Tag Archive Financial Advisor

ByCurtis Watts

Are Social Security Disability Benefits Taxable?

A disabled woman talks to her accountant about taxes.Social Security benefits, including disability benefits, can help provide a supplemental source of income to people who are eligible to receive them. If you’re receiving disability benefits from Social Security, you might be wondering whether you’ll owe taxes on the money. For most people, the answer is no. But there are some scenarios where you may have to pay taxes on Social Security disability benefits. It may also behoove you to consult with a trusted financial advisor as you navigate the complicated terrain of taxes on Social Security disability benefits.

What Is Social Security Disability?

The Social Security Disability Insurance program (SSDI) pays benefits to eligible people who have become disabled. To be considered eligible for Social Security disability benefits, you have to be “insured”, which means you worked long enough and recently enough to accumulate benefits based on your Social Security taxes paid.

You also have to meet the Social Security Administration’s definition of disabled. To be considered disabled, it would have to be determined that you can no longer do the kind of work you did before you became disabled and that you won’t be able to do any other type of work because of your disability. Your disability must have lasted at least 12 months or be expected to last 12 months.

Social Security disability benefits are different from Supplemental Security Income (SSI) and Social Security retirement benefits. SSI benefits are paid to people who are aged, blind or disabled and have little to no income. These benefits are designed to help meet basic needs for living expenses. Social Security retirement benefits are paid out based on your past earnings, regardless of disability status.

Supplemental Security Income generally isn’t taxed as it’s a needs-based benefit. The people who receive these benefits typically don’t have enough income to require tax reporting. Social Security retirement benefits, on the other hand, can be taxable if you’re working part-time or full-time while receiving benefits.

Is Social Security Disability Taxable? 

This is an important question to ask if you receive Social Security disability benefits and the short answer is, it depends. For the majority of people, these benefits are not taxable. But your Social Security disability benefits may be taxable if you’re also receiving income from another source or your spouse is receiving income.

The good news is, there are thresholds you have to reach before your Social Security disability benefits become taxable.

When Is Social Security Disability Taxable? 

A senior's tax return

The IRS says that Social Security disability benefits may be taxable if one-half of your benefits, plus all your other income, is greater than a certain amount which is based on your tax filing status. Even if you’re not working at all because of a disability, other income you’d have to report includes unearned income such as tax-exempt interest and dividends.

If you’re married and file a joint return, you also have to include your spouse’s income to determine whether any part of your Social Security disability benefits are taxable. This true even if your spouse isn’t receiving any benefits from Social Security.

The IRS sets the threshold for taxing Social Security disability benefits at the following limits:

  • $25,000 if you’re single, head of household, or qualifying widow(er),
  • $25,000 if you’re married filing separately and lived apart from your spouse for the entire year,
  • $32,000 if you’re married filing jointly,
  • $0 if you’re married filing separately and lived with your spouse at any time during the tax year.

This means that if you’re married and file a joint return, you can report a combined income of up to $32,000 before you’d have to pay taxes on Social Security disability benefits. There are two different tax rates the IRS can apply, based on how much income you report and your filing status.

If you’re single and file an individual return, you’d pay taxes on:

  • Up to 50% of your benefits if your income is between $25,000 and $34,000
  • Up to 85% of your benefits if your income is more than $34,000

If you’re married and file a joint return, you’d pay taxes on:

  • Up to 50% of your benefits if your combined income is between $32,000 and $44,000
  • Up to 85% of your benefits if your combined income is more than $44,000

In other words, the more income you have individually or as a married couple, the more likely you are to have to pay taxes on Social Security disability benefits. In terms of the actual tax rate that’s applied to these benefits, the IRS uses your marginal tax rate. So you wouldn’t be paying a 50% or 85% tax rate; instead, you’d pay your ordinary income tax rate based on whatever tax bracket you land in.

It’s also important to note that you could be temporarily pushed into a higher tax bracket if you receive Social Security disability back payments. These back payments can be paid to you in a lump sum to cover periods where you were disabled but were still waiting for your benefits application to be approved. The good news is you can apply some of those benefits to past years’ tax returns retroactively to spread out your tax liability. You’d need to file an amended return to do so.

Is Social Security Disability Taxable at the State Level?

Besides owing federal income taxes on Social Security disability benefits, it’s possible that you could owe state taxes as well. As of 2020, 12 states imposed some form of taxation on Social Security disability benefits, though they each apply the tax differently.

Nebraska and Utah, for example, follow federal government taxation rules. But other states allow for certain exemptions or exclusions and at least one state, West Virginia, plans to phase out Social Security benefits taxation by 2022. If you’re concerned about how much you might have to pay in state taxes on Social Security benefits, it can help to read up on the taxation rules for where you live.

How to Report Taxes on Social Security Disability Benefits

If you received Social Security disability benefits, those are reported in Box 5 of Form SSA-1099, Social Security Benefit Statement. This is mailed out to you each year by the Social Security Administration.

You report the amount listed in Box 5 on that form on line 5a of your Form 1040 or Form 1040-SR, depending on which one you file. The taxable part of your Social Security disability benefits is reported on line 5b of either form.

The Bottom Line

A disabled man in a wheelchairSocial Security disability benefits aren’t automatically taxable, but you may owe taxes on them if you pass the income thresholds. If you’re worried about how receiving disability benefits while reporting other income might affect your tax bill, talking to a tax professional can help. They may be able to come up with strategies or solutions to minimize the amount of taxes you’ll end up owing.

Tips on Taxes

  • Consider talking to a financial advisor as well about how to make the most of your Social Security disability benefits and other income. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool can help. By answering a few simple questions you can get personalized recommendations for professional advisors in your local area in minutes. If you’re ready, get started now.
  • While you don’t have to reach a specific age to apply for Social Security disability benefits or Supplemental Security Income benefits, there is a minimum age for claiming Social Security retirement benefits. A Social Security calculator can help you decide when you should retire.

Photo credit: ©iStock.com/kate_sept2004, ©iStock.com/JannHuizenga, ©iStock.com/AndreyPopov

The post Are Social Security Disability Benefits Taxable? appeared first on SmartAsset Blog.

Source: smartasset.com

ByCurtis Watts

FHA Loan Requirements – Guideline & Limits

FHA loan requirements are simple; they’re different than conventional loan requirements. For a conventional loan, for example, you will need a good credit score. However a FHA loan credit score is only 580.

If you’re a first time home buyer and need a first time home buyer loan to purchase your dream home, then keep reading to find out how an FHA loan is right for you.

Click here to compare the rates if you’re thinking of applying for an FHA loan. It’s totally FREE.

In this article, we will cover several topics around the FHA loan requirements. As a first time home buyer, you will need to be aware of these requirements so that your home-buying process can go as smoothly as possible.

Here’s what we will cover: FHA loan limits, FHA loan rates, FHA loan credit score, FHA lenders, and so many others. In addition, we will address the difference between conventional loan requirements versus FHA loan requirements.

Click here to apply for a FHA loan.

FHA Loan Requirements – Guideline & Limits:

Buying a house through an FHA loan, while exciting, can be daunting, especially as a first time home buyer. Taking a few moments to familiarize yourself with the FHA loan requirements can save you from costly mistakes during the home buying process. Below is an overview of FHA loan process

FHA loan definition

What is an FHA loan? Simply stated, an FHA loan is a loan that is insured by the Federal Housing Administration. These type of loan are popular among first time home buyers because they allow them to put as low as 3.5% down payment and require a very low credit score.

So if you’re a first time home buyer with a bad credit, then an FHA loan makes more sense.


Feeling Overwhelmed With Your Finances?, You have options and there are steps you can take yourself. But if you feel you need a bit more guidance, simply speak with a financial advisorSmartAsset’s free tool matches you with fiduciary advisors in your area in 5 minutes. If you are ready to meet your goals, get started with Smart Asset today.


FHA loan limits

FHA loan limits refers to the maximum amount of loan the FHA will give you. For 2019, for example, in low cost areas, FHA loan requirements have been set in place allowing the maximum amount for a single family home to be $314, 827. Whereas for a four-plex, the maximum amount is $605,525.

FHA loan limits – low cost areas
Single Duplex Triplex Fourplex
$314,827 $403,125 $487,250 $605,525

 

For high cost areas, the FHA loan limits for a single family home is $726, 525 and for a duplex, the FHA limit is $930, 300. Those limits, of course vary depending on your states and they are update annually. So visit your state to determine what the FHA mortgage lending limits are.

FHA loan limits – high cost areas
Single Duplex Triplex Fourplex
$726,525 $930,300 $1,124,475 $1,397,400

Click here to compare current FHA loan mortgage rates

FHA loan vs conventional

When it comes to get a home loan for presumably the biggest purchase you’ll ever make in your life, you certainly have to know the key differences between an FHA loan and a conventional loan. While it’s easier to get approved for an FHA loan, it’s important so that you can make the best decisions.

FHA loan requirements

fha loan requirements
FHA credit score loan requirement

The FHA loan requirements are fairly simple and straightforward. Here’s what they require: 1) You must have a credit score of at least 580.

2) A 3.5% down payment is required. (*note, if your FICO score is between 500 and 579, then you will have to put 10% down payment). 3) You will have to pay Private Mortgage Insurance (PMI);

4) Your debt to income ratio must be < 43%. Your debt to income ratio is the percentage of your income that you spend on debt, including mortgage, car loan, student debt, etc..

5) The home you intend to purchase must be your primary residence. You must also occupy the property within 60 days of closing.

Click here to shop for FHA mortgage rates in your area

It can’t be an investment property. However, you can buy a duplex or triplex, live in one unit and rent the other units. As long as you reside in the property, you will satisfy that requirement. Also, the house must meet FHA loan limits (see above).

6) Finally, and of course, you must have a steady income and proof of employment. I will discuss later whether a FHA loan is better than a conventional loan. For more information about FHA loan requirements in general, visit the FHA website.

Conventional loan requirements

The requirements for a conventional loan, however, are much stricter. By the way a conventional loan or traditional loan is not insured by the Federal Housing Administration. But instead it is guaranteed by a private lender such as a bank, credit union, mortgage companies, etc…

Of course whether you will qualify for a conventional loan vary from lenders to lenders, but the following are required:

1) A credit score of at least 680 (of course the higher the score is, the more likely you will get qualified, and the lower your interest rate on the loan will be.

2) A down payment of at least 20% of the house purchase price. If you have less than 20%, you still can get the loan. But the problem is, you will have to take out private mortgage insurance, pay its premiums until you achieve at least 20% equity in the house.

3) Your debt to income ratio needs to be around 36% and no more than 43%.

Should you apply for an FHA loan or conventional loan?

As you can see above, the FHA loan requirements are less strict than the conventional loan requirements. However, which one you choose to apply to depends on your personal circumstances.

But if you are a first time home buyer, there are a lot of good reasons why an FHA loan would seem more appealing to you. For one, the down payment is only 3.5% (compare that with a 20% down payment a conventional loan requires). A down payment is the upfront money you need to to make when buying a home.

As a first time home buyer, saving for a 20% down payment on a house can be a big burden. Homes are expensive. For example, saving for $450,000 home can take you years to accomplish, especially if you have other debt like student debt, credit card debt, car loan, etc… So a 3.5% down payment makes it easier for you to buy your own home.

Second, the FHA loan credit score is only 580. Although, you should always take steps to raise your credit score, sometimes certain changes in your life may leave you with a low credit score. Perhaps, you had to file for bankruptcy which resulted in a low credit score.

Or maybe you never had a credit card, which means that you don’t have an established credit history. Or maybe you’re a victim of identity theft which lowered your credit score. So there are several reasons why you could have a low credit score.

However, that shouldn’t mean you can’t buy a house. That’s why the FHA loan requirements make it easier for folks who otherwise would not have been qualified for a conventional loan.

Related Articles:

5 Signs You’re Not Ready To Buy A House

The Biggest Mistakes Millennials Make When Buying a House

How Much House Can I afford

Buy a home with the Right Financial Advisor

You can talk to a financial advisor who can review your finances and help you reach your goals. Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

The post FHA Loan Requirements – Guideline & Limits appeared first on GrowthRapidly.

Source: growthrapidly.com

ByCurtis Watts

The 10 Best Vanguard Index Funds to Buy

If you don’t have the time, the money or the expertise to buy individual stocks or bonds to build your investment portfolio, then consider the best Vanguard index funds.

Index funds are a good way to start saving and investing for retirement.

One reason is because the chance of making more money investing in index funds is far higher than it is investing in individual stocks, especially if you are a beginner investor.

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As the master of value investing, Warren Buffett, once said “a low-cost index fund is the most sensible equity investment for the great majority of investors.” “By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals.”

But how do you find and choose among the best Vanguard index funds? Don’t worry, GrowthRapidly can help make your choice easier.

On this page:

Index funds vs mutual funds

Index funds are one of the easiest and cheapest ways to invest in the stock market. As opposed to a mutual fund, which is actively managed by a fund manager, index funds are passive.

This means that index funds attempt to track the performance of a particular index, such as the Standard & Poor’s 500 index of 500 large U.S. company stocks or the CRSP US Small Cap Index.

So, when you invest in the Vanguard S&P 500 Index fund (which we’ll discuss in more detail below), you’re essentially buying a piece of the 500 largest publicly traded US companies.

Index funds don’t jump around; they stayed invested in the market. Again, they simply track the performance of the stock index.

Related: What is a mutual fund?

Whereas with a mutual fund, fund managers might make mistake by not being invested when the market goes up or by being too aggressive when the market goes down.

That doesn’t mean mutual funds are not good investments. In fact, they are great investment vehicles. But when it comes to long term investments, index funds are the best. However, these 8 mutual funds are great for long term investing.

Like a mutual fund, you can buy an index fund through a fund company like Vanguard.

The main advantage of a Vanguard index fund is its low-cost, which is usually less than 1% annually. Another benefit of Vanguard index funds is that they are diversified. Like mutual funds, they invest to multiple companies, thus spreading out the risk.

One of the downside with index funds, however, is that they won’t outperform the market they track.

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Why choosing the best Vanguard index funds to invest your money?

There are thousands of fund companies (such as Fidelity, Schwab, JP Morgan) where you can buy index funds. Different companies have different experiences and expertise with different type of funds. So, it can be difficult to know which one is the best. 

Here are four main factors to consider when looking to buy the best index funds for long term investments: 

  • The company: Is it a reputable and well-known company with a great track record?
  • Fees: Another major factor to consider in picking a fund company is its cost. Excessive fees have a negative effect on your investment return. These fees are deducted from your index fund’s balance every year. Other fees can apply as well. So always find a company with a low fee. 
  • Reasonable minimum investment: Will you be able to invest with as little as $1000?
  • Performance: Although past performance does not guarantee future performance, look for a fund company with a strong record of performing well against its competitors over the short and long term as well.

If you are an intelligent investor who has done his or her research, you will conclude that among the various fund companies out there, Vanguard comes out on top.

Jack Bogle, who recently died and who founded the firm Vanguard Group, invented the index fund in 1976.

Today, Vanguard is one of the World’s biggest and the best investment funds with approximately $5.6 trillion in assets.

Moreover, Vanguard has the best index funds because of their ability to keep their operating fees so low. Vanguard has all types of stock and bond index funds and their fees are the lowest.

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The advantages and disadvantages of Vanguard Index funds. 

Pros of the best vanguard index funds

By now, you know that an index fund is well diversified. But you might know these two other pros that make Vanguard index funds the best:

  • Good return: Vanguard index funds generally delivers a good return because their expenses are relatively low. The average Vanguard Index fund has an expense ratio of 0.2% per year (compare that to the average index fund operating expenses of 1.4% per year.) A 1.2% difference can be a significant difference on your return. Operating expenses are also lower because ongoing research is not needed to identify companies to invest in.
  • Tax-friendly: not only Vanguard index funds have lower operating expenses, which help increase your returns, they are also tax-friendlier when you invest outside of retirement accounts. Because a mutual fund is actively managed, they tend to jump around by selling and buying stocks more frequently. By doing that, it increases a fund’s taxable capital gains distribution. Whereas an index fund stays invested and not trying to jump around.

Cons of the best Vanguard index funds

Despite their low costs and tax-friendliness, their minimum investment while seem reasonable, might not be for the beginner investor with little money to invest.

Most Vanguard index funds requires a $3,000 minimum initial investment. Retirement account investors who plan on starting with less might be at a disadvantage.

Moreover, Vanguard has an overwhelming number of index funds to choose from. That can make it tedious for an investor to decide which ones are the best. But that’s why we have compiled the top Vanguard index funds for you.

The 10 Best Vanguard Index Funds to Buy in August 2020: 

Now that you know what an index fund is and why investing Vanguard index funds makes good sense, in no particular order, below are 10 of the best Vanguard index funds to add to your investment portfolio.

Vanguard S&P 500 Index Admiral (VFIAX)

Of all the Vanguard index funds in this list, the Vanguard S&P index fund, which tracks the Standard & Poor’s 500, is perhaps the best Vanguard index fund. One reason is that the fund invest in 500 of largest U.S. companies with a few a midsize stocks.

Some of the big name stocks in this index fund includes Apple (AAPL), Microsoft (MSFT), and Google/Alphabet (GOOGL). Another reason to select this fund is that the cost is pretty low, (0.04%) if not the lowest of all the index funds.

Index fund cost is an important factor in choosing an index fund to invest in, because fees are deducted from your balance and thus reduced your rate of returns. The last reason to invest in the VFIAX is because the initial minimum investment is also low ($3,000).

So if you’re looking for an index fund that maintains low operating expenses while enjoying a good rate of return, the Vanguard S&P 500 Index Admiral is for you.

Vanguard Developed Market Stock Index Admiral

For diversification, you should consider in your investment portfolio some index funds that invests in foreign countries. International funds are diversified because they invest in countries around the world. If so, the Vanguard Developed Market Stock Index Admiral fund (VTMGX) is a fine choice.

This Vanguard index fund tracks the performance of the FTSE Developed All Cap ex US Index. It invests in large cap stocks in 24 developed countries. Some of its several blue-chip multinational companies include the Toyota Motor Corp (7203), Royal Dutch Shell (RDS.A.), Nestle SA (NESN), making it one of the best Vanguard index funds.

This index fund has a minimum investment of $3,000 and an expense ratio of 0.07%.

Vanguard Emerging Markets Stock Index Admiral 

While Vanguard index funds invested in U.S. stocks tend to perform better than Vanguard index funds invested in emerging markets, emerging markets in Latin America, Asia, and Eastern Europe should not be overlooked.

If you don’t mind investing in emerging economies, consider checking out the Vanguard Emerging Markets Stock Index Admiral (VEMAX), which is currently one of the best Vanguard index funds to buy now.

In fact, some of the big name foreign companies included in this index fund are Alibaba Group Holding Ltd ADR (BABA), Tencent Holdings Ltd (TCEHY), Taiwan Semiconductor Manufacturing Co Ltd (2330.TW), and China Construction Bank Corp Class H (00939).

This investment attempts to track the performance of the FTSE Emerging Markets All Cap China Inclusion Index.

One of the downside of this index fund is that it has an expense ratio of 0.14%, but it still has a low minimum initial investment of $3,000.

Vanguard Total Stock Market Index (VTSAX)

The Vanguard Total Stock Market Index (VTSAX) is one of the best Vanguard index funds. It captures the total market.

That means it gives investors broad exposure to the entire U.S. equity market including large cap, mid cap and small cap growth and value stocks.

Some of the big name companies included in this Vanguard fund are: Facebook, Alphabet, JPMorgan Chase, Apple, and Microsoft.

This Vanguard index fund has an expense ratio of 0.04% and a minimum initial investment of $3,000.

So, if you’re looking for a well diversified Vanguard fund and don’t mind a little volatility, this index fund is for you.

Note that you can purchase this index fund as an ETF as well. It start at the price of one share.

Vanguard Mid-Cap Index Admiral

The Vanguard Mid-Cap Index Admiral fund (VIMAX), which tracks the CRSP U.S. Midcap Index, may be appropriate for you if you have a long term perspective.

That is because the index fund, which consists of midsize and smaller stocks, performs better in the long term rather than the short term, making it one of the best Vanguard index funds to include in your investment portfolio.

The fund targets midsize companies. The minimum investment is $3,000 with an operating expense of 0.05%.

So if you’re looking for a Vanguard index fund to use for retirement investing and you don’t expect to tap into your investment money for 10 years or more, the Vanguard Mid-Cap Index Admiral fund is for you.

Vanguard Small-Cap Index Admiral

The Vanguard Small-Cap Index Admiral (VSMAX), as the name suggests invests in stocks of smaller companies.

This index fund tracks the CRSP U.S. Small Cap Index. Some of its holdings include DocuSign, Inc (DOCU), Leidos Holdings Inc (LDOS), Tyler Technologies, Inc (TDY), Equity Lifestyle Properties, Inc (ELS), etc…

This index fund, just like the Vanguard Mid-Cap Index Admiral fund, tends to perform better in the long term. Therefore, invest in this Vanguard fund if you don’t plan to use your money within the next five years.

So if you’re looking for a broadly diversified index of stocks of small U.S. companies, the Vanguard Small-Cap Index Admiral is a good choice. This index fund has a minimum initial investment of $3,000 and an expense ratio of 0.05%. 

Vanguard Short-Term Corporate Index Admiral

If you want to invest in short term bonds to use your money in the next five years to buy a house, or if you plan to withdraw the money from your retirement account, then the Vanguard Short-Term Corporate Index Admiral fund (VSCSX) is for you.

This bond index fund tracks the performance of the Bloomberg Barclays U.S. 1-5 Year Corporate Bond Index.

While you shouldn’t expect a return of no more than 2 to 3% annually on this bond index fund, corporate bonds in general are safe, and this fund is pretty stable.

Because of this stability, this short-term bond index fund makes it an appropriate investment. The Vanguard Short-Term Corporate Index Admiral has an expense ratio of 0.07% expense and a minimum initial investment of $3000, making it one of the best Vanguard index funds around.

Vanguard High Dividend Yield ETF

The Vanguard High Dividend Yield ETF (VYM), as the name suggests, is a “dividend” fund. It attempts to track the performance of the FTSE High Dividend Yield Index.

This index ETF allows investors to earn dividend through growth companies. Some of the big companies with a strong record of paying dividends are AT&T, Intel, and Exxon Mobil.

As of 2/27/2020, this ETF has an expense ratio of 0.06%, making it one of the best Vanguard index funds for income. It starts at the price of one share.

So, if you’re looking for an index fund with the best long term investments growth potential, and you don’t mind the stock market volatility, this income-focused fund is appropriate for you.

Note that the Vanguard High Dividend Yield is also available as an Admiral share with a minimum investment of $3,000.

Vanguard Information Technology

Vanguard Information Technology Index Fund Admiral Shares (VITAX) is a sector fund. This investment attempts to track the performance of the MSCI US Investable Market/Information Technology 25/50.

Sector funds invest in stocks and/or bonds in specific industries. And the Vanguard Information Technology Index Fund, as the name suggests, focuses only on technology.

Generally, you should avoid sector funds mainly because they lack diversification. However, there is an exception with this Vanguard index fund. It focuses on technology, which makes it one of the best Vanguard funds.

In addition, this index is made up of stocks of large, mid-size, and small U.S. companies within the technology sector.

Nowadays, technology has shaped our daily lives. From computers, TVs, tablets, etc, everything is connected to the internet. Therefore, this means that there is and there will be continued growth in the years ahead.

The top companies included in this Vanguard fund are Apple, Microsoft, Visa, Adobe, PayPal, etc.

This index fund has an expense ratio of 0.10 %, but a minimum investment of $100,000. This can be high for the beginner investor.

However, this Vanguard index fund is available as an ETF, starting at the price of one share. 

Vanguard Real Estate

The Vanguard Real Estate Index Fund Admiral Shares (VGSLX) is another sector fund. It focuses on real estate investment trusts (REITs), which are companies that buy office buildings, hotels and other real estate properties.

This Vanguard fund seeks to track the performance of the MSCI US Investable Market Real Estate 25/50 index.

Just as any other sector funds, this Vanguard real estate index fund may lack diversification. So, it makes sense to have this index fund in conjunction with another a more broadly diversified Vanguard fund.

Despite the lack of diversification, however, this fund distributes higher dividend income than other funds, allowing it to be among the best Vanguard index funds for income.

This Vanguard fund has an expense ratio of 0.12%. It has a minimum initial investment of $3,000.

Note that this Vanguard fund is also available as an ETF, starting at the price of one share.

Final tips for buying the best Vanguard index funds

In general, index funds are a good investment vehicle to use. So whether you’re looking to invest money for retirement, or you’re looking to add diversification to your investment portfolio, these Vanguard index funds are a great choice for you. They are great quality funds. They produce superior returns comparing to other similar funds.

Indeed, the best Vanguard Index funds will not only save you money in fees throughout the years. But also, these low-cost index mutual funds and exchange-traded funds (ETFs) will give you a wide exposure to different asset classes.

Speak with the Right Financial Advisor

  • If you have questions beyond knowing which of the best Vanguard index funds to invest, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
  • Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
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The post The 10 Best Vanguard Index Funds to Buy appeared first on GrowthRapidly.

Source: growthrapidly.com

ByCurtis Watts

401k Early Withdrawal: What to Know Before You Cash Out

When it comes to making a 401k early withdrawal, there are a number of reasons why it might be tempting. With millions still unemployed due to the pandemic, unexpected expenses are taking a particularly hard toll. One reason why early withdrawal isn’t uncommon in the U.S. might be because it’s easy to assume you’ll have time to rebuild your 401k nest egg.

However, is the benefit of withdrawing your retirement savings early truly worth the cost? For many people, their 401k is their primary method of investing in their financial future. Before making a decision about early withdrawal, it’s important to consider the penalties and fees that could impact you. Read on to learn exactly what happens when you decide to dip into your 401k so you won’t be surprised by the repercussions.

How Much Are You Penalized for a 401k Early Withdrawal?

On the surface, withdrawing funds from your 401k might not seem like a bad option under extenuating circumstances, but you could face penalties. Young adults are especially prone to early withdrawals because they figure they have plenty of time to replace lost funds.

 

401k early withdrawal penalties

 

If you’re not experiencing a significant hardship, 401k early withdrawal probably isn’t the right choice for you. Ultimately, you could lose a substantial portion of your retirement savings if you choose to withdraw your 401k early to use the money to make other risky financial moves. Below, let’s delve further into the penalties that usually apply when you withdraw early.

1) Your Taxes Are Withheld

When you prematurely withdraw from your retirement account, your first consideration should be that you’ll have to pay normal income taxes on that money first. This means you’re losing at least roughly 30 percent of your savings to federal and state taxes before additional penalties.

Even if you only have $10,000 you want to withdraw, consider that you’re automatically giving $3,000 of your cash to the government. In the best case scenario, you might receive some money back in the form of a tax refund if your withholding exceeds your actual tax liability.

2) You Are Penalized by the IRS

If you withdraw money from your 401k before you’re 59 ½ , the IRS penalizes you with an extra 10 percent on those funds when you file your tax return. If we use the example above, an additional $1,000 would be taken by the government from your $10,000 — leaving you with just $6,000. If you’re 55 or older, you could try to get this penalty lifted by the IRS through the Rule of 55, which is designed for people retiring early.

Also, there are exceptions under the CARES Act, which is designed to help people affected by the pandemic. There are provisions under the act that state individuals under the age of 59 ½ can take up to $100,000 in Coronavirus-related early distributions from their retirement plans without facing the 10 percent early withdrawal penalty under certain conditions.

3) You Lose Thousands in Potential Growth

Even if you’re not deterred by tax penalties, think twice before you sabotage your long-term retirement savings goals. When you withdraw money early, you’ll miss out on potential future savings growth because you won’t gain the perks of compound interest. Compounding is the snowball effect resulting from your savings generating more earnings — not only on your principal investment but also on your accrued interest.

Also, if you make a 401k early withdrawal while the market is down, you’re doing yourself a disservice because you’ll be leaving thousands on the table. It’s unlikely you’ll fully recover the lost years of compound interest you would have benefited from. You might need to get creative with a passive income stream to help support you later in life.

 

tips to minimize 401k withdrawal penalties

 

When Does a 401k Early Withdrawal Make Sense?

In certain cases, it actually might be strategic to move forward with 401k early withdrawal. For example, it could be smart to cash out some of your 401k to pay off a loan with a high-interest rate, like 18–20 percent. You might be better off using alternative methods to pay off debt such as acquiring a 401k loan rather than actually withdrawing the money.

Always weigh the cost of interest against tax penalties before making your decision. Some 401k plans do allow for penalty-free early withdrawals due to a layoff, major medical expenses, home-related costs, college tuition, and more. Regardless of your strategy to withdraw with the least penalties, your retirement savings are still taking a significant hit.

401k Early Withdrawal, Hardship, or Loan: What’s the Difference?

Knowing the differences between a 401k early withdrawal, a hardship withdrawal, and a 401k loan is crucial. Due to the many obstacles to make a 401k early withdrawal, you may find you want to keep it untouched. If you’re convinced you still need to use your 401k for financial assistance, consult with a trusted financial advisor to figure out the best option.

When Does This Apply?

Taxes and
Penalties

Early Withdrawal

Your funds are withdrawn to pay off large debts or finance large projects. Your 401k fund is typically subject to taxes and penalties.

Hardship Withdrawal

You’re only eligible for this type of withdrawal under circumstances such as a pandemic or natural disasters. Withdrawals can’t exceed the amount of the need and the funds are still subject to taxes and penalties.

401k Loan

The loan must be paid back to the borrower’s retirement account under the plan. The money isn’t taxed if the loan meets the rules and the repayment schedule is followed.

Additional Considerations

If you’ve left a job and don’t know what to do with your Roth IRA, a 401k transfer is a good option. Most likely, you will save money and have a wider range of investment options when you transfer your funds. 401k fees can be high, and rolling over your funds to a Roth IRA account could be wise in the long run. Also, be aware that the process is more complicated for indirect rollovers. 

In Summary:

  • If you’re one of the millions of Americans who rely on workplace retirement savings, early 401k withdrawal may jeopardize your future financial stability.
  • There are very few instances when cashing out a portion of your 401k is a smart move.
  • In most cases, any kind of early 401k withdrawal is detrimental to your retirement plans.
  • Stick to your budget and bulk up your emergency fund to stay one step ahead.

In short, 401k early withdrawals are usually counterproductive. Prevent compromising your hard-earned savings by using a free budgeting tool that will set you up for success. After all, being prepared and informed are two of the most important parts of maintaining financial health.

Source: SEC

The post 401k Early Withdrawal: What to Know Before You Cash Out appeared first on MintLife Blog.

Source: mint.intuit.com

ByCurtis Watts

How to Invest in Stocks: A Guide to Getting Started

A tablet shows the trajectory of a stock.

In 2020, around 55% of American adults invest in the stock market. That’s down from a peak of 65% in 2007 but around the average over the past 10 years. Do you want to get a piece of the action? Before you jump all in, make sure you know the basics of how to invest in stocks. 

A quick note before we dive in: we’re not investment experts or advisors. So if you’re seriously considering investing, you should work with professional brokers, financial advisors or other knowledgeable experts when you invest. That’s especially true if you plan on investing a lot. 

1. Decide on a Budget for Investing

Start by deciding how much you want to use to invest in stocks. Here’s a good starting place—make the potential stocks you’d invest in a percentage of your portfolio. A rule of thumb that many advisors go by is to take 110 or 120 and subtract your age. That’s how much of your investment portfolio you should keep in stocks.

For example, if you’re 30, then you’d keep between 80 and 90% of your portfolio in stocks. If that feels a little aggressive for your financial goals, start with 100 and subtract your age from that.

You also need to decide how much you can invest overall. That depends on your own income, what financial obligations you have and your overall budget. While investing is important, you shouldn’t invest money at the sake of paying your bills, for example.

2. Open an Account for Making Your Investments.

Stocks aren’t like retail goods. You can’t just buy them here and there when you see one you like on display on an ecommerce site. You typically need an account to purchase your stocks through. Some options you can choose include:

  • Opening a brokerage account. This lets you buy and sell stocks through a professional service. You can opt for a brokerage where you do your own research and push the buttons on buying and selling, or you can choose a managed option where someone provides advice or handles these things on your behalf.
  • Using a robo-advisor. This is an app or software program that lets you set goals for your investments and uses machine learning, AI and algorithms to handle your investments. One popular robo-advisor is Acorns, which is an app that lets you round up your purchases with connected debit cards and put the change into investments. While you’re making many micro investments, the total can add up over time.

3. Get Help Creating an Investment Plan

An investment plan is a comprehensive approach to wealth building. Stocks may play an important part in that, but you typically want to ensure you’re well diversified. A diversified portfolio just means you have various types of investments. This way if one isn’t performing well, the others might offer some protection.

One option for getting investment advice is by signing up for an Ellevest account. You pay a monthly membership for this robo investment app, but you gain access to investment and other financial coaching and educational materials.

4. Learn More About Stocks

You don’t have to be a stock expert or financial advisor to have success investing in stocks. But you do have to know a bit about what you’re investing in, especially if you’re going to make very specific stock choices.

You might be familiar with the concept of buying and selling stocks as seen in television and movies. While you canbuy and sell specific stocks because you want to invest in a specific company, you don’t have to invest like that. You can also invest in groups of stocks via stock mutual funds. When you invest in a stock mutual fund, you’re actually buying many different stocks or pieces of stocks. That spreads your risk out over a wider range of assets.

You should also understand the trends associated with the stock market, at least in general. For example, stocks do tend to rise over time barring big economic downturns. On any particular day, the chance that stocks will rise is around 53%. The chance that they will fall is around 47%. But if you look at the long-term, such as a 12-month period, stocks typically have a chance of rising of 75%. 

5. Use Other Tools to Make Investing Easy as You Get Started

Start by getting your immediate financial house in order. Understand what your budget is, and check your credit to ensure there are no surprises looming. You can sign up for ExtraCredit to get a comprehensive understanding of where your credit score is. Once you know where you stand, you can start creating an investment plan with confidence. You can even rely on ExtraCredit’s Reward It feature for cashback offers when signing up for Credit.com partners that provide investment apps and other financial services.

Sign up for ExtraCredit today!

Start Investing in Stocks Today 

So, should you invest? Honestly, that’s up to you. Take a good look at your finances and, if you need guidance, try working with a professional. If you do decide to start investing, start easy and slow. There’s no need to jump all in right at once. Hopefully, if investing works out, you’ll reap some serious rewards. 

The post How to Invest in Stocks: A Guide to Getting Started appeared first on Credit.com.

Source: credit.com

ByCurtis Watts

What Is an Insurance Deductible?

You have to hit your insurance deductible before your insurance will start contributing.

When you have an insurance policy, you may have to foot the bill for some of your medical expenses before your insurance company starts chipping in. This initial amount is your insurance deductible. The size of deductibles can vary depending on the specifics of your plan, and you’ll want to consider the deductible as one of many factors when you’re choosing your health insurance.

The Basics of Insurance Deductibles

Your insurance deductible is the amount of money that you’ll have to pay before the insurance company will provide any assistance. So, if you have a $600 deductible for your health insurance, that means you’ll need to pay $600 out of your own pocket for any doctor’s visits, prescriptions, tests or any other medical services before insurance contributions will commence.

Deductibles apply for many different types of insurance, the most notable being health insurance, car insurance and homeowners insurance. We’ll go through details specific to each type in turn.

Health Insurance Deductibles

Health insurance deductibles will vary in amount depending on the type of insurance plan you have. Typically, plans with a high deductible have lower monthly premiums, while plans with lower deductibles will tend to have higher premiums. In other words, if you have to spend a lot to reach your deductible, the tradeoff is you pay less in premiums every month. The extreme version of this is the high-deductible health plan (HDHP), which has a deductible of at least $1,350 for an individual and $2,700 for a family. HDHPs also come with access to a health savings account (HSA), which allows you to save up for medical expenses with pre-tax money.

Once you reach your deductible, that’s when cost-sharing measures like copays and coinsurance come into play. Some plans will have copays for certain services that apply before you hit your deductible, but not all.

Homeowners and Car Insurance Deductibles

car insurance policies also come with deductibles

With a car insurance deductible, your insurance company will typically pay for any repairs necessary after you hit your deductible, provided you have a plan that covers the costs of repairs. The same is true with homeowners insurance. This differs from a health insurance deductible, where you will almost surely have to keep paying at least part of the bill after you hit it.

The calculus for choosing your deductible is slightly different with these two insurance types than with health insurance. With the latter, it’s highly unlikely that you won’t have any medical expenses during the course of the year. Most people that have health insurance are going to use it. With homeowners and car insurance though, that’s not the case. It’s very possible that you go a year without getting in a car accident or your house burning down or getting burglarized.

Choosing Your Deductible

Odds are you’ll have options to choose from when selecting your health insurance plan. Those options will likely have varying deductibles. When making the choice between these options, consider the state of your health.

Is there a good chance you’ll have an annual check-up but not much else? If that’s the case, you may be suited for a plan with a higher deductible and lower premiums. If instead you expect to have one or more procedures during the year or you require expensive medication, you may be better off accepting the higher premiums in exchange for a lower deductible.

Of course, many of your medical expenses will be impossible to predict beforehand. Therefore, you’ll also want to consider how risky you want to be with your deductible. If you have plenty of savings and could handle a few hefty medical bills, you may be more inclined to take the gamble on a high deductible. If you’re stretched thinner, this may not be the case. You may not want to risk opting for the high deductible and then getting hit with a huge bill that’s all your responsibility.

The Takeaway

Medical bills

Because of deductibles, you’ll still have pay a portion of your medical expenses before you can rely on your insurance company. When you’re considering which insurance plan is right for you, make sure to factor the deductible into your decision. If you have plenty of savings and you’re fine with some risk, you may want to opt for a higher deductible and lower premiums. If you’re more risk averse, you may decide to accept the higher premiums in exchange for a lower deductible.

Tips for Protecting Against Risk

  • Having an emergency fund in place can help provide a cushion that allows you to choose a higher deductible. You can stash your emergency fund in either a CD ladder or a high-yield savings account.
  • If you’re not sure how an unexpected medical expense would fit into your finances, consider working with a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.

Photo credit:©iStock.com/sturti, ©iStock.com/sefa ozel, Â©iStock.com/asiseeit

The post What Is an Insurance Deductible? appeared first on SmartAsset Blog.

Source: smartasset.com

ByCurtis Watts

Buying A Second Home? 8 Things To Consider

Buying a second home is a major expense. You might have several reasons for wanting to buy a second house. Perhaps, you’re buying a second home for vacations or weekend getaways. Or, it might be that you want to use it as a rental property for rental income. However, there are things to consider before buying a second home.

The benefits of buying a second home

If you’re buying a second home for rental income, you’ll benefit from many perks, especially tax advantages.

For example, you will be able to deduct interest, property taxes, homeowners insurance and other expenses against the property’s income.

Even if the value of the property declines, you will still be able to deduct depreciation from your taxes.

While these benefits are great, the mortgage requirements for a second home are much stricter than for a mortgage on your primary residence. So, make sure you can afford it.

8 Things To Consider When Buying A Second Home

1. Financing options: When you bought your first home, you had available to you what’s called an FHA loan – a government loan program.

FHA loans are an appealing and favorite choice among first time home buyers due to their relatively low down payment requirement.

FHA loans require a 3.5% down payment and a relatively low credit score of 580. However, FHA loans are not available to second home buyers.

That is because FHA requires the home to be the borrower’s primary residence. So, if you’re thinking of buying a second home, you will need to either use a conventional loan or financing it with your own cash.

2. A larger down payment: If you’re using a conventional loan for your second home, you will need to come up with a larger down payment.

Lenders for a conventional loan usually requires a 20% down payment of the home purchase price.

But for a second home which will be used as a rental property or vacation home, expect lenders to ask for 30% or even 35%.

3. A higher credit score. For an FHA loan, you only need a credit score of 580 to qualify. But for a conventional loan on a second home, you will need much higher credit score — usually 750 or higher.

4. Expect a Higher Interest Rate: Lenders will likely charge you a higher interest rate on your second home than your primary residence.

The reason is because they see a second home — be it a vacation home or a rental property — as riskier. They feel that you are more likely to default on a mortgage on your second home than on your primary residence.

5. Do your research: Just as you did your homework when you bought your place to live in, buying a second home is no different.

In fact, you’ll need to spend more time researching rental property. That means researching the neighborhood you will want to invest in, knowing the zoning laws for a particular area, the sales price for the homes in the area.

You will need to know if the area has adequate public transportation, schools, grocery shopping, etc,– things that potential tenants will need.

6. Be prepared to be a landlord: if you’re buying a second home to rent, be prepared to be a landlord.

And be prepared to deal with all of the headaches that come with being a landlord. Do you have sufficient time? Can you deal with problems?

Owning a rental property and being a landlord is time consuming. It is also hard hard work and you have to do your due diligence.

You can hire a property manager to run the property for you. But if that is not feasible, you’ll have to do it yourself.

That means, screening new tenants, collecting rent, dealing with delinquent tenants, fixing problems in the property, such as a broken pipe.

So before buying a second home, make sure you have sufficient time and make sure you can deal with the day-to-day headaches that come with being a landlord.

7. Do you have a stable income? Dealing with a second mortgage on your second home is doable.

While you may be able to afford upfront costs, if you don’t have a stable income, you may have to think twice about whether it is a good idea.

Plus, you still have to consider the additional expenses of owning a second home such as insurance, property taxes, maintenance, repairs, property management fees, etc.

8. Are you out of credit card debt? If you have paid off outstanding and high interest credit card debts, then purchasing a second home may make sense.

But if you’re still struggling to pay your debt, you may need to put buying a second home on hold. 

The bottom line

If you’re thinking about buying a second home, whether it is for investment or vacation, be prepared to save some money, budget for expenses, and come up with a bigger down payment.

More importantly, spend as much time, if not more, researching for the home just as you did when your purchased your primary home.

Speak with the Right Financial Advisor

  • If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
  • Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

The post Buying A Second Home? 8 Things To Consider appeared first on GrowthRapidly.

Source: growthrapidly.com

ByCurtis Watts

What Are Mutual Funds? Understanding The Basics

If you’re one of those investors with very little time to research and invest in individual stocks, it might be a good idea to look into investing in mutual funds.

Whether your goal is to save money for retirement, or for a down payment to buy a house, mutual funds are low-cost and effective way to invest your money.

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What is a mutual fund?

A mutual fund is an investment vehicle in which investors, like you ad me, pool their money together. They use the money to invest in securities such as stocks and bonds. A professional manages the funds.

In addition, mutual funds are cost efficient. They offer diversification to your portfolio. They have low minimum investment requirements.

These factors make mutual funds among the best investment vehicles to use. If you’re a beginner investor, you should consider investing in mutual funds or index funds.

Investing in the stock market in general, can be intimidating. If you are just starting out and don’t feel confident in your investing knowledge, you may value the advice of a financial advisor.

Types of mutual funds

There are different types of mutual funds. They are stock funds, bond funds, and money market funds.

Which funds you choose depends on your risk tolerance. While mutual funds in general are less risky than investing in individual stocks, some funds are riskier than others.

However, you can choose a combination of these three types of funds to diversify your portfolio.

  • Stock funds: a stock fund is a fund that invests heavily in stocks. However, that does not mean stock funds do not have other securities, i.e., bonds. It’s just that the majority of the money invested is in stocks.
  • Bond funds: if you don’t want your portfolio to fluctuate in value as stocks do, then you should consider bond funds.
  • Money market funds: money market funds are funds that you invest in if you tend to tap into your investment in the short term.
  • Sector funds. As the name suggests, sector funds are funds that invests in one particular sector or industry. For example, a fund that invests only in the health care industry is a sector fund. These mutual funds lack diversification. Therefore, you should avoid them or use them in conjunction to another mutual fund.

Additional funds

  • Index funds. Index funds seek to track the performance of a particular index, such as the Standard & Poor’s 500 index of 500 large U.S. company stocks or the CRSP US Small Cap Index. When you invest in the Vanguard S&P 500 Index fund, you’re essentially buying a piece of the 500 largest publicly traded US companies. Index funds don’t jump around. They stay invested in the market. 
  • Income funds: These funds focus invest primarily in corporate bonds. They also invest in some high-dividend stocks.
  • Balance funds: The portfolio of these funds have a mixed of stocks and bonds. Those funds enjoy capital growth and income dividend.

Related Article: 3 Ways to Protect Your Portfolio from the Volatile Stock Market

The advantages of mutual funds

Diversification. You’ve probably heard the popular saying “don’t put all of your eggs in one basket.” Well, it applies to mutual funds. Mutual funds invest in stocks or bonds from dozens of companies in several industries.

Thus, your risk is spread. If a stock of a company is not doing well, a stock from another company can balance it out. While most funds are diversified, some are not.

For example, sector funds which invest in a specific industry such as real estate can be risky if that industry is not doing well.

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1. Answer these few easy questions about your current financial situation

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Professional Management.

Mutual funds are professionally managed. These fund managers are well educated and experienced. Their job is to analyze data, research companies and find the best investments for the fund.

Thus, investing in mutual funds can be a huge time saver for those who have very little time and those who lack expertise in the matter.

Cost Efficiency. The operating expenses and the cost that you pay to sell or buy a fund are cheaper than trading in individual securities on your own. For example, the best Vanguard mutual funds have operating expenses as low as 0.04%. So by keeping expenses low, these funds can help boost your returns.

Low or Reasonable Minimum Investment. The majority of mutual funds, Vanguard mutual funds, for example, have a reasonable minimum requirement. Some funds even have a minimum of $1,000 and provide a monthly investment plan where you can start with as little as $50 a month.

Related Article: 7 Secrets Smart Professionals Use to Choose Financial Advisors

The disadvantage of mutual funds.

While there are several benefits to investing in mutual funds, there are some disadvantages as well. 

Active Fund Management. Mutual funds are actively managed. That means fund mangers are always on the look out for the best securities to purchase. That also means they can easily make mistakes.

Cost/expenses. While cost and expenses of investing in individual stocks are significantly higher than mutual funds, cost of a mutual fund can nonetheless be significant.

High cost can have a negative effect on your investment return. These fees are deducted from your mutual fund’s balance every year. Other fees can apply as well. So always find a company with a low cost. 

How you make money with mutual funds.

You make money with mutual funds the same way you would with individual stocks: dividend, capital gain and appreciation.

Dividend: Dividends are cash distributions from a company to its shareholders. Some companies offer dividends; others do not. And those who do pay out dividends are not obligated to do so. And the amount of dividends can vary from year to year.

As a mutual fund investor, you may receive dividend income on a regular basis.

Mutual funds offer dividend reinvestment plans. This means that instead of receiving a cash payment, you can reinvest your dividend income into buying more shares in the fund.

Capital gain distribution: in addition to receiving dividend income from the fund, you make money with mutual funds when you make a profit by selling a stock. This is called “capital gain.”

Capital gain occurs when the fund manager sells stocks for more he bought them for. The resulting profits can be paid out to the fund’s shareholders. Just as dividend income, you have the choice to reinvest your gains in the fund.

Appreciation: If stocks in your fund have appreciated in value, the price per share of the fund will increase as well. So whether you hold your shares for a short term or long term, you stand to make a profit when the shares rise. 

Best mutual funds.

Now that you know mutual funds make excellent investments, finding the best mutual funds can be overwhelming. 

Vanguard mutual funds.

Vanguard mutual funds are the best out there, because they are relatively cheaper; they are of high quality; a professional manage them; and their operating expenses are relative low. 

Here is a list of the best Vanguard mutual funds that you should invest in:

  • Vanguard Total Stock Market Index Funds
  • Vanguard 500 Index (VFIAX)
  • Total International Stock index Fund
  • Vanguard Health Care Investor

Vanguard Total Stock Market Fund 

If you’re looking for a diversified mutual fund, this Vanguard mutual fund is for you. The Vanguard’s VTSAX provides exposure to the entire U.S. stock market which includes stocks from large, medium and small U.S companies.

The top companies include Microsoft, Apple, Amazon. In addition, the expenses are relatively (0.04%). It has a minimum initial investment of $3,000, making it one of the best vanguard stock funds out there.

Vanguard S&P 500 (VFIAX)

The Vanguard 500 Index fund may be appropriate for you if you prefer a mutual fund that focuses on U.S. equities. This fund tracks the performance of the S&P 500, which means it holds about 500 of the largest U.S. stocks.

The largest U.S. companies included in this fund are Facebook, Alphabet/Google, Apple, and Amazon. This index fund has an expense ration of 0.04% and a reasonable minimum initial investment of $3,000.

Vanguard Total International Stock Market

You should consider the Vanguard International Stock Market fund of you prefer a mutual fund that invests in foreign stocks.

This international stock fund exposes its shareholders to over 6,000 non-U.S. stocks from several countries in both developed markets and emerging markets. The minimum investment is also $3,000 with an expense ratio of 0.11%.

Vanguard Health Care Investor

Sector funds are not usually a good idea, because the lack diversification. Sector funds are funds that invest in a specific industry like real estate or health care. However, if you want a fund to complement your portfolio, the Vanguard Health Care Investor is a good choice.

This Vanguard mutual fund offers investors exposure to U.S. and foreign equities focusing in the health care industry. The expense ration is a little bit higher, 0.34%. However, the minimum initial investment is $3,000, making it one of the cheapest Vanguard mutual funds.

Bottom Line

Mutual funds are great options for beginner investors or investors who have little time to research and invest in individual stocks. When you buy into these low cost investments, you’re essentially buying shares from companies.

Your money are pooled together with those of other investors. If you intend to invest in low cost investment funds, you must know which ones are the best. When it comes to saving money on fees and getting a good return on your investment, Vanguard mutual funds are among the best funds out there.

They provide professional management, diversity, low cost, income and price appreciation.

What’s Next: 5 Mistakes People Make When Hiring A Financial Advisor

Speak with the Right Financial Advisor

  • If you have questions beyond knowing which of the best Vanguard mutual funds to invest, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
  • Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
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The post What Are Mutual Funds? Understanding The Basics appeared first on GrowthRapidly.

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