Son (20) opening a Roth—investment options?

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cdc
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Son (20) opening a Roth—investment options?

Post by cdc »

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?
manatee2005
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Re: Son (20) opening a Roth—investment options?

Post by manatee2005 »

cdc wrote: Wed Apr 14, 2021 9:26 pm 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?
For a 20 year old, I'd buy GBTC.
homebuyer6426
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Re: Son (20) opening a Roth—investment options?

Post by homebuyer6426 »

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.
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whereskyle
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Re: Son (20) opening a Roth—investment options?

Post by whereskyle »

cdc wrote: Wed Apr 14, 2021 9:26 pm 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?
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.
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placeholder
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Re: Son (20) opening a Roth—investment options?

Post by placeholder »

Another option would be a target fund like Vanguard Target Retirement 2060 Fund (VTTSX) which has a $1000 minimum.
fuddbogle
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Re: Son (20) opening a Roth—investment options?

Post by fuddbogle »

Looks good

Vanguard
VTI for total stock
VXUS for international

Fidelity
ITOT for total stock
IXUS for international.
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Watty
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Re: Son (20) opening a Roth—investment options?

Post by Watty »

placeholder 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.
+1

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.
lazynovice
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Re: Son (20) opening a Roth—investment options?

Post by lazynovice »

cdc wrote: Wed Apr 14, 2021 9:26 pm 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?
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.
JBTX
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Re: Son (20) opening a Roth—investment options?

Post by JBTX »

cdc wrote: Wed Apr 14, 2021 9:26 pm 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?
Do etfs automatically reinvest, with no fees? I honestly don't know.

If not I'd probably find a single fund.
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retired@50
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Re: Son (20) opening a Roth—investment options?

Post by retired@50 »

Watty wrote: Wed Apr 14, 2021 10:49 pm
placeholder 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.
+1

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.
+2
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?

Post by placeholder »

JBTX wrote: Wed Apr 14, 2021 11:17 pm Do etfs automatically reinvest, with no fees? I honestly don't know.
Generally although that might not be the default.
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cdc
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Re: Son (20) opening a Roth—investment options?

Post by cdc »

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.
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Googliebear
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Re: Son (20) opening a Roth—investment options?

Post by Googliebear »

Suggest you and he read Simple Path To Wealth by JL Collins. He also has a Google talk on YouTube that's very informative.
vshun
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Re: Son (20) opening a Roth—investment options?

Post by vshun »

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.
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Re: Son (20) opening a Roth—investment options?

Post by ruralavalon »

cdc wrote: Wed Apr 14, 2021 9:26 pm 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?
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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40 Years' Gatherin's
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Re: Son (20) opening a Roth—investment options?

Post by 40 Years' Gatherin's »

cdc wrote: Wed Apr 14, 2021 9:26 pm 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?
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.
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retired@50
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Re: Son (20) opening a Roth—investment options?

Post by retired@50 »

40 Years' Gatherin's wrote: Thu Apr 15, 2021 5:33 pm
cdc wrote: Wed Apr 14, 2021 9:26 pm 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?
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.
Why ETFs?
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
40 Years' Gatherin's
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Re: Son (20) opening a Roth—investment options?

Post by 40 Years' Gatherin's »

retired@50 wrote: Thu Apr 15, 2021 5:39 pm
40 Years' Gatherin's wrote: Thu Apr 15, 2021 5:33 pm
cdc wrote: Wed Apr 14, 2021 9:26 pm 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?
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.
Why ETFs?
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,
Whoops, you're right. Looks like ETF's are the way to go then.
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Re: Son (20) opening a Roth—investment options?

Post by tibbitts »

40 Years' Gatherin's wrote: Thu Apr 15, 2021 5:40 pm
retired@50 wrote: Thu Apr 15, 2021 5:39 pm
40 Years' Gatherin's wrote: Thu Apr 15, 2021 5:33 pm
cdc wrote: Wed Apr 14, 2021 9:26 pm 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?
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.
Why ETFs?
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,
Whoops, you're right. Looks like ETF's are the way to go then.
As far as I know Fidelity doesn't have minimums for funds, so you could go with funds there.
Silence Dogood
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Re: Son (20) opening a Roth—investment options?

Post by Silence Dogood »

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!
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DSInvestor
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Re: Son (20) opening a Roth—investment options?

Post by DSInvestor »

I suggest Target Retirement fund for simplicity.
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cdc
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Re: Son (20) opening a Roth—investment options?

Post by cdc »

DSInvestor wrote: Thu Apr 15, 2021 7:33 pm I suggest Target Retirement fund for simplicity.
Simplicity wins! He went with the 2065 target fund. Thanks for everyone’s input.
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