What should I invest in

[RedHawk]

Hello,

My name is Ryan. I am a 20yo college sophmore majoring in finance but may switch to accounting. I have lurked on the board for awhile and this this is my first post. I am planning on opening a Roth IRA at Vanguard in the near future and contributing 4k. What should I invest this money in. I am considering the Windsor fund and the 500 Index. I will probably also make a 2007 contribution and was also considering the small-cap value index fund. Are these good funds? Any other suggestions? Thanks for your help.

[wabmester]

Start by choosing your religion (Bogle, Bernstein, etc). Then choose your asset allocation and start building.

If you've already picked Vanguard, that makes you an honorary Bogle-head. Bogle would tell you to put it all in the Total Stock Market Index fund, which isn't a bad way to go.

[Ed_The_Gypsy]

Hi, Ryan,

Those are very good funds! You really can't go wrong with any of them. Great idea to put your money into a Roth, by the way! The Roth IRA is a gift from God, IMHO. Start one early and you will be a very happy man one day--sooner than you might think!

I just did a little checking up on them. In the past 20 years, it looks like there has not been a single calendar year (Jan-Dec) when Windsor beat either VFINX (S&P 500 Index fund) or VISVX (Small Cap Value--but only available since about June '98), although there were a few 12-month periods when it did.

Windsor is more conservative and less volatile, but has produced slightly lower returns over time. VISVX has had a good run up lately. VFINX has not done quite so good at the same time, but not bad.

You have to be honest with yourself about how much risk you can live with. That is, how far you can stand to see your fund drop. It is easy for me to tell you that they all will fall and they all will recover--but it might take 10 years (worst case)--but it takes confidence to stay invested during the long dips. It took me a long time to become that confident. (FYI, I am about 3x your age. ) Personally, I like small cap value for the long run these days, but it might give someone else the heebie-jeebies. You might be happier with Windsor for a few years. Whaddaya think?

In the meantime, you might cruise the older posts on this board and find some good reading material on investment (opinions, links, book reports, etc.--also some pretty bad jokes :P ).

So, welcome to the magic world of tax-free compounded interest!

Cheers!

the old gypsy

[Arc]

Welcome Ryan,
Congratulations on getting off to a great start. Your fund selections are fine - make the plunge. Since you are starting at such an early age and putting away significant amounts, you are beginning a journey will lead to much wealth. Enjoy!

[Rich_by_the_Bay]

Target Retirement Fund, maybe 2045. Set up your deposits and forget it for a couple of decades.

[RedHawk]

Gypsy,

I have a question about your post. How did the 500 index outperform the Windsor fund in most calendar years as you said it did? On the vanguard website, the Windsor fund had higher YTD, 5 year, and 10 year returns than the 500 index. Thanks

Ryan

[Ed_The_Gypsy]

Well..............

...I was using the new Yahoo finance feature for the first time and I think I stubbed my toe on it.

It looks like it only uses NAV and ignores reinvestment of distributions.

My bad.

Now I am wondering, if it doesn't show reinvestment, what good is it?

[straightening tie and shuffling feet...]

Regardless of my fubar above, they are still, all three, very good funds. If I were starting out and could pick only one, it would be Windsor.

[wabmester]

If you invest based on historical performance, then you need to compare funds based on similar assets.

For example, compare the performance of Windsor (Large Value) to Vanguard Value Index (Large Value). And then choose the index fund.

[cons]

Quote:

Originally Posted by rjpatt Hello, My name is Ryan. I am a 20yo college sophmore majoring in finance but may switch to accounting. I have lurked on the board for awhile and this this is my first post. I am planning on opening a Roth IRA at Vanguard in the near future and contributing 4k. What should I invest this money in. I am considering the Windsor fund and the 500 Index. I will probably also make a 2007 contribution and was also considering the small-cap value index fund. Are these good funds? Any other suggestions? Thanks for your help.

my younger brother ,17, started a Roth IRA this year as well. his 2006 4k contribution is going into VTSMX (Vanguard Total Stock Mkt Idx). his 2007 4k contribution will go into VGTSX (Vanguard Total Intl Stock Idx). it is, however, a bit large-cap heavy. if you decide to get into target retirement funds, i would suggest the T. Rowe Price TR funds. i think TRP is coming out with a TR 2050 or 2055 fund. TRP is a great fund family.

also, i would try to add some foreign exposure. the windsor fund, 500 index, and small-cap doesn't give you any intl exposure.


eddie

Quote:

Originally Posted by rjpatt Hello, My name is Ryan. I am a 20yo college sophmore majoring in finance but may switch to accounting. I have lurked on the board for awhile and this this is my first post. I am planning on opening a Roth IRA at Vanguard in the near future and contributing 4k. What should I invest this money in. I am considering the Windsor fund and the 500 Index. I will probably also make a 2007 contribution and was also considering the small-cap value index fund. Are these good funds? Any other suggestions? Thanks for your help.

You are doing very well to be thinking about this stuff at age 20! - All I was thinking about at age 20 were Women, Parties and Girls

So you are off to a great start. You can afford to be invested 100% in Stock Funds at this point in your life. Invest in good Stock Market Index Funds. Set it an Forget for 20 years or so. Then you'll have time to think about the important stuff in life. Women, Parties and Girls.

[RedHawk]

Thanks everyone, I decided to go with the Vanguard value index with my 06 contribution. Havent decided on 07 contribution yet. I do own the vanguard international value fund in my taxable account.

[Brat]

Your other investment is education. My daughter was a finance major, then got her CPA ticket punched. She had to hustle a bit to catch up on the accounting side, but... eh, it worked out very well for her.
Late in your Junior year start looking at the type of clients the major houses have in various cities. Those clients are likely to be your employer after a stint in public accounting.