Newbie Investor, beginning contributions

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Dmarigs
Posts: 4
Joined: Wed Feb 28, 2018 12:17 pm

Newbie Investor, beginning contributions

Post by Dmarigs » Tue Mar 13, 2018 4:30 pm

Hello BogleheadsForum,
Newbie Dmarigs here, I am now 3 weeks in to learning about investing and eager to learn more.

Quick Bio
– 25 year old 4th year medical student with no undergraduate or medical school debt
– Starting ortho residency this summer – 5 years
– Residency salary ~ 54,602 –> $41,223 post tax –> $3435 Take home monthly pay
– I plan to dedicate around $11-12k annually / $1k monthly on investing.
– Will definitely max out my Roth IRA which I will open at vanguard @ $5,500 annual / $458.33 monthly.
– My employer does not match for residents, but offers a 401k and 403b with a Roth option under fidelity.
– My presumptive plan is to open a Roth 401k which I am planning to contribute $6k annually / $500 monthly.

Asset Allocation
– 85/15 (stocks and bonds) for my 5 years of training + 1 in fellowship, then plan to reassess goals and likely reallocate as an attending. I occasionally think if I should go 90/10 as I am relatively young and typically don’t think of myself as risk averse, however this is my first time investing.
My main questions have to do with beginning this process. I will describe my goals and then ask my specific question after.
1. For my Roth IRA, my goal is to eventually build a 3 fund portfolio of
– Vanguard Total Stock Market Index Fund Admiral Shares
– Vanguard Total International Stock Index Fund Admiral Shares
– Vanguard Total Bond Market Index Fund Admiral Shares
However, the minimum for the Admiral funds are $10k a piece and $3k for the Investor Shares.

a. My question is what to do with my first $1000 that I want to invest in this account. Do I put it in a fund (example Vanguard Target Retirement 2060 Fund), contribute monthly until I get enough money to buy the investor shares of VTSAX, VTIAX, and VBTLX? Then after that convert to admiral shares after I have enough money. Or do I save up 9k in a savings account and buy the investor shares of VTSAX, VTIAX, and VBTLX at the start.

2. Is there any real difference between doing a Roth 403b vs Roth 401k? My future employer offers both.

3. For my Roth 401k or 403b through Fidelity, my goal is to once again build a simple 3 fund portfolio. However, the choices I have are somewhat limited. Here is the link for the funds I have available ( https://nb.fidelity.com/public/nb/mayo/planoptions ).
My initial thoughts are to build up to the
– Vanguard Institutional TSM Index Fund Institutional Plus Shares (VITPX)
– Fidelity International Index Fund – Institutional Premium Class (FSPSX)
– Fidelity U.S. Bond Index Fund – Institutional Premium Class (FXNAX)
However, I think the minimum on each of these is $2,500.

a. Once again my question is what to do with my first $1000. Do I put it in a fund (example Fidelity Freedom Index 2060 Fund – Institutional Premium Class (FFLEX)), contribute monthly until I get enough money to buy into the VITPX, FSPSX, FXNAX or whatever other funds you recommend?
Thanks again for the help, I am eagerly trying to learn more about personal finance and investing and appreciate all the input!

TwstdSista
Posts: 806
Joined: Thu Nov 16, 2017 4:03 am

Re: Newbie Investor, beginning contributions

Post by TwstdSista » Tue Mar 13, 2018 4:34 pm

I think low expense ratio Target Date funds are a great idea when starting out, as well as for smaller dollar amounts (I do the same with a new account).

Be aware that you do not have to replicate the three fund portfolio across all of your accounts -- your Roth could hold one fund (total US or total international) while your 401k/403b could hold the other equity fund as well as your bond allocation.

MotoTrojan
Posts: 1624
Joined: Wed Feb 01, 2017 8:39 pm

Re: Newbie Investor, beginning contributions

Post by MotoTrojan » Tue Mar 13, 2018 5:29 pm

TwstdSista wrote:
Tue Mar 13, 2018 4:34 pm
I think low expense ratio Target Date funds are a great idea when starting out, as well as for smaller dollar amounts (I do the same with a new account).

Be aware that you do not have to replicate the three fund portfolio across all of your accounts -- your Roth could hold one fund (total US or total international) while your 401k/403b could hold the other equity fund as well as your bond allocation.
Until you start investing in taxable Id use a target retirement fund in Roth IRA and 401k and forget about it. After you have a sizable portfolio with taxable too, consider this advice to look at your portfolio as one entity and research tax efficient fund placement.

At your income I agree Roth across the board makes sense.

Tbonerazor
Posts: 27
Joined: Tue Jan 02, 2018 2:50 pm

Re: Newbie Investor, beginning contributions

Post by Tbonerazor » Tue Mar 13, 2018 8:28 pm

Dmarigs wrote:
Tue Mar 13, 2018 4:30 pm
Hello BogleheadsForum,
Newbie Dmarigs here, I am now 3 weeks in to learning about investing and eager to learn more.

Quick Bio
– 25 year old 4th year medical student with no undergraduate or medical school debt
– Starting ortho residency this summer – 5 years
– Residency salary ~ 54,602 –> $41,223 post tax –> $3435 Take home monthly pay
– I plan to dedicate around $11-12k annually / $1k monthly on investing.
– Will definitely max out my Roth IRA which I will open at vanguard @ $5,500 annual / $458.33 monthly.
– My employer does not match for residents, but offers a 401k and 403b with a Roth option under fidelity.
– My presumptive plan is to open a Roth 401k which I am planning to contribute $6k annually / $500 monthly.

Asset Allocation
– 85/15 (stocks and bonds) for my 5 years of training + 1 in fellowship, then plan to reassess goals and likely reallocate as an attending. I occasionally think if I should go 90/10 as I am relatively young and typically don’t think of myself as risk averse, however this is my first time investing.
My main questions have to do with beginning this process. I will describe my goals and then ask my specific question after.
1. For my Roth IRA, my goal is to eventually build a 3 fund portfolio of
– Vanguard Total Stock Market Index Fund Admiral Shares
– Vanguard Total International Stock Index Fund Admiral Shares
– Vanguard Total Bond Market Index Fund Admiral Shares
However, the minimum for the Admiral funds are $10k a piece and $3k for the Investor Shares.

a. My question is what to do with my first $1000 that I want to invest in this account. Do I put it in a fund (example Vanguard Target Retirement 2060 Fund), contribute monthly until I get enough money to buy the investor shares of VTSAX, VTIAX, and VBTLX? Then after that convert to admiral shares after I have enough money. Or do I save up 9k in a savings account and buy the investor shares of VTSAX, VTIAX, and VBTLX at the start.

2. Is there any real difference between doing a Roth 403b vs Roth 401k? My future employer offers both.

3. For my Roth 401k or 403b through Fidelity, my goal is to once again build a simple 3 fund portfolio. However, the choices I have are somewhat limited. Here is the link for the funds I have available ( https://nb.fidelity.com/public/nb/mayo/planoptions ).
My initial thoughts are to build up to the
– Vanguard Institutional TSM Index Fund Institutional Plus Shares (VITPX)
– Fidelity International Index Fund – Institutional Premium Class (FSPSX)
– Fidelity U.S. Bond Index Fund – Institutional Premium Class (FXNAX)
However, I think the minimum on each of these is $2,500.

a. Once again my question is what to do with my first $1000. Do I put it in a fund (example Fidelity Freedom Index 2060 Fund – Institutional Premium Class (FFLEX)), contribute monthly until I get enough money to buy into the VITPX, FSPSX, FXNAX or whatever other funds you recommend?
Thanks again for the help, I am eagerly trying to learn more about personal finance and investing and appreciate all the input!
Hi Dmarigs,
Welcome to the bogleheads community. I can see that you are being a savvy boglehead by taking the three fund approach. That is great! I will try to answer those questions for which i have some experience myself. If left out, just assume i don't know about the subject matter.

1) a. for each of these index funds, i found myself in a similar situation as yours. I called up Vanguard and they recommended the equivalent ETFs. ETFs dont have any minimums and for most practical purposes, there is virtually no distinction to a passively managed index fund. Expense ratios are the same i believ(i might be wrong). So go with ETFs for each of the funds you have mentioned. Once you reach the required amounts in your portfolio, i think you can upgrade or convert to Admiral shares. Investing $1k (including your intial $1k) every month is a great way to dollar cost average and keep increasing your ownership of the market. Waiting to save the required minimums is a financially unwise choice as there is lost interest, external factors eating into your savings etc.

3). i faced the same dilemma of a minimum for each of the funds in my 401k portfolio. However if your employer has outsourced the management to fidelity, there is a likely chance that the minimum won't be required. This happened to me with Merrill. Fidelity has a chat feature where you can get this question answered.

While you think about AA in your Roth and 401k, evaluate the choice of funds you have. 3 fund approaches are great for both vehicles. However since you are young, i would recommend expanding your exposure a little bit more to include, say Emerging Markets or REITs for example(depending on your appetite for risk). I am in the processing of learning myself. Hope these minor cents of thoughts help you on a financially rewarding future :)

Dmarigs
Posts: 4
Joined: Wed Feb 28, 2018 12:17 pm

Re: Newbie Investor, beginning contributions

Post by Dmarigs » Wed Mar 14, 2018 10:12 am

Thanks for all the input, definitely does not make sense to recreate my AA twice.
That is a good suggestion to consider a TDF as I build up a sizeable portfolio.

Another question I had is suppose I wanted to try creating my 3 fund portfolio to start maintain my AA of 85% stocks (70% US and 15% International) / 15% bonds across my two accounts. Which funds do I select from each?

For my US equities do I simply go with the total stock market index fund with the lowest ER?
– R401k (Fidelity) – Vanguard Institutional Index Fund Institutional Plus Shares (VIIIX) – ER 0.02%
vs
– R401k (Fidelity) – Vanguard Institutional Total Stock Market Index Fund Institutional Plus Shares (VITPX) – ER 0.02%
vs
– RIRA (Vanguard) – Vanguard Total Stock Market Index Fund
Investor Shares – 0.15%
Admiral Shares (VTSAX) – 0.04%

What about International stocks, once again lowest ER?
– R401k (Fidelity) – Fidelity International Index Fund – Institutional Premium Class (FSPSX) – ER 0.045%
vs
– RIRA (Vanguard) – Vanguard Total International Stock Index Fund Investor Shares (VGTSX) / Admiral (VTIAX) –
Investor Shares – 0.17%
Admiral Shares (VTSAX) – 0.11%

Finally Bonds?
– R401k (Fidelity) – Fidelity U.S. Bond Index Fund – Institutional Premium Class (FXNAX) – 0.025%
vs
– RIRA (Vanguard) – Vanguard Total Bond Market Index Fund Investor Shares (VBMFX) / Admiral (VBTLX)
Investor Shares – 0.15%
Admiral Shares (VTSAX) – 0.05%

TwstdSista
Posts: 806
Joined: Thu Nov 16, 2017 4:03 am

Re: Newbie Investor, beginning contributions

Post by TwstdSista » Thu Mar 15, 2018 6:30 am

I think you've got the right idea. I actually start with bond placement, because I want my bonds in my traditional accounts. Then I fill in with US and International stocks -- keeping my smaller value accounts in solely one fund for simplicity. Choosing the lowest ER amongst our 5 accounts is absolutely a factor.

I also make sure that I have the ability to rebalance between the three funds somewhere in a tax advantaged account, so as to avoid taxable gains.

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