Do you want to know how much money I plan to have in my Roth IRA in 30 years
over five hundred
Thousand dollars, it's not because I'm smarter than you or anything like that
The only reason is because I actually invest in my Roth IRA every single year
But don't worry because I want you to have as much money as I will or hopefully even more so in this video
I'm gonna pull back the currents to go over what you need to know and the things you need to think through
before you start investing in a Roth IRA
If you don't think about these things now
then you'll just end up opening a Roth IRA account and possibly wasting money investing in something just because you didn't know I'll
specifically touch on who can invest in a Roth IRA you were investment options choosing where to invest your Roth IRA and also,
Thinking through the types of allocation. You may want to choose because I know this video might get a little bit long
I'll have a timestamp down in the comments for you to skip around for whatever you're looking for
You can also check out the description for playlists on different personal finance topics
Check it out
When you're ready
Please Hulk smash that thumbs up button and leave a comment down below letting me know if you have or have not started
investing in your Roth IRA
you can also leave any other investment questions when it comes to Roth IRA or
general investing questions as well if you would like if you need a little general refresher on what a Roth IRA is then I made
A video about that I will throw the link in the description for you to check out first off
you need to know that anyone who has a job that has an earned income that is taxed is
Able to invest in a Roth IRA. Yes
This even means a 16 year old can invest in a Roth IRA as long as he or she has a job
This also means that you can and in my opinion should invest in an IRA
Even if you have a 401 K through your current job before we get into it
I want to mention that I am NOT giving you investment advice at all. These are my thoughts my opinions
This is for informational purposes only. Please contact a professional if you have any further questions, that's my disclaimer
What most people get stuck on is what in the heck should they be investing in now?
I agree that this can be a little bit overwhelming there are so so
Many options that we kind of get decision fatigue and end up not investing in a Roth IRA at all
I am NOT going to tell you exactly what investing but I'll lay out some of the more popular
Options and give you my personal opinion on the ones that I prefer once again
I am not telling you what to do with your money do any additional research that you need to make a decision that aligns with
your situation in a Roth IRA
You can invest in things from real estate investment trusts, which are called REITs
Sometimes a single stock to target-date funds to index funds to bonds and all kinds of other
Alternative investments like that. The first auction we'll go over is investing in single stocks
This is one. You're probably more familiar
With because it's where you buy a share of a single company while you can't make money investing in one company
You're at a higher risk of losing money, since we're putting all of your money into one company
It's like having a bag with one egg in it then dropping that bag on the ground
There is a higher likelihood that one egg is gonna break because it's the only one in the back you can decide to spread out
Your risk by buying shares of multiple stocks from any of the thousands of companies that are traded on the stock market
This would be like putting multiple eggs in a bag if you drop that bag
then your odds of breaking all of the eggs would greatly
Decrease, but the problem with investing in single stocks in your auth IRA
Is that out of the thousands and thousands of companies traded on the stock market?
How do you know which ones are winners and how you know, which ones are losers?
I agree that there are different ways to evaluate a company to decide if you should buy or not
But it's not as easy as it sounds and it takes quite a bit of time to even come close
To being good at it. So while you can't invest in single stocks and a lot of people make money from doing this
it's a lot more risky for someone who isn't interested in spending the time to evaluate all of those different companies another investment option for
Your Roth IRA could be a target date retirement fund
These are extremely popular within a lot of companies sponsor 401ks because they are super
Super simple to invest in just like a company sponsor 401k
You do have the ability to invest in a target date fund through your Roth IRA
The fund you choose is all based on the year
You plan to retire a target date fund holds many different investments to spread your risk among many different things
I'll walk you through an example in a minute the allocation of how your money is invested is based on the date you plant or
Hire these funds basically handle the management of how your money is invested
So it's less that you kind of have to worry about on a day-to-day basis
For example Vanguard lists these target date funds like this
target retirement
Then they year that you plan to retire you'll notice that these are in increments of five years because if you are within five years
of retiring
Vanguard is assuming your strategy isn't going to change very much looking at the investments within the Vanguard target retirement
2065 fund
VLX vx you'll see that the majority of the fund is invested in different stock market index funds will talk about index funds in a
Minute since a person investing in this fund isn't planning to retire for another forty six years
The fund manager has less money invested
Into less risky bonds ten percent to be exact the further you are from retirement
The more riskier investments can be so that you can capitalize on the upside of the stock
Morgan over the long term to grow your money
investing for the long term also gives you the ability to make up for any of those years that the stock market is down the
market generally rises over the long run over 36 years from 1985 to 2015 the S&P 500 was up to
27 of those years, which means it was only down nine of those 36 years
So it was basically up 75 percent of the time next we have index funds specifically
Low-cost index funds I'll be straight up with you and tell you that these are probably my favorite
Investment be hope vehicles for my Roth IRA
Index funds are funds that hold many different single stocks
The goal of an index fund is usually to match another index within the stock market
Probably the most famous and most popular index to try to mimic is the S&P
500 for example Vanguard total stock market index fund VT sa X holds over
3400 different stocks and different amounts within each stock on their website
They gave you a breakdown of the ten largest holdings for this fund
And also what percentage of the fund is invested in two different sectors
so the top ten investments are spread among many of the largest companies in the world from Microsoft to Apple to Amazon to
ExxonMobil financial services technology health and
Consumer Services are some of the largest sectors that the VTS ax fund
Invests in once again the goal of an index fund like VTS ax is to mimic what the total stock market is doing
VTS ax does this by
Investing in all of the companies that are in the S&P 500 index and then some because they're essentially investing in over
3,400 companies as we know over the long run the stock market has gone up
This funds goal is to help you benefit from the overall rise in the stock market
so investing in a total stock market index fund like VTS ax
vfi ax or there ATF's which are a vti and vo o
Gives you a good chance of a return that is about the same as the total stock market
Over the long run the feast for index funds are usually cheaper because it's not being actively managed by a fund manager
One thing to pay attention to is that some index funds will hold very little or even zero bonds in their portfolio
So if you're managing your investments on your own
Then you'll kind of need to think about how much you also want to invest in bonds based on when you plan to retire
We'll cover more about that. Once we get into the allocation part later in this video now
We have mutual funds on the surface some mutual funds may look like a low-cost index fund
But the big difference is that most mutual funds are actively managed by a fund manager
Just a heads up that some people will refer to a low-cost index fund as a mutual fund for the purposes of not
Confusing you in this video think of a mutual fund and an index fund as two separate things
mutual funds are made up of many many different investments the type of
investments each mutual funds fund holds is
based on what the fund manager chooses to buy and sell the cost of owning shares or the expense ratio in a mutual fund is
Usually high because of the many people working for that particular fund like the fund manager and the people who work under him or her
to decide which switch stocks to buy and sell because the buying and selling of investments is up to the fund manager you were basically
Betting that that fund manager knows how to pick investments that will beat the stock market and give you a higher return
On your investment there have been many different studies that show that over the long term
Fund managers aren't that good at guessing what to buy I'm not telling you not to invest in mutual funds
but I'm just saying that I never would because of the high fees associated with most of them and the fact that the odds of
That fund manager beating the market is extremely slim so slim that the famous warren buffett once been a fund manager
1 million dollars on it the fund manager was able to choose five mutual funds and bet that one of those five funds
Would beat the performance of the S&P 500 or the 500 largest
Publicly traded companies just a reminder back to our index fun to talk
vo o that low-cost index funds fund
Matches the S&P 500 and they invest in everything that the SP 500 invests in this bet lasted ten years in the SP
outperformed every single one of those five funds that that fund manager chose
Which is another reason that I like low-cost total stock market index funds like VTS ax vti
Vo oh, and I forget what the other one is. I'll put it on the screen lastly
You can invest in bonds within your Roth IRA now bonds are a lot less volatile
So their price generally isn't going to fluctuate as much as any of the other investment options
That I mentioned before we'll go more into using bonds within your Roth IRA in the allocation
Section of this video knowing exactly where to invest. Your Roth IRA is not as difficult as it might sound
There's so many different places for you to choose from that
I'm only going to lay out a few of them for you
Each platform has its pros and cons
based on your level of knowledge at this point in time while the more important part of this whole thing is
What you invest in choosing a platform is going to help you decide which investment options that you have
I do not want this decision to hold you up from funding your Roth IRA with at least something as soon as possible
Keep in mind that you can open and fund a Roth IRA with multiple companies at once as long as you don't exceed that
Yearly maximum that you're allowed either
$6,000 if you're single or
12,000 if you were married filing jointly, then you're good to go
for example, if you decide to invest one thousand dollars this year in a Roth IRA through
Then realize that you like the investment options that m1 finance offers just a little bit better
then you can turn around it and open a Roth IRA with m1 finance and start funding that account with up to
$5,000
5,000 more dollars for the current year because one thousand plus five thousand equals six thousand dollars the first option
I want to mention are Robo advisors in my opinion the three best companies in this space our betterment
Wealth front and m1 Finance which is kind of like a hybrid
Robo advisor with the Robo advisor like betterment and wealthfront you basically pick your goals and they choose how to
Invest your money based on these goals. They'll usually invest your money into low-cost index funds
Like we said before are really good like the ones that Vanguard offers
I
Love these options for people who just kind of want to throw their money in every single month and let someone else handle the investing
For a very reasonable fee and one finance is probably my favorite investment platform out of these three options
It's the main one that I've been starting to use with all of my Roth IRA money
I'll throw a link in the description for you to open an account with m1 finance or you can watch for the review that I
Did on m1 finance I'll throw the link in the description to that video
M1 finance is kind of like a hybrid
Robo-advisor for many different reasons that I don't really have time to get into in this video
Let me know in the comments below if you want me to make a more detailed video
About how to actually invest with m1 finance next your option would be to invest through one of the larger
Financial services companies these would be companies like Vanguard which I love fidelity and Charles Schwab
These are all great places to invest your Roth IRA money
I like all of these options for hands-on investors and even passive investors as well
Even though you can invest these companies more passively to get started and get things set up
you'll need to at least have a little bit of knowledge when it comes to investing so that you know what to look for if
You want me to make a video to help you out more with this?
Leave a comment down below and let me know next we have investment advisors
now you have to be
Really really careful with who you're working with
If you choose to have an advisor help you there's different types of investment advisors like brokers or even insurance
Agents you want to avoid people because they basically make a commission on what that gets you to invest in
This is problematic because their investment
recommendations could be ones that benefit them more than it benefits you what's even more messed up is that this horrible practice is
Completely legal if you really really want a financial adviser then make sure that he or she is a fiduciary
And they you're always working with you as a fiduciary
These types of advisors are legally
Required to keep your best interest in mind when advising you what to invest in the brokers and insurance
Agent people are not which becomes a huge huge
Conflict of interest since they are usually pushing investment products on you with insanely high fees because they get some sort of a lucrative
Kickback the last area you need to know about when it comes to your Roth IRA is what you want your asset allocation
To be based on different asset classes like the ones that we talked about earlier in this video for the sake of simplicity
think of it like this out of
100 percent what percentage of your money do you want?
Invested in things that could grow your money and what percentage you want invested in bonds
Which are a lot less risky and a little bit more stable
for example someone who is younger that doesn't plan on needing their retirement money for another we'll say 40 years might choose a
95 5 allocation 95 percent of their investments are in things that have
have a higher potential to grow like single stocks index funds REITs and things like that and
5% of their money is in bonds
Which like we said is a little bit less risky and a little bit more stable
You could also have a person who is five years from retirement that has enough in their retirement
portfolio who wants their money to have the potential to kind of grow a little bit and
still be safe at the same time this person might choose a
60/40 split
60% of their money is investments that have that potential to grow and
40% of their money are in is in is in bonds one strategy some people use to determine their allocation is by taking
110 minus your age and that's how much money you should have in assets that could grow
so if you were 40 years old and you wanted to use that logic and you would take
110 minus 40 which equals seven this line of thinking would say to invest
70% of your money into things like single stocks index funds REITs, etc
And 30 percent of that money into bonds one of the main problems with this strategy is that everyone is in different financial?
situations at any given age for example
if you and I were both 40 years old, and we each wanted to have 1.5 million dollars in our
portfolio by the age of 60 you have 1 million a 1 million dollar portfolio right now, and I only have
$100,000 in my portfolio then do you think our investment allocations would look exactly the same?
Probably not
I would most likely need to be investing more
Aggressively which means I would have more money in growth assets and less and more stable
Investments like bonds your asset allocation
Needs to be based on where you are today and where you need to be by the time you want to start withdrawing that money
for retirement
So it has to be based on your specific needs your specific goals how much you are willing and able to save and invest
every year and when you'll need that money, this is where a fiduciary
Financial adviser would come into play
Especially if you feel like you're way behind when it comes to your retirement investments now
I know a lot about personal finance and I feel very comfortable and confident with my investment decisions and strategy
But I can tell you that once I'm about 50 55, maybe 60. I'll meet with a fiduciary
Financial adviser not because I'm afraid I've made any huge mistakes
But just because it will be beneficial
to have another set of eyes and kind of get a different perspective on what I should be doing with my
Portfolio at that point in time since I'll be so much closer to needing that money
I look at it as hiring a teammate or a coach if you will
So while I'd love to tell you what your allocation should be I'm not going to because I don't know your specific situation
For me I can tell you that I won't need any of my retirement money for another 30 plus years
So I am heavily invested in assets that have a higher upside of growing my current split is
95% in growth investments kind of like low-cost index funds and 5% in bonds now
I might eventually go to a 90/10 split but for now
I am good with a 95 5 split. So that's what I'm sticking with another
My split is 95 5 is because I'm pretty financially stable. It's only this way because I am debt-free
I have a large emergency fund I have time on my side and I am maxing out all of my
retirement accounts every single year check out the links in the description for different playlists and
Resources that will help you with all of your personal finance needs
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Just like this one. I'll see in the next one friends a Dios