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Should I keep investing in Total Stock Market Index?
Old 03-18-2011, 12:15 PM   #1
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Should I keep investing in Total Stock Market Index?

Hi Everyone,
This is my situation

Age:23
Salary:75k - Self Employed
Emergency Fund (3-6 Month) - Complete

Current Investments-
15k - Cash (ING Account)
10k - Roth IRA (Target Retirement 2050) (maxing out)
12k - Vanguard Total Stock Market (Admiral Shares) Taxable

- No Debt (Living with parents as long as I can )

I've been investing 3k a month in the total stock market index and recently reached the 12k mark. I am very open to aggressive investments because of my age. Should I keep investing in the total stock market index? Should I try something else.. Please help!
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Old 03-18-2011, 12:23 PM   #2
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You are on the right track. I'd keep doing what you are doing.
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Old 03-18-2011, 12:33 PM   #3
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I'd start branching out internationally. You could try the Vanguard all market ex-US fund as a next step to keep it simple. I'm a semi-dedicated slicer and dicer, so adding value and small-cap funds might follow that.
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Old 03-18-2011, 01:18 PM   #4
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I like what animorph was saying. You go with that.
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Old 03-18-2011, 02:10 PM   #5
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I would go 50/50 with S&P500 and SM/MID at your age.
Better question is "why aren't you feeding a SEP-IRA?"
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Old 03-18-2011, 02:56 PM   #6
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Better question is "why aren't you feeding a SEP-IRA?" BIG +1
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Old 03-18-2011, 07:01 PM   #7
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Agree with Animorph on getting some international exposure. I think that ex-US fund is actually an ETF, which is fine, or you could go with the Total International fund.

I don't see a need to add value and small stocks since those are covered in the Total Stock Market Index, unless you feel like you'll get a better return in those sectors and want to overweight them.

At some point later you could diversify some, but I would try to get > 100K to get into the admiral funds for the total/international funds.
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Old 03-18-2011, 09:27 PM   #8
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I would go 50/50 with S&P500 and SM/MID at your age.
Better question is "why aren't you feeding a SEP-IRA?"
Or a Solo 401(K)? You could be reducing your taxable income by $16,500 (elective deferral) + approx (20% of $75K = $15K) = $31,500. This might be too much, but it's available. You should at least use whatever tools are available to get your taxable income down below the rate at which you estimate you'll be taxed when you take your savings out. (If that makes sense.)
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Old 03-19-2011, 12:22 AM   #9
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Old 03-19-2011, 09:43 AM   #10
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Welcome to the forum. Make sure the parents do not feel taken advantage of.
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Old 03-20-2011, 09:18 AM   #11
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I always made a lot more money in real estate than in the market. Good time to pick up a good deal on your first house, or better yet, duplex if they have those in your area. If you are afraid of the housing market, then look at this page. Housing Bubble Graph: San Diego, California inflation-adjusted housing prices

I think an idiot could tell you when we are ready to see a bust or boom coming. Real estate is a lot easier, and more profitable than the stock market because you can borrow other people's money at four percent and leverage it 10 to 1 with a good mortgage.

Nothing nicer than having your house paid off when you are age 50.
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Old 03-20-2011, 12:30 PM   #12
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I always made a lot more money in real estate than in the market. . . . Real estate is a lot easier, and more profitable than the stock market because you can borrow other people's money at four percent and leverage it 10 to 1 with a good mortgage.
Maybe you'll be proven right. But real estate makes a lot of money when:
1) People's incomes are going up faster than their costs of non-real estate items in their budget. That's not happening right now, and it might not happen again for a long time. It was the general trend since WW-II, but maybe not anymore. Global competition, etc.
2) The government was making easy money available for mortgages--that pushed home prices up. Fanny and Freddy are in "some difficulty", and even the former boosters of universal home ownership now acknowledge that the prior government role was harmful. That ship has sailed.
3) "Everyone" agrees that housing prices can only go up. People today are a lot more sober/realistic about real estate values. They understand that the "greater fool" might be a long time coming.

That leverage cuts both ways, as folks now realize. If you've got 10% equity and housing values go down 20%, you didn't lose 20%, you've lost 200%.

Again, maybe RE will be a winner in the future, but for now I'll take assets that produce income and growth--companies. Either ownership of them (stocks) or debt they promise to repay (bonds). I'd be very reluctant to counsel a new investor to bet 100% on real estate. And if he/she buys rental properties to manage themselves, he/she should know that they've really bought themselves a j*b as well as an investment.
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Old 03-20-2011, 01:15 PM   #13
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I would add Total International.
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Old 03-22-2011, 05:35 PM   #14
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The question I'm going to ask is: What's your goal?

To retire by 40?
To buy a house?
To travel the world?
To go to Grad school?

This is going to affect your investment strategy somewhat. Money that you have allocated for shorter-term goals (home purchase, travel, school) should probably not be in the market. Put it in a money market account instead.

Oh, and your emergency fund? Does it cover the rent/mortgage on your parent's place, or comparable market rent in your area? Because since you're living with them, their emergency would be yours, too.

Good luck! And welcome!
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