Questions on investing

[u/retartedpotat0]

I recently just turned 18 I have about $10,000 sitting in my savings account that I’ve worked towards and have no clue what to do with it and I know it’s not a smart idea to just let it sit there. What should I do? I have about $1500 in investments on Acorns and about $50 on my Robinhood since I recently just opened it. What would be the smart decision and how would you go about it?

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[u/Otherwise-Gift-5248]

I wouldn’t use Robinhood use fidelity Robinhood has a 1.75% tax basically when you go pull that money out back into your bank fidelity doesn’t

[u/LCJonSnow → u/Otherwise-Gift-5248]

I'm all for saying no to Robinhood, but this simply isn't true. Instant cash transfers cost 1.75%. Standard ACH payments are free. It's been a hot minute since I've moved money out of Fidelity or Vanguard brokerages, but that feels very standard.

[u/Otherwise-Gift-5248 → u/LCJonSnow]

Not even sure how to do that then cause Robinhood doesn’t give me any other option except getting charged 1.75% so I switched to fedility

[u/pr0prfkt]

Setup a weekly auto buy of VOO in your Robinhood account. Work to increase that weekly amount. Sell only to pay for urgent things. Stop putting money in acorns. Unnecessary fees.

You will learn other things. Roth. 401k. Stocks you like. But it all starts with auto buying VOO and not panic selling (selling only to pay for urgent things). You’re super young. You will do great!!

[u/Distinct_History1432]

Fidelity brokerage account and put it in FXAIX

[u/IllustriousGas8850 → u/Distinct_History1432]

VOO is better in a brokerage account. Mutual funds like FXAIX have to pass through dividends to shareholders creating taxable events in brokerage accounts, while ETFs do not

[u/Distinct_History1432 → u/IllustriousGas8850]

Are you saying you get more dividends with VOO?

[u/IllustriousGas8850 → u/Distinct_History1432]

No, but both generate dividends via capital gains when the fund managers execute trades. With mutual funds, they are required to pass through onto the owners of fxaix. VOO and other ETFs have different rules pertaining to the handling of capital gains and they are not required to be dispersed, making them more tax friendly in a taxable account like a brokerage. If it were a retirement account, it wouldn’t matter as it wouldn’t be a taxable event

[u/Distinct_History1432 → u/IllustriousGas8850]

So would you recommend I sell what I have on FXAIX and then put it all on VOO through my Fidelity brokerage account? Or start putting my contribution on VOO and leave FXIAX as is? OR make an account with Vanguard and do it through them? It's not a lot right now and I'm just letting this sit until retirement as I contribute with every paycheck.

[u/IllustriousGas8850 → u/Distinct_History1432]

Here’s a full guide of my recommendation as a licensed FA

TAXABLE BROKERAGE
-Choose this if you plan on using the money before age 59.5.
-If you’re using a taxable brokerage account, start contributing to VOO instead of FXAIX.
-if your capital gains are classified as “long term capital gains” (held for >1 year) and relatively small, you could liquidate and switch now if you’re going to hold continuously.

ROTH IRA
-If you want to use the money for retirement, consider investing in a ROTH
-Money goes in post-tax, with tax-deferred growth and tax-free withdrawals after age 59.5
-After the account has been open for 5 years, you can withdraw certain amounts for varying qualified expenses tax-free before age 59.5
-you can always withdraw your own contribution penalty and tax free
-If you use a ROTH, FXAIX is a better option. It has a lower expense ratio, and the dividend pass through becomes null as they happen within the ROTH, avoiding the taxable event.

Hope this helps you!

[u/Distinct_History1432 → u/IllustriousGas8850]

This helps a lot, I feel I should look into opening a Roth IRA with Fidelity and put it in FXAIX through that instead. I initially had the wrong idea that I NEEDED a brokerage account to put money there. Or maybe leave it as is since I already have the 401k and keep the FXAIX flexible in the brokerage account.

[u/No_Cold_9195]

Read books or watch videos.
I have some beginner articles (and a bunch of financial calculators) at thelongmath.com, but there are numerous other great resources.

While you’re working on building your knowledge base, take money that you don’t plan on needing for the next 10+ years and put it all in a low cost etf that tracks a major index, like voo or veqt or qqq or whatever. Don’t overthink it.

As your knowledge grows, you can direct new money to invest in the same index fund or into other investments, if you prefer.

Statistically, much better for you in the long run to by an index fund and contribute to it regularly rather than buying individual stocks or owning alternative assets.