New investor needs advice

kpanghmc said: "Hi all, I'm currently 23 years old and am pulling down $60,000 / year gross income and I want to invest as much as possible for retirement but also have enough to handle the major purchases before 59 1/2 (wedding in 2 years, new house, kids, etc). Currently I am investing 10% of my income into my company's 401(k) plan that, unfortunately, does not match any of my contributions. I am also maxing out my Roth IRA which is all invested in Vanguard's Target Retirement 2045 fund (I figure it will handle most of the diversification needed). The majority of the rest of my money sits in an EmigrantDirect money market savings account which is currently earning 5.15% APY. My questions are as follows: 1. Is this a solid plan for the future? 2. I like the Roth IRA since it lets me reinvest my dividends and capital gains tax-free. Can I withdraw my contributions (not earnings) at any time (even in the next 5 years) without paying a penalty? 3. I am thinking of investing an extra $2,000 / year. I want this money available in the next 20 years so I don't want to put it into my 401k. I'm thinking of investing in Vanguard's Lifestrategy Growth fund...but I'm a bit wary because of the 2.10% annual yield that I hear is taxable. Is this a big enough deal to not invest in it and find a mutual fund with smaller dividends?"

Mr. Gekko said: "First off, congrats on making so much at such a young age. I'm 24 and make about half that! Second, I believe you have a solid portfolio. You basically have the same set-up as me. 401K, Roth IRA... the only difference is the mutual fund. I had a fund with Wachovia and cashed it out to open my Scottrade account. That being said, I think your fund is only taxable if you sell it. If you want to invest even more money you may want to check out the HSBC online savings account. It gets a 5.05% interest rate and works just like a normal savings account. You may want to even look into playing around with stocks on your own (if you're risk tolerant). Either way, good job! :cool: ;)"

SporeMonger said: "[QUOTE=kpanghmc]Hi all, I'm currently 23 years old and am pulling down $60,000 / year gross income and I want to invest as much as possible for retirement but also have enough to handle the major purchases before 59 1/2 (wedding in 2 years, new house, kids, etc). Currently I am investing 10% of my income into my company's 401(k) plan that, unfortunately, does not match any of my contributions. I am also maxing out my Roth IRA which is all invested in Vanguard's Target Retirement 2045 fund (I figure it will handle most of the diversification needed). The majority of the rest of my money sits in an EmigrantDirect money market savings account which is currently earning 5.15% APY. My questions are as follows: 1. Is this a solid plan for the future? 2. I like the Roth IRA since it lets me reinvest my dividends and capital gains tax-free. Can I withdraw my contributions (not earnings) at any time (even in the next 5 years) without paying a penalty? 3. I am thinking of investing an extra $2,000 / year. I want this money available in the next 20 years so I don't want to put it into my 401k. I'm thinking of investing in Vanguard's Lifestrategy Growth fund...but I'm a bit wary because of the 2.10% annual yield that I hear is taxable. Is this a big enough deal to not invest in it and find a mutual fund with smaller dividends?[/QUOTE] You're doing better than the majority of Americans. Making 60k at your age is awesome! I'm making that and I'm 38. for your questions: 1) Yes it is. You might want to read some books on Index funds however. I have some titles for you, if you are interested. pretty much, you would just pick and choose various index funds from Vanguard on your own. 2) After 5 years you can withdrawl your principal amount without fee or tax consequences. I do not know for how long, however. 3) extra $2,000? Not sure what you mean. But do keep saving in your Emigrant account, the yield is great. You can get a CD of more but it will not be as liquid (You know that already). Don't take on any "bad" debts, keep an emergency account, invest for long term "Index" through Vanguard and (401k for what it's worth :rolleyes: ), and invest for short term "Trade". :cool: Now go purchase a nice Cuban cigar and relax... :cool:"

kpanghmc said: "By the extra $2000 / year I mean I want to invest another $2000 / year and I am not sure where to put it. I don't want to up my 401k contribution because I want this money to be readily available within the next 10-20 years. I've already maxed out my Roth IRA so I can't put it there. That leaves me with an individual account. I want to put it into the Vanguard Lifestrategy Growth fund (90% indexes, 10% bonds), but am wary of the 2.06% yield it dishes out yearly. Granted, the Vanguard 500 Index's yield is at 1.78%, so it's not much of an improvement. I suppose my question boils down to, is 2.06% yield, which is taxable up to 15% I believe, too high for an investment in my personal non-tax-sheltered portfolio, or should I look elsewhere? I've heard that some of Vanguard's tax-managed funds are good for that purpose, but their yields are even higher and I have no idea how much of that is tax-exempt."

kpanghmc said: "Also, quick question. My company doesn't match my 401k contributions. In addition to which, the 401k mutual fund choices all stink (all have very high expense ratios ~1.8-2.0%, even the 500 index has a 0.6% expense ratio). I realize the benefit of investing pre-tax dollars, however, given the limited amount of options available in my 401k plan, would I be better off putting it in a taxable individual account that I can control better?"

thezster said: "So much depends on what you're able to do with it - and how good/lucky you are. I closed out my 401K a few years ago and put it all in a self directed IRA - basically a trading account. Over the past 4 years or so, I've increased the value by a bit over 100%. Keep in mind though - I don't need the $$ - and am able to handle a pretty good "risk factor". I've used it as a medium term trading platform - meaning I buy/sell stocks with it - usually holding less than 3-4 months.... It's a great plan for me - but as I mentioned - I don't need the $$ for the long term.... If it went to zero (gawd, imagine losing a couple hundred grand)... I wouldn't be devastated......... upset as hell, yes... but not destitute and looking for a bridge to live under........ At your age and with a fairly decent income, I would invest 80% of my $$ in "safe" investments. Those mutual funds and CD's, etc. I would take about 20% and invest in higher risk entities - cause you've got lots of earning power and years to go before those kids hit college (talk about a spendy proposition... )"

SporeMonger said: "[QUOTE=thezster]So much depends on what you're able to do with it - and how good/lucky you are. I closed out my 401K a few years ago and put it all in a self directed IRA - basically a trading account. Over the past 4 years or so, I've increased the value by a bit over 100%. Keep in mind though - I don't need the $$ - and am able to handle a pretty good "risk factor". I've used it as a medium term trading platform - meaning I buy/sell stocks with it - usually holding less than 3-4 months.... It's a great plan for me - but as I mentioned - I don't need the $$ for the long term.... If it went to zero (gawd, imagine losing a couple hundred grand)... I wouldn't be devastated......... upset as hell, yes... but not destitute and looking for a bridge to live under........ At your age and with a fairly decent income, I would invest 80% of my $$ in "safe" investments. Those mutual funds and CD's, etc. I would take about 20% and invest in higher risk entities - cause you've got lots of earning power and years to go before those kids hit college (talk about a spendy proposition... )[/QUOTE] I couldn't have put it better. :) Look into the high dividend funds, I will be... I will add, however, that maxing out or just putting into your 401k is worth it because of the pre-tax dollar savings. But you will have to do the math to see what the break points(I call them that) are for how little or how much you should put in vs the commission fees (I haven't done it yet). You did your homework in investing vehicles, that's for sure. My employer doesn't match either. They will allow 100% of my paycheck to be deposited into my 401k, if I wish. Just the gov. puts the $15k limit on it. I'm doing 10%. You might want to increase your withholding allowance on your W-4. It will give you more money per paycheck and less tax return money, if any. It's a way to finetune what you can put away, and still have enough to take care of you and your family. If you play with the withholding, be prepared to pay. But wouldn't you rather have that money sitting in a 5%+ account, rather than giving the gov. a free loan? Here are my Vanguard holdings for your reference: (20%) 20% MIGCX *Oppenheimer Main Street Fund (40%) 25% OPMCX *Oppenheimer Main Street Small Cap Fund 15% QSCCX *Oppenheimer Small Cap Value Fund (40%) 25% ODVCX *Oppenheimer Developing Markets Fund 15% OGLCX *Oppenheimer Global Fund I tried to diversify as much as possible while keeping funds that produce. Look into the high dividend funds, I will be..."

bearNbull said: "Making 60K at 23 is sooooo very nice. Making that at 38 is very good as well. Having 200K to play with and not even nervous of losing it is a great feeling of security. My question is kinda personal, but this is the net and nobody really knows who we really are, so here goes........WHAT'S EVERYBODY'S NET WORTH??:D Be truthful now:rolleyes:"

ADEBISI said: "whats your profession?"

SporeMonger said: "[QUOTE=bearNbull]Making 60K at 23 is sooooo very nice. Making that at 38 is very good as well. Having 200K to play with and not even nervous of losing it is a great feeling of security. My question is kinda personal, but this is the net and nobody really knows who we really are, so here goes........WHAT'S EVERYBODY'S NET WORTH??:D Be truthful now:rolleyes:[/QUOTE] LOL I haven't figured my net worth out for over a year. I don't have much. My car and computer are my top assets. If I liquidated everything down to the shirt on my back, I would have to say around 50k. I don't own a property to live in. I live with my parents, ATM. I have been through a business loss, divorce, and a bankruptsy, FYI. The best thing is, is that I have a savings, no debt and have the time and motivation to improve myself, invest and dream. I'm single and choose to be. I had enough psycho women in my life, for now... If I don't make it financially, I hope to learn enough to pass good knowledge onto my children. Isn't that what life is all about? P.S. I have a great job!"

Mr. Gekko said: "[QUOTE=SporeMonger]LOL I haven't figured my net worth out for over a year. I don't have much. My car and computer are my top assets. If I liquidated everything down to the shirt on my back, I would have to say around 50k. I don't own a property to live in. I live with my parents, ATM. I have been through a business loss, divorce, and a bankruptsy, FYI. The best thing is, is that I have a savings, no debt and have the time and motivation to improve myself, invest and dream. I'm single and choose to be. I had enough psycho women in my life, for now... If I don't make it financially, I hope to learn enough to pass good knowledge onto my children. Isn't that what life is all about?[/QUOTE] You said it brotha'! A major part of life is passing down your knowledge and experiences to your survivors. Although, if you do make it financially, your assets would be one more thing to pass down."

SporeMonger said: "[QUOTE=Mr. Gekko]You said it brotha'! A major part of life is passing down your knowledge and experiences to your survivors. Although, if you do make it financially, your assets would be one more thing to pass down.[/QUOTE] 50/50 to both of them. I still have to make out a Will and Trust and get a Living Revocable Trust (with incompasity clause). Don't ask me what that is, I just took it down and that's about it. I just hope I don't die before I manage to do it."

Mr. Gekko said: "[QUOTE=SporeMonger]50/50 to both of them. I still have to make out a Will and Trust and get a Living Revocable Trust (with incompasity clause). Don't ask me what that is, I just took it down and that's about it. I just hope I don't die before I manage to do it.[/QUOTE] eh... ya' got plenty of time I'm sure! Just exercise, eat your veggies and don't do anything stupid like sky-diving. ;)"

SporeMonger said: "[QUOTE=Mr. Gekko]...don't do anything stupid like sky-diving. ;)[/QUOTE] Does educating myself in trading count? I gained about 5 lbs. and got a little more gray. :eek:"

Mr. Gekko said: "[QUOTE=SporeMonger]Does educating myself in investing count? I gained about 5 lbs. and got a little more gray. :eek:[/QUOTE] lol! That's ok, I was getting my hair cut the other day and two gray hairs were pointed out... and I'm only 23!... well, 24 on the 16th but, still! Worse still, I'm loosing my hair. The balding started prior to me being in the markets though."

kpanghmc said: "Alright, after some more digging, I've found out that my company's 401k plan has incredibly poor options (all have expense ratios over 2.0%, along with 12b management costs and whatnot, except for the 500 index which still has a relatively high expense ratio of 0.6%). Because of this, I've restructured my investing portfolio to be the following: 20% of my annual gross salary is going into savings: 1/3 into my 401k which is 100% invested in the plan's S&P 500 Index fund 1/3 into my Roth IRA (max) which is 100% invested in Vanguard's Target Retirement 2045 fund 1/3 into my personal, taxable portfolio which is 85% invested in Vanguard's Total Stock Market Index and 15% invested in Vanguard's Total International Index. How does this sound? I admit it's rather simplistic, but I figure it will give me some liquidity with my money (personal account and Roth) while keeping some of the tax benefits of the 401k without throwing too much of my money into a 401k plan that I am not all that crazy about (high expenses, loads, etc). It's rather spread out, though maybe a bit too focused on large cap stocks. Should I throw in a small cap value fund in there?"