- New investor here - Willing to help out with a quick Q ??

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YoungBoglehead
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- New investor here - Willing to help out with a quick Q ??

Post by YoungBoglehead » Sat Oct 29, 2011 11:35 am

Hi, Just joined. Googled investing forum, this is the first result.

I hope this is in the right section (sorry if not) Im not sure if i'd consider this personal or not.
Anyway, I have a pretty general question and am hoping I can find some people here willing to help a newbie with his first investment!

Background: Age 23, male, steady good paying job
goal: long term investing. 10+ years, ready to ride the waves

I have $ sitting in a bank account earning 0%. I am brand new to investing, but I probably know more than I give myself credit for.
Question:
For an initial investment, I was thinking of putting about 80% of my savings into an index fund following the S&P500

Today (oct 29th) would you guys say its a safe-enough time to get into the market on a stock like the S&P??

Nobody can predict the future but I am not sure how to read the issues going on in greece, also the talks about our debt cieling rising coming soon (i hear) also, the S&P is near its 52 week high.

On the other hand, im in it for long term, and my bank account earns 0%. Any suggestions? like a better place to invest? or a "yes get in now" or "half now" maybe "hold off for a month or 2"

Thank you in advance!! Good forum, glad to be here!
Started investing around 21, joined Bogleheads at 23.

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Taylor Larimore
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Getting started.

Post by Taylor Larimore » Sat Oct 29, 2011 1:49 pm

Hi Mason:
I have $ sitting in a bank account earning 0%. I am brand new to investing.
Welcome to the Bogleheads Forum!

Probably the best way to get started on this forum is to use this link in our wiki : Getting Started

After reading this portion of our wiki, you will probably have more questions and we are here to help.
"Simplicity is the master key to financial success." -- Jack Bogle

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JMacDonald
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Re: - New investor here - Willing to help out with a quick Q

Post by JMacDonald » Sat Oct 29, 2011 2:08 pm

Hi,
Goggle got you to the best place you could possible be for financial advise. Before you jump into the S&P 500 with 80% of your money, you need to understand asset allocation. Here is a good book to start along with the link Taylor gave you: http://www.amazon.com/About-Asset-Alloc ... roduct_top You might find it at your local library, or just get one for a penny plus shipping. :D
Best Wishes, | Joe

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nisiprius
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Re: - New investor here - Willing to help out with a quick Q

Post by nisiprius » Sat Oct 29, 2011 2:31 pm

MasonSS wrote:For an initial investment, I was thinking of putting about 80% of my savings into an index fund following the S&P500 Today (oct 29th) would you guys say its a safe-enough time to get into the market on a stock like the S&P??
I don't think anyone knows. Somehow you have to make peace with that and make your investment decisions without knowing.
Nobody can predict the future
Stop right there. End the sentence.
but
Oh, well...
I am not sure how to read the issues going on in Greece, also the talks about our debt ceiling rising coming soon (i hear) also, the S&P is near its 52 week high.
I am not sure how to read those issues either.
On the other hand, I'm in it for long term,
Good.
and my bank account earns 0%.
I don't think you should let that influence you much. Don't forget, making 0% is much better than losing 50%.
Any suggestions? like a better place to invest?
The basic assets are stocks, bonds, and cash. Neither is any better than the other, but they all offer different risk/reward propositions. Your big decision is how much you need in stocks, how much in bonds, how much in cash. Your personal risk tolerance factors into that decision and nobody can make it for you. You need to keep in mind that just about every stock market mutual fund fell to about half its value between the start of 2008 and spring of 2009. Some a bit more, some a lot more, some a bit less, but not a lot less. That is just what stocks do. I think it can happen at any time, and that there's no evidence that anyone can tell when it will happen and jump out.

80% stocks for a 20-year-old is not crazy and is in line with many recommendations but it's your money and you will be the one who might lose half of it if the stock market is in a bad mood, and you shouldn't count on making it back as quickly as has happened since 2009. To my way of thinking, I am always worried about whether it is a safe time to be investing in stocks and the way I deal with it is not to invest too much in stocks.
or a "yes get in now" or "half now" maybe "hold off for a month or 2"
This is just me and just psychological, but I like the idea of going in gradually, and accepting that some of my money will be invested at good times and some at bad and that it will sort of tend to balance out.

Once you'd decided how much you want in stocks, the next step is to choose investments. "An index fund following the S&P500" like Vanguard Five Hundred Index (VFINX), the original S&P 500 fund, is a reasonable choice.

The S&P 500 is not quite the five hundred largest companies, but it is all large companies. Many in this forum prefer a "total stock market" index mutual fund, such as Vanguard Total Stock Market Index Fund (VTSMX) or Fidelity Spartan Total Market Index Fund (FSTMX) or Schwab Total Stock Market Index Fund (SWTSX). These funds invest in indexes that try to cover the entire U. S. stock market, including not just the S&P 500 but the stocks of mid-sized and small companies as well. In reality it would have made very little difference which you invested in. But to my way of thinking, the reason for the S&P 500 funds was that in 1975 it was sort of thought of as being "the total stock market," and it was at that time too expensive and difficult for a mutual fund to invest in more than a few hundred stocks, so it was about as close as you could get. If the idea is to diversify, and not worry what stocks you're holding because you're holding all of them, a total market fund comes closer to that idea than an S&P 500 fund does.

It is conventional wisdom these days that you should hold some international stocks and not have everything in U. S. stocks. This, too, probably isn't all that important because companies are so globalized now, but it's worth considering.

Here are some examples of reasonable, sensible, ways you could invest whatever portion of your money you decide should be in stocks.
  • All of it in an S&P 500 index fund, as you suggested.
  • All of it in a "total stock market" index fund.
  • Some of it--80% or 70% or 50% of it--in a "total stock market" index fund, and the other 20% or 30% or 50% of it in an international stock market index fund like Vanguard Total International Stock Market Index (VGTSX)
  • All of it in a fund named Vanguard Total World Stock Market Index (VTWSX) which invests in the whole world--about 40% in the U. S. and about 60% internationally.
All of these would be reasonable, and none of them would be terribly different from each other. And every single one of them fell about 50% during 2008-2009, because that's what stocks did then.

As to questions like "which S&P 500 index fund is best" or "which total stock market index fund is best," the standard Boglehead answer is to look at the expense ratio, because that tells you how much of your money is being invested for you and how much is leaking out to pay fund expenses. I may shock my fellow Bogleheads by saying anything under 0.25% is OK for a U. S. stock index fund, and anything under 0.50% is OK for an international fund. Lower is better, of course. Don't buy anything with an ER higher than those numbers.

Phrasing this carefully, I really believe myself that there are no index funds better than Vanguard's. But there might be some that are just about as good. If you are committed to index fund investing (as I am) and you have a completely free choice--this isn't in a 401(k) and you haven't opened an account yet--Vanguard is a good choice.
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Re: - New investor here - Willing to help out with a quick Q

Post by ruralavalon » Sat Oct 29, 2011 3:10 pm

Welcome to the forum :) .

Here is my suggestion: (1) read nisiprius' post above several times; and (2) look at this Wiki article link: Lazy Portfolios
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sat Oct 29, 2011 3:37 pm

nisiprius wrote:
MasonSS wrote:For an initial investment, I was thinking of putting about 80% of my savings into an index fund following the S&P500 Today (oct 29th) would you guys say its a safe-enough time to get into the market on a stock like the S&P??
I don't think anyone knows. Somehow you have to make peace with that and make your investment decisions without knowing.
Nobody can predict the future
Stop right there. End the sentence.
but
Oh, well...
I am not sure how to read the issues going on in Greece, also the talks about our debt ceiling rising coming soon (i hear) also, the S&P is near its 52 week high.
I am not sure how to read those issues either.
On the other hand, I'm in it for long term,
Good.
and my bank account earns 0%.
I don't think you should let that influence you much. Don't forget, making 0% is much better than losing 50%.
Any suggestions? like a better place to invest?
The basic assets are stocks, bonds, and cash. Neither is any better than the other, but they all offer different risk/reward propositions. Your big decision is how much you need in stocks, how much in bonds, how much in cash. Your personal risk tolerance factors into that decision and nobody can make it for you. You need to keep in mind that just about every stock market mutual fund fell to about half its value between the start of 2008 and spring of 2009. Some a bit more, some a lot more, some a bit less, but not a lot less. That is just what stocks do. I think it can happen at any time, and that there's no evidence that anyone can tell when it will happen and jump out.

80% stocks for a 20-year-old is not crazy and is in line with many recommendations but it's your money and you will be the one who might lose half of it if the stock market is in a bad mood, and you shouldn't count on making it back as quickly as has happened since 2009. To my way of thinking, I am always worried about whether it is a safe time to be investing in stocks and the way I deal with it is not to invest too much in stocks.
or a "yes get in now" or "half now" maybe "hold off for a month or 2"
This is just me and just psychological, but I like the idea of going in gradually, and accepting that some of my money will be invested at good times and some at bad and that it will sort of tend to balance out.

Once you'd decided how much you want in stocks, the next step is to choose investments. "An index fund following the S&P500" like Vanguard Five Hundred Index (VFINX), the original S&P 500 fund, is a reasonable choice.

The S&P 500 is not quite the five hundred largest companies, but it is all large companies. Many in this forum prefer a "total stock market" index mutual fund, such as Vanguard Total Stock Market Index Fund (VTSMX) or Fidelity Spartan Total Market Index Fund (FSTMX) or Schwab Total Stock Market Index Fund (SWTSX). These funds invest in indexes that try to cover the entire U. S. stock market, including not just the S&P 500 but the stocks of mid-sized and small companies as well. In reality it would have made very little difference which you invested in. But to my way of thinking, the reason for the S&P 500 funds was that in 1975 it was sort of thought of as being "the total stock market," and it was at that time too expensive and difficult for a mutual fund to invest in more than a few hundred stocks, so it was about as close as you could get. If the idea is to diversify, and not worry what stocks you're holding because you're holding all of them, a total market fund comes closer to that idea than an S&P 500 fund does.

It is conventional wisdom these days that you should hold some international stocks and not have everything in U. S. stocks. This, too, probably isn't all that important because companies are so globalized now, but it's worth considering.

Here are some examples of reasonable, sensible, ways you could invest whatever portion of your money you decide should be in stocks.
  • All of it in an S&P 500 index fund, as you suggested.
  • All of it in a "total stock market" index fund.
  • Some of it--80% or 70% or 50% of it--in a "total stock market" index fund, and the other 20% or 30% or 50% of it in an international stock market index fund like Vanguard Total International Stock Market Index (VGTSX)
  • All of it in a fund named Vanguard Total World Stock Market Index (VTWSX) which invests in the whole world--about 40% in the U. S. and about 60% internationally.
All of these would be reasonable, and none of them would be terribly different from each other. And every single one of them fell about 50% during 2008-2009, because that's what stocks did then.

As to questions like "which S&P 500 index fund is best" or "which total stock market index fund is best," the standard Boglehead answer is to look at the expense ratio, because that tells you how much of your money is being invested for you and how much is leaking out to pay fund expenses. I may shock my fellow Bogleheads by saying anything under 0.25% is OK for a U. S. stock index fund, and anything under 0.50% is OK for an international fund. Lower is better, of course. Don't buy anything with an ER higher than those numbers.

Phrasing this carefully, I really believe myself that there are no index funds better than Vanguard's. But there might be some that are just about as good. If you are committed to index fund investing (as I am) and you have a completely free choice--this isn't in a 401(k) and you haven't opened an account yet--Vanguard is a good choice.

Wow... I don't think in all my probably near 10k posts online, I have come across a more helpful post or person for that matter. I Really, really appreciate it. With codes and all to help me make my own decision. Awesome forum.

My risk tolerance is high (I think, lol, we will see how long it is before I break down) and I am very interested in putting a good % in developing countries and overseas. I heard the best way to double your money is to fold it in half and stick it in your pocket, but in order to achieve my goals I need to be earning interest.. over a good period of time. I think im going to put around 70% of my investments in the US and say 30% overseas. I also have a little in PM's already (got in early on those :):) ) but done with PMs.

The only thing that really scares me is looking at the S&P500 over long periods.. if you look back say 5 years, people who invested in it are at what... -1%? not including inflation? even like 10+ years back, compared to now, they haven't done well. Not even including inflation. Maybe I am reading it wrong but that worries me. Sure, its party because of 01, and 08 ect but who's to say we won't have another one. I like the idea of vanguard a lot.. I have them for my 401k (work matches 4% so im in 4% of paycheck) I don't like IRA's too much because I want what I have to be more liquid for now. Anyway I am rambling. Thank you for your advice, a Lot.. and thank you to everybody else. I have already read some of the books/links suggested
Started investing around 21, joined Bogleheads at 23.

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Archie Sinclair
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Re: - New investor here - Willing to help out with a quick Q

Post by Archie Sinclair » Sat Oct 29, 2011 4:56 pm

MasonSS wrote:My risk tolerance is high (I think, lol, we will see how long it is before I break down) and I am very interested in putting a good % in developing countries and overseas. I heard the best way to double your money is to fold it in half and stick it in your pocket, but in order to achieve my goals I need to be earning interest.. over a good period of time. I think im going to put around 70% of my investments in the US and say 30% overseas.
One thing to keep in mind is that growing economies don't necessarily have better stock returns. There's a research paper from Vanguard showing this counterintuitive phenomenon using historical data, if you're interested: http://www.vanguard.com/pdf/icriem.pdf. Basically, since the growth of Emerging Markets isn't a secret, it's likely that their future success has already been priced in.

The truth is that we don't know which countries' stock markets will beat expectations. So it makes sense to own something of everything, like through the Vanguard Total International Index Fund (43% Europe, 26% Developed Pacific, 22% Emerging Markets, 9% Canada).

Your idea is to put 30% of your total portfolio overseas, presumably in stock mutual funds. On this forum, when people say "international allocation," they usually mean the ratio of international stocks to total stocks. Your plan can be translated as an international allocation of 37.5%. That is within the realm of the reasonable. The market weight is about 57%, but there are good reasons to overweight the stocks of your home country somewhat, as explained by a Vanguard analyst in this video: http://www.morningstar.com/cover/videoC ... ?id=437381. Vanguard recommends an international allocation somewhere between 20% and 40% for most investors.

I'm referring you to Vanguard's views, because they've done research on this topic, but if you explore this forum you'll find many other perspectives--often some variation on the above.

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YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sun Oct 30, 2011 2:25 pm

Archie Sinclair wrote:
MasonSS wrote:My risk tolerance is high (I think, lol, we will see how long it is before I break down) and I am very interested in putting a good % in developing countries and overseas. I heard the best way to double your money is to fold it in half and stick it in your pocket, but in order to achieve my goals I need to be earning interest.. over a good period of time. I think im going to put around 70% of my investments in the US and say 30% overseas.
One thing to keep in mind is that growing economies don't necessarily have better stock returns. There's a research paper from Vanguard showing this counterintuitive phenomenon using historical data, if you're interested: http://www.vanguard.com/pdf/icriem.pdf. Basically, since the growth of Emerging Markets isn't a secret, it's likely that their future success has already been priced in.

The truth is that we don't know which countries' stock markets will beat expectations. So it makes sense to own something of everything, like through the Vanguard Total International Index Fund (43% Europe, 26% Developed Pacific, 22% Emerging Markets, 9% Canada).

Your idea is to put 30% of your total portfolio overseas, presumably in stock mutual funds. On this forum, when people say "international allocation," they usually mean the ratio of international stocks to total stocks. Your plan can be translated as an international allocation of 37.5%. That is within the realm of the reasonable. The market weight is about 57%, but there are good reasons to overweight the stocks of your home country somewhat, as explained by a Vanguard analyst in this video: http://www.morningstar.com/cover/videoC ... ?id=437381. Vanguard recommends an international allocation somewhere between 20% and 40% for most investors.

I'm referring you to Vanguard's views, because they've done research on this topic, but if you explore this forum you'll find many other perspectives--often some variation on the above.
More great advice. I wish I would have found this forum months ago. Thank you

I didn't know this, I figured growing economies would have a much higher return on stocks.. But I see what you are saying now. Its already factored in. I am learning that about stocks in general, most things are already factored in.

Im starting to think the possible repercussions from the issues in Greece are already mostly factored into our stocks already, so maybe its time to get in. Thanks again
Started investing around 21, joined Bogleheads at 23.

retiredjg
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Sun Oct 30, 2011 2:38 pm

I don't believe that anyone has mentioned an emergency fund. You need this before you start investing. Otherwise, you'll always be pulling money out of investments (almost certainly at the worst possible time) to fix the car, pay a bill, etc.

Another vote for the Start UP kits as a way to get started.

Forget the idea that people can know a good day to start investing. Start when you have the money available and save and invest money on a regular basis. That is after you have an emergency fund. :wink:

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YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sun Oct 30, 2011 2:43 pm

retiredjg wrote:I don't believe that anyone has mentioned an emergency fund. You need this before you start investing. Otherwise, you'll always be pulling money out of investments (almost certainly at the worst possible time) to fix the car, pay a bill, etc.

Another vote for the Start UP kits as a way to get started.

Forget the idea that people can know a good day to start investing. Start when you have the money available and save and invest money on a regular basis. That is after you have an emergency fund. :wink:

Good stuff.. I have heard that a few times, I have an emergency fund now. I have about enough saved to live for a year without working. Paying rent and all comfortably. I think its time I start investing lol. UP Kits, I am not sure what those are. I'll look into those soon

I opened an account at Scottrade a few days before making this thread. They have a building near me which I like
Started investing around 21, joined Bogleheads at 23.

retiredjg
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Sun Oct 30, 2011 2:55 pm

MasonSS wrote:Good stuff.. I have heard that a few times, I have an emergency fund now. I have about enough saved to live for a year without working. Paying rent and all comfortably. I think its time I start investing lol.
This is good. Time to invest!
UP Kits, I am not sure what those are. I'll look into those soon
I meant the start up kit that someone mentioned earlier. Wiki article link: Bogleheads® financial start-up kit

I opened an account at Scottrade a few days before making this thread.
Make a plan and figure out what funds you need to fill the plan. I think you'll find better places to purchase the funds you pick than Scottrade.

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YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sun Oct 30, 2011 3:05 pm

retiredjg wrote:
UP Kits, I am not sure what those are. I'll look into those soon
I meant the start up kit that someone mentioned earlier. Wiki article link: Bogleheads® financial start-up kit

I opened an account at Scottrade a few days before making this thread.
Make a plan and figure out what funds you need to fill the plan. I think you'll find better places to purchase the funds you pick than Scottrade.
Reading the link now. You guys are awesome. I picked Scottrade because I heard from others they have the lowest fees. + I planned on opening up an account with them to easily transfer funds to and from my checking. From my understanding, you find a wesbite like Scottrade or others, pick a ticker and purchase shares of XX stock or fund, and those stocks and funds are all the same the only difference is the fee the website/company like Scottrade charge you. Is that correct? or is there some sort of difference if I was to open up an account at say Etrade, ect
Started investing around 21, joined Bogleheads at 23.

Bfwolf
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Re: - New investor here - Willing to help out with a quick Q

Post by Bfwolf » Sun Oct 30, 2011 3:10 pm

I used to use Scottrade before I switched to Vanguard, and they're great. Low fees, good customer service, easy to use Website. You should feel good about that choice. Many here (including me) have accounts directly with Vanguard because then we can buy their mutual funds/ETFs without any commissions, but Vanguard's Website user interface is quite clunky, and there won't be an office for you to drop by like Scottrade has.

All the advice you've gotten here is very good. You will not find many here who will try to answer your question on whether this is a good time to invest or not. There are thousands of professionals whose entire job is to analyze the market as a whole and individual stocks and decide whether they are over or under priced. Part of the Boglehead philosophy is being wise enough to know that we rank amateurs will not be able to out-smart their collective wisdom which is reflected in current market prices. Market timing is a futile and counter-productive activity that will likely leave you invested in the market when you shouldn't be and uninvested in the market when you should be. It's hard for most people to achieve their financial goals without being invested in the stock market, so we Bogleheads choose to invest and stay invested.

The key is finding an asset allocation with a risk profile that makes sense for you. The Wiki links you've been given are a great place to start. Then you can move on to some of the books in the reading list like The Bogleheads Guide To Investing.

retiredjg
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Sun Oct 30, 2011 3:21 pm

MasonSS, it depends on what you decide to buy.

For example, if you decide to buy Vanguard funds there is no reason to use an outside broker - you can buy them directly at Vanguard with no transaction fees at all. Same with Fidelity (although almost all of their really good funds have a $10k minimum).

I'm not saying "don't use Scottrade". I'm saying don't use them till you find out they are your best source for the actual funds you want to buy.

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YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sun Oct 30, 2011 3:30 pm

Bfwolf wrote:I used to use Scottrade before I switched to Vanguard, and they're great. Low fees, good customer service, easy to use Website. You should feel good about that choice. Many here (including me) have accounts directly with Vanguard because then we can buy their mutual funds/ETFs without any commissions, but Vanguard's Website user interface is quite clunky, and there won't be an office for you to drop by like Scottrade has.

All the advice you've gotten here is very good. You will not find many here who will try to answer your question on whether this is a good time to invest or not. There are thousands of professionals whose entire job is to analyze the market as a whole and individual stocks and decide whether they are over or under priced. Part of the Boglehead philosophy is being wise enough to know that we rank amateurs will not be able to out-smart their collective wisdom which is reflected in current market prices. Market timing is a futile and counter-productive activity that will likely leave you invested in the market when you shouldn't be and uninvested in the market when you should be. It's hard for most people to achieve their financial goals without being invested in the stock market, so we Bogleheads choose to invest and stay invested.

The key is finding an asset allocation with a risk profile that makes sense for you. The Wiki links you've been given are a great place to start. Then you can move on to some of the books in the reading list like The Bogleheads Guide To Investing.
Im somewhat catching on to that now, after reading more and learning more. Realizing how hard of a question and pointless "is it a good time to get in" is. I think my next step is to investigate some funds I may want to get in, and pick. I like vanguard a lot.. Just from what I have heard and learned. Then to read the Wiki links, and find the best way to get these funds.


retiredjg wrote:MasonSS, it depends on what you decide to buy.

For example, if you decide to buy Vanguard funds there is no reason to use an outside broker - you can buy them directly at Vanguard with no transaction fees at all. Same with Fidelity (although almost all of their really good funds have a $10k minimum).

I'm not saying "don't use Scottrade". I'm saying don't use them till you find out they are your best source for the actual funds you want to buy.
I see, I didn't know that. I think you are pointing me in the right direction then.. I feel like I need to research Vanguard funds more because they is probably the place I need to be. Quick question, kind of broad, what are some of these 'really good funds' I underlined in your quote? Like I said I was initially going for maybe some S&P500 funds, now I am leaning toward a % in S&P500, a % in total stock market funds (from the first long post above), and a % in overseas funds.

Are there some other really good funds you suggest I research? soaking up all the helpful advice I can lol. This will make a big difference in my life. Thanks
Started investing around 21, joined Bogleheads at 23.

Bfwolf
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Re: - New investor here - Willing to help out with a quick Q

Post by Bfwolf » Sun Oct 30, 2011 3:43 pm

It's probably unnecessary to have money in both an S&P 500 fund and a Total Stock Market fund. They are very similar. Total Stock Market funds include the S&P 500 (large cap companies) but also include smaller companies. Most of us prefer Total Stock Market funds for this reason (they represent the entire US stock market instead of just most of it like an S&P 500 fund).

VTSMX is Vanguard's Total Stock Market fund. FSTMX is Fidelity's equivalent.

VGTSX is Vanguard Total Int'l Stock Market fund. FSIIX is Fidelity's equivalent.

Note that there is only a $3,000 minimum for Vanguard's funds and a $10,000 minimum for Fidelity's. If you have over $10,000 in the Vanguard funds, you get to move up to their Admiral class shares (VTSAX and VTIAX) which have lower expense ratios.

You will also need to consider what to do with the rest of your investing money (note: does NOT include your emergency fund money), as you'd suggested you want to put 80% of it in stocks. Many here would suggest a good low-cost bond mutual fund such as VBMFX.

But really before you buy ANYTHING you should do some more reading and get to the point where you can write an Investment Policy Statement for yourself, which is described in the wiki. Don't buy anything you don't understand.

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YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sun Oct 30, 2011 3:51 pm

Bfwolf wrote:It's probably unnecessary to have money in both an S&P 500 fund and a Total Stock Market fund. They are very similar. Total Stock Market funds include the S&P 500 (large cap companies) but also include smaller companies. Most of us prefer Total Stock Market funds for this reason (they represent the entire US stock market instead of just most of it like an S&P 500 fund).

VTSMX is Vanguard's Total Stock Market fund. FSTMX is Fidelity's equivalent.

VGTSX is Vanguard Total Int'l Stock Market fund. FSIIX is Fidelity's equivalent.

Note that there is only a $3,000 minimum for Vanguard's funds and a $10,000 minimum for Fidelity's. If you have over $10,000 in the Vanguard funds, you get to move up to their Admiral class shares (VTSAX and VTIAX) which have lower expense ratios.

You will also need to consider what to do with the rest of your investing money (note: does NOT include your emergency fund money), as you'd suggested you want to put 80% of it in stocks. Many here would suggest a good low-cost bond mutual fund such as VBMFX.

But really before you buy ANYTHING you should do some more reading and get to the point where you can write an Investment Policy Statement for yourself, which is described in the wiki. Don't buy anything you don't understand.
Understood.

I am most interested in getting in the Admiral class shares, with the lower expense ratios.

Also, when i said 80% I was thinking the 20% be my emergency fund, money in the bank account. Which would put about 90% of my investments in stocks and 10% in PMs. I will get to reading before making a move like that. Although I'd bet the Vanguard or Fidelitys fund with a minimum of 10k would be a good start. Is there a difference between fidelity and vanguards 10k min funds? - I can do that research for myself by the way. Just curious
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Re: - New investor here - Willing to help out with a quick Q

Post by Bfwolf » Sun Oct 30, 2011 4:05 pm

There is not too much difference between the Vanguard and Fidelity funds for those asset classes. Consider:

http://finance.yahoo.com/echarts?s=FSII ... =undefined

The blue and red lines represent Fidelity and Vanguard's international funds respectively, and the orange and green lines represent Fidelity and Vanguard's domestic stock market funds respectively. The differences are there but are not huge. You'll also notice that domestic and international stocks are highly correlated. That's why whether you put 20% or 50% of your stock money into International is not going to make a tremendous difference.

What are PMs?

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Re: - New investor here - Willing to help out with a quick Q

Post by Bfwolf » Sun Oct 30, 2011 4:13 pm

By the way, Vanguard's admiral fund for Total Stock Market is VTSAX and for Total International Stock Market is VTIAX. Their expense ratios are very modestly less than the investor share classes (6 to 11 basis points), so while nice, their availability needn't drive your decision making. But if you're putting in over $10K to a fund anyway, of course you'd take advantage of the admiral shares.

While I do not want to open up a whole can of worms, ETFs are also an option as well. They may be especially useful if you choose to stay with Scottrade as ETF trades costs $7 with them while mutual fund trades are $17. There's lots of reading you can do on the Internet on mutual funds vs ETFs (including the wiki). The overall message is that they're not that different and both are acceptable.

Edited because I said "Vanguard" where I meant to say "Scottrade"
Last edited by Bfwolf on Sun Oct 30, 2011 4:24 pm, edited 1 time in total.

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Re: - New investor here - Willing to help out with a quick Q

Post by dave66 » Sun Oct 30, 2011 4:13 pm

Since you're young, you have a huge advantage. As far as risk, just remember this is the long haul... Since you have so much time, even if things go down a lot at some point (which they probably will eventually), you still have plenty of time to wait for them to come back up. What freaks some people out, is that they think of stocks like they're cash... So they feel like they're "loosing" money. But in reality, you still own something... so barring a complete catastrophe, the loss is temporary. The tricky part is at the end, when you want or need the money. Also because you're young, you could go just stocks for now, but like mentioned, you will want some bonds at some point. Maybe some of the treasuries to start.

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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sun Oct 30, 2011 4:13 pm

Bfwolf wrote:There is not too much difference between the Vanguard and Fidelity funds for those asset classes. Consider:

http://finance.yahoo.com/echarts?s=FSII ... =undefined

The blue and red lines represent Fidelity and Vanguard's international funds respectively, and the orange and green lines represent Fidelity and Vanguard's domestic stock market funds respectively. The differences are there but are not huge. You'll also notice that domestic and international stocks are highly correlated. That's why whether you put 20% or 50% of your stock money into International is not going to make a tremendous difference.

What are PMs?
Precious metals. I've seen them called PM's a few times, maybe thats not the right way to refer to them. Silver specifically.. got in at 17, not touching that again though.
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sun Oct 30, 2011 4:15 pm

dave66 wrote:Since you're young, you have a huge advantage. As far as risk, just remember this is the long haul... Since you have so much time, even if things go down a lot at some point (which they probably will eventually), you still have plenty of time to wait for them to come back up. What freaks some people out, is that they think of stocks like they're cash... So they feel like they're "loosing" money. But in reality, you still own something... so barring a complete catastrophe, the loss is temporary. The tricky part is at the end, when you want or need the money. Also because you're young, you could go just stocks for now, but like mentioned, you will want some bonds at some point. Maybe some of the treasuries to start.
Awesome. I can't wait to start :)

Thanks to everyone's advice, and to the guy I didn't quote above. All helpful
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Re: - New investor here - Willing to help out with a quick Q

Post by blacktupelo » Sun Oct 30, 2011 4:21 pm

For continuing eduction on investing I would recommend signing up for an RSS feed to http://moneywatch.bnet.com/investing/bl ... investing/ which is from Larry Swedroe, one of the authors read by Bogleheads. Well worth your time.
Larry

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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sun Oct 30, 2011 4:25 pm

blacktupelo wrote:For continuing eduction on investing I would recommend signing up for an RSS feed to http://moneywatch.bnet.com/investing/bl ... investing/ which is from Larry Swedroe, one of the authors read by Bogleheads. Well worth your time.
Patience is not one of my strengths :) so much reading before I dive in. Lol.. I've got to grit my teeth here and read before I get in. I know. Can't wait.
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Re: - New investor here - Willing to help out with a quick Q

Post by Bfwolf » Sun Oct 30, 2011 4:29 pm

Precious metals are a much debated asset class here, but I think most would agree that the first 3 asset classes you want to look at are US stocks, Int'l stocks, and bonds. If your portfolio is relatively small (less than $100K), it's probably a good idea to just stick with those 3 asset classes and have 3 holdings. There are many who would argue the same even for a large portfolio.

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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sun Oct 30, 2011 4:47 pm

Bfwolf wrote:Precious metals are a much debated asset class here, but I think most would agree that the first 3 asset classes you want to look at are US stocks, Int'l stocks, and bonds. If your portfolio is relatively small (less than $100K), it's probably a good idea to just stick with those 3 asset classes and have 3 holdings. There are many who would argue the same even for a large portfolio.
The more experienced people I have talked to lean this way also. Silver was fun, kind of my first dip and experiment into investing. I made some money off of it, lost a little, and time to get into stocks now.
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Sun Oct 30, 2011 5:38 pm

As a new investor, you only need 3 things - US stocks, foreign stocks, US bonds. That's it. When your portfolio is larger, you might want to look at a couple of other things (precious metals, commodities, extra REIT or small cap or small cap value). Most of that stuff is already included in the total stock market, but some people like extra. Or you can stay with the 3 basics forever. Many people do.

A very basic portfolio, popular around here, would be 56% total stock market (all the US stocks or a representation thereof), 24% total international (all or almost all the foreign stocks or a representation thereof depending on what you get) and 20% total bond market (most of the US bonds or a representation thereof). You could just go out and buy that stuff, but you should first check and see what is available in your plan at work (a 401k, 403b, etc.) if you have a one and work things around that.

In addition to what funds you want, the location you place these funds is important for efficiency in the tax arena. For example, it's best not to hold bonds in your taxable account. They are best held in a 401/403 or an IRA of some sort.

Don't get impatient and get ahead of yourself. This is not something that you should just jump into because reversing some of these decisions will cost you money. Think it out. Make a plan. Then implement the plan. Then leave it alone (other than adding money on a regular basis and rebalancing every once in awhile).

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Re: - New investor here - Willing to help out with a quick Q

Post by nisiprius » Sun Oct 30, 2011 6:20 pm

MasonSS wrote:I am most interested in getting in the Admiral class shares, with the lower expense ratios.
Then you will probably want to hold your Vanguard funds directly at Vanguard, as Admiral shares of Vanguard index funds don't seem to be available anywhere else.

This is a puzzling issue and it's hard to get straight answers. One problem is that some? many? brokerages can sell you Admiral shares of Vanguard's active funds, such as PRIMECAP--with a $100,000 minimum purchase--but not Admiral shares of Vanguard's index funds, such as Vanguard Total Stock Market Index Fund, which have $10,000 minimums. So if you ask "can I buy Admiral shares of Vanguard funds" the rep may say "yes" without realizing that it is not true for every Vanguard fund. Another problem is that some brokerages that can't sell you, say, VTSAX, the Admiral shares class of Vanguard Total Stock Market Index Fund, nevertheless show a quotation page and information for the fund anyway. ScottTrade's site shows information for VTSAX, the Admiral shares class of Vanguard Total Stock Market Index Fund, with an 0.07% ER, with no indication of whether or not you can buy it at ScottTrade. Perhaps it would show if I had an account there.

You must call ScottTrade and ask them this question, very carefully, something like this: "Can I buy the Vanguard fund with ticker symbol VTSAX through ScottTrade?" If they say "Do you mean Vanguard Total Stock Market Index," you have to say "There is more than one share class of that fund; I want the one with ticker symbol VTSAX and nothing else. Are you absolutely sure I can buy that specific share class through ScottTrade?" Hopefully, the will say "let me double-check that," before they answer you. If they say "yes" quickly--challenge them; ask again, "are you absolutely sure."

Even if you can't get Admiral shares, you might still want to use ScottTrade, depending on your total pattern of investments. You could just shrug off the difference in expense ratios. Or, you could use Vanguard ETFs--exchange traded funds--which are bought and sold like stocks, have the same low expense ratios as Admiral shares. For example, the ETF with ticker symbol VTI is the same basic fund as Total Stock Market Index. ETFs are typically are bought and sold for a low commission, probably $7 at ScottTrade. ETFS versus mutual funds are a topic of endless debate here as some people prefer one kind of investment, some the other, and you can find a summary of the pros and cons at ETFs vs. Mutual Funds.
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Re: - New investor here - Willing to help out with a quick Q

Post by Index Fan » Sun Oct 30, 2011 6:36 pm

I'd consider putting it all in Vanguard LifeStrategy Growth or a suitable Vanguard Target Retirement fund- these are superb one-stop funds containing the Total Stock Market Index, Total International Stock Index, and Total Bond Market Index (TR has TIPS in some versions). Extremely well-diversified, simple, no rebalancing necessary.

I wouldn't get too hung-up on when 'the perfect time' will be for investing. You have many decades of investment ahead of you, and whether you got in on one month or another will be trivial 40 years from now.

I congratulate you on investing early, I wish I would have been as forward-looking as you are. Best of luck!
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sun Oct 30, 2011 6:53 pm

^ Thank you to everyone above.


I think I have a lot better path now than before.

I think I am going to wait Just a little.. because the market is at a big high. I know decades from now it won't really matter.. but.. oh well.
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Tue Nov 01, 2011 5:52 pm

So one thing that really concerns me to be honest... if you look back about 15 years tracking the S&P500 (whole US market for that matter) people have made what.. 2% a year average to now?

Look back 10 years, people have made almost nothing.

Am I looking into times too specifically, and not realizing that the crashes were big in 01 & 08? I mean.. with inflation they essentually lost buying power
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Tue Nov 01, 2011 6:28 pm

MasonSS, that's what the stock market has done over the last 10 years. Actually 10+ years. Bonds have done better. It happens.

That's one reason many people here do not suggest 100% stocks. If you had been 100% bonds for the last 10 years, you'd have more money than if you had been in 100% stocks. Go figure.

Your other choice is not to invest in stocks at all. :roll: Not a good choice. The pendulum will swing back the other way and you want to already be holding stocks when that happens.

Nobody can predict the market. That's why people keep saying to build a portfolio that you can live with in good times and bad times.

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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Tue Nov 01, 2011 6:52 pm

Thank you ^


One final question.. since you all have been so helpful

Lets say i've done my fair share of research and have chosen to buy into either a total market vanguard fund, either domestic or international (i know international can tend to be more risky, especially with issues now) and I am ready to invest.

Greece is about to vote on that document. Which from my understanding, if they do not agree to it, will cause a pretty damn big crash in stocks. If they do, it sounds like the market will rise quite a bit from it.

In your opinion, your shoes, do you wait until after the vote? Or just grit my teeth, realize im in it for long term, and go in tonight, and hope things over there go well.

FYI, learning toward an admiral share of vanguards total market fund (domestic) and next month, another admiral share of vanguards international total market fund.

Thank you all so much..
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Tue Nov 01, 2011 7:23 pm

Which from my understanding, if they do not agree to it, will cause a pretty damn big crash in stocks. If they do, it sounds like the market will rise quite a bit from it.
You still seem to think you can predict the market. You can't. You are still trying to time the market. You can't.

Make a plan. Follow the plan. Forget the predicting and timing stuff. Make a plan and invest according to the plan.

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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Tue Nov 01, 2011 7:32 pm

retiredjg wrote:
Which from my understanding, if they do not agree to it, will cause a pretty damn big crash in stocks. If they do, it sounds like the market will rise quite a bit from it.
You still seem to think you can predict the market. You can't. You are still trying to time the market. You can't.

Make a plan. Follow the plan. Forget the predicting and timing stuff. Make a plan and invest according to the plan.
Alright, understood. Solid advice. Will do. Done with the newbie questions for now :)
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Tue Nov 01, 2011 8:13 pm

You really need to post your information and get a portfolio suggestion. Have you considered that?

See link below.

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Re: - New investor here - Willing to help out with a quick Q

Post by interplanetjanet » Tue Nov 01, 2011 8:36 pm

MasonSS wrote:I like the idea of vanguard a lot.. I have them for my 401k (work matches 4% so im in 4% of paycheck) I don't like IRA's too much because I want what I have to be more liquid for now.
Taking a step back here for a moment.

If you need liquidity, you should take a moment and ask yourself why, and what the time horizon is for when you need the money. If it's within the next 5 years or so, in all likelihood you either do not want to invest that money in equities or you want to have an extremely cautious allocation.

IRAs have numerous exceptions that allow you to make early withdrawals. One of the best known is that Roth IRAs allow you to withdraw your contributions (but not earnings) tax and penalty-free. Tax-advantaged accounts such as IRA and 401k accounts have a huge advantage in that capital gains tax is not an issue.

Depending on your tax bracket, a 401k can be a much better place to put money than either a taxable account or even a Roth IRA. I fund mine to the limit ($16.5k) before even considering placing money elsewhere, and before funding a taxable account I max out my Roth IRA. Understand the drag that taxes cause on your taxable investments before you move money into them.

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US stock market return?

Post by Taylor Larimore » Tue Nov 01, 2011 9:51 pm

if you look back about 15 years tracking the S&P500 (whole US market for that matter) people have made what.. 2% a year average to now?
According to Morningstar, during the past 15 years Vanguard Total Stock Market Index Fund had an annualized return of 5.85% to now.
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sat Nov 19, 2011 3:11 pm

Still haven't bought in.. Guess it has been a good move so far. Things over there are not looking pretty
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Sat Nov 19, 2011 3:22 pm

MasonSS wrote:Still haven't bought in.. Guess it has been a good move so far. Things over there are not looking pretty
You should get started anyway. What are you waiting for?

Seriously, see if you can actually put an answer to that question into words.

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Re: - New investor here - Willing to help out with a quick Q

Post by dave66 » Sat Nov 19, 2011 3:33 pm

Because he's worried his money will be worth half of what it was by March. lol I can relate, because I talked about the same thing in another thread. There's volatility and then there's volatility. I would consider this beyond average volatility. It's one thing if you;ve already been in for a long time... But it's hard for anybody to go all in during a time like this, at any age. I'm sure it will work out one way or another, but it's still hard to pull the trigger.

But on the plus side... If you're just starting out your investing future as a whole, you have a lot less to lose. You have plenty of time to make the money back, even if things dip. There's going to be numerous major dips along the way, no matter what. You've got a long way to go. You could always start out with some of the intermediate treasuries fund. That should be a lot less volatile. Then move into the stock stuff when you feel more comfortable.

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Re: - New investor here - Willing to help out with a quick Q

Post by Ozonewanderer » Sat Nov 19, 2011 6:49 pm

MasonSS wrote: My risk tolerance is high (I think, lol, we will see how long it is before I break down) and I am very interested in putting a good % in developing countries and overseas. I heard the best way to double your money is to fold it in half and stick it in your pocket, but in order to achieve my goals I need to be earning interest.. over a good period of time. I think im going to put around 70% of my investments in the US and say 30% overseas. I also have a little in PM's already (got in early on those :):) ) but done with PMs.

The only thing that really scares me is looking at the S&P500 over long periods.. if you look back say 5 years, people who invested in it are at what... -1%? not including inflation? even like 10+ years back, compared to now, they haven't done well. Not even including inflation. Maybe I am reading it wrong but that worries me. Sure, its party because of 01, and 08 ect but who's to say we won't have another one. I like the idea of vanguard a lot.. I have them for my 401k (work matches 4% so im in 4% of paycheck) I don't like IRA's too much because I want what I have to be more liquid for now. Anyway I am rambling. Thank you for your advice, a Lot.. and thank you to everybody else. I have already read some of the books/links suggested
Welcome to the forum! It's so heartening to see young people take the time to understand investing and to start saving early!

However, I must admit you've made several comments that concern me. You say your risk tolerance is high. How do you know that? Do you really know the gut wrenching fear when you've lost tens or even hundreds of thousand of dollars in a year? Do you know for certain that you won't sell out in panic at the worst possible time just to see the market come back 30% the next year while you were sitting on the sidelines? I've done this. You will not make money selling low and buying high.

You say your risk tolerance is high, but then you express concern that the market might have lost 1% over 5 years??? That's peanuts.

You say that you don't like IRA's because you want to be liquid?!

I think you are confusing investing with speculating. If you are hoping to make big gains then cash out when you need it in 5-10 years when you move, get married, buy a house or have children, then you are playing with fire. My personal rule of thumb, which is embodied in my investment plan, is that money should not be in stocks if you might need it in the next 7 years. In fact I beleive that one should really only be investing in stocks for the long term, 15 years or more.

You've also said that you are impatient. How do these time frames reconcile with your emotional makeup?

If you think you might need your money in the next decade, please do a lot of reading before you commit to stocks. Another Boglehead recently posted this article and it's an eye opener. It is possible to lose money (in real returns) over 20 years!:
In Investing It's When You Start and When You Finish
http://www.nytimes.com/interactive/2011 ... aphic.html

Please take time to carefully consider your goals, risk tolerance and time frames. We are in very volatile economic times and may very well be so for the next decade. You need a long term commitment to invest in stocks and have a good chance of beating the gains of more conservative options. You've received some terrific advice here but it all relates to investing, not speculating.

Happy reading!

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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sat Nov 19, 2011 7:43 pm

Retiredjg wrote: You should get started anyway. What are you waiting for?

Seriously, see if you can actually put an answer to that question into words.
Ok.. Let me give it a shot.. see below
dave66 wrote:Because he's worried his money will be worth half of what it was by March. lol I can relate, because I talked about the same thing in another thread. There's volatility and then there's volatility. I would consider this beyond average volatility. It's one thing if you;ve already been in for a long time... But it's hard for anybody to go all in during a time like this, at any age. I'm sure it will work out one way or another, but it's still hard to pull the trigger.

But on the plus side... If you're just starting out your investing future as a whole, you have a lot less to lose. You have plenty of time to make the money back, even if things dip. There's going to be numerous major dips along the way, no matter what. You've got a long way to go. You could always start out with some of the intermediate treasuries fund. That should be a lot less volatile. Then move into the stock stuff when you feel more comfortable.

This exactly, the reason I am holding off is things are looking Very ugly right now economically. I read about the news overseas constantly, Greece IS going to default, and a few other countries are following closely in Greece's path, in a downward spiral they can not get out of realistically. Which.. could set the Extremely fragile US economy recovery off, and will. Not to mention, debt ceiling talks are coming up shortly, and our debt is out of control and we have no real resolve planned out. The S&P is possibly going to downgrade the US credit rating from AA+ to AA if our congress can not agree on a plan by this thanksgiving... which is unlikely. To top it off, China is deliberately manipulating its currency, which is screwing us in trade, and causing things to get very... Tense.. which worries me, especially when we have the whole EU on a downward spiral they can not get out of. Honestly I am not a doomsdayer, but things are looking Very ugly right now.

I just can't bring myself to dump my life's work into a market that is bound to go into another deep recession soon or possibly a bad depression...

I don't see anyone here with news or information that makes me feel otherwise.







So... Was that in words good enough for you?
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Re: - New investor here - Willing to help out with a quick Q

Post by pkcrafter » Sat Nov 19, 2011 9:32 pm

Mason, here are a few quotes of yours from earlier posts. Please review what you have said and think again about your asset allocation--
My risk tolerance is high (I think, lol, we will see how long it is before I break down)
Are you sure your risk tolerance is as high as 80% stocks?
The only thing that really scares me is looking at the S&P500 over long periods.. if you look back say 5 years, people who invested in it are at what... -1%? not including inflation? even like 10+ years back, compared to now, they haven't done well. Not even including inflation. Maybe I am reading it wrong but that worries me.
You are aware of the past 10 years, but you don't make the connection that portfolios with much lower stock allocations outperformed those with 80% stocks.
I like the idea of vanguard a lot.. I have them for my 401k (work matches 4% so im in 4% of paycheck) I don't like IRA's too much because I want what I have to be more liquid for now.
It may be a mistake to not add more to the 401k and/or use other tax-advantaged accounts for long term investments. Consider a Roth because you can always remove your contributions if needed at any time.
Also, when i said 80% I was thinking the 20% be my emergency fund, money in the bank account. Which would put about 90% of my investments in stocks and 10% in PMs.
No, your emergency fund is separate from your long-term retirement investments. Also, any shorter-term goals need their own asset allocation.
Patience is not one of my strengths
Patience is very a necessary virtue--you won't be a good investor without it. The proper investing attitude is to always look long-term. Newbies think long term 5 years; the experienced investors look at 30 years. Acting like a jack rabbit will only lower your returns.
I think I am going to wait Just a little.. because the market is at a big high. I know decades from now it won't really matter.. but.. oh well.
This is another tell-tail sign of an imbalance in your real risk tolerance and your desired AA.
So one thing that really concerns me to be honest... if you look back about 15 years tracking the S&P500 (whole US market for that matter) people have made what.. 2% a year average to now?

Look back 10 years, people have made almost nothing.

Am I looking into times too specifically, and not realizing that the crashes were big in 01 & 08? I mean.. with inflation they essentially lost buying power
You aren't connecting the dots. Low stock allocations outperformed high stock allocations over the past 10 years. Vanguard's Wellesley, a balanced fund with 40% stocks, has a lifetime return from 1970 that equals the return of 100% S&P500. Granted, there are other reasons beside AA, but plan old bonds can and do outperform stocks over times longer than a decade. The last decade is not unique.
I just can't bring myself to dump my life's work into a market that is bound to go into another deep recession soon or possibly a bad depression...
Simple answer--Do not dump all of your life's work into the stock market.
In your opinion, your shoes, do you wait until after the vote? Or just grit my teeth, realize im in it for long term, and go in tonight, and hope things over there go well.
You can wait if you prefer, but who is to say that after you've waited and are finally all in we won't see another downturn. Here is how the stock market works--
Here is what William Coaker, CFP, CIMA, says you will encounter in your investment journey: Investment professionals often tell clients, “I think the S&P 500 will be up 10 percent next year,” and clients like to hear that. But it almost never happens. From 1926 to 2004, the S&P 500 rose between 8 percent and 14 percent in only six years, an 8 percent occurrence. In fact, just 25 times in 79 years the S&P 500 returned between 0 percent and 20 percent, which is only 32 percent of the time. That means the index has been more than twice as likely to lose money or gain more than 20 percent than to experience returns between 0 percent and 20 percent.
Here's a link to a chapter on asset allocation from online blog if you're still not burnt out on reading. :)

http://investingroadmap.wordpress.com/2011/02/25/205/

It's a bumpy ride, use some moderation in all decisions.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Topic Author
YoungBoglehead
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Re: - New investor here - Willing to help out with a quick Q

Post by YoungBoglehead » Sat Nov 19, 2011 10:02 pm

Thank you Paul, hopefully quoting this will come out getting my answers across clearly.. I will bold and underline my answers so they are easy to see.
pkcrafter wrote:Mason, here are a few quotes of yours from earlier posts. Please review what you have said and think again about your asset allocation--
My risk tolerance is high (I think, lol, we will see how long it is before I break down)
Are you sure your risk tolerance is as high as 80% stocks?

Well, I am 100% willing to take the risk, the only thing I need to know is if I am making the best educated guess as to where to put my money. If it was a smart idea to put 80% into stocks, I am 100% fine with the risk associated. After reading what you said below, maybe its best a smaller percentage go into stocks.
The only thing that really scares me is looking at the S&P500 over long periods.. if you look back say 5 years, people who invested in it are at what... -1%? not including inflation? even like 10+ years back, compared to now, they haven't done well. Not even including inflation. Maybe I am reading it wrong but that worries me.
You are aware of the past 10 years, but you don't make the connection that portfolios with much lower stock allocations outperformed those with 80% stocks.

Actually, was not aware of that. Well.. I wasn't aware it was significantly better return
I like the idea of vanguard a lot.. I have them for my 401k (work matches 4% so im in 4% of paycheck) I don't like IRA's too much because I want what I have to be more liquid for now.
It may be a mistake to not add more to the 401k and/or use other tax-advantaged accounts for long term investments. Consider a Roth because you can always remove your contributions if needed at any time.

You are right... I should probably look more into IRA's. Just an FYI, because you along with a person above you quoted my statement and questioned it.. I will clarify. I am in it long term yes, the reason I said I like to keep it more liquid is not because I want to use what I've made in 10 years, i mean I want it liquid because... I am very into investing (as you can see), so years down the road I may find some company, something I think is a great investment and want to take a big risk, put a lot into it. Who knows, maybe I want that money to invest in property, or an item I can buy and resell.. or maybe even buy a franchise. So the reason I was saying I want to keep it more liquid is not so I can go blow it faster on whatever, but so if I find an investment opportunity, I can pull whatever out easily and invest in it. whatever that may be. If that makes sense..
Also, when i said 80% I was thinking the 20% be my emergency fund, money in the bank account. Which would put about 90% of my investments in stocks and 10% in PMs.
No, your emergency fund is separate from your long-term retirement investments. Also, any shorter-term goals need their own asset allocation.

I know. I think what I was saying just didn't come across clear.
Patience is not one of my strengths
Patience is very a necessary virtue--you won't be a good investor without it. The proper investing attitude is to always look long-term. Newbies think long term 5 years; the experienced investors look at 30 years. Acting like a jack rabbit will only lower your returns.

What I mean by this is my patience is wearing thin in waiting to invest... not in investing itself, or sitting through a dip. I mean I am eager to start..

I am patient when it comes to investing and realizing I need to sit on it for a good chunk of my life. I am not patient in waiting to start/

I think I am going to wait Just a little.. because the market is at a big high. I know decades from now it won't really matter.. but.. oh well.
This is another tell-tail sign of an imbalance in your real risk tolerance and your desired AA.

{b]Disagree. In my last post I give pretty good reasons to hold out, just a few. in my opinion that is. I am comfortable knowing if I buy in, I could lose half or everything, knowing im in it for long term and short term does not matter. Actually, it has happened to me already with one of my investments and I am not worried because I am in it long term.[/b]
So one thing that really concerns me to be honest... if you look back about 15 years tracking the S&P500 (whole US market for that matter) people have made what.. 2% a year average to now?

Look back 10 years, people have made almost nothing.

Am I looking into times too specifically, and not realizing that the crashes were big in 01 & 08? I mean.. with inflation they essentially lost buying power
You aren't connecting the dots. Low stock allocations outperformed high stock allocations over the past 10 years. Vanguard's Wellesley, a balanced fund with 40% stocks, has a lifetime return from 1970 that equals the return of 100% S&P500. Granted, there are other reasons beside AA, but plan old bonds can and do outperform stocks over times longer than a decade. The last decade is not unique.

Was not aware of this. Thank you for that, it is re assuring
I just can't bring myself to dump my life's work into a market that is bound to go into another deep recession soon or possibly a bad depression...
Simple answer--Do not dump all of your life's work into the stock market.

Good answer.
In your opinion, your shoes, do you wait until after the vote? Or just grit my teeth, realize im in it for long term, and go in tonight, and hope things over there go well.


You can wait if you prefer, but who is to say that after you've waited and are finally all in we won't see another downturn. Here is how the stock market works--

again, 100% comfortable with the risk, and aware it could happen. Just shooting to give myself the best possible chance I can, with my most educated guess. Which right now, says wait for a few things to unvail themselves before starting.


Here's a link to a chapter on asset allocation from online blog if you're still not burnt out on reading. :)

http://investingroadmap.wordpress.com/2011/02/25/205/

It's a bumpy ride, use some moderation in all decisions.

Thanks man, its nice to see people who actually care enough about a stranger to take time and write responses, and correct/guide me like this. I realize its rare. very appreciated

Paul
Started investing around 21, joined Bogleheads at 23.

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dave66
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Re: - New investor here - Willing to help out with a quick Q

Post by dave66 » Sat Nov 19, 2011 10:15 pm

When I was a little older than you, I had a trust that was 40 stocks, 60 bonds. I don't even think I knew what that meant back then. lol But I think that might be a good start for you. Go to Google Finance and put in the TSM ticker, then overlay the ticker for the Intermediate Treasuries fund. Notice how they do NOT track the same way in 08. That's how you bleed off some of the pain if/when the big dips hit. Or you could even go less aggressive with 30/70, then as things calm down, you could take your new money to invest, and put it on the stock side. I think you could handle that a lot better than 100 in stocks. But all this is sort of irrelevant if you think you're just going to take the money right back out for something in 3 years or whatever. If that's the case, then just get a CD. You can find the best rates online.

pkcrafter
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Re: - New investor here - Willing to help out with a quick Q

Post by pkcrafter » Sat Nov 19, 2011 10:41 pm

Mason, my only goal in that last post was to make sure you understood the risk/reward decision. The only thing that caught my attention in your most recent post was this:
Well, I am 100% willing to take the risk, the only thing I need to know is if I am making the best educated guess as to where to put my money.


Educated guesses don't offer much, unfortunately. The best place to put your money is in a nicely diversified portfolio that has risk characteristics that you can tolerate without folding precisely because you (we, anyone) don't know what will happen.

You are enthusiastic and a quick learner, but take some time choosing funds. It's the last step in portfolio construction.


Paul
Last edited by pkcrafter on Sun Nov 20, 2011 9:44 am, edited 1 time in total.
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

pkcrafter
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Re: - New investor here - Willing to help out with a quick Q

Post by pkcrafter » Sat Nov 19, 2011 10:49 pm

Oops, forget about reviewing funds. You can do it at Morningstar.

http://www.morningstar.com/

Put a ticker symbol into the quote box at the top of the page. You can find tickers at Vanguard, Fidelity or other fund companies. Try VTSMX, Vanguard total stock market. Don't put too much emphasis on short-term returns.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

retiredjg
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Re: - New investor here - Willing to help out with a quick Q

Post by retiredjg » Sun Nov 20, 2011 1:09 am

MasonSS wrote:So... Was that in words good enough for you?
Yes. It was quite good enough, thank you. I was wondering if you really knew why you have not gotten started. Apparently, you do know - this is a scary time and you are afraid this is a poor time to invest. The trouble is, it's almost ALWAYS a poor time to invest for one reason or another. If you continue to wait till things get "better", the only thing that will happen is that you'll pay more for the exact same thing.

I agree with all that Paul said in the above post. The most insightful part of his post, in my opinion, is that you think you have a high risk tolerance, but your words say just the opposite - you do not have a high risk tolerance at all. You probably think that is some sort of insult, but it's not.

Here's a suggestion for you. Start your investing at 50% stocks and 50% bonds. Start now. As you gain experience and learn the wily ways of the market, add maybe 5% stock a year until you get to the point that you just feel good about it. Then stop adding stock and stick there awhile. As you age, reduce your stocks accordingly. I know this is an unusual approach but it's a good one and has been suggested by an author that is well respected around here. Give it some thought.

angceejay
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Re: - New investor here - Willing to help out with a quick Q

Post by angceejay » Sun Nov 20, 2011 1:41 am

When I was around your age, I tried to time the market. Always waiting for the dip and I ended up missing the boat. I say invest now rather than wait. If you can't make yourself to put all the money at the same time because of the market volatility, do dollar cost averaging e.g. gradually put the money in the span of 6 or whatever time you feel comfortable. The key is don't wait, start now.

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