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Old 06-18-2013, 09:45 AM   #21
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VTSMX is the way to go. You have over 3,000 stocks to diversify verus buying individual stocks will take time to research. The div is taxed at a beneficial rate so I don't see much of an issue. Once you have 10K or more you can save on expenses by converting to the admiral class without any tax hit. Don't forget to add some international to diversify, VGTSX.

As long as you live way below your income, you are on your way to early retirement.
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Old 06-18-2013, 10:49 AM   #22
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Wow, I was not expecting so many excellent responses! Thank you all for contributing to this thread, really appreciate it. I started reading the Four Pillars book and am 100 pages in, I took a lot of notes and really like the content. I decided to purchase a home because the market is at an all-time low here in Arizona and I was able to pick up a short sale for half the price it was built for in 2009. I already have around $40,000 in equity according to appraisal after five months of ownership. Apart from this, I will start with $5,000 in the VTSMX based on glowing reviews from all of you. I'll also look into some international stocks with VGTSX. I do live well below my means and I track all of my expenses and set monthly goals for savings, this really keeps me on course to achieve my financial goals.

As far as retirement funds go, my focus is to have a substantial amount of money in the next 10 years. I know a lot of people may think this is unreasonable but at the pace I've gone (saved almost $100,000 cash in a very short period of time) I feel it is possible. Nothing against the longer term route, it's just not for me and I will take risks to avoid it. With this approach, focusing on short-term investments seem to be my best bet. Apart from VTSMX and VGTSX and a few personal stocks, are there any other investments I should be looking at? I've looking into purchasing another home or a condo, but I'd like to avoid that at the moment as I want to look elsewhere for other investments and the market is tough here right now.

As far as my employee stock program, I'm very surprised at the comments here. I always thought it was a for sure thing and a no brainer with the returns I've been getting. The company I work for is a Fortune 100 company and has a pretty steady stock price. With this information, do you still feel I should sell and diversify my portfolio instead? I contribute $400 a month or so to the EPP program, this money could be used elsewhere. Also, annually I am granted stock options.
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Old 06-18-2013, 11:23 AM   #23
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Just make sure your company stock doesn't go over 10% of your total net worth. Keep in mind Enron and Worldcom were once dominant in their industries. A lot of employees were wiped out by Bear and Lehman. Since no one knows the future, better to diversify.

I tried to trade stocks for short term gains but they keep coming up as short term losses. So I can't assist with that part. But longer term has really worked out for me and wife.
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Old 06-18-2013, 11:46 AM   #24
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Per Yahoo, VTSMX has a 1.89% yield, a dividend that subjects its holders to tax annually. For a holding company like BRKB, for example, Warren Buffett prefers to not pay dividends but rather reinvest the dollars for more growth, thus deferring taxes for owners of that stock.
I agree with LOL! that there is no convincing reason to avoid VTSMX in favor of purchasing your own individual growth stocks. I have owned VTSMX in my taxable account for almost two decades now and have paid virtually no taxes on it. It hardly ever generates a capital gains distribution, and when it does the amount is tiny. As for dividends, the yield is small and my recollection is that it has always been 100% qualified dividends, which gives favorable tax treatment.

If you think you have some special talent for stock picking, I suppose you might want to put together a portfolio of individual stocks. But the risk is high that you will be overestimating your talent for stock picking and end up worse off than if you owned a diversified mutual fund like VTSMX. But the negligible amount of taxes you're likely to owe from owning VTSMX is not, in my opinion, a particularly good reason to avoid the diversification it provides.
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Old 06-18-2013, 01:38 PM   #25
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Good financial advice has been given. Just don't forget to enjoy your life now. You are young with money and wanting to retire. You will most likely end up retired wishing you still were young with money.
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Old 07-27-2013, 11:46 AM   #26
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Ok everyone, I'm ready to open up my Vanguard account. Is it ok to start investing now or shall I wait? I was told by a few friends in the business to wait as right now is not a good time. Thoughts on investing $1000 per month into my VTSMX? I would be fully funding my 401k and my 5% SPP as well.
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Old 07-27-2013, 12:21 PM   #27
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The best time to invest is when you have the money.
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Old 07-27-2013, 12:22 PM   #28
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The best time to invest is when you have the money.
That is sound advice, I will go by that. Do you feel $1000 a month is too aggressive for an index fund or shall I be adding more of those funds into my savings?

Or shall I diversify with $700 VTSMX and $300 VGTSX.
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Old 07-27-2013, 12:49 PM   #29
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That is sound advice, I will go by that. Do you feel $1000 a month is too aggressive for an index fund or shall I be adding more of those funds into my savings?

Or shall I diversify with $700 VTSMX and $300 VGTSX.
Do whatever you like. There are many valid answers to your question, but they often differ, Though not here, this is the home of invariant asset allocation and no timing.

If you ask a priest whether you should sin, what answer would you expect?

Ha
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Old 07-27-2013, 12:51 PM   #30
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Do whatever you like. There are many valid answers to your question, but they often differ, Though not here, this is the home of invariant asset allocation and no timing.

If you ask a priest whether you should sin, what answer would you expect?

Ha
Can you please elaborate? Thanks!!
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Old 07-27-2013, 02:44 PM   #31
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Can you please elaborate? Thanks!!
Practically the entire Fire and Money section elaborates this. It is a matter of judgment, perhaps I am wrong.

Ha
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Old 07-27-2013, 07:22 PM   #32
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In my opinion you can never start too soon or invest too much. Remember, however, it the market tubes, keep investing. Consider a market going down a chance to buy stocks cheap. When the market goes back up you really win. Good luck.
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Old 07-29-2013, 03:08 PM   #33
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That is sound advice, I will go by that. Do you feel $1000 a month is too aggressive for an index fund or shall I be adding more of those funds into my savings?

Or shall I diversify with $700 VTSMX and $300 VGTSX.
Please read this:

Bogleheads® investing start-up kit - Bogleheads

I suggest you also join that forum. Lots of experienced, knowledgeable people to help you.
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Old 07-29-2013, 03:16 PM   #34
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In my opinion you can never start too soon or invest too much. Remember, however, it the market tubes, keep investing. Consider a market going down a chance to buy stocks cheap. When the market goes back up you really win. Good luck.
In Bogleheads speak: "Stay the course."
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Old 07-29-2013, 04:39 PM   #35
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Not sure if it's in our booklist or not but I just finished Amazon.com: Can I Retire? How Much Money You Need to Retire and How to Manage Your Retirement Savings, Explained in 100 Pages or Less eBook: Mike Piper: Books . A lot of sound info that I really agree with. It was a freebie Kindle download a month or two ago.

I'm in the camp for VTSMX over individual stocks, and going ahead with investing a monthly sum now. VTSMX is pretty tax efficient and dividends at 15% aren't such a bad thing. I'm not a market timer so I believe in keeping my money invested and investing new money immediately. I've seen too many times when the good times kept rolling and I'd have missed out on upswings waiting for a dip to buy in on. However, if you decide you'd rather try to buy in only at more opportune times, that's your business.

I've gone both ways when I had ESPP shares. The thing is, you're already reliant on the company for your job, plus the stock options, so keeping ESPP shares really put you at risk if the company does fall on hard times. Continue staying enrolled in the ESPP, but consider selling as soon as you get them for the quick 15% (maybe more, depending on how they are set up and if the stock went up during the holding period) return. I rode my company's stock to FI, then lost over half of my net worth when it tanked. And this was also a solid Fortune 100 company. Diversification is a good thing. Hold it if you like, but understand the risks you are taking.

I wouldn't advise a second job unless it's something you'd really like to do. Some might like bartending, for example, or maybe you can do some independent contracting as long as it doesn't conflict with your primary employer. However, you might find that focusing on doing well at one job will get you promotions, bonuses, and more stock options and increase your wealth more easily than a second job will. Plus you'll probably maintain your sanity and not burn out.
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Old 07-30-2013, 08:15 AM   #36
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AZFI20, I think you are in an incredible position for your age and well on your way to FI very early in life. Just keep on learning, seeking your goal and staying the course.

However I don't think you are truly in the fast lane. For you to be in that type of situation you need to develop an invention, start a business, write a very successful novel, etc. Something that can get you millions of dollars in a few years. Much easier said than done. There is a book called The Millionaire's Fastlane that presents this situation.
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Old 07-30-2013, 08:22 AM   #37
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Ok everyone, I'm ready to open up my Vanguard account. Is it ok to start investing now or shall I wait? I was told by a few friends in the business to wait as right now is not a good time. Thoughts on investing $1000 per month into my VTSMX? I would be fully funding my 401k and my 5% SPP as well.

The only way to get to the fast lane is to get on the road to begin with! Put the money to work and forget what anyone else says!
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Old 07-30-2013, 09:44 AM   #38
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That is sound advice, I will go by that. Do you feel $1000 a month is too aggressive for an index fund or shall I be adding more of those funds into my savings?

Or shall I diversify with $700 VTSMX and $300 VGTSX.
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Do whatever you like. There are many valid answers to your question, but they often differ, Though not here, this is the home of invariant asset allocation and no timing.
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Originally Posted by azfi20 View Post
Can you please elaborate? Thanks!!
If you read The Four Pillars, you should be armed with these answers yourself. What did you learn about asset allocation and the various asset classes from that read? About investing vs speculation/gambling?

You have the income & saving discipline well established, congrats. Now you need to understand investing - that does not mean asking others wholesale what to do, while there is a predominant IPS here, there is still no one universal right answer. You need to be comfortable in your understanding of asset allocation, asset classes, risk vs reward, your risk tolerance, etc. AND the have the discipline to stick to your plan when the market overreacts to the downside and the upside, as it most certainly will periodically. Most people fail on the discipline and let their emotions override their heads - understandably if they don't have a solid foundation in the above.

There is no silver bullet, here or anywhere else.

With your credentials, there is no reason you can't cultivate the investment savvy needed to manage your own portfolio, and the Four Pillars is a great foundation IMO. Best of luck...you're way ahead of me at your age and I was still able to retire on a "fast track."
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