T Nation

Know How to Invest $$$?

Just wondering if any of you are financial wizards? In the market today how would you diversify your money? How do you go about finding a reputable financial adviser that doesn’t secretly milk you and smile to your face?

[quote]MISCONCEPTION wrote:
Just wondering if any of you are financial wizards? In the market today how would you diversify your money? How do you go about finding a reputable financial adviser that doesn’t secretly milk you and smile to your face? [/quote]

Learn all you can. I am no financial wizard, but just recently ended all my load funds into my roth and changed to no load funds. I was getting bilked 5.76 for each monthly investment. When someone clued me to the fact that I didn’t need to pay that and I called my advisor to change she gave me attitude and tried swaying me not to do it. I did my research and found there’s no reason to pay that.

Long term diversify with stocks in national and international funds.

Lots of unneeded fees they will charge you on your investments if you don’t know better.

D

Plenty of threads on this, if you do a search.

Basic rule, in my view - don’t try and outsmart the market, buy the market: index funds, etc.

And you don’t get rich from investing - you get rich by saving income you would ordinarily spend, and then growing those savings by investing.

Dollar-cost averaging - set aside an amount per month, regardless of how the market is “behaving”.

And don’t spend money on stupid, disposable crap. Understanding you don’t need the latest, greatest gadget or another tattoo or whatever is the first step to smart investing. I wish I had a dollar for every person I know who “needed” the latest Chocolate or Razr or phone that can play short movies and has a laser, or the latest hand held gaming system.

Reward yourself on occasion, save the rest.

[quote]thunderbolt23 wrote:
Plenty of threads on this, if you do a search.

Basic rule, in my view - don’t try and outsmart the market, buy the market: index funds, etc.

And you don’t get rich from investing - you get rich by saving income you would ordinarily spend, and then growing those savings by investing.

Dollar-cost averaging - set aside an amount per month, regardless of how the market is “behaving”.

And don’t spend money on stupid, disposable crap. Understanding you don’t need the latest, greatest gadget or another tattoo or whatever is the first step to smart investing. I wish I had a dollar for every person I know who “needed” the latest Chocolate or Razr or phone that can play short movies and has a laser, or the latest hand held gaming system.

Reward yourself on occasion, save the rest.[/quote]

Absolute advice to live by.

How does it go? “Live like no one else, so you can live like no one else.”

I’d suggest buying Dave Ramsey’s books, maybe start with My Total Money Makeover, really changed my thinking on money in general.

as thunderbolt said, don’t worry about the stock market and single stocks unless you have a lot of money to play with.

mutual funds and the like will be your best bet. Look for one with a strong track record and make saving/investing a priority.

Your investment strategy should largely depend on your age. If you are talking about investing for retirement, I would simply suggest a target retirement fund and dollar cost averaging. The fund manager will take care of all of the balancing and diversifying for you, just make sure to stay with a reputable company. Vanguard is one of the best.

If you are talking about short-term investing, there are a lot of money market accounts out there paying 5%, and that’s pretty tough to beat in the short term.

Just want to add; I’ve seen a lot of people talk proudly about the returns on their investments when those percentages are lower than the interest they’re paying on their outstanding credit cards, mortgage, etc. Look at paying off your loans first.

[quote]jehovasfitness wrote:
mutual funds and the like will be your best bet. Look for one with a strong track record and make saving/investing a priority.[/quote]

I’d advice to compare them to index funds first. The market does better than most mutual funds and the fees are lower.

[quote]will to power wrote:
Just want to add; I’ve seen a lot of people talk proudly about the returns on their investments when those percentages are lower than the interest they’re paying on their outstanding credit cards, mortgage, etc. Look at paying off your loans first.

jehovasfitness wrote:
mutual funds and the like will be your best bet. Look for one with a strong track record and make saving/investing a priority.

I’d advice to compare them to index funds first. The market does better than most mutual funds and the fees are lower.[/quote]

hate to show my ignorance here, but maybe not.

mutual funds depend on the market. it’s just a bunch of stocks lumped together in one portfolio.

While I don’t have enough money to invest right now, when I do, I will put it in the hands of my father.

He’s been doing this work for around 15 years and has only had less than a handful of clients lose money on non-guaranteed investments, and those were the few that went against his advice.

However, I suggest learning about the market, about it’s fluctuations and, in addition to that, learning how to manage your money, as others have said before me.

[quote]jehovasfitness wrote:
will to power wrote:
Just want to add; I’ve seen a lot of people talk proudly about the returns on their investments when those percentages are lower than the interest they’re paying on their outstanding credit cards, mortgage, etc. Look at paying off your loans first.

jehovasfitness wrote:
mutual funds and the like will be your best bet. Look for one with a strong track record and make saving/investing a priority.

I’d advice to compare them to index funds first. The market does better than most mutual funds and the fees are lower.

hate to show my ignorance here, but maybe not.

mutual funds depend on the market. it’s just a bunch of stocks lumped together in one portfolio.

[/quote]

All stocks depend on the market of course, but mutual funds depend on the expertise of the financial managers picking the stocks to a significant degree. Like most portfolios they’ll try to maximize the gains by picking only the stocks they think will be best.

A while back someone noticed that most stock brokers, investors and mutual fund managers do worse than the market [as in the NASDAQ, S and P, and I forget the third one in US or ASX here in Oz]. So in an index find they just buy a representative section of the stock market so that they just do however the market does and the fees are obviously lower because there’s so much less work involved.

zig when others zag. diversification can be a disaster.
Depending on age, I would invest with sharebuilder.com which reinvests dividends for free. Unless you contribute a huge amount every month, even their low $4 commission will chew you apart. If you only have a few bucks, contribute to your sharebuilder account but only invest it quarterly or even less frequent.

I was about to start a financial thread tonight but since there’s already an active one I’ll just post my dilema here.

I have a question/dilema that’s been bugging the hell out of me for the last couple of weeks:

I recently bought a house and my loan will close in about 10-14 more days. I have a fixed rate 6.00% “interest plus” 35 year loan. It’s interest only for the first 5 years and then P+I for the other 30 years. During the first 5 years you can pay any amount you want above the interest only amount, and it goes toward principle.

So my dilema…I feel I have two obvious options and I’m killing myself trying to figure out which one is best:

Option 1: Throw down all my “extra” money each month toward the principle. Some say that’s a lame idea because that’s “dead equity” and it’s just sitting there not building interest. But at a rate of 6%, paying off principle lowers the amount of interest I pay the following month. Even though it may be just a few bucks, it’s still money and essentially “a penny saved is a penny earned.”

Option 2: Throw all my “extra” money into some kind of short term investment such as a CD (or whatever). However, what the hell good does it do if the CD pays only 3.5% on the principle while I am paying out 6% on the mortgage??? The only reason I can think of is that CDs are liquid (after the short-term maturity) while equity in the home is trapped.

So basically, does anyone know of any bank paying decent returns on short term investments such as CDs? I recently read an article saying the CDs are a stupid ass investment because most of the time the rates don’t even keep up with inflation lol.

I’m open to other investments other than CDs, I just don’t know jack shit about stocks, mutual funds, index funds, etc. Hell, I’m having a bitch of a time trying to diversify my 401k because the amount of info is overwhelming. I feel like a fat newb going to the gym for the first time.

Thanks to anyone who may have advice.

Great thread, and great advice. Let me add some different insight:

I have an MBA in Finance, but ultimately all the formulas I could throw at you don’t mean jack if you don’t live the right lifestyle.

I’m 36 and have managed to save $500k in the stock market so far in my collective 401k’s. I did this while keeping my wife home for the last 8 years raising 3 kids, mind you.

How? I’ve saved 20% of every paycheck since I was 23 into my company 401k. I haven’t missed a beat in 13 years.

And before you say “well, I can’t afford that” consider the following:

I live below my means. I drive a used 528i BMW, the wife drives a used Ford Expedition Eddie Bauer. They’re both 10 years old, but they’re both paid off, look good, and run great. Why get a new car?

Our house is nice but won’t be showcased on HGTV anytime soon. But, the mortgate is nice and small so we can afford to go on 4-5 small vacations to the local beach each year. Nothing fancy, just a nice Holiday Inn or something.

We never go on exotic foreign vacations. We do go to Disney once every few years, we’ve been 6x in the last 10 years, but we stay at Cocoa Beach and drive to Disney 2-3x that week. It’s a lot cheaper that way, and more fun to spend time at the beach on alternating days.

We have one credit card, no balance on it.

I, like many people, HATE paying bills. So, all of our bills are paid on the 5th of each month via internet banking. I haven’t written a check in years, or been late with a bill in years.

I’m not preaching, but I cringe every time I meet a 20-something kid at my job and they say “I can’t afford to start my 401k yet.” I’m always like, what, you need more beer money?

Start saving. Now. You’ll thank yourself in your mid-30’s, believe me.

Otherwise, be prepared to be in your mid-40’s and 50’s wondering how you’re going to make it in retirement, pay for college, and take a vacation once in a while.

Believe me, I see it everyday with the older dudes I work with. You don’t want that grief at that point in your life.

Call Fidelity or Vanguard tomorrow. Good luck!

[quote]mazevedo wrote:
I was about to start a financial thread tonight but since there’s already an active one I’ll just post my dilema here.

I have a question/dilema that’s been bugging the hell out of me for the last couple of weeks:

I recently bought a house and my loan will close in about 10-14 more days. I have a fixed rate 6.00% “interest plus” 35 year loan. It’s interest only for the first 5 years and then P+I for the other 30 years. During the first 5 years you can pay any amount you want above the interest only amount, and it goes toward principle.

So my dilema…I feel I have two obvious options and I’m killing myself trying to figure out which one is best:

Option 1: Throw down all my “extra” money each month toward the principle. Some say that’s a lame idea because that’s “dead equity” and it’s just sitting there not building interest. But at a rate of 6%, paying off principle lowers the amount of interest I pay the following month. Even though it may be just a few bucks, it’s still money and essentially “a penny saved is a penny earned.”

Option 2: Throw all my “extra” money into some kind of short term investment such as a CD (or whatever). However, what the hell good does it do if the CD pays only 3.5% on the principle while I am paying out 6% on the mortgage??? The only reason I can think of is that CDs are liquid (after the short-term maturity) while equity in the home is trapped.

So basically, does anyone know of any bank paying decent returns on short term investments such as CDs? I recently read an article saying the CDs are a stupid ass investment because most of the time the rates don’t even keep up with inflation lol.

I’m open to other investments other than CDs, I just don’t know jack shit about stocks, mutual funds, index funds, etc. Hell, I’m having a bitch of a time trying to diversify my 401k because the amount of info is overwhelming. I feel like a fat newb going to the gym for the first time.

Thanks to anyone who may have advice.[/quote]

I’d do this:

  1. Take my extra money and save it for a few months, get at least 3 mortgage payments in savings (more if practicable).

  2. After that, I would take extra cash and pay down the principal to defeat the interest. Interest is just money being sucked out of your wallet. Interest can be deducted, but that isn’t worth keeping it around.

  3. Investing in liquid CD’s isn’t a great idea, because, as you note, the interest you pay is higher than the interest you’d make. And, inflation will eat up some gains on your CD/short term investment.

  4. In theory, you could plow the extra money into investments that tend to get better than 6%, which would be a good idea on paper - but you seem a little risk averse to begin with and you seem worried about tying up cash. Legitimate worries - if I were you, I’d spend my extra money erasing as much debt and interest as possible.

Best of luck.

[quote]ProRaven wrote:

Great thread, and great advice. Let me add some different insight:

I have an MBA in Finance, but ultimately all the formulas I could throw at you don’t mean jack if you don’t live the right lifestyle.

I’m 36 and have managed to save $500k in the stock market so far in my collective 401k’s. I did this while keeping my wife home for the last 8 years raising 3 kids, mind you.

How? I’ve saved 20% of every paycheck since I was 23 into my company 401k. I haven’t missed a beat in 13 years.

And before you say “well, I can’t afford that” consider the following:

I live below my means. I drive a used 528i BMW, the wife drives a used Ford Expedition Eddie Bauer. They’re both 10 years old, but they’re both paid off, look good, and run great. Why get a new car?

Our house is nice but won’t be showcased on HGTV anytime soon. But, the mortgate is nice and small so we can afford to go on 4-5 small vacations to the local beach each year. Nothing fancy, just a nice Holiday Inn or something.

We never go on exotic foreign vacations. We do go to Disney once every few years, we’ve been 6x in the last 10 years, but we stay at Cocoa Beach and drive to Disney 2-3x that week. It’s a lot cheaper that way, and more fun to spend time at the beach on alternating days.

We have one credit card, no balance on it.

I, like many people, HATE paying bills. So, all of our bills are paid on the 5th of each month via internet banking. I haven’t written a check in years, or been late with a bill in years.

I’m not preaching, but I cringe every time I meet a 20-something kid at my job and they say “I can’t afford to start my 401k yet.” I’m always like, what, you need more beer money?

Start saving. Now. You’ll thank yourself in your mid-30’s, believe me.

Otherwise, be prepared to be in your mid-40’s and 50’s wondering how you’re going to make it in retirement, pay for college, and take a vacation once in a while.

Believe me, I see it everyday with the older dudes I work with. You don’t want that grief at that point in your life.

Call Fidelity or Vanguard tomorrow. Good luck![/quote]

Great personal story.

Amazing - hard work, education, living beneath your means, putting off gratification, not wasting money on status goodies to keep up with the cool kids, systematically saving - it works every time.

[quote]thunderbolt23 wrote:
ProRaven wrote:

Great thread, and great advice. Let me add some different insight:

I have an MBA in Finance, but ultimately all the formulas I could throw at you don’t mean jack if you don’t live the right lifestyle.

I’m 36 and have managed to save $500k in the stock market so far in my collective 401k’s. I did this while keeping my wife home for the last 8 years raising 3 kids, mind you.

How? I’ve saved 20% of every paycheck since I was 23 into my company 401k. I haven’t missed a beat in 13 years.

And before you say “well, I can’t afford that” consider the following:

I live below my means. I drive a used 528i BMW, the wife drives a used Ford Expedition Eddie Bauer. They’re both 10 years old, but they’re both paid off, look good, and run great. Why get a new car?

Our house is nice but won’t be showcased on HGTV anytime soon. But, the mortgate is nice and small so we can afford to go on 4-5 small vacations to the local beach each year. Nothing fancy, just a nice Holiday Inn or something.

We never go on exotic foreign vacations. We do go to Disney once every few years, we’ve been 6x in the last 10 years, but we stay at Cocoa Beach and drive to Disney 2-3x that week. It’s a lot cheaper that way, and more fun to spend time at the beach on alternating days.

We have one credit card, no balance on it.

I, like many people, HATE paying bills. So, all of our bills are paid on the 5th of each month via internet banking. I haven’t written a check in years, or been late with a bill in years.

I’m not preaching, but I cringe every time I meet a 20-something kid at my job and they say “I can’t afford to start my 401k yet.” I’m always like, what, you need more beer money?

Start saving. Now. You’ll thank yourself in your mid-30’s, believe me.

Otherwise, be prepared to be in your mid-40’s and 50’s wondering how you’re going to make it in retirement, pay for college, and take a vacation once in a while.

Believe me, I see it everyday with the older dudes I work with. You don’t want that grief at that point in your life.

Call Fidelity or Vanguard tomorrow. Good luck!

Great personal story.

Amazing - hard work, education, living beneath your means, putting off gratification, not wasting money on status goodies to keep up with the cool kids, systematically saving - it works every time.[/quote]

After the hydrogen bomb exploded, Albert Einstein was asked, “What is the most poweful force in the universe?”
His answer?
“Compound interest.”

[quote]ProRaven wrote:
Great thread, and great advice. Let me add some different insight:

I have an MBA in Finance, but ultimately all the formulas I could throw at you don’t mean jack if you don’t live the right lifestyle.

I’m 36 and have managed to save $500k in the stock market so far in my collective 401k’s. I did this while keeping my wife home for the last 8 years raising 3 kids, mind you.

How? I’ve saved 20% of every paycheck since I was 23 into my company 401k. I haven’t missed a beat in 13 years.

And before you say “well, I can’t afford that” consider the following:

I live below my means. I drive a used 528i BMW, the wife drives a used Ford Expedition Eddie Bauer. They’re both 10 years old, but they’re both paid off, look good, and run great. Why get a new car?

Our house is nice but won’t be showcased on HGTV anytime soon. But, the mortgate is nice and small so we can afford to go on 4-5 small vacations to the local beach each year. Nothing fancy, just a nice Holiday Inn or something.

We never go on exotic foreign vacations. We do go to Disney once every few years, we’ve been 6x in the last 10 years, but we stay at Cocoa Beach and drive to Disney 2-3x that week. It’s a lot cheaper that way, and more fun to spend time at the beach on alternating days.

We have one credit card, no balance on it.

I, like many people, HATE paying bills. So, all of our bills are paid on the 5th of each month via internet banking. I haven’t written a check in years, or been late with a bill in years.

I’m not preaching, but I cringe every time I meet a 20-something kid at my job and they say “I can’t afford to start my 401k yet.” I’m always like, what, you need more beer money?

Start saving. Now. You’ll thank yourself in your mid-30’s, believe me.

Otherwise, be prepared to be in your mid-40’s and 50’s wondering how you’re going to make it in retirement, pay for college, and take a vacation once in a while.

Believe me, I see it everyday with the older dudes I work with. You don’t want that grief at that point in your life.

Call Fidelity or Vanguard tomorrow. Good luck![/quote]

Man, you are the shit! I just started my “career” job at 29 years old and I’m putting 15% away…I would put more but I just bought a house and that’s all I can stuff away for now. I may try to raise it later also, but my company also has a kick-ass profit sharing plan which is actually better than a 401k match. So basically I am putting away for two retirements as long as I stay with the company for at least 6 years to get 100% vested for the profit sharing.

Since you have the MBA, what tips have you got on diversifying the 401k? I have T. Rowe Price and 100% control of my assets, I just don’t know squat about what to put them into.

[quote]thunderbolt23 wrote:

I’d do this:

  1. Take my extra money and save it for a few months, get at least 3 mortgage payments in savings (more if practicable).

  2. After that, I would take extra cash and pay down the principal to defeat the interest. Interest is just money being sucked out of your wallet. Interest can be deducted, but that isn’t worth keeping it around.

  3. Investing in liquid CD’s isn’t a great idea, because, as you note, the interest you pay is higher than the interest you’d make. And, inflation will eat up some gains on your CD/short term investment.

  4. In theory, you could plow the extra money into investments that tend to get better than 6%, which would be a good idea on paper - but you seem a little risk averse to begin with and you seem worried about tying up cash. Legitimate worries - if I were you, I’d spend my extra money erasing as much debt and interest as possible.

Best of luck.[/quote]

Thanks for the advice!

By the time I go to make the first mortgage payment, I aim to have between 7k-8k in liquid savings (I do save for retirement, 15% gross into 401k, but that’s entirely seperate). I always plan to have this money there in case “shit happens”. That’s why I feel that short term investments are okay as long as they at least make up for inflation (at the very least). So I like your #1 statement for this.

I also think your #2 statement is a solid choice, and that’s probably what I will do. If I can scrape up an extra hundered or two a month I will put it toward principle to defeat interest.

And yes, I am a bit risk averse. It’s not so much that I can’t tolerate the risks, it’s more that fact that I don’t know shit about investing and it’s scary to think that I’m going to pay out the ass in fees, etc. if I try to invest without being informed about what I’m doing. But I will learn over time.

Thanks again!

Hi, no-ones mentioned the various avenues of real eastate as investment? At the moment with the banking issues you’ve got in the US, I’m suprised no-ones said go and buy a few streets worth of resi housing. Within a few yrs the market will bounce back, and you equity position will be very nice. currently all the people who’ve had to sell still need to have somewhere to live. Perhaps research areas with low rental vaccancies, and high forclosure rates.

Do you have a Line of Credit against your new house? Can you set this up as an offset account?
I have an investment property with a 25yr interest-only loan. There is an offset account which all rent and any extra saving I have goes into. The interest is auto-deducted out of this account. The more I have in the offset acc, the less interest I pay, as that sum offsets the mortgage. It acts as a defacto principle lump sum. Then if I see a nice share, fund, or property I want to invest in, I can use any amount in the offset account as the full purchase price, or as a deposit on the new investment. This way my equity in the house is kept liquid. Aditionally over time, as house prices grow, I can can get the house re-valued, borrow the increased equity and throw that in the offset account, increasing my ability to invest further. I know you can’t claim interest on loans on investment properties, however if you purchase other investments from the offset account, that interest should be deductible (check with your accountant).

I personally think 15% is a lot to throw into an savings plan for some retirement time 20/30/40yrs in the future. Who knows what gov. rule changes will happen in the meantime? If your 401K is similar to our superannuation, the gov may change the retirement age from 65 to 70, or even 80 within our working lifes (I’m 32yrs old, so similar boat). I’d rather be a self-funded retiree in 15-20yrs, than have to hope the gov don’t change the rules way out into the future.
best of luck

I’m a college kid, how can I start saving/investing?!

I’ll be a college kid for a while yet (even if I’m 24 or 27 when I’m done with grad school)…