Hi, Wanted to ask this community for any advice on how much money I should be investing vs keep in savings as a new grad. Currently, I’m maxing out my Roth 401K (Vanguard target retirement 2060) and IRA, and have about 10K in FAANG stocks. I also have company RSUs that I plan to hold for a little while. Beyond this, most of my income is just going to savings besides rent/food expense. As a new grad with higher risk tolerance, I feel like I should be investing more annually, but haven’t found a good answer or advice on what % of my savings I should be investing (whether it’s in stocks, bonds, ETFs, or more). Any thoughts? Should I just put the rest in a high yield savings account? Or something like Wealthfront? Thanks so much in advance for the tips #personalfinance #investments
Also a new grad, but I intentionally avoided the Vanguard target funds. I forget when they start including bonds in the portfolio, however, I really don’t think there’s any need for bond exposure under 30 years old at a minimum and should be 100% equity
Makes sense, it’s about 10% bonds now looks like
10% bonds is actually a great way for your portfolio to automatically “buy the dip” Vanguard knows what they’re doing. The alpha you lose makes the funds quite a bit more stable in value
Anything you don't need for at least 5 years should be invested, a total US stock index fund is simple, well-diversified, low-cost, and outcompetes > 90% of professional investors after fees and taxes. For retirement money, max out any tax advantaged accounts you have where you have low cost and high quality investing options, then put extra funds into a taxable investment account at a good low-cost brokerage like Vanguard/Fidelity/Schwab. Anything you need in the next few months should always be cash, otherwise you might end up buying high, selling low at a loss when you need the money. It's great to keep 6 months worth of total expenses in something very low risk for an emergency/flexibility fund, like a high interest savings account. It won't make you much money, maybe just matching inflation, but it'll save your ass if your car breaks down, you have an unexpected accident or medical emergency, you lose your job, etc. After you have that emergency fund fully funded, there's no limit for how much is good to invest, invest whatever you can and you'll reach financial independence decades earlier than the norm.
Wow, appreciate all the advice. Thanks a lot!
Please could you suggest any high interest savings account?
Ignore any advice that says to buy single stocks, unless you have a very very intimate understanding of the products and business that’s much better than a full time analyst (very likely you don’t). VTI and VXUS. Bogleheads.org
Start with https://engineerseekingfire.com/8-critical-decisions-for-a-successful-investing-strategy/ and create your own investing strategy. Especially look at the investing order.
Thank you! Will read through this
One tip- sell your Lyft RSUs immediately when they vest. You’re taxed immediately at vest so there’s no benefit to holding longer. The only reason to hold onto company RSUs is if you believe they will appreciate in value faster than any other investment you could put your money in. But Lyft stock ain’t no rocket ship so I recommend you derisk yourself immediately. Now to your original question- if you want to be conservative but still potentially see some upside, dollar cost average into an ETF like SPY or VOO. This isn’t a sexy option, but it’s relatively stable returns over the long term. If you’re willing to take on higher risk, invest in high growth tech stocks- just buy shares and hold for the long term; as much as I love wallstreetbets, options are a gamble. Do your research, and caveat emptor. Interest rates are near zero right now, so high yield savings won’t get you anywhere- allocate enough cash for an emergency fund into one of these accounts, but no more.
This is great- thanks a lot for the detailed answer!