As Christy said in her post Weathering the Pandemic, we recently opened up Roth IRAs. Unfortunately, we currently can only afford to put in $500 a month so that will mean we are only contributing 1/2 of what we could be, but that still brings us to 15% of our gross income when combined with what we put into my Roth 401k at work. Our plan is to stick to the $500 a month and if we have enough in savings to spare at the end of the year we will max them both out.
Since Christy is uncomfortable with investing, she chose to go with Betterment, while I favored investing through Vanguard and chose to have a more active role in picking my investments. You can pick your own investments through Betterment as well, but looking at the options they are primarily Vanguard ETFs anyway, so I figured why not cut out the middle man and pay even less in fees.
While the holdings Betterment picked for Christy based off of her personal data is a mix of 90% stock and 10% bonds, I chose the Dave Ramsey method of investing 25% each in large cap, mid cap, small cap, and international. I wasn’t able to invest completely the way I wanted to though. Since we are starting slow, I had no choice but to invest in ETFs for the time being. The ETF options don’t have a minimum. Just the price of each share. Mutual funds; however, have a $3000 minimum to invest in each category. So it’s going to be a few years before I can build up the $12,000 I need to move out of the ETFs and into mutual funds.
When Christy and I discussed our different investing paths, we were going to give it a year and then possibly move the other persons investments into whoever was doing better. With the current state of affairs in the world, I don’t know if a year would even be long enough to get a good gauge, but we also discussed keeping them separate to further diversify our investments. Unless one of us really takes a bath and the other is a clear winner, I think keeping them separate would be the way to go.
Speaking of taking a bath, I’m already behind her by about $20. With Betterment, they were able to put all of her money straight to work. With Vanguard, our initial $250 deposit was not enough, so I bought 1 share of international and had to wait another month for my next deposit before I had enough to buy a share in the other 3 categories. From using both, I see two advantages that Betterment has over Vanguard. The first is that her money is working for her right off the bat, while my balance lingers in a money market settlement fund until I can afford another share. The second is just the appearance. Betterment is way more polished and easier to look at, while Vanguard looks like their web developer died in 2003 and they never found a new one.
Am I an investment professional? Should I be handling these investments myself? I read two books, so why not?
All kidding aside, I do feel like the knowledge I have gained by researching the issue at a minimum gives me the confidence to feel comfortable making the decisions myself instead of paying someone additional fees to manage it for me. I created a spreadsheet to get an idea of how much all those fees would eat into our overall returns. Christy took a little convincing, but the results helped me make the decision to manage our investments myself for the time being. I’ll write more about that in a future post.
Since we are not dealing with large dollar amounts at this point, I want to see if I can mange to earn a respectable rate of return doing it myself. If so, I’ll keep on with what we are doing. If I see that I am not, I can always reevaluate and switch course. Luckily, since there is more management going on with my work Roth 401k and Christy’s robo-investor on Betterment, I’ll be able to use the rate of returns on those to gauge whether any poor performance on my Vanguard Roth IRA is my inexperience or just market performance.
I read a few books on money, but two books I got from the library that I would recommend are Retire Inspired by Chris Hogan and Unshakeable by Banana Hands (Tony Robbins). They both advise to use a professional for your investments. Regardless of what path you choose for your investments, these are worth reading. If you have books that you would recommend on the topic, please leave them in the comments so that others and myself can benefit.
If you are using a financial planner, you should still know the basics of investing and have an understanding of what they are recommending you put your money into. It’s your money and your decision. Not theirs.