What are y'all investing in long term? 10-20 years.

[Uppsala9496]

Vanguard brokerage account where you should be picking ETF's. Don't think they have any target date funds, however there are a lot of choices. I stick with VTI and VYM for the brokerage side of things.

 

[purbeast0]

I believe he is referring to a taxable brokerage account at Vanguard. The money invested here has already been taxed through your payroll and earnings will be taxed as well depending on your tax bracket. You want to max-out your tax advantaged accounts (401k, tIRA or rIRA, HSA, etc) before investing in a taxable account.

As I mentioned I can't do IRA's because I just found out and realized that I am over the contribution allowances (and have been for a couple years) so that's why I am looking for something else to put money into. 401k is already being maxed as is my HSA.

 

[dullard]

As someone who makes too much to contribute to a Roth IRA, what would the logical next step be as far as what to invest into that is good for the long term?

1) The best option would be to see if you can make it into the Roth IRA by changing your income. Income that is delayed isn't income (yet). For example if you buy stock XYZ for $10,000 and it is now worth $30,000, you have gained $20,000. But, that $20,000 it isn't considered income by the IRS until you sell it. And you choose when you sell it. So you actually have some control over your income without lowering your income. You can time when you sell the stocks to allow you to put more into the Roth IRA in some years and maybe choose not to do so in other years.

Doing things like opening a HSA (Health Savings Account, if you qualify) can also make it look like your income is lower than it actually is. And of course, maximize your 401k since that money also isn't considered income until many years later.

2) Open a traditional IRA but do not deduct it (you won't qualify to deduct like most people do with their IRA if you don't qualify for the Roth IRA). Then the next day convert it into a Roth IRA. There is no income limits for converting one into the other. Just be sure to not deduct your traditional IRA money and file form 8606 with the IRS. This is called a Backdoor Roth.

3) Don't be afraid of just having a taxable stock account. You can open one up at Vanguard. Use it similarly to your Roth IRA but realize that since it is taxable you have some limitations. For example, in a 401k/Roth IRA/IRA you can sell and rebalance as often as the mutual fund company will let you without worrying about taxes. With a taxable account, you want to minimize taxes so you want to try not to sell very much. If you hold the stock more than a year the taxes plunge. If you hold it long enough and let someone inherit it or you donate it the taxes are zero. So the buy and hold concept is even more important.

Since you don't want to sell very often in a taxable account, buy something that you can just hold onto for a long time. An S&P 500 tracking fund is perfect for that. VFIAX for example.

Since you don't want to sell very often in a taxable account, buy something that Vanguard won't sell for you. Small cap mutual funds and growth funds and international funds are notorious for buying/selling a lot. Thus, you get taxed at the highest possible rate when Vanguard chooses to sell. Avoid those types of mutual funds. Instead, buy a mutual fund that Vanguard rarely has to sell. Something stable, comprised of many large stocks, often value stocks and not international. An S&P 500 tracking fund is perfect for that. VFIAX for example.

 

[ronbo613]

Ammo, water filters and toilet paper.

 

[Exterous]

I believe he is referring to a taxable brokerage account at Vanguard. The money invested here has already been taxed through your payroll and earnings will be taxed as well depending on your tax bracket. You want to max-out your tax advantaged accounts (401k, tIRA or rIRA, HSA, etc) before investing in a taxable account.

I'd add a caveat that it depends on the fund options in a 401k, existing account levels and your goal retirement date. If your 401k has terrible 2+% ER active management funds (Which consistently underperform index funds) the fees and underperformance can more than offset the tax advantages of a 401k. Also if you want to retire at 50 and all your funds are in a 401k or IRA its going to pose a much larger challenge even with the 72(t) rule.

 

[SaltyNuts]

Tesla. Definitely Tesla.

 

[momeNt]

Plastics.

 

[DaveSimmons]

When you say you "invest" your savings in it, what exactly does that mean? Like I'm a total noob at doing stuff other than 401k and Roth IRA. I'm using Vanguard to handle my Roth IRA.

Would I just set up some other type of account on Vanguard and select those target funds? What type of account would this be called?

Just a regular brokerage account. You can do it at Vanguard.com so that you can get Vanguard funds without paying any trading fees, or at someone else like Charles Schwab that is probably cheaper for buying non-Vanguard funds and bonds or CDs.

ETFs can have a slight tax advantage over mutual funds because they don't have to pass as much in gains on to you while you're holding the funds, but the key with either is to get good low-expense index funds.

The simplest thing for you to do would be to set it up at Vanguard and just pick a Target fund (which from them is 100% index fund shares). You can either make enough of an initial deposit to avoid fees, or set up monthly automatic withdrawals from your bank. Or both.

Be sure to budget a bit for the taxes on gains and dividends. The brokerage will not withhold estimated taxes for you so eventually you'll need to start making estimated tax payments yourself.

 

[Sho'Nuff]

Others have commented on the value of investing in index funds, target date funds, ETF's etc. All that is well and good, and is advice to be followed to a point. If you have some money to literally "play" with, however, than investing in individual companies is fine too. Just don't put all your eggs in one basket and invest in companies you understand.

Here is a good article about how warren buffet analyzes potential investments. http://www.investopedia.com/ask/answers/081114/how-does-warren-buffett-choose-what-companies-buy.asp

It is a lot of common sense, and basically comes down to - understand the target 's financials and how they make money, determine how much of a discount the shares are being offered at (the tough part), and if all looks good, invest.

Historically, Buffett has focused on companies that provide goods that are unique, highly profitable, and consumer staples. E.g., Coca Cola, 3M, J&J, P&G, etc. Its hard to buy those companies at a discount now because lots of people understand their value. In the tech world, though, there are probably quite a few companies that provide unique products for internet/business infrastructure, but which are less well known and therefore more likely to be available at a discount.

 

[Capt Caveman]

Bought Visa on their ipo day and holding onto that forever and give it to my kids when I die.

 

[DaveSimmons]

Others have commented on the value of investing in index funds, target date funds, ETF's etc. All that is well and good, and is advice to be followed to a point. If you have some money to literally "play" with, however, than investing in individual companies is fine too. Just don't put all your eggs in one basket and invest in companies you understand.

Here is a good article about how warren buffet analyzes potential investments. http://www.investopedia.com/ask/answers/081114/how-does-warren-buffett-choose-what-companies-buy.asp

It is a lot of common sense, and basically comes down to - understand the target 's financials and how they make money, determine how much of a discount the shares are being offered at (the tough part), and if all looks good, invest.

Historically, Buffett has focused on companies that provide goods that are unique, highly profitable, and consumer staples. E.g., Coca Cola, 3M, J&J, P&G, etc. Its hard to buy those companies at a discount now because lots of people understand their value. In the tech world, though, there are probably quite a few companies that provide unique products for internet/business infrastructure, but which are less well known and therefore more likely to be available at a discount.

I usually take my fun money and ... buy more index shares, because I'm boring 🙂

For hobbies I buy hardware, games, books, music and watch discs and streaming content instead of spending that time gambling on stocks.

But if you really do find stock-picking to be fun, just be sure to treat that as a hobby and keep that gambling separate from any money you'd like to have for retirement. And realize that the odds are against you doing better than index funds in the long term.

 

[Sho'Nuff]

I usually take my fun money and ... buy more index shares, because I'm boring 🙂

For hobbies I buy hardware, games, books, music and watch discs and streaming content instead of spending that time gambling on stocks.

But if you really do find stock-picking to be fun, just be sure to treat that as a hobby and keep that gambling separate from any money you'd like to have for retirement. And realize that the odds are against you doing better than index funds in the long term.

You aren't boring. You are pragmatic. Like me. I've been buying index funds and other mutual funds since I was 19. I've taken a few gambles here and there on some individual companies, and while I've done ok I've never let myself invest enough to make any "real" money. The only company I have really kicked myself for not buying is Chipotle. I had the opportunity to get in on their IPO, but balked when their IPO share price was 30% higher than the analyst estimate ($43/sh vs. ~$33/share). As a result, I didn't invest the $10,000 I had set aside for it. About 5 years later the stock was work over $400 a share, and at one point it was over $750/share. Which means that had I purchased the $10,000 worth of shares at their IPO price and sold at their peak, I would have needed a cool $164,000 profit.

Not that I can really complain. I've done pretty well with the long and steady strategy.

 

[WhoBeDaPlaya]

Some real estate and Vanguard Index ETFs.
Nothing too fancy, except for some crypto-currency spotting here and there.

 

[John Connor]

Bitcoin, Litecoin and physical gold. Did I mention coke and hos?

 

[DaveSimmons]

You aren't boring. You are pragmatic. Like me. I've been buying index funds and other mutual funds since I was 19. I've taken a few gambles here and there on some individual companies, and while I've done ok I've never let myself invest enough to make any "real" money. The only company I have really kicked myself for not buying is Chipotle. I had the opportunity to get in on their IPO, but balked when their IPO share price was 30% higher than the analyst estimate ($43/sh vs. ~$33/share). As a result, I didn't invest the $10,000 I had set aside for it. About 5 years later the stock was work over $400 a share, and at one point it was over $750/share. Which means that had I purchased the $10,000 worth of shares at their IPO price and sold at their peak, I would have needed a cool $164,000 profit.

Not that I can really complain. I've done pretty well with the long and steady strategy.

But Chipotle is only a lost opportunity with hindsight. How many other franchise chain stocks have done that well over the same period of time? And how would you have known to sell it at $750? What if you'd had that good feeling about the < Joe's Imaginary Pretzel Hut > IPO instead?

It's like wishing you'd bought Apple, when at least at one point they had a good chance of going under. If I recall correctly Microsoft helped prop them up partly to be able to show there was "competition" in the OS market. Had they chosen not to, those shares could have been a loss.

Since I know I can't predict what's going to happen with any company or market, I don't try. And as a bonus, I can binge-watch something on Netflix instead of doing research 🙂

 

[Elganja]

When you say you "invest" your savings in it, what exactly does that mean? Like I'm a total noob at doing stuff other than 401k and Roth IRA. I'm using Vanguard to handle my Roth IRA.

Would I just set up some other type of account on Vanguard and select those target funds? What type of account would this be called?

I believe he is referring to a taxable brokerage account at Vanguard. The money invested here has already been taxed through your payroll and earnings will be taxed as well depending on your tax bracket. You want to max-out your tax advantaged accounts (401k, tIRA or rIRA, HSA, etc) before investing in a taxable account.

correct, a brokerage account with vanguard... i have auto drafts setup, to buy each month

 

[shortylickens]

A Canadian citizenship.

 

[Scarpozzi]

I like stable dividend stocks like DUK (Duke Energy), General Mills (GIS), and CLX (Clorox) if you're going long term...

I don't own Clorox stock, but do own the other two. Quite a few index funds use it for market stability from what I've read, especially because its dividend yield is pretty decent (despite its high cost per share).

The energy sector is somewhat shaky ground because every few years DUK has a situation with a reactor or pollution or workers, but it's a pretty sizable corporation that operates in many states. It's not a bad performer because utilities are pretty much a monopoly.

 

[NesuD]

I have been investing in Condoms all my life!!!

Well that will save you money but it wont earn you anything.

 

[zinfamous]

VTSAX, baby. 😎

 

[zinfamous]

As someone who doesn't know anything about investments and stuff, I have just done my 401k and Roth IRA with the "target" retirement funds for the most part.

Well I just found out (from another thread on this forum actually) that I make too much to contribute to a Roth IRA.

As someone who makes too much to contribute to a Roth IRA, what would the logical next step be as far as what to invest into that is good for the long term?

just open a personal brokerage account at Vanguard or wherever and put that money in a tax efficient Index like VTSAX. You won't get any tax-deferred benefits, but you aren't going to be paying heavy interest taxes there, either. If you have been salaried-out of all remaining tax-advantaged options and/or hit your maximum annuals in each (401, HSA, trIRA/roth IRA, etc), then brokerage is a good bet, as long as you focus on funds that aren't going to generate heavy annual tax burdens (e.g: low-to-no dividends; slower, yet steady annual growth). Especially if you don't treat it as a savings/checking account (selling shares every once in a while to pay for projects or toys).

 

[zinfamous]

When you say you "invest" your savings in it, what exactly does that mean? Like I'm a total noob at doing stuff other than 401k and Roth IRA. I'm using Vanguard to handle my Roth IRA.

Would I just set up some other type of account on Vanguard and select those target funds? What type of account would this be called?

yes, you can just set up a personal brokerage account and it takes about 2 minutes. Link it to your checking account, and just transfer money there as you have been to your Roth. If you are already heavily into a target retirement account, I would ignore those and focus on something that is 100% stocks, especially if you have no plans to retire in the next 20 or more years. Bonds are really quite inefficient in the long term and you lose a lot of potential. They are great when you are old, have a large pile of money, and only need a modest growth profile with tiny risk to sustain you until death. You can always transfer money from stocks to bonds whenever you want (no penalties/taxes when doing this in your retirement accounts). This is really all that target funds do for you: set stock/bond ratio at some age and gradually shift into heavier weighting for bonds the closer you get to retirement. They also charge you a heavier fee for this service...which is completely unnecessary. It's not an awfully large fee like you will see with some of those super scammy funds (like, greater than 1%), but it's still pretty high considering it only takes 10 minutes out of every year to do this yourself.

I would look into Vanguard's S&P Index or even better, the total market fund (VTSAX or VTMAX or whatever--VTSAX requires minimum $10k invested but is 0.3% vs 0.5% fees with the non-admiral fund), or some of their mid-cap or large-cap funds.

Personally, I'm about 98% stocks and 2% bonds across retirement accounts and brokerage. I feel like I have WAY too much money in bonds, lol. If you don't mind watching the day-to-day rollercoaster ride of large portions of money sitting completely in stocks, then that really is the best option...and you shouldn't mind that. It's totally normal and is better in the long run.

 

[zinfamous]

I believe he is referring to a taxable brokerage account at Vanguard. The money invested here has already been taxed through your payroll and earnings will be taxed as well depending on your tax bracket. *You want to max-out your tax advantaged accounts (401k, tIRA or rIRA, HSA, etc) before investing in a taxable account.

*only if you plan to "retire" at "normal" retirement age and live out the best years of your life like a chump. 😛 Only sorta kidding...the primary advantage of brokerage accounts is that this is the money whose interest you plan to live off of, if you retire way early, and simply can not access your retirement accounts. Granted, you have to be one of those "crazy" types that choose to live rather than work, and it is obviously always very wise to max out and contribute to tax-advantaged accounts to your greatest ability, when you can, but there are very real advantages to taxable accounts that, in many cases, can prioritize over tax-advantaged accounts.

 

[repoman0]

*only if you plan to "retire" at "normal" retirement age and live out the best years of your life like a chump. 😛 Only sorta kidding...the primary advantage of brokerage accounts is that this is the money whose interest you plan to live off of, if you retire way early, and simply can not access your retirement accounts. Granted, you have to be one of those "crazy" types that choose to live rather than work, and it is obviously always very wise to max out and contribute to tax-advantaged accounts to your greatest ability, when you can, but there are very real advantages to taxable accounts that, in many cases, can prioritize over tax-advantaged accounts.

What about schemes to access retirement account money early like a Roth conversion ladder? I think it's something like this:

- Save up 5 years worth of expenses in a taxable account, savings account, whatever
- Retire
- Each year, convert one year of expenses from your normal 401k/IRA to Roth IRA and pay the corresponding taxes. This is your "income" for the year, as reported on your taxes
- Live off of one year of money saved in step 1 (tax free or low long term capital gain tax rate)
- The money you just converted can be withdrawn penalty and tax free from the Roth 5 years later

I guess it's similar to just investing more in taxable accounts than retirement accounts, but you get tax free growth this way. A strategy like this is my current plan to hopefully retire in my 40s, so I completely max out my 401/403/Roth IRA accounts rather than taxable investments (though at some point I'll need to start on that 5 years of living expenses). Hopefully it works, because I'd hate to be stuck working until age 59.5 like a sucker.

 

[zinfamous]

What about schemes to access retirement account money early like a Roth conversion ladder? I think it's something like this:

- Save up 5 years worth of expenses in a taxable account, savings account, whatever
- Retire
- Each year, convert one year of expenses from your normal 401k/IRA to Roth IRA and pay the corresponding taxes. This is your "income" for the year, as reported on your taxes
- Live off of one year of money saved in step 1 (tax free or low long term capital gain tax rate)
- The money you just converted can be withdrawn penalty and tax free from the Roth 5 years later

I guess it's similar to just investing more in taxable accounts than retirement accounts, but you get tax free growth this way. A strategy like this is my current plan to hopefully retire in my 40s, so I completely max out my 401/403/Roth IRA accounts rather than taxable investments (though at some point I'll need to start on that 5 years of living expenses). Hopefully it works, because I'd hate to be stuck working until age 59.5 like a sucker.

Yes, I like schemes like this, and I've never quite figured out the Roth conversion ladder, but keep it in the back of my mind for when I might need it. Thanks, I'll go back over this a dozen times because it might make more sense to me than the other reams of information that I have tried to understand about it.