Of course, it always depends on the particular index fund or ETF in question as well as your individual funding plan
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Home Questions Tags Users Unanswered. I am a 23 yr old looking to open a Roth IRA. Sam Sam 51 2. Do you have access to a K with a company match? A possibly trivial point, but are you employed? Contributions to an IRA require you to have earned income wages from a job or self-employment income , but at 23 25 now, I guess , you might be a graduate student on a fellowship See, for example, this answer for some details.
I know this post is years old and I'm just seeing it because of the recent edit, but you're somewhat overestimating the final cost of an expense ratio. You seem to be calculating on the assumption that all forty years of contributions will be subject to all forty years of expense, which isn't the case. I agree with your general point, though. Perhaps, but in my case, I deposited starting at 20, and retired at I'm spending the first deposits 30 years later, and the deposits just before I retired at age So, while I might have exaggerated a bit, it's not too far off.
Good point about expenses in the years after retirement. I hadn't considered that. If you are suggesting that one should simply buy just those 4, I'd ask, why does anyone keep a dime in the other 48? Sure, any one fund may beat the index over any given time period. But how do you know which? By the time you diversify enough to cover all the possibilities, you're pretty close to just tracking the index again Or you're accepting more risk in exchange for the possible highter reward, which is fine if that's really what you want to do but isn't an inherently better answer just a different one.
Yes, when young you can accept more risk -- less to lose and more time to recover -- but the standard advice about fund mixture accounts for thst. The fund or fund mix you choose should be: However, there are some other ways to achieve these properties, including: Sign up or log in Sign up using Google. Sign up using Facebook. When we're young we have a bunch of time for it to correct upwards around that rising mean. When we're old, we are closer in our need to withdraw the money so we need to remove some volatility.
If we withdraw when the market is low we are losing money! Probably neither, but it depends on your goals and tolerances. I'm actually fairly aggressive with investing theory for the under 30 crowd. South Korea is a great recent example of why international investments are lucrative. I'm a big fan of http: Just read read read, study study study, and never invest in anything you don't fully understand and agree with. You work too hard to lose all your money because you blindly followed advice from some magazine or your uncle.
The events he talks about aren't directly stock market related, but I think the primary world event that influences him is whether the company he works for will put a dollar in if they contribute. Most people's uncles know little about investing, including yours. Probably not your best source of expert advice. Too bad he tried to time the market - he missed out on some amazing gains.
And pity he's concentrating his risk in US large cap stocks - he needs global equities, as well as plenty of fixed income. You need to educate yourself. The Boglehead's Guide to Investing is a good place to start. The purpose is to create a blend that will accurately portray the entire market, but just with a much smaller sample size.
It's an index, it's designed for people to dump money in for 40 years and forget about it. It's not for day traders. Put in more when you're able, and watch your earnings grow. I suspect this is why you got downvoted, because you are giving some questionable and rather unclear advice here. You do seem to be saying "max out Roth IRA, max out k , then make taxable investments" which is a common mantra on this subreddit. Most sources including Bogleheads, which is oft-cited here suggest that you treat your entire portfolio as one entity.
This allows you to maximize the efficiency of your tax advantaged accounts IRA and k. If you are interested in learning more about this, this wiki gives a pretty good overview. But the question betrays a large knowledge hole on your end. What you really need to do is learn about investing. Timing the market is never a good idea. However, you can expect high returns long-term with an all-stock strategy, only with high volatility. If you want to go all stocks, you should at least buy some of a fund that is exposed to the global economy, for instance the MSCI World Index.
Quick and dirty answer: Choose which Target Retirement fund based on the number of years until retirement. Do not sell anything until retirement. I am just stuck on the part where he stopped contributing before the "stock market drama".
Would have been marginally better if he had sold all positions before the drama but kept contributing. Even better if he had sold, kept contributing, them reinvested at 60 day increments to try and time the actual bottom. That would have allowed him to ride the gains all the way back up to current day. But very few of us none maybe could have the vision to follow through on all three correctly.
Finding it odd that someone would tell everyone they know to buy at the proverbial top we have right now if he was a market timer in the past. He wasn't a "market timer" in the past. I doubt he even knows what that means. He stopped because the amount in the account, which had been going up, began to go down. I've got a lot of reading to do, but I can tell you most of what you said is just not applicable to their situaton. I don't know if they even could do stuff like that.
I'll take you guys' word for it that he should have resumed before now, but I can tell you that some of his co-workers who didn't stop when he did lost most of what had been in their accounts. It would be a bad k plan indeed if you could stop and start but not sell and buy. If one decided to rebalance, you have to be able to buy and sell by default rebalancing being one of the basic options of any k.
I still wouldn't recommend selling all positions but as I stated, it would have made more sense than just stopping contributions because he would have then had the fresh capital to start again at low prices. When I said "sell all positions" what that amounts to is moving out of whatever mutual funds or ETF's that might be available and putting it into a capital protection or money market fund.
Many k's are designed with a capital protection mechanism such as this. It's possible his is not and therefore is technically stuck in whatever options he has available. Still stopping contributions is the least best choice so that part does in fact apply. He stopped at a time when he could have purchased at the lowest prices in years and is now starting back at the highest prices.
He is in fact trying to be a market timer whether he knows what that is or not. Unfortunately he is just buying high and missing the great deals at the low prices. Plus missing dividends along the way.
Good luck to you in your investments. There are a lot of books available to you but books that follow John Bogle's path are great places to begin. You guys are the best, thanks! I'll definitely check out the Boglehead's Guide. This is complicated stuff..
Probably should've said this in the original post, but I'm the one with the big dream of one day sitting on my ass and living off my K. Uncle's a little out there, but he's not that delusional. They're in the income bracket where it's more like a little savings account. Stable value funds are great conservative options for retirement plans, but their rate of return is very low. Now, most stable value funds are yielding in the area of 1. Inflation is closer to First, it is reflective of large US based companies.
There are great investment opportunities in both areas. The is a passive index, meaning that no one is actually managing the portfolio; if a component stock of the is underperforming, the index doesn't remove it from your portfolio.
Index investing such as the get a lot of positive press because it is generally cheap. However, I believe that focusing exclusively on index funds because of cost is short sighted. Many actively managed funds perform well and offer diversification options that indexes often cannot.