I didn’t realize the difference between an Index Fund and an ETF before this video. I thought they were the same thing. Thanks for another insightful and educational video. Please keep them coming.
Index Funds for the win! I opened a Roth IRA with Fidelity in January of 2022. I chose to invest in the S&P 500 Index fund and now have about $9K dollars in it. Hopefully I will have a decent amount to retire in about 15 years.
Your explanations are so simple and easy to understand Erin. I often get the different terminology mixed up, and this video provides some excellent clarification especially with NOT being able to automatically invest with etfs as opposed to mutual funds and index funds.
50 year old single male here from Michigan debt free first thing I do is fill up my Roth IRA every year and then I do a mixture of index funds and dividend stocks
I only use ETFs. Here in Germany, brokers offer savings plans, where you can invest a fixed amount each month in an ETF, which results in fractional ETF shares.
So glad more places are offering fractional buying for ETF. You should talk about Sector index funds and is the risks and benefits of sector index funds. If they are beneficial for some investors.
I owe only ETF because I cannot access index fund with the French account I have. But since it has some tax avantages, the inconvenience is small. I really love the job you do to breakdown concepts. Hope you keep the good work, it helps a lot. I have just a request since you seem to assume that many people start investing in their twenties, is it possible to have more examples for people starting in their mid thirties or later. I always saved but I started investing without touching the amount invested right before my 30th birthday but to convert and convince older people to invest with your video it seems like it is too late for them. But maybe your subscribers are in their twenties. Thanks again!
That's a great video suggestion. It's true that a lot of the messaging around investing makes it seem like you missed the boat if you didn't start investing in your 20's, when reality the best thing you can do is just start today instead of tomorrow!
@@howtoadultschool well said. Investing in today 30s likely still fits this 40year horizon. Our lifespans are increasing, which has also kept people working longer to afford their longer retirements.
You can buy fractional shares of ETF’s on M1 finance and you can have it automated to buy when you want. I have mine buy in every other Friday when I get paid. I have multiple ETF’s that I buy and a target percentage that it try’s to keep. So if one fund shoots up I won’t buy that fund anymore until the other funds catch up by either growing or by me buying more of the other ones.
Thank you for your content. Can we make suggestions? If so, can you cover gold and other precious metals and give us your position on them. The pros and cons.
Great job in explaining this! Can you make a video on short term and long term capital gain tax. Also when we selling and rebuy another index fund with in a year, is it consider as short term gain tax? How this will be calculated?
Short and long term treatment is based on the holding period. You have a taxable gain or taxable loss whenever you sell a stock (with some exceptions such as if you sell a stock at a loss and then immediately rebuy the stock---you don't have a realized loss in this situation). If you hold the stock (or any asset) for 1 year or more, it's long term. If you hold it less than 1 year, it's short term. Federal tax rates are the same or lower on long term capital gains compared to short term. The maximum long term tax rate is 23.8% (Biden's tax plan (House plan) is proposing to increase to 31.8%). Short term gains are taxed at a maximum of 40.8% (Biden's tax plan is proposing to increase to 46.4%). There are state taxes on top of these.
Short and long term treatment is based on the holding period. You have a taxable gain or taxable loss whenever you sell a stock (with some exceptions such as if you sell a stock at a loss and then immediately rebuy the stock---you don't have a realized loss in this situation). If you hold the stock (or any asset) for 1 year or more, it's long term. If you hold it less than 1 year, it's short term. Federal tax rates are the same or lower on long term capital gains compared to short term. The maximum long term tax rate is 23.8% (Biden's tax plan (House plan) is proposing to increase to 31.8%). Short term gains are taxed at a maximum of 40.8% (Biden's tax plan is proposing to increase to 46.4%). There are state taxes on top of these.
Hi Erin. Another excellent video! I appreciate you and the information. I have a question on your preference for the Fidelity 500 index fund versus the Vanguard 500 index fund? I am thinking of moving 10k from a CD to one of these. Thanks again.
Personally I always tend to favor Vanguard...but largely my choice is emotional (not a great thing). I have been with Vanguard for a long time so I am partial to that company, and I love what the company stands for. You can't go wrong with either. And there are cases where Fidelity fees and expense ratios actually beat Vanguards.
Hey Erin, Been listening to you for a while and really like your insights. I've been trying to wrap my head around passive and active investing for 2 years now. But, even though I invest about 30% of my portfolio into index funds, I've had a hard time neglecting the 30 years of superior returns in lieu of the more academically support index funds. I was listening to Ben just now and this question popped up. If mutual funds superior returns are justified by higher Beta (instead of Alpha) how do you increase your Beta within your limited 401k selections, if the managed funds are the ones with higher Beta? P.S: due to my age, I welcome volatility...
Great review- devils advocate though, what about mutual funds that you can find on Fidelity for example with 1.5% fees but a track record of 15+% over the last 15 years or so? For some, the fees may be worth the risk for higher returns? But I too like index funds
I can appreciate your devils advocate approach. And if there is a fund with such a fee and such a historical performance it would have left the investor in a better position than if they would hav gone with index funds. And in that case I would eating my words. Ultimately what someone chooses to invest in has to pass the pillow test for them. If it makes someone feel better to invest in actively managed funds and helps them sleep better at night, well then that's the better investment for them. (I'm still going to speak out against paying high fees because I believe that it costs too much over a lifetime of investing and I want investors to keep as much of their money as possible. However, this is my personal opinion.) 😊
Do index funds and ETFs function in a similar manner when it comes to capital gain distributions? All of my index funds produce significant capital gains distributions toward the end of each calendar year and I have to pay taxes on the distribution.
Ya know this is good info but I have an investment prison person that I pay to buy and sell for me. I think about it this way... Can I make my own pizza..? Sure. But for $8 I can buy pizza from someone who makes pizza for a living and it will be less time and money. That leaves me to focus on my specialization (my job) and time to myself. Just a thought. Now come for me comment section.
I don't ever "come for" anyone one in the comments 😂 If you are working with CFP or other well qualified and credentialed financial professional! 👏👏👏 They can be an invaluable asset for your financial life. I just hate when I see "financial advisors" (there are no qualifications necessary to call yourself this) take an upfront fee from hard working individuals then just dump their money in high cost mutual funds - which they are also paid a management fee for doing. You do not have to feel as if investing or finance is something you have to DIY. Many people certainly do DIY aspects of it, but turning to a fee only CFP is honestly one of the best things many people can do!
Well said Erin! Thanks for looking out for the young investors who may not know about some (NOT ALL) that call themselves financial advisors who are nothing but glorified salesmen looking to prey on some innocent people that may not be educated in this area. I’ve seen it first hand in the field of education. They set up shop in the teacher’s lounge waiting to sell the best 403b their company has to offer. Lunch on them. Meanwhile they fail to mention the high fees associated with their company’s plan. In addition to the surrender fees these poor teachers get suckered into paying when they realize they were sold down the river because SOME unethical financial advisors (minus that fiduciary CFP title) did not have their best interests at heart. Burns me up because unlike them, 30 years ago channels such as yours did not exist and these teachers paid and are still paying to get out of bad plans. Thank goodness my father was my mentor!! So disregard the haters and keep on doing the great job you do educating young investors and opening their eyes to a not so rosy world out there 👏👏👏
Your against managed funds, well I’m against taking your car to a shop to get worked on (which you likely do). Not everyone can know how to do everything. Sometimes you just have to pay a professional. Managing money isn’t my forte but wrenching is. We all have our thing in life.
The Adventures of a Renaissance Man is spot on!! If you are working with CFP or other well qualified and credentialed financial professional! 👏👏👏 They can be an invaluable asset for your financial life. I just hate when I see "financial advisors" (there are no qualifications necessary to call yourself this) take an upfront fee from hard working individuals then just dump their money in high cost mutual funds - which they are also paid a management fee for doing. I know index funds are often associated with people DIY-ing their finances, but that's not always the case. Especially when people get further into their investing careers the more important it is to reach out to a well qualified CFP, accountant and other well credentialed individuals who can help you grow and just as importantly keep your wealth!!
I didn’t realize the difference between an Index Fund and an ETF before this video. I thought they were the same thing. Thanks for another insightful and educational video. Please keep them coming.
Glad it was helpful! 😊
I love how you are so clear and understandable. It's a joy to watch your videos
I appreciate that! I really try to be clear and concise! 😊🙏 I want finance to be easily digestible.
M1 Finance allows for automated investing and fractional shares of ETFs
Nice!!!
Index Funds for the win! I opened a Roth IRA with Fidelity in January of 2022. I chose to invest in the S&P 500 Index fund and now have about $9K dollars in it. Hopefully I will have a decent amount to retire in about 15 years.
Your explanations are so simple and easy to understand Erin. I often get the different terminology mixed up, and this video provides some excellent clarification especially with NOT being able to automatically invest with etfs as opposed to mutual funds and index funds.
Great video and explanations! M1 can buy partial ETFs and automatically invest, if you haven't checked it out already!
50 year old single male here from Michigan debt free first thing I do is fill up my Roth IRA every year and then I do a mixture of index funds and dividend stocks
Woo-hoo!!! Fellow Michigander here!! ✋ You and I have very similar investing strategies! 😊
Excellent and thorough analysis like always - Great work!
Good point about index funds. I am the same way. I automate my investing
I only use ETFs. Here in Germany, brokers offer savings plans, where you can invest a fixed amount each month in an ETF, which results in fractional ETF shares.
Nice!!
So glad more places are offering fractional buying for ETF. You should talk about Sector index funds and is the risks and benefits of sector index funds. If they are beneficial for some investors.
Mutual funds < Index Funds. None of those high paid fund managers can consistently beat the market. VOO or VTI, auto invest, and never look back
👏👏👏
Index funds for the win!
YES!!! 👏👏
Make sure to tell your senators to not change how ETFs are taxed!
I owe only ETF because I cannot access index fund with the French account I have. But since it has some tax avantages, the inconvenience is small. I really love the job you do to breakdown concepts. Hope you keep the good work, it helps a lot. I have just a request since you seem to assume that many people start investing in their twenties, is it possible to have more examples for people starting in their mid thirties or later. I always saved but I started investing without touching the amount invested right before my 30th birthday but to convert and convince older people to invest with your video it seems like it is too late for them. But maybe your subscribers are in their twenties. Thanks again!
Love the suggestion 🙏 I can absolutely plan a video on that
That's a great video suggestion. It's true that a lot of the messaging around investing makes it seem like you missed the boat if you didn't start investing in your 20's, when reality the best thing you can do is just start today instead of tomorrow!
@@howtoadultschool well said. Investing in today 30s likely still fits this 40year horizon. Our lifespans are increasing, which has also kept people working longer to afford their longer retirements.
Great video Erin! I plan to share this info with my extended family and friends. We will be having monthly discussions about personal finance.
I love that!!! I think everyone will get so much benefit out of those discussions!!! 😊
You can buy fractional shares of ETF’s on M1 finance and you can have it automated to buy when you want. I have mine buy in every other Friday when I get paid. I have multiple ETF’s that I buy and a target percentage that it try’s to keep. So if one fund shoots up I won’t buy that fund anymore until the other funds catch up by either growing or by me buying more of the other ones.
Great content Erin. I learned some things from you today. I am a big QQQ fan. It has been a very good investment over the last 10 years.
I’m so glad…I love QQQ!!! But why can’t they make an index fund that tracks the Nasdaq…come one vanguard 😂
Thank you for your content. Can we make suggestions? If so, can you cover gold and other precious metals and give us your position on them. The pros and cons.
I will consider this video idea 😊
Great job in explaining this! Can you make a video on short term and long term capital gain tax. Also when we selling and rebuy another index fund with in a year, is it consider as short term gain tax? How this will be calculated?
Yes I can!!
Short and long term treatment is based on the holding period. You have a taxable gain or taxable loss whenever you sell a stock (with some exceptions such as if you sell a stock at a loss and then immediately rebuy the stock---you don't have a realized loss in this situation). If you hold the stock (or any asset) for 1 year or more, it's long term. If you hold it less than 1 year, it's short term. Federal tax rates are the same or lower on long term capital gains compared to short term. The maximum long term tax rate is 23.8% (Biden's tax plan (House plan) is proposing to increase to 31.8%). Short term gains are taxed at a maximum of 40.8% (Biden's tax plan is proposing to increase to 46.4%). There are state taxes on top of these.
Short and long term treatment is based on the holding period. You have a taxable gain or taxable loss whenever you sell a stock (with some exceptions such as if you sell a stock at a loss and then immediately rebuy the stock---you don't have a realized loss in this situation). If you hold the stock (or any asset) for 1 year or more, it's long term. If you hold it less than 1 year, it's short term. Federal tax rates are the same or lower on long term capital gains compared to short term. The maximum long term tax rate is 23.8% (Biden's tax plan (House plan) is proposing to increase to 31.8%). Short term gains are taxed at a maximum of 40.8% (Biden's tax plan is proposing to increase to 46.4%). There are state taxes on top of these.
Love your channel. We share very similar opinion about money
Awesome! Thank you! 😊
Actually they also usually charge you whether they make money or not. Stocks rarely charge for the ownership
So well explained - will definitely use this for my friends rather than the less elegant bumbling around that is my usual explanation! :-D
Glad it was helpful! That makes me so happy!
Hi Erin. Another excellent video! I appreciate you and the information. I have a question on your preference for the Fidelity 500 index fund versus the Vanguard 500 index fund? I am thinking of moving 10k from a CD to one of these. Thanks again.
Personally I always tend to favor Vanguard...but largely my choice is emotional (not a great thing). I have been with Vanguard for a long time so I am partial to that company, and I love what the company stands for. You can't go wrong with either. And there are cases where Fidelity fees and expense ratios actually beat Vanguards.
💯
Great information. Also very beautiful. Love your videos and knowledge.
Thanks so much for watching and for your kind words! 😊
I prefer index funds!
Great video Erin! You are providing a much needed service and you look great doing it. Lol
Hey Erin,
Been listening to you for a while and really like your insights. I've been trying to wrap my head around passive and active investing for 2 years now. But, even though I invest about 30% of my portfolio into index funds, I've had a hard time neglecting the 30 years of superior returns in lieu of the more academically support index funds. I was listening to Ben just now and this question popped up. If mutual funds superior returns are justified by higher Beta (instead of Alpha) how do you increase your Beta within your limited 401k selections, if the managed funds are the ones with higher Beta?
P.S: due to my age, I welcome volatility...
What is the calculator you use to project 40 years of investment?
Well done!
Thank you!! 😊
Great video!
Thanks! 🙏
Question #1 : From a tax prospective in a Taxable Account what makes the most sense an ETF like VTI or the Mutual FUND equivalent (VTSAX?)
They're the same
Great review- devils advocate though, what about mutual funds that you can find on Fidelity for example with 1.5% fees but a track record of 15+% over the last 15 years or so? For some, the fees may be worth the risk for higher returns?
But I too like index funds
I can appreciate your devils advocate approach. And if there is a fund with such a fee and such a historical performance it would have left the investor in a better position than if they would hav gone with index funds. And in that case I would eating my words.
Ultimately what someone chooses to invest in has to pass the pillow test for them. If it makes someone feel better to invest in actively managed funds and helps them sleep better at night, well then that's the better investment for them. (I'm still going to speak out against paying high fees because I believe that it costs too much over a lifetime of investing and I want investors to keep as much of their money as possible. However, this is my personal opinion.) 😊
Do index funds and ETFs function in a similar manner when it comes to capital gain distributions? All of my index funds produce significant capital gains distributions toward the end of each calendar year and I have to pay taxes on the distribution.
Ya know this is good info but I have an investment prison person that I pay to buy and sell for me. I think about it this way... Can I make my own pizza..? Sure. But for $8 I can buy pizza from someone who makes pizza for a living and it will be less time and money. That leaves me to focus on my specialization (my job) and time to myself. Just a thought. Now come for me comment section.
I don't ever "come for" anyone one in the comments 😂
If you are working with CFP or other well qualified and credentialed financial professional! 👏👏👏 They can be an invaluable asset for your financial life. I just hate when I see "financial advisors" (there are no qualifications necessary to call yourself this) take an upfront fee from hard working individuals then just dump their money in high cost mutual funds - which they are also paid a management fee for doing.
You do not have to feel as if investing or finance is something you have to DIY. Many people certainly do DIY aspects of it, but turning to a fee only CFP is honestly one of the best things many people can do!
Well said Erin! Thanks for looking out for the young investors who may not know about some (NOT ALL) that call themselves financial advisors who are nothing but glorified salesmen looking to prey on some innocent people that may not be educated in this area. I’ve seen it first hand in the field of education. They set up shop in the teacher’s lounge waiting to sell the best 403b their company has to offer. Lunch on them. Meanwhile they fail to mention the high fees associated with their company’s plan. In addition to the surrender fees these poor teachers get suckered into paying when they realize they were sold down the river because SOME unethical financial advisors (minus that fiduciary CFP title) did not have their best interests at heart. Burns me up because unlike them, 30 years ago channels such as yours did not exist and these teachers paid and are still paying to get out of bad plans. Thank goodness my father was my mentor!! So disregard the haters and keep on doing the great job you do educating young investors and opening their eyes to a not so rosy world out there 👏👏👏
Wow You are Hot and understand Investing Money. Cheers!
Your against managed funds, well I’m against taking your car to a shop to get worked on (which you likely do). Not everyone can know how to do everything. Sometimes you just have to pay a professional. Managing money isn’t my forte but wrenching is. We all have our thing in life.
The Adventures of a Renaissance Man is spot on!!
If you are working with CFP or other well qualified and credentialed financial professional! 👏👏👏 They can be an invaluable asset for your financial life. I just hate when I see "financial advisors" (there are no qualifications necessary to call yourself this) take an upfront fee from hard working individuals then just dump their money in high cost mutual funds - which they are also paid a management fee for doing.
I know index funds are often associated with people DIY-ing their finances, but that's not always the case. Especially when people get further into their investing careers the more important it is to reach out to a well qualified CFP, accountant and other well credentialed individuals who can help you grow and just as importantly keep your wealth!!