Just looking for some investment tips out there.
I’m a self employed carpenter looking to save for retirement.
So far, it seems the way to go is a SEP-IRA with Vanguard investments, at least to get started.
It’s my understanding they have the lowest rates, and the SEP is the way to go for the self employed looking to retirement.
Any small business owners out there with any helpful advice?
Much appreciated.
Send me all your money now and in the future. I will reurn in 100 fold in 40 years.
There are far better areas on the internet for this sort of advice. I will tell you to buy Robert Kyosaki’s book, “Rich Dad, Poor Dad” for wealth-building advice. After all, building wealth is the whole point of investing.
DB
[quote]Avoids Roids wrote:
Send me all your money now and in the future. I will reurn in 100 fold in 40 years.[/quote]
Good advice-just replace Avoids Roids with a small-cap index tracker and you should see that result in 40 years.
[quote]PrincePaul wrote:
Just looking for some investment tips out there.
I’m a self employed carpenter looking to save for retirement.
So far, it seems the way to go is a SEP-IRA with Vanguard investments, at least to get started.
It’s my understanding they have the lowest rates, and the SEP is the way to go for the self employed looking to retirement.
Any small business owners out there with any helpful advice?
Much appreciated.[/quote]
Not self-employed, but understand investing. You are correct on both counts - SEP-IRA and Vanguard would be the way to go if you are self-employed and just starting. Vanguards fees are some of the lower in the industry and they have a long track record. The important thing is to save early and save often. You want to have as many years on your side as possible. Einstein described compound growth as the eighth wonder of the world. I don’t know anything about your aversion to risk, financial situation, time horizon, etc., but this initial approach is sound until you learn more.
[quote]dollarbill44 wrote:
I will tell you to buy Robert Kyosaki’s book, “Rich Dad, Poor Dad” for wealth-building advice. [/quote]
The book is a good read, OK in content. The author is a fraud, though.
I manage assets for a living. I would also agree that a SEP would be your best avenue for accumulating your tax-deferred, non-qualified money. You may also consider a Roth IRA in addition, but hopefully you are making too much to participate in a Roth.
What is your level of involvement in your portfolio? Will you be managing the assets yourself or having Vanguard manage them for you? Vanguard is a solid and affordable mutual fund manager, however most mutual funds cannot consistantly beat their benchmarks (S&P, Russell, Wilshire), especially after fees and taxes. Then again, Vanguard specializes in index funds which addresses this problem.
If you will be managing your portfolio yourself, you may also want to look into ETFs (Exchange Traded Funds), which are vehicles that replicate various indexes. ETFs are sort of a hybrid between mutual funds and stocks, and I feel they embody the best characteristics of each.
They are generally less expensive, more tax efficient, more liquid and can be more “market-efficient” than many retail mutual funds. Vanguard offers several great ETFs, although I prefer Barclay’s iShares (I use both for my clients).
I would also strongly recommend determining your risk-tolerance level, and developing asset-allocation parameters for your portfolio. By asset allocation, I mean determining what proportion of your funds should be in Large Cap US Equities, Midcap, Smallcap, REIT, Large Foreign, Emerging Market, Fixed Income, etc., etc. Asset class is one of the key drivers of return and risk management.
if you don’t want to do any research and your own investing, then consider putting equal amounts of money every month into an index tracking fund such as a SPDR (spider, S&P 500 index fund) DIA (diamond, dow index fund) or QQQ (nasdaq index fund).
why?
here’s the dilly: if you are investing in a mutual fund, you are in effect picking a stock picker (and other investments too, but that’s not important - at least for the purposes of this discussion).
the average return on a mutual fund is the same as the market as a whole minus the 3-4% fees associated with the management of the fund. the reason the return over time is the same (before expenses) is that 90% of the money invested in the market is through funds of some sort, which means they pretty much are the market.
this is not to say that some fund managers will not be able to beat the market long term, just you have no way of analysing all their investments. if you could, you would just pick your own stocks or other investments.
go with an ETF (exchange traded fund - examples above) and save yourself 3-4%, imagine that compounded over a decade or two(at 3%, free 34% for one decade, 80% for two decades; at 4%, 48% and 120%), basically double the money in 20 years.
with the equal monthly purchases, you end up buying some cheaper, and some more expensively as the market goes up and down, but over time, your average purchase cost will be slightly less than whatever the average price was (called dollar cost averaging).
if you want to learn how to invest for yourself, there are a couple books worth reading:
Security Analysis by Graham and Dodd
The Essays of Warren Buffet: Lessons for Corporate America edited by Lawrence Cunningham
the Buffet book is a collection of his writings organized into a coherent philosophy and is quite funny. the Graham text on the other hand is straight up evaluating investments. btw Graham was Buffet’s mentor and prof.
Sounds like you’re off to a good start. Main thing is to save, save, save–doesn’t matter if it’s $5 or $5000 each month–just save consistently. If you want to get into the market Vanguard is a great alternative because fees are low–primarily index investing.
Most actively managed funds don’t beat the index anyways. Depends on your risk tolerance but target retuirement accounts (just choose the year you want to retire) are a great option. They diversify and become gradually more conservative. SEP-IRA is good.
Also look at Roth IRAs–fund this before your personal account as savings are tax-free. Always dollar-cost average–i.e. don’t put in 4k at once put in $333 every month instead. Don’t sweat the market movements just stay consistent (or go against what others are doing) 3 months salary in cash is recommended–maybe 5-6 months if you’re self-employed and biz could dry up.
Lastly, if you have kids or dependents seriously consider at least 3-5X yearly salary in insurance. Be careful of individual stocks and don’t let your investments keep you up at night–might mean your taking on too much risk. Make it EZ. Take a set $ out of your bank account into Vanguard or T Rowe Price Retirement Accounts and reinvest Divs. Throw some $ into ING or online savings also
How old are you?
Can you go past maxing out on your IRA donations yearly? (as in, having an IRA be apart of your retirement portfolio, not your entire retirement portfolio)
Dan John of all people said something pretty intelligent that I’ve been taught by various “financial gurus”, which is to save 10% of each paycheck (assuming you’re not in severe debt and you need the money).
Open up an ING Direct or HSBC Direct savings account, set monthly withdrawls linked to your bank account, keep them relatively close to 10% of what you make (assuming your income fluctuates since you’re self-employed) in a month. When you have what you want to open a brokerage account, you can set it to do the same.
Also seconding disapproval of Robert Kiyosaki. There are free resources that provide better information than he does without trying to sell you on little seminar packages. I’ve met him more than once, he is definitely a piece of shit.
[quote]Dweezil wrote:
There are free resources that provide better information than he does without trying to sell you on little seminar packages.[/quote]
Can you suggest any?
[quote]grew7 wrote:
Can you suggest any?[/quote]
Fool.com (don’t let them sell you on their shit, sign up for a free account to browse the majority of the articles), Investopedia.com (for terms, market simulator, basic articles), marketrade.com is good for a quick look-up of terms, Marketocracy.com is a more advanced simulator, finance.yahoo.com has a ton of basic articles and is what most people use for stock quotes besides their online brokerage account, finance.google.com or quote.com and Marketwatch.com + moneycentral.msn.com are slightly more broad and have some good articles.
There are other resources, but you really don’t need anymore than that.
The best bet for beginning investors who are concerned with understanding the basics and investing for the long-term/retirement as far as books go are The Four Pillars by Bernstein or a Random Walk by Malkiel.
[quote]Dweezil wrote:
How old are you?
Can you go past maxing out on your IRA donations yearly? (as in, having an IRA be apart of your retirement portfolio, not your entire retirement portfolio)
Dan John of all people said something pretty intelligent that I’ve been taught by various “financial gurus”, which is to save 10% of each paycheck (assuming you’re not in severe debt and you need the money).
Open up an ING Direct or HSBC Direct savings account, set monthly withdrawls linked to your bank account, keep them relatively close to 10% of what you make (assuming your income fluctuates since you’re self-employed) in a month. When you have what you want to open a brokerage account, you can set it to do the same.
Also seconding disapproval of Robert Kiyosaki. There are free resources that provide better information than he does without trying to sell you on little seminar packages. I’ve met him more than once, he is definitely a piece of shit.[/quote]
If I remember correctly a Sep-IRA allows for up to 40,000 a year (not sure on the precentage amount)
I think maxing it out would be very tough for a small business owner, and if they did they would have a descent amount of wealth for any late starter in a few short years
Check out www.minyanville.com for improving your overall financial literacy. It’s an unbelievable resource for both traders and investors alike. Your level of understanding will increase dramatically. I can’t recommend this site highly enough, one of my all-time favorites.
[quote]Dweezil wrote:
Also seconding disapproval of Robert Kiyosaki. There are free resources that provide better information than he does without trying to sell you on little seminar packages. I’ve met him more than once, he is definitely a piece of shit.[/quote]
Not that I really give a shit about Kiyosaki. I bought his book used for $3 and I won’t ever pay for a get-rich seminar. It’s an easy read and has sound advice, but it’s not really an investment how-to, more of a mind-set adjuster.
DB
[quote]haney wrote:
If I remember correctly a Sep-IRA allows for up to 40,000 a year (not sure on the precentage amount)
I think maxing it out would be very tough for a small business owner, and if they did they would have a descent amount of wealth for any late starter in a few short years
[/quote]
It’s 42 this year, 44 next year. I was referring to the maximum his income would allow.
Hey all,
just wanted to say thanks for all the great comments.
Some of you asked for a little more information about my financial situation, so I thought I’d throw it out there:
30 y.o. , no debt, no dependents. My only investments so far has been approx. $1500 I have in gold coins, sitting in a safe deposit box. Pretty old school. Also a decent amount of savings.
I’m willing to take fairly high risk early on in the investment process, though honestly I don’t have much interest in doing the investing myself. If I have to, I will, but it’s a job I’d rather pass on to someone else.
j.
[quote]PrincePaul wrote:
30 y.o. , no debt, no dependents. My only investments so far has been approx. $1500 I have in gold coins, sitting in a safe deposit box. Pretty old school. Also a decent amount of savings.[/quote]
Can you invest $4,500 a year in a Roth IRA? Can you invest another 15% of your yearly income in a SEP? If you can’t do both, and you don’t want to study too much of the market, I’d open a Roth and go by the beginning investor chart in The Four Pillars for portfolio allocation. It’s geared to a college student, but the allocation applies to everyone who’s starting to hold stock assets while building a portfolio, and it’s pretty solid even with the book being a few years old.
If you care about something, you handle it yourself or you put it in the hands of the best people you possibly can. Money, I have learned, is something you’re better off getting a rudimentary knowledge in learning how to handle and taking care of it yourself. As they say, no one cares more about your money than you.
When would you like to retire, and what are your wealth benchmarks?
[quote]Dweezil wrote:
PrincePaul wrote:
30 y.o. , no debt, no dependents. My only investments so far has been approx. $1500 I have in gold coins, sitting in a safe deposit box. Pretty old school. Also a decent amount of savings.
Can you invest $4,500 a year in a Roth IRA? Can you invest another 15% of your yearly income in a SEP? If you can’t do both, and you don’t want to study too much of the market, I’d open a Roth and go by the beginning investor chart in The Four Pillars for portfolio allocation. It’s geared to a college student, but the allocation applies to everyone who’s starting to hold stock assets while building a portfolio, and it’s pretty solid even with the book being a few years old.
I’m willing to take fairly high risk early on in the investment process, though honestly I don’t have much interest in doing the investing myself. If I have to, I will, but it’s a job I’d rather pass on to someone else.
If you care about something, you handle it yourself or you put it in the hands of the best people you possibly can. Money, I have learned, is something you’re better off getting a rudimentary knowledge in learning how to handle and taking care of it yourself. As they say, no one cares more about your money than you.
When would you like to retire, and what are your wealth benchmarks?[/quote]
Given my savings record over the past two years, putting away 15% of my income as well as $4500 a year into a Roth, would be entirely manageable.
If I had my way, I’d retire at about 60. Or at least go half time at that point.
I’ll have to think about what my wealth benchmark would be. That’s somewhat hard to quantify seeing as I don’t know what they would necessarily cost. The most important things would be: Security, good health care, own a home, good food, and not having to worry about cost if I wanted to pick up and go to Cabo for a week or two.
I hear you on taking care things yourself. Thanks for all the advice, I’ll check out all the books that have been mentioned in the thread.
much appreciated.
J.
[quote]PrincePaul wrote:
Given my savings record over the past two years, putting away 15% of my income as well as $4500 a year into a Roth, would be entirely manageable.[/quote]
Then you know what you have to do. Google intelligently and get the information you need.
30 years is on the low end of sufficient. You don’t want risk unless it’s money you’re willing to lose. And it’s worth note, everyone under 50 really should have some excess gamble money once they’ve set-up a basic retirement account, a clusterfuck account and they have a well-sized savings/monkey market account, just keep your hand out of the cookie jar for a set period of time if you run out of cookies.
If you were 5 years younger, I’d probably tell you to invest aggressively until you are 30 if you want to retire at 60.
What you would want if you were retiring today + 3% per year until your retirement date. 3% is a rough estimate, I’ve always estimated 3.5% because… Well I don’t know, I always assume I’ll be richer than everyone else when I retire.
Eventually you’re going to want to invest in a second house. I genuinely believe on the coasts that the current downswing will only last for four years to six years before the value of homes start to increase rapidly all over again. If you want to take the next couple of years to do some sporadic research and try and nail something down it would be good. *
Do not underestimate the massive advantage of owning a second house. If there is one piece of advice I have given everyone who has bitched at me to give them financial advice, it is to own the place you live in (unless you’re doing very specific things) and own one other house.
If you pick a property that is an alright investment, it doesn’t even have to be good, 40 years down the road you’ll probably have made as much on the house as you did contributing regularly to your retirement portfolio, and you’ll have made a little extra income from the house during those 40 years. **
[quote]I hear you on taking care things yourself. Thanks for all the advice, I’ll check out all the books that have been mentioned in the thread.
[/quote]
Just say no to Robert Kiyosaki.
** Really though, I’m pretty much always right. I think the last time I was wrong was 7 years ago when I hadn’t slept in something like 2 1/2 days and I was convinced Brian and Greg Gumble were actually named Brian and Bryant Gumble and I argued it so convincingly that I ended up making 5 other people agree with me. I never told them that I was wrong when I realized it a week later. ***
*** Seriously, don’t sue me.