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NFT: Starting up Investing

ManningLobsItBurressAlone : 1/10/2017 4:39 pm
I've come to this site, and read great advice on many different topics. Figured try my luck with this topic: Starting to Invest

Currently I'm 28, with no significant debt. I contribute 13% to my employer 401K and do have a former 401K/Roth from my previous employer that I just transitioned to an IRA (traditional/Roth separated through Fidelity).

I have been doing a lot of research. Recently on the auto-adviser applications like Betterment and Wealthfront- They are sort of- set it and forget it- type applications, that auto-rebalance, and do tax loss harvesting (don't think I'm that significant yet). Being young, and more willing to take on risk, the 90-10 split seems to be the standard, but on these 2, have not been performing that well recently (seems to be due to ~45% of the stock portion in the international markets). You can't pick the allocation of money, but the ETF's that you are given seem to be standard (ie Betterment using VEA and VWO as two of them).

My initial start off that I want to put in is around $7K, but I want to also be able to contribute $3-500 a month. Getting some advice that just opening an account with Schwab and personally picking some stocks and ETFs might be the way to go, but I then worry about the fees from the transactions as I'm not a big balance account in the beginning.

Any advice is greatly appreciated.
With Schwab, the carrot for them is  
Bobby Humphrey's Earpad : 1/10/2017 4:49 pm : link
they sell you their funds for dirt cheap and very little minimum investment for IRAs. The expense ratio for say their S&P 500 is like 0.07.

The downside is spending $75 on a Vanguard index fund.
I would advise you to buy Tony Robbin's book...  
Tesla : 1/10/2017 4:55 pm : link
called Money: Master the Game. Some really fantastic info. in there, and it's not just about which mutual fund to pick, etc. but also about making a lifelong income plan. Can't recommend it highly enough.
Im avoiding the robo advisors  
Deej : 1/10/2017 5:00 pm : link
I think you want to see a product like that tested a little more before throwing it with it. Remember, there can be serious tax consequences to unwinding an investment. I think there is a lot more development that needs to come out of those products (and there will be more fee competition).

Take this as an example. The robo says you should be 60% stock, 25% bond, 15% cash. Cash being there as a safety net. Except it isnt, because you cant withdraw it. If you go to withdraw 5% of your portfolio and want it all from the cash, you cant do it. Rather, they'll sell some of your stocks and bonds and keep your allocation flat. Moreover, Schwab puts people in a low yielding proprietary cash fund -- ie Schwab is basically skimming.
So what do I do?  
Deej : 1/10/2017 5:02 pm : link
I buy Vanguard index funds. The All US fund (S&P 500 funds are a comparatively bad investment -- they lose some returns to people front running changes to the index makeup). The all world ex-US fund. And the REIT fund. Three assets, plus cash. Right now Im not in bonds because of the yields and my investment horizon.
Tesla has a good recommendation  
pjcas18 : 1/10/2017 5:04 pm : link
and maybe even before that you should read Peter Lynch's books One up on Wall Street and Beating the Street (I haven't read his 3rd book Learn to Earn, I've heard it's sort of remedial and for a younger audience.

both easy reads.

both books are still as relevant today IMO as the day they were written.

You may get hit with an annual fee from Schwab  
njm : 1/10/2017 5:08 pm : link
They charge it on accounts below a certain amount. If you have a retirement plan or rollover with them it counts towards the total.

Right now I'd be careful with robo advisors because I think a lot of algorithms are going to need revision.
A 2nd for One Up on Wall Street  
njm : 1/10/2017 5:09 pm : link
.
RE: Im avoiding the robo advisors  
ManningLobsItBurressAlone : 1/10/2017 5:09 pm : link
In comment 13320507 Deej said:
Quote:
I think you want to see a product like that tested a little more before throwing it with it. Remember, there can be serious tax consequences to unwinding an investment. I think there is a lot more development that needs to come out of those products (and there will be more fee competition).

Take this as an example. The robo says you should be 60% stock, 25% bond, 15% cash. Cash being there as a safety net. Except it isnt, because you cant withdraw it. If you go to withdraw 5% of your portfolio and want it all from the cash, you cant do it. Rather, they'll sell some of your stocks and bonds and keep your allocation flat. Moreover, Schwab puts people in a low yielding proprietary cash fund -- ie Schwab is basically skimming.


I saw that in my research regarding Schwab's robo adviser specifically. Up to 15% of the holdings in a low interest account in Schwab's name. In Bettermet for example, for wealth growth, the 90/10 split is:

US Total Stock Market: VTI 16.2%
US Large-Cap Value: VTV 16.2%
US Mid-Cap Value: VOE 5.2%
US Small-Cap Value: VBR 4.5%
Developed Markets: VEA 37.5%
Emerging Markets: VWO 10.5%
Inflation-Protected Bonds: VTIP 0.0%
Short-Term Treasuries: SHV 0.0%
Municipal Bonds: MUB 5.5%
US Corporate Bonds: LQD 0.6%
International Bonds: BNDX 2.4%
Emerging Markets Bonds: EMB 1.6%

With nothing held in cash. Thanks again for the comments.
I'm in a similar situation  
DC Gmen Fan : 1/10/2017 5:19 pm : link
and reading a book called The Bogleheads Guide to Investing.

Written by the "Bogleheads" which is a great forum on investing. Check it out.
I dont think betterment  
Deej : 1/10/2017 5:21 pm : link
is worth .35% annual fee for below 10k or even probably .25% for <$100k. Moreover if you have that much invested, dont worry about tax lost harvesting. Remember, that's all on top of the cost of the underlying investment funds.

I could buy that it has value at 15 basis points for $100+k accounts, in particular for people who cant be bothered. I just think Vanguard will eventually blow everyone out of the water. They have a robo advisor already. .30% fee, $50k minimum. The history of Vanguard is that they will cut fees drastically if they are not actually necessary to maintain the product. So their broad us equity funds are now in the .05% range. Ultimately I think Vanguard gets pretty close to that for their robo advisor, if not making it altogether free.
DIY investing has never been easier  
Patrick77 : 1/10/2017 5:29 pm : link
Really most ETF-based plans I read about all more or less start from Bogle. I follow a blog about couch potato investing - basically focused on investing in 3 ETFs and rebalancing yearly.

My expenses per year used to be less than 1% of the portfolio, now they are lower than .5%. To me focusing on keeping your expenses low and sticking with a simple strategy are the big things. I even limit myself to no more than 15 stocks/etfs/financial instruments. Even that number is too high IMO and I currently only own 1 stock and 6 ETFs.

You don't beat the market, at least not with any consistency. My advice is to keep it simple.
My advice:  
mavric : 1/10/2017 5:47 pm : link
Diversify, diversify, diversify
RE: DIY investing has never been easier  
ManningLobsItBurressAlone : 1/10/2017 5:49 pm : link
In comment 13320564 Patrick77 said:
Quote:
Really most ETF-based plans I read about all more or less start from Bogle. I follow a blog about couch potato investing - basically focused on investing in 3 ETFs and rebalancing yearly.

My expenses per year used to be less than 1% of the portfolio, now they are lower than .5%. To me focusing on keeping your expenses low and sticking with a simple strategy are the big things. I even limit myself to no more than 15 stocks/etfs/financial instruments. Even that number is too high IMO and I currently only own 1 stock and 6 ETFs.

You don't beat the market, at least not with any consistency. My advice is to keep it simple.


This is the way I've been leaning. My only question would then become, my preference would be to start off with my initial investment (around $7K to start), then every paycheck be able to keep increasing what I have invested (around $200-$400 a paycheck). For something like a Vanguard ETF would my preference of periodically paying into it hurt me with all the fees I'd incur. At a place like Schwab it seems there is a flat rate for each transaction, so I'd imagine that would be very detrimental over the course of a year.
Kiplinger's  
charlito : 1/10/2017 6:00 pm : link
Magazine has great information.
RE: RE: DIY investing has never been easier  
DC Gmen Fan : 1/10/2017 6:04 pm : link
In comment 13320581 ManningLobsItBurressAlone said:
Quote:
In comment 13320564 Patrick77 said:


Quote:


. At a place like Schwab it seems there is a flat rate for each transaction, so I'd imagine that would be very detrimental over the course of a year.




That's why you should invest in no load low cost mutual funds rather than ETFs. The ETFs incur the transaction fee.
You can start an account with Vanguard  
giants#1 : 1/10/2017 6:12 pm : link
Not sure if there is a minimum investment (maybe $10K?), but if you trade Vanguard ETFs/mutual funds from the account, then it's commission free. For most of their funds, they have both an ETF and a mutual fund option. One advantage to the mutual fund is that you can purchase fractional shares, so if you're contributing say $50 per month, then you'll be buying an equivalent amount of the funds each month, whereas with the ETFs you have to purchase whole shares so if the ETF is valued at $28, you'll end up with $22 in cash until you're next deposit (they automatically sweep any cash to a low yield money market fund).
..  
Named Later : 1/10/2017 6:56 pm : link
There's an awful lot of overlap in that List --

US Total Stock Market: VTI 16.2%
US Large-Cap Value: VTV 16.2%
US Mid-Cap Value: VOE 5.2%
US Small-Cap Value: VBR 4.5%
Developed Markets: VEA 37.5%
Emerging Markets: VWO 10.5%
Inflation-Protected Bonds: VTIP 0.0%
Short-Term Treasuries: SHV 0.0%
Municipal Bonds: MUB 5.5%
US Corporate Bonds: LQD 0.6%
International Bonds: BNDX 2.4%
Emerging Markets Bonds: EMB 1.6%

Why would you want to hold the Total Stock Market, and then the Large, Mid and Small Cap Markets ??

And why so heavy into Bonds ?? They are broadcasting higher Rates this year, which would drive down the value of anything you buy today. International Bonds = Big Risk.


RE: You can start an account with Vanguard  
Fox : 1/10/2017 8:06 pm : link
In comment 13320608 giants#1 said:
Quote:
Not sure if there is a minimum investment (maybe $10K?), but if you trade Vanguard ETFs/mutual funds from the account, then it's commission free. For most of their funds, they have both an ETF and a mutual fund option. One advantage to the mutual fund is that you can purchase fractional shares, so if you're contributing say $50 per month, then you'll be buying an equivalent amount of the funds each month, whereas with the ETFs you have to purchase whole shares so if the ETF is valued at $28, you'll end up with $22 in cash until you're next deposit (they automatically sweep any cash to a low yield money market fund).


Vanguard Star fund has min investment of $1,000. Beyond that, they're funds are $3K and up min investment depending on the fund. Some funds have a general version that converts to Admiral Shares (lower expense ratio) once you reach $10K invested in that particular fund, or you can start with the Admiral Shares if you have $10K or more to invest at the start.
Schwalb offers nothing as far as guidance, go to Fidelity  
gtt350 : 1/11/2017 12:11 am : link
or better yet Essex Financial and pay for a planner. the returns are well worth the price
One word  
Gman11 : 1/11/2017 9:08 am : link
Condominiums.

I never use them.
I use Schwab for both my checking and Brokerage account  
rsmith32 : 1/11/2017 11:30 am : link
free ATMs for their checking.

Schwab helps you create an ETF portfolio based on your needs/risk tolerance. ETFs have low expense ratios, but Schwab has some of the lowest in the industry (even lower than Vanguard). Free trades/commissions for their ETFs, so it does not cost anything when you have the re-balance your portfolio every so often.

If you want to do stock trading, Robinhood is probably your cheapest bet...
I forgot who posted it, but  
rsmith32 : 1/11/2017 11:35 am : link
you can also create a well diversified portfolio with three simple Vanguard ETFs:

VTI
VXUS
VNQ
RE: I forgot who posted it, but  
Deej : 1/11/2017 11:41 am : link
In comment 13321344 rsmith32 said:
Quote:
you can also create a well diversified portfolio with three simple Vanguard ETFs:

VTI
VXUS
VNQ


That's my threesome (Im sure I didnt invent it). .05%, .13%, and .12% expense ratios, respectively. On $10k invested you're probably paying $9-10 a year in expenses. Deal of the century.
RE: RE: I forgot who posted it, but  
ManningLobsItBurressAlone : 1/11/2017 11:57 am : link
In comment 13321354 Deej said:
Quote:
In comment 13321344 rsmith32 said:


Quote:


you can also create a well diversified portfolio with three simple Vanguard ETFs:

VTI
VXUS
VNQ



That's my threesome (Im sure I didnt invent it). .05%, .13%, and .12% expense ratios, respectively. On $10k invested you're probably paying $9-10 a year in expenses. Deal of the century.


Now would this be going and setting up the account through Vanguard? One thing I am seeing in some of my research is that it might be smarter to wait til my initial investment can be $10K, instead of the ~$7K I'm OK with doing now. That might help with minimums and avoiding fees.
I invest thru Vanguard, yes  
Deej : 1/11/2017 12:16 pm : link
If you buy Vanguard brand ETFs instead of funds, you wont have to pay them a commission on trades.
Link - ( New Window )
..  
Named Later : 1/11/2017 12:59 pm : link
ManningLobs--
What kind of funds does your current employer offer in the 401K ?? What their Expense Ratio ??
Do they have a Company Match ??

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