For a young investor, what percentage of my discretionary income should I put into the market

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Tenesmus83
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For a young investor, what percentage of my discretionary income should I put into the market

Post by Tenesmus83 » Sat May 09, 2020 9:13 am

I'm Looking to buy some mutual funds on a monthly basis in my taxable account. Retirement account are maxed out and I do not
have any immediate use of money in the near term. Just wanted to know what other people are doing.

260chrisb
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Re: For a young investor, what percentage of my discretionary income should I put into the market

Post by 260chrisb » Sat May 09, 2020 9:23 am

If you really have no need for it in the near term simply invest as much as you feel comfortable. A percentage is kind of irrelevant. Have a fully funded emergency fund with liquidity and after that, let it roll provided you're within you comfort level as it relates to risk. Savings for upcoming future expenses (like a house) perhaps should remain separate thus allowing these taxable investments to really do their thing and not be sold at an inopportune time. Well done!

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Sandtrap
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Re: For a young investor, what percentage of my discretionary income should I put into the market

Post by Sandtrap » Sat May 09, 2020 9:29 am

Tenesmus83 wrote:
Sat May 09, 2020 9:13 am
I'm Looking to buy some mutual funds on a monthly basis in my taxable account. Retirement account are maxed out and I do not
have any immediate use of money in the near term. Just wanted to know what other people are doing.
"Immediate use of the money in the 'near term'".
1
When are you likely to need the money from the savings from this discretionary income?
3 years?
5 years?
10 years?

2
Will you eventually be saving for a home down payment, new truck/car, etc.?

3
How much do you have in an Emergency Fund (EF) in case of job or income loss?

4
What is your existing overall allocation and age?
equity / bond (bond like fixed) ?

Everyone is doing something different from ages 18 to 90, and within those ages, at least a zillion different financial circumstances.
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TomatoTomahto
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Re: For a young investor, what percentage of my discretionary income should I put into the market

Post by TomatoTomahto » Sat May 09, 2020 9:34 am

We invest EVERYTHING that’s not needed in the near term (ie, next year or so). We also have a good amount of fixed income assets we can touch if equities tank and our emergency fund is depleted.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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grabiner
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Re: For a young investor, what percentage of my discretionary income should I put into the market

Post by grabiner » Sat May 09, 2020 9:37 am

If "the market" means the stock market, then what matters for long-term savings is the total amount of your investments in the market, not which account. If you want 80% of your investments to be in stock, and half your portfolio is taxable, you could have 100% of your taxable account in stock (except for an emergency fund and savings for shorter-term needs such as a car) and 60% of your 401(k) and IRA in stock. Alternatively, you could have 100% of your 401(k) and IRA in stock, and 60% of your taxable account in stock (with the other 40% in municipal bonds in a high tax bracket, or taxable bonds in a low bracket); this might be better if your 401(k) has better stock than bond options, or for tax reasons.
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ruralavalon
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Re: For a young investor, what percentage of my discretionary income should I put into the market

Post by ruralavalon » Sat May 09, 2020 9:42 am

Tenesmus83 wrote:
Sat May 09, 2020 9:13 am
I'm Looking to buy some mutual funds on a monthly basis in my taxable account. Retirement account are maxed out and I do not
have any immediate use of money in the near term. Just wanted to know what other people are doing.
What is the intended use for this money (e.g. home purchase, car purchase, vacation, nothing in particular) and the time frame (e.g. 5 years, 10 years, don't know)?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Tenesmus83
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Re: For a young investor, what percentage of my discretionary income should I put into the market

Post by Tenesmus83 » Sat May 09, 2020 11:14 am

Intended use is to augment retirement savings. I'm paying down mortgage for current house.

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Nate79
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Re: For a young investor, what percentage of my discretionary income should I put into the market

Post by Nate79 » Sat May 09, 2020 11:18 am

Do you have at least 6 months emergency fund?

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ruralavalon
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Re: For a young investor, what percentage of my discretionary income should I put into the market

Post by ruralavalon » Sat May 09, 2020 11:25 am

Tenesmus83 wrote:
Sat May 09, 2020 9:13 am
I'm Looking to buy some mutual funds on a monthly basis in my taxable account. Retirement account are maxed out and I do not
have any immediate use of money in the near term. Just wanted to know what other people are doing.
Tenesmus83 wrote:
Sat May 09, 2020 11:14 am
Intended use is to augment retirement savings. I'm paying down mortgage for current house.
Then in your taxable brokerage account I suggest investing in very tax-efficient stock index funds, with good diversification and very low expense ratios. . Wiki article "Tax-efficient Fund Placement" . Examples include Vanguard Total Stock Market Index Fund (VTSAX) and Vanguard Total International Stock Index Fund (VTIAX).

Then in a tax-advantaged account exchange some stock funds to a bond fund to maintain by your desired overall asset allocation.
Last edited by ruralavalon on Sat May 09, 2020 11:27 am, edited 1 time in total.
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greg24
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Re: For a young investor, what percentage of my discretionary income should I put into the market

Post by greg24 » Sat May 09, 2020 11:27 am

As much as possible.

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midareff
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Re: For a young investor, what percentage of my discretionary income should I put into the market

Post by midareff » Sat May 09, 2020 11:31 am

Tenesmus83 wrote:
Sat May 09, 2020 9:13 am
I'm Looking to buy some mutual funds on a monthly basis in my taxable account. Retirement account are maxed out and I do not
have any immediate use of money in the near term. Just wanted to know what other people are doing.
Retirement account are maxed out and I do not have any immediate use of money in the near term. Been there and did that when I was younger and long term planning for retirement. After you max your retirement account (IRA, 457(b) or whatever) the next step many overlook is the Roth... you fill the Roth next, then you move on to investing in taxable accounts. I always kept my expenses and life style moderate and conservative an d invested up to 33% of my income annually for many years. While I never made big money I did wind up with a reasonable 2 comma portfolio which we use for luxo international travel and the nice things in life, although our monthly expense requirements remain quite low.

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