We recently transferred our ROTH IRA amount managed by a personal finance guy over to vanguard to manage ourselves. Maybe prematurely cuz I’m feeling a bit overwhelmed now lol. He had the bulk of ours in SCWCX, which it says is a mutual fund, and won’t let me “exchange” it for an index fund as it’s not in the “same fund family within the same share class”. Do i first need to sell SCWCX then buy VFINX? Also, i set up my auto contributions to the Money Market Fun, and I see I have close to $2k in that fund, once my contributions add up there, can I simply buy more index fund shares with that? (I know you want some money in that fund always-any advice on how much?) Any help in understanding would be greatly appreciated!
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Hi Kristen! So I think you will have to sell SCWCX to diversify into VFINX. Things you probably already know but just so it is stated, ROTH IRA’s have a yearly $6,000 maximum contribution. Since you are saying “we” maybe you and your partner both have a ROTH IRA, which means a collective $12,000 a year! Did this help any?
Hi Kirsten!
I know the first time you deal with the logistics of buying or selling a mutual fund, it can be confusing, but you basically have it!
You basically have to follow these steps:
- Click “My Accounts -> Buy & Sell -> Sell Funds”
- Choose to sell all of the fund you want to get rid of
- Wait a couple days (these things take time to settle the funds)
- Go back to your Vanguard account and click “My Accounts -> Buy & Sell -> Buy Funds”
- Choose “Add another Vanguard mutual fund” and enter the ticker symbol there (see below)
- You’ll likely want to put all of your money into the new fund since there’s no point in having cash sitting in a Roth IRA
Regarding what fund to invest in. Since this is an investment retirement account, you likely don’t want any money sitting in the money market fund. That’s just cash sitting there not working for you. So the proceeds from selling the old fund, all the cash in the money market fund and all future contributions should go to your Vanguard mutual fund. VFINX is cool because it’s the first EVER mutual fund… but it’s actually closed to new investors. (And it’s more of a historical relic than the fund you want to be investing in). The modern US total stock market index fund equivalent would probably be VTSAX. ALTHOUGH, I think you should consider a target date index fund. That’s an “all in one fund” that has the total US stock market fund inside of it, as well as international stocks and bonds. It’s a great choice for all in one, set-it-and-forget-it investing. Here’s a look at target date index funds (the Vanguard ticker symbols are at the bottom):
And here’s a video explaining the difference between an S&P 500 index fund and a TDIF:
I hope that helps! You got this! 