[quote]
davidtower wrote:
In my opinion, if you are young (in your 30’s) you’ve got plenty of time to be very aggressive with your portfolio. My entire 401k is in one aggressive mutual fund. It was up 35% last year alone. I personally think that diversication is overrated and can really hurt the returns of younger investors.
Or, you could stick all your money in the Vangaurd S+P 500 Index fund and never look at it again. You’d probably average 7 to 12 percent a year over a long enough timeframe.
-DT
LIFTICVSMAXIMVS wrote:
The best piece of advice I ever received is to not listen to the glorified salesmen that call themselves
investors/brokers–especially when they quote the returns they recieved in one year. Sounds like a sales pitch when you start quoting random numbers.
The important thing to remember is that the market is a gamble. Just like in all betting type games you have people who bet for the loss and those that bet for the gain. Do not listen to those that tell you they can beat the market. It is completely random and either way its a 50-50 gamble. You either beat it or don’t. They cannot consistantly pick winners becasue the parameters are too many and they change at a moments notice. Your best bet is still Diversification.[/quote]
I second this. And if you’re young and investing long term, allocate assets aggressively - i.e. weight toward stocks. Definitely allocate at least some of your portfolio to foreign stocks to diversify market-specific risk. And if you do invest in bonds, the only thing that matters is lowering your costs.
Vanguard is excellent. ETFs are also good for diversification and low costs, particularly if you buy and hold.
[quote]LIFTICVSMAXIMVS wrote:
pappapump wrote:
im looking to buy mutual funds but have no idea where i need to start anyone out there have any suggestions?
I reccomend the book “The Random Walk Guide to Investing” by Burton G. Malkiel. It is very informative and helps individuals strategize long-term investment based on personal goals and disposition. He pretty much tells it like it is. It is not a get rich quick book if that is what you are after. Its a quick read and easy to follow.
[/quote]
I was amazed that you recommended this book. I finished this book a few days ago previous to this post. It is written basically but provides a very strong importance.
Great great book.
Here are a few ETFs that are good for some asset allocation:
For international value stocks:
For broad-based commodities:
iShares GSCI Commodity-Indexed Trust (I actually don’t know if this is available yet, but it’s definitely been filed - it will be offered by BGI and will track the Goldman Sachs commodities index)
For health care:
If you do want some bonds, here’s a good bond ETF:
iShares Lehman Aggregate
The nice thing about ETFs is that they don’t have the minimum investment requirement associate with mutual funds – funds like Vanguard usually have at least a $2500 or $3000 minimum initial investment. You can use ETFs for the regular indexes too: SPDRs, VIPERS, Diamonds, etc.
[quote]MrChill wrote:
2.3%
Remember this number. Thats the average investor performance` ?
As someone said in the Buying the whole index market, determine if you will be needing this money within 5 years. Don`t expose yourself too much to market cycles if you are not sure your investment horizon is below 5 years.[/quote]
I second that. These people that buy and sell based on employement reports, etc, aren’t doing very well for themselves.
Simply investing in a fund that tracks the S&P500 will, most likely, get you a 7 to 13% return in twenty to thirty years – by just leaving it alone!
Stay away from mutual funds with an expense ratio higher than .99%.
And the poster that said to pay off your debt first is correct. Even if you averaged 9% returns on the S&P 500, consider the interest you’re paying on your debt. Most likely, it’s higher than 9%! If that’s the case, you’ll end up with a net loss.
Read everything at www.fool.com. You do need to register, but membership is free.
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Pay off your credit cards.
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Maximize any 401k contributions, at least to the matching limit of your employer. Even with no match, this investing is done with pre-tax dollars and grows tax free until you take it out.
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IRA is deductible for lower incomes, Roth is Ok for most and has no tax(unless AMT kicks in)when cashed out, still a good delayed tax investment no matter what. Use no-load funds inside these instruments.
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If you are in a non-retirement fund capital gains will kick your ass, so go with index funds, which throw off small capital gains due to low turnover.
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Bonds are for old people and people who know what they are doing.
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Diversification means a big stock fund, an international fund, a smaller cap fund, and maybe a value fund.
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Dollar cost average. Only very few can market time effectively.
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Vanguard, American century, Janus, T. Rowe price, etc. are all good starts in the no load fund arena.
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Start now.
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Derivatives, Options, Shelters, and Commodities are for Doctors, Airline Pilots, and damn fools.
What are your goals for the mutual funds? Short term or long term? You should seek professional advice. Some people threw out some basics about investing on here, but until you tell us what your goals are, no one can really help you.
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find out what you want out of this.
What is your main goal, when do you want it reached. -
find out your risk tolerance. If you can’t commit to a program that requires you to put your fears/excitement a side you can’t handle the market.
3.Educate yourself, no one stock, no one way is the only way to do it.
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find an investor club in your area, you need a mentor that has experience.
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free advice is the most expensive advice. So take everything you are reading on this board with a grain of salt when it comes to investing. Some of the advice on this board is from people who might not be/even working to be where you want your investments so why ask someone who has never done it.
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I would find an advisor personally.
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Get this book
Amazon.com
Someone already posted, but Malkeil’s Random Walk Down Wall Street is a fantastically written book. The basic point of his book, and of most undergraduate economics courses related to the stock market is that no one consistently beats the market anymore after factoring in transactions fees, so the best strategy is a broad based buy and hold strategy (S&P 500 index funds and such).
In any case, read the book. It sucked me in.
[quote]jackreape wrote:
9. Start now.[/quote]
Here`s what I found to be a realistic roadmap for retirement accounts:
http://www.cotar.org/articles/life%20cycle%20of%20rrsp.pdf
Sure it is Canada-oriented, but the logic applies to US retirement plans anyway.
In case the link does not work, the article is called Life Cycle of an RRSP on this webpage: http://www.cotar.org/articles/index.htm
http://www.morningstar.com rates mutual funds and has lots of info. Also I recommend a trip to the library or bookstore to read up on the basics. And definitely a 401K if your work has one. Company matching is the shiznat.
Sometimes you can find good funds that waive the initial minimum investment if you sign up for automatic deposits. At least that was the case when I started out with one.
[quote]jackreape wrote:
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Pay off your credit cards.
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Maximize any 401k contributions, at least to the matching limit of your employer. Even with no match, this investing is done with pre-tax dollars and grows tax free until you take it out.
-
IRA is deductible for lower incomes, Roth is Ok for most and has no tax(unless AMT kicks in)when cashed out, still a good delayed tax investment no matter what. Use no-load funds inside these instruments.
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If you are in a non-retirement fund capital gains will kick your ass, so go with index funds, which throw off small capital gains due to low turnover.
-
Bonds are for old people and people who know what they are doing.
-
Diversification means a big stock fund, an international fund, a smaller cap fund, and maybe a value fund.
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Dollar cost average. Only very few can market time effectively.
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Vanguard, American century, Janus, T. Rowe price, etc. are all good starts in the no load fund arena.
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Start now.
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Derivatives, Options, Shelters, and Commodities are for Doctors, Airline Pilots, and damn fools.[/quote]
As a licensed financial advisor and have been investing in the stock market since I was 15, some of these points as well as replies to this thread are valid. However, I would like to make some powerful distinctions. This is free advice so listen up everyone!!!
When I tell my clients the necessary ingredients to a successful financial plan I use the house analogy, but with T-Nation members, it will be easier to use the fitness and bodybuilding analogy. Draw yourself a big triangle. Now imagine that triangle being separated into three different areas from the bottom to the top. Think of the bottom part, the foundation of the triangle to be “Nutrition.” You ask any guru, any fitness expert, if your goal is to lose fat or gain muscle, the most important part of the plan is what you eat. The middle part of the pyramid is “exercice,” and the upper part where the peak is what I call, “magic potions and powders.”
Now how this pertains to a successful financial plan is, the bottom part, the “nutrition” part is your saving account and insurance-whether its health insurance, life, property, car, etc. The middle part like the “exercise” part is the 401k and IRA’s. The top part where where the peak is, the “magic potions and powders” part, this is individual stocks, real estate, commodities, etc. The really risky stuff.
Now with all this in mind, just like you don’t tell a newbie who is just getting into bodybuilding to start taking steroids and or start consuming tons of protein shakes, creatin and ammino acids without first making sure their nutrition and exercise is in order. I am 100% certain if you truly want a successful financial plan, you don’t get yourself into individual stocks, REIT’s, commodities right away. What you do instead, in the following order:
1.) pay off credit cards every month, or try to keep balance to a bare minimum
2.) have atleast 3 months of your salary in the savings account
3.) carry proper insurance and that includes yes, life and disability insurance
4.) Make sure you take the FULL match of your employer’s 401k plan, if your not, you are walking away from free money
5.) Don’t put in more than the match(and if the company doesn’t match don’t use it then) UNTILL you utilize the full limit to the Roth IRA. This year the max contribution for anyone under 50 is $4000 and over 50 is $5000
And why is #5 so crucial especially for the young people. We are heading into very interesting times, and with the Baby Boomer generation retiring, the gov’t is going to have to fork over more benefits. Basically what will end up happening is the gov’t will shell out more money in social security, medicare, and medicaid then what they will collect in taxes (in todays standards) To make the long story short-TAX RATES ARE GOING TO GO UP!! Whether we like it or not, tax rates are actually on sale right now. Its not worth taking the deduction now, pay the tax now so you don’t have to pay tax later-in other words use the ROTH IRA over unmatched 401k and regular IRA. For those of you who make too much money to use the Roth IRA, then you buy a “Cash-Value” Life Insurance Policy, and over-fund that. This policy works just like the Roth except theres a death benefit to it and there are no limits to how much you can put in.
6.) Once you completed the first 5 steps, and want to sock away more, pay 1 or 2 extra house payments a year. The gov’t is talking to increase revenue for them, they might take away the mortgage interest deduction, if this was to happen, that would take away a big advantage of having a big house loan
7.) Then you can get into the risky stuff
As far as answering the original question, if you got the first 4 steps done, than I would utilize the ROTH IRA. What mutual funds to use? You have heard from a lot of people to use “no-load” funds such as Vanguard. When I hear this, the first thing I think about is “you get what you pay for.” The reason why other mutual funds have higher fees is because they outperform the no-load funds. Yes, grant it not every fund will do that, but if you work with a professional he will find you a fund that yes, will be more expensive than “no-load” however it will make more money for you in the long run. Let’s say your a parachuter, do you go out and shop for the cheapest parachute or will you be willing to pay extra for better quality one.
The final point I have to make is Allocation, allocation, allocation. There are 9 different parts of the market. Diversify your portfolio, what might be hot one year, I can almost guarantee you in three years, it will be the worse, and three to four years it will be up at the top again. A proper diversified portfolio is a must. If your starting out with $50 or a $100/month, its hard to touch all the parts of the market, but once your portfolio gets some size, make sure its diversified.
There you have it, from a guy who does this everyday. I hope it was helpful as well as simple to understand. Feel free to ask any questions.
Take care
[quote]edgecrusher wrote:
Hey guys (and girls),
My Co offers a 401k, but no matching contributions. Should I be maxing out a Roth IRA first and then putting the rest into my 401k, or just investing it elsewhere?
I’m pretty sure I know what Bob Brinker and Dave Ramsey would say, but would like another opinion.
much thanks!
[/quote]
Hey Edgecrusher,
By reading my other post will probably help you understand why, but if your employer doesn’t have a match, yes, utilize the ROTH IRA and and another wonderful tool, cash-value life insurance. Once you utilize both those tools the best you can, than you can go ahead and use your 401k. Our tax rates will more than likely go up, it is better to pay the tax now, than pay the tax later. Hope this was of help.
Peace
[quote]jackreape wrote:
-
Pay off your credit cards.
-
Maximize any 401k contributions, at least to the matching limit of your employer. Even with no match, this investing is done with pre-tax dollars and grows tax free until you take it out.
-
IRA is deductible for lower incomes, Roth is Ok for most and has no tax(unless AMT kicks in)when cashed out, still a good delayed tax investment no matter what. Use no-load funds inside these instruments.
-
If you are in a non-retirement fund capital gains will kick your ass, so go with index funds, which throw off small capital gains due to low turnover.
-
Bonds are for old people and people who know what they are doing.
-
Diversification means a big stock fund, an international fund, a smaller cap fund, and maybe a value fund.
-
Dollar cost average. Only very few can market time effectively.
-
Vanguard, American century, Janus, T. Rowe price, etc. are all good starts in the no load fund arena.
-
Start now.
-
Derivatives, Options, Shelters, and Commodities are for Doctors, Airline Pilots, and damn fools.[/quote]
You don’t need to read anything else on this thread, do exactly what you read above and you will do well.