Sunday, August 26, 2012

Making mobile investments with Vanguard

I’ve talked about investing with Vanguard before.  I prefer Vanguard for their low expense ratios, no account maintenance fees, and no load fees when it comes to setting up an IRA. 

Today I will talk about making mobile investments.  Vanguard offers several ways of making mobile investments that you can see here including: iPhone, iPad, and android devices. 
If you regularly follow any news, check out yahoo finance, or listen to NPR from time to time, you will always hear status updates on the stock market, including updates on how the DOW, S&P 500, and NASDAQ indices are doing.  These indices are a simple way to measure the performance of big companies trading in the US stock market. 

It’s fun to watch the market values go up and down in response to economic news in the financial world.  Market value fluctuations will have a direct effect on any investments you have, whether it's for your retirement or for any short term savings goals.  When you make an investment, you can either: invest in one lump sum, or dollar cost average.
Wikipedia defines dollar cost averaging as an investment strategy that invests equal monetary amounts regularly and periodically over specific time periods (such as $100 monthly for 10 months) in a particular investment or portfolio.

When you dollar cost average, you purchase more shares when prices are low, and less shares when prices are high.  The purpose of spreading out your investments is to lower the total average cost per share of the investment, giving you a lower overall cost for shares purchased over time.  It’s a safer way to invest that involves less risk.  Also, not all of us will have a large lump sum to invest all at once anyways.

As I’ve mentioned before in my article about retirement and your Roth IRA, I like to wait for the stock market to dip, allowing me to purchase more funds per dollar.  When the stock market drops, it’s like your mutual fund is on sale for a discount.  For example, when the stock market dropped 100 points last week, each share of VTIVX dropped by 10 cents, making each share slightly cheaper to purchase.  You can see other Vanguard target retirement funds here.

If you monitor the stock market and you’d like to make a purchase, you can use your mobile device to make an investment contribution to your retirement account.  

When I see the DOW drop by 100-200 points (same day or over a few days), and it’s before the close of the stock exchange, I like to login to my Vanguard iPhone app and make a quick investment in my IRA. 

You simply log in:
You can see your account main page:

Click on Buy:  
From here you can select which method of funding (checking or savings account) you'd like to deposit money from.  This page also tells you your current total Vanguard contributions and which year you're investing in, as well as the dollar amount that you can still invest.  

Remember that with a Roth IRA, you can only invest a maximum of $5,000 per year (if you're under 50 years of age).  

Then review and submit purchase:
That’s it.  The whole process takes less than 2 minutes to do.

I’ve only had my IRA open at Vanguard since Dec 2011, and the fund continues to slowly pay off.  So far I’m up over $1000 in investment returns in 8 months.  
Owning one single fund in my IRA may not be exciting or sexy, but it’s an extremely easy way to diversify your assets in over 6,000 US stocks and bonds and over 2,000 international stocks.

The price that you pay for a mutual fund is determined after the close of regular trading on the New York Stock Exchange, which is 4pm Eastern Time.  

You lock in your investment amount if you submit a payment prior to the close of regular trading

Note: diversification does not guarantee a profit or protect against a loss in a declining market.  However, you have a more likely chance of losing all your money in one individual stock versus owning thousands of stocks held together within a single fund.

If you're young and still have a few decades prior to retirement, dips in the stock market are excellent times to continue to invest.  With most investment companies these days, it's easy to make mobile investments on the go.  I use Vanguard.  It's up to you which company to choose, just make sure you're investing in yourself and your future.

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