I already have a Roth IRA account and fund that to the max, I would like to set up a separate mutual fund account for long-term savings to buy a home or other large purchase in about 8 years. I will be investing a set amount of money each month until I am ready to sell. What are some good funds to pick that would be best for this goal?
My Roth is set up with Vanguard, so I guess it would be easier to keep this one with that company as well, if you have any suggestions for Vanguard. Also I would like to minimize the amount of tax I would have to pay each year on dividends until I am ready to sell shares. Any advice would be appreciated. thanks! Vanguard has a tax-managed mutual fund, which holds about 50% stocks and 50% bonds. VTMFX is the ticker. This would be a pretty good allocation for a goal that is 8 years away. Of course, you might want to switch it to a bond-only fund about 2 years away from your goal, to preserve your money. The only problem with this fund is that it takes $10,000 to get it started.
If you do not have the startup money for this, one of their lifestyle funds, like their conservative growth fund VSCGX has a nice balanced allocation for a goal about 8 years away. Once again, switch to a more conservative fund about 2 years away from the goal. This has a $3000 startup amount, but you will pay more in taxes.
If you absolutely do not want to pay taxes until you sell shares, you will need to use one of their tax-exempt bond funds that invest in municipal bonds. Their intermediate-term tax exempt bond fund has a duration of about 5 years. This will contain less risk than the other 2 funds mentioned above. This means if the stock market does well, you will earn less with this. However, if the market does poorly, you will be ahead with this fund. With this bond fund, the interest is tax-exempt, but you will pay capital gains taxes when you eventually sell the shares. Also, be warned that if you have a lot of money in muni bonds, you might be subject to the Alternative Minimum Tax.
The problem with using ETFs is that you pay a commission every time you buy and sell. ETFs are great for lump-sum investments, but make less sense for people who are investing small amounts at regular intervals. The repeated commissions might hurt your returns. In your case, you would probably be better off in a no-load mutual fund.
If I were in your shoes, I would use the municipal bond fund. I tend to err on the conservative side and only use stocks if my goal is at least 10 years or longer. I am actually in the same boat as you, since I am now going to start to save for my house in a few years. I will be using a short-term municipal bond fund since my time horizon is about 3 years. IMO (and this is just my opinion), it is better to be conservative when saving for a house. A house downpayment is more of a savings endeavor than an investing endeavor. I would hate to have to wait to buy my house because I am waiting for my stocks to recover. The growth of my wealth will come in the appreciation of the house and the building of equity into it. So, IMO, it is more important to preserve your downpayment money than to try to grow your downpayment money.
Good luck. Bare investments does not mean anything.............If you want investment for long Run then the best appreciation and investments are in real estate
needs in this World due to increase in population is increasing constantly..................But the amount of land available is constant.
Go for long term real estate investment even if not in your city state or country
Hope it helps
I tried my best!
Cheers anyway! Vanguard is a great choice for your mutual fund needs. If you're interested in earning a 225% rate of return, which most people believe it unachievable, I can show you specifically how to do that at very little risk. have a look at ETF, wich are Exchange traded funds that track major indexes. With ETF you invest on broad indexes so you are safe from dangerous bet on single stocks. Also, ETF are traded as stocks, so differently from mutual funds you can divest in real time. Also, they enjoy the small commission of stocks and are far less expensive than mutual funds.
for long term (10 years?), you might want to give a look at emerging markets which are developing quite a lot and might achieve very interesting results over the long term.
Alternatively, you have world equity and bond indexes which are likely to return less but are less risky
http://finance.yahoo.com/etf
is a good source of information for US ETF and ETF regulation in general. Eight years is NOT long term (in investments, long-term starts at 20 years or so). So your best bet is to invest mostly in bonds.
Unfortunately, there are not many options for tax management in this investment, since you are already maxing out your IRA. About the only option I can think of is buying municipal bonds of the state you live in... Anthony Robbins used to advocate a system called OPA (Outcome Focused, Purpose Driven, Action Plan) to help you reach your goals. The name was later changed to RPM.
Anyway what that meant was you first of all had an Outcome (Let us say that your outcome is to grow $10,000 into $5Million over the next 15-20 years)
Purpose Driven. This is what will make you strive towards your goal, taking all actions, and not getting discouraged. (This is the dream. What will you do when/if you had $5M. This is what will kick start your massive action plan, this is what will give you the energy, the stamina, the belief that it is all worth while)
Finally, the massive action plan. What it will take for you to reach your goal, your $5M.
Having studied many investment funds, read books, and followed the financial press, you will rarely find anyone (who has a proven track record) that will tell you exactly what stocks to buy, when to buy them, and more importantly when to sell them.
Most Mutual funds fail to beat the market average, so even if you chose Mutual Funds, there is no guarantee of success.
So what can you do? What is the best way to reach your goal of $5M balancing the amount of risk you are willing to take against the chances of reaching your goal within the next 15-20 years?
Unless you have a crystal ball, all investment systems will lose money some of the time, but a really good system will always have more 鈥楿P鈥?months than 鈥楧own鈥?months, and the 鈥楿P鈥?months will generally return more than the down months will lose.
The one system that I have seen, that has a past record, is achievable, and more importantly is easy to understand is the Stocks Monthly system. |
