Earlier in the year, I set the goal of opening a taxable investment account by my birthday. I was spending a lot of time researching Betterment and Wealthfront. It seemed like robo-investors were a pretty painless way to up my fairly pathetic investment game. Now that thirty has come and gone, here’s where things stand in my little part of the investment world:
Taxable Savings Account
I was going to take the plunge into Wealthfront because I wasn’t taking a very big plunge. My plan was to play with about $3,000 as a means of getting my feet wet. I cannot overemphasize how counterintuitive the risk of investing seems to me. But, alas, I know that squirreling away my dollars for cents isn’t keeping up with inflation or doing me any good. The peace of mind is nice, though. Regardless, Wealthfront hasn’t happened. At least not yet.
Then there was the Betterment option. Wealthfront made lots of promises about no/low fees for teeny accounts (read: mine), but I actually know–in the virtual sense–more Betterment users, and I’ve seen a few more blog posts favoring Betterment over Wealthfront. Still, I didn’t go that route either.
Instead, I went with option C. I opened up a Vanguard LifeStrategy Mutual Fund. While I think I might be able to find a lower-fee option through Vanguard, this LifeStrategy option ticked all the boxes for me. $3,000 got me in the game. There’s diversification, automatic rebalancing, low fund fees, and no account fees with online statements. Plus, I drank the Bogleheads Kool-Aid when I finished the book over the spring break. Setting up the account was a piece of cake. Vanguard continues to be ridiculously friendly and responsive to all of my inquiries, and the website is a font of information. I’d like to tell you that it’s been all sunshine and roses since I opened the account, but since the funds weren’t transferred until the end of the month, I’ve been stuck in the red. While that isn’t exactly the start I was hoping for, I am quite to have this goal crossed off my list.
Yes, I Have a Roth
We are still planning on maxing out our Roth IRAs for 2016. I do need to transfer money into that account soon. In the past, I’ve saved my money in regular savings and then transferred before the deadline. Because I’m still that nervous. And because a guaranteed 1% seems so exorbitant compared to a number with a negative in front of it. But truly, I know that this hesitation is only holding me back in the long run. So, for my next goal, I’ll deposit this money more consistently rather than one lump sum at the end of the year.
No, I Don’t Have a 403(b)…Yet
When I tweet about my investment follies and fears, I get a lot of advice about opening a regular IRA or a 403(b). I have a pension plan, so I’m not going to the IRA route. Currently, our district has aligned itself so closely with AXA–and special advisors who will literally make the two-click AXA transfer for you for additional fees–that I’m in no hurry to jump in the 403(b) pool. However, a rumor has been circulating that we might have investment options with Fidelity soon. Vanguard would be my preference–because, swoon…Vanguard–but anything is better than the ridiculously high fees of AXA. I have a call in to our business office to get more details on my options. I’m hoping to get the ball rolling on this come summer, but it will only come to fruition if our investment options improve. Otherwise, I’ll keep adding to our taxable savings account and pursuing alternate savings and investment options.
So Tell Me…What savings or investment goals are you working on?
We use Vanguard for all of our investments. It works well with our lazy investment style, and they have the lowest costs over all.
Glad to know I’m in good company, Holly. Thanks!
Yayyyy!!!!! You took the plunge! I see the expense ratio is .16. That’s pretty low for this type of fund.
Please tell me you put more than 50% in stocks?
I did, Mrs. Grovvy. Just for you 😉 Just kidding! 80/20 until I pee my pants. Then I might go 60/40. Ekk!
If it makes you feel any better, I went with Betterment because my non-retirement investments started with an initial deposit of $300. I have a $100/month auto-deposit set up.
When I was just getting started out last year, Vanguard sounded like something the big scary professionals used, while Betterment seemed geared more towards total n00bs like me. Now that I know more about Vanguard, I’d like to roll over my workplace retirement plans to a Vanguard IRA when I leave, though!
I once spent almost an hour on the phone with Vanguard. I kept saying, “I’m not really paying you for your help, so I’ll hang up now.” They are just SO nice and helpful. I feel totally supported using them. I just need to get better at using them. I’d love to hear how the rollover goes!
That’s too bad your district is aligned with high-fee options. At least you’re wise to it and exploring better options. We’ve got a Vanguard index fund and traditional IRAs. We’ll pay the taxes now on the pre-growth amount, since we never plan to withdraw a large income due to our relatively low expenses.
Don’t stress too much about being in the red after a couple weeks–as you know, it’s a long-term game!
I’m not stressing. I was just hoping to have a snazzy graphic to add to this post. It was too depressing to post the red downward slope 😉 The high fees are one thing in my district. The fact that my district advocates the use of really expensive advisors to open high-fee accounts is mind blowing. I’m convinced that my coworkers have lost money these past few years and don’t even really understand enough to realize it. 🙁
I’m very happy with Vanguard, and I think it will scale up with you better than Wealthfront or Betterment if you decide to get more diverse with your investments. I certainly like the low fees, but also the fact that I can buy and sell individual stocks in addition to the funds.
I’m sorry your 403(b) options have been less then stellar. It’s nice to get that pre-tax money working (even if you have to pay taxes on it later).
Thanks, Emily! I think there are so many possibilities with Vanguard. That Bogleheads book really opened my eyes. I’m still trying to figure out what is right for us and learn more about my options, but I’m happy to have started. And I hope to get the 403(b) mess sorted soon!
The robo-investors are intriguing – I’ve been spending some time researching as well, but still haven’t taken the leap. The appeal, as I see it, is the low cost, plus minimum investments are lower – one can invest a smaller amount of money at a time.
We have the goal to max our IRAs (with Vanguard) each year. This year, we used our tax return and I add extra money when we can – only $1000 left to go for 2016!
Hooray for putting tax return money to good use. That’s what we do with ours, too!
I’m hoping to open a SEP this year. I’m hoping to be able to fully fund it in 1-2 years. We were going to do that this year but now that we can’t touch Tim’s disability checks… Sigh.
On the other hand, if we can get used to living without that amount, we can easily fund the SEP once the appeal is over. Of course, that could be a couple of years. Double sigh.
I want to fully fund my IRA and also save at least half of a down payment this year. Next year, I want to do both and add at least another $5000 to my two S&P500 mutual funds. If I finish developing the skill to double my income, I’d like to do all this and more.
None of the above. I suspect the Robo-advisors get pushed on blogs because of affiliate fees.
Your choice of the LifeStrategy fund is exactly what I would suggest for anyone who wanted to be hands off with investing and wanted to set it and forget it.