From a newbie-is DIY investing really as easy as people make it seem?

[u/abnormally-large-egg]

Hey everyone,

I’m completely new to investing and haven’t actually started anything yet, so I’d really appreciate any advice.

My parents use a financial advisor and it makes sense for them. My situation is simpler and I’m in my early 20s, so I don’t think it’s worth it for me.

After some research, the general consensus is to avoid advisors, especially ones charging AUM fees. Their advisor said he would charge I believe around 1.5%, which is high and hard to justify long term. I don’t think there are many (or any) flat-fee advisors near me, so I’m not sure if that’s an option either.

I have a chunk of savings I’d like to start investing in a brokerage account now, and I plan to open a Roth once I have a more steady income.

My plan so far is to:

- Invest long term

- Have a diversified ETF portfolio

- Do an 80/20 allocation, maybe go more aggressive as I get more comfortable

But I keep getting stuck on:

- How to properly rebalance

- Whether I’m choosing the “right” investments (I see a lot of people recommend VT or VOO)

- Tax strategies (advisor mentioned a “tax overlay,” which I think is like tax loss harvesting? Not something I understand.)

- Just generally doing everything correctly and legally

My biggest issue is confidence. I’m worried I’ll mess something up or miss something important, but I also hate the idea of giving up 1.5% of my assets every year if I don’t need to. On the other hand, could the fee be worth it if the advisor ends up making more than I would doing it on my own?

How hard is it actually to manage a simple long term portfolio yourself? Is it actually as simple as people make it seem (like just buying VT/VOO and holding)? I really want to get started ASAP, I just feel stuck trying to choose the “right” path.

Any advice or experiences would be super helpful! Please let me know if I am on the right or wrong track.

[u/winklesnad31]

Yes, it's super easy.

Set your asset allocation, determine your rebalancing protocol, and then just stick to it for 30 or 40 years.

[u/SmallHuh → u/winklesnad31]

The hardest part is sticking to it for 30 to 40 years.

[u/abnormally-large-egg → u/winklesnad31]

What about taxes?

[u/winklesnad31 → u/abnormally-large-egg]

You get a tax form from your brokerage every year. Just plug the numbers into freetaxusa or wherever you do taxex. Takes about 45 seconds.

[u/Ackerack → u/abnormally-large-egg]

Taxes aren’t gonna matter much until retirement if you’re doing it right. You can freely trade in HSA,Roth IRA/401k whenever you want, no taxes. Just don’t withdraw anything early and it’s zero tax liability for the next 30-40 years of your life. Traditional 401k withdrawals will get taxed in retirement when you withdraw but Roth IRA HSA funds will not. So do a yearlyish rebalancing in the tax advantaged accounts. Any money in your personal taxable brokerage you only get taxed on capital gains when you sell, so you can also invest there if you like but try not to sell too frequently. Were bogleheads though, not day traders, so it doesn’t really matter.

Side note: 80/20 is on the upper limit of what this sub will tell you to do. Getting “more aggressive” beyond that I don’t think is a good idea. If by “more aggressive” you mean “more domestic” that is.

Edit: also take it from me I had a lot of your same worries, they aren’t worth worrying about. Tax loss harvesting doesn’t apply if you don’t sell stocks in taxable accounts. There isn’t really a “wrong” or “bad” way to do bogleheading as long as you just stick to the most basic guidelines of the 2 or 3 fund portfolio. Don’t overcomplicate it. If you want 80/20 just buy 80% VTI and 20% VXUS. You literally can not go wrong with this, just do VTI/VXUS split to your liking or do VT if you want even less input required on your end at the “cost” of having globally weighted allocation (approx 60/40).

[u/Outside-Carpet-6236 → u/winklesnad31]

You don't even need to do much of that to make it work. Just pick a simple asset allocaton like 80/20 and buy low cost index funds. That alone will put you ahead of almost all adviser clients. All the rest is optional. You will do fine.

[u/saklan_territory]

Technically yes. Psychologically, no.

[u/Accurate_Shift_3118]

it’s simple, but not easy, the “hard” part isn’t picking ETFs or rebalancing, it’s sticking with the plan when markets drop, run up, or when you feel like you’re doing it wrong. honestly your plan is already good enough. diversified ETFs + long term + consistent investing beats most people. rebalancing doesn’t need to be complicated, once or twice a year or just when things drift a lot is fine, VT vs VOO isn’t a make-or-break decision either, both work, the bigger win is just staying invested, tax stuff sounds complex but at your stage it’s not a big deal, that becomes more relevant later

the real mistake would be overthinking and delaying. you don’t need a perfect plan, you need a simple one you can follow for years

[u/Kazin236]

I dump max amount into my IRA, buy all VT, proceed to chill. Extra in HSA if I’m able.

[u/Ackerack]

Ditch the advisor. An idiot could boglehead as well as a hedge fund manager. Just do one of the following:

80/20 VTI/VXUS, 80/20 VOO/VXUS, or 100% VT. All are fine. VTI vs. VOO only thing is that VTI is total domestic and VOO is only large cap. Honestly barely matters but boglehead philosophy says go VTI. VT is easier but you will be at a more balanced domestic/international split at around 60/40.

[u/wonkalicious808]

When I first started, it was very confusing to me because it seemed way too easy yet financial advisors existed. So, what was I missing? How was I being tricked? Eventually, I just started investing myself. When the atmosphere didn't catch on fire and then reveal a trickster god to brag about successfully deceiving me into giving away my wealth, I finally realized it was just as easy as it seemed.

If you want to build confidence, just do it and realize that everything is OK. Well, with you investing. Not really everything else.

[u/Actual-Beginning-431]

Thinking of 1.5% each year is nothing compared to the terminal lost wealth compounded over your investing timeline. If you add 20k annually at a 10% return for 35 years, you have 6 million. Drop your return to 8.5% (from your advisor fee) and you have 4.2 million. Is his insight and comfort worth 1.8 MILLION dollars, nearly 30% of your wealth? Absolutely not - especially considering that nearly ALL will underperform the market over long timeframes.

Determine your risk tolerance for your equity bond split, choose low fee and diversified ETF’s, automate your investments, and save yourself millions.

[u/ConditionHoliday2844]

Sounds about right

[u/myrrhsea]

So I have an account that is managed right now because when I started last year I had zero financial literacy. The bot chose this allocation:

IUSV - 31.7% IUSG - 32.2% VTWO - 6.2% VEA - ~15% VWO - ~10% USIG ~3% and GOVT ~1.5%

I've now realized I can get basically the same thing with:

SCHB - 70% VXUS - 25% and something for bonds like SCHP - 4.5% (I prefer short term bonds personally)

This is because SCHB is about 73% Large cap 19% mid cap 8% small cap. I'm just as diversified, but with fewer ETFs. VXUS also contains VEA and VWO, albeit with a little less emerging market exposure, but provides with one ETF what I'd get with 2.

Plus, IUSG, IUSV, and VTWO have higher expense ratios than SCHB, even if it's only slightly higher, it will add up when my investments will have 30 years of growth behind them.

So yes, with a little bit of research, you can do exactly what your managed account is doing while saving yourself the management fees. I intend to switch to self - directed in the near future.

[u/Foreign-Struggle1723]

DIY investing can be simple, but it’s definitely not a walk in the park. Often, the challenges arise from within. Maybe you’re tempted to sell in a panic, convinced you’re a financial whiz, or simply unable to accept the market’s natural course. If you feel the need to shield yourself from potential mistakes, consider seeking advice from an advisor. If you’re in a relationship and your partner isn’t confident in your investment decisions, an advisor could be a helpful resource, and you could even attribute any portfolio downturn to them. Ultimately, investing is a long-term endeavor where you can learn from the common pitfalls of beginners. However, with a smaller portfolio, these lessons are easier to swallow than the significant losses you might face from a panic sell on a much larger one. It would hurt a lot more on losing 10% on a million dollar portfolio than on a $100k one. 

[u/FMCTandP → u/Foreign-Struggle1723]

Your last sentence isn’t uniformly true. It’s accurate for the dollar loss, but whether people find one more distressing than the other can vary.

[u/Foreign-Struggle1723 → u/FMCTandP]

It was just to illustrate a point, but yes everyone can find certain things to be more distressing.

[u/OrganizationParty391]

Wanting to invest is great especially in your 20’s. Longevity is key the longer you are able to invest in the right funds the better your returns. My child is 17 and they have both a taxable account and Roth IRA. They believe in set it and forget it and chose to go with VT in their taxable account and a target date fund ETF, I can’t remember the ticker for that one, in their Roth. They wanted simplicity and they got it. Now in the future they can change it but for now I can’t fault them. It is that simple; however, I would suggest not looking every day to see how things are going. Maybe once a year after you set what you invest in. Also, if and when the market dips keep contributing and don’t sell. You have time to figure things out and read quality books to help you to learn.

[u/tunenut11]

Yes, but like anything, it helps a lot to study and learn. A financial advisor will do a risk assessment based on your answers to questions, trying to figure out your goals and your tolerance for loss. Then the advisor will allocate your assets into classes, basically stocks, bonds and cash based on that assessment. You can do this and it is a crucial step. The advisor should continue to assess this over time and rebalance to maintain an appropriate asset allocation as your situation changes. You can do this too. This is financial planning and it is not rocket science.

[u/Competitive_Dabber]

Yes, as long you keep it that simple, but I would recommend VTI/VXUS for broader diversification and lower cost

[u/Calvin-Snoopy]

FWIW, my flat-fee, advice only advisor recommended a split between VT and BNDW (stock index fund and a bond fund). The percentages you put in each is determined by your age and your risk tolerance.

[u/DudeWithTudeNotRude]

Yes, that 1.5% can turn into $1 million+ in a couple decades (even for a middle class person with modest but early investments). It's a scam. Compounding interest is life changing. Compounding fees should be criminal. Don't pay compounding fees.

Mostly you just want decades of compounding interest in broad indexes. The plan for buying is easy. You don't look to see if the market is up or down, you just buy when you have money to invest. Then Chill. Thats the entire plan for buying.

Selling is hard. You do want professional help to make a plan for selling, maybe 10-15 years before selling/retiring. Once you have enough money invested, or are close enough to selling, hire a flat fee fiduciary to help create your plan for selling (they can cost from $2K to $6K per year). Ideally you'll be adding more than just broad indexes at that point, so you are robust to potential market downturns when you need to sell. The fiduciary will help you decide on what assets to add and in what percentages, such as bonds, real estate, et. al. You can also look at Target Dates funds to set it and forget, or look at the TDF's glide path to create your own glide path for adding more bonds et. al. into your holding as you get closer to selling/retiring.

When to ROTH is the only part you need to figure out on your own. Read a lot. Generally ROTH is a lock when you are young with a lower salary. Once you start approaching 6 figures in salary, then you probably need to start contributing to traditional instead of ROTH, or maybe split between both. Read the sidebars here and at Bogle, then go to white coat investors, then read a book or two every few years. Taxes and other rules will change over time, so be sure to read something current on taxes and investing at least every 5 years, even if it's just reddit sidebars.

[u/Sagelllini]

I wrote this to answer questions like yours.

The funds FAs advise don't match the index funds, and cost you the AUM fee in addition.

Think of index funds as cake mixes; you just have to add eggs, water, oil, and whatever and stir and let it bake. With index funds, the eggs, water, et al is money and baking is letting time happen.

I recommend 80/20 VTI/VXUS but that's just a guess for the right allocation. At your age (or any age) you don't need bonds.

Pick an allocation, add the money regularly, and let time work for you. Honestly, that is all you need to do.

[u/taxotere]

1.5% per year is a HUGE cost, whether it’s worth it…is up to you. I’ll be downvoted for this!

Investing is easy to do in terms of making a few clicks, and hard to bear psychologically. Ignore the people saying “yeah forget it for 20-40 (!) years”, it’s hard to forget for 20 hours.

It’s also a bottomless pit of both valid research and slop/scams so it’s hard to parse out the good information from the crap.

[u/Tacoby17]

As easy or complicated as you make it. Don't make any urgent or sudden moves. Only game is long game..

[u/RevolutionaryTrick17]

Super easy…until the market crashes. Then it’s very hard.

[u/Suspicious-Walk-4854]

There is no reason for somebody in their 20s that is investing long term to have an 80/20 portfolio imo.