Stock Investing

[Shockwave]

In at $16.20 already up almost $2 a share

Edited September 28, 2017 by Shockey1979

[incognito_man]

Just think if you retired in 1981. Sell off your stocks, buy 30yr treasuries.

Earn a 16% coupon for the rest of your life.

 

Edited September 29, 2017 by incognito_man

[TVScout]

11 hours ago, incognito_man said:

Just think if you retired in 1981. Sell off your stocks, buy 30yr treasuries.

Earn a 16% coupon for the rest of your life.

 

[incognito_man]

35 minutes ago, TVScout said:

I know. What a perfect time that was to buy treasuries. 35yr bull market on them starting in the early 80s. Can't see that ever happening in our lifetimes again.

[Mox]

Extremely new to investing. My dad had put $200 into stocks for me a few years back which immediately tanked (finally went from losing money to up 50% this year). Just started putting money into Vanguard mutual funds this year, and now looking into Fidelity as well. Advice?

[ramssuperbowl99]

48 minutes ago, Bullet Club said:

Extremely new to investing. My dad had put $200 into stocks for me a few years back which immediately tanked (finally went from losing money to up 50% this year). Just started putting money into Vanguard mutual funds this year, and now looking into Fidelity as well. Advice?

The company you use to invest isn't nearly as important as the type of investment (bond, stock, ETF, actively managed mutual fund, passively managed mutual fund, etc.) or the tax vehicle (none, 401k, HSA, IRA, 403b, etc.).

In order to give good advice, you'd have to tell us more about your specific situation - are you working, what income or debt do you have that might be the primary focus before you invest, what tax-advantaged space might you have because of your job, what your goals are for the money, etc.

[ramssuperbowl99]

On 9/22/2017 at 7:20 PM, theJ said:

It's a nice option, but more useful for the high income crowd whose tax free growth investment options are limited. Most people are better off limiting their hsa contributions to what they really need, and doing their retirement savings in their Roth IRA or Roth 401k. 

Also, what @LETSGOBROWNIES said and was alluding to. It's not going to make much difference, and you probably don't want to invest the money that's covering your deductible. 

Why would you want to do both a Roth IRA and a Roth 401k? Most people's income (and therefore expected tax rate) goes down in retirement, so they'd come out ahead with the traditional 401k. Having a roth IRA on top of that might not be optimal, but is good for tax diversification.

An HSA is almost a perfect retirement account. I use HSA Bank for mine, get charged about $60/year in fees, but get to deduct the income on my taxes, invest it in whichever funds I want (way better than a lot of 401k options for people), and I will never pay taxes on anything I withdraw as long as I have a medical expense receipt saved to justify it. Better than a 401k because you get to pick the funds you want and better than both a 401k and an IRA because you will get away with not paying taxes on some of the money at the end. Better than the roth versions because the taxes you will pay come in retirement when you'll likely be in a lower tax bracket.

The only disadvantage of an HSA is that it isn't protected if you have a medical bankruptcy. But with no lifetime limits on insurance that's not the end of the world.

[Mox]

53 minutes ago, ramssuperbowl99 said:

The company you use to invest isn't nearly as important as the type of investment (bond, stock, ETF, actively managed mutual fund, passively managed mutual fund, etc.) or the tax vehicle (none, 401k, HSA, IRA, 403b, etc.).

In order to give good advice, you'd have to tell us more about your specific situation - are you working, what income or debt do you have that might be the primary focus before you invest, what tax-advantaged space might you have because of your job, what your goals are for the money, etc.

Have money in mutual funds, Roth IRA, checking/savings accounts, the one stock and a permanent life insurance policy. Not offered a 401k where I work. Depending on commission I make 38-45k a year with zero debt currently. Goal would be to save as much as possible.

Edited October 4, 2017 by Bullet Club

[ramssuperbowl99]

47 minutes ago, Bullet Club said:

Only have money in mutual funds, checking/savings accounts and a permanent life insurance policy. Not offered a 401k where I work. Depending on commission I make 38-45k a year with zero debt currently. Goal would be to save as much as possible.

If it's saving for retirement, the go-to first option for most people is to open an IRA (background here: https://www.fidelity.com/building-savings/learn-about-iras/what-is-an-ira).

There are 2 types, and you're right on the border for which one makes sense. A traditional IRA would let you not pay taxes on that income right now, and would take you from just inside the 25% tax bracket to just under it (back to 15%). Then, you would owe taxes on that amount when you withdraw it once you are eligible (at 59.5 years old). The other option is a Roth IRA, where you would still owe taxes on the money you put in now, but would never pay taxes on it afterwards. You are also able to withdraw the contributions at any time (but, you can only put in $5,500 yearly, so if you withdraw a year's contributions, you don't get to put it back in later).

When people are deciding whether a traditional or roth IRA makes sense, it often comes down to when you anticipate to pay more in taxes - now (in which case traditional makes sense) or later (in which case roth makes sense). A rule of thumb a lot of people use is that if you are in the 15% tax bracket or under, the roth makes sense. Otherwise, the traditional makes sense. In your case, since you're just starting out, the amount of money you make down the line could change. If you start making a bunch more money, having the roth IRA could be nice. If you decide to go back to school and will have a few years with very little income, then a traditional would be a great option because you can convert the traditional to a roth IRA and pay those taxes during years where you're in a very small tax bracket.

Lots to consider there, but really either option is good. 

 

Whether something is an IRA/401k/whatever only really matters to the government, you still need to figure out what type of investment you want in that account. Given that you're just starting out and don't have a ton of background, Vanguard is a good place for you. They are most known for passively-managed/index mutual funds that cover things like the total US market or total international market that don't have as much risk as individual stocks and have very low fees associated so that you'll keep almost all of your money. How much of each type of investment you may want, again, depends on your personal situation. If you were closer to retirement and couldn't afford a temporary crash in the market, you would want to invest more in bonds, which have less growth potential but aren't going to bottom out either. If you're further away, you can afford to be more risky since the market will rebound.

I'm 27 and use a 3-fund portfolio with:

• 75% Vanguard Total Stock Market Index Fund (VTSMX)
• 20% Vanguard Total International Stock Index Fund (VGTSX)
• 5% Vanguard Total Bond Market Fund (VBMFX)

This is about as aggressive an allocation as you'll see (95% stocks/5% bonds), but I'm not near retirement, don't want kids, etc. so I can afford that risk. Something like 90/10 or 80/20 is probably more common among people further off from retirement. At retirement, that shifts to something closer to 60/40 or even 50/50.

 

If it's saving for something else, like a house or a car, a good rule of thumb is to invest your savings in a regular brokerage account if you need to make the purchase 5 years down the line or later, or if you're willing to wait to make the purchase in case the market does poorly. Since you need the money sooner, a less aggressive allocation would be best in that case.

Edited October 4, 2017 by ramssuperbowl99

[Mox]

6 minutes ago, ramssuperbowl99 said:

If it's saving for retirement, the go-to first option for most people is to open an IRA (background here: https://www.fidelity.com/building-savings/learn-about-iras/what-is-an-ira).

There are 2 types, and you're right on the border for which one makes sense. A traditional IRA would let you not pay taxes on that income right now, and would take you from just inside the 25% tax bracket to just under it (back to 15%). Then, you would owe taxes on that amount when you withdraw it once you are eligible (at 59.5 years old). The other option is a Roth IRA, where you would still owe taxes on the money you put in now, but would never pay taxes on it afterwards. You are also able to withdraw the contributions at any time (but, you can only put in $5,500 yearly, so if you withdraw a year's contributions, you don't get to put it back in later).

When people are deciding whether a traditional or roth IRA makes sense, it often comes down to when you anticipate to pay more in taxes - now (in which case traditional makes sense) or later (in which case roth makes sense). A rule of thumb a lot of people use is that if you are in the 15% tax bracket or under, the roth makes sense. Otherwise, the traditional makes sense. In your case, since you're just starting out, the amount of money you make down the line could change. If you start making a bunch more money, having the roth IRA could be nice. If you decide to go back to school and will have a few years with very little income, then a traditional would be a great option because you can convert the traditional to a roth IRA and pay those taxes during years where you're in a very small tax bracket.

Lots to consider there, but really either option is good. 

 

Whether something is an IRA/401k/whatever only really matters to the government, you still need to figure out what type of investment you want in that account. Given that you're just starting out and don't have a ton of background, Vanguard is a good place for you. They are most known for passively-managed/index mutual funds that cover things like the total US market or total international market that don't have as much risk as individual stocks and have very low fees associated so that you'll keep almost all of your money. How much of each type of investment you may want, again, depends on your personal situation. If you were closer to retirement and couldn't afford a temporary crash in the market, you would want to invest more in bonds, which have less growth potential but aren't going to bottom out either. If you're further away, you can afford to be more risky since the market will rebound.

I'm 27 and use a 3-fund portfolio with:

• 75% Vanguard Total Stock Market Index Fund (VTSMX)
• 20% Vanguard Total International Stock Index Fund (VGTSX)
• 5% Vanguard Total Bond Market Fund (VBMFX)

This is about as aggressive an allocation as you'll see (95% stocks/5% bonds), but I'm not near retirement, don't want kids, etc. so I can afford that risk. Something like 90/10 or 80/20 is probably more common among people further off from retirement. At retirement, that shifts to something closer to 60/40 or even 50/50.

 

If it's saving for something else, like a house or a car, a good rule of thumb is to invest your savings in a regular brokerage account if you need to make the purchase 5 years down the line or later, or if you're willing to wait to make the purchase in case the market does poorly. Since you need the money sooner, a less aggressive allocation would be best in that case.

I edited my earlier post. I have a Roth that has been maxed out last year and this year (with Vanguard). I do anticipate to make more later so I'm comfortable with that. I have three mutual funds with Vanguard right now (Flagship member via my family, if that matters) and my asset mix is 83/17 stocks/bonds. I have some money left over in checking/savings accounts as well for emergencies, regular spending, bills, etc.

[ramssuperbowl99]

Just now, Bullet Club said:

I edited my earlier post. I have a Roth that has been maxed out last year and this year (with Vanguard). I do anticipate to make more later so I'm comfortable with that. I have three mutual funds with Vanguard right now (Flagship member via my family, if that matters) and my asset mix is 83/17 stocks/bonds. I have some money left over in checking/savings accounts as well for emergencies, regular spending, bills, etc.

Hah yeah I just saw that. There goes that effort. 

If you're looking for more tax advantaged space and you have a high deductible health care plan, an HSA is awesome. That's what I'd go to next. It's another $3,400/year you can put in (double that if you're married), you get to avoid paying taxes on it, and if you spend it on medical expenses you get to never pay taxes on it. Or you can do what I do with mine, which is use it as a retirement account - see more here (http://www.madfientist.com/ultimate-retirement-account/).

If your employer offers one as part of their benefits package, use that one because you dodge social security tax on it. If not, you can open one with anybody. I use HSABank. It's about $60/year in fees, but I get Vanguard mutual funds to invest in.

[Mox]

7 minutes ago, ramssuperbowl99 said:

Hah yeah I just saw that. There goes that effort. 

If you're looking for more tax advantaged space and you have a high deductible health care plan, an HSA is awesome. That's what I'd go to next. It's another $3,400/year you can put in (double that if you're married), you get to avoid paying taxes on it, and if you spend it on medical expenses you get to never pay taxes on it. Or you can do what I do with mine, which is use it as a retirement account - see more here (http://www.madfientist.com/ultimate-retirement-account/).

If your employer offers one as part of their benefits package, use that one because you dodge social security tax on it. If not, you can open one with anybody. I use HSABank. It's about $60/year in fees, but I get Vanguard mutual funds to invest in.

So it's another thing I can essentially use as an investment? Why not just throw it into my other Vanguard funds instead? Better tax advantage?

 

EDIT: Reading the article cleared some things up.

Edited October 4, 2017 by Bullet Club

[ramssuperbowl99]

Just now, Bullet Club said:

So it's another thing I can essentially use as an investment? Why not just throw it into my other Vanguard funds instead? Better tax advantage?

Yep. You're in the 25% bracket, so on $3,400 you're making $850 bucks off the top in reduced tax burden and it gets to grow tax free too so you aren't paying taxes on dividends every year either. The trade off is that you will end up having to pay taxes and potentially waiting a while to access it. (In general, when talking about investing in a 401k, IRA, HSA, etc. it's all about how you get out of paying as much of your taxes as you can.)

One other thing you can do is start setting aside your $5500 for your roth IRA next year so that on January 1 you hit it for the max. Beyond that, without a 401k there's not a whole lot of tax advantaged space left for you, so you could start buying mutual funds in a brokerage account. And again, in order to dodge taxes, you'll want to rebalance your investments so that the 17% of your total profile that is bonds are in your brokerage account as much as possible.

[LETSGOBROWNIES]

@ramssuperbowl99, what do you do for a living?

[ramssuperbowl99]

Just now, LETSGOBROWNIES said:

@ramssuperbowl99, what do you do for a living?

I work in pharma. My interest in personal finance is a combination of being a nerd, having a mom who listened to Dave Ramsey with me in the car for years on end, and just being a white person with a genetic predisposition for avoiding taxes whenever possible.