Investments as a young person

LightngSVT said:
I understood about 1/2 of what you guys are talking about. IS it expensive to work with a Financial Planner? That may be my best bet until I get a better grasp on this stuff. Also wondering are you all just investing for retirement or for other things like house, nice cars, etc?
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Investing for everything....house, retirement, emergency, nice cars, kid's college funds (I don't have kids yet). I have to start to look into 529 plans for kid's college funds. From what I've seen so far, it's a good vehicle.



Just like we do on Autopia about products and techniques, you have to read, read and read. Once you get a starting idea of what you want to do, make up a fake portfolio and choose your investments without actually using real cash. I still do this with speculative investments....and naturally, there are those which are "Dang, should've jumped on that one", and of course the "Wooo....good thing I didn't".



I don't use a financial planner, so I can't comment on that. I think I will when my stake gets bigger.
 
Ben Z. said:
Ok, I have quick question. My employer doesn't start matching until I've been there for a year. Sounds like I should I hold off on my 401K until then. So, what to do with the money I was planning on investing (~20,000 this year). I am planning on becoming a first-time homeowner next year, should I just save it all for the down payment and hold off on any other investments? Thanks!
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I think financial advisors say that you should not invest money you will need in the short term (6 months to 1 year). At least not in volitale areas like stocks. If you're looking to buy a home in the next year, I'd keep it in something safe.
 
Nice to see some real-wolrd strategies. Does anyone have a link to a website or websites, that explains in detail how various investing procedures work? For instance, how a Roth IRA works and a comparison between Roth and Traditional IRAs. I could Google it, but just wondering if anyone has any recommendation(s). I'm currently 23 years old and have been seriously considering my options for investing, but I'm just not up to speed on all the options available. I have 401k at work and have been thinking about investing in that. I'm also interested in starting a Roth, but need to do some more research on my part to determine what it the best option.
 
Fool.com

These guyz have been around for a while. I first heard of them in the mid 90s when one of my friends was majoring in Finance, while I was majoring in Business / IS. He took the right path IMO :doh

Anyway, go to that site and on the left hand column, there will be a link for IRAs, in there you'll find some easy to understand articles.
 
Real estate and the stock market are both great investments. I have prospered from both over the last 20 years. For the long term I like the stock market. its been the proven winner over 25-30 year periods compared to real estate. Real estate has been great the last few years but buying now at these elevated prices could pose a risk. Lost money on a property I owned in the 90's when the real estate market was slow. Diversify is the best advice anyone could give to somebody just getting into the market. spread your money around everywhere and basically buy the market. I have my investments (401k's and others) in stocks, bonds, mutual funds, fixed income and more. this will keep you balanced for the times when the markets get hit hard. If you have all investments in one area you could get burned real bad. I have been in the market since 1991 and have not had a down year in 14. If you do a little homework on the market you will find its not that difficult to put your money in the right spot and make profits. I have made a bundle on my house in the last 20 years but when I think of the money that has poured into and out of it the last 20 years like repairs, maintenance, interest, heating costs,and taxes it does not look as good on paper. I like the market for the long haul and thats why I put 30% of my wife's and my income into investments. It has done well for us over the years.



Later,04MysticCobra.



---------------------------------------------------

2004 Mystichrome Cobra coupe

2004 Majestic Blue Maxima SE
 
One of the best places I found to learn about investments was a book called (no kidding here):



Personal Finance for Dummies. By Eric Tyson.



The edition I have is pretty old, but I'm sure there are newer more updated editions. Definately a good place to start.



Beware of financial planners. There are some really good ones out there, but there are alot that are just insurance salesmen, or worse, scammers. The personal finance for dummies book gives you alot of details about what to look for in a financial planner, how to pick a good one, and avoid the bad ones.



Speaking of motley fool, I found the following quote in one of their articles:



"A 25-year-old investing $200 each month for just 10 years will have $402,797 in her retirement kitty by age 65 (assuming an annual 8% return). If a 35-year-old were to invest $200 each month until age 65 -- that's two decades longer than the doe-eyed quarter-lifer in the next cubicle -- she ends up with a little more than $300,000 (minus whatever she spent on Botox for those retirement-savings worry wrinkles)."



Another example of START EARLY!!
 
mdsmithers said:
So far we have in this order Roth IRA/Traditional IRA > 401K(if it's matched and up to the match) > Real Estate > Expensive cars > Fast Women > Fast Cars > Expensive Women, sounds like a plan.



Whatever you do, do it today, the sooner the better and pay yourself first.
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I would still put 401k>IRA simply because you can use pre-tax dollars to pay for the 401k, which in effect reduces your taxable income.
 
"A 25-year-old investing $200 each month for just 10 years will have $402,797 in her retirement kitty by age 65 (assuming an annual 8% return). If a 35-year-old were to invest $200 each month until age 65 -- that's two decades longer than the doe-eyed quarter-lifer in the next cubicle -- she ends up with a little more than $300,000 (minus whatever she spent on Botox for those retirement-savings worry wrinkles)."



Another example of START EARLY!![/QUOTE]



Great point. It shows you how well compounding and dollar cost averaging works over periods of time. Like many of us here investing on any level started later than earlier. the 10 year period from 22 to 32 was very wasteful for me and I did not invest when I should of been. I was in a Union being sold on their retirement pension and that was a big mistake. this leads to another tip. Dont put all your money in the company's pension or 401k that you are working for. Many people have lost entire life savings by doing this and getting burned. the company you work for should offer other investments inside the 401k or penison besides there own. Like Dom said above max out your 401k because it is a win-win situation by using pre-tax dollars to lower you taxable income and send less to Uncle Sam.



Later, 04MysticCobra.

------------------------------------------------------------

2004 Mystichrome Cobra coupe

2004 Majestic Blue Maxima SE
 
There's a book that I can request, "The Only Investment Guide (or Book) You'll Ever Need". Mentions some stuff here and conflicts with others. It really tells you how to be cheap so in the end you'll end up with a ton of money after retirement. Haven't finished the book yet 'cause of the Harry Potter release and now I've started to read Freakonomics then Managers Not MBAs.



I figured, I have one more year of college left so I'll have time to finish it up then.
 
Dom said:
I would still put 401k>IRA simply because you can use pre-tax dollars to pay for the 401k, which in effect reduces your taxable income.
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I agree Dom, I only put it that way because not everyone has a 401K option, but anyone can contribute to a IRA.
 
LightngSVT said:
I understood about 1/2 of what you guys are talking about. IS it expensive to work with a Financial Planner? That may be my best bet until I get a better grasp on this stuff. Also wondering are you all just investing for retirement or for other things like house, nice cars, etc?
Click to expand...





IMO unless you have a sizable estate and assets you really shouldnt even need a financial planner. After all it is your money you should value it enough to learn a basic plan and put it in effect. Some of the easiest ways I mentioned before are target funds or as others have mentioned low ex. ratio index funds of something as simple as the S&P 500 for a start and learn as you go. Another easy fund many people use is the Vangaurd total market index (VTSMX) and the Vanguard total bond market index (???) chose an allocation you are comfortable with bonds to stocks and your rolling. I personaly only carry about 5% between cash and bond funds for my age espcialy in a rising rate environment you can actualy loose money on bond funds.



If you decide to use a planner I would suggest using a fee based planner rather then a commission based planner. Usualy if you use a commission planner youll end up with a portfolio of B class loaded funds and the broker will be relaxing on the beach somewhere.
 
mdsmithers said:
I agree Dom, I only put it that way because not everyone has a 401K option, but anyone can contribute to a IRA.
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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)



Of course it is always advantageous to invest in the 401k up till your max match cause that is an instant ROI, but after the match I think your wiser to take your money and fund a roth. (unless of course you doing some type of tax planning like I mentioned before to lower your AGI)
 
TnM6i said:
Nice to see some real-wolrd strategies. Does anyone have a link to a website or websites, that explains in detail how various investing procedures work? For instance, how a Roth IRA works and a comparison between Roth and Traditional IRAs. I could Google it, but just wondering if anyone has any recommendation(s). I'm currently 23 years old and have been seriously considering my options for investing, but I'm just not up to speed on all the options available. I have 401k at work and have been thinking about investing in that. I'm also interested in starting a Roth, but need to do some more research on my part to determine what it the best option.
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http://personal.fidelity.com/retirement/?bar=c
 
Ben Z. said:
Ok, I have quick question. My employer doesn't start matching until I've been there for a year. Sounds like I should I hold off on my 401K until then. So, what to do with the money I was planning on investing (~20,000 this year). I am planning on becoming a first-time homeowner next year, should I just save it all for the down payment and hold off on any other investments? Thanks!
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If you need the 20k for a down payment I'd hold it in a cash or near cash vehicle. The stock market isnt something that should be invested in for a year in your case with your down payment. I'd look into something like a CD or high yield savings acct for your DP money.



I personaly am storing my house DP money in an ING direct savings account that pays 3.15% with no fees or minimums. Only thing is it's online only account and can take up to 4 days to transfer to your checking. Other then that it's great. If you want I can send you an email that will get you an extra $25 when you open the account. There yield is steadliy rising as the fed funds rate is increased also in many cases there yield is higher then short term CD's.



Also if you have the cash it is never too early to start a roth look at the above fidelity link for info they have some good research on their site I also reccomend them as a broker.
 
SK2003TypeS said:
I think financial advisors say that you should not invest money you will need in the short term (6 months to 1 year). At least not in volitale areas like stocks. If you're looking to buy a home in the next year, I'd keep it in something safe.
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Well, I wasn't really clear. Lets say I can get by with a 10,000 down payment, is it smarter to put the other 10,000 in a roth or something, or just increase my down payment to 20,000. I'm leaning towards the later. Thanks!



Tek- that sounds pretty good, I'd appreciate any info, the bank is giving me like 0.2% apr...
 
Ben Z. said:
Well, I wasn't really clear. Lets say I can get by with a 10,000 down payment, is it smarter to put the other 10,000 in a roth or something, or just increase my down payment to 20,000. I'm leaning towards the later. Thanks!



Tek- that sounds pretty good, I'd appreciate any info, the bank is giving me like 0.2% apr...
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It's all up to you if you like the security of having the money in your home then it's good. Also if this is the place you plan to live the rest of your life or out right own some day. My personal view wich is not nessacarily correct is that I'd rather put as little into a home if I know I'm not going to ever own it. I would depend on it appreciating rather then trying to pay it off. It's a calculated risk, but especialy at this young age I know I wouldnt be in a house long enough to ever own it. Though I also know that I can afford the payments and refi into a longer term loan if the market moves against my appreciation theory.



If I personaly was in your situation I would take 4k and max a roth out for this year and save the other 16k and add too it for your downpayment fund/ emergency fund. (4k is the max amount you can invest in a roth ira this year) Also I'd get that money from earning .2% to the 3.15% so you at least keep pace with inflation on it.
 
Well, I wasn't really clear. Lets say I can get by with a 10,000 down payment, is it smarter to put the other 10,000 in a roth or something, or just increase my down payment to 20,000. I'm leaning towards the later. Thanks!
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In florida where i live a house lot 2 years ago was around 8k. Today they are 65k.



This area is kinda too late for making money on lots, but get on the net, areas around occalla(sp) are taking off next.



But to answer the question about 10 or 20k down. You want to put as much down as it takes to get rid of PMI.



PMI= the devil.
 
Two suggestions



STAY OUT OF DEBT If you don't have the cash don't buy it, save until you do



Invest in a ROTH 401K now. In a short time (less than 10 years of scraping by) your return will be more than what you could contribute.



Stay the course and don't look back
 
Ben Z. said:
Ok, I have quick question. My employer doesn't start matching until I've been there for a year. Sounds like I should I hold off on my 401K until then. So, what to do with the money I was planning on investing (~20,000 this year). I am planning on becoming a first-time homeowner next year, should I just save it all for the down payment and hold off on any other investments? Thanks!
Click to expand...



well don't just stick it under your mattress. If your time horizon is just one year then you want virtually no risk, but want some return. Put it in some interest bering account and just let it go. A 1 yr cd won't get you much, but it's better then seeing 20K stare at you on each bank statement asking you to spend it on a plasma or nice downpayment on a car. Even if you stick it in "solid" stocks or bonds, you never know what happens tomorrow and how prices or rate/yeilds will react.
 
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