This post was meant to pop up approximately one month, to give a quick update, since I decided I was all-in on the Moustacian train (http://www.mrmoneymustache.com). But what can I say? I’ve been busy. So how are things looking a month and a half later? Did I commit or fall flat on my face?
As I eluded to recently, the first order of business was figuring out expense ratios on my employer’s 401k
plan and making those adjustments after figuring out just what the heck those were (see last post). Done and done.
Next, I
opened an online brokerage account after doing some googling to determine who
was offering the best deals at the time. Nerdwallet gives a good general
breakdown, but YMMV. (http://www.nerdwallet.com/blog/investing/best-online-brokers/stock-trading-accounts/)
Next I started watching darling Apple to see when might be a good time to buy. The
latest phones hadn’t come out yet, nor had the iPad Pro and other goodies, but
if history was any indication, the stock would rise, then plummet after
announcement, then slowly climb again. Now, ask any advisor what stocks you
should invest in, and if they’re not on your payroll, they should be telling
you to avoid any single stock pick and instead invest in index funds. If you
are paying an advisor, then they’ll tell you the opposite after consulting
their crystal ball (they don’t care if you make money or lose money, their
commission is on buys and sells). However, Apple is one of the few stocks solid
enough that it’s tough to go bust on if you like to gamble. Incidentally, I
ended up buying both ‘pre’ and ‘post’ product announcements and then again
yesterday. Nobody that ever invested in the stock market has lost money if they
buy for the long term. Not even through the last recession nor the crash of ’29.
Additionally, if you sell without holding for at least 12 months, you’ll get
taxed up the ying-yang, so why not let it ride?
Then
the market dropped out. No joke, about a week after going all-in, the market
fell apart. But guess what? No better time to buy then when stocks are “on sale”.
Now,
after crunching the numbers, having adjusted my 401k diversification and seeing
the S&P plummet, I went all-in on my 401k contributions and will continue to
do so through the end of the year in an attempt to hit the IRS max contribution
limit. This will be a bit of a game as if I cap out early, I won’t get the
employer match…or maybe I will (and a question to HR on front-loading and
percent-distribution was met with boilerplate that didn’t answer my question). Yes,
my take home checks are pretty small, but the net gain is larger in the long
run as the majority was deducted tax-free.
Unlike
a 401k that limits contributions for the year at Dec 31st, an IRA can
be contributed to through April 15th of the following year. Though
both traditional and ROTH IRAs have a combined cap of $5500. Since my 401k plan
doesn’t offer Vanguard index funds (seriously, look these guys up), it made
sense to open a free account with Vanguard themselves. Anyone can do it, and
since they manage the funds directly, you’re not paying a second party a hefty
expense ratio to do so. This is where you want to invest. I opened a ROTH and
invested in a stock heavy mix. Then when the markets dipped yesterday I made
another buy. The goal is to max this out by the 2015 tax deadline, then do it
again in 2016. Yes, this is considered taxed income, but withdrawals on the
deposits can be made at anytime without penalty. If you don’t have a 401k plan
through your employer, you should seriously consider a traditional IRA which is
pre-tax and see if you meet the guidelines.
So,
the goals so far have been pretty simple: Max out any tax-advantaged vehicles.
Put any “savings” into index funds (whether taxed or not). Optimize any company
matching. Cut frivolous spending (I cut my coffee/lunch bill for the last month
down to $1.18 for the ENTIRE month). Invest in stocks when they’re on sale. Oh,
and go read Mr. Money Moustache.
