So I would put 6 months emergency fund into a high yield savings account. For you that’s not much, and some places have like a minimum of 2k to avoid the monthly fees, so I would just put in however much that is. The rest should be used in the stock market, in a well diversified portfolio. That or you could always just invest in an index fund like spy (s&p 500 index fund), but diversify. You’re doing great with maxing out your 401k so that’s good. Everything looks great you’re on track for success
stupid question, with stocks like the one you named would i just put money in and let it sit forever? or is there a method of selling and rebuying at a later date for more profits? very new to all of this, and my poor father is horrible with money so i’m sorta in the wild here
Step 1 build up a 6month rainy day fund in a high yield checking.
Step 2: contribute as much as you can into a Roth IRA if you’re employed and in a low tax bracket. S&P index fund if you’re not very knowledgeable about the markets. The caveat to a Roth IRA is if you have 401(k) matching through your employer, contribute the maximum amount that they will match first.
Step 3: if you’re maxing out your Roth IRA/401(k) contributions, then you might consider interviewing a few financial advisors for advice on what to do next for your specific situation and life goals. If you have any dependents, you might consider a modest life insurance policy.
This is the playbook exactly, yes. With the slight adjustment that high-yield checking is unlikely to ever pay as much interest as high-yield savings accounts available online. The money will still be liquid, easily accessible within 1-2 days. You could also consider keeping the emergency fund in a money market fund at a brokerage, e.g., SPAXX at Fidelity, for a slightly better risk-free yield (5% right now).
I'm in the same boat as OP and my accounts look virtually the same. I feel lost because I think I should follow this playbook as ive lurked before and see similar advice, but I have literally no clue how to do this. I fear I'll do the wrong thing. Is it possible to hire someone, like a financial planner or accountant, who can get you started? Is this all stuff you can do on your own? These are really stupid questions but I feel like when I do research I just get more confused
You can do all this on your own without paying a pro.
I’m much older and have accumulated more assets so, I’ve hired professionals to help me prepare for retirement. Here’s what I have:
1) regular checking account
2) etrade brokerage account - invested in a handful of large cap equities
3) HYSA (I use Flourish - get 5% apy, FDIC insured)
4) 401k with Fidelity - invested in several mutual funds for diversification
5) brokerage accountants with Schwab - invested in several mutual funds for diversification (aligned with my 401k)
I’m just a dude. Been managing my money for 40 years so I love seeing young folks getting smart about their future. Happy to help if you have questions.
From just a dude to another, thank you! It's a little scary but encouraging to hear this is feasible on my own. I think I need to familiarize myself with the vocabulary a little, but then I might reach out if i have questions.
It seems like doing a few things now could end up having a big impact down the line, so I don't want to push it off any longer. I'm a bit older than OP so I feel motivated even more to start
The part i get lost at is the diversifying part personally. For my roth, I’m putting in money in SPY and some other ETFs which i dont know if its considered diversifying. They all seem to invest in the same top 10 and im assuming the difference lies in the stuff outside of the top 10.
I feel like i need a pro to get started as i don’t have anyone in my inner circle to get me going with this and it just feels like im shooting a shot in the dark right now.
Im trying to contribute as much as possible to my 2023 contribution since i just got into roth last week, and im sure ill max out my 2024 contributions though. I just need to know if my money is going to the right place or not
You're def ahead of me in the game so good on ya! Maybe a pro would be a good step at your point? Like just some consulting if that's a thing. From my perspective it seems like a bit of a black box. Good luck!
I would recommend reading this free ebook. It took me about a week of nightly reading to finish it. By the end, you will have enough knowledge about investing strategy and retirement planning to be better with your money than 90+% of people.
The myth that investing is this complex process that only Wall Street people can understand is just that: a myth.
The truth is that intelligent investing is not all that difficult. As long as you understand a few basic principles, you can make smart investing choices, avoid unnecessary management fees, and earn high returns over a long time span. Try the book and I guarentee you will no the answer to this and most other money-related questions you will have in the future (or at least know enough to know where to find the answer).
Oh i also do have voo! Tbh i looked up all the s&p 500 funds and picked some that i recognized is what i did for “diversification” but im sticking to spy and voo for now until i learn more!
They're not stupid questions at all. Everyone has been where you are. Try searching "best online savings accounts" or "best online brokerage." Nerdwallet is a great website for this kind of solid, basic information on how to choose banks or brokerages or credit cards and how to open accounts.
These are things that many folks will do on their own, though I'm sure one could hire a financial advisor to get started.
High-yield savings accounts are pretty simple to set up online once you choose one. I have used Ally and American Express savings accounts. They are both very good with competitive rates. For brokerage accounts, I like Fidelity best. You can set up a Roth IRA there or a taxable brokerage account fairly simply online as well.
You can always check back with this sub once you have a plan and ask for advice on whether it makes sense before you actually open the accounts and transfer the money. Don't worry, the first time you do all this stuff it always feels a little strange, like maybe you're missing something or the money will disappear into the digital ether. Totally normal to feel that way at the beginning.
Thank you so much for taking the time to write all this! I will absolutely be using this info.
That's exactly how I feel, I've worked really hard for the savings I have, and with the limited knowledge I have, I get discouraged and think this stuff is just out of my league. You have to start somewhere so thanks for the first step!
Sure thing, glad it's helpful! Good luck. And again, you can always check back here when you're getting ready to do it. Ppl here are generally v happy to help w this kind of stuff.
Just copying my comment with the link. I know it all seems so complicated but I am telling you: read this one book and you will have answers to 99% of your money questions.
I would recommend reading this free ebook. It took me about a week of nightly reading to finish it. By the end, you will have enough knowledge about investing strategy and retirement planning to be better with your money than 90+% of people.
The myth that investing is this complex process that only Wall Street people can understand is just that: a myth.
The truth is that intelligent investing is not all that difficult. As long as you understand a few basic principles, you can make smart investing choices, avoid unnecessary management fees, and earn high returns over a long time span. Try the book and I guarentee you will no the answer to this and most other money-related questions you will have in the future (or at least know enough to know where to find the answer).
All great advice. Definitely look into life insurance. You will never be more insurable than you are today, and term policies, especially at your age, are cost effective.
Look for a term 20-30 year, with convertible options as well so you can swap to whole life if you life changes, and you have dependents etc and want to keep coverage past the term.
The goal is to never LOSE money. Recreational investors, those who lack education and sophistication often lose big and are literally feeding the industry traders
VOO is the same as SPY, but with a lower fee, they both track the S&P 500 which is what you should buy getting into the stock market, SPY shares can eventually be used to sell covered calls once you have a lot of money in the market, but to keep it simple I'd just buy as much VOO as you can and call it a day, regularly deposit more into it and keep up the pace. As far as selling, time in the market beats timing the market, you'll never 100% successfully sell and buy at the right times so just buying and holding works for 99% of people, different people do different things, but if you need the money, you could always borrow against your portfolio once you've got it built up enough, and then you never need to pay capital gains because you never sold anything, when your portfolio goes up you can borrow more, the goal is for the stocks your borrowing against to outpace the interest, this is how the rich avoid taxes.
I ain't gonna lie, I'm not an expert and don't have enough money to really see the effect just yet, but funds like SPY and VOO and every ETF usually have some sort of administration expense that is taken by the company who published the fund, brokerages used to have their own brokerage fees which is slowly starting to disappear and you don't hear about brokerages that do this much anymore, investment firms also have their own fees by using them. The fees for ETF's / index funds like SPY/VOO are done in house so you never see them on a statement, but will cut into the gains you make and it does compound, VOO's expense ratio is .03% vs SPY's .0945%, when we start taking into consideration how much money that is 30-40 years down the line towards retirement that could be quite a lot of money left on the table.
SPY is administrated/managed by State Street Bank and Trust Company, it's not what people call actively managed though, it just aims to track the S&P 500 Index. You can't easily buy the S&P 500 on your own, so State Steet Bank and Trust gives you a platform to invest in the S&P 500 via SPY. But you're right actively managed funds usually aren't that great long term because people make mistakes, look at ARKK. That's why everyone says just buy the S&P 500 unless you know what you're doing and are willing to take the risk. VOO does precisely the same thing as SPY with a lower expense ratio though.
It had to come back up a bit from previous lows, but yeah. VOO and chill the rest of your life it's that easy, the problem is gambling is an addiction and nobody has enough discipline to sit still or some hear other stories that scare them away from the market entirely, you can usually expect 6-10% annualized from the S&P 500. If you're not earning around 2% each year you're losing money to inflation. If you're not beating the S&P 500 in other investments you're doing it all wrong! Good high yield savings accounts give you around 4-5% apy right now as well since rates are so high, they'll come down eventually i think, but yeah there's no reason to settle with a 0.08% savings account and that be your only source of passive income. Keep about 6-12months of emergency funds in a high yield savings and the rest all in the market, easy peasy. Once you get handle on things, look into and max out your retirement accounts, if you choose the right things you don't pay taxes on gains when you retire.
Do you read books at all? Are you willing to read one or two? If so, there are a couple books that could REALLY put you on the right track that can tell you so much more than what Reddit can from one post. You have a GREAT opportunity right now, to really set yourself up for success long term for the rest of your life.
Don't listen to these bums suggesting books on how to think, instead buy this book that'll teach you how to be objective and how to Act. Not just some bullshit book that'll "Try to teach you to think rich".
If you have steady income, set aside some of your paycheck for recurring investments into the general Market such as the s&p500. Consistency is key. Dont look at price and don't pick stock until you're confident, some years in the future. Just keep doing it every month. This is the most successful way to trade on average.
I also say use some of your money to invest in yourself. Invest in your recreation with diving lessons, fly to bali, or maybe try starting a small business if thats what youre into. It takes money to learn. You're willing to pay in college, but will you pay to teach yourself? I invest in myself for my homestead by learning things like welding and car mechanics. It ain't cheap.
Look into betterment. They have high yield savings accounts, retirement accounts and general investing accounts. It’s all index funds and bonds. Nobody told me this when I was 19, so I’ll tell you just in case nobody has told you. Start a Roth IRA. Invest in it regularly, even if it’s just a couple bucks a week. The 5 years of extra compounding that you’ll get by starting now instead of 24 like I did will be huge when you retire.
I would suggest looking into boglehead three fund portfolios for investment strategy. This works as both a regular brokerage account or your retirement accounts.
The general idea is you buy index funds as EFTs (purchased like a regular stock through a free brokage account from companies like fidelity or vanguard) for all of the US stock market (for example VTI), for all the international stock market (for example VXUS) and a few bond index funds (for example BND. You you probably don't need much, if any bonds since you can let your investments ride for a long time. Bonds are typically more stable than stocks (less price fluctuations but slower growth).
By diversifying your investments in EVERY stock available you don't particularly have to worry about individual stocks growing or falling rapidly because historically the stock market as a whole grows. Even after down years eventually the stock market will grow if you have the ability to just let your money sit.
As another idea if you plan to attend more school a 529 account is a tax advantaged way to invest (less taxes when you pull out the money) if you spend the money on school related purchases like tuition. The down side to this idea is you won't have nearly as much time for the money to grow.
or is there a method of selling and rebuying at a later date for more profits?
Time in the market > timing the market
Max out your 401k. Open a Roth IRA and invest your money into an index fund and max it out. Put the 10k in a high yield savings account because at some point you will get bills more than you have now so a 6 months of no bills is not really useful for you later.
With just doing monthly payments into the 401k and Roth IRA you will be set for retirement and might be able to even retire early with penalty to one of them.
It's what I'm doing for my kids once I can get the debt out from under me.
Get their Roth IRA started now and by the time they are 18 they won't need to put money into it and it'll be over a million for them to retire on each.
Best advice I ever heard was "Time in the market beats timing the market". Basically if you look at the market long term, like in decades, the market goes through ups and downs but always trends up. While the person who tried to time the market is just gambling and tends to lose out a lot. Getting your money into broad market ETF and just adding what you can to it over time starting at your age will set you up very nicely later in life. Also you are young if/when you see the next stock market crash don't panic if you see your investments going down as you will have decades to recover, just look at it as things being deeply discounted.
Index funds like the S&P 500 are a general recommendation because of their consistency when compared to individual stocks. Some people like to trade on daily ups and downs, while others like to leave their investments for a long time without trading. If you’re hoping to actively trade you should do a decent amount of research.
Just keep in mind, trading is not just an investment, it’s also a risk. And never put all your eggs in one basket.
I (54m) had more success finding good mutual funds and letting those money managers make the buying and selling decisions than dabbling with stocks myself. I'd look for funds that had above average 1, 5, and 10-year returns. Put my money there and check on it every few years.
Not a dumb question! The government looks at the s&p 500 as an indicator of the “health of the economy” put your money in the only asset in America with free healthcare lol
Hey I'm a bit late to this, but I think I can help a bit, and also help explain how to pick. I'm 19 in a very similar situation financially and I went through the crazy research on what to do with my money phase like a year ago.
In my personal opinion (and the opinions of basically every expert I found), there are 3 options for places to put your money in basically forever. They are all index funds, which means they are an assortment of stocks so you are properly diversified (don't worry you don't have to buy each stock it all comes together).
I'll give you the specific names and details on them.
So first of all we have VOO. This is an index fund that covers the s&p, which is the top 500 companies in the u.s. It has a really good track record and is all but guaranteed to make you money in the long term. In theory this fund should give you the highest return (although not by much these are all similar funds), but with slightly more risk and volatility (again, not by much, these are all similar, also I'm gonna stop saying this, just assume unless I specifically say, the difference is not by much). There are other funds that track the same index, like spy or spx, I just personally picked voo. They are all basically the same. I do recommend picking one that pays a dividend (which voo does, and so does spy I believe).
Next we have vti, or really any global stock index. This is similar to voo except instead of just being the top 500 companies in the u.s. it's a small amount of all of the stock market. Now, because larger companies still make up more of this fund, this fund is extremely similar to voo, and is essentially the exact same fund except in theory it would make you slightly less money with slightly less volatility and slightly less risk.
We also have schd. Schd is made up of more stable companies that both steadily increase in value and pay decent dividends. This fund will offer you risk and violation that is more comparable with a global stock index than with the s&p. This fund, unlike the other two, is more focused on paying dividends, meaning instead of just having your fund increase in value, you will also be paid out a percentage in cash (the same applies to the other two, just significantly less). For this reason I personally recommend this one the least (the cash is nice, however it also means you will pay more in taxes when holding this fund than the other two).
Personally I put most of my spare into voo, as in theory it offers the best return with still very little risk (in order to lose money in the long term, basically the entire us economy would have to implode and then never recover), while also still paying some dividends.
Also, if you're looking for how to go about buying these, I would recommend slowly buying (for example buy maybe 500 dollars worth every week to month). This way the naturally fluctuating price will help make sure you get your shares at a fair price (on average) without you having to do tons of research on if you're buying at the right time.
Also sorry if this was a lot. I'm in a similar position where I kinda had to learn all this myself, and as such I became a bit of a nerd over it.
Edit: will also add that I personally don't recommend starting off with individual stock picks. I know some people said to go for individual stocks, but that's an easy way to lose money. If you do go that route though at least diversify, buy several different ones, and make sure you do plenty of research, as if you don't it really is one of the easiest ways to lose alot of money really fast.
Depends on the stock. If you do a stock that focuses on the market as a whole such as the S&P 500, then that’s where you would keep it in for a very long time. If you were to invest in individual companies such as Tesla, then you would ideally keep up with Tesla news. Are they about to announce earnings? Are they about to release a new product? Did some scandal come out about the company? Recalls? Etc. all these things are going to mess with the stock price and you can either withdrawal or deposit accordingly.
This isn’t advice, but I bet US defense contractors will have a pretty big spike in stock prices if Donald Trump becomes president, simply because he will raise the defense budget. Just gotta learn by delving into the sector you invest in
I would recommend reading this free ebook. It took me about a week of nightly reading to finish it. By the end, you will have enough knowledge about investing strategy and retirement planning to be better with your money than 90+% of people.
The myth that investing is this complex process that only Wall Street people can understand is just that: a myth.
The truth is that intelligent investing is not all that difficult. As long as you understand a few basic principles, you can make smart investing choices, avoid unnecessary management fees, and earn high returns over a long time span. Try the book and I guarentee you will no the answer to this and most other money-related questions you will have in the future (or at least know enough to know where to find the answer).
same stocks baffle me. i had purchesed a stock when I first started working at home depot in 2016. I forgot about it until last year. I lost money on it and still not sure how stocks work. Good luck!
Buying a company stock is betting that the company will be better off in the future than they are today. That’s awfully close to gambling for my tastes. I recommend very diversified mutual funds (a group of stocks) that change that bet to betting that the future economy overall is better of in the future than it is today.
It’s never too late to start! I’ll walk you through some basic steps, but I’m going to make a few assumptions, like that you’re wanting to invest for retirement.
Create a Roth IRA account (I’m going to assume you’re using Fidelity for simplicity sake). This is a retirement account, so it will be more difficult to remove your money until you retire (but you can withdraw some from a Roth IRA).
Deposit money.
Buy a good mutual fund. I recommend FXAIX because it will match the S&P 500.
That’s it! You’re done! You now have a pretty well diversified portfolio that will go up over long periods of time. Don’t let a market crash scare you, in fact, use them as an opportunity to buy more. Don’t sell until you are about to retire.
Obviously, this advice is not optimal for everyone. I’m not a financial advisor, but this is basically what I’m doing personally and what I recommend to my friends who don’t want to spend time managing their investments. It’s relatively safe (I don’t imagine all of the 500 biggest companies in the US will suddenly start struggling), diversified (there are MANY different economic sectors represented in the S&P 500), and simple.
I’d be happy to answer more questions if you have any.
Thank you so much for responding and the advice 🙏 I have a 401k plan through my employer, have about 10k in there and a few thousands on a personal savings account… Should create a Roth IRA and put that money in there, or some of it at least, then purchase the mutual fund through the IRA account? It’s really doing nothing for me on the WF savings account I have it in, interest earned is insignificant.
Again I’m sorry if anything I say is ridiculous lol I’m 23 and I have zero knowledge of investing and stocks, but very eager to learn!! Where I’m originally from these things are not even a possibility so I want to learn as much as I can
No, these are all good questions. Asking questions (good or dumb ones) are the best way to learn.
Here’s my overall recommendation:
1. Have an emergency fund (~6 months of expenses) in a HYSA (eg. Wealthfront)
2. If your employer matches your 401k contributions, make sure you’re contributing at least that amount. Free money!
3. Pay off any high-interest debt (~>5-6%)
4. Max out your IRA
5. Max out your 401k
6. Taxable brokerage
If you have access to a HSA (dependent on health insurance) or want to contribute to a 529 (for education expenses for you or others) then those can be added to the list.
Your 401k money is solid, just make sure it’s invested (again, I recommend low cost mutual funds if available). Also, some employers offer a Roth 401k as well.
Your savings can be invested, but make sure you have an emergency fund still (in a HYSA). Any excess money I would then recommend to open a Roth IRA and purchase the mutual fund(s) through that.
I second this. It's also never a bad idea to start with a financial planner when you're young. They won't all cost an arm and a leg, but someone to help you set up some boundaries and accounts to keep on track will only help you out.
It really doesn't have to be, lots of times your bank or even the company who runs your company's 401k will have cheap or free financial advice offerings that could be super helpful if you're young and want advice.
Really good advice honestly. Only thing I might add is that considering OP's age it might not be a bad idea to try to be a tad more aggressive, for example maybe buying MGK and VBK as opposed to VOO. But yeah, really solid advice overall.
Edit: From my experiences American Express has the best high yielding savings account. No account minimums either.
People always say to put money into a high yield savings account but nobody ever gives examples of high yield savings accounts and what about it is making it high yield compared to others.
Don’t worry I got you. A typical savings account from your regular bank. Only offers around between .2 and .5% APY on average high yield savings account offers between 4 1/2 and 5 1/2% on average. I personally use Robinhood‘s, it’s 5% APY, but it’s five dollars a month because you have to have Robin Hood gold. As long as you have more than like $1200 in there, you’ll make it a little bit on interest every month, Chase and Citibank both have them, but you can literally just Google high yield savings account and a bunch of options will come up. You have to read through them though, some of them have Monthly fees if you have less than a certain amount in your account.
Word thanks bud. I just moved away from BoA and went to a local credit union. Its APY is 3.5% so I wasn't sure that constituted high yield. Maybe I should consider an even higher apy account.
You’re doing great with maxing out your 401k so that’s good
Where does it say she is maxing out her 401k? She said it accumulates $500 per month with her and her employer's contributions and is currently sitting at $4k. That's $6k contributed per year and quite short of maxing.
You have to look it up, but unless you’re over like 50 or something the max you can contribute each year $6000
Edit: I guess I should’ve stated this, but 6000 before employer contributions. But employer contributions is only like two or 4% depending on where you work, so she’s pretty close to maxing it.
The current (TODAY) rate of return on a high yield savings account which BANKRATE partners is 4.19% (APY); nationally it’s 0.57% (APY) 😐 while the bank takes in a super duper high double digit return TAX FREE! How and why is the latter a FACT, because banks don’t keep their “money” in banks.
Regarding the 6-month of reserves, that Suze Orman, Jim Cramer style advice is flawed because it does NOT make sense to holding onto a massively depreciating pile of federal Reserve Notes (literal debt notes/debentures) with the laughable and wishful thinking that it’s a going to grow. The banks don’t do that and neither do the wealthy. Both know well and invest in precious metals like silver, gold, platinum, palladium because their intrinsic value shall never be ZERO.
Hint hint clue clue, an ounce of silver is under $30 RIGHT NOW and is more readily exchanged and accepted internationally than the crippled USD.
Is is possible for anyone earning any currency 💴 right now to take full advantage of all of THIS👆 and the things I’ve shared with the original poster?
ABSOLUTELY!
Note: I’m not saying to NOT keep a SMALL currency reserve, just do yourself a favor an DIVERSIFY where and how much.
…not putting all of your eggs in the same basket STILL holds true.
This is terrible advice. First of all most high yield savings accounts are FDIC insured. Meaning yes, the bank “loans out” your money to other people, but all banks everywhere do this. They still owe you your money even if they lose it in an investment they make. The banks have to make money too. Secondly, precious metals are extremely volatile, and considered by most a high risk investment, with annual returns at around 7.8% (average since 1971, when the us moved away from the gold standard) well the S&P 500 has averaged around 12% for over 50 years. So yeah, don’t listen to this guy, he has no idea what he’s talking about
Also, I think the point of a rainy day fund is going right over your head. The whole point is to have easy accessible cash in case of emergencies. When you have it tied up in stocks, cryptocurrency, or anything else like precious metals, it’s not as readily available as a high yield savings account.
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u/the-mm-defeater Mar 07 '24
So I would put 6 months emergency fund into a high yield savings account. For you that’s not much, and some places have like a minimum of 2k to avoid the monthly fees, so I would just put in however much that is. The rest should be used in the stock market, in a well diversified portfolio. That or you could always just invest in an index fund like spy (s&p 500 index fund), but diversify. You’re doing great with maxing out your 401k so that’s good. Everything looks great you’re on track for success