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I would like to start investing in a non-retirement account. I have:

  • A 401k through my employer I'm contributing to with Vanguard
  • A 529 for my two daughters, three and five, I'm contributing to with Vanguard
  • No debt
  • A six month emergency fund
  • A couple thousand "play money" I would like to invest for at least one year

The money is just sitting there and I would like to keep up with inflation at the least. Vanguard gives me the option to add a new brokerage account for "stocks, bonds, ETFs, CDs, and non-Vanguard mutual funds."

Are ETFs a good option? If so, how would taxes work? For example, if I invest $2,000, it returns 10% in one year and I don't withdraw anything, around how much would I owe on the $2,200? If I withdraw the entire $2,200 around how much would I owe?

  • The I in IRA stands for Individual. Your employer may be agreeing to put monthly deposits into your IRA account with Vanguard instead of including these amounts in your take-home pay, but other than this, your employer has no connection with your IRA. It is you, the Individual who has an IRA account with Vanguard. – Dilip Sarwate Oct 27 '14 at 1:35
  • Used the wrong term - updated. – Ryan Oct 27 '14 at 2:13
  • For some answers to the questions in your last paragraph, read this answer posted some time ago. – Dilip Sarwate Oct 27 '14 at 2:19
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You pay taxes on any gains you make after selling, so if you buy and hold you won't pay taxes (and you should hold for more than a year so that it gets taxed at the long-term rate, not the short-term rate).

I like ETFs, there are some good ones Vanguard offers that are fairly broad, or you can use something like www.Betterment.com which invests in a diversified portfolio of ETFs (and includes things like automatic re-balancing and tax-loss harvesting).

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    Are there no dividends anymore? Wouldn't those be taxable distributions? – JB King Oct 28 '14 at 14:49

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