Why I Love my Vanguard Roth IRA

Vanguard Roth IRA

One of the very first investments I made when I started my entry level job out of college was in a Vanguard Roth IRA. This was something that I had researched for a long time through various different articles, podcasts, and books on the topic. Overtime, common theme kept appearing… the company Vanguard and the Roth IRA. I kept seeing successful investors young and old, vehemently promoting Vanguard as an excellent resource to choose to improve your net worth and invest for your retirement. After I continued to hear more of this trend during my research, the decision became clear, I had to find out how to get my money into a Vanguard Roth IRA and get started!

The position I was entering didn’t offer a 401k due it being contract work with no consistent longevity of each work contract. So I needed to find a place to invest my money for retirement outside of the company. You can choose to do this anywhere, but I wanted to do this in a tax advantaged manner to improve my overall results with an optimum return by saving on the taxes either on the front end (Traditional IRA) or saving on the money as I pull the funds out (Roth IRA).

I ended up choosing a Roth IRA after careful consideration. I wanted to find something that grew tax free overtime, so that when I pull the money out come retirement I would know the balance in my account is actually all my money and won’t be cut down by taxes during withdrawal; which is the theory behind the Roth IRA.

At that point I was pretty set on the Roth IRA as my tax advantaged investment vehicle of choice. Now what? There were so many options to choose from as to what company I was going to select to be my brokerage account to start a Roth IRA within. After careful research, as mentioned above, I decided that Vanguard Roth IRA was the best fit for me, and I am still extremely happy I made this decision then.

Vanguard Index Funds

Vanguard was founded by John C. Bogle in 1975, who is now a world renowned finance hero for the invention of the index fund within Vanguard. Vanguard index funds are a low cost mutual fund with minimal to almost no fees or expense ratios. These funds track an index such as the Large cap “S&P 500 index” or Small cap “Russell 2000 shares index”, other words they aim to replicate the very closely mirrored market results of a select group of stocks depending on which index fund you wish to invest in. This is a simple way to capture specific market sector returns with exposure to many different stocks to mitigate risk with intra-sector diversification.

As the inventor of index funds Vanguard has risen to the apex of the financial world as more and more individual investors and corporate investors see the positive power keeping your fees low and trying to match the market rather than pay high fees and attempt to beat the market, which rarely occurs. Therefore I decided, as like many others do, that Vanguard is an excellent place to start investing and I felt more than trustful of this incredible company.

I then had it figured I was going to use a Vanguard Roth IRA, so now I was left with the massive world of index funds to choose from within my vanguard account. This meant much more research as the options can seem overwhelming. This can be good and bad, as freedom of choice is an excellent thing, but you must at least have an idea of where to start. The continued research began, this time on index funds.

This part will be different for everyone based on their goals and risk tolerance at the time they start investing. I was personally in a high risk tolerance as I was young starting my first job and have a long time horizon to invest. Therefore, I chose to invest in an all stock index fund tracking the entire US stock market. This index fund was called “Total Stock Market Index Fund” or VTSAX. This was a decision to provide higher long term returns as it was an all stock collection, as well as provide diversification within the fund. The diversification comes from many different company sizes being involved in one fund rather than just say “ large companies” or “small companies”. Since this is a total US stock market imitation there are companies of all sizes and in many different trade sectors involved in just one fund.

This has been a good decision FOR ME. I have stuck with this fund and continue to allocate money towards it. However this does not mean this is the best fund selection for everyone, I want that to be clear. Based on risk tolerance and goals there are many different approaches you can take. You can invest in single stocks ( I wouldn’t recommend ), real estate investment trusts (REITS), Electronically Traded Funds (ETFs), and many other great investment vehicles within your Vangaurd Roth IRA. This all has to be a choice that comes down to where you are at as an individual and how much risk you are willing to take on, in return for a higher yield on those investments.

I would recommend anyone making this decision that doesn’t feel comfortable with deciding to seek the help of a trusted financial expert. Spending a little money now to get the best personal advice could set you up much better for long term success.

So that is how I decided to get started with Vanguard, and I would recommend them to anyone, family, or friend (which I have and will continue to do). I have been very happy with the customer service from day one helping me create the account and continued support along the way. I will continue to use Vanguard and I think you should too.

I do not get any financial compensation from Vanguard whatsoever, and any links in this article don’t give me a referral kickback. I simply try to recommend great products that I know will honestly help people, and this is definitely one of them. Get started with them today and start setting up that future the right way!

 

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