We Opened the Roth

by Kevin on February 3, 2008

That pretty much says it all. Last night I went to Vanguard’s website and signed up for our first Roth IRA (in my name). We had originally planned to open my account with Vanguard’s Total Stock Market Index (VTSMX), and the next contribution (whether to my account, or to open up one for my wife) would be Vanguard’s Total International Stock Market (VGTSX). We would continue to contribute to both funds for diversification.

However, it is going to be a while before we have another $3,000 saved up to invest in another Vanguard fund. That means it would be a while before we can better diversify.

So last night I made the choice to give us instant diversification with Vanguard Target Retirement 2050 (VFIFX). Target Retirement Funds are really “funds of funds”. This means the mutual fund doesn’t invest in individual stocks. Instead, it invests in other Vanguard mutual funds in this breakdown:

  • 71.61% – Vanguard Total Stock Market Index
  • 10.26% – Vanguard European Stock Index
  • 9.89% – Vanguard Total Bond Market Index
  • 4.66% – Vanguard Pacific Stock Index
  • 3.34% – Vanguard Emerging Markets Index
  • 0.23% – Vanguard Total Stock Market ETF

I think the bond allocation is way too high, in fact I would prefer it to be 0%. I looked at some of other Target funds and they all had very similar asset allocations. I’m willing to give up the 10% for bonds if I can get instant diversification. In the future, we may add more to the stock funds (buying them individually) to up our percentages.

Nonetheless, we’re started. And that’s worth something — first step counts!

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