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VANGUARD ROTH IRA GUIDE - Opening Account, Buying Stock, Automatic Investing, DRIP - YouTube
Channel: Sean Lei on Investing
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this video is part of an investment
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series I highly recommend you start at
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the very beginning I'll leave the link
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in the card in description below I'm
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Shawn a computer scientist working in AI
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with a passion for investing and in this
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video I'm going to show you step by step
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how to open a retirement account with
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Vanguard and how to start investing by
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purchasing your very first stock
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Vanguard is one of the world's largest
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investment companies with over 30
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million investors the company has a
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well-earned reputation for its low cost
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investing and their highly rated funds
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is what gets people to advertise for
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them through word-of-mouth Jack Bogle
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who created Vanguard is also the man who
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is credited for creating the first index
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fund which revolutionized investing for
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everyone
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the low-cost options from Vanguard allow
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you to grow with the market which we
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learned in previous video is one of the
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best ways to invest and a top it off
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Vanguard is owned by the funds managed
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by the companies and therefore is owned
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by its customers which will be you at
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the end of this video
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and that is why Vanguard is a fantastic
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place to invest before you invest in a
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taxable brokerage account you should
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invest in a Roth IRA first the maximum
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contribution you can make to a Roth IRA
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is six thousand dollars per year or
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seven thousand dollars if you're over 50
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now the reason why you want to invest in
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a Roth IRA first is because if the tax
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incentives you get from it if you have
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six thousand dollars in both a Roth IRA
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and a taxable brokerage account and save
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those six thousand grows to $100,000
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over the course of 40 years that
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$100,000 will be pulled out from both
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accounts but with a taxable brokerage
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account you will pay taxes and lose tens
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of thousands of dollars but with a Roth
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IRA you can keep that $100,000 all to
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yourself paying no taxes if you reach
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the certain age of fifty nine and a half
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years old the government incentivizes
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people to save for retirement and this
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is just one way that people do so
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there's also another benefit of a Roth
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IRA and it's said you can pull out your
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contributions at any time so say you
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contributed six thousand dollars and
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that six thousand dollars grew to seven
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thousand dollars you can take out that
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six thousand dollars free and clear
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without paying any fees whenever you
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want all right so now I'm gonna pull up
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my screen and guide you through how to
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open up a Roth IRA with Vanguard and how
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to also invest by purchasing your first
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stop we're gonna go through opening an
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account connecting your bank account to
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add money buying a stock or an index
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fund automated your contribution
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automating the investments of your
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contributions and setting up drip or
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dividend reinvestment plan before we
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begin I just want to say that this video
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is specifically targeting us investors
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for those who are not US citizens or
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living in the United States your
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country's government might have
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different tax incentives so this might
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not apply to you but with that out of
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the way first we have to realize that
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there are income limits to contributing
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to a Roth IRA and whether you qualify to
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contribute to a Roth IRA or not is based
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on your modified adjusted gross income
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or your Maggie a regular AGI is just
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your salary or how much money you make
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through the course of a year - certain
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deductions such as student loans or
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contributions to a health savings
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account in HSA and your Maggie is your
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AGI with those certain deductions added
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back ends so your Maggie is what
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determines whether you can contribute to
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a Roth IRA for 2020 if you're a single
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and you make below a hundred twenty four
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thousand dollars then you can contribute
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the full max of six thousand dollars to
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Roth IRA if you make in between twenty
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four 124k to 139 KN it starts to phase
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out where the maximum amount you can
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contribute to a Roth IRA becomes less
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and less as you get closer to 139 K and
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then here's the income limits to married
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filing separately not much of an
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incentive to do this all right so with
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that out of the way we're going to
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Vanguard comm and so this is the home
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page of Vanguard it looks nice there's a
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nice picture here but honestly the user
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experience of this website isn't great
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as a computer scientist in your typical
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tech-savvy millennial the website is a
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struggle to navigate with Vanguard has a
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high reputation for its low cost funds
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they're fantastic but maybe they also
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have a low cost website Vanguard please
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don't hate me but it definitely could
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use a lot of work but overall it has
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everything you need to invest in
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everything you could possibly want is
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probably here you just got to find it so
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we want to open up a Roth IRA
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Raye and this is the first confusion
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people have retirement plan participants
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or for those who already have an
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accountant but we want to go to personal
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investors click on that and then here at
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the bottom right I'll scroll down so you
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can see get started today
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open an account online and if you have
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assets somewhere else Vanguard if you
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have a another IRA you want to transfer
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or you want to do a rollover from a 401k
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to a Roth IRA you can certainly do that
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here but we are opening an account for
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the very first time so we want to do an
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electronic bank transfer to our new
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Vanguard Roth IRA account and here we do
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not have an account so we want to open
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that up so the two main things are going
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to need is your bank account information
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and your employer's name and address
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this is just your powered by law so
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we're going to go continue so we want to
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open up a an IRA or an individual
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retirement account and we want to go a
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raw there are two common traditional
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Roth traditional basically putting in
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pre-tax money Roth I already is putting
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in post tax money so you might be
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wondering is there a fee to open up an
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account and there is no fee to open an
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account but there is an annual account
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service fee but if you elect for a
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delivery of your statements then the
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annual service fee goes away so we're
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saving the environment and saving 20
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bucks all right so now is the part where
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you put in your personal information and
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you actually don't have to be you a
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citizen to open up a Roth IRA Vanguard
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as long as you're a resident in the
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United States that's totally fine but
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you want to put any personal information
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and it'll ask you about your social
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security number your address and then
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eventually your bank account so you can
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connect your bank account to your Roth
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IRA so I'm gonna go ahead and actually
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log into my account
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all right so this is the general
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homepage that you're gonna first log
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into this money at the top is your total
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portfolio value I've been contributing
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to Roth IRA maxing out every years for
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the past four years and you certainly
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don't have to start by maxing out the
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first year any amount of money you can
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contribute to a Roth IRA will help you
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in the long run just opening a Roth IRA
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and starting to invest is a huge step
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forward than most people do so good on
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you okay so the first thing that I'm
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going to show you is actually how to
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edit the bank account if you want to if
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you want to change your bank account for
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any reason than the one you open the
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account with this is where the user
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experience of Vanguard is really tricky
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to navigate so what you want to do is go
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all the way down account maintenance
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this is actually a very important button
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they just hide at the very bottom but
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then you want to go to bank information
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here and then you can add in whatever
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bank you want to contribute money from
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now I'm going to show you how to
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purchase your first stock so you want to
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go to my accounts and then here buy and
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sell and there a couple options I highly
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recommend you invest with Vanguard
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mutual funds there are a lot of low cost
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index fund options for you but for now
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I'm gonna I'm gonna come back to this
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but for now I'm going to show how to
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invest in stocks so you want to buy a
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stock and you can search for a stock if
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you'd like if you don't know the actual
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ticker symbol say Apple and then you can
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scroll through any companies with the
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name close to Apple will be in here the
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Apple that I was referring to was Apple
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incorporated the ones who make iPods
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iPhones all of that you would not be
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surprised in the number of Esther's who
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look up a company name thinking that
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they're investing in that company but in
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reality they're investing in a
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completely different company for example
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if there was a company named apples then
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investors might get tripped up so make
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sure you're investing you in the exact
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company that you want banker does have
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stock information if you would like to
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read more about it
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but I would say there are better
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resources to do research
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okay so once you put in the stock you
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can see the market price right here and
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you can buy how many stocks you want
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here you'll see the amount of money that
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you actually have so I have seven
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dollars fourteen cents you probably have
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more than me but if you say if you want
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to buy one stock and then you go down to
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the Lord type here a market order would
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put the order in whatever the price is
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for that stock at the time you put that
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order so right now it's showing that's
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321 and one cent but when you place that
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market over when you place that market
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order this number will probably change a
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bit and so whatever the market changes
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at the time is what you're gonna buy it
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has a limit in terms of buying a buying
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limit order is a lower threshold that
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you're setting that you want to buy at
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the maximum so that's a bit confusing to
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say but say you want to buy Apple stock
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for 320 and that's the highest you're
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willing to pay for it
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you can place a limit order for 320 and
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what if that Apple stock goes below 320
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or hits 320 then your buy order will go
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and you will purchase that stock for 320
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at the max stop order is basically the
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opposite where you set a upper threshold
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for example here you might be waiting
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for this stock to drop but in the case
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that it does go to like 325 dollars then
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you want to buy that stock so with stop
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order 325 would initiate once that Apple
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price hits 325 and a stop limit is just
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a combination of the two
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setting the upper and lower bounds and
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then when you place a sell order the
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limit stop and stop limit are reversed
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all right so we're gonna do a market
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order and then you would continue okay
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so here you want to make sure that you
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have enough money to cover this payment
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or else you will go in the negative and
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Veigar might sell your other securities
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to actually pay for this so make sure
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the funds available to trade covers this
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net amount that you are being charged
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for and on the other hand if you don't
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want to invest in innovative stocks but
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you want to invest in eet
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there are a lot of great options in my
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previous investing video I mentioned bTW
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I go into an deep analysis of yvt I
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might be the only sock you would want to
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buy basically because it's an index fund
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that has thousands of stocks within that
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fun so you're diversifying across the
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entire US stock market so we can look at
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the vti
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same thing you can buy however many
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shares you want the market order type
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and then purchase it something that I
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want to show you is how to invest in
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Vanguard mutual funds specifically
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low-cost index funds these are arguably
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the reason why you would want to have
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your account through Vanguard so we're
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going to buy funds here you're probably
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not going to have any of these up here
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so you'll want to add another Vanguard
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mutual fund a great one to invest in is
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the u.s. total stock market so something
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about Vanguard mutual funds is that they
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typically have a required minimum amount
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you would need to start investing and in
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this some of them have a minimum of
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$1,000 for this one specifically it's
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$3,000 I already have it here so you go
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ahead and add it and I will just click
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on this here and then set the dollar
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amount that you want to purchase I'm
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gonna go ahead and say 7.05 just to put
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all my funds into all my available funds
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into this account for my settlement fund
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you're nice to do Girardi from your bank
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account I'm gonna do from my settlement
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fund continue hmm and mid well okay so
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going back to count overview I'm next
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I'm gonna show you how to automate your
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contributions into your third or into
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your Roth IRA and automate the
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purchasing of funds you go all the way
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down to the bottom of the account
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maintenance and then go to automatic
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investment and then I already have one
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set up but you're going to add an
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automatic transaction here now another
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way to actually reach this is to just
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search automatic investing honestly this
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is how I found it first any questions
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you have you probably should just search
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it in the bank or search and
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first thing that pops up and then it'll
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take you to where you can add in an
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automatic investment plan I would
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recommend you connect your bank account
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so you can automatically contribute and
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buy the funds you want but if you have
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money in a settlement account already
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then you can set the frequency every
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month every year week two weeks I
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personally do two weeks but you might
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want to do every month beginning on
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whenever you can start
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I've already maxed out at twenty twenty
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so you can start forward twenty twenty
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two or twenty twenty one until you stop
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this and if you can you can put five
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hundred dollars every single month and
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that will allow you to reach the maximum
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contribution limit of six thousand
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dollars a year you can allocate what you
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want to buy by dollar amount or by
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percentage for example a dollar amount
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can be one hundred dollars here and then
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four hundred dollars into this fund so
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you fully invest the five hundred
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dollars every single month or if you
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want to buy investments based off of
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percentages you can go percent I like to
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do eighty twenty eighty percent into a
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total u.s. stock market index fund and
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twenty percent into a total
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international stock market index fund
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and then you can continue and review
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your submission make sure it's all what
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you desire and then submit but I already
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have something set up so I'm going to
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cancel that so the issue with adding in
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automatic transactions is that you
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already have to own some of the fun you
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want to invest in as stated here to
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establish automatic investments you must
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already own the Vanguard fund to set up
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those contributions so to make up a
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one-time purchase
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you're gonna refer to the steps we just
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to purchase the fund that you want to go
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even more in-depth once you connect your
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bank account and you're able to
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automatic until the exact funds you want
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you can actually edit when your
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contributions will be so I have set it
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up so that it maximizes my Roth IRA
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every single year every two weeks but
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you can also
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you have a lot of flexibility with this
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you can put in $2,000 the first three
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months and therefore max out your Roth
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IRA within the first three months and
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with that you can you can set that up
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and have the first three months active
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such as January February and March and
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if you want this to happen every single
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year then you can go ahead and keep
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those three months active and then skip
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every other contribution because you've
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already maxed out for the entire year
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and you can submit that lastly I'm going
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to walk you through how to set up drip
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or a dividend reinvestment plan and this
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is important because companies that
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you're invested in will pay out a
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dividend which is a payout to its
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shareholders and if you don't have drip
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set up those dividends will just sit in
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your account not invested in anything so
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it's way better to set up there's
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automatic dividend reinvesting so that
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your money goes back into the fund and
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continuously make money for you so to
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set that up you're going to go to the
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home page of my accounts and then go to
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dividends and capital gains and here
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you'll want to click this button change
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distribution elections you'll see all
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your funds and whether they are set up
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to reinvest I currently have them as
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that they might automatically be set to
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reinvest but just in case you want to
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double check and if not change elections
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here so you're going to select the two
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funds you want to change make sure
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they're set to reinvest continue review
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it and then click Submit one of the best
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things you can do as an investor is to
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automate everything away you want to
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take the human factor out of investing
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because you want to be as efficient as
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possible make sure you set up your
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automatic contributions into your author
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array the automatic purchasing of the
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funds you want and the automatic
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dividend reinvestment all of these are
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very important to set up a system where
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you don't have to monitor and maintain
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your investments now I'm not a financial
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advisor this video is basically just to
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educate you on how to navigate through
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the Vanguard website because at the
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beginning it is
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a struggle we become for any investment
[1039]
questions that you might have bop the
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like button to support this channel and
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hit the notification bell so you're
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notified when the next investing video
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is out I'll see you all in the comment
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section below
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peace
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