This is quite generic advice but it’ll get you on the right path. Moderate to aggressive growth may constitute anything between a 60/40 up to a 95/5 split of stocks/bonds. I’d strongly suggest you select ETF’s (Exchange Traded Funds) and avoid mutual funds. For each category (stocks, bonds) buy several ETF’s 5-10 should be sufficient that encompass a blend of multiple sectors and industries, both US and International.
Reasoning behind an ETF over mutual fund? Iirc then vanguard doesn't allow auto deposits in ETFs and you're only able to buy in whole shares ie 4k is fine for a mutual fund since you're above the minimum but if the ETF is $250 a share then you can only but in mutliples of $250, correct?
That’s a good point, I’m not entirely familiar with Vanguard’s exact deposit structure. The biggest reason for ETF’s over Mutual Funds is that in the long run (say a 20 year span) 99% of mutual funds underperform against the market when accounting for management fees (ETF’s track market indices). Additionally since ETF’s just track the performance of an index in the market, there is no manual money management and therefore the management fees are in hundredth’s of a percent versus percent fees from mutual funds.
Yeah so the expense ratio for VTSAX (s&p 500 based mutual fund) is 0.04% and VTI (s&p 500 based ETF) is 0.03% (I'm looking at it right now). If you deposit $2134, then VTSAX will cost $95 and VTI will cost $71. The difference after 10 years with an initial deposit of $10k is that VTI is about $8.xx higher at $39,455.xx so, it's negligible. VTSAX does have a 3k minimum, so if you're working with less then that, go for the ETF. BUT, VTSAX allows auto deposits from your bank account which may make a huge difference in busy periods and when things look bleak. It's much easier to have something auto deposited rather than consciously make the decision to pull money from your bank account. I'm not sure what the tax implications are between the two and if they differ much.
Yeah that makes sense and it’s fine. Since 1. It tracks an index (S&P) and 2. The expense ratio is really low it doesn’t matter what it’s called (index or mutual fund) just what it represents. Also didn’t realize the restrictions on deposits on certain funds.
Yep. So you're correct that the ETF does indeed pull better returns. But if it's only $8 on an initial deposit of $10k. Then even if we pushed that to $1MM and kept the ratio, it'd be a difference of $800 (assuming there are no differences in fees once you reach a certain account value). For me personally, I hate having to make that manual deposit. That alone convinced me to go to VTSAX. They are both tracking the same companies and assets. They're essentially the same product wrapped differently. Im willing to spend the extra 0.01% to not need to think about withdrawing money from my account every two weeks.
So far I have enrolled myself into: 1) PIMco total return fund institutional class/ 25% 2) vanguard explorer fund admiral shares/15% 3) institutional 500 index trust- 25% 4) target retirement income 2045 trust select- 20% 5) target retirement income trust select 15%