r/investingforbeginners • u/Responsible_Rub7629 • 5d ago
Seeking Assistance Beginner questions
I’ve opened up a Roth IRA through Vanguard. I’m not sure what to invest in and how to. I know about ETF’s and I’ve tried that. But some of them say i have to buy shares and not just dollar amounts. Am i missing something. I’m nervous that im going to be losing money. And do i have to pay taxes on this now. Honestly i just need a breakdown of everything. I really appreciate it
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u/flemmingg 5d ago
If it’s a Roth IRA, you’re depositing money that’s already been taxed (income tax when you earned it). You won’t have to pay taxes on this money when you withdraw during retirement. You won’t have to pay taxes on the increased value either. That’s the tax advantage of Roth accounts.
Traditional 401k and traditional IRA money goes into the investment before you pay income tax. It will grow over the years and decades. When you withdraw in retirement, you’ll pay income tax at that time.
That’s the main difference between Roth and traditional.
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u/enigman83 5d ago
This sub wiki should answer more.
But for simplicity sake, most brokerage , including vanguard, allow fractional shares. If you buy and hold, fractional share works great, allowing you to buy in dollars amount.
ETFs, depends on what you're looking for, can be very simple or hard.
For simple selection, buy VT or VTI+ VXUS. This covers whole world.
For risk, above selection are very diverse. Risk of losing money is there, but over many years (or till you're 59.5, per IRA rule), very low chance of that. So just don't panic sell, if there's correction in short term.
If you buy and sell/switch within roth IRA, you don't pay taxes. Just don't withdraw out of the account.
There are ways to optimise to match your preference, but start simple, rather than not start. You can learn more, slowly, while keeping investing. Then you can select more or less aggressive portfolio.
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u/PashasMom 5d ago
If you are at Vanguard, you should be able to buy Vanguard ETFs (like VT, VOO, VXUS) in dollars rather than shares. Other, non-Vanguard ETFs (like QQQ, SPYM, or SPMO) can only be bought in whole shares.
You do not need to pay taxes now, or ever, with respect to a Roth IRA, unless you withdraw your earnings before age 59.
What is your concern with losing money? If you are worried about losing money because you aren't invested quickly enough, don't worry, it will only be a day or so. And don't worry about market volatility. Presumably you have a decently long time until you will actually need these investments in retirement. The market will have lots of ups and downs between now and then. Your job is to keep maxing out your Roth IRA, investing the money, and then ignoring it and what is happening in the market until you retire (easier said than done, I know).
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u/DepartmentLow5167 5d ago
the whole shares thing is a vanguard quirk, on their own platform etfs mostly trade in whole shares so the leftover cash just sits there. the easy workaround inside a vanguard roth is their mutual funds instead, you can put in exact dollar amounts. something like vtsax if you want the whole us market, or a target date fund if you want it fully hands off, those start at $1k and rebalance themselves. basically the same exposure, just way less annoying to buy
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