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Dokstarr

Dokstarr

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Hey everyone,

I searched the forums but I didn't see any threads like this so I wanted to look for some advice.

I'm 25 and have finished paying off school loans. I have about $15,000 saved up that I was keeping in a savings account but the interest rate is so low at 1%. CDs all have such a low interest rate. I was keeping the money close at hand because I was planning on going to graduate school in the fall, but now I've found a new job that I'm going to be staying at for at least a year or so.

So now I'm wondering how and where to invest the money. Advice from the CAG community is greatly appreciated, I don't like just Googling for investment information because I don't know where it is coming from.

Thanks
 
[quote name='Dokstarr']I don't like just Googling for investment information because I don't know where it is coming from. [/QUOTE]

My neighbor has a subscription to The Wall Street Journal. Natural resources are up and synthetics are down.
 
Job with a 401K with employer match is the best.

If you can't land one of those, then start a Roth IRA and try to max out the contribution each year. I stay away from individual stock investing/day trading. Don't have the time or interest to learn to do that.

I have a good 401K type plan from the university I work at--5% of my paycheck goes to it (I can't move that up or down), along with a 9.x% match from my employer. Also have a Roth IRA that I'm trying to funnel some money to now that I've got my rainy day fund built up. But I'm focusing more on my car loan and student loans before worrying about maxing it out--as well as saving up for a down payment on a house/condo eventually.

Rainy day fund is in an ING Direct savings account.
 
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If your employer is matching on a 401k, make sure you're contributing enough to get the entire match.

After that, I would open up a Roth IRA and max that out. It limits at $5000 this year for you.

After that, I would change my contributions to my 401k to max ($16,500) and live off of the rest.

I would keep some liquid money in an online bank account, just for emergencies.

Unless you're investing large amounts of money in individual stocks, they aren't really worth it. You're going to get eaten up in fees/taxes.

I'm doing the exact same thing as dmaul, except I'm maxing my Roth, my 401k, have 24 months liquid savings, and I'm now focusing on paying off my mortgage early.
 
Matching employer 401k is easiest way to build retirement funds, just make sure it isn't all in company stock.

Roth IRA's are good as well.

I disagree about individual stocks with some of the previous posters. If you have no interest or time to properly research individual plays, then it makes sense to just dump your money in a few different funds. However, if you do have the time to research your own plays then investing in individual stocks can be far more rewarding.

Funds are designed to minimize risk. This works on both the downside as well as the upside. The vast majority of funds are set up to outperform a few key benchmark indexes, like the S&P 500 which has a historical return of around 9% per year. If you are happy with that type of return and are more concerned with minimizing risk then by all means, stick with the funds.

If you are young, can stomach some additional risk, have the time to do research then you can greatly improve your returns by investing in individual stocks.

As far as risk goes, you should be taking the most risk during your younger years (giving you time to recover should things go bad) and then reducing risk in your overall portfolio as you age.

I am not saying that everyone should be a trader or that even a majority of savings should be going into individual stocks but it makes sense from a money management standpoint to allocate funds to the 401k, to the Roth IRA and then to an investment account for individual plays that offer far more upside potential than your typical mutual fund.

The bad thing about IRA's and 401k's is that the funds are not avaliable to use without rather large fees, with a few exceptions, until its time to retire so keep that in mind as you allocate funds.

Money invested in individual stocks is always just a click away. You can get raped on fees through trade charges but there are a variety of discount brokers that offer trades as low as $3 per trade and if you really start trading actively the fees can go much lower. Also, some funds charge huge fees as well so you need to watch out for that as well.

Bottom line, have a little exposure to everything and you will be good to go. If it turns out you really dislike one aspect, you can always change it later. Everyone has different risk tolerances, find your balance and go from there.
 
Agreed. There's definitely bigger potential for gains from day trading in individual stocks etc.

I don't have the time or interest to learn personally (just don't care that much about money), but for those that do it's a viable option as long as they're still maxing out safer retirement options like 401k etc.
 
As a CAG

I would advise you to take investing advice elsewhere.

All u will hear here will be MvsCapcom 3 Special Ed. MAY fetch u 200 in 10 years.

I understand the importance of investing and wish u the best.
 
I wasn't just talking about daytrading. Daytrading is not something I would ever recommend to someone new to investing. Daytrading should be the last type of investing someone tackles. The shorter the timeframe you are trading in, the higher the risk of failure, the more accurate you have to be in terms of your entry and exit. New investors should never look at anything shorter than a daily chart.

Simply buying shares of companies to hold for anywhere from a few days to several months, depending on how the trade performs, is more along the lines of what I was referring to.

You can "trade" the market without being a daytrader.
 
Thanks for the help everyone.

As for the 401k - I will have to check my paper work for the timeframe but I'm not elgible for it yet.

Since I've just recently paid off my school loans it is weird having money actually available to me not really belonging to sallie mae.

I'd also apreciate it if anyone can recommend some good websites
where I can read up on investing, roth ira, funds, etc.
 
[quote name='BillyBob29']
You can "trade" the market without being a daytrader.[/QUOTE]

Thanks for the distinction. I always lump individual stock buying and day trading together, but I guess I shouldn't.

Anyway, agreed that's a profitable option for those with the knowledge and the time to keep up on it.

It's not for me as I don't care about maximizing my money (wouldn't have chose a social science career if I did!) and already have too little free time.

So I took the easiest way possible and choose those re-balancing funds where you pick your retirement date and it starts very aggressive (90% stocks) and goes more conservative as you get closer to the goal data. I have both my 401-K type plan (higher education equivalent--forget the name/number) and my Roth IRA in those type of funds.

They've been doing quite well (made around 17% last year) and I don't have to think about it or waste precious free time on them.

I'm also not that worried about retirement. Being a state employee (university prof) I have a great plan as noted above, and besides by the time I'm retirement age I'll be making a reasonably big salary and just cruising teaching courses I've taught a gazillion times, not spending so much time on research and doing very little work in the summer months (unlike now where I'm slaving away year round grinding toward tenure!)--so I'm in not rush to retire early anyway.
 
[quote name='Dokstarr']Thanks for the help everyone.

As for the 401k - I will have to check my paper work for the timeframe but I'm not elgible for it yet.

Since I've just recently paid off my school loans it is weird having money actually available to me not really belonging to sallie mae.

I'd also apreciate it if anyone can recommend some good websites
where I can read up on investing, roth ira, funds, etc.[/QUOTE]

www.investopedia.com
www.fidelity.com
www.vanguard.com
www.minyanville.com

I personally trade with etrade, fidelity, and vanguard. I like Fidelity the best. They have a LOT of mutual fund options that have very reasonable entry amounts.
 
I know it's a bit of a dirty word here but the finance forums at fatwallet I've found to be pretty helpful - some pretty sharp folks over there.
 
That's BS. Things are bouncing back slowly. Like I said, I made 17% or so last year on mine and that's just a 2040 target date mutual fund and not me being an active investor. Thankfully I didn't have much invested during the crash as I was still in grad school.

The stock market sees a lot of ups and downs, but historically it's averaged 10% or so returns over the long term (30-40 year periods--typical working career lengths).

The key is to be aggressive when young and try to build up principle to maximize compound interest, and then get into safe money market funds, bonds etc. as you get close to retirement and beyond.
 
Very good advice with the 401K and IRA information. The market has actually been coming through if you went hard after the bottom fell out early/mid 08. We are "ahem" due for some correction soon. That and a Apple split when Mr. Jobs departs.
 
[quote name='dmaul1114']That's BS. Things are bouncing back slowly. Like I said, I made 17% or so last year on mine and that's just a 2040 target date mutual fund and not me being an active investor. Thankfully I didn't have much invested during the crash as I was still in grad school.

The stock market sees a lot of ups and downs, but historically it's averaged 10% or so returns over the long term (30-40 year periods--typical working career lengths).

The key is to be aggressive when young and try to build up principle to maximize compound interest, and then get into safe money market funds, bonds etc. as you get close to retirement and beyond.[/QUOTE]

Oh dmaul, we both know the dollar will hardly be worth the paper it's printed on in 20 years.
 
I've never shared your pessimism/cynicism on such things.

In any case, that's moot when it comes to investing as if that happened your cash in the bank would be just as useless as invested money.
 
I am just starting to think about my future at the tender age of 25 and I have a few questions about retirement plans. A little background:

Our non-profit organization just switched over from a 403b retirement plan to a 401k plan. With the 403b, they just put money into a retirement account for us (I think it was 9% of our gross), which was nice. That account is now frozen. With the 401k, they match the first 3% of contributions dollar for dollar, and after that $.50 on the dollar up to 5% max. In other words if I contribute 5%, they will effectively match 4%. They also say they will contribute an additional 3-5% at the end of the year, depending on company performance.

Anyway, rather than choose a multi-asset fund (i.e. Vanguard TR 2050), I decided to create my own portfolio. Here's how I allocated my investments:

Fidelity Spartan 500 Index Advtg (FUSVX): 20%
GE Inst Core Value Equity Inv (GEIVX): 20%
Vanguard Extended Market Idx Signal (VEMSX): 40%
American Funds EuroPacific Gr R6 (RERGX): 20%

As you can see, it's divided into mid-cap, large-cap, and international stocks. How is this portfolio? Am I spread too thin? Should I invest in some bonds? The reason I decided against bonds is because the return on those seem very low (non-existent?) To be quite honest, I have no idea what I'm doing with respect to choosing investments. All I've done is look at past performance via Google Financing (they make cool-looking comparison charts), and they all seem to be on the up-and-up.

More questions: What does the Unit Value represent? What exactly happens to the money that I have contributed into the 401k? What determines how much it goes up or down? I'm very new to all of this, so any help would be appreciated.
 
long term gold is good but at the moment it had a huge run up, so if u were gonna trade yourself wait for a pullback.

Some higher yielding dividend stocks that you have set to reinvest back are a good longterm strat imo. An example would be verizon or abbott labs with a 5.35% and 3.94% respective yields. Just be sure to be diversified...dont want to chase what is hot or have too large of a position in heathcare, energy, etc if they get hit hard, so will your portfolio.

Obviously the market has run up quite a bit in the past 4months so the hardest thing is finding a good entry point. Buying half your position and waiting a few weeks or a month has always worked well for me.
 
It doesn't matter where stocks have come from, it just matters where they are going. Invest in companies with strong balance sheets in industries that are showing strong global growth......global, not just US.

Yes, the market has doubled in the past 2 years, the easy money has certainly been made. CAT isn't likely to go up another 300% over the next 2 years but does it have the potential for another 25% return based on current valuations and expected growth and demand from Brazil, the Middle East and China? Certainly.

There are still a lot of attractive buys out there but at this point we are likely back to more "normal" levels of return for the average investment as opposed to the last 2 years were it was extremely easy to jump on board companies providing 50-100% returns over very short periods of time.
 
First. Make a budget. Put in all your expenses and income into it, and see how much you save every month. If you don't save anything try to cut back.
Second. Make an emergency fund of 3 to 6 months or expenses.
Third. Pay off your debt aggressively
Fourth. Now you can think about investing.

I would be aggressive at your age. Mostly stocks, but I would shy away from individual stocks. If you don't have the time to read annual reports about the company it is best to start with Index funds. They track the big indexes including Dow Jones, Nasdaq, and S & P 500. They have very low fees, and usually bet "day traders" due to this fact. And of course in the last ___ years the only way to make money is invest in the stock market. It has been proven time and time again.

Good Luck.
 
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