Son (20) opening a Roth—investment options?
Son (20) opening a Roth—investment options?
My son opened a Roth IRA tonight at Vanguard with $1,000 he earned over the winter. I’m thinking ETFs are the way to go. 80% total stock and 20% international stock. Is this reasonable for a 20 year old?
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Re: Son (20) opening a Roth—investment options?
That's very reasonable, I'm 35 and only have 5% in bonds. The VTI ETF is my main investment and has done well for me over the past decade.
45% Total Stock Market | 52% Consumer Staples | 3% Short Term Reserves
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Re: Son (20) opening a Roth—investment options?
Yep. Go for it. Actually, Vanguard doesn't offer fractional share purchasing of its etfs. Did he already contribute? I'd actually open an account with m1 or fidelity so he doesn't have to worry about buying whole shares. Once he gets to mutual fund minimums, then he can use vanguard.
Last edited by whereskyle on Wed Apr 14, 2021 9:33 pm, edited 1 time in total.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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Re: Son (20) opening a Roth—investment options?
Another option would be a target fund like Vanguard Target Retirement 2060 Fund (VTTSX) which has a $1000 minimum.
Re: Son (20) opening a Roth—investment options?
Looks good
Vanguard
VTI for total stock
VXUS for international
Fidelity
ITOT for total stock
IXUS for international.
Vanguard
VTI for total stock
VXUS for international
Fidelity
ITOT for total stock
IXUS for international.
Re: Son (20) opening a Roth—investment options?
+1placeholder wrote: ↑Wed Apr 14, 2021 9:32 pm Another option would be a target fund like Vanguard Target Retirement 2060 Fund (VTTSX) which has a $1000 minimum.
Getting him on path with target date funds is good choice and he could even stick with those forever and still do better than most people.
Starting early and getting on a good automatic pilot path would be a major accomplishment.
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Re: Son (20) opening a Roth—investment options?
My kids started Roths in their teens with grocery bagging money and we stuck it in 100% Total Stock Market Index mutual funds. I’ve talked to them about international and gotten blank stares, so you are ahead of me.
Re: Son (20) opening a Roth—investment options?
Do etfs automatically reinvest, with no fees? I honestly don't know.
If not I'd probably find a single fund.
- retired@50
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Re: Son (20) opening a Roth—investment options?
+2Watty wrote: ↑Wed Apr 14, 2021 10:49 pm+1placeholder wrote: ↑Wed Apr 14, 2021 9:32 pm Another option would be a target fund like Vanguard Target Retirement 2060 Fund (VTTSX) which has a $1000 minimum.
Getting him on path with target date funds is good choice and he could even stick with those forever and still do better than most people.
Starting early and getting on a good automatic pilot path would be a major accomplishment.
Establishing a savings habit is huge, if you can help your son with that, it's half the battle.
I also think using a target date fund is smart. No need to complicate things this early in the process. Let him focus on earning and saving.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Re: Son (20) opening a Roth—investment options?
Thanks everyone. It seems like the pros of each are as follows:
ETFs: flexibility and a lower expense ratio
Target fund: simplicity
Recognizing that once his balance hits $3,000 he can move to admiral funds if he wants.
ETFs: flexibility and a lower expense ratio
Target fund: simplicity
Recognizing that once his balance hits $3,000 he can move to admiral funds if he wants.
- Googliebear
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Re: Son (20) opening a Roth—investment options?
Suggest you and he read Simple Path To Wealth by JL Collins. He also has a Google talk on YouTube that's very informative.
Re: Son (20) opening a Roth—investment options?
Why not VTWAX and chill? As simple as it gets.
1. No need to weight asset classes.
2. No need to keep questioning yourself whether ones domestic/international split is right and tweaking it and as a result potentially buying more expensive asset.
3. As long as he understands that stocks go up and down bonds at current yield will be unnecessary drag on his portfolio anbd not needed for a while.
1. No need to weight asset classes.
2. No need to keep questioning yourself whether ones domestic/international split is right and tweaking it and as a result potentially buying more expensive asset.
3. As long as he understands that stocks go up and down bonds at current yield will be unnecessary drag on his portfolio anbd not needed for a while.
- ruralavalon
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Re: Son (20) opening a Roth—investment options?
For a beginner in an IRA at Vanguard with $1k to invest I suggest a target date fund like Vanguard Target Retirement 2060 Fund (VTTSX) ER 0.15%.
It seems that an allocation fund insulates the investor from behavioral errors, and so produces higher investor returns. Morningstar (8/15/2019) "Mind the Gap 2019", link.
Last edited by ruralavalon on Thu Apr 15, 2021 5:45 pm, edited 1 time in total.
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Re: Son (20) opening a Roth—investment options?
Your son theoretically won't touch that money for 50 years. There is no reason for him to have bonds in his Roth IRA as of yet, so I like his 100% equities approach. I think the 80/20 split between US and International sounds perfectly fine. Why ETF's? I would just go with VTSAX and VTIAX.
- retired@50
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Re: Son (20) opening a Roth—investment options?
Why ETFs?40 Years' Gatherin's wrote: ↑Thu Apr 15, 2021 5:33 pmYour son theoretically won't touch that money for 50 years. There is no reason for him to have bonds in his Roth IRA as of yet, so I like his 100% equities approach. I think the 80/20 split between US and International sounds perfectly fine. Why ETF's? I would just go with VTSAX and VTIAX.
Since VTSAX and VTIAX each have a $3,000 minimum initial purchase, the OP's son is shy by a couple thousand dollars, for one fund, or shy by $5,000 if he were to try and buy both funds.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Re: Son (20) opening a Roth—investment options?
Whoops, you're right. Looks like ETF's are the way to go then.retired@50 wrote: ↑Thu Apr 15, 2021 5:39 pmWhy ETFs?40 Years' Gatherin's wrote: ↑Thu Apr 15, 2021 5:33 pmYour son theoretically won't touch that money for 50 years. There is no reason for him to have bonds in his Roth IRA as of yet, so I like his 100% equities approach. I think the 80/20 split between US and International sounds perfectly fine. Why ETF's? I would just go with VTSAX and VTIAX.
Since VTSAX and VTIAX each have a $3,000 minimum initial purchase, the OP's son is shy by a couple thousand dollars, for one fund, or shy by $5,000 if he were to try and buy both funds.
Regards,
Re: Son (20) opening a Roth—investment options?
As far as I know Fidelity doesn't have minimums for funds, so you could go with funds there.40 Years' Gatherin's wrote: ↑Thu Apr 15, 2021 5:40 pmWhoops, you're right. Looks like ETF's are the way to go then.retired@50 wrote: ↑Thu Apr 15, 2021 5:39 pmWhy ETFs?40 Years' Gatherin's wrote: ↑Thu Apr 15, 2021 5:33 pmYour son theoretically won't touch that money for 50 years. There is no reason for him to have bonds in his Roth IRA as of yet, so I like his 100% equities approach. I think the 80/20 split between US and International sounds perfectly fine. Why ETF's? I would just go with VTSAX and VTIAX.
Since VTSAX and VTIAX each have a $3,000 minimum initial purchase, the OP's son is shy by a couple thousand dollars, for one fund, or shy by $5,000 if he were to try and buy both funds.
Regards,
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Re: Son (20) opening a Roth—investment options?
OP,
Focus on what matters.
Going forward, the most important consideration for your son will be his savings rate.
Ultimately, the best portfolio for your son will be the one that he can stick with.
My advice: Keep it simple!
Focus on what matters.
Going forward, the most important consideration for your son will be his savings rate.
Ultimately, the best portfolio for your son will be the one that he can stick with.
My advice: Keep it simple!
Jack Bogle wrote:"Successful investing involves doing just a few things right and avoiding serious mistakes."
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Re: Son (20) opening a Roth—investment options?
Simplicity wins! He went with the 2065 target fund. Thanks for everyone’s input.