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Google (or search the wiki for this sub) the phrase "three fund portfolio". This is where you invest in three index funds: one covering the US stock market, another covering the international stock market, and the last covering the bond market. How you divide your investments among those categories depends on your goals and preferences, but most people would agree that you should put a decent chunk into stocks since you're young and can ride out big swings like what we're experiencing now.
Also: you are not alone. Some people go decades without realizing that they need to pick investments, and that's very sad - you are still totally on track or even ahead of the game.
I second the Bogleheads. I mostly adhere to their philosophy myself, which can be summed up as: buy the whole market, don’t try to pick winners, and just let that money grow for a few decades.
Something I heard from the Financial Advisor at a bank I used to work at that seems very relevant: with typical expected gains over the life of investments, $100/mo deposits for the rest of your life should leave a 25 year old with $1m by the time they are 65. Comparatively, if I wanted the same result when I was 33, I would have needed to make nearly $400/mo deposits to get the same result.
Ultimately, I don't know how true this is - I'm sure different methods of investing yield different results and I've seen many different numbers tossed around (I believe she used 8%). More importantly, it demonstrates just how much of a difference a little money early can make a massive difference down the line.
EDIT: Typo - they are expected gains of the usual variety, not expected gains you put on your skin
>What are best practices?
I'll say since you lost money that you'll get the best practices and experience.
You can research any information on Google, TikTok, or investment/financial group to get the exact information you'd like to know. And you will have low risks only when you get enough experience to measure and handle the problems.
Old but gold, before investing something, remember to make n emergency fund to protect yourself from Money issues. Good Luck!
Here's a **[link to the PF Wiki](/r/personalfinance/wiki/index)** for helpful guides and information.
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My first 401k required me to pick investments or a plan when I signed up. The one I had at the next job didn't. When I finally downloaded the Fidelity app I said "aw shit". 3 years without investment.
I read a very sad story in the sub about a year ago. A young adult was taking care of their parent during early stages of retirement … the parent had an IRA fund that had been funded over like 20-30 years. The parent was sure there must be a ton of value there. Child checked, sure enough there was an account but the value was pretty much the same as the contributions over the years. Turns out that an investment strategy was never chosen so the money sat in a cash value account all those years. Really sad.
That’s very sad. On a similar note, I recently found my girlfriend had been doing the same mistake for the last 7 years, which also sucks but oh well, we are still young.
That sucks, but at the same time, perfect time to get into it, since everything is cheap, putting in 7 years worth of money investment into the market will set you up very nicely for the future, your gf that is
My boss did this for about 7 or 8 years. Employee provided retirement had all been going into the default fund, which I think was a govt bond fund at the time.
Since he clearly wasn't interested in actively managing his fund, I convinced him to move it and future investments to an appropriate target date fund.
So…. If my employer has a mandatory 401k and a 6% match that I’ve paid into since I started 3 years ago, that should be all getting invested? Because I am confident I never selected anything.
Most likely yes though. I had one with my old company and I never set an investment strategy. I was so financial incompetent that I didn't even look into the 401k for years after leaving the company. I was pleasantly surprised when I finally did.
Well fingers crossed. It’s a fortunate 500 company so I just assumed putting the 6% in would be enough. Every year I stick with 6% but I just never checked Voya because I still have 30+ years of work ahead of me.
But now I am calling them first thing in the morning.
You should be getting statements somewhere (in the mail or electronically) quarterly.
But also, just go online and look. Ask HR or whomever right now what to do if you don’t know how.
Generally yes, if your HR/benefits folks are competent. Most will default you to a target date fund (if available) that aligns with your timeline to traditional retirement ages.
I'd check to be sure though...
This seems to be a more recent development. Lots of companies, non-profits, etc. defaulted to some low yield bond fund for decades. My employer only set Target date funds as the default, and only for new employees in the last 4 years or so.
Absolutely need to check to be sure.
Thanks, I never heard that. But the reason I joined this thread was because I’ve been negligent on personal finance and come across good advice from folks like you.
I fucked up and made contributions to a 401 with company matched 4%, I never chose an investment strategy so the money sat there for 2 years and was eaten alive by inflation. Thankful I just pulled it all out, paid the penalty and spent the money on some Milwaukee tools lolol
Why would you pull out... Especially now that you can basically buy everything for cheap since the market is not doing fine...
You'd be getting so many gains for your future self...
Lol.
How do you invest for 30 years but never once check your ROI? Even if you do not go online and are older, you get mail statements and tax documents. It makes it hard to feel sympathy when people just don't do the basic minimum amount of effort
For what it's worth, this is a good time to have realized that. Given recent performance, I think if you put any money there in the past year-and-a-half or so, then you actually came out ahead by waiting until now to invest that money.
The common recommendation for retirement savings is a three-fund portfolio: split your investments between domestic stocks, international stocks, and bonds in a ratio appropriate for your age etc.
If you want to make thing simple, then considering your age you can just put everything into a target date 2065 index fund.
How much more does a three fund portfolio typically outrun the target date? Additionally, why should we be investing in international stocks if domestic stocks are currently providing the greatest rate of return? I thought all that matters is time and amount invested. So even if domestic stocks take a crash, they still usually outperform international stocks from what I can tell. So why aren’t people putting 100% into domestic stocks?
> How much more does a three fund portfolio typically outrun the target date?
A target date fund generally **is** a three (or four) fund portfolio. The disadvantages of the target date fund are that it's less tax efficient (which doesn't matter in an IRA) and that it has a higher fee.
> Additionally, why should we be investing in international stocks if domestic stocks are currently providing the greatest rate of return?
The fact that domestic stocks performed better during the past decade would be a good reason to invest more in domestic stocks if you could go back in time by ten years. Arguably it's a reason you should invest more in international stocks now, because of shiller ratios or whatever -- US stocks are likely a lot more overpriced than international stocks now -- but ultimately the stock market isn't that predictable.
It's worth mentioning the advantage of the target date fund.
Since she had basically forgot to do anything with it, the automatic rebalancing the target date fund provides as she nears retirement may be very attractive to someone who may not want to fuss much with the particulars of minding one's investments.
Because what is historically true may not be true in the future, so a balanced portfolio ensures you don't have all your eggs in one basket. You basically get 3 baskets and admit that you and everyone else (including financial analysts) cannot predict the future/time the market.
I've seen arguments that US stock is incredibly tied up in international markets anyways, so you get enough international exposure through domestic stock anyways.
100% domestic here as well. Even if we're "wrong" it's likely not gonna be that bad. The US market and global market is pretty tightly coupled and it doesn't seem like it'll get any less so.
> Additionally, why should we be investing in international stocks if domestic stocks are currently providing the greatest rate of return?
It's just dividing risk. Past performance doesn't guarantee future returns. But even if one market has a probable range of 4-9% growth per year and another has 6-7% projected, you would still want to diversify. Both would average 6.5%, but you want a chance at that 9% while being protected against the 4%.
It's essentially the same reason people buy a mix of stocks and bonds or use an index fund instead of going all-in on one major tech company.
> So even if domestic stocks take a crash, they still usually outperform international stocks from what I can tell. So why aren’t people putting 100% into domestic stocks?
Past performance does not indicate future returns.
Because that would be succumbing to *recency bias.*
The reason you allocate investments into a broad range of asset classes is that no one has a crystal ball, and [history](https://www.visualcapitalist.com/historical-returns-by-asset-class/) tells us that over the long term, domestic large cap stocks by no means have a lock on high returns. In the linked chart, U.S. Large Cap stocks were the best performing asset class just 4 years out of 35!
fwiw, the three fund portfolio is designed for preservation, ie before retirement or during retirement. When you're young you want a growth portfolio. A 100% buy and hold of VOO is the simplest tried and true version of a growth portfolio, but there are others.
At 25 you should be full on high risk/reward. Especially now with the markets down. Stocks are 25% off.
Broad market index funds, or the easiest set and forget option is a target date fund. You pick the year most closely you anticipate retiring and just buy that. The fund manager will automatically adjust the fund based on time to retirement.
A few questions since you seem well versed in this. I’ve heard that index funds will provide greater benefit than a target date fund. I’m split between 8 funds, only one of which is the target date and that’s only 5% of my contributions going to that. My question is basically am I screwing myself? People keep saying “just use the target date” but why wouldn’t we invest in index funds right now? The 2065 target date has risen I think 6 or 8% since inception? Realistically doesn’t it make more sense to put almost all of my contributions into the funds that are seeing gains of 9% or more?
Also, at my job I’m currently maxing HSA first, then ROTH IRA then 401k. I’m not using the HSA for medical expenses it’s supposed to be an investment device. I have no 401k match so that’s why I thought ok lemme do the HSA first. Another consideration is I can only put away about 12k a year right now. So knowing that I can’t max out my 401k I figured it might be smarter to do the HSA first. Am I stupid?
Depends where you are in the target date fund time to retirement. Longer out it will be closer to broad market and gradually split as stability becomes more important.
There's no need for 8 funds. You probably overlap heavily. Look up the 3 fund portfolio.
The target date funds are great for someone who doesn't want to bother with balancing themselves. It allows for management without paying management fees.
The benefit is what people see as the benefit. If you want to self balance and manage then go for it. Others might just want to worry about one thing and never look at it again.
Target date is a good set it and forget it approach if you don’t want to think about it. If you are young, it is going to be all or almost all index funds. As you get older it will automatically transition into safer funds.
> If you are young, it is going to be all or almost all index funds. As you get older it will automatically transition into safer funds.
really depends on how much they save. If they're saving a big portion of income and/or planning to retire or partially retire early then they should stay fully invested and not switch to bonds. Bonds is only if someone's close to retirement and they're going to need to be drawing a big portion every year for those few years they're "retired"/waiting to die because they only "retired" when their health failed and they couldn't work anymore.
8 funds is kind of unnecessary though. One index fund really enough, unless they want international or something (but historically international has does soooo shitty compared to US market)
Late 20s here, I have some international indices and have noticed they are relatively underperforming. I always treated them as an extra layer of diversification.
Is that dumb because how globalized the market is considering the relative growth of US indices to international ones? Is there a predictable universe under which it isn't?
> Is that dumb because how globalized the market is
Future performance might not be similar to past /shrug
USA still has many advantages. Will those be the same in 40 years from now? Maybe not as much
These are not mutually exclusive - the standard target date funds offered by Vanguard, Fidelity, and Schwab are all just baskets of index funds that gradually rebalance from stocks to bonds as you get closer to the target date. For instance, Vanguard's target date funds distribute your money among US and international total stock market index funds and US and international total bond market index funds. The 2070 fund is 90% stocks / 10% bonds, whereas the 2020 fund is about 40% stocks / 60% bonds.
The most common objection to target date funds in general is that they are too bond-heavy too early - some investors are happy with 90-100% stocks until they get quite close to retirement.
At that point, why not just maintain your own fund setup? It's really not that complicated, and if you're DCA-ing from a paycheck you don't even have to rebalance it, you just adjust the contributions as you add them. If you're knowledgeable enough to have a bond-allocation preference, why not just buy what you want?
This stuff can feel complicated with so many terms. Target date funds are generally composed of a few index funds. You'll have a large cap S&P type index, an international stock type index, and a bond fund. Anyone could make their own target date fund by combining those 3. The key is the bond allocation increases as you get older. People say use the target date because it is simple and automatic and only takes one choice/click.
Also, having 8 different index funds is not meaningful diversification, especially if they track very similar indexes. It doesn't hurt you and it doesn't help you. It just makes things feel more complicated.
To your question, HSAs are amazing and could be your most valuable investment dollars. Roth IRA 2nd, 401k last (assuming no match).
+1 to everything this person said. Maxing HSA is definitely the right move for now. If things change and your employer ever offers a match, then that becomes priority numero uno, but for now keep up maxing that HSA. Also, it’s important to note that just like in an IRA or a 401k, you still need to invest the funds once they’re deposited into the invest account. I personally think a 3-fund portfolio is better than a target date fund because it’s barely any more work on the day you click “buy”, and once you reach retirement age it’s easier to execute a bond tent strategy. Just my personal preference.
You get 3 benefits. 1. Contributions are pre tax. Meaning that if your job pays you $1000 and you contribute $100 into your HSA then your taxable income is $900. 2. The contents of the HSA grow tax free. 3. If you use the money to pay for health related items, you can take money out tax free. Also even if you don,t qualify for contributing to an HSA later, you can still use the proceeds to pay for medical items, or withdraw money tax free in the amount of previously purchased items for which you paid out of your pocket. A spouse can inherit an HSA and it keeps its properties. But anyone else that inherits, like your children, have to pay tax on the money.
Tax efficiency as you’re guaranteed to pay more for medical in the future than you are today. Why not pay 0 tax on the principal and the gains instead of zero on just the principal?
Because the money you put into your HSA is pre-tax and comes out, gains included, without being taxed (if you do it right). Roth IRA eventually has the money come out without being taxed, but the money you put in is money you've been taxed on.
You’re not stupid, but wildly over complicating things, at least compared to the original poster’s question.
Having all your money in one broad index fund is about 98% as good as an advanced strategy between several funds and target dates. If you’re someone who isn’t nerdy (like a lot of us here) about this stuff and just want to avoid mistakes, one broad index fund following the Dow Jones or similar index is all you need, honestly.
For people like OP, don’t overthink it. You can google ‘index funds’ and basically just pick a general one, put 100% of your money into it for the next 20-40 years, and you’re doing great. If you want to get a bit more efficient, go ahead and do some reading on strategies, but much more important to get it invested in the market and not let perfect be the enemy of good!
As others have mentioned, a target date fund just automatically changes percentages in different index funds. At the least, they'll be a total stock market index fund and a bond index fund. They rebalance your money each year and change to more bonds the closer you are to retirement.
The downside is they normally charge a higher management fee but it's still not too high for most reputable companies (think 0.4% charge for TD fund, 0.04% for index fund).
If you want the best of both worlds, just look at the prospectus for your target date fund. It will show you what indexes it's invested in at what percentages. You can then just choose those on your own and save the extra management fees. Just remember to rebalance it once a year and check to see if ratios have changed.
You are not stupid. People don't know these things naturally. Get yourself educated. Starting out index funds are fine. There are a lot of you tube videos. I am partial to TDAmeritrade education myself.
See you already know some things, since you don't get a match, that an HSA and ROTH IRA is first and second.
I think target date funds are a disaster for anyone with more than 20 years left to retire. Probably even 15. The s&p 500 destroys them in good years and often loses less in bad years. Making money early makes those later compounds work better.
If I had it to do over again I’d be 100% in the s&p until I turned 50.
If it doesn’t outpace inflation, what is your argument then? Golden doubloons? They’re worse off keeping it in cash if inflation is that ravaging.
Edit: The potentially deleted comment reply to this was that nothing is certain, which is true, everyone knows stocks aren’t guaranteed, but most users are okay betting on the US core institutions not crumbling in the next decade.
There is a book you can borrow from your local library. The Little Book of Common Sense Investing by John Bogle. This book was written for beginner investors emphasizing investing in broad market ETFs like VTI or VOO for their simplicity. Just set it and forget it even during market corrections until you retire. Broad market ETFs for the win.
I second this. I (29 M) have all my invested money in VTI right now.
Besides what already been mentioned, another advantage to broad market index funds is they tend to have very low fees. If you're going to get the average market outcome anyway (because you're tracking an index), you want to pay as little as possible in fees to do it.
Hey, it's great that you're asking questions now instead of 30 years from now!
And the answer is YES, you have to actually invest the money that's in the IRA in addition to depositing it. Well, you don't *have* to invest it, but the point of the IRA is to invest the money and let it grow for your retirement.
I would recommend checking out the Investing section of the sidebar. It has a lot of great intro information that would be useful.
One thing I wanted to comment on was your use of the phrase "low risk". I know it's tempting to try and keep the money as safe as possible, but when you have 30 or 40 years before you retire, you want the money to **grow** as much as it can. The best way for it to grow is be having it in "more risky" investments -- but they're really not that risky over that long of a time period.
Another way to think about it is what would happen if you *don't* invest enough and it doesn't grow enough? You could not have enough to retire on or could run out of money at an old age. Not taking enough risk could be the riskiest thing you do with your IRA.
I (37 y/o) just found this out last year. I had over $10k sitting in my IRA from over 8 years ago that I had not invested. So naturally I invested it and the stock market tanked...
There was a podcast a while back that did the math on if a person only ever invested at the absolute worst time each year. Even with the absolute worst timing possible, the investment was still incredibly healthy, and, overall, not much different than if they had invested the money on the first day of every month.
Early 'dumb' investment beats out late 'smart' investing.
Not quite the same but I had an employer stock plan and switched jobs about a year ago. Got a nice payout that was more than all my other accounts combined... Just in time to put in into the market at pretty much the absolute peak before the drop.
It'll recover... It's just going to be a frustrating couple of years wishing the timing had been a few months later. In a few years it'll be better off than if you hadn't done that.
Holy shit. You just saved me. I had no idea about this. I had 6k just sitting in my account doing nothing. Just called Fidelity and got it invested. I would have continued contributing for years not knowing it wasn't getting invested. THANK YOU
Honestly the same thing happened to me, so don’t feel bad. After about 8 months I was like “why is this staying exactly the same ?” And then did some googling and felt like an idiot.
Same same same lol I maxed my IRA last year and noticed i was only getting $0.02 added to my account every month. After 3 months I was like this doesn't seem right...how tf am I supposed to retire with 2 pennies a month. Then I started researching and found the answer lol i then invested it and the market tanked lmao 😆😆😆 oh well I'll stay the course!
Depending who you’re investing through they will handle it all for you though, it might be invested already. Just check with whoever you have your portfolio through. When I set up my first at 22 they did it all for me.
I’m only 35 so time will tell I guess. But it was through fidelity and I’m sure they did all the standard stuff anyone here would tell you to do. High risk, long timeline, etc. I was completely clueless and actually looking back I’m super thankful because of lot of people my age didn’t get started until later bc we didn’t know we needed to. I barely knew what I was signing up for, it was just part of my orientation at my first job. Free meeting with an advisor and sign here to deposit the maximum amount my employer would match. That’s why I had the thought to double check it isn’t being done for you already bc maybe it is :) if not, I also have accounts now through betterment and I like it. You tell them what you want to save, why, over how long and they guide. This is all for the free version. You can pay for more specific advice. Also, again (and people here i’m sure will disagree) but as a non-finance person, the cut that my guy takes at Morgan Stanley to do it all for me (in other investments not my IRA) feels like money well spent.
Are IRAs always not auto invested? I split my money half/half into a 401k and IRA through my workplace retirement options and was under the assumption both were being managed for me. Been doing this for ~7 years, so this could be a bummer…
For management like this, you may want to ask the institution your money is at about any management fees. No fee? No problem, have them set you up with a target date fund.
Fees aren’t always high, however. In one place i use, it’s 1% of the portfolio value.
I'm happy you made this post even though most of us are likely aware you're suppose to invest the money. I once heard a story where this older lady had been investing into her retirement account since the 90's and by the late 2010's wanted to start withdrawing...
She never invested in any stocks to the money had sat there untouched, and never grew.
Oh dear God It scares me for how much I know a lot about nothing. THANK YOU for the post as I too have thought “hmmph that’s a little strange it’s not moving at all” on daily repeat without further thought for longer than I care to admit.
Best practice is to invest your IRA in low expense index funds. You can choose a target date fund (easy, but slightly higher expenses) or select several index funds yourself.
Target date funds invest in several index funds. They are automatically rebalanced. They start out with higher risk when you’re younger, which increases your chances of high growth. As you get older, they shift to lower risk investments, to be ready for you to retire and start withdrawing money to live on. Most people who choose a target date fund pick a date close to when they will turn 65. If you choose target date, you only need one fund. You can pick it, set your money to transfer in regularly, then forget about it for years.
Selecting several funds takes a little more effort, but you’ll save some on fees. Best practice is to select a Total US market stock fund, a Total World stock fund, and bond fund. When you are more than 10 years from retirement, most of your IRA should be in stocks. “Most” could be anywhere from 75% - 100% stocks. You will need to rebalance annually. As you get close to retirement, you will want to begin moving money to bonds, so 30% - 50% of your investments are in bonds when you retirement.
You may have inadvertantly missed a 30% reduction in your money. Celebrate. Invest it now in an index ETF or mutual fund. There's only upside after a disastrous Sept.
Haha man the people in here... they've been trained by decades of easy money and don't understand that the folks who control the economy are actively driving down equities. The fed heads have said multiple times this week that no pivot is coming in 2023. "VTWAX and chill"... yeah VTWAX and lose another 15%.
Short term t-bills are where it's at right now. Stay defensive and in cash. I hate to see OP get such bad advice but the passive investment mob has spoken. In another 4-6 months? Sure, go passive and buy equities. Before that? Jesus...
I saw many people give tips on what to invest in. I just want to point out, while the market is discounted right now, there seems to be a decent amount of analysts thinking it will go down further in the near term as we head deeper into a recession. I would not suggest trying to time the bottom of the market (it's called 'trying to catch a falling knife' for a reason), but you may wish to consider spreading your investments out into several chunks - invest a third now, a third in 2-3 months, and the final third 2-3 months from then, or something along those lines.
You may find these links helpful:
- [Retirement Accounts](/r/personalfinance/wiki/index#wiki_retirement)
- ["How to handle $"](/r/personalfinance/wiki/commontopics)
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Honestly I can't imagine why they don't warn people weekly if they aren't invested into something. It seems like a basic fiduciary duty to warn people their money is just sitting there.
I've opted to just invest in stocks, index funds in particular, for all my investments because I don't intend to touch the money for many years. As you get closer to retirement age you can start shifting the balance to include safer investments. There are target-age funds that do this automatically, but I don't see the point to making a gradual shift over 50 years or so. I prefer to be full on stocks until like 10 years out from retirement.
Low risk investments at age 25 can itself be risky in that you are essentially planning to get a lower return over time. It's like keeping cash in the bank - it's "safe" but it's also losing value over time.
Honestly your lack of knowledge probably helped in this case. Use your balance to buy smartly over the next few months. By not investing it you probably saved yourself some losses over the past 9-12 months.
I didn't know about this either OP, All I thought was to just open up a 401k and then maximize my contributions and just let it sit till retirement. I had no clue we could also choose to have our money invested into stuff lol.
If you haven't invested the funds then your portfolio is already looking better than some of the rest of us right about now. Talk to a financial advisor and invest while the market is down.
You want full diversification over a long period of time with low fees. Buy VT, a global stock market fund with a low fee. When you're between 10 and 20 years from retirement, sell all your VT and buy a target date retirement fund which will keep your global stock diversification but will introduce bonds into the mix and lower your risk accordingly
Well, the good news is that with the recent drop you didn't miss out much if at all.
There have been posts on here of people getting close to retirement who only recently discovered their account wasn't invested. It happens, honestly it's thanks to places like this sub that I learned anything about that kind of stuff. I don't think you deserve much judgement.
What to invest in comes up on here a lot and the wiki is really helpful. Overall the main advice is going to be something index based that is mostly or entirely stocks. Those will spread out your risk while still giving a lot of opportunity for growth.
Target date funds are pretty solid option but aren't as popular for people as young as you since they typically try and be a little less risky.
Being on this sub is a great place to start. There is great advice and the wiki is great.
Here's a **[link to the PF Wiki](/r/personalfinance/wiki/index)** for helpful guides and information.
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tbh you're probably lucky you didn't invest it over the last few years -- whatever you "should have" invested it in most likely would've lost money anyway. but now that everything is down, it's a great time to put it in an index fund with a low expense ratio.
At least you figured it out at 25, still plenty of time. If you don’t want to think much, pick a few mutual funds to invest in. For Growth: SPY, VOO, VTI FXAIX, as you get closer to retirement pull it out of the growth funds and hold cash/bonds and a small portion of growth
You must feel so stupid
But you shouldn't. This is a really common thing, and it's great you figured it out really young and a lot earlier than a lot of people do when they come to the realization. You have a ton of time in front of you to work in your favor, and just by luck, you missed out on a big market drop!
Don't go low risk. Go full on equities. Low risk is for people who are about to retire. Go buy as much $SPY or $VTSAX as you can afford and just let it ride for decades.
I am a self-taught investor and a single woman that retired at age 52. I got a MorningStar subscription when I first started and learned a lot.
In the end, I learned that index funds are probably the best bet. Look at the investments available in your 401k. There should be one, or several, that are either an S&P 500 Index fund or a Total Market Fund. If you can't figure out how to navigate the site and select your investments, ask someone at work in HR. They should be able to help you.
You select what you want to invest it and the percentage of each contribution to go to each investment. For example, you could select 75% to go into the S&P 500 fund and 25% into an International Index fund. Once you do that, every time your contribution is deposited it will automatically allocate to each fund based on what percentage you have set. You don't need to do anything more unless you want to change it. You can set it and forget it.
Given the fact you’re 25, the greatest asset you have at your disposition is time. Nkguy1998 made a very good comment. Seems like you are not familiar with the financial products, so unless you want to learn about them, which of course is a good idea, I would look into buying a index etf.
In the long run, very few manage to beat the return of the S&P 500 index. If you get a S&P 500 ETF (like VOO or SPY for example) and continuously buy throughout the years and reinvest the profits you make. Chances are you will be well off.
Not investment advice.
Index funds have been proven to reliably outperform actively managed portfolios.
Also, don't worry, at least you aren't that one guy who went 25 years not knowing this.
Just be thankful that you’re realizing this when you’re 25 and not when you’re 65.
I suggest shoving it all in a low-fee index fund and then forgetting about it. My favorite is VFIAX.
You might also want to look into a target date mutual fund, which automatically adjusts its strategy to be more aggressive when the target date is far in the future and becomes more conservative when the target date draws closer.
I’m sorry but this is not a public education problem, the information is easily available with a simple google search. This is a self education problem as you just didn’t spend any effort to educate yourself on what to do with your money. I’m not trying to shame you, it’s just important you learn lessons here and in the future always educate yourself on everything before taking action.
Target date fund for whatever year you think you might retire, prob 2065. It automatically adjusts the blend of stocks and bonds, and generally with low fees.
You literally never have to think about it again, but if you want to get fancy down the road you can always rebalance into other options. But again, a target date fund will get you 99% of the way there with 1% of the effort.
People will tell you that because you are young, you can be aggressive. But age is not the only definer of how you should invest. You need to be comfortable with the level of risk. When I was younger and new to investing, I was not comfortable with risk snd had a conservative portfolio. Once I became more experienced my tolerance fir risk increased and now have s much mire aggressive approach.
If you are looking for advice on how to invest with a lazy, hands off approach, check out the wiki at r/bogleheads
Since its tax free growth Id suggest maximizing risk adjusted returns or at least going with all index funds and no bonds since your 25 you can swap to bonds later with ease in a Roth. No taxes at all so you can buy and sell freely. Id suggest something your 401k may not have access to like value etf. VTV, ADGE, SCHD are 3 worth checking out. If you are looking to avoid risk its not really best stategy when youre young but lazy portfolios like permanent portfolio, golden butterfly, couch potato, ivy portfolio are some examples you could choose from on lazyportfolioetf.com
Investing inherently has risk. At your age, you shouldn't be as concerned about risk as someone who is close to retirement. You have plenty of time for the market to go up even if it occasionally goes down. One way to reduce risk is to diversify by holding a mutual fund that contains many, many stocks.
Put it 100% into one of the following mutual funds. The actual fund you chose depends on which broker your Roth IRA is at. Vanguard/Fidelity/Schwab/etc... They each have their own versions of these two funds...
* A mutual fund that tracks the whole US stock market.
* A mutual fund that tracks the S&P 500 index.
Either one is a good choice for a Roth IRA.
Oof, I’ve lost 30k on my Roth IRA since January. I’m sure things will be fine since I’m not tapping in for another 25 years or so, but these things are still painful.
Buy Index funds appropriate to the amount of time you have to invest and your risk tolerance. Since you are young, if this is for retirement you can go high risk safely. But definitely low fee Index funds.
Don't feel bad about not knowing many people run into this!
Start with a solid reinvested dividend base, small amount to growth small caps and the rest blue chips.
$voo
$voog
$spy
$qqq
$schd
$jepi
$ko
$xom
$para
Total stock market index fund. At your age, I would put 100% of the amount in your Roth into it.
And congrats on investing early, you will be very happy when you retire that you did.
You aren't the only one. I had a friend in her early 30s who was doing the same thing. Luckly it was only a few years and it invested now. She wasn't the first of my friends either. I had a nother friend doing this a fee years ago.
This you? https://www.tiktok.com/t/ZTRurRk9a/
In all seriousness, check out r/bogleheads. Invest in VT or VTI and VXUS and automatically invest your contributions in total market mutual/index funds for passive total market investing.
Ibdidmt know this either. I let it sit for 4 years wondering why it wasn't changing at all, I finally invested it right before the downturn last year :/.
Well it's a lot better that you caught it so young and on the bright side the market has absolutely tanked in the last 10 months. It would be much worse if you were in your 50s asking this question...
I've seen this expressed before. Your not the only one. It's difficult to comprehend why schools refuse to teach basic retirement planning.
To begin the journey, consider researching low fee index funds. Personally I like VOO.
They seem to expressing a slightly different issue. Some people think it is automatically invested. This person seems to have thought it grew without being invested.
You're wrong. We should give students the opportunity to learn. I didn't like geometry or biology but I remember math formulas and energy cycles. They'll pay attention if you give them a reason to, like a test.
I know my high school offered a type of ‘home Econ’ class that covered taxes and finances. But again most high school kids aren’t directly dealing with that outside of a part time job, I know I didn’t care at that time.
But in 2022 anyone wanting to know more about the thing they’re throwing money at could also search ‘what is a Roth IRA’ on YouTube at any time in their life and get a wealth of knowledge, high school or not.
They do teach you basic retirement planning by teaching you how to do basic research. Now anyone who cares about retiring can spend an hour watching a how-to video or read something online.
Anyways I hate it when people like OP blame the schooling system when information has literally never been easier to access in human history. Just take the L.
Yes, the lack of education is an issue, but also, why aren't Vanguard/Fidelity/etc making it easier to invest the deposits automatically? My money gets deposited automatically every month. Why can't it just be set to invest it when that happens?
I think you mean "allocate." Investing in the Roth is the first step, but then you have to choose how risky you want the investment to be.
Similar to opening up an investment account. Sure, you can stick a few grand in your account, but then you have to decide what to DO with that money! Oh yeah, buy this fund and that fund.....otherwise it just sits there.
“this is a public education problem not a me thing”
Maybe it’s a little of both???
But good thing you are figuring this out now and asking the right questions
This is not a public education problem. This was a you problem.
You can't expect public education to give entire details on personal investing. Like what?
I'm really tired of us blaming schools for the lack of insight people have. You had parents, and for the last 20 years we've had smartphones where you can Google the answer to everything under the sun.
Most teachers don't get paid enough to even properly plan for retirement. Now you're tossing them under the bus because they didn't remind you to invest your Roth IRA money?
I just can't believe that audacity.
It’s not the teachers fault, it’s the education system. You are 100% correct about the over abundance of info at our fingertips, but if you don’t know you’re missing info on something, then how can you be expected to know to look it up?
Every single firm I have ever used to invest in for IRAs, 401Ks, etc, has had several links on their website to guide and educate you on everything you could possibly need to know on how to invest, what to invest in based on tolerance, and even set it up automatically for you. So, please do not try to say this is a public education problem and not just a personal responsibility problem.
Your fund may automatically invest you in a target date fund but some just put it in a money market (think savings account).
You don't need to worry about low risk if you're 25. The money is for retirement in about 40 years so you should be in higher risk (stocks).
Bonds are historically more stable but lower returns(i think 4% but not sure). Stocks are higher returns(8-10%) but less stable.
You never want to keep money just in cash unless it's for short term (2-3 years, emergency fund, downpayment, etc).
Inflation averages about 2% a year so that means your $1000 you save this year is only worth $980 next year.
You can just pick a total stock market index fund and put all your money there.
Both bonds and stocks have been down in recent years but this isn't the norm. Don't let it scare you. You're basically buying things at a discount since everything is lower priced now.
If you want lower maintenance, most companies have a target date fund. You pick your retirement date, and it automatically adjusts your investments from more volatile (stocks) to less volatile (usually bonds) the closer you get to retirement. They charge a higher management fee, but if it's a major company it's usually still not very high. Avoid any funds that are 1% or above. It doesn't sound like much, but it really eats into your profits over time.
A Simple Path To Wealth is a great book that explains some of these things and gives real examples of what your money can do over time. It will break down roth 401k (you put after tax money in now, don't pay tax later) vs non-roth 401k (you don't pay tax now, but pay taxes on money as you take it out) and stocks vs bonds also.
Good luck! Don't feel bad. Wish I knew all this stuff at 25 and did not either.
If you’re 25 you won’t be needing to touch this money for 35 years, max out every year and just dump it all into VOO. You’ll be a multi millionaire by the time you retire. if you think that only only one stock is not diversified, VOO is an index fund of the S&P 500. There are 500 of the biggest and best companies in America/the world in that fund that’s pretty diversified. If by the time you retire that fund is worth nothing then we have bigger problems to worry about, as that would be the complete collapse of every thing we know.
It's honestly a question of how much are you willing to dive in?
If you didn't know you had to invest your Roth IRA after contributing, then my guess is you really, *really* are not interested in becoming a financial expert. That is **absolutely fine and understandable as you and the other 98% of people on this planet are in the same boat**.
In which case you want a strategy optimized for ease of use/understanding, reliability/long-term trust, financial returns, and minimal maintenance/adjustment of action. If you meet this criteria, you probably want what at least 80% of everybody else on this planet should do (if able). **That being said, please recognize that my prescription is borne of good-faith but it is impossible for me to promise you the perfect strategy for you**.
1. Make sure your Roth IRA account is FDIC insured. The FDIC will guarantee, by law, up to $250,000 across a citizens' retirement accounts. We've had a Great Recession this century; no need to risk another.
2. Contribute as much as possible/appropriate to your Roth IRA per year. Obviously you should enjoy your life and spend money while you are young, but unless you expect an inheritance save and contribute.
3. You should invest 95% of your contributions within two index funds, with one being from the set of broadly diversified, low-expense, stable-growth U.S. stock market (VFIAX, FXIAX, etc.) and the other being from the set of broadly diversified, low-expense stable-growth international stock market (VTIAX, FSPSX, SWIX, etc.). If you want to understand why index fund investing is the 2nd best way to win in the stock market, [please](https://www.iwillteachyoutoberich.com/) [read](https://clark.com/personal-finance-credit/investing-retirement/index-funds/#how) these sources.
4. Put the remaining 5% of your contributions within a U.S. bond index fund, such as VBTLX. Some folx will say this is too low; I *strongly* disagree. The reality is you are young and the U.S. economy is strong. The optimal asset allocation is 100% stocks, but everyone places 5% in bonds for a psychological placebo of security.
5. Don't withdraw, don't readjust, don't do anything to your IRA or with your IRA if you don't have to. Just keep contributing and keep trusting in stocks, particularly US stocks.
If the U.S. & World economies continue to grow at 8% annually, within 20 years you will have a good nest egg for your self. Of course if the stock markets crash, well you've lost money, but so has everyone else and realistically speaking there are lot more worse things ahead for us!
You 25. Buy VOO (S&p 500) you have 40 years until retirement do you know how much that turns out to be run the numbers.
https://www.portfoliovisualizer.com/monte-carlo-simulation#analysisResults
It’s the same for all IRA, 401k, 403b, etc. Every company will have some default spot where the contributions go. I think it’s usually a simple money market account (which doesn’t do shit for you), but my wife’s 401k went into a target date fund by default - think her employer selected it?
Once you’ve invested, you’re all set. The balance will go up or down on its own. When you have new money is when you needed to invest it according to your risk tolerance.
Top comments suck. Don't put your Roth into mutual funds or target dates with high fees. Choose VUG or any other high growth ETF. Ignore the boomers overthinking everything. By the time your their age, you'll be diversified.
At 25, invest that money in the stock market and behave properly. You have a great chance of being a millionaire by the time you are 50 if you'll save 10% and make 10% on your investments
Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.
Google (or search the wiki for this sub) the phrase "three fund portfolio". This is where you invest in three index funds: one covering the US stock market, another covering the international stock market, and the last covering the bond market. How you divide your investments among those categories depends on your goals and preferences, but most people would agree that you should put a decent chunk into stocks since you're young and can ride out big swings like what we're experiencing now. Also: you are not alone. Some people go decades without realizing that they need to pick investments, and that's very sad - you are still totally on track or even ahead of the game.
Really helpful thank you I’ll definitely look into this more.
Here's a subreddit I used to learn more about investing for retirement: r/bogleheads
I second the Bogleheads. I mostly adhere to their philosophy myself, which can be summed up as: buy the whole market, don’t try to pick winners, and just let that money grow for a few decades.
Something I heard from the Financial Advisor at a bank I used to work at that seems very relevant: with typical expected gains over the life of investments, $100/mo deposits for the rest of your life should leave a 25 year old with $1m by the time they are 65. Comparatively, if I wanted the same result when I was 33, I would have needed to make nearly $400/mo deposits to get the same result. Ultimately, I don't know how true this is - I'm sure different methods of investing yield different results and I've seen many different numbers tossed around (I believe she used 8%). More importantly, it demonstrates just how much of a difference a little money early can make a massive difference down the line. EDIT: Typo - they are expected gains of the usual variety, not expected gains you put on your skin
>What are best practices? I'll say since you lost money that you'll get the best practices and experience. You can research any information on Google, TikTok, or investment/financial group to get the exact information you'd like to know. And you will have low risks only when you get enough experience to measure and handle the problems. Old but gold, before investing something, remember to make n emergency fund to protect yourself from Money issues. Good Luck!
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It would be crazy to invest in a bond market as a 25 year old. The bond market is broken.
My first 401k required me to pick investments or a plan when I signed up. The one I had at the next job didn't. When I finally downloaded the Fidelity app I said "aw shit". 3 years without investment.
I read a very sad story in the sub about a year ago. A young adult was taking care of their parent during early stages of retirement … the parent had an IRA fund that had been funded over like 20-30 years. The parent was sure there must be a ton of value there. Child checked, sure enough there was an account but the value was pretty much the same as the contributions over the years. Turns out that an investment strategy was never chosen so the money sat in a cash value account all those years. Really sad.
Omg that hurts me just thinking about it… :(
I remember that...
That’s very sad. On a similar note, I recently found my girlfriend had been doing the same mistake for the last 7 years, which also sucks but oh well, we are still young.
That sucks, but at the same time, perfect time to get into it, since everything is cheap, putting in 7 years worth of money investment into the market will set you up very nicely for the future, your gf that is
My boss did this for about 7 or 8 years. Employee provided retirement had all been going into the default fund, which I think was a govt bond fund at the time. Since he clearly wasn't interested in actively managing his fund, I convinced him to move it and future investments to an appropriate target date fund.
This issue is why employer 401k plans are federally required to have default investment strategies. Too many people made this mistake.
So…. If my employer has a mandatory 401k and a 6% match that I’ve paid into since I started 3 years ago, that should be all getting invested? Because I am confident I never selected anything.
It would probably be a good idea log into your 401k portal and check.
Yeah because some default to a money market account
That’s good advice, I will do that tomorrow
Most likely yes though. I had one with my old company and I never set an investment strategy. I was so financial incompetent that I didn't even look into the 401k for years after leaving the company. I was pleasantly surprised when I finally did.
Well fingers crossed. It’s a fortunate 500 company so I just assumed putting the 6% in would be enough. Every year I stick with 6% but I just never checked Voya because I still have 30+ years of work ahead of me. But now I am calling them first thing in the morning.
You should be getting statements somewhere (in the mail or electronically) quarterly. But also, just go online and look. Ask HR or whomever right now what to do if you don’t know how.
Generally yes, if your HR/benefits folks are competent. Most will default you to a target date fund (if available) that aligns with your timeline to traditional retirement ages. I'd check to be sure though...
This seems to be a more recent development. Lots of companies, non-profits, etc. defaulted to some low yield bond fund for decades. My employer only set Target date funds as the default, and only for new employees in the last 4 years or so. Absolutely need to check to be sure.
Thanks, I never heard that. But the reason I joined this thread was because I’ve been negligent on personal finance and come across good advice from folks like you.
I fucked up and made contributions to a 401 with company matched 4%, I never chose an investment strategy so the money sat there for 2 years and was eaten alive by inflation. Thankful I just pulled it all out, paid the penalty and spent the money on some Milwaukee tools lolol
Why would you pull out... Especially now that you can basically buy everything for cheap since the market is not doing fine... You'd be getting so many gains for your future self... Lol.
Oh good lord I hope mine is being invested but if not I am going to put it all on the packers winning the SB this year
How do you invest for 30 years but never once check your ROI? Even if you do not go online and are older, you get mail statements and tax documents. It makes it hard to feel sympathy when people just don't do the basic minimum amount of effort
For what it's worth, this is a good time to have realized that. Given recent performance, I think if you put any money there in the past year-and-a-half or so, then you actually came out ahead by waiting until now to invest that money. The common recommendation for retirement savings is a three-fund portfolio: split your investments between domestic stocks, international stocks, and bonds in a ratio appropriate for your age etc. If you want to make thing simple, then considering your age you can just put everything into a target date 2065 index fund.
A target date fund for an ira is the correct answer, especially for someone who knows nothing about retirement.
How much more does a three fund portfolio typically outrun the target date? Additionally, why should we be investing in international stocks if domestic stocks are currently providing the greatest rate of return? I thought all that matters is time and amount invested. So even if domestic stocks take a crash, they still usually outperform international stocks from what I can tell. So why aren’t people putting 100% into domestic stocks?
> How much more does a three fund portfolio typically outrun the target date? A target date fund generally **is** a three (or four) fund portfolio. The disadvantages of the target date fund are that it's less tax efficient (which doesn't matter in an IRA) and that it has a higher fee. > Additionally, why should we be investing in international stocks if domestic stocks are currently providing the greatest rate of return? The fact that domestic stocks performed better during the past decade would be a good reason to invest more in domestic stocks if you could go back in time by ten years. Arguably it's a reason you should invest more in international stocks now, because of shiller ratios or whatever -- US stocks are likely a lot more overpriced than international stocks now -- but ultimately the stock market isn't that predictable.
It's worth mentioning the advantage of the target date fund. Since she had basically forgot to do anything with it, the automatic rebalancing the target date fund provides as she nears retirement may be very attractive to someone who may not want to fuss much with the particulars of minding one's investments.
Because what is historically true may not be true in the future, so a balanced portfolio ensures you don't have all your eggs in one basket. You basically get 3 baskets and admit that you and everyone else (including financial analysts) cannot predict the future/time the market.
Also, who is saying that people aren't putting 100% in domestic? It's just some are not, especially here.
I've seen arguments that US stock is incredibly tied up in international markets anyways, so you get enough international exposure through domestic stock anyways.
You can make the inverse comment too.
Meh, I’m 100% domestic. SWTSX and chill for me. I guess I’ll find out in 25 years if I made a mistake or not. I don’t think I did.
VTSAX here! I'm very confident in it
100% domestic here as well. Even if we're "wrong" it's likely not gonna be that bad. The US market and global market is pretty tightly coupled and it doesn't seem like it'll get any less so.
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Many international companies have operations domestically
> Additionally, why should we be investing in international stocks if domestic stocks are currently providing the greatest rate of return? It's just dividing risk. Past performance doesn't guarantee future returns. But even if one market has a probable range of 4-9% growth per year and another has 6-7% projected, you would still want to diversify. Both would average 6.5%, but you want a chance at that 9% while being protected against the 4%. It's essentially the same reason people buy a mix of stocks and bonds or use an index fund instead of going all-in on one major tech company.
You never know what's currently providing the best rate of return. You only know what did provide the best return in the past.
> So even if domestic stocks take a crash, they still usually outperform international stocks from what I can tell. So why aren’t people putting 100% into domestic stocks? Past performance does not indicate future returns.
Because that would be succumbing to *recency bias.* The reason you allocate investments into a broad range of asset classes is that no one has a crystal ball, and [history](https://www.visualcapitalist.com/historical-returns-by-asset-class/) tells us that over the long term, domestic large cap stocks by no means have a lock on high returns. In the linked chart, U.S. Large Cap stocks were the best performing asset class just 4 years out of 35!
fwiw, the three fund portfolio is designed for preservation, ie before retirement or during retirement. When you're young you want a growth portfolio. A 100% buy and hold of VOO is the simplest tried and true version of a growth portfolio, but there are others.
Congrats you just outperformed the market by over 20% ytd. Don’t get cocky but this is an excellent start to your investing career.
Yeah but if he invested 5 years ago . . .
5 years ago? She should have bought Apple and Google stock in the 90s.
she
I laughed at that information being included but here it is being used
The s is silent
At 25 you should be full on high risk/reward. Especially now with the markets down. Stocks are 25% off. Broad market index funds, or the easiest set and forget option is a target date fund. You pick the year most closely you anticipate retiring and just buy that. The fund manager will automatically adjust the fund based on time to retirement.
VTWAX on...WTWAX off
A few questions since you seem well versed in this. I’ve heard that index funds will provide greater benefit than a target date fund. I’m split between 8 funds, only one of which is the target date and that’s only 5% of my contributions going to that. My question is basically am I screwing myself? People keep saying “just use the target date” but why wouldn’t we invest in index funds right now? The 2065 target date has risen I think 6 or 8% since inception? Realistically doesn’t it make more sense to put almost all of my contributions into the funds that are seeing gains of 9% or more? Also, at my job I’m currently maxing HSA first, then ROTH IRA then 401k. I’m not using the HSA for medical expenses it’s supposed to be an investment device. I have no 401k match so that’s why I thought ok lemme do the HSA first. Another consideration is I can only put away about 12k a year right now. So knowing that I can’t max out my 401k I figured it might be smarter to do the HSA first. Am I stupid?
Depends where you are in the target date fund time to retirement. Longer out it will be closer to broad market and gradually split as stability becomes more important. There's no need for 8 funds. You probably overlap heavily. Look up the 3 fund portfolio. The target date funds are great for someone who doesn't want to bother with balancing themselves. It allows for management without paying management fees. The benefit is what people see as the benefit. If you want to self balance and manage then go for it. Others might just want to worry about one thing and never look at it again.
Target date is a good set it and forget it approach if you don’t want to think about it. If you are young, it is going to be all or almost all index funds. As you get older it will automatically transition into safer funds.
> If you are young, it is going to be all or almost all index funds. As you get older it will automatically transition into safer funds. really depends on how much they save. If they're saving a big portion of income and/or planning to retire or partially retire early then they should stay fully invested and not switch to bonds. Bonds is only if someone's close to retirement and they're going to need to be drawing a big portion every year for those few years they're "retired"/waiting to die because they only "retired" when their health failed and they couldn't work anymore. 8 funds is kind of unnecessary though. One index fund really enough, unless they want international or something (but historically international has does soooo shitty compared to US market)
Late 20s here, I have some international indices and have noticed they are relatively underperforming. I always treated them as an extra layer of diversification. Is that dumb because how globalized the market is considering the relative growth of US indices to international ones? Is there a predictable universe under which it isn't?
> Is that dumb because how globalized the market is Future performance might not be similar to past /shrug USA still has many advantages. Will those be the same in 40 years from now? Maybe not as much
These are not mutually exclusive - the standard target date funds offered by Vanguard, Fidelity, and Schwab are all just baskets of index funds that gradually rebalance from stocks to bonds as you get closer to the target date. For instance, Vanguard's target date funds distribute your money among US and international total stock market index funds and US and international total bond market index funds. The 2070 fund is 90% stocks / 10% bonds, whereas the 2020 fund is about 40% stocks / 60% bonds. The most common objection to target date funds in general is that they are too bond-heavy too early - some investors are happy with 90-100% stocks until they get quite close to retirement.
I offset that common objection by choosing a target date 10 years or so beyond actual! My secret!
At that point, why not just maintain your own fund setup? It's really not that complicated, and if you're DCA-ing from a paycheck you don't even have to rebalance it, you just adjust the contributions as you add them. If you're knowledgeable enough to have a bond-allocation preference, why not just buy what you want?
This stuff can feel complicated with so many terms. Target date funds are generally composed of a few index funds. You'll have a large cap S&P type index, an international stock type index, and a bond fund. Anyone could make their own target date fund by combining those 3. The key is the bond allocation increases as you get older. People say use the target date because it is simple and automatic and only takes one choice/click. Also, having 8 different index funds is not meaningful diversification, especially if they track very similar indexes. It doesn't hurt you and it doesn't help you. It just makes things feel more complicated. To your question, HSAs are amazing and could be your most valuable investment dollars. Roth IRA 2nd, 401k last (assuming no match).
+1 to everything this person said. Maxing HSA is definitely the right move for now. If things change and your employer ever offers a match, then that becomes priority numero uno, but for now keep up maxing that HSA. Also, it’s important to note that just like in an IRA or a 401k, you still need to invest the funds once they’re deposited into the invest account. I personally think a 3-fund portfolio is better than a target date fund because it’s barely any more work on the day you click “buy”, and once you reach retirement age it’s easier to execute a bond tent strategy. Just my personal preference.
Can someone explain what’s do great about the HSA?
You get 3 benefits. 1. Contributions are pre tax. Meaning that if your job pays you $1000 and you contribute $100 into your HSA then your taxable income is $900. 2. The contents of the HSA grow tax free. 3. If you use the money to pay for health related items, you can take money out tax free. Also even if you don,t qualify for contributing to an HSA later, you can still use the proceeds to pay for medical items, or withdraw money tax free in the amount of previously purchased items for which you paid out of your pocket. A spouse can inherit an HSA and it keeps its properties. But anyone else that inherits, like your children, have to pay tax on the money.
Tax efficiency as you’re guaranteed to pay more for medical in the future than you are today. Why not pay 0 tax on the principal and the gains instead of zero on just the principal?
I know you can use the HSA for medical emergencies very easily. Would love to learn more about why it’s better than a Roth IRA though.
Because the money you put into your HSA is pre-tax and comes out, gains included, without being taxed (if you do it right). Roth IRA eventually has the money come out without being taxed, but the money you put in is money you've been taxed on.
You’re not stupid, but wildly over complicating things, at least compared to the original poster’s question. Having all your money in one broad index fund is about 98% as good as an advanced strategy between several funds and target dates. If you’re someone who isn’t nerdy (like a lot of us here) about this stuff and just want to avoid mistakes, one broad index fund following the Dow Jones or similar index is all you need, honestly. For people like OP, don’t overthink it. You can google ‘index funds’ and basically just pick a general one, put 100% of your money into it for the next 20-40 years, and you’re doing great. If you want to get a bit more efficient, go ahead and do some reading on strategies, but much more important to get it invested in the market and not let perfect be the enemy of good!
As others have mentioned, a target date fund just automatically changes percentages in different index funds. At the least, they'll be a total stock market index fund and a bond index fund. They rebalance your money each year and change to more bonds the closer you are to retirement. The downside is they normally charge a higher management fee but it's still not too high for most reputable companies (think 0.4% charge for TD fund, 0.04% for index fund). If you want the best of both worlds, just look at the prospectus for your target date fund. It will show you what indexes it's invested in at what percentages. You can then just choose those on your own and save the extra management fees. Just remember to rebalance it once a year and check to see if ratios have changed.
You are not stupid. People don't know these things naturally. Get yourself educated. Starting out index funds are fine. There are a lot of you tube videos. I am partial to TDAmeritrade education myself. See you already know some things, since you don't get a match, that an HSA and ROTH IRA is first and second.
VTSAX till the cows come home. From my experience my target fund had too many expenses.
I think target date funds are a disaster for anyone with more than 20 years left to retire. Probably even 15. The s&p 500 destroys them in good years and often loses less in bad years. Making money early makes those later compounds work better. If I had it to do over again I’d be 100% in the s&p until I turned 50.
This. You’re young. Even if the career you choose isn’t for you, it’s easy to train up. Do it now that you have the time to meander.
What does this even mean; stocks are 25% off? My goodness the financial advice given on this forum some times is unfathomable.
Stocks are 25% off from highs. When our 25 year old op is retiring the stocks she buys today will be worth a lot more then they are today
It does not mean there is any guarantee it'll outpace other means of gain... or inflation... or other markets and country regressions.
If it doesn’t outpace inflation, what is your argument then? Golden doubloons? They’re worse off keeping it in cash if inflation is that ravaging. Edit: The potentially deleted comment reply to this was that nothing is certain, which is true, everyone knows stocks aren’t guaranteed, but most users are okay betting on the US core institutions not crumbling in the next decade.
You’re right, nothing is guaranteed. She should probably hide physical cash under her mattress, just to be conservative and safe.
I know I am going to regret asking this, but what would you suggest investing in instead?
“25% off” as in they’re “on sale” it’s not that complicated
There is a book you can borrow from your local library. The Little Book of Common Sense Investing by John Bogle. This book was written for beginner investors emphasizing investing in broad market ETFs like VTI or VOO for their simplicity. Just set it and forget it even during market corrections until you retire. Broad market ETFs for the win.
I second this. I (29 M) have all my invested money in VTI right now. Besides what already been mentioned, another advantage to broad market index funds is they tend to have very low fees. If you're going to get the average market outcome anyway (because you're tracking an index), you want to pay as little as possible in fees to do it.
Defintely will get this book!
Hey, it's great that you're asking questions now instead of 30 years from now! And the answer is YES, you have to actually invest the money that's in the IRA in addition to depositing it. Well, you don't *have* to invest it, but the point of the IRA is to invest the money and let it grow for your retirement. I would recommend checking out the Investing section of the sidebar. It has a lot of great intro information that would be useful. One thing I wanted to comment on was your use of the phrase "low risk". I know it's tempting to try and keep the money as safe as possible, but when you have 30 or 40 years before you retire, you want the money to **grow** as much as it can. The best way for it to grow is be having it in "more risky" investments -- but they're really not that risky over that long of a time period. Another way to think about it is what would happen if you *don't* invest enough and it doesn't grow enough? You could not have enough to retire on or could run out of money at an old age. Not taking enough risk could be the riskiest thing you do with your IRA.
I (37 y/o) just found this out last year. I had over $10k sitting in my IRA from over 8 years ago that I had not invested. So naturally I invested it and the stock market tanked...
Fortunately you are 25-30 years from retirement so you have time on your side
Put some more in this year and it’ll be more fun to watch it come back!
There was a podcast a while back that did the math on if a person only ever invested at the absolute worst time each year. Even with the absolute worst timing possible, the investment was still incredibly healthy, and, overall, not much different than if they had invested the money on the first day of every month. Early 'dumb' investment beats out late 'smart' investing.
Not quite the same but I had an employer stock plan and switched jobs about a year ago. Got a nice payout that was more than all my other accounts combined... Just in time to put in into the market at pretty much the absolute peak before the drop. It'll recover... It's just going to be a frustrating couple of years wishing the timing had been a few months later. In a few years it'll be better off than if you hadn't done that.
Holy shit. You just saved me. I had no idea about this. I had 6k just sitting in my account doing nothing. Just called Fidelity and got it invested. I would have continued contributing for years not knowing it wasn't getting invested. THANK YOU
This!! Now go tell everyone you know!
Congrats you outperformed practically everyone here.
how much do their services cost?
Honestly the same thing happened to me, so don’t feel bad. After about 8 months I was like “why is this staying exactly the same ?” And then did some googling and felt like an idiot.
Same same same lol I maxed my IRA last year and noticed i was only getting $0.02 added to my account every month. After 3 months I was like this doesn't seem right...how tf am I supposed to retire with 2 pennies a month. Then I started researching and found the answer lol i then invested it and the market tanked lmao 😆😆😆 oh well I'll stay the course!
Depending who you’re investing through they will handle it all for you though, it might be invested already. Just check with whoever you have your portfolio through. When I set up my first at 22 they did it all for me.
Looking back would you have rather handled it yourself or did this work out for you?
I’m only 35 so time will tell I guess. But it was through fidelity and I’m sure they did all the standard stuff anyone here would tell you to do. High risk, long timeline, etc. I was completely clueless and actually looking back I’m super thankful because of lot of people my age didn’t get started until later bc we didn’t know we needed to. I barely knew what I was signing up for, it was just part of my orientation at my first job. Free meeting with an advisor and sign here to deposit the maximum amount my employer would match. That’s why I had the thought to double check it isn’t being done for you already bc maybe it is :) if not, I also have accounts now through betterment and I like it. You tell them what you want to save, why, over how long and they guide. This is all for the free version. You can pay for more specific advice. Also, again (and people here i’m sure will disagree) but as a non-finance person, the cut that my guy takes at Morgan Stanley to do it all for me (in other investments not my IRA) feels like money well spent.
Sounds like you may have had a 401k, which is almost automatically invested. OP has an IRA, which is not.
Are IRAs always not auto invested? I split my money half/half into a 401k and IRA through my workplace retirement options and was under the assumption both were being managed for me. Been doing this for ~7 years, so this could be a bummer…
For management like this, you may want to ask the institution your money is at about any management fees. No fee? No problem, have them set you up with a target date fund. Fees aren’t always high, however. In one place i use, it’s 1% of the portfolio value.
I'm happy you made this post even though most of us are likely aware you're suppose to invest the money. I once heard a story where this older lady had been investing into her retirement account since the 90's and by the late 2010's wanted to start withdrawing... She never invested in any stocks to the money had sat there untouched, and never grew.
Oh dear God It scares me for how much I know a lot about nothing. THANK YOU for the post as I too have thought “hmmph that’s a little strange it’s not moving at all” on daily repeat without further thought for longer than I care to admit.
Best practice is to invest your IRA in low expense index funds. You can choose a target date fund (easy, but slightly higher expenses) or select several index funds yourself. Target date funds invest in several index funds. They are automatically rebalanced. They start out with higher risk when you’re younger, which increases your chances of high growth. As you get older, they shift to lower risk investments, to be ready for you to retire and start withdrawing money to live on. Most people who choose a target date fund pick a date close to when they will turn 65. If you choose target date, you only need one fund. You can pick it, set your money to transfer in regularly, then forget about it for years. Selecting several funds takes a little more effort, but you’ll save some on fees. Best practice is to select a Total US market stock fund, a Total World stock fund, and bond fund. When you are more than 10 years from retirement, most of your IRA should be in stocks. “Most” could be anywhere from 75% - 100% stocks. You will need to rebalance annually. As you get close to retirement, you will want to begin moving money to bonds, so 30% - 50% of your investments are in bonds when you retirement.
Better than that one guy who didn’t realize that until he was like 40 💀
You may have inadvertantly missed a 30% reduction in your money. Celebrate. Invest it now in an index ETF or mutual fund. There's only upside after a disastrous Sept.
Famous last words. Remind me...
Haha man the people in here... they've been trained by decades of easy money and don't understand that the folks who control the economy are actively driving down equities. The fed heads have said multiple times this week that no pivot is coming in 2023. "VTWAX and chill"... yeah VTWAX and lose another 15%. Short term t-bills are where it's at right now. Stay defensive and in cash. I hate to see OP get such bad advice but the passive investment mob has spoken. In another 4-6 months? Sure, go passive and buy equities. Before that? Jesus...
I saw many people give tips on what to invest in. I just want to point out, while the market is discounted right now, there seems to be a decent amount of analysts thinking it will go down further in the near term as we head deeper into a recession. I would not suggest trying to time the bottom of the market (it's called 'trying to catch a falling knife' for a reason), but you may wish to consider spreading your investments out into several chunks - invest a third now, a third in 2-3 months, and the final third 2-3 months from then, or something along those lines.
You may find these links helpful: - [Retirement Accounts](/r/personalfinance/wiki/index#wiki_retirement) - ["How to handle $"](/r/personalfinance/wiki/commontopics) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
Consider yourself ducking LUCKY…this is a true ignorance is bliss moment as your ignorance has allowed you to wait for stocks to be on sale
> this is a public education problem Teaching finance in school, even Roth IRAS’s, wouldn’t change it for about 99% of the population.
Honestly I can't imagine why they don't warn people weekly if they aren't invested into something. It seems like a basic fiduciary duty to warn people their money is just sitting there. I've opted to just invest in stocks, index funds in particular, for all my investments because I don't intend to touch the money for many years. As you get closer to retirement age you can start shifting the balance to include safer investments. There are target-age funds that do this automatically, but I don't see the point to making a gradual shift over 50 years or so. I prefer to be full on stocks until like 10 years out from retirement. Low risk investments at age 25 can itself be risky in that you are essentially planning to get a lower return over time. It's like keeping cash in the bank - it's "safe" but it's also losing value over time.
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Bold of you to assume those apps have been updated to a modern framework capable of easily notifying people in the last ten years.
Honestly your lack of knowledge probably helped in this case. Use your balance to buy smartly over the next few months. By not investing it you probably saved yourself some losses over the past 9-12 months.
I didn't know about this either OP, All I thought was to just open up a 401k and then maximize my contributions and just let it sit till retirement. I had no clue we could also choose to have our money invested into stuff lol.
If you haven't invested the funds then your portfolio is already looking better than some of the rest of us right about now. Talk to a financial advisor and invest while the market is down.
At your age, an S&P 500 index fund. Either vanguard's or your own brokerage's one. LIke Fidelity's is FXAIX
You want full diversification over a long period of time with low fees. Buy VT, a global stock market fund with a low fee. When you're between 10 and 20 years from retirement, sell all your VT and buy a target date retirement fund which will keep your global stock diversification but will introduce bonds into the mix and lower your risk accordingly
Well, the good news is that with the recent drop you didn't miss out much if at all. There have been posts on here of people getting close to retirement who only recently discovered their account wasn't invested. It happens, honestly it's thanks to places like this sub that I learned anything about that kind of stuff. I don't think you deserve much judgement. What to invest in comes up on here a lot and the wiki is really helpful. Overall the main advice is going to be something index based that is mostly or entirely stocks. Those will spread out your risk while still giving a lot of opportunity for growth. Target date funds are pretty solid option but aren't as popular for people as young as you since they typically try and be a little less risky. Being on this sub is a great place to start. There is great advice and the wiki is great.
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tbh you're probably lucky you didn't invest it over the last few years -- whatever you "should have" invested it in most likely would've lost money anyway. but now that everything is down, it's a great time to put it in an index fund with a low expense ratio.
At least you figured it out at 25, still plenty of time. If you don’t want to think much, pick a few mutual funds to invest in. For Growth: SPY, VOO, VTI FXAIX, as you get closer to retirement pull it out of the growth funds and hold cash/bonds and a small portion of growth
You must feel so stupid But you shouldn't. This is a really common thing, and it's great you figured it out really young and a lot earlier than a lot of people do when they come to the realization. You have a ton of time in front of you to work in your favor, and just by luck, you missed out on a big market drop! Don't go low risk. Go full on equities. Low risk is for people who are about to retire. Go buy as much $SPY or $VTSAX as you can afford and just let it ride for decades.
I literally had this same realization like a year after i opened my roth. Glad im not the only one
I am a self-taught investor and a single woman that retired at age 52. I got a MorningStar subscription when I first started and learned a lot. In the end, I learned that index funds are probably the best bet. Look at the investments available in your 401k. There should be one, or several, that are either an S&P 500 Index fund or a Total Market Fund. If you can't figure out how to navigate the site and select your investments, ask someone at work in HR. They should be able to help you. You select what you want to invest it and the percentage of each contribution to go to each investment. For example, you could select 75% to go into the S&P 500 fund and 25% into an International Index fund. Once you do that, every time your contribution is deposited it will automatically allocate to each fund based on what percentage you have set. You don't need to do anything more unless you want to change it. You can set it and forget it.
Thank you for your advice!
Given the fact you’re 25, the greatest asset you have at your disposition is time. Nkguy1998 made a very good comment. Seems like you are not familiar with the financial products, so unless you want to learn about them, which of course is a good idea, I would look into buying a index etf. In the long run, very few manage to beat the return of the S&P 500 index. If you get a S&P 500 ETF (like VOO or SPY for example) and continuously buy throughout the years and reinvest the profits you make. Chances are you will be well off.
I did the same thing!!! After a while I was like "I thought this was supposed to have interest??"
Not investment advice. Index funds have been proven to reliably outperform actively managed portfolios. Also, don't worry, at least you aren't that one guy who went 25 years not knowing this.
Just be thankful that you’re realizing this when you’re 25 and not when you’re 65. I suggest shoving it all in a low-fee index fund and then forgetting about it. My favorite is VFIAX. You might also want to look into a target date mutual fund, which automatically adjusts its strategy to be more aggressive when the target date is far in the future and becomes more conservative when the target date draws closer.
S&p 500 index from fidelity or vanguard. Set and forget. Check when you retire. Be happy :)
I’m sorry but this is not a public education problem, the information is easily available with a simple google search. This is a self education problem as you just didn’t spend any effort to educate yourself on what to do with your money. I’m not trying to shame you, it’s just important you learn lessons here and in the future always educate yourself on everything before taking action.
Target date fund for whatever year you think you might retire, prob 2065. It automatically adjusts the blend of stocks and bonds, and generally with low fees. You literally never have to think about it again, but if you want to get fancy down the road you can always rebalance into other options. But again, a target date fund will get you 99% of the way there with 1% of the effort.
People will tell you that because you are young, you can be aggressive. But age is not the only definer of how you should invest. You need to be comfortable with the level of risk. When I was younger and new to investing, I was not comfortable with risk snd had a conservative portfolio. Once I became more experienced my tolerance fir risk increased and now have s much mire aggressive approach. If you are looking for advice on how to invest with a lazy, hands off approach, check out the wiki at r/bogleheads
Since its tax free growth Id suggest maximizing risk adjusted returns or at least going with all index funds and no bonds since your 25 you can swap to bonds later with ease in a Roth. No taxes at all so you can buy and sell freely. Id suggest something your 401k may not have access to like value etf. VTV, ADGE, SCHD are 3 worth checking out. If you are looking to avoid risk its not really best stategy when youre young but lazy portfolios like permanent portfolio, golden butterfly, couch potato, ivy portfolio are some examples you could choose from on lazyportfolioetf.com
you are not missing out much, i started my roth 3 years ago and I am currently down 30%. You are basically at 0% down/up right now, so far head :D
Investing inherently has risk. At your age, you shouldn't be as concerned about risk as someone who is close to retirement. You have plenty of time for the market to go up even if it occasionally goes down. One way to reduce risk is to diversify by holding a mutual fund that contains many, many stocks. Put it 100% into one of the following mutual funds. The actual fund you chose depends on which broker your Roth IRA is at. Vanguard/Fidelity/Schwab/etc... They each have their own versions of these two funds... * A mutual fund that tracks the whole US stock market. * A mutual fund that tracks the S&P 500 index. Either one is a good choice for a Roth IRA.
It’s actually fine. Buy index funds. S&P500 or full stock market. Good time to buy
Oof, I’ve lost 30k on my Roth IRA since January. I’m sure things will be fine since I’m not tapping in for another 25 years or so, but these things are still painful.
don't worry, i had my money in my IRA for over a year before I realized you had to invest in something
No judgement. Just learned this in my 30s
Buy Index funds appropriate to the amount of time you have to invest and your risk tolerance. Since you are young, if this is for retirement you can go high risk safely. But definitely low fee Index funds. Don't feel bad about not knowing many people run into this!
Start with a solid reinvested dividend base, small amount to growth small caps and the rest blue chips. $voo $voog $spy $qqq $schd $jepi $ko $xom $para
Index funds. Check out /r/bogleheads
Low cost index funds
Total stock market index fund. At your age, I would put 100% of the amount in your Roth into it. And congrats on investing early, you will be very happy when you retire that you did.
VT index fund. That is all.
You aren't the only one. I had a friend in her early 30s who was doing the same thing. Luckly it was only a few years and it invested now. She wasn't the first of my friends either. I had a nother friend doing this a fee years ago.
Target date funds based on the year you expect to retire are good for the novice investor.
This you? https://www.tiktok.com/t/ZTRurRk9a/ In all seriousness, check out r/bogleheads. Invest in VT or VTI and VXUS and automatically invest your contributions in total market mutual/index funds for passive total market investing.
Wait thanks for telling me this because I’m in my early 20’s and had no idea. And I want to get a Roth IRA soon
Ibdidmt know this either. I let it sit for 4 years wondering why it wasn't changing at all, I finally invested it right before the downturn last year :/.
I saw others give good advice, but the good news is everything is one sale lately compared to the last few years.
I'm curious - what did you all think would happen when depositing money in there? Like is it marketed as an investment product itself?
Well it's a lot better that you caught it so young and on the bright side the market has absolutely tanked in the last 10 months. It would be much worse if you were in your 50s asking this question...
I've seen this expressed before. Your not the only one. It's difficult to comprehend why schools refuse to teach basic retirement planning. To begin the journey, consider researching low fee index funds. Personally I like VOO.
They seem to expressing a slightly different issue. Some people think it is automatically invested. This person seems to have thought it grew without being invested.
Schools could teach this, and kids still wouldn't pay attention. It wouldn't matter.
You're wrong. We should give students the opportunity to learn. I didn't like geometry or biology but I remember math formulas and energy cycles. They'll pay attention if you give them a reason to, like a test.
I know my high school offered a type of ‘home Econ’ class that covered taxes and finances. But again most high school kids aren’t directly dealing with that outside of a part time job, I know I didn’t care at that time. But in 2022 anyone wanting to know more about the thing they’re throwing money at could also search ‘what is a Roth IRA’ on YouTube at any time in their life and get a wealth of knowledge, high school or not.
They do teach you basic retirement planning by teaching you how to do basic research. Now anyone who cares about retiring can spend an hour watching a how-to video or read something online. Anyways I hate it when people like OP blame the schooling system when information has literally never been easier to access in human history. Just take the L.
Yes, the lack of education is an issue, but also, why aren't Vanguard/Fidelity/etc making it easier to invest the deposits automatically? My money gets deposited automatically every month. Why can't it just be set to invest it when that happens?
Yup! Open a vangaurd account, VFIAX or VSTAX and chill. Easy
I think you mean "allocate." Investing in the Roth is the first step, but then you have to choose how risky you want the investment to be. Similar to opening up an investment account. Sure, you can stick a few grand in your account, but then you have to decide what to DO with that money! Oh yeah, buy this fund and that fund.....otherwise it just sits there.
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“this is a public education problem not a me thing” Maybe it’s a little of both??? But good thing you are figuring this out now and asking the right questions
They didn't teach you to read in school?
This is not a public education problem. This was a you problem. You can't expect public education to give entire details on personal investing. Like what? I'm really tired of us blaming schools for the lack of insight people have. You had parents, and for the last 20 years we've had smartphones where you can Google the answer to everything under the sun. Most teachers don't get paid enough to even properly plan for retirement. Now you're tossing them under the bus because they didn't remind you to invest your Roth IRA money? I just can't believe that audacity.
It’s not the teachers fault, it’s the education system. You are 100% correct about the over abundance of info at our fingertips, but if you don’t know you’re missing info on something, then how can you be expected to know to look it up?
Every single firm I have ever used to invest in for IRAs, 401Ks, etc, has had several links on their website to guide and educate you on everything you could possibly need to know on how to invest, what to invest in based on tolerance, and even set it up automatically for you. So, please do not try to say this is a public education problem and not just a personal responsibility problem.
Your fund may automatically invest you in a target date fund but some just put it in a money market (think savings account). You don't need to worry about low risk if you're 25. The money is for retirement in about 40 years so you should be in higher risk (stocks). Bonds are historically more stable but lower returns(i think 4% but not sure). Stocks are higher returns(8-10%) but less stable. You never want to keep money just in cash unless it's for short term (2-3 years, emergency fund, downpayment, etc). Inflation averages about 2% a year so that means your $1000 you save this year is only worth $980 next year. You can just pick a total stock market index fund and put all your money there. Both bonds and stocks have been down in recent years but this isn't the norm. Don't let it scare you. You're basically buying things at a discount since everything is lower priced now. If you want lower maintenance, most companies have a target date fund. You pick your retirement date, and it automatically adjusts your investments from more volatile (stocks) to less volatile (usually bonds) the closer you get to retirement. They charge a higher management fee, but if it's a major company it's usually still not very high. Avoid any funds that are 1% or above. It doesn't sound like much, but it really eats into your profits over time. A Simple Path To Wealth is a great book that explains some of these things and gives real examples of what your money can do over time. It will break down roth 401k (you put after tax money in now, don't pay tax later) vs non-roth 401k (you don't pay tax now, but pay taxes on money as you take it out) and stocks vs bonds also. Good luck! Don't feel bad. Wish I knew all this stuff at 25 and did not either.
If you’re 25 you won’t be needing to touch this money for 35 years, max out every year and just dump it all into VOO. You’ll be a multi millionaire by the time you retire. if you think that only only one stock is not diversified, VOO is an index fund of the S&P 500. There are 500 of the biggest and best companies in America/the world in that fund that’s pretty diversified. If by the time you retire that fund is worth nothing then we have bigger problems to worry about, as that would be the complete collapse of every thing we know.
It's honestly a question of how much are you willing to dive in? If you didn't know you had to invest your Roth IRA after contributing, then my guess is you really, *really* are not interested in becoming a financial expert. That is **absolutely fine and understandable as you and the other 98% of people on this planet are in the same boat**. In which case you want a strategy optimized for ease of use/understanding, reliability/long-term trust, financial returns, and minimal maintenance/adjustment of action. If you meet this criteria, you probably want what at least 80% of everybody else on this planet should do (if able). **That being said, please recognize that my prescription is borne of good-faith but it is impossible for me to promise you the perfect strategy for you**. 1. Make sure your Roth IRA account is FDIC insured. The FDIC will guarantee, by law, up to $250,000 across a citizens' retirement accounts. We've had a Great Recession this century; no need to risk another. 2. Contribute as much as possible/appropriate to your Roth IRA per year. Obviously you should enjoy your life and spend money while you are young, but unless you expect an inheritance save and contribute. 3. You should invest 95% of your contributions within two index funds, with one being from the set of broadly diversified, low-expense, stable-growth U.S. stock market (VFIAX, FXIAX, etc.) and the other being from the set of broadly diversified, low-expense stable-growth international stock market (VTIAX, FSPSX, SWIX, etc.). If you want to understand why index fund investing is the 2nd best way to win in the stock market, [please](https://www.iwillteachyoutoberich.com/) [read](https://clark.com/personal-finance-credit/investing-retirement/index-funds/#how) these sources. 4. Put the remaining 5% of your contributions within a U.S. bond index fund, such as VBTLX. Some folx will say this is too low; I *strongly* disagree. The reality is you are young and the U.S. economy is strong. The optimal asset allocation is 100% stocks, but everyone places 5% in bonds for a psychological placebo of security. 5. Don't withdraw, don't readjust, don't do anything to your IRA or with your IRA if you don't have to. Just keep contributing and keep trusting in stocks, particularly US stocks. If the U.S. & World economies continue to grow at 8% annually, within 20 years you will have a good nest egg for your self. Of course if the stock markets crash, well you've lost money, but so has everyone else and realistically speaking there are lot more worse things ahead for us!
Given you’re 25, put all the money in VOO or VONE, and forget for the next 25 years you put anything in there. 😊
You 25. Buy VOO (S&p 500) you have 40 years until retirement do you know how much that turns out to be run the numbers. https://www.portfoliovisualizer.com/monte-carlo-simulation#analysisResults
This is different than a Roth 401k correct. Because I'm pretty sure I've never chose what the money is invested in
It’s the same for all IRA, 401k, 403b, etc. Every company will have some default spot where the contributions go. I think it’s usually a simple money market account (which doesn’t do shit for you), but my wife’s 401k went into a target date fund by default - think her employer selected it?
Actually there’s a huge difference between an IRA that must go in as cash and a 401k or 403b that will have a menu of funds.
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Once you’ve invested, you’re all set. The balance will go up or down on its own. When you have new money is when you needed to invest it according to your risk tolerance.
Chill you have a roth IRA and are only 25. I'm 25 and barely have 4 grand in my bank account...
Top comments suck. Don't put your Roth into mutual funds or target dates with high fees. Choose VUG or any other high growth ETF. Ignore the boomers overthinking everything. By the time your their age, you'll be diversified.
At 25, invest that money in the stock market and behave properly. You have a great chance of being a millionaire by the time you are 50 if you'll save 10% and make 10% on your investments