Confused 21 years old [Help choose funds in Roth account]

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SetoKaiba
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Confused 21 years old [Help choose funds in Roth account]

Post by SetoKaiba »

Hello guys, I'm new to this world of investing, I'm currently trying to create my Roth IRA, I've thought for multiple days about the investments that I should have, I thought about having a Fidelity 2065 Target Date Index Fund, but I've read that I shouldn't have bonds in my portfolio since I'm 21 years old, and the target date funds are like 54% u.s stock, 36% international stock, and 10% bonds, so I thought about creating my own portfolio with maybe two Index funds? Such as a total U.S stock market index funds (80%) and Total international index funds (20%) and keep those until I have to rebalance the portfolio years later, what do you guys think, I'll really appreciate all suggestions!

[Title clarified by moderator Kendall.]
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MillennialFinance19
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by MillennialFinance19 »

At 21, I'd invest all of it in VOO or VTI and forget about it.
VTI and chill until 57...
popoki
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by popoki »

MillennialFinance19 wrote: Tue May 14, 2024 12:38 pm At 21, I'd invest all of it in VOO or VTI and forget about it.
Good suggestion. These funds will cost you less in expense ratio than a target date fund. Any exposure to international or bonds could come later when your account balance is higher.
Gray doesn't matter.
niagara_guy
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by niagara_guy »

+1 for VOO or VTI
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retired@50
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by retired@50 »

SetoKaiba wrote: Tue May 14, 2024 12:11 pm Hello guys, I'm new to this world of investing, I'm currently trying to create my Roth IRA, I've thought for multiple days about the investments that I should have, I thought about having a Fidelity 2065 Target Date Index Fund, but I've read that I shouldn't have bonds in my portfolio since I'm 21 years old, and the target date funds are like 54% u.s stock, 36% international stock, and 10% bonds, so I thought about creating my own portfolio with maybe two Index funds? Such as a total U.S stock market index funds (80%) and Total international index funds (20%) and keep those until I have to rebalance the portfolio years later, what do you guys think, I'll really appreciate all suggestions!

[Title clarified by moderator Kendall.]
I think the 80% US and 20% International is a good idea. Go with it.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Joe Public
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by Joe Public »

SetoKaiba wrote: Tue May 14, 2024 12:11 pm Hello guys, I'm new to this world of investing, I'm currently trying to create my Roth IRA, I've thought for multiple days about the investments that I should have, I thought about having a Fidelity 2065 Target Date Index Fund, but I've read that I shouldn't have bonds in my portfolio since I'm 21 years old, and the target date funds are like 54% u.s stock, 36% international stock, and 10% bonds, so I thought about creating my own portfolio with maybe two Index funds? Such as a total U.S stock market index funds (80%) and Total international index funds (20%) and keep those until I have to rebalance the portfolio years later, what do you guys think, I'll really appreciate all suggestions!

[Title clarified by moderator Kendall.]
First, good for you for starting to save and invest. How soon one starts and the amount one contributes are two of the most important factors.

Next, both options you list above will be fine, so I would say to pick what suits you. A target date index fund is the most convenient, set-and-forget option. The bond portion isn’t large enough that I would be concerned, and the fund will take care of all rebalancing and glide path adjustments over the years. It does have a higher proportion of equities invested in international (approx. 40%) than your other listed option of 20% international.

Opinions on how much international to hold as a percentage of total equities vary on this site, with some popular percentages being 0% (that is, 100% U.S. equities), 20%, and 40% (close to global market capitalization weighting). For now, though, consistent contribution over time is vastly more important than equity allocation percentages within that range.

Good luck going forward!
popoki
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by popoki »

The Fidelity Freedom® 2065 Fund https://fundresearch.fidelity.com/mutua ... /315796797 looks to have an expense ratio of 0.75%. That's a high price to pay for a small exposure to international and bond. VTI only costs 0.03%. Over the next 60-75 years, OP would lose a lot of money just to unnecessary expenses.
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lakpr
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by lakpr »

I would go 100% VOO or VTI (or their respective mutual fund equivalents at Fidelity, FXAIX and FSKAX).

I prefer mutual funds since you always get the day's closing price. With my luck,if I were to buy or sell ETFs, I would receive the worse-off price, leading me to regret later "if only I delayed my purchase 2 hours later!". I want to minimize that regret.

I would also NOT bother about investing in international equities at this time. Keep it simple for now, once you reach six figures in investment, THEN you can start slicing/dicing into international equities / small-caps etc. When starting out, 100% US stocks.

I agree with NO BONDS in a Roth account. Not only at your age, but any age, ever!. The entire deal with the Roth accounts is that all growth is tax free. Why would you want to choke off that growth using bonds?
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by bertilak »

At age 21 I would stick with VTI or VOO for a while. (I prefer VTI but no big difference.)

As you and your nest egg grow, it will be time to consider adding assets other than US stocks, primarily bonds and international stocks, but plenty of time for that. In preparation for that time, look at two things:
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
ScubaHogg
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by ScubaHogg »

Personally I’d go VT, especially since you seem interested in international investing vice 100% US
“Conventional Treasury rates are risk free only in the sense that they guarantee nominal principal. But their real rate of return is uncertain until after the fact.” -Risk Less and Prosper
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by ScubaHogg »

lakpr wrote: Tue May 14, 2024 1:06 pm I
I would also NOT bother about investing in international equities at this time. Keep it simple for now,
What is simpler than a single global weight equity ETF?
“Conventional Treasury rates are risk free only in the sense that they guarantee nominal principal. But their real rate of return is uncertain until after the fact.” -Risk Less and Prosper
WhiteMaxima
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by WhiteMaxima »

retired@50 wrote: Tue May 14, 2024 12:52 pm
SetoKaiba wrote: Tue May 14, 2024 12:11 pm Hello guys, I'm new to this world of investing, I'm currently trying to create my Roth IRA, I've thought for multiple days about the investments that I should have, I thought about having a Fidelity 2065 Target Date Index Fund, but I've read that I shouldn't have bonds in my portfolio since I'm 21 years old, and the target date funds are like 54% u.s stock, 36% international stock, and 10% bonds, so I thought about creating my own portfolio with maybe two Index funds? Such as a total U.S stock market index funds (80%) and Total international index funds (20%) and keep those until I have to rebalance the portfolio years later, what do you guys think, I'll really appreciate all suggestions!

[Title clarified by moderator Kendall.]
I think the 80% US and 20% International is a good idea. Go with it.

Regards,
I am 70% US, 30% int'l. Am I Ok?
lakpr
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by lakpr »

ScubaHogg wrote: Tue May 14, 2024 1:26 pm
lakpr wrote: Tue May 14, 2024 1:06 pm I would also NOT bother about investing in international equities at this time. Keep it simple for now,
What is simpler than a single global weight equity ETF?
I expect international equities to be dogs in my portfolio, their only purpose being provide diversification. I do NOT want 40%+ international equities in my portfolio, 20% is more than enough (and this is where my current portfolio is/will be due to annual rebalancing). Which means I would need TWO ETFs, which in turn means I'd rather not think about it until I have something more substantial. If it's not clear enough, I am *NOT* a fan of global-weight equity ETF.
abc132
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by abc132 »

Pick one fund and keep accumulating for 10 years. Focus on meeting your savings goal and not the short term or getting the best outcome.

Revisit at age 31.

You can decide what is best for you in 10 years. That gives you a good decade not to mess this up by constantly shifting your choices around - which is a losing behavioral strategy.

I would pick 100% US or a target date for my first 10 years of investing. Either is Boglehead-approved and whatever you like better today will suit you fine for the next decade.

Avoid target date in taxable - they can throw unexpected taxes at you.
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by retired@50 »

WhiteMaxima wrote: Tue May 14, 2024 1:29 pm
retired@50 wrote: Tue May 14, 2024 12:52 pm
SetoKaiba wrote: Tue May 14, 2024 12:11 pm Hello guys, I'm new to this world of investing, I'm currently trying to create my Roth IRA, I've thought for multiple days about the investments that I should have, I thought about having a Fidelity 2065 Target Date Index Fund, but I've read that I shouldn't have bonds in my portfolio since I'm 21 years old, and the target date funds are like 54% u.s stock, 36% international stock, and 10% bonds, so I thought about creating my own portfolio with maybe two Index funds? Such as a total U.S stock market index funds (80%) and Total international index funds (20%) and keep those until I have to rebalance the portfolio years later, what do you guys think, I'll really appreciate all suggestions!

[Title clarified by moderator Kendall.]
I think the 80% US and 20% International is a good idea. Go with it.

Regards,
I am 70% US, 30% int'l. Am I Ok?
Sure. Having anywhere between 20% to 40% of your stock investments in an international stock index fund is a fine choice.

Others may disagree as there are plenty of opinions on the topic, but I don't want to derail this thread by delving into all the arguments.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
alex_686
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by alex_686 »

ScubaHogg wrote: Tue May 14, 2024 1:26 pm
lakpr wrote: Tue May 14, 2024 1:06 pm I
I would also NOT bother about investing in international equities at this time. Keep it simple for now,
What is simpler than a single global weight equity ETF?
Welcome to the forum.

I would just relax, pull the trigger, and buy the target date fund.

There are well informed, well researched opinions on both sides. These opinions rest on nuanced technical analysis on a deep, vast subject. However, the actual impact between the choices is somewhere between medium and low.

What really matters is that develop a plan (see our Investment Policy Statement section), execute that plan, and follow that plan even during times of market stress. the impact of time-in-the-market and regular contributions will outweigh minor differences in your asset allocation.

I favor a light allocation to bonds. They increase the efficiency of the portfolio (return per unit of risk), thus reducing volatility leakage, helping you weather downturns, and maybe offering you a rebalancing bonus.

I favor a market neutral weighting for international. This is a pretty deep subject. Without getting deep into the financial statements, just know that the majority of international firms are large multinational companies that look and act much like their American counterparts. The big difference is the sector weights.

Note, my opinion rests of some market assumptions. Only time will tell if I am right or not. But in the big picture, this is a mole hill, not a mountain. At Bogleheads we enjoy debating over molehills. Don't let this distract you. Don't stress over this, just get started.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by ScubaHogg »

lakpr wrote: Tue May 14, 2024 1:31 pm
ScubaHogg wrote: Tue May 14, 2024 1:26 pm
lakpr wrote: Tue May 14, 2024 1:06 pm I would also NOT bother about investing in international equities at this time. Keep it simple for now,
What is simpler than a single global weight equity ETF?
I expect international equities to be dogs in my portfolio, their only purpose being provide diversification. I do NOT want 40%+ international equities in my portfolio, 20% is more than enough (and this is where my current portfolio is/will be due to annual rebalancing). Which means I would need TWO ETFs, which in turn means I'd rather not think about it until I have something more substantial. If it's not clear enough, I am *NOT* a fan of global-weight equity ETF.
Which is totally fine and personal preference. I just don’t want the OP to think global investing has to be “complicated.”
“Conventional Treasury rates are risk free only in the sense that they guarantee nominal principal. But their real rate of return is uncertain until after the fact.” -Risk Less and Prosper
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by Elysium »

SetoKaiba wrote: Tue May 14, 2024 12:11 pm Hello guys, I'm new to this world of investing, I'm currently trying to create my Roth IRA, I've thought for multiple days about the investments that I should have, I thought about having a Fidelity 2065 Target Date Index Fund, but I've read that I shouldn't have bonds in my portfolio since I'm 21 years old, and the target date funds are like 54% u.s stock, 36% international stock, and 10% bonds, so I thought about creating my own portfolio with maybe two Index funds? Such as a total U.S stock market index funds (80%) and Total international index funds (20%) and keep those until I have to rebalance the portfolio years later, what do you guys think, I'll really appreciate all suggestions!

[Title clarified by moderator Kendall.]
I helped my 21 year old son recently with his first Roth IRA account funding. After running some numbers explaining risks vs returns for different investments, potential growth over years, drawdowns, pay off, etc., suggested a leveraged 1.5x 60/40 Balanced fund - Wisdomtree US Efficient Core Fund (NTSX). Its essentially 90% S&P 500 and 60% US Treasury Bonds equaling returns. The other options considered were 100% VTI or VOO, and 100% PIMCO leveraged fund PSLDX. First one, considered good enough, although adding 1.5x 60/40 makes it more interesting for someone young and have a long timeframe. It can add a lot more when both Stocks and Bonds do well, they should because both are expected to have positive returns over long periods. The reason to not go more aggressive with PSLDX was of the unsure nature of long treasury this year, wanted to wait a little bit more, and have more money by then to make the switch. I may eventually suggest he go that route, or just leave it at NTSX. Don't think another option is needed, one good core fund that gives plenty of stock exposure and even bond exposure in same package without losing out on returns. The risk adjusted returns are great too.
esteen
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by esteen »

Joe Public wrote: Tue May 14, 2024 1:00 pm
SetoKaiba wrote: Tue May 14, 2024 12:11 pm Hello guys, I'm new to this world of investing, I'm currently trying to create my Roth IRA, I've thought for multiple days about the investments that I should have, I thought about having a Fidelity 2065 Target Date Index Fund, but I've read that I shouldn't have bonds in my portfolio since I'm 21 years old, and the target date funds are like 54% u.s stock, 36% international stock, and 10% bonds, so I thought about creating my own portfolio with maybe two Index funds? Such as a total U.S stock market index funds (80%) and Total international index funds (20%) and keep those until I have to rebalance the portfolio years later, what do you guys think, I'll really appreciate all suggestions!

[Title clarified by moderator Kendall.]
First, good for you for starting to save and invest. How soon one starts and the amount one contributes are two of the most important factors.

Next, both options you list above will be fine, so I would say to pick what suits you. A target date index fund is the most convenient, set-and-forget option. The bond portion isn’t large enough that I would be concerned, and the fund will take care of all rebalancing and glide path adjustments over the years. It does have a higher proportion of equities invested in international (approx. 40%) than your other listed option of 20% international.

Opinions on how much international to hold as a percentage of total equities vary on this site, with some popular percentages being 0% (that is, 100% U.S. equities), 20%, and 40% (close to global market capitalization weighting). For now, though, consistent contribution over time is vastly more important than equity allocation percentages within that range.

Good luck going forward!
+1

Good for you, and welcome!

As you can see from prior posters, there are folks on here with strong opinions on international vs domestic equities. But to you, at this age, this is an insignificant debate. Your idea of 80% domestic/20% international is absolutely fine. Also, if you changed your mind and went all VTI or all VTSAX, that would be absolutely fine too. Or if you did the target date fund, that's fine too!

All of those options are simple, and investing in mostly/all equities. Keep it simple, and keep it life-stage-appropriate (i.e. mostly/all equities at your stage), and put your focus toward living beneath your means and consistently saving a meaningful percentage of your income each month into the funds.

The most important things by far are 1) starting early, 2) how much you (consistently!) contribute, and 3) your overall asset allocation (split of stocks vs bonds, in broad brush strokes). Much further down the list is: international vs domestic, REITs vs none, bond funds vs nominal bonds, SCV tilt or not, etc. etc. Feel free to study up on those as you get older but they are not likely to move the needle for you at this stage in your investing lifetime.
This post is for entertainment or information only, and should not be construed as professional financial advice. | | "Invest your money passively and your time actively" -Michael LeBoeuf
Topic Author
SetoKaiba
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by SetoKaiba »

Thank you so much :]
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SetoKaiba
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I need some advice with my personal finances

Post by SetoKaiba »

[Thread merged into here --admin LadyGeek]

Hello guys,

I have around $17000 saved up, I'm 21 in community college, no debt, own my car, and pay my school+scholarships, I'm new to this world but I decided to be responsible with my money, I thought about starting my emergency fund of course, and I'll be using a 360 high yield savings account with capital one, I don't know if this is the best way to start and keep my emergency fund so any suggestions are welcomed, I'll have to move from my parents somewhere in the future, maybe two or 3 years, so I'm aware that I have to set aside some money that is not my emergency fund, plus I'll probably need a new car, I also will start a 2065 target date index fund so currently I'm working in setting my automatic payments into each account, I was wondering if you guys have any suggestions to all this or maybe have a piece of advise, I don't have anyone to talk about this kind of stuff so I will really appreciate your time. Thank you!
billfromct
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Re: I need some advice with my personal finances

Post by billfromct »

Do you have earned income so you can contribute to a Roth IRA?

For 2024 you can contribute up to your earned income amount, with a maximum $7,000.

At 21 years old with 40-50 years for that Roth IRA to compound tax free & taken out state & Federal tax free after age 59.5, your retired self will thank you, the 21 year old student.

bill
Last edited by billfromct on Tue May 14, 2024 8:02 pm, edited 1 time in total.
WhitePuma
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Re: I need some advice with my personal finances

Post by WhitePuma »

I recommend reading “If You can”. You’re off to a great start!
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SetoKaiba
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Re: I need some advice with my personal finances

Post by SetoKaiba »

Yes I'm planning to open my Roth IRA and invest in TDF index fund while I learn more about investing
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SetoKaiba
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Re: I need some advice with my personal finances

Post by SetoKaiba »

WhitePuma wrote: Tue May 14, 2024 7:58 pm I recommend reading “If You can”. You’re off to a great start!
I'll add it to my list for sure!! I just finished I'll teach you to be rich so I learn a lot of the basics
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SetoKaiba
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Re: I need some advice with my personal finances

Post by SetoKaiba »

billfromct wrote: Tue May 14, 2024 7:57 pm Do you have earned income so you can contribute to a Roth IRA?

At 21 years old with 40-50 years for that Roth IRA to compound tax free & taken out state & Federal tax free after age 59.5, your retired self will thank you, the 21 year old student.

bill
Yes! I have income but it's really low to be honest but planning to get something better I just make minimum wage or around 25k :(
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Re: I need some advice with my personal finances

Post by arcticpineapplecorp. »

you're doing great so far with everything you said: online high yield savings account, live within your means, no car payment, be responsible with money, Roth IRA, using low cost target date index fund.

The only thing I'll add is the target date fund 2065 is 90% stock and 10% bonds. So you should be prepared for similar declines along with movement of the stock market. So if stocks fall 20%, holding 90% in stocks means your portfolio might fall around 18% (.90 x .20 = .18)

you probably don't have access to a 401k with employer match (if you do, please invest there at least to capture 100% of the employer match) and if you don't have access to a 401k, try to max the Roth IRA if you can (and do this every year).

what questions do you have?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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SetoKaiba
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Re: I need some advice with my personal finances

Post by SetoKaiba »

arcticpineapplecorp. wrote: Tue May 14, 2024 8:03 pm you're doing great so far with everything you said: online high yield savings account, live within your means, no car payment, be responsible with money, Roth IRA, using low cost target date index fund.

The only thing I'll add is the target date fund 2065 is 90% stock and 10% bonds. So you should be prepared for similar declines along with movement of the stock market. So if stocks fall 20%, holding 90% in stocks means your portfolio might fall around 18% (.90 x .20 = .18)

you probably don't have access to a 401k with employer match (if you do, please invest there at least to capture 100% of the employer match) and if you don't have access to a 401k, try to max the Roth IRA if you can (and do this every year).

what questions do you have?
Should I invest in 80% u.s total stock market and 20% international stock market? I know some people say I shouldn't have bonds at my age
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SetoKaiba
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Re: I need some advice with my personal finances

Post by SetoKaiba »

arcticpineapplecorp. wrote: Tue May 14, 2024 8:03 pm you're doing great so far with everything you said: online high yield savings account, live within your means, no car payment, be responsible with money, Roth IRA, using low cost target date index fund.

The only thing I'll add is the target date fund 2065 is 90% stock and 10% bonds. So you should be prepared for similar declines along with movement of the stock market. So if stocks fall 20%, holding 90% in stocks means your portfolio might fall around 18% (.90 x .20 = .18)

you probably don't have access to a 401k with employer match (if you do, please invest there at least to capture 100% of the employer match) and if you don't have access to a 401k, try to max the Roth IRA if you can (and do this every year).

what questions do you have?
Should I invest in 80% u.s total stock market and 20% international stock market? I know some people say I shouldn't have bonds at my age
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arcticpineapplecorp.
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Re: I need some advice with my personal finances

Post by arcticpineapplecorp. »

SetoKaiba wrote: Tue May 14, 2024 8:14 pm
arcticpineapplecorp. wrote: Tue May 14, 2024 8:03 pm you're doing great so far with everything you said: online high yield savings account, live within your means, no car payment, be responsible with money, Roth IRA, using low cost target date index fund.

The only thing I'll add is the target date fund 2065 is 90% stock and 10% bonds. So you should be prepared for similar declines along with movement of the stock market. So if stocks fall 20%, holding 90% in stocks means your portfolio might fall around 18% (.90 x .20 = .18)

you probably don't have access to a 401k with employer match (if you do, please invest there at least to capture 100% of the employer match) and if you don't have access to a 401k, try to max the Roth IRA if you can (and do this every year).

what questions do you have?
Should I invest in 80% u.s total stock market and 20% international stock market? I know some people say I shouldn't have bonds at my age
your allocation should be based on your need, ability and willingness to take risk. It's not based on one's age.

read more on that here:

How much risk do you need to take: https://www.cbsnews.com/news/asset-allo ... -you-need/
How much risk do you have the ability to take: https://www.cbsnews.com/news/asset-allo ... -you-take/
How much risk do you have the willingness to take: https://www.cbsnews.com/news/asset-allo ... tolerance/
How to deal with conflicts between the need, ability and willingness to take risk: https://www.cbsnews.com/news/asset-allo ... ing-goals/

regarding how much in international, that also is a personal decision. The starting point is probably market cap which appears to be 61% US and 39% outside US, unless you have a good reason to do something else. There are reasons to tilt away from market cap (Larry Swedroe discusses these in his book "Your complete guide to a successful and secure retirement" but they probably don't yet apply to you, so why not hold the world? VT and chill.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by LadyGeek »

SetoKaiba - In order to provide appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread. If you have any questions, ask them here.

(Thanks to the member who reported the post and provided a link to this thread.)
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by my2p »

Please read JL Collins' book "The simple path to wealth". IMO, it is the simplest and most effective framework for finances and pretty much all you need. His recommendation for you would be 100% VTSAX (or VTI) if you are with Vanguard. If with Fidelity, go with 100% FSKAX (and don't buy VTSAX through Fidelity).
“The simple path to wealth” — JL Collins.
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by babystep »

bertilak wrote: Tue May 14, 2024 1:17 pm At age 21 I would stick with VTI or VOO for a while. (I prefer VTI but no big difference.)

As you and your nest egg grow, it will be time to consider adding assets other than US stocks, primarily bonds and international stocks, but plenty of time for that. In preparation for that time, look at two things:
+1. Too early to think about TDF in Roth.
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Re: Confused 21 years old [Help choose funds in Roth account

Post by momopi »

SetoKaiba wrote: Tue May 14, 2024 12:11 pm Hello guys, I'm new to this world of investing, I'm currently trying to create my Roth IRA, I've thought for multiple days about the investments that I should have, I thought about having a Fidelity 2065 Target Date Index Fund, but I've read that I shouldn't have bonds in my portfolio since I'm 21 years old, and the target date funds are like 54% u.s stock, 36% international stock, and 10% bonds, so I thought about creating my own portfolio with maybe two Index funds? Such as a total U.S stock market index funds (80%) and Total international index funds (20%) and keep those until I have to rebalance the portfolio years later, what do you guys think, I'll really appreciate all suggestions!
[Title clarified by moderator Kendall.]
Considering your age, I would avoid target date or balanced fund and go aggressive with US equities from start.

Assuming 45 years of contributions, I would do 100% S&P 500 index (or total us stock index) for first 15 years or so, then add some international index and bonds for next 30 years. As you get older/closer to retirement age you can rebalance the portfolio by your comfort level.
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by dogagility »

SetoKaiba wrote: Tue May 14, 2024 12:11 pm ...so I thought about creating my own portfolio with maybe two Index funds? Such as a total U.S stock market index funds (80%) and Total international index funds (20%) and keep those until I have to rebalance the portfolio years later, what do you guys think, I'll really appreciate all suggestions!
A fine idea. :sharebeer
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by biscuit5 »

MillennialFinance19 wrote: Tue May 14, 2024 12:38 pm At 21, I'd invest all of it in VOO or VTI and forget about it.
^^ this. At 21 I'd put it all in VTI. You can add items later as needed.
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by HipCoyote »

my2p wrote: Tue May 14, 2024 10:29 pm Please read JL Collins' book "The simple path to wealth". IMO, it is the simplest and most effective framework for finances and pretty much all you need. His recommendation for you would be 100% VTSAX (or VTI) if you are with Vanguard. If with Fidelity, go with 100% FSKAX (and don't buy VTSAX through Fidelity).
I agree. And the enemy of a good plan is a perfect plan. Just do 100% VTI or VTSAX or FSKAX and reevaluate in a few years.
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by NYstrip »

Recommendation here is to use 100% SPTM, SCHB, or SCHK. These are essentially the same as VOO or VTI but the share prices of the three I mentioned are in the $50-65 range as of today.

This way you don't have to save up almost $500 to buy just one share of VOO and allows you to buy just a couple of shares at a time if you so wish.

More time in the market and helps with dollar cost averaging, too.
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by ruralavalon »

Welcome to the forum :D

As a beginner the most important investing decisions you can make is to establish a high rate of contributions, and to make use of all available tax-advantaged accounts.


SetoKaiba wrote: Tue May 14, 2024 12:11 pm Hello guys, I'm new to this world of investing, I'm currently trying to create my Roth IRA, I've thought for multiple days about the investments that I should have, I thought about having a Fidelity 2065 Target Date Index Fund, but I've read that I shouldn't have bonds in my portfolio since I'm 21 years old, and the target date funds are like 54% u.s stock, 36% international stock, and 10% bonds, so I thought about creating my own portfolio with maybe two Index funds? Such as a total U.S stock market index funds (80%) and Total international index funds (20%) and keep those until I have to rebalance the portfolio years later, what do you guys think, I'll really appreciate all suggestions!

[Title clarified by moderator Kendall.]
In general either a target date fund, S&P 500 index fund, or total U.S. stock market index fund will probably be fine for your Roth IRA.

How much will you contribute annually to your new Roth IRA? Which fund company or brokerage will that new Roth IRA be with?

The fund(s) to use in your new Roth IRA depends somewhat on what investments to have in other accounts. It's often best to treat all accounts together as a single unified portfolio, rather than view each account separately.

Does your employer offer a plan such as a 401k, 403b, 457b, SEP IRA, SIMPLE IRA, or TSP? If so then is there any employer match, do you contribute to the plan, how much do you contribute annually, and which funds do you use?

As a beginner the most important investing decisions you can make is to establish a high rate of contributions, and make use of all available tax-advantaged accounts.
Last edited by ruralavalon on Wed May 15, 2024 3:01 pm, edited 1 time in total.
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Robert20
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by Robert20 »

SetoKaiba wrote: Tue May 14, 2024 12:11 pm Hello guys, I'm new to this world of investing, I'm currently trying to create my Roth IRA, I've thought for multiple days about the investments that I should have, I thought about having a Fidelity 2065 Target Date Index Fund, but I've read that I shouldn't have bonds in my portfolio since I'm 21 years old, and the target date funds are like 54% u.s stock, 36% international stock, and 10% bonds, so I thought about creating my own portfolio with maybe two Index funds? Such as a total U.S stock market index funds (80%) and Total international index funds (20%) and keep those until I have to rebalance the portfolio years later, what do you guys think, I'll really appreciate all suggestions!

[Title clarified by moderator Kendall.]
I would do 80% VTI and 20% VXUS OR 100% VT
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ruralavalon
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by ruralavalon »

popoki wrote: Tue May 14, 2024 1:05 pm The Fidelity Freedom® 2065 Fund https://fundresearch.fidelity.com/mutua ... /315796797 looks to have an expense ratio of 0.75%. That's a high price to pay for a small exposure to international and bond. VTI only costs 0.03%. Over the next 60-75 years, OP would lose a lot of money just to unnecessary expenses.
But Fidelity Freedom Index 2065 Investor (FFIJX) has an expense ratio of just 0.12%.

Using an allocation fund (like a target date fund) seems to insulate the investor against behavioral errors and so produce higher investor returns. Morningstar, Mind the Gap 2019
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Re: Confused 21 years old [Help choose funds in Roth account]

Post by popoki »

NYstrip wrote: Wed May 15, 2024 2:44 pm Recommendation here is to use 100% SPTM, SCHB, or SCHK. These are essentially the same as VOO or VTI but the share prices of the three I mentioned are in the $50-65 range as of today.

This way you don't have to save up almost $500 to buy just one share of VOO and allows you to buy just a couple of shares at a time if you so wish.

More time in the market and helps with dollar cost averaging, too.
Vanguard ETFs (exchange-traded funds) bought at Vanguard have a minimum investment of $1.
Gray doesn't matter.
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