In this post, I’ll provide a lot of basic information about investing, with links to additional reading for various concepts. Most of these concepts are not US-centric, though I will be mentioning US-specific details, such as tax-advantaged account types....
Looks good. I’m opinionated on the asset allocations but it makes sense not to put some of those biases in for an overview. I’m very surprised that the Bogleheads wiki glosses over bond allocation with “age in bonds” and a small note that this is “conservative”, which is quite an understatement - starting your investment plan with 20% bonds at age 20 is throwing money away.
Most people take a simple view of cash: they have a checking account for spending and a savings account for savings, and if they get fancy, they’ll have a CD for longer term savings goals. Power users will change to an online bank with better returns, and that’s about as far as it goes. That certainly works, but we can do a...
I used to do this but if you aren’t aware Regulation D was removed during the pandemic which means you can use savings accounts exactly like checking accounts. Some banks will also let you store nothing in checking and auto-draw from savings when you use your checking account.
I currently store my cash with SoFi which allows this and has 4.6% returns. I made the decision to stop using a brokerage as checking a while ago but IIRC, money market accounts and HYSA accounts moved together for returns and sometimes HYSAs were better so I felt like it wasn’t worth the complication for potentially a few dollars of profit per year. I store very little cash on hand anyway since I’m able to sell raw stocks in the event of an emergency. (Selling while the market is down will still put you ahead of cash returns if you invested that part of your emergency fund a while ago).
I keep a budget, and this structure keeps me honest
It’s not clear why you don’t have it all sit in brokerage checking instead of split between savings? Personally I find any sort of attempts to “trick” yourself into certain spending behaviors when it would be more optimal to do something else with better discipline to be silly.
However, the bank account can’t fulfill other benefits, like state tax savings on interest
How much interest are you making? For every 1000 you have in SPAXX, let’s say you make 5% interest on it, so $50. You can take 30% of that income off of your state taxes, so $15. Let’s say your state taxes are 5% because I’m not sure where you live, so that’s 75 cents per 1000 that you’ve saved (did I do that correctly?). Returns being 5% is highly abnormal, so this is best case scenario at the moment.
the ability to invest part of my savings into t-bills or funds(I can get a CD though).
Unless you can sell these fully liquid I don’t see the point. You might as well put it into these types of accounts normally if that’s where you want money to be. If your money is truly tied up in t-bill ladders then it seems less liquid than selling stocks.
the debit card is way better than any bank account I’ve had
Good banks have good debit cards.
What happens if SoFi no longer has the best rates?
I’m not married to SoFi, but if it was severe I would move. I already have accounts at most of the big ones so it’s not a big deal to me. Money market accounts are not guaranteed to be the highest rates either, and when I switched a few years ago HYSAs were leading money market returns. When that becomes the case will you move? Personally I don’t keep enough cash to sweat $0-10 per year.
when will they add needing debit card transactions as well? That kind of thing is pretty common with banks since they may not need to be as aggressive in getting deposits at some point if the loan market cools
This doesn’t happen at normal banks. This is common with very specific banks that offer really high returns compared to normal HYSAs. I don’t think these sorts of banks are ever worth it unless you’re holding onto a ton of cash, which I also don’t think is good.
Regardless, that’s not really what this is about. I’m discussing bank vs brokerage account, not investing vs not investing cash reserves…
It’s relevant because your entire emergency fund strategy changes when you keep most of it in a real brokerage account instead of with money market. You are talking about how to optimize your big pool of cash, but I’m saying that you should focus less on chasing 0.3% returns on your cash and more on keeping less cash around in the first place. I keep about $3-4k cash around liquid as money that I could use today if I needed to. If I need more money for an emergency, I can still cash it out of my brokerage account very quickly without needing to keep the full 6 months worth of expenses tied up in cash. Note that I have a ton of money in raw brokerage because I make too much money to put it all into tax advantaged spaces. If you don’t make enough money to outpace your tax-advantaged spaces it’s possible that you don’t have any money available to play with in raw brokerage to start with.
it all comes down to when you’re likely to need that cash and how much the market has tanked. By the time you have enough assets that the difference doesn’t matter, you also have enough assets where the extra you’d potentially get by investing it doesn’t matter.
I’m not sure what you mean by the second part but as for thinking that having your emergency fund in a brokerage account isn’t worth it: if you have very bad luck you might lose money in the short term, e.g. putting money into stocks, market crashes, then you have an emergency. Even in this case, unless you continue to have an emergency frequently and with every downturn, you will still come out ahead of cash if you continue with the strategy after your first emergency. On the flip side, in the average case if you have an emergency without the market being down or best case don’t have an emergency for the first few years, you’ll have outpaced any returns that cash will give you for quite a while, and this will continue to grow indefinitely. Stick it in bonds if you’re risk-averse, but keeping it in cash is wasting money. Cash returns are very high right now and it’s easy to feel comfortable with your 5% money market, but the calculus will change when returns go sub-1% again.
48 years old, currently have no investments. My net worth is my car and the clothes on my back, and I don’t ever want to be in this situation again....
I think this is actually not true at the moment since the Trump administration removed that rule (?). It seems the Biden administration has a plan to put the rule back as of a week or so ago though. If someone knows for sure I’d love clarification.
Either way I wouldn’t bother with a fiduciary at the moment unless you have a very complicated retirement setup. Retirement planning is something you can easily learn by yourself by following standard “Boglehead” principles (the strategies everyone in this thread are suggesting). If you get very close to pulling the trigger and are uncomfortable you could check with one just to make sure everything is in order, but you don’t need their advice on “picking stocks” or where to put money etc.
This is all great advice in this thread that I can vouch for. If you have more questions post more threads - this investing stuff is more or less a “solved” math problem so you’ll generally get “the right answer” from anyone in this community.
There’s also more to learn beyond what to buy and where it goes. You should also look into the psychology and strategy of Boglehead investing. You’ll need the nerves/rationality to never ever sell your stocks or react to market changes in any way. Don’t even look at the market or your money ideally. Set a course and trust the math. The best way to lose invested money is by touching it. The more you touch it, the more you lose. Index fund investing is so simple that you may feel anxious that you are not doing enough - this is normal and it’s important that you don’t start fiddling with your money by e.g. tilting towards tech or trying crypto etc.
Yeah, annual rebalancing is a thing if you’re going that way. You’ll need less rebalancing if you invest in a total world index fund (auto-rebalances domestic+foreign stocks) or a Target Date Fund (auto-rebalances everything for you). I’ll also note that ideally you shouldn’t sell any positions while rebalancing, just start buying more of the other thing. If your plan is 30% bonds/70% stocks and you’re at 25%/75%, pump your next paychecks into bonds until you reach the right ratio again.
Crypto’s volatility is akin to gambling, and gambling does sometimes pays off. On average it does not - ask the epidemic of people who lost everything in crypto how they feel about it. Regardless, past performance does not guarantee future returns - the crux of index funds is that finding “the right winners” consistently over time is impossible, and doing it for 20-60 years straight without getting burned once or twice is even harder. You may be up on crypto at the moment but if that money is part of your retirement fund you need to choose when to cash out or how to hold crypto through your entire life without getting burned.
The common advice I see relating to crypto and stock picking is to dedicate ~$1000 into those risky ventures and see how much ROI you can get. Most often, people end up trailing their index fund returns and giving up with a cheap lesson.
It depends on where you’re putting it. Someone already posted the US flowchart which I highly recommend following.
If you’re putting it in a 401k you’ll be setting that up with your employer’s 401k provider, which you don’t get to pick.
If you’re putting it in an IRA you get to choose your own provider, and the best ones that people recommend are Fidelity, Schwab, and Vanguard. You’ll be served well by any of those 3, as they are all friendly and have no fees etc.
If you’re putting it in an HSA you’ll set that up through your employer’s HSA provider, which you don’t get to pick.
If you run out of space in your 401k/IRA/HSA you can also open a “brokerage” account which gets put raw into the market with no tax-advantages, but has no yearly input limits. This type can also be started from your Fidelity/Schwab/Vanguard account.
I’m not sure if you meant it in the way that it reads but stocks and bonds absolutely do not return the same amount of money over time - why would anyone ever buy risky stocks if bonds returned the same? Also, if your 5% difference becomes that wild then you can try rebalancing every paycheck instead. There’s no downside to this other than needing to calculate more frequently. When you’re retired and no longer earning, you can sell from your portfolio’s overweighted portions to rebalance instead.
If one section of your portfolio has gotten smaller that means that part is doing bad or other parts are doing well. Buying portions that are doing bad means you’re buying them “on sale”. Buying portions that are doing well means you’re “paying extra”. The end result is similar to selling high and buying low, just like a sell+buy rebalance would, except that you’re only ever “buying low”. This changes to “selling high” in retirement.
To be more clear, you can sell and rebalance if you want but make sure you’re not causing taxable events by doing so - avoiding these taxable events is the primary reason to ‘only buy’ to rebalance (or ‘only sell’ in retirement).
Actually not sarcasm. I literally was on medication and then I got a good job and I don’t need it anymore. I’m mildly sure I still have depression but I’m much happier in my life and nowhere near risk of self-harm anymore.
You don’t have to “spend” all your money. Live frugally, invest the rest, then retire early or donate it or something. Spending your whole paycheck is very bad at any income level, but it turns out when you’re poor you don’t get a choice.
It is objectively bad. Spending your whole paycheck means you live month-to-month, and any unexpected expenses can and will sink you and send you into further poverty. It is not financially healthy to live without an emergency fund or investment savings for the future. Just because you do not have enough money to accomplish this doesn’t mean it’s not bad.
I’m not intending to be “judgmental” while saying this - it’s important to recognize the problems that poverty causes.
Hi, the first snippet is in response to the commenter’s quote: “I don’t want to be filthy rich because I think I’d do a lot of dumb things more than I would doing charitable things.”
To which I replied that being rich doesn’t mean they need to spend all their money.
At this point you are intentionally misreading the word “bad” to mean “bad decision” instead of “bad situation”. I’ve already explicitly explained that’s not what I meant so I don’t know what you want me to reply with.
Your specific strawman of how you choose to read what I wrote is what you’re fighting right now. I’ve clarified myself a non-zero number of times, which is more than necessary. If you want to write about this topic start a new post, because it’s not related to what I said.
^why is always the furries with the high paying job…^
My best guess is because furries in general are very into STEM fields and those happen to pay a lot of money. There’s also a high correlation between being a furry and being on the autism spectrum, so if your special interest happens to be STEM-related then it’s cheat codes for big money and being great at your job. Furries have a ton of correlated attributes, e.g. 80%+ of us are queer, and they’re very interesting as a social phenomenon. I hope someone someday figures out what causes furries, because it’s more complicated than nature or nurture.
For reference, you’re comparing a Target Date Fund (TDF) to a world index fund. A TDF is composed of stocks and bonds and slowly shifts towards bonds as it reaches its target date (the date is ideally “your retirement date” - the one you’re looking at is for 2020). The world index fund (VT) is an index of every stock in the world, so by buying one share you buy a piece of everything that exists.
Unless you’re retiring very soon, you should generally just buy VT and forget about it. If you’re close to retiring you might want to think about a “bond tent”, where you increase your bond percentage incrementally up until you retire, then slowly sell your bonds after you retire. You can do this by buying a bond index by itself.
There’s a few “right” answers to this depending on what you believe so I would do more research and understand what all of this actually is. The good news is that proper investing is actually really easy. The best strategy is generally to “buy the entire haystack, don’t ever sell”. The Bogleheads wiki is a good place to check first to get some of the basics down.
In the US, if you make a lot, are covered by a work retirement account or you contribute to a Roth, you can’t deduct traditional ira contributions right?...
You’re correct about the now vs. later part but I’ll also note that tax laws can change and some people think that getting ahead of the curve and confirming their taxes now via Roth has value. I’m not one of them, but it’s certainly a strategy.
The main thing I don’t get is that the top talent at your company are the ones that can easily find another job instead of putting up with your BS. The people that aren’t competent enough to leave on a whim are the ones you’re going to be keeping.
[US] Intro to investing - stocks, bonds, asset allocation, and account types
In this post, I’ll provide a lot of basic information about investing, with links to additional reading for various concepts. Most of these concepts are not US-centric, though I will be mentioning US-specific details, such as tax-advantaged account types....
[US] Consider a brokerage account for your main bank
Most people take a simple view of cash: they have a checking account for spending and a savings account for savings, and if they get fancy, they’ll have a CD for longer term savings goals. Power users will change to an online bank with better returns, and that’s about as far as it goes. That certainly works, but we can do a...
Can you offer investment advice? I'm debt-free, about to start earning $2k more per month than I need to survive. Please offer any suggestions for optimal investment method(s).
48 years old, currently have no investments. My net worth is my car and the clothes on my back, and I don’t ever want to be in this situation again....
I'm not asking to be rich. ( lemmy.world )
If your goal is early retirement, which one is better FPIFX or VT?
Surely, one of you fine folks has a better solution to attach a spare fan to an ISP gateway without damaging it? ( sh.itjust.works )
Do you basically get double taxed if you make non deductable contributions to a traditional ira? Why do it?
In the US, if you make a lot, are covered by a work retirement account or you contribute to a Roth, you can’t deduct traditional ira contributions right?...
The reason CEOs want workers to Return To Office is because they want you to quit ( www.fastcompany.com )