I am going to be starting as an analyst at a BB in 2 months or so and was wondering what I should do with my personal trading account. I don't plan to have the time or desire to actively manage it when I start working. Does anyone have advice on what I should do with it? Money Manager, index funds, bonds, etc? Any thoughts would be appreciated.
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Sure, transfer your funds into my account
Vanguard.com ->Mutual funds.
Done.
Alternatively, figure out who your firm's designated broker is and transfer your account to them.
Go with ETFs. Mutual funds have historically underperformed comparable ETFs due to fees, etc. Just leave them parked for a while. Or pick up a nice dividend paying stock like T or AZN.
Most Vanguard funds have sub- 0.4-0.5% management fees, and their ETFs look more like 0.2%. For $5K in a brokerage account, you're going to pay $15/year extra in fees. So my thinking at the very least is that for a non-huge sum, the extra cost on an investment returning 5-10%/year may be worth saving the hassle.
Obviously you would be right for a $100K brokerage account. Then ETFs make more sense.
Touche. That's why you've got the gold star next to your name.
Be sure to consider trading commissions because index/mutual funds usually don't have any while ETFs do. So yes, ETFs would be better if you sit on that $100k without making any trades. But with just a couple trades a year after going through compliance, it may be cheaper to get an index/mutual fund.
Also, you should check whether dividends are reinvested in the fund or paid out in cash.
Best to stick to mutual funds your first couple years, IMHO. At some point, stocks make more sense since they do not incur management fees and you can be a lot more selective about your individual investments, but for a typical $5-10K brokerage account that a college kid might be graduating with, it's just best not being "that guy"- the new analyst who needs to make fifteen trades every week- all at separate times- and get preapproval from his manager.
how much is in your account
Firm's have a list of acceptable brokers--Fidelity, ETrade, company brokerage, ect. If you are not with an accepted company, you will need to move. You won't be able to actively trade the account anyway since firm's make you hold trades for 30 days. Also, email the compliance trade authorization people/look on your company's intranet for all the trade rules. My firm has a lot of different rules on options that can be very helpful (such as no SN unless they are LEAPS, you can buy puts and calls on any index (ETFs included), ect. You should talk with your coworkers and your manager about what they do.
Thanks for all the advice, Illini especially. I guess I will go with ETF's.
how much of the bonus should one analyst invest?
The whole thing on coke and hookers.
You'll likely need all of your signing bonus-after tax- to survive the summer, put up a security deposit, and move to NYC.
As for first year bonus, first pay off any high-interest debt you might have. This includes student loans charging more than 6% interest. Then get a 401K match, then pay off loans charging more than 3-4%, then build up an eight month emergency savings fund, then a Roth IRA contrib, then max out your 401k, then pay off remaining student loans at greater interest rates than your savings account, finally invest in the stock market.
For emergency savings, I recommend series-I savings bonds to keep up with inflation if you can hold them for the minimum 1-year period.
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