Newbie investment help

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kinophysio
Posts: 5
Joined: Wed Oct 10, 2018 7:50 pm

Newbie investment help

Post by kinophysio » Wed Oct 10, 2018 9:03 pm

I just made my first investment at the age of 26, I bought several VTIs. I plan to invest long term for 10 years or so. I took the test in vanguard and it was determined that 80 stocks and 20 bonds should be my allocation. For bonds, i'm keeping it simple and sticking to BND and BNDX. For stocks, besides the VTIs (core ETF), I was thinking if I got VO would it be overkill? For the other stock ETFs I'm thinking of getting VEU, VWO, and VNQI. If not VO, I would change it to VHT. Is having this amount of ETFs too much? and especially a lot in foreign ETFs? Thanks guys still making my way around. :happy

Freefallin
Posts: 21
Joined: Thu Oct 04, 2018 1:12 pm

Re: Newbie investment help

Post by Freefallin » Thu Oct 11, 2018 12:02 am

"Pain is the touchstone of all growth." - Bill W.

Living Free
Posts: 97
Joined: Thu Jul 19, 2018 7:31 pm

Re: Newbie investment help

Post by Living Free » Thu Oct 11, 2018 7:36 pm

Welcome kinophysio,
I agree - try to keep it simple.

You would have a lot of overlap/duplication if you bought all of those funds. I'd recommend using the 3 fund portfolio as your foundation. Some like to do "tilts" beyond that, such as to small cap stocks, or add a REIT fund, or do emerging markets. Those strategies may or may not provide higher return in the future (we'll know a few decades from now what strategy was the best!).

Where will you be investing with these ETF? Will it be in a brokerage/taxable account, an IRA, an employer sponsored account such as a 401k?

kinophysio
Posts: 5
Joined: Wed Oct 10, 2018 7:50 pm

Re: Newbie investment help

Post by kinophysio » Fri Oct 12, 2018 8:03 pm

Living Free wrote:
Thu Oct 11, 2018 7:36 pm
Welcome kinophysio,
I agree - try to keep it simple.

You would have a lot of overlap/duplication if you bought all of those funds. I'd recommend using the 3 fund portfolio as your foundation. Some like to do "tilts" beyond that, such as to small cap stocks, or add a REIT fund, or do emerging markets. Those strategies may or may not provide higher return in the future (we'll know a few decades from now what strategy was the best!).

Where will you be investing with these ETF? Will it be in a brokerage/taxable account, an IRA, an employer sponsored account such as a 401k?
I forgot to mention my specifics, if it will help

State: Florida
Tax Bracket: 22%
I will be investing in a taxable account as of now. I have maximized my 401k with my company at 3%. I also invested in a 5 year CD at 2.4% instead of bonds. And after reading the links sent by the first member I have decided to keep it simple and stick to VTI at 60% and VXUS at 40% in my Vanguard account. Hope this info helps!

Living Free
Posts: 97
Joined: Thu Jul 19, 2018 7:31 pm

Re: Newbie investment help

Post by Living Free » Fri Oct 12, 2018 8:47 pm

kinophysio wrote:
Fri Oct 12, 2018 8:03 pm



I forgot to mention my specifics, if it will help

State: Florida
Tax Bracket: 22%
I will be investing in a taxable account as of now. I have maximized my 401k with my company at 3%. I also invested in a 5 year CD at 2.4% instead of bonds. And after reading the links sent by the first member I have decided to keep it simple and stick to VTI at 60% and VXUS at 40% in my Vanguard account. Hope this info helps!
You mention that you are maximizing your 401k at 3%. I presume that means that you are contributing enough to get the full employer match? Are you contributing the full $18,500 per year into that account? If you have good investment options there you should consider using the tax advantaged accounts before using a taxable account. Remember, the taxable account gets taxed twice, as income when you earn it to invest then again (probably, though maybe not if your income is low enough) as capital gains when you sell the investments to use them for cash. The 401k money will be taxed just once as income when you withdraw it.
What about an IRA?
One strategy is to do the 401k to get the match, then do the IRA to max ($5,500 per year) and then after that fill up the 401k to the max 18.5k then after that go to taxable.

Freefallin
Posts: 21
Joined: Thu Oct 04, 2018 1:12 pm

Re: Newbie investment help

Post by Freefallin » Fri Oct 12, 2018 9:35 pm

Living Free wrote:
Fri Oct 12, 2018 8:47 pm
kinophysio wrote:
Fri Oct 12, 2018 8:03 pm



I forgot to mention my specifics, if it will help

State: Florida
Tax Bracket: 22%
I will be investing in a taxable account as of now. I have maximized my 401k with my company at 3%. I also invested in a 5 year CD at 2.4% instead of bonds. And after reading the links sent by the first member I have decided to keep it simple and stick to VTI at 60% and VXUS at 40% in my Vanguard account. Hope this info helps!
You mention that you are maximizing your 401k at 3%. I presume that means that you are contributing enough to get the full employer match? Are you contributing the full $18,500 per year into that account? If you have good investment options there you should consider using the tax advantaged accounts before using a taxable account. Remember, the taxable account gets taxed twice, as income when you earn it to invest then again (probably, though maybe not if your income is low enough) as capital gains when you sell the investments to use them for cash. The 401k money will be taxed just once as income when you withdraw it.
What about an IRA?
One strategy is to do the 401k to get the match, then do the IRA to max ($5,500 per year) and then after that fill up the 401k to the max 18.5k then after that go to taxable.
This is good advice above. Looking into a Roth IRA after meeting your company match in your 401k may be something to consider. Max out your tax deferred accounts before investing in a taxable account.
"Pain is the touchstone of all growth." - Bill W.

frugalmama
Posts: 111
Joined: Tue Mar 20, 2018 12:53 pm

Re: Newbie investment help

Post by frugalmama » Fri Oct 12, 2018 10:33 pm

kinophysio wrote:
Wed Oct 10, 2018 9:03 pm
I just made my first investment at the age of 26, I bought several VTIs. I plan to invest long term for 10 years or so.
Congratulations on your first investment! You've received some great advice here. Can I ask why you are only talking 10 years for this investment? 10 years isn't actually that long of a horizon. Are you planning on using this money for something particular?

Flyer24
Posts: 298
Joined: Sun Apr 08, 2018 4:21 pm

Re: Newbie investment help

Post by Flyer24 » Sat Oct 13, 2018 4:12 am

I agree with the others. You should be doing taxable last. The Roth IRA (5500/yr) should be done after doing your 401K match. There is only so much space in tax advantaged accounts per year so take advantage of it while you are young.

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ruralavalon
Posts: 13968
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Newbie investment help

Post by ruralavalon » Sat Oct 13, 2018 11:22 am

Welcome to the forum :) .

It's good to see that you are starting young and using broadly diversified index funds with low expense ratios.

You could consider using an IRA (traditional or Roth) instead of a taxable brokerage account. The tax advantage will be useful.

What funds are you using in your 401k? What other funds are offered in your 401k? Please give fund names, tickers and expense ratios.

How much (in dollars) are you contributing annually to each account? (When young and just starting out a high contribution rate is as important as almost anything else you can do in investing.)

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.


kinophysio wrote:
Wed Oct 10, 2018 9:03 pm
I just made my first investment at the age of 26, I bought several VTIs. I plan to invest long term for 10 years or so. I took the test in vanguard and it was determined that 80 stocks and 20 bonds should be my allocation. For bonds, i'm keeping it simple and sticking to BND and BNDX. For stocks, besides the VTIs (core ETF), I was thinking if I got VO would it be overkill? For the other stock ETFs I'm thinking of getting VEU, VWO, and VNQI. If not VO, I would change it to VHT. Is having this amount of ETFs too much? and especially a lot in foreign ETFs? Thanks guys still making my way around. :happy
In my opinion at age 26 an asset allocation of 80/20 stocks/bonds is within the range of what is reasonable.

I suggest simply using three funds:
1) Vanguard Total Stock Market ETF (VTI) or Fund (VTSMX or VTSAX);
2) Vanguard Total International Stock ETF (VXUS) or Fund (VGTSX or VTIAX); and
3) Vanguard Total Bond Market ETF (BND) or Fund (VBMFX or VBTLX).

CDs are acceptable as a substitute for a bond fund.

It's often better to coordinate investments among all accounts, treating all accounts together as a single unified portfolio, rather than view each account separately.

It's usually better to make the annual maximum contributions to all tax-advantaged accounts before contributing to a taxable brokerage account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

kinophysio
Posts: 5
Joined: Wed Oct 10, 2018 7:50 pm

Re: Newbie investment help

Post by kinophysio » Sat Oct 13, 2018 6:33 pm

Living Free wrote:
Fri Oct 12, 2018 8:47 pm
kinophysio wrote:
Fri Oct 12, 2018 8:03 pm



I forgot to mention my specifics, if it will help

State: Florida
Tax Bracket: 22%
I will be investing in a taxable account as of now. I have maximized my 401k with my company at 3%. I also invested in a 5 year CD at 2.4% instead of bonds. And after reading the links sent by the first member I have decided to keep it simple and stick to VTI at 60% and VXUS at 40% in my Vanguard account. Hope this info helps!
You mention that you are maximizing your 401k at 3%. I presume that means that you are contributing enough to get the full employer match? Are you contributing the full $18,500 per year into that account? If you have good investment options there you should consider using the tax advantaged accounts before using a taxable account. Remember, the taxable account gets taxed twice, as income when you earn it to invest then again (probably, though maybe not if your income is low enough) as capital gains when you sell the investments to use them for cash. The 401k money will be taxed just once as income when you withdraw it.
What about an IRA?
One strategy is to do the 401k to get the match, then do the IRA to max ($5,500 per year) and then after that fill up the 401k to the max 18.5k then after that go to taxable.
I'm somewhat so-so if I should invest in my 401k right now or even at all. I spoke with my boss and some of my other officemates and I was told that if I leave the company, I work in a Hospital, before 5 years or so I would get penalized and lose money from the 401k. I still have to go to HR and get the specifics on that. Yes, I will put my taxable account on hold for now and start with an IRA immediately for this year or probably wait for my tax return!

kinophysio
Posts: 5
Joined: Wed Oct 10, 2018 7:50 pm

Re: Newbie investment help

Post by kinophysio » Sat Oct 13, 2018 6:35 pm

Freefallin wrote:
Fri Oct 12, 2018 9:35 pm
Living Free wrote:
Fri Oct 12, 2018 8:47 pm
kinophysio wrote:
Fri Oct 12, 2018 8:03 pm



I forgot to mention my specifics, if it will help

State: Florida
Tax Bracket: 22%
I will be investing in a taxable account as of now. I have maximized my 401k with my company at 3%. I also invested in a 5 year CD at 2.4% instead of bonds. And after reading the links sent by the first member I have decided to keep it simple and stick to VTI at 60% and VXUS at 40% in my Vanguard account. Hope this info helps!
You mention that you are maximizing your 401k at 3%. I presume that means that you are contributing enough to get the full employer match? Are you contributing the full $18,500 per year into that account? If you have good investment options there you should consider using the tax advantaged accounts before using a taxable account. Remember, the taxable account gets taxed twice, as income when you earn it to invest then again (probably, though maybe not if your income is low enough) as capital gains when you sell the investments to use them for cash. The 401k money will be taxed just once as income when you withdraw it.
What about an IRA?
One strategy is to do the 401k to get the match, then do the IRA to max ($5,500 per year) and then after that fill up the 401k to the max 18.5k then after that go to taxable.
This is good advice above. Looking into a Roth IRA after meeting your company match in your 401k may be something to consider. Max out your tax deferred accounts before investing in a taxable account.
Thank you Freefallin, will do!

kinophysio
Posts: 5
Joined: Wed Oct 10, 2018 7:50 pm

Re: Newbie investment help

Post by kinophysio » Sat Oct 13, 2018 6:43 pm

frugalmama wrote:
Fri Oct 12, 2018 10:33 pm
kinophysio wrote:
Wed Oct 10, 2018 9:03 pm
I just made my first investment at the age of 26, I bought several VTIs. I plan to invest long term for 10 years or so.
Congratulations on your first investment! You've received some great advice here. Can I ask why you are only talking 10 years for this investment? 10 years isn't actually that long of a horizon. Are you planning on using this money for something particular?
Thank you! I was thinking 10 years or so for my taxable account because I wanted to save up some extra cash when me and my wife get a house so we can pay for a good interior designer and the furniture that comes along (little goals ). But then I can always make this a longer term investment :happy

Flyer24
Posts: 298
Joined: Sun Apr 08, 2018 4:21 pm

Re: Newbie investment help

Post by Flyer24 » Sat Oct 13, 2018 6:48 pm

kinophysio wrote:
Sat Oct 13, 2018 6:33 pm
Living Free wrote:
Fri Oct 12, 2018 8:47 pm
kinophysio wrote:
Fri Oct 12, 2018 8:03 pm



I forgot to mention my specifics, if it will help

State: Florida
Tax Bracket: 22%
I will be investing in a taxable account as of now. I have maximized my 401k with my company at 3%. I also invested in a 5 year CD at 2.4% instead of bonds. And after reading the links sent by the first member I have decided to keep it simple and stick to VTI at 60% and VXUS at 40% in my Vanguard account. Hope this info helps!
You mention that you are maximizing your 401k at 3%. I presume that means that you are contributing enough to get the full employer match? Are you contributing the full $18,500 per year into that account? If you have good investment options there you should consider using the tax advantaged accounts before using a taxable account. Remember, the taxable account gets taxed twice, as income when you earn it to invest then again (probably, though maybe not if your income is low enough) as capital gains when you sell the investments to use them for cash. The 401k money will be taxed just once as income when you withdraw it.
What about an IRA?
One strategy is to do the 401k to get the match, then do the IRA to max ($5,500 per year) and then after that fill up the 401k to the max 18.5k then after that go to taxable.
I'm somewhat so-so if I should invest in my 401k right now or even at all. I spoke with my boss and some of my other officemates and I was told that if I leave the company, I work in a Hospital, before 5 years or so I would get penalized and lose money from the 401k. I still have to go to HR and get the specifics on that. Yes, I will put my taxable account on hold for now and start with an IRA immediately for this year or probably wait for my tax return!
They would be talking about the company match. Many companies require you to be there a certain number of years to be vested. I would still follow the plan below.

Invest enough in 401K to get match.
Max a Roth IRA
Max your 401K
Taxable

Living Free
Posts: 97
Joined: Thu Jul 19, 2018 7:31 pm

Re: Newbie investment help

Post by Living Free » Sun Oct 14, 2018 9:00 am

kinophysio wrote:
Sat Oct 13, 2018 6:33 pm
Living Free wrote:
Fri Oct 12, 2018 8:47 pm
kinophysio wrote:
Fri Oct 12, 2018 8:03 pm



I forgot to mention my specifics, if it will help

State: Florida
Tax Bracket: 22%
I will be investing in a taxable account as of now. I have maximized my 401k with my company at 3%. I also invested in a 5 year CD at 2.4% instead of bonds. And after reading the links sent by the first member I have decided to keep it simple and stick to VTI at 60% and VXUS at 40% in my Vanguard account. Hope this info helps!
You mention that you are maximizing your 401k at 3%. I presume that means that you are contributing enough to get the full employer match? Are you contributing the full $18,500 per year into that account? If you have good investment options there you should consider using the tax advantaged accounts before using a taxable account. Remember, the taxable account gets taxed twice, as income when you earn it to invest then again (probably, though maybe not if your income is low enough) as capital gains when you sell the investments to use them for cash. The 401k money will be taxed just once as income when you withdraw it.
What about an IRA?
One strategy is to do the 401k to get the match, then do the IRA to max ($5,500 per year) and then after that fill up the 401k to the max 18.5k then after that go to taxable.
I'm somewhat so-so if I should invest in my 401k right now or even at all. I spoke with my boss and some of my other officemates and I was told that if I leave the company, I work in a Hospital, before 5 years or so I would get penalized and lose money from the 401k. I still have to go to HR and get the specifics on that. Yes, I will put my taxable account on hold for now and start with an IRA immediately for this year or probably wait for my tax return!
I agree with Flyer24. Usually what you are referring to is vesting, which would only apply to the employer contribution to the 401k, not to the employee contribution. I would clarify with HR, but all the money that you contribute should be yours right when it's contributed.

User avatar
ruralavalon
Posts: 13968
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Newbie investment help

Post by ruralavalon » Sun Oct 14, 2018 10:36 am

Flyer24 wrote:
Sat Oct 13, 2018 6:48 pm
kinophysio wrote:
Sat Oct 13, 2018 6:33 pm
Living Free wrote:
Fri Oct 12, 2018 8:47 pm
kinophysio wrote:
Fri Oct 12, 2018 8:03 pm



I forgot to mention my specifics, if it will help

State: Florida
Tax Bracket: 22%
I will be investing in a taxable account as of now. I have maximized my 401k with my company at 3%. I also invested in a 5 year CD at 2.4% instead of bonds. And after reading the links sent by the first member I have decided to keep it simple and stick to VTI at 60% and VXUS at 40% in my Vanguard account. Hope this info helps!
You mention that you are maximizing your 401k at 3%. I presume that means that you are contributing enough to get the full employer match? Are you contributing the full $18,500 per year into that account? If you have good investment options there you should consider using the tax advantaged accounts before using a taxable account. Remember, the taxable account gets taxed twice, as income when you earn it to invest then again (probably, though maybe not if your income is low enough) as capital gains when you sell the investments to use them for cash. The 401k money will be taxed just once as income when you withdraw it.
What about an IRA?
One strategy is to do the 401k to get the match, then do the IRA to max ($5,500 per year) and then after that fill up the 401k to the max 18.5k then after that go to taxable.
I'm somewhat so-so if I should invest in my 401k right now or even at all. I spoke with my boss and some of my other officemates and I was told that if I leave the company, I work in a Hospital, before 5 years or so I would get penalized and lose money from the 401k. I still have to go to HR and get the specifics on that. Yes, I will put my taxable account on hold for now and start with an IRA immediately for this year or probably wait for my tax return!
They would be talking about the company match. Many companies require you to be there a certain number of years to be vested. I would still follow the plan below.

Invest enough in 401K to get match.
Max a Roth IRA
Max your 401K
Taxable
Your copntributions are your money, you don't lose any of that if you leave. If there are any decent funds offered in your 401k then you should be contributing.

Here is a general account funding priority that usually works well for many people (when there is no high interest debt or HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, TSP, etc.) enough to get the full employer match (the match is like free money, your best possible investment);
2) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances;
3) Contribute the remainder of the maximum employee contribution to the work-based accounts; and
4) Contribute to a taxable investing account.

"If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA." Please see the wiki article "Prioritizing investments".

A traditional IRA is usually the better choice than a Roth IRA (unless your income is too high to allow traditional deductible contributions). Wiki article, "Traditional vs Roth".
"Tax considerations:
* If your current marginal tax rate is 15% or less, prefer a Roth.
* If you expect to have higher marginal rates than your current marginal rate for most of your career, prefer a Roth.
* If you will have a traditional account or a pension large enough to meet your expected retirement expenses (and you expect to take that pension shortly after retiring), prefer a Roth.
* Otherwise, prefer a traditional account."
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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