Since a lot of us here have expressed interest in not starving to death in a gutter, I figured I'd start a weekly thread to discuss financial matters.
Ground Rules
- Remember that we're all just Internet randos. Don't bet your life savings on a hot tip from this thread.
- Keep culture war in the culture war thread. Yes, global events may impact our personal finances, but that does not mean we have to incessantly harp on culture war aspects here. If you are going to discuss it, please stick to the practical impacts of it on an individual level.
- Be kind. Remember that everyone here comes from different circumstances. We all have different resources available and different risk tolerances.
- Don't let the perfect be the enemy of the good. Better is better. Celebrate people when they take a step up and work to move their finances in the right direction. Don't flame out because they haven't followed what you consider the optimal path. Everybody has to start somewhere.
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Notes -
I could use some investing advice. I have about $120k in Vanguard VTSAX and $100k sitting around in a bank account that I have no plans for at the moment. My goal is to be low effort and just sit long on it, since I'm lazy and just generally want it to sit around and not have to pay attention to it. Should I just buy more VTSAX? Are there better index funds I can throw my money in and get more returns long term? I don't want to have to actually pay attention to the stock market and buy and sell different things, but am not sure if I'm leaving money on the table by not knowing about XYZ fancy financing thing I could stick my money in.
There's no such thing as investing lazily while achieving absolutely optimal result. If there was, everybody would be investing in exactly the same thing and it would be the only option recommended by anyone who is not a crook. However, the reality is if you take more risk, you can earn more reward. Or not. That's why it's called risk.
If you just want to park the money somewhere and forget about it while it is gaining value in lockstep with the market, a wide market index fund is the way to go. Compare which one charges least expense and follows the index most faithfully and just park there. Vanguard has pretty good offerings in that area, with very decent expense ratios.
However, as it will raise with the market, it will fall with the market. Broader portfolios, incorporating more asset classes (bonds, gold, resources, even cryptos if you're into that), may provide better long-term returns due to being more robust against volatile markets. On the other hand, you may use more risky but potentially more rewarding narrower strategies - like, investing everything in AI companies only - if it works out, you can make enormous profits, but it also can go bust very easily. I don't think a thing where you can get more reward with the same risk profile can exist long term in the market - if it pops up, people will start buying it, and drive the price up, thus diminishing the potential reward, until it will be roughly the same as other things with the same risk profile. Of course, people can be mistaken in determining the risk profile - but so could be you.
I'd say if you don't want to get too deep into it, and if you are not going to need this money anytime soon, and you plan to HODL regardless of what the market does today, then index fund is not a bad option. Another option may be a target date fund, if you know when you'd need the money, which provides more balanced portfolio so you won't find yourself forced to sell in the market dip because you need liquidity now. Do not be tempted to "keep up with the Joneses" and seek seemingly more profitable investment, unless you understand why it is more profitable and what risks you are taking there. Yes, you may leave some money on the table this way. Better than leave all the money on the table if something goes wrong.
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VTIAX, maybe? AKA "rest of the world", since VTSAX is US market only? Not necessarily more returns, but the global market does sometimes outperform the US market, and that bit of diversification isn’t a bad thing.
If you don't mind EFTs instead of mutual funds, you could always go VT, which is VTSAX + VTIAX -- aka "the entire global market in one fund". Minimum effort, maximum diversification.
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