Investment Plan for 25-year old

[sakowitzm]

Daughter #1 is 25 and has the basics covered -- good, steady job; able to save $3K-$5K/year; contributes 10% to 401(k); and has 6 months of expenses put aside. She has $40,000 additional and is ready to kick-start her investing life. She is fairly risk-averse, especially with the market at an all-time high. We talked about it and here's our current plan:

Open an account at Vanguard and immediately put half the money ($20,000) to work in Wellington. Stick the other half in a money market fund and move $1,000/month into Vanguard's S&P 500 Index fund.

Appreciate any thoughts/opinions on this approach.

 

[Jerry1]

I think that's a great plan. She sounds like she's off to a great start. You've probably already instilled LBYM and saving as much as you can but other than your plan, the best thing she can do (is doing) is saving young. She'll be a millionaire in no time. I'm sure you're very proud.

 

[pb4uski]

I think Wellington is way too much in bonds for a 25 year old. My 29 year old uses the Vanguard Target Retirement 2050 Fund... its ~90/10 and includes ~70/30 domestic equities/international equities and has a 0.16% ER.

What I would do is buy $4k of VFIFX and put the $36k in an online savings account... they will pay ~1.25-1.50%.... then a month later add whatever is necessary to increase the VFIFX account balance to $8,000... then a month later add whatever is necessary to increase the balance to $12,000... rinse and repeat increasing the balance by $4,000 each month until the $40k is fully invested... she'll buy more when prices are relatively low and less when prices are relatively high.

 

[RunningBum]

Is this retirement savings, or savings for a house, both, something else?

 

[Free bird]

Buy VTI for next 30 years. Spend the money for the next 30 years.

 

[FlaGator]

At 25, she should gut it out with 100% equity with money that is not earmarked for specific things over the next 5-7 years.

Doing so will help her understand her risk tolerance as she gets older, and she'll get valuable experience in dealing with the ups and downs of the market. If she can stay the course, she'll be money ahead in the long term. If she can't, she will learn young how to not worry about her investments.

 

[DrRoy]

Buy VTI for next 30 years. Spend the money for the next 30 years.

+1