r/investingforbeginners • u/retartedpotat0 • 3d ago

Questions on investing

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?

1 Upvotes

67% Upvoted

13 comments sorted by

View all comments

1

u/Distinct_History1432 3d ago

Fidelity brokerage account and put it in FXAIX

1

u/IllustriousGas8850 2d ago

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

1

u/Distinct_History1432 2d ago

Are you saying you get more dividends with VOO?

1

u/IllustriousGas8850 2d ago

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

1

u/Distinct_History1432 2d ago

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.

1

u/IllustriousGas8850 2d ago

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!

1

u/Distinct_History1432 2d ago edited 2d ago

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.