22-Year-Old With $70K Cash Debates Dropping $40K Into VTSAX – 'Am I Making A Huge Mistake Or Securing My Financial Future?'
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Investing early is one of the most powerful financial decisions an individual can make at a young age.

Even modest investments can grow considerably over time because of compound interest, so the potential for wealth when starting young is immense. While the benefits of early investing are clear, many young investors face a common issue: figuring out where to put their money.

This challenge is also on a 22-year-old investor’s main concerns list. The individual has $70,000 in cash and is debating whether to invest $40,000 of the whole sum into Vanguard Total Stock Market Index Fund Admiral Shares VTSAX or somewhere else.

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“I am dumb, dumb, real dumb. But from the research and reading I've done it seems like this would be a safe choice, right? The two main concerns I see are the controversy in allocating some of them into an international stock. The other is timing,” he wrote on Reddit.

The self-employed investor also mentioned that he has less than $10,000 in an emergency fund and isn’t sure the sum is enough. The Reddit community has provided the poster with advice, so let’s dissect that below.

Is Dumping $40,000 Into VTSAX the Right Choice? Reddit Investors React

Prioritize an Emergency Fund and Tax-Advantaged Accounts

Many commenters mentioned how important it is to build a solid financial basis before diving into the stock market, namely, establishing an emergency fund and maximizing contributions to tax-advantaged accounts.

“Rainy day fund needs to be the first priority. Get that up to $30,000-$40,000 and then invest the rest in an IRA or increase 401(k) contributions and live off that $70,000 for a bit,” a Redditor advised.

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One commenter touched on the fact that the poster is self-employed, which can mean facing income volatility, so in this situation, an emergency fund is a must.

“You want an emergency fund first and foremost before investing. My industry is volatile and oftentimes takes people six months to a year if not more to find work if they get let go, sometimes with significant upheaval to their lives and a need to move somewhere else. I max out my [high savings account] and Roth IRA, close to maxing my 401(k), no kids. So I don't feel a need to invest the [high-yield savings account] funds,” the Redditor wrote.

“First, max out a Roth IRA ($7,000), then put the rest in a brokerage account,” another Redditor advised.

Diversify and Look Into VTSAX Alternatives

Several comments suggested the investor diversify his investments across different funds and explore other VTSAX alternatives that might offer better benefits.

“Just look into mutual funds (VTSAX) versus ETF [Vanguard Total Stock Market ETF VTI]). VTSAX and VTI are basically the same thing, dressed up differently. There are pros and cons on each side. I personally prefer VTI as it allows me to easily move my holdings to another broker if I so choose. VTSAX, on the other hand, allows automatic investments at Vanguard,” a comment reads.

“There are better places than Vanguard and cheaper funds than VTSAX,” another Redditor said.

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A commenter suggested a diversification strategy for the young investor.

“I like to invest 60% VTI, 30% [Schwab U.S. Large-Cap Growth ETF SCHG], 10% [iShares Bitcoin Trust ETF IBIT],” he said.

This Redditor recommended the investor a few different ETF choices, both national and international, with the mention to diversify across several funds.

“Don’t put all the money in one ETF. I would consider one international like [Vanguard FTSE All-World UCITS ETF], another S&P 500 like [Vanguard S&P 500 ETF VOO], and another a bit speculative like [Invesco QQQ Trust ETF QQQ] or [Vanguard Mega Cap ETF MGC],” he wrote.

“Consider diversifying: $10,000 in VTSAX, $10,000 in VTI or VOO, $2,000 in individual stocks or ETFs you find interesting like [Meta Platforms Inc. META], [Alphabet Inc. GOOG GOOGL],BOTZ]), or a nuclear energy ETF,” another Redditor suggested.

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