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oldhat

Buying Over The Counter From Vanguard

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Hi everyone, I consolidated my students loans and have some extra money to save and invest. Does anyone have experience with buying mutual funds, stocks and bonds directly from Vanguard? You guys seem to rave about them. I was looking at low fee online brokers like Firstrade and Tradeking. I feel out of my league picking individual stocks and bonds. Vanguard's commissions compare well to online brokers.

 

The main thing I'm looking for is a DRIP (dividend reinvestment program) to compound the interest. Is this the right approach?

 

I'd put more into my 403b but I need something with a little more flexibility than a straight retirement account. I want to save up for a house over the next 10 years and get a better return than my M.A.T.T.R.E.S.S. account.

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Hi everyone, I consolidated my students loans and have some extra money to save and invest. Does anyone have experience with buying mutual funds, stocks and bonds directly from Vanguard? You guys seem to rave about them. I was looking at low fee online brokers like Firstrade and Tradeking. I feel out of my league picking individual stocks and bonds. Vanguard's commissions compare well to online brokers.

 

The main thing I'm looking for is a DRIP (dividend reinvestment program) to compound the interest. Is this the right approach?

 

I'd put more into my 403b but I need something with a little more flexibility than a straight retirement account. I want to save up for a house over the next 10 years and get a better return than my M.A.T.T.R.E.S.S. account.

 

Tough question.

You are right about not picking individual stocks. For me, that is speculation, not investing.

If it were my money, I would not use a DRIP until I knew all of the advantages and disadvantages. There is a lot of information on the web.

What kind of interest are you looking for? You probably know that the entire population is looking for a safe investment paying 4-5%, the safe investment paying that much do not exist. If you are expecting something less, you might check out TIAA CREF Traditional annuity. I believe its paying about 3.00%. In this day and age of low inflation, 3.00% is not bad return, more than the mattress account, and its low fee with no surrender charges. You can set up automatic saving from your checking account to that account.

Because this is a time certain plan, you would not want to invest in equities.

Steve

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Thanks, Steve, I hadn't thought of a fixed annuity. I'll definitely look into TIAA-CREF.

 

Any thoughts on Vanguard ETFs?

 

I own the VG Total Stock Market Index ETF but thats all. It is part of a portfolio of different asset classes.

 

Lets back up for a second and think about your goal. You said in your OP that you want to save for a house downpayment and have a ten year time horizen.

How much do you want at the end of ten years in 2021?

What do you have right now in the account towards that house down payment?

How much are you willing to set aside each month, each year for the next ten years to reach your goal?

Think more about what you will do, rather than what a specific fund or strategy will do for you.

When you decide what you can do realistically, then lets talk about specific funds that will work with you with realistic assumptions (4%, 5%) to achieve your goal of what? $25,000? $40,000?

BTW, this money is NOT be tax deferred.

2 cents,

Steve

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How much do you want at the end of ten years in 2021?

 

I live in the Bay Area and housing is absurdly expensive here. I don't have a wealthy family and expect nothing as far as an inheritance (hahaha, as if!). I think I'd need at least $100,000 to put down. That's assuming I'm buying something already on the market in the Bay Area. I'd rather buy a plot of land for under $100,000 and build a small house (850 square feet). My estimations are with materials, fees, permits, appliances, etc., the house would cost another $150,000 to build.

 

What do you have right now in the account towards that house down payment?

 

I just started saving.

 

How much are you willing to set aside each month, each year for the next ten years to reach your goal?

 

I'm pretty frugal and I can save some per month. A few hundred more here and there if I try.

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Hi Oldhat,

Ok, here is the deal at present time. Below, I calculated the $500 per month, $6000 per year for 10 years.

Your investment would have to perform at 9% annually to reach your goal.

 

With that long of a time period, you can comfortably assume that sometime you will be saving more than $500 per month because of raises and other monies, part-time work, etc.

Then your other problem would be the actual cost of housing in the SF area in ten years. That’s a lifetime in real estate!

 

But this is a plan and I like it! Yes the assumption of 9% is unrealistic, but things happen for the better when you write it out and start DOING IT. I am confident that you will reach your goal somehow.

I am currently in a similar situation. I am saving to buy my very first brand new car, either the Chevy Volt or the Nissan Electric Leaf. I just started taking the interest of my IRA and other investments since last summer. I thought it would take a couple of years to set aside $40,000 little by little to avoid selling principal. It turns out that I will be at my goal in about one year! This has happened frequently throughout the years. Write down a plan and start and good things happen most of the time and you reach the goal ahead of time.

Go for it. I think you can do it because you have a plan and you live within your means. That’s the key: LIVING WITHIN YOUR MEANS. That’s a novel idea.

Steve

 

500 per month, 9% per year for ten years.

Year 1: $6,525

$13,621

$21,338

$29,730

$38,856

$48,781

$59,574

$71,312

$84,077

Year 10: $97,959

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Old Hat

 

I am amazed at the cost of living in California. Maybe you should move. I'm sure the weather is nice but wow you guys live in one expensive state. Good luck in all your endeavors. At least

you are thinking it out and doing some planning.

 

 

Tony

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I agree, the Bay Area is too expensive for regular people. You have to be a doctor or a lawyer to buy a house. I've thought strongly about relocating to Oregon or way Northern California.

 

I think I'll go with my plan of buying a basket of Vanguard ETFs for now. Thnaks for the comments guys.

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I am a big fan of the One Stop Shop of the Vanguard STAR Fund. A balanced blend of several of their actively managed funds, with a low $1000 initial investment required. And returns that put to shame any straight bond or straight stock fund for just about any reasonably lengthy time period that you choose. At .37% expense ratio, it is a bit more expensive than Vanguard index funds or Fidelity Spartan funds. But it is like the Energizer Bunny...or is it more Aesop's Tortoise?

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