Woohoo! I fully funded my 2009 Roth IRA yesterday after taking $3,000 out of savings and sticking it in my Vanguard account. The great thing about that is that I now am eligible for many more funds. Until today, I’ve been using their STAR fund, which is basically a mutual fund of mutual funds. I’m willing to take more risk and will be researching some of the other options. Any suggestions?
I’m not worried about my emergency fund dwindling (It’s at about 1 month’s expenses right now) because the next 6 weeks will be the best ever. Not only does my pay raise go into effect then, and not only will I be getting $868 back from the federal and state governments, but there are 3 pay periods in April this year! The calendar just happens to work out that way, but it will be a nice boost for my savings plan and it’s going to put everything back in its place and then some.
Here are some of the mutual fund options I’m considering:
Vanguard Target Retirement 2050 (VFIFX): This life-cycle fund includes several other index funds and will change its allocation by reducing stocks and increasing bonds around 2026. It’s the least involved options I have because it will automatically change its investments as I age. There is a 0.20% acquired fund fees for this fund.
Vanguard 500 Index Fund Investor Shares (VFINX): This domestic stock fund invests in stocks in the S&P 500 index. The expense ration is 0.18%, meaning that for every $1,000 I have invested, Vanguard takes $1.80.
Vanguard Emerging Markets Stock Index Fund Investor Shares (VEIEX): There are higher fees for this fund (0.40% expense ratio, 0.25% redemption fee, and 0.50% purchase fee) and it has a higher risk level that the other funds, which also could mean more of a reward. The international stock fund invests in stocks in emerging markets around the world, such as Brazil, Russia, China, Korea, and Taiwan.
Finally, I have the option of investing in Berkshire Hathaway Class B stock through my employer, which is owned by Berkshire Hathaway and the amazing Warren Buffett. It has done extremely well this year (24.71% YTD returns, while none of the other options I listed have gained more than 5%), but will it continue to rise?
There are many other options, such as the growth index funds, mid- and small-cap funds, and others, but I wanted to highlight these specifically.
Given my time horizon (age 22), which of these investing options should I take? I’ll share my thoughts later in the day. Keep in mind that this isn’t the only time I will be putting money in my retirement account!