again the next day. Gains up to $2200 on a child's taxable account are tax free. If you let them be for longer, you might unnecessarily pay taxes on the gain.
Where can I find more information on it? And do you recommend me to sell my VTI too and buy it back also or just with VGT? short term gain for VTI:200, Long term: 400.
Trader Joe wrote:
Sun Nov 24, 2019 6:36 pm
Ynarto wrote:
Sun Nov 24, 2019 1:28 am
Hello! I am currently 19 almost 20 and I was hoping to get advice on my vanguard brokerage account and my vanguard Roth IRA account.

Currently I have:
-Vanguard Brokerage: 10k (VGT - 50%, VTI- 50%); invest extra money after I max my Roth IRA
-Vanguard Roth IRA: 10k (VTSAX- 100%); i try to max it out every year but I only work part time so not guaranteed every year

I started investing in 2018 at 18 and I live at home with my parents so I don't pay for anything except for wants. I also keep at least $2000 in my bank checking account at all times. I've never had any advice at home so I was just wondering if I could have some pointers especially on what I should do in the future to better my portfolio or things I probably don't know about investing properly(because I don't really know anything except basic knowledge on the internet) but should know. Thank you in advance!
Welcome to the forum. I am a very successful investor with many decades of experience.

If I could go back in time to your age, I would do the following:

1. Invest 100% in VTSAX or VFIAX (both taxable and non-taxable).
2. Never, ever invest in either bonds or international.
3. Tune out the ups and downs of the U.S. Stock Market.
4. Keep my emergency fund in VMMXX.
5. Print out this post and keep it next to your computer.
Thank you! I will start to save emergency funds I just haven't saved up enough yet. Whats a good amount for an emergency fund?
Chrono Triggered wrote:
Sun Nov 24, 2019 7:02 pm
Why are people telling someone who has a 60+ year investing horizon to invest 100% USA? Pretty poor advice that is laden with recency bias.

OP, you seem enamored by VGT. Why are you over-weighting this specifically?
The one that got me to start investing recommended me only one fund and it was VGT. I made a mistake and didn't research about it but it ended up doing really good.

lakpr
Posts: 5409
Joined: Fri Mar 18, 2011 9:59 am

Re: 19 Years Old, Need some advice

Post by lakpr » Sun Nov 24, 2019 10:48 pm

Ynarto wrote:
Sun Nov 24, 2019 10:23 pm
lakpr wrote:
Sun Nov 24, 2019 6:30 pm

If you are being claimed as a dependent, I would tax gain harvest. SELL NOW. Sell the investment, and buy it again the next day. Gains up to $2200 on a child's taxable account are tax free. If you let them be for longer, you might unnecessarily pay taxes on the gain.
Where can I find more information on it? And do you recommend me to sell my VTI too and buy it back also or just with VGT? short term gain for VTI:200, Long term: 400.
Simply Google "Kiddie Tax". Up to $2200 in non-earned income for children (includes college students) is tax free, per year. The phrase non-earned income includes interest income and investment gains.

Miriam2
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Re: 19 Years Old, Need some advice

Post by Miriam2 » Sun Nov 24, 2019 11:56 pm

Ynarto wrote: Where can I find more information on it [taxes and tax gain harvesting]? And do you recommend me to sell my VTI too and buy it back also or just with VGT?
You have VGT short term gains of $13 and long term gains of $1,300. Even if it were more gains, I have a different take on this. I would not complicate this tax issue for a 19-yr-old over $5,000 in VGT with these capital gains.

Ynarto is probably in the lowest tax bracket he will ever be in now, so why not just sell the entire VGT and be done with it. Put all the funds in the Total Stock Index fund. Most likely, he'll make back whatever he paid in taxes within a short time - and then he has 40 years of investing ahead of him. The taxes on VGT at this point are a drop in the bucket.
Ynarto wrote:I do not do my own taxes. I am still filed as dependent and my dad's accountant does my taxes. I'm not sure when I should become independent or how tax really works.
Ynatro - I agree with the others who suggest you start doing your own taxes, starting with the 2019 tax year. And by doing your own taxes, I mean pencil and paper and calculator along with the IRS website, directions to the Forms and Publication 17. Pour over each line on your Form 1040 and read all the directions carefully. I guarantee you will learn more than most people about your taxes and this will be of great benefit to you for the rest of your life. And actually, you will see how much selling VGT cost you in taxes and why.

Even if you use an accountant, knowing how your personal taxes work is truly empowering knowledge. You wish to be a dentist and you'll have a nice future income, you may have your own practice and business to watch over. Knowing how taxes work is an important part of financial education. :happy

However, since your parents still have you as a dependent and their accountant does their taxes, I wouldn't file your own taxes until you run it by their accountant.

BTW - using Turbo Tax doesn't work for tax learning. They ask Qs, you answer, but the context of where, when and why that you learn by doing the tax forms line by line is lost.

ohai
Posts: 1327
Joined: Wed Dec 27, 2017 2:10 pm

Re: 19 Years Old, Need some advice

Post by ohai » Mon Nov 25, 2019 1:24 am

Hi, OP. You know what is my greatest regret as an investor? It is not using leverage when I was younger. People use leverage all the time in real estate. In many ways, borrowing 5x your capital to buy a single house is much more risky than leveraging equities.

As an example, circa 2009-2010 when I was out of college, I bought Vanguard 500 Index funds, and let's say they are 3x the value they were at the time. If I had bought instead SPX 3x leverage ETF, I would have 26x my original investment. This would have been retirement level capital.

The capital you have now is tiny relative to what you will have later. You don't have much to lose by taking extreme risk. In case you do not like the rebalancing method used by leveraged ETFs, there are other ways to achieve leverage.

Some people obviously won't like this strategy, but do the research yourself and figure out your own conclusion. I wish I had done this research earlier myself.

Topic Author
Ynarto
Posts: 11
Joined: Fri Jul 13, 2018 10:31 am

Re: 19 Years Old, Need some advice

Post by Ynarto » Wed Nov 27, 2019 1:07 am

Trader Joe wrote:
Sun Nov 24, 2019 6:36 pm

Welcome to the forum. I am a very successful investor with many decades of experience.

If I could go back in time to your age, I would do the following:

1. Invest 100% in VTSAX or VFIAX (both taxable and non-taxable).
2. Never, ever invest in either bonds or international.
3. Tune out the ups and downs of the U.S. Stock Market.
4. Keep my emergency fund in VMMXX.
5. Print out this post and keep it next to your computer.
Hi Trader Joe, I have a question. I was researching about VMMXX and I came across the settlement fund VMFXX and how after taxes the yield for VMFXX is higher than VMMXX. What makes you recommend VMMXX over VMFXX?

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dratkinson
Posts: 4942
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: 19 Years Old, Need some advice

Post by dratkinson » Wed Nov 27, 2019 6:27 pm

Congratulations on your early start.



Emotions and the whole market. Sometimes it requires a visceral lesson to learn that we can not trust our emotions. If you want to keep VGT, then do so, but don’t buy more. And redirect all distributions to VTI so you don't inadvertently buy more.

When VGT tanks---all sectors do occasionally and our emotions turn to worry and we will wish we had sold sooner---then you will have learned THE lesson. "If you don't *know* more than the whole market, then don't second-guess the whole market---just buy the whole market."

Been there, done that. My sector was Energy. It was great. Until it wasn't. I watched it decline for many years before selling. And during that time the whole market/VTI was more stable and rising. Lesson learned.

“When one discovers they are riding a dead horse, the best strategy is to dismount.”

From discussion above, it sounds like you have a profit and your tax cost to dismount would be very low. (Option. If needing help with “kiddie tax”, can split sale over two years to reduce tax cost each year.)

If you do sell VGT, expect it to continue rising and to believe you are a fool for selling. However, when VGT begins to tank, you will believe you are a genius for selling early. Neither belief is correct, it's just our emotions playing tricks with our mind. (Been there, done that too, when I sold individual stocks.)



Roth IRA (rIRA). There is merit to using a TDR (target date retirement) fund in your rIRA---more diversified than VTI so will be less volatile. But VTSAX also has merit since your human capital acts as your bond component so makes your total investments less volatile. Since it's tax-free to change, you can do so later if YOU have a good reason to do so.

Suggestion. Wait unit you’ve done more reading/study and only change if you have a good reason to do so. (Folks in higher tax brackets may choose to use a TDR fund in tax-advantaged retirement accounts to make it easier to TLH (tax-loss harvest) in their taxable account---VTSAX can interfere with TLHing VTI, a TDR will not. But being able to benefit from TLHing is not your current situation.)

Bottom line. What you are doing is okay for now.



Taxes. You need to learn to do them for yourself. Why? So you get a better feel for how all of the pieces fit together. Why? So you will see the effects on your tax return and know: (1) why it's suboptimal to put tax inefficient investments in a taxable account in higher tax brackets, (2) why VTI is recommended for use in a taxable account in all tax brackets,…. (The stuff we are advising you comes from our knowledge of wise investing, tax reporting, and your unknown true personal risk tolerance.)

For now it's okay to let your parents' accountant include your taxes with theirs. But when you begin doing your own taxes---before you need to hire your business CPA---can use an IRS freefile software option.

I have used and like the IRS OLT (OnLine Tax) freefile option. It’s much cheaper than TurboTax et al., and much easier than pencil and paper tax forms/instructions.
Search: http://www.google.com/search?q=IRS+freefile+software



Suggested reading. (What I wish I had known at your age. Get books from local library.)
--The Only Investment Guide You’ll Every Need, Tobias. (General personal finance topics.)
--The Bogleheads’ Guide to Investing. (Investing for retirement.)
--Date...or Soul Mate, Warren. (Priceless if it helps avoid bad relationship, marriage, divorce.)



Stupid doctor tricks. As you near graduation, suggest learning about the "stupid doctor tricks" (financial mistakes) mentioned on the White Coat Investor website. Avoid making same.
Search: http://www.google.com/search?q=stupid+doctor+tricks



Welcome.



Edit. Second thoughts.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.

Cornflakey
Posts: 24
Joined: Wed Jan 25, 2017 11:24 am

Re: 19 Years Old, Need some advice

Post by Cornflakey » Mon Jan 20, 2020 4:29 pm

OP, first, huge kudos to you for getting started so early. The lessons you'll learn here are true. I did not start investing until I was 26. I am 36 today, and while the power of continued investment and compounding did not really begin to manifest until year 7 or 8, the past 2 to 3 years have seen my compounded returns taking off. And this is with another 30 years to retirement. So keep at it.

Second point: have some fun. Your 20s will be a level of fun and freedom you'll never know again, so don't let your wise investment goals derail making those memories friends that will stick with you for the rest of your life.

Lastly, on VGT: did you sell? Between November 2019 and today, this ETF has performed superbly. It seems blindingly simple obvious to me that IT is and shall remain the defining US economic driver for the decades during which we are investing. Everyone on BH hates a sector tilt, but it seems.self evident to me that tech will be the center of the US economy for many years to come. I wouldnt buy more VGT at this price, but I certainly wouldn't sell it. I bought $3,000 worth in June 2016 at $105. Those shares are now worth $260. Just a thought.

But most importantly, WELL DONE ON GETTING STARTED SO EARLY! Keep it up and you'll be a very wealthy man by the time you reach 50. Congratulations - you just achieved the American dream.

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