6 out of 10 Americans have less than $500 in their savings account; how about you?f

[mamba]

ETFs trade like stocks. So, you can get in and get out as you need.

I know the Admiral Funds have a min investment needed to participate. For the equivalent ETFs, there are no minimums.

You can start out with a simple S&P 500 index tracker ETF such as VOO from Vanguard. If you setup an account with Vanguard, your trading fees for Vanguard ETFs are waived.

 

[krexzen]

ETFs trade like stocks. So, you can get in and get out as you need.

I know the Admiral Funds have a min investment needed to participate. For the equivalent ETFs, there are no minimums.

You can start out with a simple S&P 500 index tracker ETF such as VOO from Vanguard. If you setup an account with Vanguard, your trading fees for Vanguard ETFs are waived.

The bolded made me hesitant to start with ETFs. Mutual funds just came off to me as a simpler lower risk investment. The book I was reading also seemed to emphasize cover mutual index funds in more detail. I'll do some more reading and probably make an ETF my next purchase. Thanks!

 

[mamba]

The bolded made me hesitant to start with ETFs. Mutual funds just came off to me as a simpler lower risk investment. The book I was reading also seemed to emphasize cover mutual index funds in more detail. I'll do some more reading and probably make an ETF my next purchase. Thanks!

The stocks in a index fund (mutual fund tracking an index) are the same as as the stocks in an ETF tracking an index. The risk is the same, breh. Difference is, for Vanguard Admiral, you need $10,000 to even invest. For the ETF, you just need enough money to buy a single share! Instead of sinking $10,000 into one index fund, you can diversify among ETFs and have a really balanced portfolio.

Notice that the ETF has outperformed the mutual fund over a 10-year period, whereas the index fund has simple tracked the market. The blue and red plots are 1:1 matches.

Here are the holdings for the Vanguard S&P 500 Index Fund (VFIAX):

Rank Holdings
1 Apple Inc.
2 Microsoft Corp.
3 Alphabet Inc.
4 Facebook Inc.
5 Amazon.com Inc.
6 Johnson & Johnson
7 Exxon Mobil Corp.
8 Berkshire Hathaway Inc.
9 JPMorgan Chase & Co.
10 Wells Fargo & Co.
Ten largest holdings = 20.0% of total net assets

Here are the holdings for the Vanguard S&P 500 ETF (VOO)

Rank Holdings
1 Apple Inc.
2 Microsoft Corp.
3 Alphabet Inc.
4 Facebook Inc.
5 Amazon.com Inc.
6 Johnson & Johnson
7 Exxon Mobil Corp.
8 Berkshire Hathaway Inc.
9 JPMorgan Chase & Co.
10 Wells Fargo & Co.
Ten largest holdings = 20.0% of total net assets

 

[krexzen]

The stocks in a index fund (mutual fund tracking an index) are the same as as the stocks in an ETF tracking an index. The risk is the same, breh. Difference is, for Vanguard Admiral, you need $10,000 to even invest. For the ETF, you just need enough money to buy a single share!

Notice that the ETF has outperformed the mutual fund over a 10-year period, whereas the index fund has simple tracked the market. The blue and red plots are 1:1 matches.

Here are the holdings for the Vanguard S&P 500 Index Fund (VFIAX):

Rank Holdings
1 Apple Inc.
2 Microsoft Corp.
3 Alphabet Inc.
4 Facebook Inc.
5 Amazon.com Inc.
6 Johnson & Johnson
7 Exxon Mobil Corp.
8 Berkshire Hathaway Inc.
9 JPMorgan Chase & Co.
10 Wells Fargo & Co.
Ten largest holdings = 20.0% of total net assets

Here are the holdings for the Vanguard S&P 500 ETF (VOO)

Rank Holdings
1 Apple Inc.
2 Microsoft Corp.
3 Alphabet Inc.
4 Facebook Inc.
5 Amazon.com Inc.
6 Johnson & Johnson
7 Exxon Mobil Corp.
8 Berkshire Hathaway Inc.
9 JPMorgan Chase & Co.
10 Wells Fargo & Co.
Ten largest holdings = 20.0% of total net assets

Thanks again, that's very helpful. I was planning on making this year like a trial run where I dive in while learning as much as I can. I finally decided that even if didn't make the perfect decisions, I would still be better off than keeping it all in a bank with low interest. I'll probably go with VOO or VTI next.

 

[mamba]

Thanks again, that's very helpful. I was planning on making this year like a trial run where I dive in while learning as much as I can. I finally decided that even if didn't make the perfect decisions, I would still be better off than keeping it all in a bank with low interest. I'll probably go with VOO or VTI next.

That's right. It's better to put that money to use than to let it sit and get eroded by inflation.

Time value of money is real.

 

[ryderldb]

For the people that put most of their saving into ETFs do you ever take money out from it? What's the best way to reduce/avoid capital gains tax?

 

[ThaBronxBully]

Savings & Investing Should Be 2 Different Things, Have A Savings Set Aside, Then Start Investing, Why Invest Your Savings?

 

[Panther]

I agree with the above post. Savings should be pretty liquid so that can be easily accessible

 

[mamba]

For the people that put most of their saving into ETFs do you ever take money out from it? What's the best way to reduce/avoid capital gains tax?

You should build up an emergency savings fund before investing, breh.

If you're constantly selling your ETFs, the caital gains taxes and commissions are going to cut into your gains.

Build up 3-6 months of living expenses into an online savings account (they tend to pay more in interest than a brick-n-mortar chain's account).

Once you get that established, then start investing the excess into ETFs. Only time you should be selling ETFs is when you need to rebalance and buy better ETFs.

 

[ryderldb]

You should build up an emergency savings fund before investing, breh.

If you're constantly selling your ETFs, the caital gains taxes and commissions are going to cut into your gains.

Build up 3-6 months of living expenses into an online savings account (they tend to pay more in interest than a brick-n-mortar chain's account).

Once you get that established, then start investing the excess into ETFs. Only time you should be selling ETFs is when you need to rebalance and buy better ETFs.

Oh I definitely have enough savings, too much to be honest. It's just sitting in a savings account earning .4%. I know I need to move a lot of it to ETFs or something. Its stupid of me not to.

 

[mamba]

Oh I definitely have enough savings, too much to be honest. It's just sitting in a savings account earning .4%. I know I need to move a lot of it to ETFs or something. Its stupid of me not to.

Got it.

Leave about $6-8k in the savings account.

Throw the rest in an investment account.

 

[Camile.Bidan]

I got 15K in a money market 10K in checking, 10K in savings and 60K 401k... I am not looking to hot at my age (35) to be honest. I have two pensions however, and I am about to cash one pension for 23K and transfer that to the 401K (only was going to pay 36 per month at 65yo). My other pension is 2000 a month, and I am hoping they buy me out of that one...

 

[ryderldb]

Got it.

Leave about $6-8k in the savings account.

Throw the rest in an investment account.

You recommend buying Berkshire stock for long term? I hear it outpaces the S&P quite a bit.

 

[ByAnyMeans]

Got it.

Leave about $6-8k in the savings account.

Throw the rest in an investment account.

Breh, I've been grappling with this as I think of my investment strategy and where to place my cash. Why have 6-8k cash sitting somewhere not earning interest. Maybe if you're lucky you get 1% in a high yielding savings.

Why not sit like $1,200-$1,500 in the high yielding savings or brick and mortar and invest the rest? Even to cover for losses you can add a 20-30% buffer.

My thing is can anyone point to a time when they were in a emergency and literally needed cash that second and the amount was over $1,000. better yet they couldn't swipe the credit card in the process. If you have a 5 figure credit card and $1,500 in the bank for "emergency" I think that's more than enough.

I get that emergency are unpredictable and sudden but I can't think of one where I would need $5,000 or even $2000 in a short time period.

6 months of expenses is a smooth $21,000 I'm not sitting that in a savings account. Not even half of that.

I think maybe keeping $1,500 in cash in a brick and mortar (high yeilding savings takes too long to clear and transfer if you need it fast) . And then sit the rest in a ETF if something. But I would add 20-30% to cover for losses but over the long term there shouldn't be losses based on historical returns.



What do you think of this strategy?

 

[mamba]

You recommend buying Berkshire stock for long term? I hear it outpaces the S&P quite a bit.

I wouldn't. That's a lot of money to sink in just a few shares of a stock. Price per share is well above $100k for BH.

You'd be better off sinking some in a good ETF portfolio, some in cryptos (Bitcoin, Ether, etc.) and the rest in some bonds.