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Old 10-06-2015, 10:35 AM
Skibro Skibro is offline
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Default roth IRA investing



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I am a 17 yr old kid that is looking to invest $4000 into a Vanguard roth IRA account to start my retirement investment. I am thinking about splitting it half and half with a more aggressive account using stocks, and then putting the other half into a more secure but lower interest rate. My parents aren't completely sure of what is the best option for me. Does anybody know what options are the best for the more aggressive account? Or should I split it up 4 ways into different accounts? I may be a little confused on the terminology of what I posted, so sorry if it's incorrect. Any advice would help.
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Old 10-06-2015, 10:57 AM
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Dave Ramsey would say to split it among 4 types of mutual funds:
  • Growth
  • Growth and income
  • Aggressive growth
  • International

All those do for you is spread your investment out so that something should be doing well at any given time. That's called diversifying. If you put all your money into one company, you are putting it at risk of something bad happening to that company. A mutual fund is a bunch of different stocks that investors buy together, in a pot. Instead of you buying 40 shares of a company, you're buying a little piece of a huge pile of stocks where all the mutual fund members share the risk and the profits.

The mix of stocks in a mutual fund determines which of those four categories it's labeled. A fund that invests mostly in stable, long-lived companies that provide staples for human existence is considered more of a growth or growth and income stock. A fund that invests in tech startups that may do extremely well and also may crash and burn would be more of an aggressive fund. A fund that invests in emerging markets would be international. By buying some of each of these, you diversify even further.

At age 17, you have another opportunity for a huge investment, and that's in you. How are you going to pay for your education or trade training? If you put that $4000 in training that prepared you for a career, and didn't borrow any money for student loans, you'd be making a giant investment with nearly guaranteed returns, as the returns are your earnings for the rest of your working life.
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Old 10-06-2015, 11:18 AM
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I really like Vanguard (they are like the Credit Union of investment firms...owned by the people who have money invested). I have been using them for a couple of years now.
Vanguard has a pretty neat plan option of selecting when you want to retire and then they adjust the investments accordingly as you get closer to the date of retirement. They already have these plans diversified between stocks, bonds, mutual funds and other things (can't remember what off the top of my head).

They also have a recommendation calculator that you can input how much risk you want to take etc and they will show you the best plan for what you selected.

Talk to one of their advisors and they can help recommend a plan for your needs or wants...but they won't give financial advise. For proper financial advise you may need to talk to someone who is going to cost money.

The good thing about Vanguard is that it is easy to move your investment around as much as you want without penalties if your situation and goals change.
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Old 10-06-2015, 01:37 PM
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What a wonderful age to get started for retirement. I worked hard and saved for a large portion of my life and am now comfortably retired, but our only stock holding is a privately held company so I will not try to give investment advice on the public markets.

All I have to say is do get started early and keep up your contributions as these first 5 maybe 10 years of savings and investments should give you a great hedge towards retirement, perhaps a very early retirement with your starting so young. Best of luck, I'm sure your efforts will be solid.
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Old 10-06-2015, 01:49 PM
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You are 17, so your risk tolerance and time horizon are both massive. I see no need for bonds or stable value so early on.

I'd suggest going the index fund route. $2k in a total US market fund like VTI, and $2k in a total International fund like VXUS. These are both broadly diversified funds with rock bottom expense ratios, and cover the entire world market.
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Old 10-06-2015, 02:33 PM
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On the other hand, at age 17 he may be likely paying much more on college, mortgage, and other life's obligations that it's unlikely he'll go through life debt-free. So never hesitate to add up the value of saving for retirement now vs. the near-certainty of maintaining debt much of your adult life. At age 17, I wish I had some money set aside for college -- let alone half a century into the future.
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Old 10-06-2015, 02:58 PM
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https://www.bogleheads.org/wiki/Thre...Vanguard_funds
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Old 10-06-2015, 04:04 PM
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You can make more money investing directly in stocks if you choose wisely. The stock market is filled with good stocks and bad stocks. Index funds are safe but all you can make is the average of the market. If you buy the right stocks, you will make money over the long term - but it's riskier. Some months are good, some are not good.

There is no magic formula. Buy solid, strong companies with a long history of winning. Winners usually continue to win. There's a little more to it just because you need to have an understanding of how to read financials but that's a good education anyway.

Don't try to make 50% a year. But a good solid company that has returned 15%-20% year after year will probably continue to do so. Own several of these because sometimes one of the good ones tanks unexpectedly.

If I was starting at 17, I'd invest in index funds for the first year. I'd spend that year researching and learning. There are investment simulators online where you can open a few fake accounts and practice making money in stocks. Once you feel you understand what you're looking for, I'd start investing on my own.

Avoid investments that will provide big returns. Greed will create a house of cards that will eventually fall. There are lots of people who sell books suggesting that you can time the market or read the patterns in charts. These strategies may work a few times but they aren't dependable. Slow and steady wins this race. Diversify into lots of solid companies with a long history of winning year after year.
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Old 10-06-2015, 04:26 PM
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I am a firm believer, late in life, that debt is just not the way to go. I wish someone had convinced me at 17 of this. I'm going to give it my best shot with you:

Please, please, please get through your career training without debt. Please. Please! Please do whatever you can to avoid debt. It's NOT inevitable, contrary to what someone said above. It doesn't have to be this way. Just because most people have debt doesn't mean you have to.

(please)
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Old 10-07-2015, 07:45 PM
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First of all, don't go looking for financial advice on the internet. That tells me rite there that at 17 I seriously doubt you have the experience to dabble in the stock market or you wouldn't be here asking.

Go to your bank and see them about retirement NO RISK retirement accounts. You can't loose your money.

I put up 300K and I get $1250 a month for life. They can't call it either. Even if NY LIFE goes broke they have insurance to pay it and they have been in business for over 100 years. They might have something better for you. What works for me might not work for you or you might find something better.
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Old 10-07-2015, 09:35 PM
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Vanguard - a great choice, btw! - has a great selection of low-cost target date funds. If you are pretty sure this is going to be retirement money, (i.e., you are not going to be taking it out for house, car, education, etc. over the near term) just put all into a target date fund like VTTSX for now, at least until you have at least 20k to work with. Then you can start worrying about how to allocate it on your own. Meanwhile let the Vanguard pros decide how to allocate it for your retirement goals based on your anticipated retirement date (currently VTTSX is 90% stocks etc, 10% cash and bonds.) Risk level appropriate for your age, limited reliance on the long term health of the dollar.
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Old 10-08-2015, 06:58 AM
metrowash metrowash is offline
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Man, I just wanted to say CONGRATULATIONS for having your head on straight this age.

I second the target retirement funds offered by Vanguard or fidelity. We are due for a correction so you may want to dollar cost average in the market over a year's time.

You can worry about investing in specific funds later, but it's been proven time and again it is hard for the individual to beat the returns of the total market. It is possible but it is time consuming and can be a bit stressful.
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Old 10-08-2015, 08:30 PM
Mctaco Mctaco is offline
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I think you've been given a lot of good advice here. You're young. You have a high risk tolerance. I would wait until you are getting a steady income to start making regular deposits into an IRA. If I were you I would maybe buy something relatively safe, letting your bank manage it for your right now would be fine. Just something to get a few percent a year but where you can get access to the money when your ready to try your hand at using it yourself. I would then start learning how you would invest it yourself.

Open a paper trading account with ThinkorSwim, its free. Start practicing picking and choosing your own investments. Poke around on Stocktwits, Onlnetradersforum.com, Khan academy, and Investopedia. Learn how to notice the snake-oil and stupidity people peddle. Then once you start to get it, you should be about close to 18 and able to open an account with some of your own money. Not only will it possibly help you make some money, investing will teach you things about yourself, and people within mass sociological systems, and risk that will last you a lifetime.

The fact your thinking this way now and kicking around on a survivalist board is awesome dude. Seems pretty clear your a self-starter. That puts you above at least half of the population already.

No matter what though, buyer beware of any finance advice given from anonymous internet people.
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Old 10-09-2015, 09:25 AM
zuren zuren is offline
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As mentioned above, definitely look at funds with low fees. High fees can really erode the growth of your investment. Assuming nothing crashes and average growth, you should be seeing nice growth in several years.
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Old 10-11-2015, 07:55 AM
c1ogden c1ogden is offline
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Excellent life choice! The earlier you start saving for retirement the better off you'll be. As is frequently said in the financial planning industry, "pay yourself first". I have a chart that shows how overwhelmingly important an early start is in regards to lifetime savings totals but I don't know how to post it here. If you want to PM me I can email it to you.

Instead of two separate accounts I would put it all into one. I use TD Ameritrade for all of my family's Roth IRAs. Ameritrade allows me to buy and sell stocks, options, ETFs, mutual funds, bonds, and CDs. Ameritrade also has tremendous financial research and training available to it's account holders. Others, like Scottrade or E-Trade, are probably similar but I haven't used them so I can't say for sure.

Use whatever educational tools they provide and spend a lot of time in the investing section of your local library. There are many opportunities in the investing world that most people never hear about. Find them and take advantage of them! Invest early and often!
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Old 10-11-2015, 08:15 AM
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I say keep it liquid if it's your entire savings. A basic money market account or short term CDs work for that. A person should keep enough cash to live on for at least a few months without income. After you reach that point, then jump into the market. I like the suggestions for target date funds. That'll ensure proper diversification.
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Old 10-11-2015, 08:32 AM
txprep txprep is offline
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At your age 100% stocks. Start with s&p 500 index for now. Do not watch them, ever.
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