Investments as a young person

[medic]

I really don't completly agree. I'd rather invest my after tax dollars and have them grow tax free for life then invest with pretax dollars and pay tax on them when they have grown to a huge amount. (roth investing is an acceptable form of a front end load :chuckle: pay the tax man upfront)

It depends on what you think taxes will be now vs when you retire. If you expect to have a lower tax liability when you retire (e.g. live on less than what you live on now) the 401k is perfect. On the other hand, if you expect to live on the same or more money and be in a higher tax bracket then an IRA makes more sense. This is of course after you received the 401k company match.



However, you should also look at your 401k choices. With the recent increase in stock prices since the crash, a lot of funds have closed and are only open to 401ks. if tese funds are of interest you may want to look at investing beyond the company match.



Also, to add something new to the mix, think about life insurance if you have the cash. your rates will only get higer as time goes on. in my mid twenties, I can get a million dollar whole life policy for 1/10 of what my dad can get. you pay these policies for 10-15 years and then they take care of themselves. I wouldn't think of life insurance as an investment to make money, but its a good safety net and can build some cash value over time. I'd only look at this after I've exhausted my 401k and IRA options.



Finally, in case people don't want to invest right now because they think they need the money for a house or something, you can pull money out of 401ks and iras for 1st time home purchases. jus be careful though since 1) you just lost that groth over time and 2) for 401ks if you lose your job you need to pay all that money back right away.

 

[Prometheus]

I guess it really depends upon what you wish to achieve. Do you want to start an IRA, or just something that you can take out whenever you feel the need and still let grow. Historically, the stock market has grown somewhere between 10-12% on the whole. Yeah, you'll get bumps and dips along the way, but overall thats what it averages. With that in mind, as a first investment, I personally would go along the lines of a market index fund. First one that comes to mind is a spider (http://www.spdrindex.com/) You can get an entire market spider (basically a mutual fund of sorts that has every stock in the S&P 500 in it) or you can get spiders in specific segments of the market (IE energy, tech, health care, etc.) As a launching point, I would probably go with the regular old spider (sign SPDR on the AMEX I believe). It's not perfect, but relatively stable and will *probably* beat other kinds of investments.



Real estate was an incredable investment ten or fifteen years ago, but right now, I'm not so sure. I'm not a market genius, but I've studied my fair share of economics and business stuff (for lack of a better term), and to me it seems the real estate bubble is about to pop within the next year-18 months. Not that it will drop in value, but probably level off for the next 5 or so years. Real estate has historically gone in insane spurts, great growth for a decade, then flatlines for 25-30 years. How much did property values go up from 1950 to 1980, almost nothing more than the rate of inflation. To me, real estate is great, but would consider a market index firstly.



Anyways, thats my advice, take from it what you will.

 

[imported_Teck]

Spdr's symbol is SPY.



ETF"S (electoric traded funds) are great low cost instruments, but many small time investors can get beat up by commision/brokerage fees trying to invest small amounts. Thats why I mentioned before I havent completly changed my portfolio to all ETF's I'm using low cost mutual funds to build up some equity first so I can build up enough money to buy a diversified ETF portfolio.



Think about it if you start with 2k in a roth and have a $20 commision rate and you buy 2k worth of spy your immediatly down 1%. Now think of trying to split that 2k into 4 different ETF"s too diversify and on each position you start in the hole 5%.

 

[imported_Griz]

That's supposed to be expensive cars and fast women.

That's debatable; although I would argue that both are expensive and often fast.

 

[Prometheus]

Spdr's symbol is SPY.



ETF"S (electoric traded funds) are great low cost instruments, but many small time investors can get beat up by commision/brokerage fees trying to invest small amounts. Thats why I mentioned before I havent completly changed my portfolio to all ETF's I'm using low cost mutual funds to build up some equity first so I can build up enough money to buy a diversified ETF portfolio.



Think about it if you start with 2k in a roth and have a $20 commision rate and you buy 2k worth of spy your immediatly down 1%. Now think of trying to split that 2k into 4 different ETF"s too diversify and on each position you start in the hole 5%.

If you don't want to get beat up by commissions, you could just put your monthly contribution in a separate bank account, and put the money in the ETF once a quarter or something. Not the optimal situation, but better than some. Or find a broker with lower fees. :nixweiss

 

[PerfectFinish1]

I was searching for another post and I somehow came across this... does anyone have any other advice to offer? I'm 19 and about to buy my first double house. (My boss is trying to convince me to go with a 4-suiter, but I dont think I could afford it, and don't want it in the ghetto) I know it would be the best move now but I'm still hesitant and want to find just the right property.