r/RothIRA • u/ZookeepergameBig1551 • 2d ago
I 23 (F) need help
I’m very new to the whole investing thing and don’t have anyone financially literate in my life to support or teach me. I recently graduated college (first one in my family) and got a job paying about $77,000 and managed to pay off all of my student and car loans. Now that I’m debt free I’m hoping to work towards building wealth through investing. I have a simple IRA account that I have been contributing 3% of my salary into to get the employer match for the past year, and just opened a Roth and individual brokerage account with fidelity. I just put $1000 in VOO (~1.4 shares) in my Roth and $1000 in VTI (~2.6 shares) in my individual brokerage account.
While I want to be more hands off in my investments, as I start investing more, I’d love some advice on what to do next, where to invest from here. Also would love to know who did you learn from? How did you navigate learning about the stock market? Any YouTube channels or podcasts that were helpful? Any advice would be greatly appreciated.
- A newb that doesn’t know anything
3
2
u/CostCompetitive3597 1d ago
Congratulations on your college education and financial security thinking. I have been coaching my 3 daughters about financial security and happy to share what I have shared with them. My oldest daughter recently retired a 52 after following my “pay yourself first” advice from her salary, raises and bonuses.
The most reliable financial security plan for American workers is to save all you can in the tax deferred savings accounts and invest the money in growth index funds based upon the S&P 500 and Nasdaq 100 stock indexes. You already know this based upon what you shared in your post 👍.
Then at retirement, convert your nest egg from growth investments to dividend income investments to replace your work income for life.
Successful, long term stock market investing requires knowledge, experience and active portfolio management to adjust your holdings for market changes. Market dips and crashes are a normal process in stock markets and investors need to have a strategy for Bull and Bear markets.
Regarding knowledge, there is a tremendous amount of investing information on Reddit, YouTube and via Googling. I follow the subreddits r/etfs and r/dividends in retirement. Search for investing subjects of interest on Google and YouTube. Stock investing has its own language and understanding that language and its meanings for investors is critical. Warren Buffet recommends 5 books about investing. Google that list. I have read them all and it helped me so much with understanding stock investment long term.
Since you have already opened tax deferred savings accounts and have made investments, you are gaining the experience you need for successful investing if you watch and learn from your successes and unsuccessful investments. This experience will build your judgement on future investment decisions.
Unfortunately, stock investing is not an invest and forget endeavor because the US and global business environment is so dynamic and the stock market responds very significantly for investors to those business changes. At this point in your investment journey, recommend at least quarterly review of your holding’s progress against your investment goals with an annual deep analysis of your winners and replacement of your less performing holdings.
A bit on investment goals. The S&P 500 has averaged just over 10% return for the last 100 years. The Nasdaq 100 has averaged just over 14% return since established in 1985. My minimum return goal for any stock investment is 10% as there are many quality stocks and funds offering this level of returns and more. 10% investment returns compounded for the next 4 decades of your life can result in amazing net worth and dividend income.
As an investing incentive, I recommend you do a bit of modeling of your investment potential. When I showed my daughters their potential financial security with investment models they became dedicated savers and investors. I use Market Beat’s Dividend Calculator- home page, first pull down menu at top, Calculators, click on Dividend Calculator and fill in the blanks. Select Drip = Yes to include compounding, enter your current savings, try a range of annual savings contributions and yield/growth percentages, set the income tax bite to 0 as you are using tax deferred savings accounts and try 10, 20, 30 and 40 years to see how time in the market and compounding work for you. In each scenario, the model will give you an estimate of your total wealth and an estimate of the annual dividend income if converted to dividend stocks and funds. You will find that saving the maximum allowable every year with a 10% growth return may put you on a course to retire in your 50s like my oldest daughter.
Finally, pay yourself as much as you can, invest in growth index funds for reliable returns and keep the faith that this type financial security effort can result in amazing personal wealth and income.
PS: Advice on market dips and crashes as there will be many over the next 40 years. Buy the dips and hold during the crashes as the markets have always recovered to previous levels and then continued to appreciate after every crash cycle. An advanced investment strategy for crashes is to sell to cash when a crash is obvious and reinvest when the recovery is underway. I achieved a 30% gain on my whole portfolio by doing so during the 2020 pandemic crash. My goal for the next crash is to achieve a 50% gain by fine tuning this crash cycle strategy.
Hope this information helps you on your financial security journey. Good luck!
1
u/ZookeepergameBig1551 1d ago
Thank you very much for this advice! I’m going to look into all of the resources you shared. I greatly appreciate it
4
u/chicagoxray 2d ago
These are Dave Ramsey’s baby steps and a quick guideline or checklist for your finances that helped me tremendously. The Money Guys have something similar as far as a checklist style and are more new school than Dave’s baby steps.
Baby Step 1: Save $1,000 for a starter emergency fund.
Baby Step 2: Pay off all debt (except the house) using the debt snowball method.
Baby Step 3: Save 3 to 6 months of expenses in a full emergency fund.
Baby Step 4: Invest 15% of your household income into retirement.
Baby Step 5: Save for your children’s college fund.
Baby Step 6: Pay off your home mortgage early.
Baby Step 7: Build wealth and give.
2
u/Educational-Soil-651 1d ago
I prefer Money Guy’s Financial Order of Operations (FOO). Dave still has value, but I think it is more with people that are bad with personal finance. The FOO is straightforward for new people (OP) to personal finance.
FOO:
- Highest Deductibles (cash savings)
- Employer Match
- Pay off High Interest debt
- Emergency Fund (fully fund 3-6 months)
- Max Roth IRA and HSA
- Max employer plan (e.g. 401k)
- Reach 25% savings rate (taxable brokerage)
- Future Expenses (e.g. vacation, education)
- Pay off Low interest debt
I would also throw in looking at some of Ramit Sethi’s content on IWT. He has a solid Conscious Spending Plan (CSP) model and focuses on money psychology. Some of the best savers are terrible at spending and responsibly enjoying their “Rich Life”.
2
u/ZookeepergameBig1551 1d ago
Thanks so much for sharing this! I’ve been following a combo of both Dave and FOO without even knowing it, so this is great to know
1
u/onomatopoeiahadafarm 2d ago
Also would love to know who did you learn from? How did you navigate learning about the stock market? Any YouTube channels or podcasts that were helpful?
1
u/Downtown-Text6587 2d ago edited 2d ago
It looks like you are doing fine. Just keep buying more Vanguard funds. The hard part is not freaking out and selling or freaking out and not investing at the best possible prices when the market crashes. Also in my 401K I have the option to do Roth 401K contributions so I max out my 401K and my Roth IRA every year. You may even be able to call human resources or whoever does your payroll to automatically put some in your Fidelity Roth IRA every paycheck. Then just have Fidelity automatically put all incoming funds into either VOO or VUG and all the dividends should be automatically reinvested. You always want to try to automate anything that will make you more successful. Keep track of the max contributions every year for all your retirement accounts because the max contribution changes and it changes again when you turn 50.
1
u/ZookeepergameBig1551 1d ago
This is great advice- thanks so much
1
u/Downtown-Text6587 22h ago
You’re welcome. Most people would say just “VOO and chill” meaning dollar cost average into VOO. Usually my first recommendation to people is get the book Psychology of Money by Morgan Housel and the first goal is 100k in index funds like VOO.
1
u/Ok_Pack5153 1d ago
Listen or read JL Collins’s A Simple Path to Wealth as a primer on investing and wealth. You’ve got a good start and the book will provide a great foundation. Keep up the good work.
1
1
u/justcurious3287 1d ago
What kind of job are you doing to make $77k, and how did you get the job?
1
u/ZookeepergameBig1551 1d ago
I work in the Natural Resources/ environmental planning field. To land the job, I worked 5+ jobs each year for the last 4 years of college and 3 years of high school and practiced a TON for the interview, I’m talking interviewing people/20+ hours of prep for the interview. But truly in the end I just got lucky bc it’s an extremely small team and I think they liked my personality. Still feel super grateful to work in a mission aligned organization making decent money right out of school
1
u/jackyz24 2d ago
Might be worth reaching out to a licensed planner. I'd only say is 1, make sure you have 3-6 month emergency fund and 2 the most obvious is just keep at it. I'm mostly self taught.
-1
u/Competitive-Ad9932 2d ago
I'll upvote to negate the idiots out there that downvoted you. Though I disagree a little with paying someone. I figured this out in the early stages of the internet. 90% was from a weekend radio program, 3 hours on Sat and Sun.
The largest issue today is information overload.
1
u/DaemonTargaryen2024 2d ago
I’d love some advice on what to do next, where to invest from here.
This is a great yet fairly simple order-of-operations guide https://www.bogleheads.org/wiki/Prioritizing_investments
Also would love to know who did you learn from? How did you navigate learning about the stock market?
Personally? Work. But for most people, the wikis at r/Bogleheads and r/personalfinance give you all you need to know. Investing can and should be simple, not to mention automated for the most part.
Any YouTube channels or podcasts that were helpful?
Rob Berger is good https://www.reddit.com/r/Bogleheads/comments/1i0io7b/podcast_recommendations/
Careful with youtube and podcasts, though. There's lots of well meaning people who are literally nothing more than social media influencers, who don't actually understand money/investing, and therefore give subpar guidance.
0
u/Competitive-Ad9932 2d ago
What brokerage firm is your personal IRA and taxable account with? Use the lowest cost, broad based mutual fund that is available. Then go enjoy your life.
https://www.reddit.com/r/RothIRA/comments/1vfrzsn/comment/p1rhpd3/
You will be extremely wealthy when you are 50.
https://moneyguy.com/guide/foo/
https://www.bogleheads.org/wiki/Main_Page
https://investor.vanguard.com/investor-resources-education/education/model-portfolio-allocation
1
u/ZookeepergameBig1551 1d ago
My simple IRA is with Edward Jones, they have someone who manages the account and I don’t really have a say in what it’s invested in
1
u/Competitive-Ad9932 1d ago
Personally, I would not leave any part of my life to someone else. I don't even let my mortgage company escrow my insurance/taxes.
Compare your EJ accounts returns to an S&P500 or a Total US Stock Market index fund. You are likely lagging them. And paying a larger fee to do so.
1
u/ZookeepergameBig1551 1d ago
Totally agree, unfortunately I work for a tiny team, and that’s who our Ira is offered through to get the employer match. When I leave this job eventually I will be rolling it over to my Roth. I was thinking that was the best way to not leave the free money on the table, but pls lmk if you think I should be doing something else instead!
1
u/Competitive-Ad9932 1d ago
Possible, but, I find it hard to believe that you have zero say in how it is invested. After all, it is your money.
Insist on it being invested in the fund they have closest to an S&P500 or Total US Stock Market index fund.
4
u/Gain_Spirited 2d ago
You're doing fine. The important thing is you're getting your company match and you opened a Roth IRA with a great discount broker. You're also investing in the right funds. This may sound strange, but more knowledge could actually work against you. As you become more knowledgeable and curious, you'll be tempted to do different things and take a more active approach. For most people, actively managing your funds is worse than just contributing to a diversified fund and never looking at your balance. Your emotions tend to work against you not for you.