Which Vanguard Fund?

[mb914]

Hi everyone,

I'm a college student looking to start building my portfolio for the future. I've decided to place $4,000 into a Vanguard fund, but I'm not sure which fund would be the best for me. I like the 500 Index Fund, but I've also read good things about the Small cap index funds and the Total stock market fund. I'm pretty young, so I suppose that I can afford some risk with my investment. Does anybody have any advise as to which fund I should invest in?


Thanks!

[disneysteve]

What is the purpose of this money? What is your timeline? Do you have any other investments?

I think the 500 index is a good core holding and a reasonable place to start if this is your first investment. Another good choice would be their Total Stock Market index which would give you broader diversification.

[Broken Arrow]

If this is for retirement, I recommend the Target Retirement fund.

But as Steve said, this really depends on what you have in mind for the money.

[mb914]

Thanks for the replies!

No, I wasn't really planning on using this for retirement, but rather for general investing. I'm leaning towards the 500 index to start building my portfolio, and then I'll go from there.

[Scanner]

If this is not for retirement, you'll need something tax efficient.

You may actually be better off with an ETF like SPY (ticker symbol). Any of the indexes will be efficient though, more than active managed funds.

[mb914]

I was thinking about investing in an etf, but I want to keep contributing to my account, and I don't want the fees to overwhelm me. Are the index funds really tax-inefficient?

[disneysteve]

I was thinking about investing in an etf, but I want to keep contributing to my account, and I don't want the fees to overwhelm me. Are the index funds really tax-inefficient?

You're correct that an ETF isn't the best option for regular investing because there is a commission on every purchase, unlike a mutual fund that has no transaction fees.

Index funds are tax efficient since they don't do much trading. ETFs are even more tax efficient, but for most people, the index fund is the way to go, especially when you are just starting out.

[jc3900]

Even if you are young, you still need to be diversified. I would say either the total stock market index or the S&P 500 would be fine for a good base of instant diversification. If you have enough money to split into more funds, I would recomend adding the total international stock market index. At least this is the current track I'm on

[aida2003]

We've had a VTSMX in our taxable account for a few years and I consider tax-efficient. At the beginning of the year we were contemplating to open an int'l fund for diversification, but then it struck me that I'm not totally maxed out in my 401k. Therefore I increased my 401k contributions and that took care of our spare money .