suggestions for a beginner to taxable investing?

[illinicheme]

I've got ~$10k that I'm ready to start taxable investing with (and then continue with ~$300 per month). I've been planning to get underway sometime this year, but have been paralyzed by the overwhelming number of choices. DH is 35 and I'm 33. My risk tolerance is relatively high but DH is fairly conservative.

Any suggestions for a beginner? Our retirement accounts are at Fidelity, Vanguard, and TIAA-CREF.

[Driftr]

If it were me, I'd open a brokerage account with the 10k at Schwabb (or another company that allows for auto-reinvesting of dividends) and buy 5-10 different large cap dividend paying stocks in increments of 2K or 1K blocks and set them to re-invest the dividends. My top 5 off the top of my head and for no particular reason would be PM, DUK, KO, JNJ, KFT but there are tons out there.

I'd open a new savings account with no service fees and a $200 minimum balance and deposit the first $300 there. I'd then open a Treasury Direct account and invest the $300 per month starting in the second month in 30 year treasuries. Set up the TD account to pull from and send to that savings account. When the interest you've earned reaches $100, buy $400 in 30 year treasuries that month.

When your treasury holdings are equal to your brokerage account (est 3 years or so), hopefully your after tax savings have increased to $400 per month. Split it between the Treasuries and Brokerage account each month. Buy more stock (new position if you'd like to diversify more) when the brokerage fee is less than 0.5%-1.0% of your purchase.

This is all assuming you have a rainy day fund already available and you won't need to use these funds for anything.

[illinicheme]

Nov 4, 2011 11:02:30 GMT -5 Driftr said:

This is all assuming you have a rainy day fund already available and you won't need to use these funds for anything.

Excluding the $10k, we've got ~$55k in cash right now (most in 1% online savings accounts). I'll likely move more of that into investments once I dip my toes in and start to feel more comfortable with the whole thing.

Couple of follow-up questions:

1) What does Schwab offer over Vanguard (particularly if I was going to hold a Vanguard fund via Schwab as wxyz suggests)?

2) Does it make any difference that I'm eligible for "Voyager Select" service at Vanguard (whatever that entails?)

[Driftr]

I don't have an account at either so I don't know the differences between the two. I do know the brokerage account I opened doesn't allow for auto re-investing and while I like the freedom it gives me to invest in whichever of the stocks I currently want more of, the auto-feature would allow me to avoid the bias I may have at the time of re-investment and the fees I pay when I do invest the proceeds.

In all liklihood you may do better investing in stocks, but you are certain to get your principal back in 30 years investing in Treasuries. By investing a small amount over a long time, you should be able to take advantage if the yields on Treasuries start moving back up rather than trying to time when the good time to get into treasuries is. By actually purchasing the bonds yourself, you are not subject to the decrease in principal balance you'll see in a bond fund if/when rates start to rise.

[Deleted]

I would open the Vanguard 500 at Vanguard. They do allow auto reinvesting at no extra cost (technically you're paying on your collective balance so I can't say it's "free"). I rolled my 401k over to them earlier this year. Very nice people and easy to work with.

[Bluerobin]

Go with individual utility stocks that pay a dividend. The rate will be much better than you can get at a bank, and reinvestment will make the funds further grow. I started with local utilities. Plus utilities do not fluctuate in value as much as some large cap stocks.

[nalto]

Just opened the SP 500 index with Vanguard. Definitely was easy to do, automatically reinvests dividends and capital gains (you can easily change that if you want.) So far, I'm happy. Just have to keep putting money in, and forget all about it.

[Deleted]

News Alert: For those folks who use USAA, they have a nifty new feature which allows you to connect all your accounts on line. Therefore when I log onto USAA, I see our accounts with them, DH's 401k at Fidelity, my 457 at Deferred Comp (or whatever the new name is) and my roll over IRA at Vanguard.

I was too lazy to add in the 5 accounts we have with BofA or my account with Chase but I could.

Very nifty feature!

[Bluerobin]

Bonn, the only problem with that is I don't want any of them knowing my whole financial picture!

[safeharbor37]

When I opened my Schwab account they charged a fee if you didn't meet certain requirements. I now have a balance for which they waive the fee and give discounted trading commissions, but I'm not sure 10K would qualify.
I also have an account with Scottrade and find it very satisfactory ~ they don't charge a fee and require a minimum balance, as I recall, of $500. I don't see much difference although Schwab keeps offering free counseling, but, in my case, the Scottrade offices are much more convenient ~ Schwab closed a lot of offices a few years ago.
The commission isn't much higher than Scottrade and there are some less expensive than $7, but I don't have experience with them.

My suggestion would be to buy a S&P500 ETF and let it ride while learning a bit about trading with a small portion of the 10K. This board has been in the past a good place to get advice as was Market Talk. illinicheme appears to have the retirement and emergency funds taken care of and so may be ready to investigate some trading/investing with spare funds. My main warning is that one shouldn't jump in too quickly, but" test the waters" while "learning the ropes." Good trading.

[yogiii]

You sound like us. I just opened a taxable in August and I've been moving cash there. DH will not settle for anything less than 30k cash so that's where we are at. I went with Vanguard as we already had Roths there and was happy with the selection.

[illinicheme]

Thanks everyone for the advice. Right now I'm leaning towards using about half the money to buy the Vanguard SP500 (probably through Vanguard, since I already have accounts there). I'm not sure yet on the other half, but am trying to get over my fear of buying individual stocks. Per wxyz's request, I'll post an update in the long term investor thread when I finally pull the trigger.