I've been investing for a few months now with mixed success, only a little under $2,000 in my portfolio so far. I just got a $5,000 Christmas check from my grandma and I'm deciding to use it to start with long-term low-risk investing that will compound over the years.
Of that $5,000, I'm putting $2,500 into savings, $1,000 into investing in whatever I want, and the last $1,500 into long-term growth. I put $750 each into VOO and SCHD. I'm gonna start with $50 monthly deposits into each one, so $100 total each month, and then go from there. I've been using a compound interest calculator to map out the future of this investment, and it looks really good. Increasing my monthly deposit into each of VOO and SCHD by just $5 a year ($55 per month in 2027…), I'm projected to make $5.2 million off of $194k in contributions when I'm 65 years old. These numbers are assuming each of these investments' average annual return over the last 10 years (14% for VOO and 8.5% for SCHD), and something that I wasn't able to include in this math was dividends, which is especially notable for SCHD.
I'm messing around with larger monthly contributions each year, for instance, changing my monthly deposits to an extra $10 a year ($60 per month in 2027) projects to make me about $1.6 million more by age 65, just from VOO. I don't know how to code and I'm not great with spreadsheets, so doing this is taking forever, and I haven't calculated this second figure for SCHD yet. I'm also thinking about $25 more per month per year, or maybe $50. I don't know what I'm gonna end up doing, but I'm excited.
I'm not an expert investor, I'm still very new to it all. I'm a freshman majoring in finance (and probably double major in accounting, maybe minor in entrepreneurship) at Wash U who hopes to get into the world of finance and make a lot of money. I guess I just want some feedback on how well I'm doing this with the goal of setting aside some of my money in very low-risk investments to make millions by retirement age.
Posted by HenriST2
8 Comments
Your head is in the right place. You’re thinking well about all of this. Slow and steady – and you have a lot of time.
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You do not want to buy SCHD, ever. First off, when investing in a taxable account your goal is to be as tax efficient as possible. Dividends are completely irrelevant; total return is all that matters. If you need cash; sell stock! This has been studied extensively and a good first read would be: Franco Modigliani and Merton Miller: dividend irrelevance theorem. A dividend is just a forced sale and hasn’t been a useful investing tool for at least a decade. Adding SCHD to VOO is a little redundant; you have no diversity. Historically, small cap and value is what succeeds and the analysts think that large cap/mega cap won’t keep outperforming in the future. A portfolio using VOO as your foundation looks like: VOO/(a small cap)/VXUS
Time is on your side. Just invest what you can afford to invest and let it grow. Don’t try and time the market or pick individual stocks. Just put it in a good index fund and let it grow naturally. Some of my largest gains have been with small amounts of money that I invested early in my career (~5k a year), every year in my 20s
your best investment, might very well be in yourself. having a good career >> than getting a 10k head start. That said, if you have all that taken care of, great. At that point I’d dump it into VOO, or VTI.
I’d recommend low cost, globally diversified index funds such as VT (65% US, 35% ex-US), or VTI (total US) and VXUS (total international ex-US). You have decades and decades of runway for your portfolio to grow. Dividends don’t really matter in this case, total return makes sense in accumulation.
[https://www.bogleheads.org/wiki/Lazy_portfolios](https://www.bogleheads.org/wiki/Lazy_portfolios)
“VOO and SCHD” tells me you started your research on tiktok. Just stick with VOO and ditch dividends.