Lucky enough to start young...need your guidance

[zdavies50]

I am 19 years old and due to wealthy grandparents/parents etc. I am fortunate enough to have received about 25,000 invested in various ways. I would appreciate advice to optimize these investments for long term capital appreciation.

I have direct control of 12,000, and currently have it invested equally between Vanguard's index funds VFINX (S+P 500), VIMSX (Mid-Cap), NAESX (Small-Cap), and VGTSX (total int'l stock market) for a total of 3,000 in each.

The rest of the money comes from 10,000 that was invested in MSFT in 1998...it did very well for a while, dropped back and has done very little in the last 5 years...it is currently around 13000 dollars, not a very strong investment.

What I hope to do is consolidate everything into my Vanguard account and buy and hold for as long as possible.

My Questions:

Are there any new options that I should add when moving the 13000 from MSFT to Vanguard (such as Total Bond Market Index, Emerging Markets, etc.?)

How should I distribute my money percentage wise between my 4 (or more if suggested) different index funds?

Thanks you very much for any advice

[Rich_in_Tampa]

Welcome aboard.

You are off to a great start and have obviously done your homework. No one will be able to tell you what to do with your MSFT, but that is a high percent of your savings in that one equity so conventional wisdom is that you prune it back, at least. You can do that in one lump sum.

One caveat, and then I'll let the experts take over: $25k must seem like a fortune to you now, and in many ways it is; but that is because of its compounding potential and your young starting age. Avoid any temptation to start dipping into it if you can. If we could give you a pill that lasted for 25 years which would make you forget you had it (after investing, that is), it would be good medicine.

Enjoy the board.

[sarahsays]

Congrats on starting early.

If you think you'll be tempted to spend any amount of the money, I suggest selling some of your stock position and taking a little ($500-1000) out to spend on yourself. That way you can buy something you really want and put the rest away for the long haul!

[rgarling]

I'd combine your sp500, midcap, small cap to Vanguard's Total Stock Market (VTSMX) since there isn't any advantage to your current breakout, and since this is a taxable account. There may be a slight advantage to increasing your international holdings slightly. When you sell your microsoft stock, holding some intermediate-term treasury bonds might be a good idea (maybe 20%), but it is hard to get excited about it. If you feel comfortable with 100% equities, I would do it. Just be ready to take a few 30% hits along the way.

[DblDoc]

1+ to rgarling on consolidating your assets into VTSMX. You are "recreating" it using the individual funds but at your expense:

Fund (ER)
VFINX (0.15)
VIMSX (0.21)
NAESX (0.22)

VTSMX (0.15)

Avoid bonds in your taxable account so wait until you have an IRA or 401k and then put them there. You don't have enough assets yet to be slicing and dicing. Just stick with VTSMX and a bond fund for now. You can add international later as well as any other slices you want (EM, REIT's, commodities, value tilt etc.)

DD

[zdavies50]

Thanks for all of the advice...i do already have about 500 dollars in a checking account for personal use.

Should i try to time a switch over to vtsmx? My guess is that it doesn't really matter but I just want to make sure.

Do you recommend vanguard total bond market index fund? How should I split percentage-wise between that, total stock market index, and total int'l stock market index?

[lhamo]

Do you have any earned income? If so, I would plan on selling off the MSFT and moving that into a Roth IRA in one of the vanguard funds mentioned above.

Congratulations on starting out young -- and smart!

lhamo

[rgarling]

Originally Posted by zdavies50

...
Should i try to time a switch over to vtsmx? My guess is that it doesn't really matter but I just want to make sure.

Do you recommend vanguard total bond market index fund? How should I split percentage-wise between that, total stock market index, and total int'l stock market index?

No need to time your exchange, but you should consider the tax implications. Vanguard total bond fund is good, but as suggested should be held in a non-taxable account if possible. (Vanguard intermediate term treasury fund is also good.)

Concerning your asset allocation, people get all wound up about it. Until you figure out what you really want to do, going 70% TSM and 30% international won't hurt you any. Add bonds when you get a non-taxable retirement account going. You will find that people will suggest something like 0% to 30% bonds for you.

[aida2003]

You're so young that I don't see any need for bonds right now unless you're super conservative.
Congrats for not wasting money from your well-off parents/grandparents.

[Bimmerbill]

Read "The little black book of common sense investing" by John Bogle. Easy read, not much math or other technical stuff in it.

Bottom line: index funds for the LONG term, the lower fees the better.

[crazy connie]

Others may give advice on what to buy. That being said, my suggestion as soon as possible is to open a ROTH IRA. If you work part time while in college and contribute the max (even if you spend down some of the gifted monies) your future will be ever so much better. Small steps now become great assets later in life!

[popowich]

I created a similar issue with too many funds in my IRA without knowing it. I did not have all of the OP's funds but I had some and also had the VEIEX. Thank you for the tip about VTSMX so I can use that for my IRA. Thanks!

-Raymond