Disclaimer: I am NOT a financial advisor. All investments are subject to risk and are not insured by the FDIC. I hold no responsibility with any investment decisions you make based on any of my articles.
I first made a post about starting your retirement fund on January 26, 2012. The take home message from my previous article: If you’re working right now, you need to be thinking about retirement.
I transferred my previous Roth IRA over from a brokerage
account to Vanguard on December 18, 2011. I haven’t looked back since. I don't have to deal with annual maintenance fees anymore. More importantly, I have much more control of my finances. Who better to look over your money than yourself?
The
stock market has been doing well lately.
Just look at this image tracking the year to date (YTD) returns on the
Dow:
Today,
the Dow closed above 13,000 points (13,005.12) for the first time since May
2008 and the S&P 500 closed at a milestone 1,372.18 points.
The
Dow Jones is a stock market index of 30 large publicly owned companies. The S&P 500 is an index of 500 large US owned companies. These
are the two indexes most commonly used to track the American economy. The S&P 500 is now up about 9 percent since the start of the year.
So what
does this mean for individual investors like myself? Take a look at
my investment returns over the last 2 months:
In a period of 2 months, I made $712.15 just for parking my money inside my Roth IRA. My money is being put to work for me with the least amount of effort possible.
Don’t
forget, I do not pay any taxes when I withdrawal money from this account in the future.
Let
me ask you again, have you opened your Roth IRA yet?
Which fund am I currently investing in for my Roth IRA?
Vanguard Target Retirement 2045 VTIVX
As I’ve mentioned before, I am a big fan of the simplicity of picking just a few funds and then sitting back as it continues to earn. Jack Bogle (founder of Vanguard) once said: “Simplicity is the master key to financial success. When there are multiple solutions to a problem, choose the simplest one.”
edit: this fund may not apply to you based on your age range / risk aversion / investment goals.
Which fund am I currently investing in for my Roth IRA?
Vanguard Target Retirement 2045 VTIVX
As I’ve mentioned before, I am a big fan of the simplicity of picking just a few funds and then sitting back as it continues to earn. Jack Bogle (founder of Vanguard) once said: “Simplicity is the master key to financial success. When there are multiple solutions to a problem, choose the simplest one.”
edit: this fund may not apply to you based on your age range / risk aversion / investment goals.
The
current YTD return of VTIVX is 10.10%; what interest rates have your basic checking or savings accounts yielded?
Yes
with some stocks you can make much more with one investment, but you could also
lose it all. Amazon stock has
increased 25% year after year.
Other stocks like Apple have returned much more. With high reward comes very high
risk. If you only own one stock
and then it tanks, you can go broke overnight. On the other hand, if you choose to invest in an index fund,
your portfolio is automatically diversified with hundreds to thousands of
stocks in the same basket. You’re
reducing your risk for a steadier payout.
According to Fool.com, one single factor may best predict mutual
fund performance. That factor:
fees. Remember, Vanguard has the
lowest fees in the industry.
Please also note that fees aren’t everything. To quote fool.com: “cheapness alone doesn't guarantee
success - but it does appear to be a necessary condition for success. So while
inexpensive funds should be a crucial aspect of your mutual fund search, you
shouldn't make cost your only criterion”
Also to quote fool.com: “According to research from Standard & Poor's, funds that
consistently outperform others in their peer group typically have long-tenured
managers at the helm. You want at least 7 years.”
As you can see, VTIVX's current manager has been with the
fund for over 9 years.
The
stock market is bound to go up and down over time, but the trend is always
up. Historically, we’ve seen huge
drops in the stock market: from the great depression, to the dot-com bubble, to
9-11, to the housing crisis, the downgrade of our triple A credit
rating system and recently to the Greek debt crisis.
Where is the market now? It’s up. When
should you start investing? Now.
The deadline to contribute (up to $5000) for the year 2011 is on April 17, 2012.
The deadline to contribute (up to $5000) for the year 2011 is on April 17, 2012.
P.S.,
here are some of Vanguard’s disclaimers, which apply to all investments and
which I will repost:
- All investments are subject to risk.
- Focus on long term performance and not short term market fluctuations.
- Past performance does not guarantee future results.
- Studies find that a buy-and-hold strategy is better than market timing (trying to figure out when to “jump in or out” of stocks and bonds.
- Consider consulting a tax advisor concerning your individual situation.
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