Vanguard vs. ING accounts?

Question

I'm looking to invest and am deciding between a short term ING savings account and a Vanguard IRA? I'm young and it's not crucial for me to gain access to this money any time soon. Has anyone had any good/bad experiences with either? I've heard that Vanguard is a bit riskier, but the rates are great. Any thoughts?

Answer 1

You are not comparing apples to apples and the difference is significant.

The ING account is a regular savings account, and it definitely pays a decent rate of interest, that is federally insured. In other words, you have immediate liquidity (access to your money) and you will make a profit (though you will owe taxes on the interest).

An IRA is a savings account for your retirement and this type of investment should be put away for that purpose, not for money you may want sooner. An IRA can hold almost any kind of investment. Vanguard is one option and yes, they make good mutual funds. Mutual funds are an excellent choice for a retirement savings account.

If you open an IRA, you either will never have to pay taxes on the profits (if it is a ROTH IRA and you don't take your money out until retirement) or will be tax-deferred until you do withdraw at retirement. In both cases, if you withdraw your money before retirement, the profit will be subject to both taxes AND a 10% penatly.

This is why the reason you are putting this money away makes a big difference in the type of account that is a better choice.

Now a discussion on risk -

There are different types of investment risk. The most obvious is the risk of loss of your origninal investment (called principle) and mutual funds, bonds and stocks all carry varying degrees of risk of loss of principle. Some are riskier than others; some carry the potential of significantly higher returns.

Another type of loss is purchasing power and this is the risk with the savings account. Inflation continuously drives prices for everything you buy higher. If your investment incur a lower rate of growth, by the time inflation and taxes are taken into consideration, sometimes your money is actually worth less than it was when you originally invested.

For shorter term investments, going with the lower risk of loss of principle is the better choice. In the short run, inflation isn't that big a risk and you don't want to have less money when you started.

For longer term (5 years or more), it is usually worth taking the risk equated with stock mutual funds. Over the long run, stocks have always gone up (as a group). The historical average growth of the S&P500 has been around 8%. That's quite a bit higher than a savings account. Some recent years have seen significant drops in the market, and some have seen much higher rates of returns (in excess of 20% in one year).

So in the short term, the stock market is just too unpredictable, but for the longer run it is a good bet.

The second trick to stock market (mutual fund) investing is picking the right stocks. Obviously, if you only hold one or two stocks, your risk is higher because no one can predict if or how much a stock will rise or fall in value (this is true even with good companies because lots of factors affect stock price). When you buy a mutual fund, the fund manager picks a lot of stocks to balance that risk with the potential for growth.

There are two major approaches to how mutual funds buy stocks. Vanguard managers run what are called "index funds." These funds invest to materially match the performance of the index that particular fund invests in. There are many different indices including the Dow Jones, the NASDAQ, the S&P, and various bond and international indices. There are also some that track growth stocks (usually younger companies expected to grow faster than the average) and value stocks (stocks believed to be trading for less than they are really worth). So you can pick an index fund based on what kind of stocks or bonds you want in your portfolio, but your "bet" is placed on the index, not the skill of the manager. Whether or not you get "great rates" depends on which index you are invested in and how that index is currently performing. There are significant differences in risk and return potential, and Vanguard has many funds to choose from.

The other major approach is active management and fund companies like T. Rowe Price and American Funds use the active approach. In this type of fund, there is a stated objective (ie. growth stocks), where the manager will study and research and pick a portfolio of what they think are the best choices for that category. They can make changes to the portfolio as they see fit. In other words, there is a human element that can add or subtract value.

It is less important which approach you choose, than it is that you pick the right kind of investment for your time frame AND that you invest regularly throughout your lifetime. Yes, some love index investing and some prefer active and both camps have good arguments (I prefer active myself). But again, it is picking the right kind of investment (stocks vs bonds, growth vs value, etc.) that makes the bigger diffference.

Vanguard and ING are both good companies but as I stated at the beginning - they each do something different.

A couple of points on wrap up - ING has no minimums. Vanguard has a $2000 minimum, though you may be able to guarantee that over several months and get in with less. Vanguard is not going to be suitable for a shorter time frame.

And before you invest (the ING account is a good place to park your money until you're ready to invest), you should either hire a broker to help you pick the right investments OR start studying and learning so you can make good decisions.

Answer 2

1

Answer 3

It's wise to put some money in IRA, however you also want liquidity in case you need some money. Depending on the amount of money you have, you can divi it up. If you have small amount, majority should go into liquidity; if you have large amound, majority in IRA.

Also you don't necessary have to go with the companies you mentioned. Emigrant, HSBC offer better rate than ING. And in terms of IRA, Vanguard is not the best either. Just remember, even if you choose IRA, you still have to decide which mutual funds that you think will grow. I've seen a lot of mutual funds underperforming big time.

Answer 4

Vanguarding

Answer 5

I would think about ING, true Vanguard does have great rates, but there is greater risk involved. Plus I have NUMEROUS problems with Vanguard customer service. They are a pain in the a$$ to deal with. Go with ING, they are more customer oriented.

Answer 6

First of all, IRA is not an investment vehicle, it's a tax reduction tool. When you open an IRA, you will still need to decide what to invest in (you are probably confusing Vanguard money market fund with an IRA). Since you are young, you should consider investing in stocks (or stock funds) and real estate (or real estate investment trusts). Think about including foreign stocks (or funds that invest in foreign stocks) into your portfolio. These are relatively high-risk investments, but they tend to pay well in the long run.

Answer 7

This penny stock service has years of proven experience. Ultimately it is the best service for beginners to use https://tr.im/3LaQM
You will have to wait between 3 and 10 days to get into the system in most cases. When I signed up it took 8 days. I wished it was faster, but if you can wait a week or two to start earn life changing money than you will have what it takes to make it in this business.

Answer 8

Penny stocks are loosely categorized companies with share prices of below $5 and with market caps of under $200 million. They are sometimes referred to as "the slot machines of the equity market" because of the money involved. There may be a good place for penny stocks in the portfolio of an experienced, advanced investor, however, if you follow this guide you will learn the most efficient strategies https://tr.im/c8109

Answer 9

This may be feasible

Answer 10

ING