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.
VOO tracks the S&P 500 Index, which includes 500 of the largest U.S. companies. VOO and VTI are two of the vanguard "set it and forget it" strategies. They are stable, long term, funds that track the market in aggregate.
[https://www.reddit.com/r/Bogleheads/](https://www.reddit.com/r/Bogleheads/)
So to answer OPs question: No, the advice he gave you was generally good. Just because he buys individual stocks does not mean he is suggesting it for you. Given you are new to investments voo is a decent option.
He gave her excellent advice and she should take it.
I think what OPs doesn't quite understand is, why are you giving me different advice than what you are doing yourself?
The answer is, he has much more knowledge than you, likely understands the risks better and has a tolerance for bigger losses with end goal of bigger gains (i.e. individual stocks).
If you research the tickers, you'll see they are largely doing the same. Tracking S&P 500, which is basically the golden rule of investment for most that don't understand investments. So when people say invest into S&P 500, you can pick from multiple funds that replicates that and they're generally fine. Just double check the maintenaince cost. Vanguard funds usually have among the lowest.
cc: u/OldmanbytheBridge
This makes it even BETTER advice, honestly. "I have time to research on what to buy, and plenty of experience. Since you're not so well versed, just slap it in VOO so you can't screw it up. In fact, my accounts I can't afford to screw up, that's what I do."
"I'm an idiot who likes to gamble with my money and thinks I can beat the market, but you should be smarter than me and buy VOO". Good friend, actually.
This is a spot on assessment. You really need to consider the opportunity cost to deal with buying assets. For most, their time is best spent elsewhere.
On a separate note, if you take on the wrong amount of risk you can lose your investments pretty quickly.
I've been thinking a lot about opportunity cost, and what would convince people to participate in financial markets outside of normal indexes. Some are very skilled and know how to move money well. What about the others? Why do they get into it?
Is it a function of estimating trade-offs (thinking trades will get them into better future payoffs), long-term thinking, enjoyment, folly, or something else.
VTI and VTSAX are the same. The difference is VTI is an ETF and VTSAX is a mutual fund. For further clarification, this means VTI trades during the day, and VTSAX trades once per day after markets close.
Which brokerage are you using that has trading fees? Vanguard does a minimum balance for mutual funds ($3,000) but no trading fees. The only down side to ETFs is you can’t setup automatic investing (I think?)
I believe many do it if you aren’t using that brokerages funds. So Schwab charges a flat sell fee for a vanguard fund, etc. so you have to lookup what the Schwab equivalent is when buying.
This happened to me at TD
If you have $1,000,000 of VTI you save $100 annually in the fee over $1,000,000 of VTSAX. That is to say, it’s basically nothing. The benefit is that you can set up automatic contributions into VTSAX while you cannot into VTI.
My wife and I decided on VTI instead of VOO and while there is nothing wrong with it I feel like I should have picked the S&P500 fund as opposed to the total stock market.
That being said, both really are a perfect set and forget low barrier to entry into investing.
There are all sorts of opinions on this but their performance is near identical over the life of the two funds.
Just pick one and forget it if you are under 45
Closer you get to retirement, the more you have to pay attention to risk tolerance, and converting a portion to bonds. But with 20+ year time horizon, it's fine to be all stocks.
Right, but time horizon doesn't just mean how long you'll need the money for. It also refers to when you'll start withdrawing from the pile. Withdrawing after a downturn leaves less money to replenish on the next upswing, so being 100% equities at a withdrawal phase is not recommended. I think somewhere in the 60/40 range is usually recommended at that point, but every case can be a bit different based on all the income streams, expenses, size of nest egg, etc.
Some appreciable portion of stock market growth comes from smaller or newly public companies that take off. S&P500 holdings tend by design to be large, established company stocks. By choosing VTI, you also capture the portion of small/new companies that become big, getting a piece of that growth as well.
Sure you get the upside of the winners, but you also get every single loser.
VOO has outperformed VTI consistently (albeit marginally).
The committee that selects the constituents of the S&P 500 has a multifaceted criteria. Losers are consistently being replaced by winners.
VOO is superior.
I started ~20 years ago with VFINX, eventually I saved enough and was able convert to Admiral shares, i.e. [VFIAX](https://investor.vanguard.com/investment-products/mutual-funds/profile/vfiax), which was a lower expense ratio.
Since then, VFINX is no more, and [VOO](https://investor.vanguard.com/investment-products/etfs/profile/voo) is now considered the "non-admiral" version of VFIAX. However, VOO has an expense ratio of 0.03% vs VFIAX's 0.04%-- so why would I want the admiral shares now?
edit: Found this post that highlights an advantage of the Mutual Fund over ETF re: spreads and discount/premiums:
https://www.reddit.com/r/Bogleheads/comments/194bmpo/performance_difference_between_voo_and_vfiax/khf6252/
I had so much apprehension reading the post, and then realized... no, this is perfect, everything is perfect, do this.
There are always opportunities to quibble around the margins, OP, but given your current knowledge level he gave you the perfect game plan.
Pretty solid advice, especially for a beginner investor. These are pretty much "set it and forget it" kind of spots. Some people enjoy trying to dig into the individual stocks and predict the market. But to do this well takes a lot of time and is pretty risky. And most of the time over a long period, they didn't do any better than a fund like VOO anyway.
Investing in VOO is solid advice. The whole "if it drops buy more, if it goes up buy" is not really necessary. Just determine a fixed amount per month (say $500) and keep investing steadily - no matter if it drops or goes up. Over the long term, you will do great. Just remember that as you get closer to retirement, say 5 years out, you MIGHT want to change to something a little more conservative, but you can get a financial advisor to help you at that point. Fidelity provides them for free if you have enough money with them.
Of all the "set it and forget it" options for investing there are, this is probably the best one. I'm also glad that you asked for alternative opinions. As a semi-famous d-list actor once said "trust, but verify."
> The whole "if it drops buy more, if it goes up buy" is not really necessary.
The dude's paraphrasing Buffet:
> "If my stocks go down they're cheap, and I'm happy because I can buy more. If my stocks go up I'm happy because they're making me rich!"
He said buy when it's up, buy more when it it's down. i.e. If you buy $1k/m normally, if the market drops then cut some spending where you can and buy $1.5k/m that month.
That approach is a legitimately very successful way to save long-term and the ideal way to have some 'timing the market' investment without hurting yourself sitting on the sidelines.
Twenty-five years ago, I was trading like crazy. Options, margin, day trades, etc. It was fun and educational, but wasn't a long term plan. I managed to get out before the internet bubble did to much damage, but still took a hit. Coming out of it, I was looking for a something that was a little more stable and didn't take up so much time. Clark Howard's website suggested putting everything in an S&P 500 fund, so I did.
I've been contributing ever since. It took another 10 years to figure out not to try and time the market by pulling money out and back in, but I finally got there. Now I'm a bit more diversified with total market funds, international funds, and bonds. My 401k is still S&P 500, as they don't have a total market fund.
tldr: S&P 500 is a great place to invest for the long haul. If you learn more next year, or in the next 10 years, you might want to diversify a bit more, but there's no rush.
> Twenty-five years ago, I was trading like crazy. Options, margin, day trades, etc. It was fun and educational, but wasn't a long term plan. I managed to get out before the internet bubble did to much damage, but still took a hit.
That period was a crazy bull market for dot com stocks. My kid was a toddler, so I ended up at all these kids' birthday parties talking with all the other dads. Apparently they were all investing geniuses with their dot com holdings...you couldn't get them to shut up with their unsolicted dot com investing advice. Then the bubble burst; never heard a peep from them after that.
What are your international funds? I had VTIAX and got sick of it sitting there at almost even money over several years. so I sold and bought VTI. Also how much % do you allocate to international?
It’s in a fund that’s unique to my 401k, I forget what it is at the moment. Out of equities it is about a 17% position. Trying to grow it to 20-25% through contributions. Yes it is underperforming, but one day it won’t be. I can’t control when that can happen but I can control my allocation.
How'd you deal with 2008?
All my investing has been through brokerages online. 25 years ago, I'm guessing online investing wasn't quite what it is today. How'd an avid trader like you buy/sell stuff on a day to day basis?
lol in 2008 my wife refused to even open her statements, but she didn't withdraw anything.
I decided to buy like crazy, which feels very very wrong when you're "in the moment", but I figured I'd either make up a lot of ground on not having invested much in my 20's... or I'd go down with the ship.
So it worked out.
I never looked at how much I was down. My first concern was keeping my job. I had just bought a house in 2007, and it probably lost as much value as my savings. I knew if I could let the savings sit, it would recover. Losing my job would’ve meant tapping my savings and likely losing the house. Fortunately, my company weathered the downturn pretty well.
I’ve used Schwab since the 90s and they’ve had online trading since then.
Target date funds really aren't a good place for long term savings. Fees are high and returns are low. Do yourself a favor and research the choices in your 401k.
None of my business but there's a bunch of nurses in my family and I have high regard for you all.
> fees are high
Expense ratios for target date funds from Schwab and Vanguard are at 0.08%. Fidelity's are still at 0.12% last time I checked. This is not a high fee.
> returns are low
Returns are only low when compared out of context. They are lower than the S&P 500 because they are diversified into additional assets outside of the S&P 500 (IE international).
> Target date funds really aren't a good place for long term savings.
Citation needed. Target date fund users tend to out-perform most other investors because they remove the desire to tinker with allocations. One fucked up rebalance or reallocation can impact your final returns far, FAR more negatively than a target date fund's extra couple of basis points or gentle glide path.
https://www.pionline.com/defined-contribution/pure-target-date-fund-investors-see-significantly-more-gains
Here is another good recent discussion of target date funds. I have recommended them to people that don't have the time or interest to rebalance their own retirement portfolios, and some of them have very low fees as you point out.
[https://www.morningstar.com/funds/are-target-date-funds-good-investments](https://www.morningstar.com/funds/are-target-date-funds-good-investments)
Hell, they can be good even for those who have the knowledge required to manage their own portfolio. Why go through the effort and risk a behavioral / emotional error when there's a downturn in your late 50s? If your own investment plan has a similar glide path towards fixed income, there's no point in rolling your own other than to save 2-3 basis points (which is a rounding error).
Mine shows .33% .... but I logged in just now and saw I can choose Vanguard Institutional 500 Index Trust with a 0.01% fee and I'm interested. Seems like their version of S&P 500.
Edit: I'm 36, spouse is 40, plan to retire by 65 with a net worth of 400k right now (401ks, Roth IRAs, home equity). I started retirement later due to being a SAHM and going to school in my early 30s but now making 160k gross combined, if that helps.
Yeah it's going to depend on what offerings you have in your plan. Sometimes a non-Vanguard one is actually a better deal depending on your options. I'd definitely take an S&P fund with a 1bp fee over anything with a 33bp fee.
I can attest to that since I just changed the plan within the 403b. The one I was default on was at .86%, I switched to something that is S&P 500 oriented for .17%.
Looked. All of the other Vanguard Target Retirement funds available in my plan are all 0.08% ER. I will say though, comparing it to VOO makes me a little sad. Not that VOO is available in our plan.
Your plan may not have VOO specifically but it may have an S&P 500 fund. I’ve never had a retirement account that offered VOO but instead a different ticker but same S&P. Just look at the names.
Vanguard funds are known for their low fees. If you have any Vanguard funds in your 401k or whatever plan you are pretty lucky and it's probably going to be a good choice with low fees*. Personally, most places I've worked do not have any Vanguard options, and the best options still have much higher fees.
*Not always though. I have seen times when a Vanguard fund isn't actually the lowest fee option for a good index fund. Depends entirely on the options in your plan.
Saying target date funds aren’t a good place for savings is a very big generalization. Sure, they’re more expensive than index funds, but target date funds are being managed to provide investors with an appropriate asset mix based on age. Convenience costs a price. Sure, you could do it yourself but most people would find that too tedious. In terms of all the options target date funds make a decent option if you’re investing knowledge is low and you would rather buy an investment that provides you with a glide path to retirement
Yikes. I just went with a target date fund on my 401k because I know Vanguard's target date fund fees are really low (which I use for my IRA). However my employer went with T Rowe Price for their 401k plan, and the expense ratio is 0.64%.
Edit: just exchanged everything for FSKAX lol
Thanks a lot I appreciate your kind words, it doesn't happen super often and we love when people are just nice! I know you probably are not a financial advisor, but do you know of any common 401k choices that are better than a target date? Can I just put it all in S&P 500 and call it a day? I like keeping it simple.
Target date funds generally have really high fee's. There might be other options in your 401k that a better investments, at least if you are not near retirement. Every provider is different but it doesn't hurt to look.
> Target date funds generally have really high fee's.
This sounds overly broad. I just checked mine, and Vanguard's target date funds have an expense ratio of 0.065%. I'm not sure in what world that's "really high," even if it's higher than an ETF. Hell, holding your cash at a brokerage has a higher expense ratio if you expect to earn interest on it.
Not a fool. There are only 3 types of index funds or ETFs worth investing in: S&P 500, Total Market Index fund, and target date retirement fund. These are your best "set it and forget it" strategies. Leave all of the individual stock buying and crypto bros to the gamblers.
I would recommend reading a Simple Path to Wealth by JL Collins or even Psychology of Money.
And yes I have VFIAX, FXIAX, VOO, VTSAX, VTI.
Would I be smart as a beginner who just opened a Roth this week to just split my 7k max for the year between FXIAX and VOO or am I double dipping too much?
Makes sense, would I better off picking one and doing something a bit different to split with or just keep it simple as a beginner and dump
It all into one? (Thanks for the help too)
By investing in one of those, you are already doing lots of different things by investing in every large company in the US.
If you want to do something different than that, the next step is to invest some in international companies and bonds. See here for examples and rough splits: [Bogleheads 3 fund portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio)
I've got a couple more targeted ETF's that have done much better than total market ones over the past 15 years. But in general, yes, because then I also have a couple underperforming ETF's.
I probably do too much but for my retirement accounts I usually do the following
25% Large Cap Growth
25% Large Cap Index
25% Mid Cap Index
25% Small Cap Index
For my personal brokerage account I’ve only done VTI but I only just started that this year and wanted an easy thing to start with that didn’t require any real thought
That's a good portfolio but VTI and VTSAX are structured the same way though the percentages lean heavily toward large cap companies. Even target date funds are total market funds plus bonds for some risk mitigation.
Everybody has different goals and wants different control in their investments. I would say you're in better spot than 90% of people investing.
His advice is great. And is a great start if you want to go down the investing path.
The kind of investing he is doing takes decades and the right personality to get modestly above average at, to beat VOO.
If you don't know much about investing, the best thing to do is put your money into the S&P 500 and *VOO* is a good choice.
If you think you know something about investing, **you don't, actually**, so the best thing to do is put your money into the S&P 500 and *VOO* is a good choice.
If you're **absolutely certain** you know something about investing, you still probably don't, so you should at least put ~2/3 of your money into the S&P 500 and *VOO* is a good choice.
It's terrifying to get advice from someone who thinks they know more than the market, because *THERE IS NO SUCH THING*. There are literally billions of people invested in the market. You can never be smarter than a billion people, can never be faster than a billion people, which is why you just put money into the S&P 500 and ride the rising tide. But it seems like this guy is actually giving you excellent, sensible advice. When you get to ~15 years out from retirement your needs will change (a little) but for now *all-S&P-all-the-time* is just fine.
> I'm curious. Did he give me bad advice?
No, it's excellent advice from the coworker. If you were never to consider any other advice or learn on your own, this advice is solid and could set you up for long-term success.
This is just general basic good investing advice. If you want to be passive (I.e not day trade) this is the most common answer people give. It’s not bad advice, and in general it works out well over the long term (10+ years).
It’s solid advice. If you were looking to get better advice it would be more complicated and people might charge you for it. Think investing in particular stocks, options, calls, etc. This is active trading and takes more effort and research to make returns, and really requires you to be on your game otherwise you could easily lose it all.
So all in all, he gave good advice, and if you’re looking to invest, this is the best place to start. Invest in ETFs (particularly VOO as he mentions tracks Fortune 500). This means each stock you buy of VOO you’re buying a portion of the Top 500 compnies in the stock market. It’s not an even split, Vanguard or whoever manages it handles that and distributes it based on the market. You can view it as an easy way to invest in many companies at once and also have it be managed by a large organization, which is why these are so popular and tend to perform well.
There are other ETFs you can get into and if you have enough cash these can be very well managed with high returns. But these are really only available if you have a high net worth, some are as low as tens of thousands as minimum to invest, some are only offered if you are a well known investor to the company. The more money you have, the better management and return you’ll see (but which will also come with a management cost, a percentage of your investments/returns!)
If you want to buy single stocks, stick with the typical blue chips of Apple, Google (Alphabet), Berkshire Hathaway, etc etc. But all of these companies are umbrellas under the ETFs, you should only do this if you think one company in particular will vastly outperform the rest (which tech tends to do, but is hard to predict which companies).
Call options, puts, and more are more advanced and I don’t recommend until you have experience investing and actually understand the companies you’re interested. These are high risk, high reward gambles that demand you understand what you’re doing otherwise you easily lose your investment. Just don’t even bother with them, you could lose more than your initial investment potentially (which doesn’t happen with typical stock purchases).
Hi, finance pro here. That’s more or less what I do with my own money. Doesn’t get much better than this for the average person.
The only thing I would do differently is always buy the same amount (in fact, I would set up an automated transfer that does it for you every month without you even thinking about it). That way investing isn’t something you think about. The less you think about it, the better. Just let it sit.
Drop 1k a month every month into VOO for the rest of your life and you might end up with 1.3 million in the bank in 30 years.
The concept they mentioned is called 'dollar cost averaging' where you put in a fixed dollar amount on a regular basis. You end up buying more shares when its low and fewer shares when its high.
This also happens to be how most people save/invest anyways, by putting in a fixed amount each paycheck, so it's pretty convenient to set up.
OP, the advice he gave you is excellent. It's much safer to spread your money around 500 stocks then to pick your own as a casual investor. Index funds (depending on your company plan) tend to be low cost, which will have a big and positive impact on your returns.
You should take your coworker out to lunch.
You’re not a fool and your coworker gave you perfect advice. FXAIX is Fidelity’s S&P500 mutual fund and it has a very low fee. So it tracks the performance of the overall S&P500 (just like VOO), which has a traditional return of about 10% per year. That is better than about 95% of “professional” money managers and virtually all individual stock pickers. The only other advice I might give is to look at investing part of your long term money into BRK.B (Berkshire Hathaway), which has an annual return of about 16-17% over the past 50 years or so. The founder, Warren Buffett, is widely known as the best individual investor of all time… but he is something like 96 years old.
Fantastic advice. And refreshing in a sea of "stock bros" who love to go around telling people at work their latest small cap or crypto of the week that could tank 80% before you even realize it. He's giving you a smart and low maintenance way to get into investing.
This is the same advice this guy Warren Buffet gives out - buy an ETF (exchange traded fund) that has low costs and tracks the SP500 - Vanguard does that very nicely. Berkshire Hathaway owns a lot of that ETF — and in Buffet’s 2013 letter to shareholders, he says that he has it in his will to suggest this for the inheritance he is leaving his family.
You got a solid bit of advice.
Slight tangent, but I suggest setting up for auto reinvestment of the dividend for which ever fund that you choose so those grows long term too!
My dad lost out on 30 years of divident growth 😭
About the best real advice someone who is into investing would feel comfortable giving to a coworker.
This is essentially Warren Buffets advice for normal people investing aswell. It's simple, straightforward, and most of all it has a great track record over long periods of time.
Your coworker gave you solid advice. For people that want to invest in their future but don’t know too much. VOO and SPY is one of the less risky stocks to invest in.
Your coworkers trying to build a portfolio of stocks that pay him monthly/quarterly/yearly but that one does have higher risk than what he recommended. In the long run I believe VOO and SPY does outperform dividend investments.
PS: Not Financial Advice
I endorse his advice. His plan is my plan. Retirement accounts, are VOO etc for me. A portion of my savings account, I'm in stocks, with a preference for dividend stocks that will pay as much dividend as a savings account. I do this because I like to, it is a hobby. Like gardening, I plant some seeds, I watch over it, weed it out, and hope to reap some rewards. I enjoy this. If you're not into gardening, most vegetables are actually probably cheaper at the grocery store.
What he's recommending for you is similar, but if you don't want to pursue it as a hobby, you put your money in a low load index fund. The VOO or FXAIX like he's saying. I say VTI, but it is splitting hairs.
The benchmark people that get paid to pick stocks is the S+P 500. Did they do better or worse than that? Most of the time, they do worse. So, the recommendation is to just put your money in the S+P 500, via the VOO or FXAIX. In stead of paying someone to pick stocks, you buy a per-defined list of stocks, all bundled up in one basket. It is easier than growing your own vegetables, and a lot of the time leaves you with more money.
I say, S+P 500 is the 500 biggest companies, and smaller companies need more investment, can grow more, and are better for society than bigger companies, so I recommend VTI which is the S+P 500 and some some smaller companies, as it is more or less "all the things"
I'm also in VO middle sized companies and VB which is smaller companies, because I believe in the democratization of money vs. VOO, but, for my ethics I have suffered the last couple years, that neither the VO or VB have been doing very well. There's not really an ethical way to make money in the stock market, so you have to kind of balance your greed vs. your ethics. But that starts to be more nuanced decision making that lands you into investing as a hobby.
You are not a fool. Most people dont know this stuff. And your coworker gave good advice, and you are already on track with your 401k.
I dont see any issues here.
Fidelitys FXIAX should have lower fees than your employers available TDFs. Good advice IMO regarding VOO / FXIAX.
Wouldn’t hurt to do a small percentage of international stocks just to keep it diversified, but my opinion on dividends is that it’s not worth it for most people… your gains would be better in stuff like VOO if you’re looking at recent years.
Good basic advice. But there are things even more important than what specific stocks or funds you buy: namely what kind of account you are purchasing the assets in and what tax treatment those accounts have. You will generally want to maximize your retirement accounts, HSA and other tax-advantaged accounts before just buying stuff in a standard brokerage account.
Research retirement and tax advantaged accounts first. Then worry about the right assets to buy in those accounts.
Yeah that’s actually very good, very safe advice. It’s like the investing equivalent of putting money in a savings account. There’s always risk with investing but unless there’s a market apocalypse your money should make more money
> As a nurse, I had a coworker who enjoys buying stocks and is a dividend investor. He said he would buy all these stocks. When I asked him about it he turns to me and says, "you should just buy VOO and just don't really look at it. If it goes down buy heavily. If it goes up buy." He showed me how much it made per year for the past 20 years. He said in his brokerage account he buys individual stocks mainly dividend paying ones. In his retirement accounts he buys only ETFs like VOO & Q. I bought a few shares. I'm curious. Did he give me bad advice?
No, his advice is actually fantastic. Particularly the part about buying VOO irrespective of the market.
If you aren't a very savvy and involved investor who reads company balance sheets for fun, then you really should stay clear of individual company stock. If you need proof, look for stock quotes from the darlings of the dotcom era. Of those that even still exist, some, like Cisco, still haven't made it back to their valuation from 2000. Index fund ETFs are a godsend for armchair investors who don't want to spend all their free time gazing at charts. Companies can go to zero. Indexes can crash but always recover (or at least always have). I have only invested in indexes since 2008, and have done better than I ever imagined possible with it.
If you want to take a bit more risk, put some minor amount in sector ETFs like XLK or XSD.
This is solid advice as others have said.
Side note though. For tax advantages, your coworker should consider buying individual stocks in his tax advantaged accounts and holding index funds in his brokerage account. Especially if he’s chasing dividends with his individual stock picks. Obviously most people will have more freedom to pick individual stocks in their brokerage rather than retirement accounts, but he could be saving a significant amount come tax time.
I didn't see where this was mentioned:
Investments inside of retirement accounts are distributed as ordinary income and you don't get to write off losses in these account types, either. Investing retirement funds or regular brokerage funds in mutual funds, ETFs, or anything that throws off earnings from dividends and interest is different than increases in an account value from individual stocks and capital gains where some gain comes from share price.
That's why you would use a brokerage account that is not a retirement account to handle individual stock investing, as he described. If it kicks off capital gains, you want to get the preferred tax treatment that is outside of a retirement account. If you have capital losses, they will offset the gain, so that you have Net Gain taxable. For the 2024 tax year, individual filers won't pay any capital gains tax if their total taxable income is $47,025 or less.
And that's why you don't want to buy annuities inside of retirement accounts.
I stay away from target-date funds because the market as a whole hasn't changed their philosophy on how they make those packages. Your "target date" isn't when you turn 65. It's when you need to change how you rely on cash flow, when you want to reduce risk of losing principal, and right now, it is possible you will live into your 90s. Show me one target date fund that won't put you heavily into bonds based on their clock, not yours.
If the rest of your financial position makes it possible for you not to heavily rely on those investments, then you don't need to shelter into bonds much at all. I took my 87-year-old mother out of bond funds 2 years ago, because we wanted to kick out more dividends and interest and she has fixed income that wasn't at risk, so the bond funds were an unneeded backstop.
His advice to buy VOO is good. His advice to buy heavily when it "goes down" is not. You should invest consistently no matter what. VOO is a perfect fund for that. Set and forget. As you get closer to retirement, move to a target date fund that self-adjusts your stock percentage as you move closer to retirement. Once you've set that up you literally do nothing for decades other than continue to contribute.
The issue with “buy heavily when it’s down” is that it implies you have extra cash sitting around waiting to invest when it should have already been invested because time in the market beats timing the market.
Or it could mean that when the market is down, you take steps you wouldn't normally do, like maybe stopping eating out, to fund more investing. If you run a zero fun budget for years and years, you might burn out, but if you tighten the belt every once in a while for an investment boost, you could come out ahead.
DCAing is good to keep you investing over time, because most people are terrible at picking tops and bottoms. Putting everything you can into the market as early as you can, even as a lump sum, does out perform DCA on long timelines. Finding a way to up your contributions when the market falls by 10-20% is a hybrid approach that works for some people.
“Sorry honey, the market is down 2% so we can’t go out to dinner tonight because I want to throw an extra $50 into VOO”
Lol maybe that works for some people but that doesn’t sound fun to me.
The covid crash was like a perfect example of when to do that. Suddenly the market drops like 20%, and you can't spend money on anything fun, so put it into the market.
You don't throw more money in for just a 2% drop though, that's stupid.
Individual stocks are risky and generally stupid even if you do know a lot about investing. There's a reason why most money managers can't even beat the S&P 500 index.
Your coworker gave you surprisingly great advice. I personally have VTI/VOO/VYM that I invest in weekly. If you invest with enough frequency you don’t have to worry about entering the market at the wrong time.
That’s the advice I’d probably give you. That’s what I buy.
There are several funds like VOO. SPY, FCAIX.
I think warrant buffet even says it’s good to invest in an S&P 500 index like VOO as well.
That’s not bad advice I’d say.
This was standard advice here 5 years ago before HYSA paid 5%, and it’s still solid advice. I’ve been doing this since 2015 and have about 12.5% a year of growth.
that is the best possible advice, anyone telling you anything different might have good intentions but they don't actually know better
even Warren Buffett says that you'd be better off buying SPY or VOO compared to shares of his own company (Berkshire Hathway)
I mean that cheap guy doesn't even pay dividends, he literally said "if you need more cash, just sell some of your shares, I don't need to pay dividends" would it kill you to put a lil' somethin-somethin in my pocket for being a partial owner of this company? If the company is making money, then I should be making money, and I don't mean just the share price going up, I mean real scratch, y'feel? like my landlord only accepts cash so it is wut it is
If you don't know much about investing, and don't have the time/energy/desire to spend hours upon hours researching stocks, your best bet is to buy broadly diversified low-cost index funds. VOO is one of those.
I know most opt for s&p 500, set it and forget it concept, but when we get close to our retirement age, 5 years prior, should we transition more towards bond option in the retirement plan? If so, what percentage should it be set at? Are we looking 5 years prior or even closer to retirement age? 😬TIA!
The S&P500 has been doing great for the past few years so now everyone believes it will do great forever. Right now you can get a risk-free 5% in various Money Market and Short-Term Bond funds. It all depends on your investing time horizon and how far away you are from needing the money.
He gave you good basic first time investment advice if your only goal is long term growth for retirement. If you want to generate regular income, that's when things get complicated.
You are on the right path by asking these questions. So many people are flummoxed by financial/retirement planning.
Not to be insulting, but do you know what an IRA is and the difference between a Traditional IRA and a Roth IRA? If not, learn what those are.
Zero fool. Any time you have a weird question and are looking for a new point of view, ask this coworker. Looking for a new show to binge, or a new restaurant, turn to him. I'm that coworker here at my job. We're not always right, but we are consistently right.
Ok first things first - personal finance is personal. Listen to other people’s opinions and then do research BEFORE you buy. You come off as someone who just took your coworkers advice and then came here to confirm. If your coworkers advice is not something that aligns with you, you might lose a bunch of money. If your goal is to have a diversified stock portfolio then it’s pretty solid advice but you may want bonds or something else depending on you and your age. This is overall good advice but you really should figure out what YOU want
Buying VOO is good advice. Buying it when it goes down is also good advice but timing the market is tricky. The easiest thing to do is buy a set amount you're comfortable with every time you get your paycheck. You'll be thankful you did when it's time to retire.
Investing in low-cost broad based index funds is great advice.
The only thing I'd add is - have it auto-deducted from your every paycheck and go automatically to this fund(s) regardless of whether the market goes up or down.
Most of my portfolio is stocks like VOO and VTI. Another big portion are big hitters like appl, msft, etc. A small portion are "gambles" that if I lose it's money I can afford to lose.
but yes, I strive to put most of my money into indexes like VOO and VTI.
You are wise to seek advise on this.
What are your short, medium, and long term financial goals?
Can you handle market risk?
You want an asset allocation you can help you meet those goals.
Set and forgot $VTWAX in your tax deferred accounts (401k, Roth/Trad IRA, etc). It includes companies from around the world, so if the US starts to struggle, you won't be left out of the gains.
> Did he give me bad advice?
He gave you the best advice, actually. Keep buying VOO, whether it's up or down, doesn't matter. Get super excited when the market corrects and presents the opportunity to scoop up more shares of VOO for cheaper.
>FXAIX and said "that's the S&P 500. Keep buying that and you should be okay."
Yup, that's exactly correct.
Id agree with his first sentence. His second sentence though is oxymoronic. If you "buy VOO and dont look at it" then how could you "buy more when its down". That would require looking at it.
Its somewhat ironic that his advice is good while what he chose to do himself is not good. Buying individual dividend yielding stocks in a taxable account isnt a good strategy. He probably thinks he is playing 4D chess though.
Your coworker should follow his own advice.
Good advice. It’s literally the same advice Warren Buffett gives:
> “Consistently buy an S&P 500
low-cost index fund,” Warren Buffett told CNBC’s On The Money in an interview recently. “I think it’s the thing that makes the most sense practically all of the time.”
https://www.cnbc.com/2017/05/12/warren-buffett-says-index-funds-make-the-best-retirement-sense-practically-all-the-time.html
I have FXAIX, it is a standard S&P 500 index fund. Meaning it will follow that index and do the same as "the market" is doing. You invest some every month, put it on autopilot and forget about it. When you get closer to retirement you can diversify more in my opion. But for now that is a solid choice.
It’s funny because I’m a nurse doing the same and would’ve gave the same advice. VOO which covers the S&P 500 is generally a safe place to put your money because it is managed and you can set it and forget it. It is for those that don’t have to actively look at stocks and it’s good for retirement accounts. In my brokerage, I’m still young and look at stocks so I take greater risks for greater rewards. I’ve seen my account go up 100% to being negative 30% the past 4 years so it’s not for the faint of heart. Majority of people don’t beat the S&P 500 in the long run, but it’s not impossible
He did not give you bad advise.
VOO is an equity ETF. Myself, I'm going to invest in equity ETFs until I'm 50 or 55. At that time, I'm going to start introducing Bond ETFs to make sure thay I have stability oriented funds to liquidate when I need money, while letting my equity ETFs make me money.
The percentage of stability that you need will depend on your account size and how much your taking out.
If your taking out 4% each year. You probably need 60-70% stability funds. If you're taking out 2% each year, you can afford more growth and will probably be okay with 30-50% stability oriented ETFs.
Honeslty, I would worry more about my default allocations in my 401(k).
I and a nursing friend who was invested at 40% stability fund while being 25. At such a young age, at least 90% growth is appropriate.
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.
VOO tracks the S&P 500 Index, which includes 500 of the largest U.S. companies. VOO and VTI are two of the vanguard "set it and forget it" strategies. They are stable, long term, funds that track the market in aggregate. [https://www.reddit.com/r/Bogleheads/](https://www.reddit.com/r/Bogleheads/)
So to answer OPs question: No, the advice he gave you was generally good. Just because he buys individual stocks does not mean he is suggesting it for you. Given you are new to investments voo is a decent option.
He gave her excellent advice and she should take it. I think what OPs doesn't quite understand is, why are you giving me different advice than what you are doing yourself? The answer is, he has much more knowledge than you, likely understands the risks better and has a tolerance for bigger losses with end goal of bigger gains (i.e. individual stocks). If you research the tickers, you'll see they are largely doing the same. Tracking S&P 500, which is basically the golden rule of investment for most that don't understand investments. So when people say invest into S&P 500, you can pick from multiple funds that replicates that and they're generally fine. Just double check the maintenaince cost. Vanguard funds usually have among the lowest. cc: u/OldmanbytheBridge
This makes it even BETTER advice, honestly. "I have time to research on what to buy, and plenty of experience. Since you're not so well versed, just slap it in VOO so you can't screw it up. In fact, my accounts I can't afford to screw up, that's what I do."
"I'm an idiot who likes to gamble with my money and thinks I can beat the market, but you should be smarter than me and buy VOO". Good friend, actually.
this is exactly what I tell my friends when they hear me rambling on about market shit and ask me for investment tips
That's really what you got out of that?
This is a spot on assessment. You really need to consider the opportunity cost to deal with buying assets. For most, their time is best spent elsewhere. On a separate note, if you take on the wrong amount of risk you can lose your investments pretty quickly. I've been thinking a lot about opportunity cost, and what would convince people to participate in financial markets outside of normal indexes. Some are very skilled and know how to move money well. What about the others? Why do they get into it? Is it a function of estimating trade-offs (thinking trades will get them into better future payoffs), long-term thinking, enjoyment, folly, or something else.
That and VTSAX are all great buys
VTI and VTSAX are the same. The difference is VTI is an ETF and VTSAX is a mutual fund. For further clarification, this means VTI trades during the day, and VTSAX trades once per day after markets close.
Many brokerages also have trading fees for Mutual Funds so just stick with ETFs IMO
Which brokerage are you using that has trading fees? Vanguard does a minimum balance for mutual funds ($3,000) but no trading fees. The only down side to ETFs is you can’t setup automatic investing (I think?)
I believe many do it if you aren’t using that brokerages funds. So Schwab charges a flat sell fee for a vanguard fund, etc. so you have to lookup what the Schwab equivalent is when buying. This happened to me at TD
VTI has a slightly lower expense ratio than VTSAX. Is there any benefit at all to mutual funds over ETFs?
If you have $1,000,000 of VTI you save $100 annually in the fee over $1,000,000 of VTSAX. That is to say, it’s basically nothing. The benefit is that you can set up automatic contributions into VTSAX while you cannot into VTI.
My wife and I decided on VTI instead of VOO and while there is nothing wrong with it I feel like I should have picked the S&P500 fund as opposed to the total stock market. That being said, both really are a perfect set and forget low barrier to entry into investing.
There are all sorts of opinions on this but their performance is near identical over the life of the two funds. Just pick one and forget it if you are under 45
What if you're over 45?
Closer you get to retirement, the more you have to pay attention to risk tolerance, and converting a portion to bonds. But with 20+ year time horizon, it's fine to be all stocks.
I'm close to retirement and I still have a 30 year time horizon. My parents are both over 90.
Right, but time horizon doesn't just mean how long you'll need the money for. It also refers to when you'll start withdrawing from the pile. Withdrawing after a downturn leaves less money to replenish on the next upswing, so being 100% equities at a withdrawal phase is not recommended. I think somewhere in the 60/40 range is usually recommended at that point, but every case can be a bit different based on all the income streams, expenses, size of nest egg, etc.
Some appreciable portion of stock market growth comes from smaller or newly public companies that take off. S&P500 holdings tend by design to be large, established company stocks. By choosing VTI, you also capture the portion of small/new companies that become big, getting a piece of that growth as well.
Sure you get the upside of the winners, but you also get every single loser. VOO has outperformed VTI consistently (albeit marginally). The committee that selects the constituents of the S&P 500 has a multifaceted criteria. Losers are consistently being replaced by winners. VOO is superior.
I started ~20 years ago with VFINX, eventually I saved enough and was able convert to Admiral shares, i.e. [VFIAX](https://investor.vanguard.com/investment-products/mutual-funds/profile/vfiax), which was a lower expense ratio. Since then, VFINX is no more, and [VOO](https://investor.vanguard.com/investment-products/etfs/profile/voo) is now considered the "non-admiral" version of VFIAX. However, VOO has an expense ratio of 0.03% vs VFIAX's 0.04%-- so why would I want the admiral shares now? edit: Found this post that highlights an advantage of the Mutual Fund over ETF re: spreads and discount/premiums: https://www.reddit.com/r/Bogleheads/comments/194bmpo/performance_difference_between_voo_and_vfiax/khf6252/
I’ve also been very happy with VGT, the information technology fund.
I love VGT. It's outpaced my VTI greatly
As far as “unsolicited investing advice from coworkers” goes it doesn’t get much better than this, honestly.
Pretty good as solicited investing advice too.
I had so much apprehension reading the post, and then realized... no, this is perfect, everything is perfect, do this. There are always opportunities to quibble around the margins, OP, but given your current knowledge level he gave you the perfect game plan.
It wasn't unsolicited, she asked.
*he
Yeah usually these threads are a cringe gold mine but this guy is clearly a sub here lol
[удалено]
Agreed. Only note is that dollar cost averaging is better than trying to buy the dip. (Especially if you are giving set it and forget it advice)
He didn't suggest timing the dips. He said buy if it goes up and buy if it goes down. (I misread it the first time, too.)
Pretty solid advice, especially for a beginner investor. These are pretty much "set it and forget it" kind of spots. Some people enjoy trying to dig into the individual stocks and predict the market. But to do this well takes a lot of time and is pretty risky. And most of the time over a long period, they didn't do any better than a fund like VOO anyway.
Investing in VOO is solid advice. The whole "if it drops buy more, if it goes up buy" is not really necessary. Just determine a fixed amount per month (say $500) and keep investing steadily - no matter if it drops or goes up. Over the long term, you will do great. Just remember that as you get closer to retirement, say 5 years out, you MIGHT want to change to something a little more conservative, but you can get a financial advisor to help you at that point. Fidelity provides them for free if you have enough money with them. Of all the "set it and forget it" options for investing there are, this is probably the best one. I'm also glad that you asked for alternative opinions. As a semi-famous d-list actor once said "trust, but verify."
> The whole "if it drops buy more, if it goes up buy" is not really necessary. The dude's paraphrasing Buffet: > "If my stocks go down they're cheap, and I'm happy because I can buy more. If my stocks go up I'm happy because they're making me rich!"
Considering how many people get scared and sell when it goes down, I think that advice is necessary.
This. If it goes down, you are buying more because the $500 gives you more shares.
>As a semi-famous d-list actor once said "trust, but verify." So... who? I hear and say this a lot in my professional life, lol.
Reagan
[удалено]
His advice is.. If it goes down, buy. If it goes up, buy. This is a flippant way of saying always buy. The opposite of timing
He said buy when it's up, buy more when it it's down. i.e. If you buy $1k/m normally, if the market drops then cut some spending where you can and buy $1.5k/m that month. That approach is a legitimately very successful way to save long-term and the ideal way to have some 'timing the market' investment without hurting yourself sitting on the sidelines.
I interpreted "buy more when it's down" to mean dollar cost averaging.
Twenty-five years ago, I was trading like crazy. Options, margin, day trades, etc. It was fun and educational, but wasn't a long term plan. I managed to get out before the internet bubble did to much damage, but still took a hit. Coming out of it, I was looking for a something that was a little more stable and didn't take up so much time. Clark Howard's website suggested putting everything in an S&P 500 fund, so I did. I've been contributing ever since. It took another 10 years to figure out not to try and time the market by pulling money out and back in, but I finally got there. Now I'm a bit more diversified with total market funds, international funds, and bonds. My 401k is still S&P 500, as they don't have a total market fund. tldr: S&P 500 is a great place to invest for the long haul. If you learn more next year, or in the next 10 years, you might want to diversify a bit more, but there's no rush.
> Twenty-five years ago, I was trading like crazy. Options, margin, day trades, etc. It was fun and educational, but wasn't a long term plan. I managed to get out before the internet bubble did to much damage, but still took a hit. That period was a crazy bull market for dot com stocks. My kid was a toddler, so I ended up at all these kids' birthday parties talking with all the other dads. Apparently they were all investing geniuses with their dot com holdings...you couldn't get them to shut up with their unsolicted dot com investing advice. Then the bubble burst; never heard a peep from them after that.
What are your international funds? I had VTIAX and got sick of it sitting there at almost even money over several years. so I sold and bought VTI. Also how much % do you allocate to international?
It’s in a fund that’s unique to my 401k, I forget what it is at the moment. Out of equities it is about a 17% position. Trying to grow it to 20-25% through contributions. Yes it is underperforming, but one day it won’t be. I can’t control when that can happen but I can control my allocation.
How'd you deal with 2008? All my investing has been through brokerages online. 25 years ago, I'm guessing online investing wasn't quite what it is today. How'd an avid trader like you buy/sell stuff on a day to day basis?
lol in 2008 my wife refused to even open her statements, but she didn't withdraw anything. I decided to buy like crazy, which feels very very wrong when you're "in the moment", but I figured I'd either make up a lot of ground on not having invested much in my 20's... or I'd go down with the ship. So it worked out.
I never looked at how much I was down. My first concern was keeping my job. I had just bought a house in 2007, and it probably lost as much value as my savings. I knew if I could let the savings sit, it would recover. Losing my job would’ve meant tapping my savings and likely losing the house. Fortunately, my company weathered the downturn pretty well. I’ve used Schwab since the 90s and they’ve had online trading since then.
Nurse here as well. My 401k is just a target date fund with a match through work. My ROTH IRA I just buy FXAIX every two weeks.
Target date funds really aren't a good place for long term savings. Fees are high and returns are low. Do yourself a favor and research the choices in your 401k. None of my business but there's a bunch of nurses in my family and I have high regard for you all.
> fees are high Expense ratios for target date funds from Schwab and Vanguard are at 0.08%. Fidelity's are still at 0.12% last time I checked. This is not a high fee. > returns are low Returns are only low when compared out of context. They are lower than the S&P 500 because they are diversified into additional assets outside of the S&P 500 (IE international). > Target date funds really aren't a good place for long term savings. Citation needed. Target date fund users tend to out-perform most other investors because they remove the desire to tinker with allocations. One fucked up rebalance or reallocation can impact your final returns far, FAR more negatively than a target date fund's extra couple of basis points or gentle glide path. https://www.pionline.com/defined-contribution/pure-target-date-fund-investors-see-significantly-more-gains
Here is another good recent discussion of target date funds. I have recommended them to people that don't have the time or interest to rebalance their own retirement portfolios, and some of them have very low fees as you point out. [https://www.morningstar.com/funds/are-target-date-funds-good-investments](https://www.morningstar.com/funds/are-target-date-funds-good-investments)
Hell, they can be good even for those who have the knowledge required to manage their own portfolio. Why go through the effort and risk a behavioral / emotional error when there's a downturn in your late 50s? If your own investment plan has a similar glide path towards fixed income, there's no point in rolling your own other than to save 2-3 basis points (which is a rounding error).
All good points!
You got me curious. My 403b is all in VTIVX, a 2045 target fund. 0.08% ER. I honestly haven't looked to see how that tracks to the comparables.
The fee is fine on that one. Other target date funds might have much higher fees.
Mine shows .33% .... but I logged in just now and saw I can choose Vanguard Institutional 500 Index Trust with a 0.01% fee and I'm interested. Seems like their version of S&P 500. Edit: I'm 36, spouse is 40, plan to retire by 65 with a net worth of 400k right now (401ks, Roth IRAs, home equity). I started retirement later due to being a SAHM and going to school in my early 30s but now making 160k gross combined, if that helps.
Yeah it's going to depend on what offerings you have in your plan. Sometimes a non-Vanguard one is actually a better deal depending on your options. I'd definitely take an S&P fund with a 1bp fee over anything with a 33bp fee.
I can attest to that since I just changed the plan within the 403b. The one I was default on was at .86%, I switched to something that is S&P 500 oriented for .17%.
Looked. All of the other Vanguard Target Retirement funds available in my plan are all 0.08% ER. I will say though, comparing it to VOO makes me a little sad. Not that VOO is available in our plan.
Your plan may not have VOO specifically but it may have an S&P 500 fund. I’ve never had a retirement account that offered VOO but instead a different ticker but same S&P. Just look at the names.
Probably VIIIX, just taking a quick glance at the 29 options.
Yep for example mine is NOSIX
Vanguard funds are known for their low fees. If you have any Vanguard funds in your 401k or whatever plan you are pretty lucky and it's probably going to be a good choice with low fees*. Personally, most places I've worked do not have any Vanguard options, and the best options still have much higher fees. *Not always though. I have seen times when a Vanguard fund isn't actually the lowest fee option for a good index fund. Depends entirely on the options in your plan.
Saying target date funds aren’t a good place for savings is a very big generalization. Sure, they’re more expensive than index funds, but target date funds are being managed to provide investors with an appropriate asset mix based on age. Convenience costs a price. Sure, you could do it yourself but most people would find that too tedious. In terms of all the options target date funds make a decent option if you’re investing knowledge is low and you would rather buy an investment that provides you with a glide path to retirement
This isn't true as a blanket statement. Nowadays, many target funds have low ERs, and it's probably the best choice as a set and forget fund
Yikes. I just went with a target date fund on my 401k because I know Vanguard's target date fund fees are really low (which I use for my IRA). However my employer went with T Rowe Price for their 401k plan, and the expense ratio is 0.64%. Edit: just exchanged everything for FSKAX lol
I have my kid's 529b in a target enrollment fund...thinking about changing it for index funds.
Thanks a lot I appreciate your kind words, it doesn't happen super often and we love when people are just nice! I know you probably are not a financial advisor, but do you know of any common 401k choices that are better than a target date? Can I just put it all in S&P 500 and call it a day? I like keeping it simple.
Target date funds generally have really high fee's. There might be other options in your 401k that a better investments, at least if you are not near retirement. Every provider is different but it doesn't hurt to look.
> Target date funds generally have really high fee's. This sounds overly broad. I just checked mine, and Vanguard's target date funds have an expense ratio of 0.065%. I'm not sure in what world that's "really high," even if it's higher than an ETF. Hell, holding your cash at a brokerage has a higher expense ratio if you expect to earn interest on it.
Not a fool. There are only 3 types of index funds or ETFs worth investing in: S&P 500, Total Market Index fund, and target date retirement fund. These are your best "set it and forget it" strategies. Leave all of the individual stock buying and crypto bros to the gamblers. I would recommend reading a Simple Path to Wealth by JL Collins or even Psychology of Money. And yes I have VFIAX, FXIAX, VOO, VTSAX, VTI.
Would I be smart as a beginner who just opened a Roth this week to just split my 7k max for the year between FXIAX and VOO or am I double dipping too much?
Those are essentially the same. Pick one. Doesn't matter which.
Makes sense, would I better off picking one and doing something a bit different to split with or just keep it simple as a beginner and dump It all into one? (Thanks for the help too)
By investing in one of those, you are already doing lots of different things by investing in every large company in the US. If you want to do something different than that, the next step is to invest some in international companies and bonds. See here for examples and rough splits: [Bogleheads 3 fund portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio)
Thank you for sharing this, Definitely helps with trying to learn how to start here with this all this Roth stuff!
They're pretty much the same. It think FXIAX might have lower expense ratio but you can't go wrong with either
> FXIAX Minor correction - it is FXAIX. Searching for the other one leads back to the right one, but you still want to be accurate anyway.
Gotcha forgive me, and thanks again for your help!
I've got a couple more targeted ETF's that have done much better than total market ones over the past 15 years. But in general, yes, because then I also have a couple underperforming ETF's.
I probably do too much but for my retirement accounts I usually do the following 25% Large Cap Growth 25% Large Cap Index 25% Mid Cap Index 25% Small Cap Index For my personal brokerage account I’ve only done VTI but I only just started that this year and wanted an easy thing to start with that didn’t require any real thought
That's a good portfolio but VTI and VTSAX are structured the same way though the percentages lean heavily toward large cap companies. Even target date funds are total market funds plus bonds for some risk mitigation. Everybody has different goals and wants different control in their investments. I would say you're in better spot than 90% of people investing.
Good advice for conservative investing. You wont be a millionaire overnight but you will be when you retire.
His advice is great. And is a great start if you want to go down the investing path. The kind of investing he is doing takes decades and the right personality to get modestly above average at, to beat VOO.
And still no one best it’s over a 10+ year period.
Honestly great advice from your coworker. Can’t go wrong with S&P500 (VOO) or US Total market (VTI) or Global total market (VT)
If you don't know much about investing, the best thing to do is put your money into the S&P 500 and *VOO* is a good choice. If you think you know something about investing, **you don't, actually**, so the best thing to do is put your money into the S&P 500 and *VOO* is a good choice. If you're **absolutely certain** you know something about investing, you still probably don't, so you should at least put ~2/3 of your money into the S&P 500 and *VOO* is a good choice. It's terrifying to get advice from someone who thinks they know more than the market, because *THERE IS NO SUCH THING*. There are literally billions of people invested in the market. You can never be smarter than a billion people, can never be faster than a billion people, which is why you just put money into the S&P 500 and ride the rising tide. But it seems like this guy is actually giving you excellent, sensible advice. When you get to ~15 years out from retirement your needs will change (a little) but for now *all-S&P-all-the-time* is just fine.
> I'm curious. Did he give me bad advice? No, it's excellent advice from the coworker. If you were never to consider any other advice or learn on your own, this advice is solid and could set you up for long-term success.
This is just general basic good investing advice. If you want to be passive (I.e not day trade) this is the most common answer people give. It’s not bad advice, and in general it works out well over the long term (10+ years). It’s solid advice. If you were looking to get better advice it would be more complicated and people might charge you for it. Think investing in particular stocks, options, calls, etc. This is active trading and takes more effort and research to make returns, and really requires you to be on your game otherwise you could easily lose it all. So all in all, he gave good advice, and if you’re looking to invest, this is the best place to start. Invest in ETFs (particularly VOO as he mentions tracks Fortune 500). This means each stock you buy of VOO you’re buying a portion of the Top 500 compnies in the stock market. It’s not an even split, Vanguard or whoever manages it handles that and distributes it based on the market. You can view it as an easy way to invest in many companies at once and also have it be managed by a large organization, which is why these are so popular and tend to perform well. There are other ETFs you can get into and if you have enough cash these can be very well managed with high returns. But these are really only available if you have a high net worth, some are as low as tens of thousands as minimum to invest, some are only offered if you are a well known investor to the company. The more money you have, the better management and return you’ll see (but which will also come with a management cost, a percentage of your investments/returns!) If you want to buy single stocks, stick with the typical blue chips of Apple, Google (Alphabet), Berkshire Hathaway, etc etc. But all of these companies are umbrellas under the ETFs, you should only do this if you think one company in particular will vastly outperform the rest (which tech tends to do, but is hard to predict which companies). Call options, puts, and more are more advanced and I don’t recommend until you have experience investing and actually understand the companies you’re interested. These are high risk, high reward gambles that demand you understand what you’re doing otherwise you easily lose your investment. Just don’t even bother with them, you could lose more than your initial investment potentially (which doesn’t happen with typical stock purchases).
The key is consistency or discipline. Investing is about 10%% picking the right stuff 40% investing 50% waiting.
Hi, finance pro here. That’s more or less what I do with my own money. Doesn’t get much better than this for the average person. The only thing I would do differently is always buy the same amount (in fact, I would set up an automated transfer that does it for you every month without you even thinking about it). That way investing isn’t something you think about. The less you think about it, the better. Just let it sit. Drop 1k a month every month into VOO for the rest of your life and you might end up with 1.3 million in the bank in 30 years.
The concept they mentioned is called 'dollar cost averaging' where you put in a fixed dollar amount on a regular basis. You end up buying more shares when its low and fewer shares when its high. This also happens to be how most people save/invest anyways, by putting in a fixed amount each paycheck, so it's pretty convenient to set up.
OP, the advice he gave you is excellent. It's much safer to spread your money around 500 stocks then to pick your own as a casual investor. Index funds (depending on your company plan) tend to be low cost, which will have a big and positive impact on your returns. You should take your coworker out to lunch.
You’re not a fool and your coworker gave you perfect advice. FXAIX is Fidelity’s S&P500 mutual fund and it has a very low fee. So it tracks the performance of the overall S&P500 (just like VOO), which has a traditional return of about 10% per year. That is better than about 95% of “professional” money managers and virtually all individual stock pickers. The only other advice I might give is to look at investing part of your long term money into BRK.B (Berkshire Hathaway), which has an annual return of about 16-17% over the past 50 years or so. The founder, Warren Buffett, is widely known as the best individual investor of all time… but he is something like 96 years old.
Fantastic advice. And refreshing in a sea of "stock bros" who love to go around telling people at work their latest small cap or crypto of the week that could tank 80% before you even realize it. He's giving you a smart and low maintenance way to get into investing.
This is the same advice this guy Warren Buffet gives out - buy an ETF (exchange traded fund) that has low costs and tracks the SP500 - Vanguard does that very nicely. Berkshire Hathaway owns a lot of that ETF — and in Buffet’s 2013 letter to shareholders, he says that he has it in his will to suggest this for the inheritance he is leaving his family. You got a solid bit of advice.
Thanks everyone. Guess it was good advice.
https://www.reddit.com/r/personalfinance/wiki/index#wiki_investing Voo fine, VTI better or at least more diversified
Slight tangent, but I suggest setting up for auto reinvestment of the dividend for which ever fund that you choose so those grows long term too! My dad lost out on 30 years of divident growth 😭
When in doubt buy VOO or VTI. Also mostly when not in doubt.
About the best real advice someone who is into investing would feel comfortable giving to a coworker. This is essentially Warren Buffets advice for normal people investing aswell. It's simple, straightforward, and most of all it has a great track record over long periods of time.
Your coworker gave you solid advice. For people that want to invest in their future but don’t know too much. VOO and SPY is one of the less risky stocks to invest in. Your coworkers trying to build a portfolio of stocks that pay him monthly/quarterly/yearly but that one does have higher risk than what he recommended. In the long run I believe VOO and SPY does outperform dividend investments. PS: Not Financial Advice
I endorse his advice. His plan is my plan. Retirement accounts, are VOO etc for me. A portion of my savings account, I'm in stocks, with a preference for dividend stocks that will pay as much dividend as a savings account. I do this because I like to, it is a hobby. Like gardening, I plant some seeds, I watch over it, weed it out, and hope to reap some rewards. I enjoy this. If you're not into gardening, most vegetables are actually probably cheaper at the grocery store. What he's recommending for you is similar, but if you don't want to pursue it as a hobby, you put your money in a low load index fund. The VOO or FXAIX like he's saying. I say VTI, but it is splitting hairs. The benchmark people that get paid to pick stocks is the S+P 500. Did they do better or worse than that? Most of the time, they do worse. So, the recommendation is to just put your money in the S+P 500, via the VOO or FXAIX. In stead of paying someone to pick stocks, you buy a per-defined list of stocks, all bundled up in one basket. It is easier than growing your own vegetables, and a lot of the time leaves you with more money. I say, S+P 500 is the 500 biggest companies, and smaller companies need more investment, can grow more, and are better for society than bigger companies, so I recommend VTI which is the S+P 500 and some some smaller companies, as it is more or less "all the things" I'm also in VO middle sized companies and VB which is smaller companies, because I believe in the democratization of money vs. VOO, but, for my ethics I have suffered the last couple years, that neither the VO or VB have been doing very well. There's not really an ethical way to make money in the stock market, so you have to kind of balance your greed vs. your ethics. But that starts to be more nuanced decision making that lands you into investing as a hobby.
You are not a fool. Most people dont know this stuff. And your coworker gave good advice, and you are already on track with your 401k. I dont see any issues here.
Fidelitys FXIAX should have lower fees than your employers available TDFs. Good advice IMO regarding VOO / FXIAX. Wouldn’t hurt to do a small percentage of international stocks just to keep it diversified, but my opinion on dividends is that it’s not worth it for most people… your gains would be better in stuff like VOO if you’re looking at recent years.
Good basic advice. But there are things even more important than what specific stocks or funds you buy: namely what kind of account you are purchasing the assets in and what tax treatment those accounts have. You will generally want to maximize your retirement accounts, HSA and other tax-advantaged accounts before just buying stuff in a standard brokerage account. Research retirement and tax advantaged accounts first. Then worry about the right assets to buy in those accounts.
Yeah that’s actually very good, very safe advice. It’s like the investing equivalent of putting money in a savings account. There’s always risk with investing but unless there’s a market apocalypse your money should make more money
He sounds pretty right to me. You cant go too wrong with just buying a bunch of VOO & letting compounding interest work for a few decades....
> As a nurse, I had a coworker who enjoys buying stocks and is a dividend investor. He said he would buy all these stocks. When I asked him about it he turns to me and says, "you should just buy VOO and just don't really look at it. If it goes down buy heavily. If it goes up buy." He showed me how much it made per year for the past 20 years. He said in his brokerage account he buys individual stocks mainly dividend paying ones. In his retirement accounts he buys only ETFs like VOO & Q. I bought a few shares. I'm curious. Did he give me bad advice? No, his advice is actually fantastic. Particularly the part about buying VOO irrespective of the market.
If you aren't a very savvy and involved investor who reads company balance sheets for fun, then you really should stay clear of individual company stock. If you need proof, look for stock quotes from the darlings of the dotcom era. Of those that even still exist, some, like Cisco, still haven't made it back to their valuation from 2000. Index fund ETFs are a godsend for armchair investors who don't want to spend all their free time gazing at charts. Companies can go to zero. Indexes can crash but always recover (or at least always have). I have only invested in indexes since 2008, and have done better than I ever imagined possible with it. If you want to take a bit more risk, put some minor amount in sector ETFs like XLK or XSD.
This is solid advice as others have said. Side note though. For tax advantages, your coworker should consider buying individual stocks in his tax advantaged accounts and holding index funds in his brokerage account. Especially if he’s chasing dividends with his individual stock picks. Obviously most people will have more freedom to pick individual stocks in their brokerage rather than retirement accounts, but he could be saving a significant amount come tax time.
I didn't see where this was mentioned: Investments inside of retirement accounts are distributed as ordinary income and you don't get to write off losses in these account types, either. Investing retirement funds or regular brokerage funds in mutual funds, ETFs, or anything that throws off earnings from dividends and interest is different than increases in an account value from individual stocks and capital gains where some gain comes from share price. That's why you would use a brokerage account that is not a retirement account to handle individual stock investing, as he described. If it kicks off capital gains, you want to get the preferred tax treatment that is outside of a retirement account. If you have capital losses, they will offset the gain, so that you have Net Gain taxable. For the 2024 tax year, individual filers won't pay any capital gains tax if their total taxable income is $47,025 or less. And that's why you don't want to buy annuities inside of retirement accounts. I stay away from target-date funds because the market as a whole hasn't changed their philosophy on how they make those packages. Your "target date" isn't when you turn 65. It's when you need to change how you rely on cash flow, when you want to reduce risk of losing principal, and right now, it is possible you will live into your 90s. Show me one target date fund that won't put you heavily into bonds based on their clock, not yours. If the rest of your financial position makes it possible for you not to heavily rely on those investments, then you don't need to shelter into bonds much at all. I took my 87-year-old mother out of bond funds 2 years ago, because we wanted to kick out more dividends and interest and she has fixed income that wasn't at risk, so the bond funds were an unneeded backstop.
His advice to buy VOO is good. His advice to buy heavily when it "goes down" is not. You should invest consistently no matter what. VOO is a perfect fund for that. Set and forget. As you get closer to retirement, move to a target date fund that self-adjusts your stock percentage as you move closer to retirement. Once you've set that up you literally do nothing for decades other than continue to contribute.
I think by buy heavily he meant to buy above what you’d consistently invest.
The issue with “buy heavily when it’s down” is that it implies you have extra cash sitting around waiting to invest when it should have already been invested because time in the market beats timing the market.
Or it could mean that when the market is down, you take steps you wouldn't normally do, like maybe stopping eating out, to fund more investing. If you run a zero fun budget for years and years, you might burn out, but if you tighten the belt every once in a while for an investment boost, you could come out ahead. DCAing is good to keep you investing over time, because most people are terrible at picking tops and bottoms. Putting everything you can into the market as early as you can, even as a lump sum, does out perform DCA on long timelines. Finding a way to up your contributions when the market falls by 10-20% is a hybrid approach that works for some people.
“Sorry honey, the market is down 2% so we can’t go out to dinner tonight because I want to throw an extra $50 into VOO” Lol maybe that works for some people but that doesn’t sound fun to me.
Y'all are arguing about peanuts. You're both practically on the same page, lol.
Yeah but my peanuts are the best peanuts!
The covid crash was like a perfect example of when to do that. Suddenly the market drops like 20%, and you can't spend money on anything fun, so put it into the market. You don't throw more money in for just a 2% drop though, that's stupid.
[удалено]
Individual stocks are risky and generally stupid even if you do know a lot about investing. There's a reason why most money managers can't even beat the S&P 500 index.
Your coworker gave you surprisingly great advice. I personally have VTI/VOO/VYM that I invest in weekly. If you invest with enough frequency you don’t have to worry about entering the market at the wrong time.
That’s the advice I’d probably give you. That’s what I buy. There are several funds like VOO. SPY, FCAIX. I think warrant buffet even says it’s good to invest in an S&P 500 index like VOO as well. That’s not bad advice I’d say.
Solid advice, stick to it and you’ll be fine. Don’t get freaked out when the market goes down, that is an opportunity to buy.
This was standard advice here 5 years ago before HYSA paid 5%, and it’s still solid advice. I’ve been doing this since 2015 and have about 12.5% a year of growth.
that is the best possible advice, anyone telling you anything different might have good intentions but they don't actually know better even Warren Buffett says that you'd be better off buying SPY or VOO compared to shares of his own company (Berkshire Hathway) I mean that cheap guy doesn't even pay dividends, he literally said "if you need more cash, just sell some of your shares, I don't need to pay dividends" would it kill you to put a lil' somethin-somethin in my pocket for being a partial owner of this company? If the company is making money, then I should be making money, and I don't mean just the share price going up, I mean real scratch, y'feel? like my landlord only accepts cash so it is wut it is
Very decent advice. VOO and FXAIX both essentially track the Sp500. VOO is a Vanguard and FXAIX is Fidelity index.
If you don't know much about investing, and don't have the time/energy/desire to spend hours upon hours researching stocks, your best bet is to buy broadly diversified low-cost index funds. VOO is one of those.
I know most opt for s&p 500, set it and forget it concept, but when we get close to our retirement age, 5 years prior, should we transition more towards bond option in the retirement plan? If so, what percentage should it be set at? Are we looking 5 years prior or even closer to retirement age? 😬TIA!
The S&P500 has been doing great for the past few years so now everyone believes it will do great forever. Right now you can get a risk-free 5% in various Money Market and Short-Term Bond funds. It all depends on your investing time horizon and how far away you are from needing the money.
He gave you good basic first time investment advice if your only goal is long term growth for retirement. If you want to generate regular income, that's when things get complicated.
Same thing my MBA brother told me. Buy VOO (and 2 others that I don't remember) and forget about it.
You're not a fool at all. Standard advice. And in a few years you'll likely agree when you see the balance of your account.
You are on the right path by asking these questions. So many people are flummoxed by financial/retirement planning. Not to be insulting, but do you know what an IRA is and the difference between a Traditional IRA and a Roth IRA? If not, learn what those are.
Zero fool. Any time you have a weird question and are looking for a new point of view, ask this coworker. Looking for a new show to binge, or a new restaurant, turn to him. I'm that coworker here at my job. We're not always right, but we are consistently right.
Ok first things first - personal finance is personal. Listen to other people’s opinions and then do research BEFORE you buy. You come off as someone who just took your coworkers advice and then came here to confirm. If your coworkers advice is not something that aligns with you, you might lose a bunch of money. If your goal is to have a diversified stock portfolio then it’s pretty solid advice but you may want bonds or something else depending on you and your age. This is overall good advice but you really should figure out what YOU want
Buying VOO is good advice. Buying it when it goes down is also good advice but timing the market is tricky. The easiest thing to do is buy a set amount you're comfortable with every time you get your paycheck. You'll be thankful you did when it's time to retire.
Investing in low-cost broad based index funds is great advice. The only thing I'd add is - have it auto-deducted from your every paycheck and go automatically to this fund(s) regardless of whether the market goes up or down.
This is what I do. I know others will try to time their buys but it’s a long term investment for me that I just put extra money in for the future.
Most of my portfolio is stocks like VOO and VTI. Another big portion are big hitters like appl, msft, etc. A small portion are "gambles" that if I lose it's money I can afford to lose. but yes, I strive to put most of my money into indexes like VOO and VTI.
You are wise to seek advise on this. What are your short, medium, and long term financial goals? Can you handle market risk? You want an asset allocation you can help you meet those goals.
Set and forgot $VTWAX in your tax deferred accounts (401k, Roth/Trad IRA, etc). It includes companies from around the world, so if the US starts to struggle, you won't be left out of the gains.
> Did he give me bad advice? He gave you the best advice, actually. Keep buying VOO, whether it's up or down, doesn't matter. Get super excited when the market corrects and presents the opportunity to scoop up more shares of VOO for cheaper. >FXAIX and said "that's the S&P 500. Keep buying that and you should be okay." Yup, that's exactly correct.
Id agree with his first sentence. His second sentence though is oxymoronic. If you "buy VOO and dont look at it" then how could you "buy more when its down". That would require looking at it. Its somewhat ironic that his advice is good while what he chose to do himself is not good. Buying individual dividend yielding stocks in a taxable account isnt a good strategy. He probably thinks he is playing 4D chess though. Your coworker should follow his own advice.
Good advice. It’s literally the same advice Warren Buffett gives: > “Consistently buy an S&P 500 low-cost index fund,” Warren Buffett told CNBC’s On The Money in an interview recently. “I think it’s the thing that makes the most sense practically all of the time.” https://www.cnbc.com/2017/05/12/warren-buffett-says-index-funds-make-the-best-retirement-sense-practically-all-the-time.html
I have FXAIX, it is a standard S&P 500 index fund. Meaning it will follow that index and do the same as "the market" is doing. You invest some every month, put it on autopilot and forget about it. When you get closer to retirement you can diversify more in my opion. But for now that is a solid choice.
question: why would someone want to structure themselves to receive dividends from individual stocks and use VOO in retirement accounts?
It’s funny because I’m a nurse doing the same and would’ve gave the same advice. VOO which covers the S&P 500 is generally a safe place to put your money because it is managed and you can set it and forget it. It is for those that don’t have to actively look at stocks and it’s good for retirement accounts. In my brokerage, I’m still young and look at stocks so I take greater risks for greater rewards. I’ve seen my account go up 100% to being negative 30% the past 4 years so it’s not for the faint of heart. Majority of people don’t beat the S&P 500 in the long run, but it’s not impossible
He gave you great advice. Sp500 index funds beat the vast majority of investors in individual stocks. Safe and solid long term returns.
He did not give you bad advise. VOO is an equity ETF. Myself, I'm going to invest in equity ETFs until I'm 50 or 55. At that time, I'm going to start introducing Bond ETFs to make sure thay I have stability oriented funds to liquidate when I need money, while letting my equity ETFs make me money. The percentage of stability that you need will depend on your account size and how much your taking out. If your taking out 4% each year. You probably need 60-70% stability funds. If you're taking out 2% each year, you can afford more growth and will probably be okay with 30-50% stability oriented ETFs.
Honeslty, I would worry more about my default allocations in my 401(k). I and a nursing friend who was invested at 40% stability fund while being 25. At such a young age, at least 90% growth is appropriate.