Getting Started In Investing? Forum

[Anonymous User]

Hi all - slightly unrelated topic, but I'm transitioning into Big Law and wanted to get you all's thoughts on getting started on investing, resources, recommendations, etc.

[Sackboy]

Put your money in an index fund that tracks the S&P 500 (e.g. VOO) or some other diversified pool of companies (e.g. QQQ for tech). Then, proceed to forget about all of that money for the next 40 years. /thread

[objctnyrhnr]

Put your money in an index fund that tracks the S&P 500 (e.g. VOO) or some other diversified pool of companies (e.g. QQQ for tech). Then, proceed to forget about all of that money for the next 40 years. /thread

Yeah this is what most people do.

The other major option (not mutually exclusive of course—nothing wrong with diversification) is real estate.

Whatever you do, the red tape involves in trying to pick specific companies will not be something you’ll want to deal with.

[jotarokujo]

go all in on an index fund like VT, or split between vti/voo and vxus

[CanadianWolf]

Agree that investing in a mutual fund or index is a good approach over trying to pick individual stocks.

Also agree that real estate can be a great investment, but real estate requires more time & additional costs (such as insurance & property taxes).

During a period of inflation, it is smart to invest in stocks & real estate.

[nealric]

Hi all - slightly unrelated topic, but I'm transitioning into Big Law and wanted to get you all's thoughts on getting started on investing, resources, recommendations, etc.

First of all, get to know your tax advantaged space. You'll of course want to max out your pre-tax 401k contributions, but bear in mind that many firms also allow post-tax 401k contributions with backdoor roth conversions (the "Mega Backdoor Roth"), which will allow you to shovel over $50k into tax advantaged space. On top of that, you have the regular backdoor Roth (currently $6k), and HSA plans (even though it has "Health" in the name, these can be thought of as additional Roth space). With so much tax advantaged space available, you probably only need a taxable account for short-term needs (emergency fund and/or house down payment fund).

Second, factor your loan situation. I'd go 100% equity if you have loans at more than 3-4%. No point in buying bonds funds yielding 2% to turn around and make loan payments at 4%.

Third, focus on broad market index funds that are low fee. Fees of .8% sound small, but keep in mind how much they add up as your balance grows. On a $1,000,000 account (you will hit that before you know it), a 1% fee is $10,000 every single year and subtracts over 10% from your returns. Some brokerages, such as Fidelty, offer zero fee index funds. For your 401k space, you'll be limited to what is available, but I'd put almost everything into the closest thing to a total market or S&P500 fund offered.

Finally, don't chase yield or extraordinary return. If you are making biglaw salary, you don't need extraordinary return. Contribute generously from your biglaw salary, and you will be financially independent in a decade with average historic market returns.

[JusticeChuckleNutz]

Hi all - slightly unrelated topic, but I'm transitioning into Big Law and wanted to get you all's thoughts on getting started on investing, resources, recommendations, etc.

First of all, get to know your tax advantaged space. You'll of course want to max out your pre-tax 401k contributions, but bear in mind that many firms also allow post-tax 401k contributions with backdoor roth conversions (the "Mega Backdoor Roth"), which will allow you to shovel over $50k into tax advantaged space. On top of that, you have the regular backdoor Roth (currently $6k), and HSA plans (even though it has "Health" in the name, these can be thought of as additional Roth space). With so much tax advantaged space available, you probably only need a taxable account for short-term needs (emergency fund and/or house down payment fund).

Second, factor your loan situation. I'd go 100% equity if you have loans at more than 3-4%. No point in buying bonds funds yielding 2% to turn around and make loan payments at 4%.

Third, focus on broad market index funds that are low fee. Fees of .8% sound small, but keep in mind how much they add up as your balance grows. On a $1,000,000 account (you will hit that before you know it), a 1% fee is $10,000 every single year and subtracts over 10% from your returns. Some brokerages, such as Fidelty, offer zero fee index funds. For your 401k space, you'll be limited to what is available, but I'd put almost everything into the closest thing to a total market or S&P500 fund offered.

Finally, don't chase yield or extraordinary return. If you are making biglaw salary, you don't need extraordinary return. Contribute generously from your biglaw salary, and you will be financially independent in a decade with average historic market returns.

As far as market index funds, how do folks feel about VTSAX? Is it a solid choice?

[nealric]

Hi all - slightly unrelated topic, but I'm transitioning into Big Law and wanted to get you all's thoughts on getting started on investing, resources, recommendations, etc.

First of all, get to know your tax advantaged space. You'll of course want to max out your pre-tax 401k contributions, but bear in mind that many firms also allow post-tax 401k contributions with backdoor roth conversions (the "Mega Backdoor Roth"), which will allow you to shovel over $50k into tax advantaged space. On top of that, you have the regular backdoor Roth (currently $6k), and HSA plans (even though it has "Health" in the name, these can be thought of as additional Roth space). With so much tax advantaged space available, you probably only need a taxable account for short-term needs (emergency fund and/or house down payment fund).

Second, factor your loan situation. I'd go 100% equity if you have loans at more than 3-4%. No point in buying bonds funds yielding 2% to turn around and make loan payments at 4%.

Third, focus on broad market index funds that are low fee. Fees of .8% sound small, but keep in mind how much they add up as your balance grows. On a $1,000,000 account (you will hit that before you know it), a 1% fee is $10,000 every single year and subtracts over 10% from your returns. Some brokerages, such as Fidelty, offer zero fee index funds. For your 401k space, you'll be limited to what is available, but I'd put almost everything into the closest thing to a total market or S&P500 fund offered.

Finally, don't chase yield or extraordinary return. If you are making biglaw salary, you don't need extraordinary return. Contribute generously from your biglaw salary, and you will be financially independent in a decade with average historic market returns.

As far as market index funds, how do folks feel about VTSAX? Is it a solid choice?

Yes, VTSAX is pretty much the gold standard. However, I tend to prefer VTI (literally the same fund in an ETF wrapper) because my brokerage does free trades for ETFs but not mutual funds. Not sure if it's still the case, but VTI also had slightly lower fees if you were buying less than $10k.

[2013]

Would probably avoid real estate now. Market is high, so it’s unlikely you make significant returns 20 years out. Plus, tenants (both residential and commercial) and real estate taxes are headaches.

[jotarokujo]

Hi all - slightly unrelated topic, but I'm transitioning into Big Law and wanted to get you all's thoughts on getting started on investing, resources, recommendations, etc.

First of all, get to know your tax advantaged space. You'll of course want to max out your pre-tax 401k contributions, but bear in mind that many firms also allow post-tax 401k contributions with backdoor roth conversions (the "Mega Backdoor Roth"), which will allow you to shovel over $50k into tax advantaged space. On top of that, you have the regular backdoor Roth (currently $6k), and HSA plans (even though it has "Health" in the name, these can be thought of as additional Roth space). With so much tax advantaged space available, you probably only need a taxable account for short-term needs (emergency fund and/or house down payment fund).

Second, factor your loan situation. I'd go 100% equity if you have loans at more than 3-4%. No point in buying bonds funds yielding 2% to turn around and make loan payments at 4%.

Third, focus on broad market index funds that are low fee. Fees of .8% sound small, but keep in mind how much they add up as your balance grows. On a $1,000,000 account (you will hit that before you know it), a 1% fee is $10,000 every single year and subtracts over 10% from your returns. Some brokerages, such as Fidelty, offer zero fee index funds. For your 401k space, you'll be limited to what is available, but I'd put almost everything into the closest thing to a total market or S&P500 fund offered.

Finally, don't chase yield or extraordinary return. If you are making biglaw salary, you don't need extraordinary return. Contribute generously from your biglaw salary, and you will be financially independent in a decade with average historic market returns.

As far as market index funds, how do folks feel about VTSAX? Is it a solid choice?

VT is probably the easiest, most passive thing you can all in on

[Joachim2017]

(With the caveat that this is not a place for formal investment advice, etc etc): what do folks think about the nexus between the rising antitrust sentiment in DC these days and ETFs/index funds that favor Big Tech?

It seems to me the Biden admin's changes (or upcoming attempts to change) antitrust regs to rein in big tech like Amazon may make conventional wisdom less sure-footed. As I understand it (please let me know if I'm wrong!) the conventional wisdom for finance un-savvy folks is that products like VOO are the safe, white bread of investing. But VOO goes in heavy on firms like Amazon. I wonder if that sort of portfolio is soon going to no longer be as safe and conservative as it used to be, even just a few months ago.

[CanadianWolf]

Biden is more Delaware than Democrat.

Amazon is more diversified than most realize.

[Joachim2017]

Biden is more Delaware than Democrat.

Amazon is more diversified than most realize.

It's not Biden himself I worry about...

https://www.ftc.gov/about-ftc/biographies/lina-m-khan

[CanadianWolf]

How did the feds do against Microsoft ?

Again, Amazon is more diversified than most realize.

I think that antitrust concerns are more effective at thwarting mergers & acquisitions that affect the marketplace than trying to break-up Seattle based companies.

Amazon is more concerned with the taxing authorities than with any antitrust action.

[nealric]

How did the feds do against Microsoft ?

Again, Amazon is more diversified than most realize.

I think that antitrust concerns are more effective at thwarting mergers & acquisitions that affect the marketplace than trying to break-up Seattle based companies.

Amazon is more concerned with the taxing authorities than with any antitrust action.

I'd also note that investors actually profited from the Standard Oil breakup. There aren't too many examples of antitrust action really hurting investors much.

[Anonymous User]

How did the feds do against Microsoft ?

Again, Amazon is more diversified than most realize.

I think that antitrust concerns are more effective at thwarting mergers & acquisitions that affect the marketplace than trying to break-up Seattle based companies.

Amazon is more concerned with the taxing authorities than with any antitrust action.

I'd also note that investors actually profited from the Standard Oil breakup. There aren't too many examples of antitrust action really hurting investors much.

Also, what's the alternative? All the broad market funds are going to be heavily invested in Big Tech - that's what happens when a market sector is made up of multiple trillion dollar companies. The alternative to investing in things like VTI/VTSAX or SPY is to try to pick stocks or pick market sectors. You can achieve reasonable diversification this way but it's not easy and I'm frankly not sure where you'd find enough low-fee ETFs to get exposure to the entire market-that-isn't-Big-Tech.

EDIT: Accidental anon. Wanderingdrock

[nealric]

How did the feds do against Microsoft ?

Again, Amazon is more diversified than most realize.

I think that antitrust concerns are more effective at thwarting mergers & acquisitions that affect the marketplace than trying to break-up Seattle based companies.

Amazon is more concerned with the taxing authorities than with any antitrust action.

I'd also note that investors actually profited from the Standard Oil breakup. There aren't too many examples of antitrust action really hurting investors much.

Also, what's the alternative? All the broad market funds are going to be heavily invested in Big Tech - that's what happens when a market sector is made up of multiple trillion dollar companies. The alternative to investing in things like VTI/VTSAX or SPY is to try to pick stocks or pick market sectors. You can achieve reasonable diversification this way but it's not easy and I'm frankly not sure where you'd find enough low-fee ETFs to get exposure to the entire market-that-isn't-Big-Tech.

A big tech crash could also be offset by a sector rotation. For example, energy used to be as much over 15% of the S&P 500 market cap, but it is currently well under 5%. A rotation back could come from comparatively high energy prices over the next few years.

But in the end, nobody knows nothin. There's always going to be risk, and trying to cherry pick sectors you think have less risk can just result in concentration of risk or missing the upside. A huge portion of historic total market gains have come from a fairly small number of companies. If you try to weed out risky companies, you can loose out on the big winners that define market performance.

[Buglaw]

Hi all - slightly unrelated topic, but I'm transitioning into Big Law and wanted to get you all's thoughts on getting started on investing, resources, recommendations, etc.

To answer your question, there are a ton of books and resources, but we aren't the right forum to be seeking advice. I'd direct you to the bogleheads forum for tons of detailed discussions and lists of resources. There are also tons of people like you on there (Dr., lawyer, tech professionals, etc.). The discussion there is a bit biased towards passive index investing, but much more sophisticated and useful on investing than what you will find here.

[unlicensedpotato]

How did the feds do against Microsoft ?

Again, Amazon is more diversified than most realize.

I think that antitrust concerns are more effective at thwarting mergers & acquisitions that affect the marketplace than trying to break-up Seattle based companies.

Amazon is more concerned with the taxing authorities than with any antitrust action.

I'd also note that investors actually profited from the Standard Oil breakup. There aren't too many examples of antitrust action really hurting investors much.

Also, what's the alternative? All the broad market funds are going to be heavily invested in Big Tech - that's what happens when a market sector is made up of multiple trillion dollar companies. The alternative to investing in things like VTI/VTSAX or SPY is to try to pick stocks or pick market sectors. You can achieve reasonable diversification this way but it's not easy and I'm frankly not sure where you'd find enough low-fee ETFs to get exposure to the entire market-that-isn't-Big-Tech.

A big tech crash could also be offset by a sector rotation. For example, energy used to be as much over 15% of the S&P 500 market cap, but it is currently well under 5%. A rotation back could come from comparatively high energy prices over the next few years.

But in the end, nobody knows nothin. There's always going to be risk, and trying to cherry pick sectors you think have less risk can just result in concentration of risk or missing the upside. A huge portion of historic total market gains have come from a fairly small number of companies. If you try to weed out risky companies, you can loose out on the big winners that define market performance.

You could put money in the equal-weighted S&P 500 ETF (RSP) to try to mitigate this risk, but that also results in less exposure to the biggest (and many of the best-performing) companies. As an aside, Amazon specifically has really underperformed the market this year thus far.

[phan]

any recommended investments to throw money at more short term-ish (5 years) with the end goal to put a down payment on a house?

[thisismytlsuername]

Bitcoin

[Anonymous User]

I actually took some of the suggestions in this and other similar TLS threads to heart, and started looking into VOO. When I contacted someone at Fidelity about that, they recommended I take around half of what I was thinking about putting into VOO and instead put it into an annuity (the purpose being, tax-advantages down the road, as I don't need the money soon). The hands-off annuity they recommended still has a small percent-based fee (they called it a "mortality and expectation" fee, or something like that..). Sound like a reasonable cost for an annuity?

Do people around here go in for annuities? (As well as, or instead of, safe vanilla stock-based products like VOO?)

[Definitely Not North]

I actually took some of the suggestions in this and other similar TLS threads to heart, and started looking into VOO. When I contacted someone at Fidelity about that, they recommended I take around half of what I was thinking about putting into VOO and instead put it into an annuity (the purpose being, tax-advantages down the road, as I don't need the money soon). The hands-off annuity they recommended still has a small percent-based fee (they called it a "mortality and expectation" fee, or something like that..). Sound like a reasonable cost for an annuity?

Do people around here go in for annuities? (As well as, or instead of, safe vanilla stock-based products like VOO?)

What else did the salesman say you need that he happens to sell?

I’d say nobody on here is buying annuities (lol), but this is also the forum where a shocking number of people think they’re smart having several hundred thousand dollars sitting in a bank account earning nothing.

I’d suggest putting 100% into VOO or equivalent (clicking the buttons yourself, not giving someone the opportunity to sell you dumb stuff) and never talking to a financial “advisor” again. This is all you need: https://www.bogleheads.org/wiki/Three-fund_portfolio. This stuff isn’t as hard as financial “advisors” want you to think it is.

[Wanderingdrock]

I actually took some of the suggestions in this and other similar TLS threads to heart, and started looking into VOO. When I contacted someone at Fidelity about that, they recommended I take around half of what I was thinking about putting into VOO and instead put it into an annuity (the purpose being, tax-advantages down the road, as I don't need the money soon). The hands-off annuity they recommended still has a small percent-based fee (they called it a "mortality and expectation" fee, or something like that..). Sound like a reasonable cost for an annuity?

Do people around here go in for annuities? (As well as, or instead of, safe vanilla stock-based products like VOO?)

I've read that annuities can very occasionally make sense in certain very specific situations, but I've never quite wrapped my head around what those situations would be and am fairly certain I'll never find myself in one. A good rule of thumb is that when someone tries to get you to buy an annuity, it's because they stand to make a commission on it. That's it. That's the rule of thumb. Run, do not walk, away from that person who is not fulfilling any kind of fiduciary duty to you.

[k_moreno]

I broadly agree with what's in this thread, but I'd particularly emphasize the tax point. Definitely your investments themselves should just be in easy index funds. But there are massive advantages to getting taxes right. Certainly think about tax-protected accounts -- not not just 401k, but also 529 and HSA. Also look into savings bonds -- tax deferred plus a massively above-market return (though illiquid for 20 years). If you donate to charity, always give them appreciated stock. Tax loss harvesting can also add up significantly over time.

The benefits from doing better on taxes are easily worth 1-2% on your overall investment returns, which is very likely far more than you'll make on average from picking better investments.