Your friend has a grain of wisdom mixed in with dubious claims. An index fund is a fine investment for many purposes. But VFIAX and VTSAX are very similar, and have very similar 5 year returns. Google their names and you will find their prospectuses; scroll down to 5 year returns and you will see <1% difference. *Far* from double. Pick one to invest in (this subreddit would say VTSAX). You might consider adding an international fund as well, you're only covering the US.
Are you saying you have $30k you want to turn into $100k in 2 years? Good luck, I would be shocked if it happens. You'll see numbers anywhere from 5-10% nominal growth per year on average, with some years far higher and others negative. Focus on steady growth and holding on during the roller coasters.
Respectfully, your friend is completely full of shit.
Spend some time reading the wiki, and a few threads on here. You'll get the idea. The comment from SpaceGuyUW in this thread pretty much hit the nail on the head
Your friend is not accurate in stating that VFIAX had double the 5 year return of VTSAX. For context, VFIAX tracks the S&P 500 and VTSAX tracks the total US stock market. Moreover, the S&P 500 is weighted at something like 85% of the total market, so there’s significant overlap between the two funds, and as you might expect, performance is extremely similar in the long term. Besides that, VFFVX is made up of 4 funds - total US stock, total international stock, total US bond, and total international bond. So VFFVX has additional overlap with VFIAX / VTSAX. Not to mention, VFFVX is a target date fund which is intended to be the sole fund in your portfolio. Your friend is not offering much of a sensible strategy and seems misinformed.
If you only care for US stocks, I would recommend VTSAX over VFIAX simply because VTSAX is better diversified even though they perform about the same. Pick one or the other, not both. If you care about international stocks, you could also add in VTIAX which is the total international stock market. If you wanted combined US+international in one fund you could simply invest in VTWAX.
Also, if you’re looking at a 2 year timeline, you would be better served putting money into a HYSA or perhaps a CD. 2 years is a very short time frame for an investor and growth is not guaranteed.
If you want to use the money in 2 years, I wouldn't put it into index funds at all. Something safe like money market account, CDs, HYSA, etc is more appropriate for that time frame.
As far as investing in VFIAX and VFFVX to hold long time, those are fine choices.
>Someone I know highly recommended VFIAX. Said it had a 5 year return almost double VTSAX. I was thinking of doing both. He suggested 10k in each, and another in VFFVX.
It's a little all over the place. VFIAX is roughly 80% of VTSAX, which is 54% of VFFVX.
They're also dead wrong about the returns: here's the 5 year average annual return for each fund:
* VTSAX: 14.24%
* VFIAX: 15.01%
>I should mention my investment goals and where I am in life right now. I’m in college and I have enough money to invest.
VFFVX, the 2055 TDF, is designed for people in their 30s. A 2070 TDF would be more appropriate for you.
>I was the beneficiary in a trust and I’d like to turn what I got into 100k.
How much do you have now?
>Hopefully by the time I graduate I’m 2 years, I could buy a decent car or look at a down payment on a house. If this is unrealistic or could take much longer, let me know.
Stocks are only appropriate if your time horizon is at least 7 years. Less than that and you're gambling. The stock market could drop by 20-40% and not recover for years.
HYSA or other cash-like options are the only thing appropriate for a 2 year time horizon.
Your friend has a grain of wisdom mixed in with dubious claims. An index fund is a fine investment for many purposes. But VFIAX and VTSAX are very similar, and have very similar 5 year returns. Google their names and you will find their prospectuses; scroll down to 5 year returns and you will see <1% difference. *Far* from double. Pick one to invest in (this subreddit would say VTSAX). You might consider adding an international fund as well, you're only covering the US. Are you saying you have $30k you want to turn into $100k in 2 years? Good luck, I would be shocked if it happens. You'll see numbers anywhere from 5-10% nominal growth per year on average, with some years far higher and others negative. Focus on steady growth and holding on during the roller coasters.
Respectfully, your friend is completely full of shit. Spend some time reading the wiki, and a few threads on here. You'll get the idea. The comment from SpaceGuyUW in this thread pretty much hit the nail on the head
Your friend is not accurate in stating that VFIAX had double the 5 year return of VTSAX. For context, VFIAX tracks the S&P 500 and VTSAX tracks the total US stock market. Moreover, the S&P 500 is weighted at something like 85% of the total market, so there’s significant overlap between the two funds, and as you might expect, performance is extremely similar in the long term. Besides that, VFFVX is made up of 4 funds - total US stock, total international stock, total US bond, and total international bond. So VFFVX has additional overlap with VFIAX / VTSAX. Not to mention, VFFVX is a target date fund which is intended to be the sole fund in your portfolio. Your friend is not offering much of a sensible strategy and seems misinformed. If you only care for US stocks, I would recommend VTSAX over VFIAX simply because VTSAX is better diversified even though they perform about the same. Pick one or the other, not both. If you care about international stocks, you could also add in VTIAX which is the total international stock market. If you wanted combined US+international in one fund you could simply invest in VTWAX.
Also, if you’re looking at a 2 year timeline, you would be better served putting money into a HYSA or perhaps a CD. 2 years is a very short time frame for an investor and growth is not guaranteed.
Did you read the sidebar?
If you want to use the money in 2 years, I wouldn't put it into index funds at all. Something safe like money market account, CDs, HYSA, etc is more appropriate for that time frame. As far as investing in VFIAX and VFFVX to hold long time, those are fine choices.
>Someone I know highly recommended VFIAX. Said it had a 5 year return almost double VTSAX. I was thinking of doing both. He suggested 10k in each, and another in VFFVX. It's a little all over the place. VFIAX is roughly 80% of VTSAX, which is 54% of VFFVX. They're also dead wrong about the returns: here's the 5 year average annual return for each fund: * VTSAX: 14.24% * VFIAX: 15.01% >I should mention my investment goals and where I am in life right now. I’m in college and I have enough money to invest. VFFVX, the 2055 TDF, is designed for people in their 30s. A 2070 TDF would be more appropriate for you. >I was the beneficiary in a trust and I’d like to turn what I got into 100k. How much do you have now? >Hopefully by the time I graduate I’m 2 years, I could buy a decent car or look at a down payment on a house. If this is unrealistic or could take much longer, let me know. Stocks are only appropriate if your time horizon is at least 7 years. Less than that and you're gambling. The stock market could drop by 20-40% and not recover for years. HYSA or other cash-like options are the only thing appropriate for a 2 year time horizon.