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5 Questions: Brokerage Accounts, Car Payments, and Credit Card Fraud

It’s time for your questions.  We’ll cover brokerage accounts, car payments, and credit card fraud.  You know where to come for the answers.

1.  Why us Betterment over Vanguard S&P 500 for index funds? Betterment has a much lower minimum for investing.  To get into that Vanguard fund, the minimum is $10,000.

2.  Is it worthwhile to have more than one brokerage account?  It depends on your goals and how involved you want to be.  Betterment is the hands off option.  A good reason to have multiple accounts is SIPC protection.  Each account is guaranteed up to $500,000.  If you have more than that in an account, you could lose that amount.  Spreading the money out in $500,000 increments is safer.

3.  Why is Matt investing when he has a car loan he’s paying interest on?  Matt’s interest rate is 2% so he’s making more in investments.  As long as your interest rate is very low, keep the money invested.

4.  If I have fraud on my credit card and have to receive a new account number, does that negatively impact my credit score?  It doesn’t impact open or closed accounts or age of accounts.  It’s not the account being closed, just a number change.  If someone has fraudulently opened a card in your name, this will impact your score and takes forever to sort out.  Most cards are chipped now and are more secure.  Just call the credit card company and request the chipped version of your current card.  Chip and pin is still a distant dream for Americans but you can get a chip and signature card.

5.  What was the name of the fund that allows you to choose your proportion of stocks to bonds depending on your age and how much risk you want to take?  This is a Life Cycle Fund.  The fee is higher than other funds because it is much more actively managed.  Andrew wrote an article on investing and there is information about Vanguard’s Target Retirement 2050 Fund.

Thanks for the questions guys, keep e-mailing them in.

Show Notes

St Martin Brune:  A medium bodied Belgium beer

Betterment:  The hands off way to invest.


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12 responses to “5 Questions: Brokerage Accounts, Car Payments, and Credit Card Fraud”

  1. jb1907 says:

    Most of Vanguard funds don’t need a minimum of $10,000. If you have the “normal” S&P, it probably has a lower entry fee.

    • Base level is $1,000 but the fees are higher than at the Admiral level.

      • jb1907 says:

        Even the $3K minimum has a pretty cheap expense. I agree if you are just starting, $3,000 is a lot. I used to save up $5,000 just to make an ETF trade worthwhile. Once we hit the free level, it didn’t matter how small of a trade I made. We are lucky that my wife’s 401K is at Vanguard so that put us in a high level from the beginning. Let listener’s know if they have Vanguard as their 401K that all money counts towards the service levels. Most other places have free ETF trades now.

        500 Index VFINX – 0.17% $3,000 Minimum
        500 Index Adm Shares VFIAX .05% $10,000 Minimum

        • Oh wow, I didn’t know the 401k balances counted towards your fund class level – thanks for that! I swear I learn more from listeners every day than guests.

          $5k was actually the same number I used to initially get into funds a few years back – before I sent to auto deposits monthly. I definitely resonate with it but I think that most people take quite a long time to reach the fist $5k. For example, Matt’s net worth as of today isn’t even $5k.

          • jb1907 says:

            Wow, that seems sort of sad that Matt makes what he makes and doesn’t even have a $5K net worth. I guess if he rents and has a car payment credit card debt will do that. I haven’t listened long enough to know if you guys have talked about what he has saved in retirement. Seems like he make enough to max out his 401K.

          • Matt started as a typical spend more than you make dude and only started reforming his ways before he me. Plus, he only really started making reasonable money in this past year but stuff like his car loan and underwater home hasn’t helped his net worth. He’s been working hard to right his mistakes so the fact that he’s now finally positive is a huge win for him. For quite awhile he was making next to nothing.

            Humble beginnings :)

          • jb1907 says:

            Makes sense. We’ve all been there. I paid off 13K in credit card debt while living with the future wife so I could be credit card debt free before we go married. Sounds like he has done well going from nothing to his current job in a few years.

        • jb1907 says:

          Assets invested in Vanguard funds and Vanguard ETFs® Vanguard ETFs1Stocks and non-Vanguard ETFsLess than $50,000

          (Standard)2 Free$7 for the first 25 trades3
          $20 for subsequent trades$50,000–$500,000
          (Voyager Services®)FreeAll trades: $7$500,000–$ 1 million
          (Voyager Select Services®)FreeAll trades: $2$1 million plus
          (Flagship Services®)FreeFree for first 25 trades3
          $2 for subsequent trades

  2. jb1907 says:

    Lifecycle funds are OK, but you really never know when they are going to start shifting. You can do the same with two Vanguard funds. One stock fund, one bond fund and set your own allocation strategy. But in most 401ks, that option usually isn’t available.

    • You know, I’m really torn on the whole LifeCycle fund thing. I’m a big fan of tools like Betterment which allow me to determine my own pace of bond accumulation. Fee isn’t terrible though so for the lazy and uninterested, it’s definitely a killer product.

  3. jb1907 says:

    OK, most people listening don’t have $500K in an account, but keeping stuff in one account helps you reach certain personal service levels.

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