Unlocking the Mysteries of Dividend Investing in Your Vanguard Roth IRA with AI Legalese Decoder for Beginners
- May 27, 2024
- Posted by: legaleseblogger
- Category: Related News
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## New Roth IRA Investor Seeking Advice on DRIP
Hello,
I recently turned 20 years old and just opened a Roth IRA. As a beginner, I am learning about investment strategies through YouTube. I am interested in purchasing $200 worth of shares of VOO every month, as I have seen many recommendations for VOO as a good choice. However, I recently learned about the significance of DRIP (Dividend Reinvestment Plan) and how it can impact returns.
When I tried to navigate to the ‘Change dividends elections’ page, I only saw the Vanguard Settlement Fund listed. Is this the fund I should enable for dividend reinvestment, considering I am investing in VOO?
Given that I have only invested in VOO and no other mutual funds, I am unsure about how the reinvestment strategy would work. Would I simply continue buying shares with the dividends I earn from VOO? Any advice on this matter would be greatly appreciated.
How AI Legalese Decoder Can Help:
You can use AI Legalese Decoder to better understand the terms and options available to you when setting up your DRIP with Vanguard Settlement Fund. This tool can provide simplified explanations and guidance on how dividend reinvestment works, helping you make informed decisions regarding your investment strategy.
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>I see a lot of people suggesting VOO so I believe this is a good choice?)
You can probably do better, even with 1 fund. For a 1 fund portfolio, that’s only 3 types I’d consider, and VOO would place 5th at best.
Single fund portfolios: https://www.reddit.com/r/Bogleheads/comments/tg1az5/should_i_invest_in_x_index_fund_a_simple_faq/
And for one link on the reasoning behind it:
https://www.pwlcapital.com/should-you-invest-in-the-sp-500-index – invest in the S&P 500, but don’t end there (this covers info on both the US extended market and ex-US markets) [a total US market fund combines S&P 500 + extended market into one]
The 3 types i would consider fall under:
* Target date (index)
* Target allocation (index)
* Total world stock (index)
>When I go to the ‘Change dividends elections’ page, I only see the Vanguard Settlement Fund — would this be the fund I turn on reinvestment for?
Have you already bought VOO? If so, when?
>would I just keep buying shares with dividends I make from VOO?
When reinvestment is turned on, your brokerage will automatically buy more of the fund for you when it receives dividends from that fund.
Another important point to consider is where you are investing.
Roth IRA is a good place but make sure to take advantage of any match your employer gives on 401k contributions. That is free money. So if they give 50% on first 3%. Fund the 401k minimum 3%. Realize that might not apply to your situation but want others to know.
You really can’t go wrong with any low fee cost index funds. S&P500 versus total stock market versus S&P500 plus international, etc. I don’t like the target date ones as they are not aggressive during the time period you are not going to access your money in a Roth. Vanguard has the reinvestment option which others have mentioned (acts like a DRIP). Some will disagree on the target date opinion.
There are bunch of studies about right asset mix and it depends where the money is held over different periods of your life. Roth versus 401k versus brokerage. All valid approaches with some pros and cons but you are doing the most important thing. Contributing early and often 🙂
Just buy Vtsax and be done with it. Stop watching dividend investors on YouTube.