Any reccomended funds in vanguard?
just get an S&P 500 index fund. At your age you will be able to ride out any corrections.
Hardly any mutual fund beats a simple index fund. And Im not sure any do in the long run.
Investing is very simple, you can search the forums for my lemonade stand posts.
When investing in companies you are buying a tiny fractional ownership in that company. Ultimately what you want to do is determine if the price is good or bad. There is one simple way to do this, count up all the profits over some period of time and compare that to the price you pay.
For example if a lemonade stand is guaranteed to make 1000/year for 10 years how much would you pay for it?
You clearly would pay $1000 and clearly would not pay 10,000 (because you would just get your money back). Between these two numbers is a number that makes sense to buy. Buying stocks is the same way. The general method (called discounted cash flow) is to add up the forecasted profits for the next 10 years and compare that to the asking price. Tradition uses 10 years.
This effectively shows up in price to earnings (which is backwards looking). The S&P 500 has a price/earnings ratio of about 20 right now which means people are paying for 20 years worth of todays profits (too much in my opinion). This is a bit high as the historical number is probably around 15 or so. This does not mean a correction is imminent as the market can just go sideways and wait for companies to grow thus reducing their P/E. However a correction can also happen.
The reason why people are willing to pay such a high multiple (instead of say 5-6) is because the companies are expected to grow some.
So when doing this analysis
1) figure out how much profit you think the company will make over 10 years (this is hard but warren buffet has lots of good ideas about it)
2) Figure out how much % you could make from safe alternate investments (0% most likely, but if you have credit card debt, that is worth 18%)
3) Figure out how much the company is worth
4) Discount that to reflect that you dont know lots of things (I like to use 25%)
If I were in your shoes I would save a 6 month emergency fund first. Then start investing slowly over time into S&P 500 index funds. Keep building your emergency fund to 1 year then when a correction happens use about 6 months of your savings to buy cheap stocks.
Money is made when there is blood in the streets and everyone is running. Most people buy when everyone else is buying and sell when everyone else is selling.
