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The Bogleheads' Guide to Investing?
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You should absolutely look into how it is invested. If you want to just do the least amount of work, look to see if there are any target date funds with expense ratios less than .2 and invest everything in the fund with the year that you want to retire. If you want to get more into it, I highly recommend the Bogleheads Guide to Investing as a very beginner friendly book that will give you the tools you need to pick funds for yourself (or maybe even decide that the target date fund is your preference).
If I may, I really like the Boglehead's Guide to Investing as a good all-rounder book that'll help you through your investment journey about what to pay down, how to invest, withdraw, and live off of your investments.
I liked the book so much I bough a copy for each of my family members and I've even loaned the book to several of my friends who have been using the knowledge from the book to help them setup their financial future. I started reading the second edition they put out the other day until a friend asked if he could borrow it to have one of his employees read as he wanted to give her some direction in investments.
If you’re the reading type, Bogglehead’s Guide to Investing is the best way you can spend your $16. The book will not try to upsell you anything and has a chapter on exactly your situation.
I highly recommend reading The Bogleheads' Guide to Investing, it's a pretty good overall handbook on investing. They espouse a buy and hold index mutual fund strategy. It's a great place to start when looking to take charge of your own investments.
I've left some comments in other subthreads, but wanted to recommend the book The Bogleheads' Guide to Investing based on the philosophy of Jack Bogle, the founder of Vanguard.
Market crashes are only a risk if you are trying to pull money put while everything is down. I recommed reading a copy of bogleheads guide to investing. The boglehead philosophy is the philosophy Vanguard follows.
It's a fine choice. It's a fund that is made up of other funds. Two of them are the rough equivalent to VTWAX.
If you want to learn and understand more, you can read The Bogleheads' Guide to Investing. If you're not interested in learning more, just know that you've picked a good fund for your retirement. You literally just have to put money in it every paycheck and they will take care of adjusting the risk levels as it approaches 2060.
I can understand the short time horizon, however I'm also comparing the services I'm being offered, especially on my second bank where I have most of my money and since 2007 they had a 41% increase, while S&P in the same time period had almost 100%.
Even with a more conservative approach in their investments, which I like because in 2008 there was no negative returns and they actually ended up the year at +0.32%, while S&P 500 ended at almost -40%. However, even with that -40% S&P was able to return more in the same amount of years, even with -40% years.
I pay 1%-1.50% commission to the bank AFAIK.
Do you think in the MSCI BRIC ETF that a 3% annualized for the past 10 years is good? That's what I'm getting mostly with the investments I'm getting at the moment.
From what I can understand $BKF had 45% increase in 2017, while MSCI BRIC ETF had 30%. In 2016 it was 23% to 31%. Either I'm reading this wrong, but it wasn't nearly identically performances, it was a 10% difference each year.
I will read Boggleheads, is it this? https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW
In general, ETFs like $SPY, $VTI, or similar have much lower fees than mutual funds and as a result more money gets to you rather than someone else's pocket. A good book: The Bogleheads' Guide to Investing
Three-fund portfolio, as explained in this fantastic book.
I recommend new investors read (check your local library):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
Read The Boglehead's Guide to Investing. Don't listen to anyone suggesting stock-picking strategies. Especially not gurus who "got rich" from picking stocks.
The Boglehead’s Guide to Investing.
https://www.amazon.com/dp/B00JUV01RW/ref=cm_sw_r_cp_awdb_M9PJEPG3MXH9DBHQ3C67
It sounds like you'll benefit from the reading I suggest for new investors, (You may want to check your local library to see if they have copies):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
I recommend the following reading for new investors,
(You may want to check your local library to see if they have copies):
T*he Bogleheads Guide to Investing*: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
>How do I go about starting a mutual fund? Are there recommended websites? Do I go through a specific platform? I honestly have no idea. I've learned about what they are but how to actually start one.
Vanguard or Fidelity are good, low-fee, often-recommended mutual fund companies. Since you mentioned that your 401k is at Fidelity, that would probably be the better option for you. You should be able to search their site for info about opening a regular taxable brokerage account and/or an IRA (Roth and/or Traditional).
>How do I go about buying stocks? How does it work? I hear a lot about Robinhood, so I'm not sure if I should get that.
You'll be able to buy stocks using Fidelity, although I don't recommend buying stocks for new investors. Mutual funds and ETFs are much better options for new investors-- read the info I linked to at the top of this reply.
>How much savings is a good amount to have in my bank account and how much should I be putting into investments?
Enough to cover 3-6 months of expenses is the usual recommendation for an emergency fund. This should be held in a "safe" place, like a savings account at your bank, rather than invested. Typically, the lower the risk of you losing your income, and the easier you think it'll be to replace your income if you should lose your job, the smaller your emergency fund needs to be. If there's a high chance of losing your job, and/or you think it will be hard for you to find another, a 6 month emergency fund might be on the low end of what you should have.
You'll also want to save money in a bank account for any upcoming expenditures you plan within the next 5 years (car, home purchase, etc.)
As far as investments, one rule of thumb is to save at least 15% of your income for retirement + any additional money you may not need for at least 5-10 years.
If you can't afford to save "enough" right away, that's OK. Just save as much as you can, and each time you get a wage/salary increase, increase your saving %.
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>For my 401k through Fidelity, I'm contributing a good amount. I also see that there's an option for a Roth Ira that I am not contributing to. Can I and should I contribute to both?
Having your retirement investments in a mix of pre-tax 401k assets and Roth assets gives you the most flexibility in retirement. Typically, early in your working career is the time when your income, and therefore income tax rate, is the lowest, so that can be a good time to make contributions to a Roth IRA or Roth 401k (if your company offers one).
This would probably be a good start: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW
Maybe this as well: https://www.amazon.com/Simple-Path-Wealth-financial-independence-ebook/dp/B01H97OQY2/
I recommend the following reading for new investors,
(You may want to check your local library to see if they have copies):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
Having your retirement investments in a mix of pre-tax 401k assets and Roth assets gives you the most flexibility in retirement. Typically, early in your working career is the time when your income, and therefore income tax rate, is the lowest, so that can be a good time to make contributions to a Roth IRA or Roth 401k.
I recommend this one, which is about investing in general. It also explains the three-fund portfolio.
>I’ve read about the three-fund portfolio - is that best for a regular brokerage account too?
Yes. You might be interested in reading The Boglehead's Guide to Investing, https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ or The Simple Path to Wealth by J.L. Collins, although you can read the same content on his blog: https://jlcollinsnh.com/about/ .
>Do I stick with index funds/ETFs, or is it worth dipping my feet into individual funds, because I’m young?)
Stick with broad-market index mutual funds and ETFs. For almost everyone, it's not worth investing in individual stocks unless you plan to do a LOT of research.
The most conservative investment is going to be saving it in a bank account, but this will result in you losing money to inflation over time.
How old are you? If you have a long time horizon for needing the money available, your best option is probably going to be to invest it in broad-market stock-index mutual funds or ETFs.
You might be interesting in reading the following (you may be able to find the books at your library):
The Bogleheads' Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ ,
and/or
The Simple Path to Wealth by J. L. Collins; although you can read most of the content on his website here: https://jlcollinsnh.com/about/ .
I second J.L. Collins and also recommend the book: The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
J.L. Collins also has a book: The Simple Path to Wealth , but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/.
Maybe if you approach it as both learning more together, you can get on the same page.
You've received some good suggestions so far. I'd personally recommend the Vanguard/Fidelity indexes rather than one of the Target Date fund.
Of your choices, stick with the Vanguard or Fidelity. The expense ratios on the American Funds and JP Morgan choices are higher than you need to pay.
The main reason I wanted to reply was to suggest you do a little reading to educate yourself about investing. This will help you understand and evaluate the "why"s of what people recommend and can help you avoid making mistakes down the line.
I recommend the following for new investors (You may want to check your local library to see if they have copies):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
You'll benefit from reading one or both of the following.
(You may want to check your local library to see if they have copies):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
The time spent educating yourself will be time very well spent.
You've probably been trading (trying to buy and sell stocks) rather than investing (buying and holding).
You'd probably benefit from reading one or both of the following.
(You may want to check your local library to see if they have copies):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
Create an account at one of the low-fee companies like Vanguard or Fidelity and invest in low-fee, broad-market, index funds for the long-term.
Start reading here:
(You may want to check your local library to see if they have copies):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
Make sure you're purchasing low-expense-ratios (<0.2%, or even better, <0.1%), broad-market index funds (mutual funds or ETFs) with no purchasing or redemption fees. Offerings by Vanguard and Fidelity are typically good choices.
There's no reason to hold a dozen different mutual funds since each one typically holds shares of hundreds to thousands of different companies.
In addition to this group's wiki...
For learning about investing, start reading here:
(You may want to check your local library to see if they have copies):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/.
Start reading here:
(You may want to check your local library to see if they have copies):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
Create an account at one of the low-fee companies like Vanguard or Fidelity and invest in low-fee, broad-market, index funds. (More detailed info can be found in my recommendations.)
First, make sure you realize that you can only contribute to an IRA (Roth or Traditional) if you have earned income-- like from a job or self-employment.
If you do, then you can contribute up to $6k or your earned income for the year (whichever is less) to an IRA. This can be Roth, Traditional, or a combination of both.
Regarding which one, Roth or Traditional, if you're like most college students, your income now will be lower than at any point in your career, and if you're starting to save for retirement now, you understand its importance and will likely continue to save. This means that your taxes in retirement will likely be the same or higher in retirement than your current marginal tax bracket. If this is the case, then now is a prime time to invest in a Roth account. You may also find this part of the sub's Wiki worth reading: Roth or Traditional?
Roth IRAs are also good because you can withdraw your contributions at any time without tax or penalty; HOWEVER, it's not recommended because you're "raiding" your retirement and losing the chance for any future compound growth.
It's not difficult to open an IRA of either type. I recommend going with a low-fee fund company like Vanguard or Fidelity. Either would be happy to help guide you through the process of opening an IRA with them. Once you contribute to the IRA (Roth or Traditional), make sure you're actually investing the money in a low-fee, broad-market, index fund (either mutual fund or ETF).
You may also benefit from reading the following that I recommend for new investors:
(You may want to check your local library to see if they have copies):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
After figuring out how to set you goals (short-, medium-, and long-term) and determine how much you actually want to invest, I recommend reading what my suggestions for new investors. (You may want to check your local library to see if they have copies):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
First, make sure you keep an emergency fund of 3-6 months of expenses in an accessible savings account, to be used for emergencies, or to tide you over between jobs if you lose yours.
>Pay off student loans - 32k highest interest rate loan is of 6 percent. I’ve been holding off on this for the sheer thought that maybe the current administration might do some loan forgiveness for students and graduates.
Then, pay off any loans with an interest rate of 4% or more. Any loan forgiveness that's currently being discussed is only for $10k of loans and I wouldn't count on it passing.
>
Diversify in the stock market - not sure what percentage I should put into each but I was thinking of just choosing the safest etfs and dumping it all in the market.
Next, invest. You don't want to choose the safest etfs. Those will be bond based and will not provide you the best return over time. Assuming you have at least 5-10 years before you'll need the money, invest it in broad-market index funds-- either mutual funds or ETFs. It sounds like you'll benefit from the reading I suggest for new investors, (You may want to check your local library to see if they have copies):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
If you'll need the money in less than 5 years, it'll be safer to put it in CDs, bonds (not bond funds), or in a savings account.
>
Get a rental property - this is something I’ve thought about this entire summer. I’ve even put offers in (about 10-15 offers sent) but have not gotten anything accepted yet.
Owning rental property can be a lot of work, so unless you know what you're doing and have the time and skills, I'd highly recommend investing over becoming a landlord.
Here are a couple recommendations I give to new investors. You may be able to borrow the books from your library.
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
Look into reading (check your local library):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
Look at reading (check your local library):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/.
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/.
I'd suggest looking for an advisor that charges you a flat fee per hour for advice and is a fiduciary, rather than one that charges a % of your assets under management, IF you feel a need for a long-term advisor.
Alternatively, I'd suggest you educate yourself so you can manage your own assets.
I recommend starting with (check your local library):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/.
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/.
Educating yourself and checking in periodically with a fiduciary financial planner will save you significant $$ over the course of your investing life.
Here are a couple recommendations I give to new investors. You may be able to borrow the books from your library.
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
I recommend spending some time learning about investing.
Look at reading (check your local library):
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
I've seen most of your questions answered except for picking a company. I'd suggest opening an account with either Fidelity or Vanguard-- they're two of the largest, no-/low-fee brokerage houses. Both have low-cost investments and will allow you to hold a taxable brokerage account or retirement accounts.
You may also benefit from reading:
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
and/or
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
You can definitely learn to do it yourself!
I recommend reading The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
You may also like The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
Yes, what /u/68_Bullitt is talking about is mutual funds or ETFs (Exchange Traded Funds) which allow you to invest in hundreds or thousands of different companies by investing it one fund that owns them. This allows significant diversification (that reduces risk) without having to go out and purchase shares of that many individual companies yourself.
I recommend reading The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
You may also like The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
Open an account at Vanguard or Fidelity, educate yourself about investing, and invest in broad market index funds (mutual funds or ETFs). There's really no need to pay someone to manage your money.
Good resources for learning:
The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
Read The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
You may also like The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
These are good books for learning more about taking charge of your investments.
I recommend reading The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ .
You may also like The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
I agree with /u/1hotjava. Split between VTSAX and VTIAX rather than a Target Date fund. I'd probably recommend 70/30 or 75/25.
You would probably benefit from reading The Bogleheads' Guide to Investing, https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ and/or The Simple Path to Wealth, by J.L. Collins, https://www.amazon.com/Simple-Path-Wealth-financial-independence-ebook/dp/B01H97OQY2/ . J.L. Collins also has a good website that contains most of the info in his book: https://jlcollinsnh.com/about/
Read The Bogleheads Guide to Investing: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/ . You may also like The Simple Path to Wealth by J.L. Collins, but you can read most of the content on his website: https://jlcollinsnh.com/manifesto/ and https://jlcollinsnh.com/stock-series/ .
This is a hard question to answer.
At your age (late 20s) I don't think it's necessarily crazy to switch it all, but it depends on how risk adverse you are, and what your tolerance for volatility is. Doing as you're suggesting will take you out of bonds pretty much completely, which will open your portfolio up to additional volatility (since bonds/fixed income funds will have a stabilizing effect). Since you have quite a while until you're reach retirement age, you have time to ride out any volatility for now, if you have the stomach for it. ;)
Something to be aware of is that if you invest in both S&P 500 and Large cap funds, you're going to be duplicating a lot of the companies within the two funds. So, this may or may not be a good solution.
My suggestion would be to either buy or try to borrow a copy of The Bogleheads' Guide to Investing. This is the newest edition: https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/. It recommends a buy and hold approach to index investing and is a great introduction to investing. It does also get into more complex topics, but should be a helpful resource.
Once you start thinking about investing, see if you can find a copy of (or buy a copy of) The Bogleheads' Guide to Investing. https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/
It's an excellent introduction to investing. Be aware that parts can get a little dense, but that's OK, you don't need to understand everything all at once. Just read it slowly, taking time to digest as you go. Some sections you'll be OK just skimming enough that you know those options exist and you can come back and digest more later if you need the info.
I'm not familiar with Canadian plans, so my information is US specific.
A few clarifications/corrections:
>Protected savings intended for retirement or disability savings such as an IRA in the US or RRSP in Canada. There are some rules to follow, mainly limits on how much you can put in every year. But as long as the money sits there gathering interest until you reach retirement age, there is no tax on it. You are required to leave the money there for the full term, with very few exceptions. And while the interest rate may seem low, there is a cumulative effect at work.
Re: "But as long as the money sits there gathering interest until you reach retirement age, there is no tax on it."
-- Depending on the type of retirement account, there may or may not be taxes due when the money is pulled out of the retirement account when you retire.
With Roth accounts (Roth IRA or Roth 401k), you pay tax on the money you contribute in the year that you make the contribution (contributions are NOT tax deductible), but if you wait until you're 59.5 and have had a Roth for at least 5 years, when you retire and withdraw the money, you will NOT pay tax on any of the distributions.
On the other hand, with Traditional accounts (Trad IRA or Trad 401k), your contributions can be tax deductible if your AGI is below the cut-off (and after-tax if not). Regardless, these accounts will grow tax-free until retirement. These accounts differ from Roth IRAs in that the distributions are taxable (typically because the contributions haven't been taxed). In the case where your contribution was after-tax, a percentage of each distribution that's considered a return of your cost basis (the after-tax contributions) will not be taxable.
Re: "You are required to leave the money there for the full term, with very few exceptions."
-- Full term being until your 59.5. However with Roth IRAs, you can withdraw your *contributions* at any time.
Re: "And while the interest rate may seem low, there is a cumulative effect at work."
-- Yes, there is a compounding effect at work, but assets in a retirement account (IRA or 401k) don't have to be invested in something will a low interest rate. With an IRA, you can choose what to invest in based on which company you choose as the custodian. With a custodian like Vanguard or Fidelity, you have a huge number of choices. With a 401k, you can invest in any of the options provided by your employer's plan.
>Standard investments are taxed. But only when money is removed. You can cash in an index fund for example at any time, but have to pay tax on the profit. (Called capital gains tax) As long as the money is at work, there is no tax due.
It's important to realized that depending on the investment, there could be capital gain or dividend distributions throughout the year. These would be counted as income each year, even if you choose to reinvest those amounts. Since they would be included as income on your tax return, those amounts would add to your cost basis (basically the amount of your investment(s) that's already been taxed).
Yes, the main taxation does occur when the investments are sold, at which point only the profit is included as income on your tax return.
>One nice thing is that, quite often, if you don't have enough funds to hit the cap on your IRA or RDSP in a given year, you can remove funds from your taxable investments and move it into the tax sheltered investment without triggering the capital gains taxes.
Not really-- at least for IRAs. While, yes, you can sell your taxable investment to get the money to contribute to your retirement account (IRA), you will trigger reportable income if you sell the investment at a gain. Your statement that not triggering capital gains taxes is not the case.
>For long term investments (or any investments really) the key is being ruthless about avoiding or minimizing the fees you have to pay. Fees come out at the front and can easily wipe out most of your gains.
Absolutely! This typically means choosing investments that have no purchase or redemption fees, and for funds (mutual funds or ETFs) that have no loads and low expense ratios.
For those new to investing, I suggest low-cost, broad-market index funds-- either ETFs or mutual funds-- because they offer instant diversification. Vanguard and Fidelity are two brokerages that typically offer a wide selection of low-cost options.
I also recommend those new to investing read The Bogleheads' Guide to Investing. https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/
Oh boy, you've really dripped info into this thread throughout. $150K in savings here, planning to buy a home there. LOL. Anyway, while you don't have as much as one would like at your age, I don't think anybody here is gonna scold you for it. The past is the past. All you can do is look toward the future and I commend you on trying to make a positive change in your life.
The first and very most important thing I would suggest to you is to go buy The Bogleheads Guide to Investing and read it. There's a bunch of other books you may wish to read as well but that's a good starting place. You may also want to check out the Getting Started portion of the wiki.
>But I felt a boost in morale that I don’t carry any sort of debt.
Excellent, I don't think anyone should invest until they've paid off debt.
> I totally agree that AAPL is not a conservative investment but I’m doing it out of emotion. Which can be dangerous.
You seem to be self aware enough to know that you're letting your emotions take charge of your investments rather then vice versa. Can I ask why there's an attachment to Apple?
> What is your take on VWELX.
I did some research on VWELX, and while it's a good fund, a combination of broad index funds has beat it and will continue to beat it. If you're young and saving for the long-term future, I think VWELX has too many bonds. 58 Stocks in the fund is way too little (doesn't offer much diversification, and most stocks appear to be in tech).
>What would you do if you were in my shoes?
Well, I can't say for sure since I don't know your goals, current situation, etc. One thing I know for sure, I'd drop the Apple investments. Investing in well-established and extremely successful companies USUSALLY means they're at the top of the wave and there isn't anywhere to go but down. Being counter-intuitive is the best bet when it comes to investing.
I think that 99% of people are best served putting their investments in a combination of VTSAX and VTIAX (or all of it in VTWAX, which is VTSAX and VTIAX combined).
https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW
This book has changed the lives of most who've read it. I'd highly recommend it for someone who's unsure about their investment path. Best $16 bucks you'll ever spend
https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW
Research backed, an easy read, and it will teach you how to invest inexpensively and as safely as possible.
This book The Bogleheads' Guide to Investing gave me a solid baseline on investing and I was 10+ years older than you when I read it and began investing.
Listen to the Freakonomics podcast episode The Stupidest Thing You Can Do With Your Money and/or check out this book from your local library: The Bogleheads' Guide to Investing.
Long story short: buy and hold diversified, low-cost index funds. There are many examples including $IVV, $SPY, $VTI.
Popular alternatives to The Bogleheads' Guide to In...
The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits)
The Simple Path to Wealth: Your road map to financial independence and a rich, free life
