not entirely new, but knowledge is power right?

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Topic Author
james8266
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Joined: Sat Oct 17, 2020 9:19 am

not entirely new, but knowledge is power right?

Post by james8266 »

Morning,

Fresh out of college 03/2020 , degree in biology ( still deciding my next step, currently interning for $17/hr ), i saved as much as i could during from scholarship returns and have around lower $20k saved. I will max my ROTH by the end of the year from earned income.


Emergency funds: $1,122

Debt: none

Tax Filing Status: Single

Tax Rate: 12% Federal, 7% State

State of Residence: FL

Age: 21

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 10% of stocks

low five figures?

Current retirement assets

His 401k
0% My job makes u wait a year before they do 401k (due to high turnover) and im only 9 months in

His Roth IRA at Vanguard
100% SWYMX, 183 shares



Questions:
1. After looking around at these stocks, im just a little lost at what to choose and stay with
[spoiler]
Schb/d
VXIAF
Fxaix
Vtsax -US STOCKS
VYM - GOOD DIV ETF & HOLD
MCD
VGT
V
VIG- GOOD DIV ETF
VTI- US STOCKS
VSUX
HDV - GOOD DIV ETF
VOO
SWPPX
SPHD - GOOD DIV ETF
SNXFX
SWTSX
VTSAX
FSKAX
VXF
VTIAX- INTERNATIONAL
VXUS- INTERNATIONAL
VBTLX- BONDS
BND- BONDS
FFIN- BANK
[/spoiler]

2. Also a career question how do you guys rationalize the idea of accruing debt and potential gains lost in the market with that money not going there? I still live with my family and roughly spend $200 biweekly and the rest is waiting to be invested.

After lurking here and other placed on reddit, i just want to avoid mistakes and use this knowledge here to make a more sensible decision than investing poorly

Thank you
JBTX
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Re: not entirely new, but knowledge is power right?

Post by JBTX »

I'd start with VTSAX, and down the road when you save enough ($10k or more) also get Vanguard total international.

As to debt, I don't understand your question. High interest debt should be paid off asap. Low interest debt, like a mortgage or some student loans, can be held longer, with the priority of filling up retirement accounts first before paying off low interest debt. Some here like to pay off all debt as fast as possible. Others here (including me) don't mind holding low interest debt as a means to an end.
protagonist
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Re: not entirely new, but knowledge is power right?

Post by protagonist »

JBTX wrote: Sat Oct 17, 2020 11:07 am I'd start with VTSAX, and down the road when you save enough ($10k or more) also get Vanguard total international.

As to debt, I don't understand your question. High interest debt should be paid off asap. Low interest debt, like a mortgage or some student loans, can be held longer, with the priority of filling up retirement accounts first before paying off low interest debt. Some here like to pay off all debt as fast as possible. Others here (including me) don't mind holding low interest debt as a means to an end.
I agree with JBTX. I am one of those who believes in paying off debt as a #1 priority. That said his analysis is very sound.
Given how low interest rates are these days, I would consider putting your 20% bond allocation into I-bonds. You can buy up to 10K/year (15K if you overpay your income tax with estimated payments), and at least you know you will keep up with inflation if interest rates rise.
Last edited by protagonist on Sat Oct 17, 2020 11:18 am, edited 2 times in total.
sd323232
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Re: not entirely new, but knowledge is power right?

Post by sd323232 »

What is ur goal? Do you wanna make alot of money or work dream job? Going for money will put u on fast track to FI and u can retire in 30s.
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familythriftmd
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Re: not entirely new, but knowledge is power right?

Post by familythriftmd »

james8266 wrote: Sat Oct 17, 2020 9:48 am ...
JBTX wrote: Sat Oct 17, 2020 11:07 am As to debt, I don't understand your question. High interest debt should be paid off asap. Low interest debt, like a mortgage or some student loans, can be held longer, with the priority of filling up retirement accounts first before paying off low interest debt. Some here like to pay off all debt as fast as possible. Others here (including me) don't mind holding low interest debt as a means to an end.
I think, but I'm not sure that OP is talking about leveraging some debt to increase market exposure.

If that is the case, then I suggest OP sits down with some popcorn and a beer and dive into this wonderful thread:
viewtopic.php?t=5934
Thrift stores, outlets and market corrections have this in common: you're buying on sale.
Outer Marker
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Re: not entirely new, but knowledge is power right?

Post by Outer Marker »

I would focus on paying off debt, and to the extent you can fund a Roth put everything into a target date fund from Fidelity or Vanguard.
milktoast
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Re: not entirely new, but knowledge is power right?

Post by milktoast »

On debt. Not clear if you have debt or are thinking about getting debt. Generally the only good debt is mortgage.

Ignoring mortgage, which you don’t have, I would recommend not taking out debt and paying down existing. In fact if you have debt with higher interest rate than BND SEC yield, instead of investing 80/20 in VTSAX/BND take that 20% and apply it to your debt.

And if you have debt above 8% rate, just invest enough to get your 401k match and retire that debt.
Topic Author
james8266
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Re: not entirely new, but knowledge is power right?

Post by james8266 »

Thank you Thank you Thank you Thank you for all the responses
JBTX wrote: Sat Oct 17, 2020 11:07 am I'd start with VTSAX, and down the road when you save enough ($10k or more) also get Vanguard total international.

As to debt, I don't understand your question. High interest debt should be paid off asap. Low interest debt, like a mortgage or some student loans, can be held longer, with the priority of filling up retirement accounts first before paying off low interest debt. Some here like to pay off all debt as fast as possible. Others here (including me) don't mind holding low interest debt as a means to an end.
Ill purchase some VTSAX on Monday,

Also for everyone, i dont have debt
EDIT: I was considering going into something medical that i could tolerate in the hopes of going to increase income after of course drastically paying it off.
protagonist wrote: Sat Oct 17, 2020 11:13 am
JBTX wrote: Sat Oct 17, 2020 11:07 am I'd start with VTSAX, and down the road when you save enough ($10k or more) also get Vanguard total international.

As to debt, I don't understand your question. High interest debt should be paid off asap. Low interest debt, like a mortgage or some student loans, can be held longer, with the priority of filling up retirement accounts first before paying off low interest debt. Some here like to pay off all debt as fast as possible. Others here (including me) don't mind holding low interest debt as a means to an end.
I agree with JBTX. I am one of those who believes in paying off debt as a #1 priority. That said his analysis is very sound.
Given how low interest rates are these days, I would consider putting your 20% bond allocation into I-bonds. You can buy up to 10K/year (15K if you overpay your income tax with estimated payments), and at least you know you will keep up with inflation if interest rates rise.
I will look into I-bonds, as a means of savings to counteract inflation. Was looking to hold $5k** in savings
sd323232 wrote: Sat Oct 17, 2020 11:15 am What is ur goal? Do you wanna make alot of money or work dream job? Going for money will put u on fast track to FI and u can retire in 30s.
After looking into FI i realized i already basically lived like this lol, im so amazed that there was a whole community around this principle and its exactly what i want. Unfortunately i got rushed into the medical fast track due to strict school oriented parents, but i have no true desire and after working in the medical field i realize its very much NOT what i like aside from the patient to patient connection.

I very much simply want to make a lot of money.
familythriftmd wrote: Sat Oct 17, 2020 11:25 am
james8266 wrote: Sat Oct 17, 2020 9:48 am ...
JBTX wrote: Sat Oct 17, 2020 11:07 am As to debt, I don't understand your question. High interest debt should be paid off asap. Low interest debt, like a mortgage or some student loans, can be held longer, with the priority of filling up retirement accounts first before paying off low interest debt. Some here like to pay off all debt as fast as possible. Others here (including me) don't mind holding low interest debt as a means to an end.
I think, but I'm not sure that OP is talking about leveraging some debt to increase market exposure.

If that is the case, then I suggest OP sits down with some popcorn and a beer and dive into this wonderful thread:
viewtopic.php?t=5934
that thread :mrgreen:
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ruralavalon
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Re: not entirely new, but knowledge is power right?

Post by ruralavalon »

Welcome to the forum :) .

Its great to see that you are debt free, and starting young at investing using a Roth IRA at Vanguard.

(1) In your Roth IRA at Vanguard either Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX), or Vanguard LifeStrategy Growth Fund (VASGX) (80%stocks/20% bonds), or Vanguard Target Retirement 2050 (VFIFX) (90% stocks/10% bonds) would be a good way to start. Just pick one fund for now.

Why did you start with Schwab Target 2050 Index Fund (SWYMX)?

(2) Don't borrow money to invest in the stock market. That's very risky in my opinion.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
sd323232
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Re: not entirely new, but knowledge is power right?

Post by sd323232 »

At your age, it's not about investments, it's all about ur income growth. U need to pile up as big cash pile as u can by ur 30s. So concentrate on that.
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KingRiggs
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Re: not entirely new, but knowledge is power right?

Post by KingRiggs »

80/20 stocks/bonds is pretty conservative for a 21-year-old. As is a 2050 Target Date Fund. I'd suggest everything in a total stock market index or S&P 500 index until you hit $100k or 30 yers old, then re-evaluate.

Are you asking whether it is worth it to take on debt to pursue an advanced degree? It depends on the degree, I suppose. Medicine, dentistry are a resounding YES if you're interested in those. The fact that you're "considering next steps" with a biology degree gives me pause, though. Did you get a BA or BS? How were your grades? These are all factors in your "future capital". If you can realistically take on some degree of debt and drastically increase your "future capital", by all means do so. If an added degree won't result in increased earnings within a reasonable amount of time, run the other way. There are plenty of well-paying jobs out there for people with a biology background.

Best of luck, and congratulations on even THINKING about these things at 21!
Advice = noun | Advise = verb | | Roth, not ROTH
TSX
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Re: not entirely new, but knowledge is power right?

Post by TSX »

at the age 21 why are you chasing total market index ETFs like VXIAF or Vtsax?
Ma, V, MSFT, etc. can move you way ahead. You’re not in your 50th to be so conservative.
Dontridetheindexdown
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Re: not entirely new, but knowledge is power right?

Post by Dontridetheindexdown »

Are you sure about this?

Tax Rate: 12% Federal, 7% State

State of Residence: FL

To the best of my knowledge, Florida does not have a state income tax.
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ruralavalon
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Re: not entirely new, but knowledge is power right?

Post by ruralavalon »

TSX wrote: Sat Oct 17, 2020 2:20 pm at the age 21 why are you chasing total market index ETFs like VXIAF or Vtsax?
Ma, V, MSFT, etc. can move you way ahead. You’re not in your 50th to be so conservative.
Nonsense. Have you not heard about diversification?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
james8266
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Re: not entirely new, but knowledge is power right?

Post by james8266 »

Sorry posted twice!
Last edited by james8266 on Sat Oct 17, 2020 3:25 pm, edited 1 time in total.
Topic Author
james8266
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Re: not entirely new, but knowledge is power right?

Post by james8266 »

Sorry posted twice!
Last edited by james8266 on Sat Oct 17, 2020 3:24 pm, edited 1 time in total.
Topic Author
james8266
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Re: not entirely new, but knowledge is power right?

Post by james8266 »

ruralavalon wrote: Sat Oct 17, 2020 1:44 pm Welcome to the forum :) .

Its great to see that you are debt free, and starting young at investing using a Roth IRA at Vanguard.

(1) In your Roth IRA at Vanguard either Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX), or Vanguard LifeStrategy Growth Fund (VASGX) (80%stocks/20% bonds), or Vanguard Target Retirement 2050 (VFIFX) (90% stocks/10% bonds) would be a good way to start. Just pick one fund for now.

Why did you start with Schwab Target 2050 Index Fund (SWYMX)?

(2) Don't borrow money to invest in the stock market. That's very risky in my opinion.
When i opened up my brokerage they told me its a good start to use SWYMX, i wasn't aware that i could switch out from SWYMX to another within my fund. The brokerage told me there was a-penalty of removing the money in that account before $5k?
EDIT: My brokerage is Schwab
Dontridetheindexdown wrote: Sat Oct 17, 2020 2:38 pm Are you sure about this?

Tax Rate: 12% Federal, 7% State

State of Residence: FL

To the best of my knowledge, Florida does not have a state income tax.
This is what i found searching online.
TSX wrote: Sat Oct 17, 2020 2:20 pm at the age 21 why are you chasing total market index ETFs like VXIAF or Vtsax?
Ma, V, MSFT, etc. can move you way ahead. You’re not in your 50th to be so conservative.
While i may be 21, i enjoy peace of mind, index funds seem to provide more of that than dumping everything into TSLA or individual stocks only
KingRiggs wrote: Sat Oct 17, 2020 2:11 pm 80/20 stocks/bonds is pretty conservative for a 21-year-old. As is a 2050 Target Date Fund. I'd suggest everything in a total stock market index or S&P 500 index until you hit $100k or 30 yers old, then re-evaluate.

Are you asking whether it is worth it to take on debt to pursue an advanced degree? It depends on the degree, I suppose. Medicine, dentistry are a resounding YES if you're interested in those. The fact that you're "considering next steps" with a biology degree gives me pause, though. Did you get a BA or BS? How were your grades? These are all factors in your "future capital". If you can realistically take on some degree of debt and drastically increase your "future capital", by all means do so. If an added degree won't result in increased earnings within a reasonable amount of time, run the other way. There are plenty of well-paying jobs out there for people with a biology background.

Best of luck, and congratulations on even THINKING about these things at 21!
Yes i will be investing into VTSAX and VTI bright and early when the markets open Monday lol.

As for school, it was interesting to learn as i enjoyed the education aspect of it, its just that the career field itself is a bit daunting and has become what i see it as "a moneys game for insurance companies and quiet a bill for patients".

I got a BS in Biology with a 3.6 gpa

I would love to entertain the idea of gaining debt to acquire more income through school(PA or maybe dental), the issue that many people that i have asked is that "If you are just doing it for the money, you will experience burnout and loath your existence".
There are plenty of well-paying jobs out there for people with a biology background.
I currently work as a Certified Ophthalmic assistant, its interesting and cool however its not something i would see myself doing long term. Do you know of some well-paying jobs in this background? Im all ears as im eager to increase my pay.

Once again thank you, but at 21 i believe my generation is having this type of conversation more than it seems ( at least the people im around ) i just want to avoid making mistakes and i realized that you all have years of experience ahead of me. :beer
sd323232 wrote: Sat Oct 17, 2020 1:48 pm At your age, it's not about investments, it's all about ur income growth. U need to pile up as big cash pile as u can by ur 30s. So concentrate on that.
Thats my current plan i've been giving my parents $400 as a thank you for letting me stay with them and saving the rest.
Alaric
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Re: not entirely new, but knowledge is power right?

Post by Alaric »

There is no state income tax in FL. The state sales tax rate is 6% and counties may add up to another 1%, as Dade for example does. You probably found a reference to a 7% sales tax rate.
ivgrivchuck
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Re: not entirely new, but knowledge is power right?

Post by ivgrivchuck »

protagonist wrote: Sat Oct 17, 2020 11:13 am
I agree with JBTX. I am one of those who believes in paying off debt as a #1 priority. That said his analysis is very sound.
Given how low interest rates are these days, I would consider putting your 20% bond allocation into I-bonds. You can buy up to 10K/year (15K if you overpay your income tax with estimated payments), and at least you know you will keep up with inflation if interest rates rise.
I agree:

80/20 VTSAX/I-bonds is something I would go for in your shoes. You can worry about the international exposure later.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
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ruralavalon
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Re: not entirely new, but knowledge is power right?

Post by ruralavalon »

So your account is at Schwab. Now I understand why you use Schwab Target 2050 Index Fund (SWYMX).

Is this account an IRA or something else?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
protagonist
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Re: not entirely new, but knowledge is power right?

Post by protagonist »

james8266 wrote: Sat Oct 17, 2020 1:29 pm

After looking into FI i realized i already basically lived like this lol, im so amazed that there was a whole community around this principle and its exactly what i want. Unfortunately i got rushed into the medical fast track due to strict school oriented parents, but i have no true desire and after working in the medical field i realize its very much NOT what i like aside from the patient to patient connection.

I very much simply want to make a lot of money.
Retired physician here.

This article quotes one of many studies that, from my cursory reading, all seem to come to the same conclusion....that though there is some correlation between "happiness and satisfaction" and increased income up to a point (roughly $60K-100K/yr), beyond that point making more money does not make people happier, and some studies even show a negative correlation between making more money beyond that point and happiness/satisfaction. https://www.cnbc.com/2020/05/26/how-you ... 0decreased.

I'm not suggesting that you should not view prosperity as a goal. But to "simply want to make a lot of money", period, is IMHO not a recipe for a happy life. There is way more to life than that, and money won't buy it.
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celia
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Re: not entirely new, but knowledge is power right?

Post by celia »

At your age and lower income, I would max out all you can with a Roth IRA and Roth 401k because your wages and tax bracket will increase over time. (The employer matches will have to go to tax-deferred.). When you get to the 22% tax bracket, you can change your 401K contribution to tax-deferred.

In the Roths, use 100% stocks since you want to maximize the tax-free growth. When you get to $50-100k as your retirement balance, start adding bond funds. Stay away from funds of funds since it is harder to rebalance, and you won’t be able to get 100% stocks.

As far as a career, have you considered something environmental? I’m sure that was touched on frequently in your classes.
Topic Author
james8266
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Re: not entirely new, but knowledge is power right?

Post by james8266 »

celia wrote: Sun Oct 18, 2020 3:06 pm At your age and lower income, I would max out all you can with a Roth IRA and Roth 401k because your wages and tax bracket will increase over time. (The employer matches will have to go to tax-deferred.). When you get to the 22% tax bracket, you can change your 401K contribution to tax-deferred.

In the Roths, use 100% stocks since you want to maximize the tax-free growth. When you get to $50-100k as your retirement balance, start adding bond funds. Stay away from funds of funds since it is harder to rebalance, and you won’t be able to get 100% stocks.

As far as a career, have you considered something environmental? I’m sure that was touched on frequently in your classes.
I would say that $50k-$70k would be fine, it would be enough for good living and also enough for saving and investing while also a modest lifestyle. Im not looking to necessary make as much as possible from working but to have my income make more over time as multiple streams.
celia wrote: Sun Oct 18, 2020 3:06 pm At your age and lower income, I would max out all you can with a Roth IRA and Roth 401k because your wages and tax bracket will increase over time. (The employer matches will have to go to tax-deferred.). When you get to the 22% tax bracket, you can change your 401K contribution to tax-deferred.

In the Roths, use 100% stocks since you want to maximize the tax-free growth. When you get to $50-100k as your retirement balance, start adding bond funds. Stay away from funds of funds since it is harder to rebalance, and you won’t be able to get 100% stocks.

As far as a career, have you considered something environmental? I’m sure that was touched on frequently in your classes.
I have looked into the environmental aspect of it during covid, but a lot of places have furloughed their staff and are keeping senior staff ( on part time too ) so its a dead end for the time being
ivgrivchuck
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Re: not entirely new, but knowledge is power right?

Post by ivgrivchuck »

celia wrote: Sun Oct 18, 2020 3:06 pm At your age and lower income, I would max out all you can with a Roth IRA and Roth 401k because your wages and tax bracket will increase over time. (The employer matches will have to go to tax-deferred.). When you get to the 22% tax bracket, you can change your 401K contribution to tax-deferred.
Good call on Roth. Definitely preferable at that age.
In the Roths, use 100% stocks since you want to maximize the tax-free growth. When you get to $50-100k as your retirement balance, start adding bond funds. Stay away from funds of funds since it is harder to rebalance, and you won’t be able to get 100% stocks.
100% stocks in the Roth is definitely the way to go.

About bond funds I'm not so sure. Yields are very low, there is a duration risk. I-bonds protect you against inflation which is kind of the best you can ask at the moment, very good for small portfolios.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
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cchrissyy
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Re: not entirely new, but knowledge is power right?

Post by cchrissyy »

When i opened up my brokerage they told me its a good start to use SWYMX, i wasn't aware that i could switch out from SWYMX to another within my fund. The brokerage told me there was a-penalty of removing the money in that account before $5k?
EDIT: My brokerage is Schwab
hey i just want to stop you from doing something dangerous here. don't pull the money out of the roth ira. that's what schwab is saying not to do, and they are correct, because selling the SWYMX and buying VTSAX is something that happens inside your ira account. you can change from SWYMX to any other stock or index fund just by selling those shares and buying something else the important thing is you never move the money out of the account.
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ruralavalon
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Re: not entirely new, but knowledge is power right?

Post by ruralavalon »

cchrissyy wrote: Sun Oct 18, 2020 8:40 pm
When i opened up my brokerage they told me its a good start to use SWYMX, i wasn't aware that i could switch out from SWYMX to another within my fund. The brokerage told me there was a-penalty of removing the money in that account before $5k?
EDIT: My brokerage is Schwab
hey i just want to stop you from doing something dangerous here. don't pull the money out of the roth ira. that's what schwab is saying not to do, and they are correct, because selling the SWYMX and buying VTSAX is something that happens inside your ira account. you can change from SWYMX to any other stock or index fund just by selling those shares and buying something else the important thing is you never move the money out of the account.
Since your Roth IRA is at Schwab, if you want to switch to a total stock market index fund then don't buy Vanguard Total Stock Market Index Fund (VTSAX). Schwab would charge a $50 fee to buy shares of the Vanguard fund. Instead (if you want to switch away from the target date fund) use Schwab Total Market Index Fund (SWTSX) ER 0.03%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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james8266
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Re: not entirely new, but knowledge is power right?

Post by james8266 »

cchrissyy wrote: Sun Oct 18, 2020 8:40 pm
When i opened up my brokerage they told me its a good start to use SWYMX, i wasn't aware that i could switch out from SWYMX to another within my fund. The brokerage told me there was a-penalty of removing the money in that account before $5k?
EDIT: My brokerage is Schwab
hey i just want to stop you from doing something dangerous here. don't pull the money out of the roth ira. that's what schwab is saying not to do, and they are correct, because selling the SWYMX and buying VTSAX is something that happens inside your ira account. you can change from SWYMX to any other stock or index fund just by selling those shares and buying something else the important thing is you never move the money out of the account.
Yeaaa after looking around more i realized what you meant :oops:
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james8266
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Re: not entirely new, but knowledge is power right?

Post by james8266 »

So after a few calls at schwab i realized it would make more sense to get the VTSAX schwab equivalent of SWTSX to avoid the fee that comes with vanguard funds.

60% SWTSX
30% SWISX
10% SWAGX
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ruralavalon
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Re: not entirely new, but knowledge is power right?

Post by ruralavalon »

james8266 wrote: Wed Oct 21, 2020 8:50 pm So after a few calls at schwab i realized it would make more sense to get the VTSAX schwab equivalent of SWTSX to avoid the fee that comes with vanguard funds.

60% SWTSX
30% SWISX
10% SWAGX
Those are good fund choices for your IRA at Schwab.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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