Questions about Investing...

The friendliest place on the web for anyone that follows U2.
If you have answers, please help by responding to the unanswered posts.

melon

ONE love, blood, life
Joined
Oct 2, 2000
Messages
11,790
Location
Ásgarðr
Hello all...I know this place has a lot of smart and opinionated people from both sides of the political spectrum. So I figured I would ask some informal advice on the subject of investing...

...mainly on where the hell to start.

I have my company 401K, and I've diversified it, etc. However, I'm also interested in investing beyond retirement needs--i.e., I don't want to be old and half dead before I start enjoying my money.

However, on this question, I've generally found myself a bit intimidated and wandering. Are there places/funds that deal with less affluent investors? I don't have a lot of money upfront, but I want to have an automatic transfer from my bank account every month to keep on adding to it. I don't want to invest conservatively like with bank CDs, etc. I generally want something like my 401K where I can diversify it into multiple funds of various risk over long periods of time (a mutual fund?).

So does anyone have any advice for where I should go?

I worked in a bank for six years, but the one side of banking I never touched was anything to do with investments. Too bad, because I always found it interesting.

Much thanks!

Melon
 
Melon, you should consider a Roth IRA (individual retirement account). With a Roth, you contribute your after-tax dollars, up to $4000.00 per year. All of your gains are tax free, and this is huge if you plan on leaving your money alone until you are old and gray. You would probably want to stick to low cost mutual funds or exchange traded funds. I'm with T. Rowe Price, where you can start an Roth account with $1000.00. I'm pretty sure that you can contribute as little as $50.00 per month on an automatic investment plan. Vanguard also has quality funds, although there are many other great options. What you invest in depends on your age, goals, and what you hold in your 401(k).

Once you get a general plan together, get some advice from someone you trust about where you might put your money specifically. Morningstar.com is also a great source for research. Good Luck!
 
Thanks for the advice. I'm going to do some investigating.

I looked up T. Rowe Price, and they don't have any offices in my area. I'll have to see if any of their competitors are around here. I'm a bit hesitant to open anything online at this point, mainly because I need the in-person advice this early in the game.

Melon
 
To be honest with you, you will not get a great investor or stock broker without at least $100K to invest. They simply don't deal with small amounts of money. If this is what you're interested in, you need sufficient capital to compel them to take your money.
 
melon said:

...mainly on where the hell to start.

Why don't you start with the company that holds your 401k? Since you are already a client, they may be more flexible on minimal regular deposits in a non-retirement account.

Most mutual funds have minimums (i.e. $25/month is probably the bare minimum) so if you want to diversify, look for a balanced fund OR a balanced portfolio fund that draws on underlying funds of varying risk within the same family.

Good luck :)
 
Re: Re: Questions about Investing...

AliEnvy said:
Why don't you start with the company that holds your 401k? Since you are already a client, they may be more flexible on minimal regular deposits in a non-retirement account.

You know, I never thought of that! My 401K is through Ameriprise, and I just did a search on their site for financial advisors. There's quite a few in my area, and I think I'm going to check one of them out...

...but then I see that there's a whole site dedicated to how much they suck as financial advisors...

http://www.ameriprisesuck.com/

LOL. Oh what to do...

Melon
 
Last edited:
Just tread very carefully with anyone claiming to be a "financial advisor," but earns their living off sales commissions. The key words you should be looking for are "no-load" funds (no up front sales commission).

I interviewed at Ameriprise when it was called American Express. I turned down the job because I didn't want a sales job, which is was what it amounted to.
 
Bluer White said:
Just tread very carefully with anyone claiming to be a "financial advisor," but earns their living off sales commissions. The key words you should be looking for are "no-load" funds (no up front sales commission).

I interviewed at Ameriprise when it was called American Express. I turned down the job because I didn't want a sales job, which is was what it amounted to.

Doing some research here, this sounds like sound advise--meaning I should probably avoid places like Ameriprise completely.

I've seen some talk about "fee-only financial planners," such as advocated through this site:

http://www.napfa.org/

The logic sounds correct, so would it be advised to try to find someone like that?

Melon
 
Other firms like Fidelity also provide this service, and they have branches you can visit to discuss this. They take into account what your financial objective and risk tolerance is, and can recommend funds and assets accordingly. Risk/return is a big factor in the recommendations.
 
I agree with the Vanguard suggestion. They are one of the largest and most respected mutual fund companies around. I suggest you visit their web site. Even if you decide not to open any accounts with them, the site has some excellent tutorial content.
 
melon said:

The logic sounds correct, so would it be advised to try to find someone like that?

In my opinion it's only worthwhile to pay for financial advice once you're substantially in the black. But, the fee-based advisors would at least be the most objective in helping you sort through the myriad of fund choices and fund companies. Plus, the fee is likely tax-deductible.

All the big fund companies offer the free advisor service and they all suck. Mainly because they all follow the same cookie-cutter investing formulas and selling schtick for accounts under certain thresholds.

When choosing no-load for long-term investing, watch for high fund management fees - could actually be more expensive in the long run!
 
AliEnvy said:
In my opinion it's only worthwhile to pay for financial advice once you're substantially in the black. But, the fee-based advisors would at least be the most objective in helping you sort through the myriad of fund choices and fund companies. Plus, the fee is likely tax-deductible.

Do you know what the fee normally runs? And if I didn't pay for financial advice in this route, what route would you suggest for the most sound and unbiased advice?

When choosing no-load for long-term investing, watch for high fund management fees - could actually be more expensive in the long run!

Good point. But what's considered "average" in terms of management fees?

Thanks everyone for your opinions and advice so far. I appreciate it.

Melon
 
ntalwar said:
Other firms like Fidelity also provide this service, and they have branches you can visit to discuss this. They take into account what your financial objective and risk tolerance is, and can recommend funds and assets accordingly. Risk/return is a big factor in the recommendations.

redsox04 said:
I agree with the Vanguard suggestion. They are one of the largest and most respected mutual fund companies around. I suggest you visit their web site. Even if you decide not to open any accounts with them, the site has some excellent tutorial content.

Interestingly, when I was researching what "no-load mutual funds" meant, Fidelity and Vanguard were the two names that came up. I used to live in Boston, so I know that the "Fidelity" name carries some weight.

Melon
 
You could day trade like me...hehe....my .92 Cent Gold Stock from three years ago is now a $36.00 Stock.....
 
It may not be sexy, but an index fund is the way to go

Buy an Index Fund

Remember the overview to this step? Here's a reminder: "Buy an index fund."

Stock index funds seek to match the returns of a specified stock benchmark or index. An index fund simply seeks to match "the market" by buying representative amounts of each stock in the index, rather than paying a manager to make bets on individual stocks, sectors, or investment strategies. Index funds do not even attempt to beat the equities market, they simply seek to come as close as possible to equaling it. The key to the unquestioned superiority of index funds is their extremely low expenses - they charge very low fees for providing the market's returns.

Sound simple? Sound like aiming too low? It isn't. Almost all actively managed equity mutual funds over time lose to the market averages. And those funds that do beat the market's return typically do so for only a very short period of time, and then quickly reverse course.

The largest and most well-known index fund is the very first index fund, the Vanguard S&P 500 Index Fund. This fund, started by the Vanguard Group, nearly matches the returns of the Standard & Poor's 500 Index, and over the last ten years it has beaten the performance of over 90% of all mutual funds. Many other mutual fund companies now offer S&P 500 index funds.

It's simple, it's smart and it's everything you want. It's completely diversified and you definitely want to set it up where you automatically put some money in it every month.

This should be the foundation of anyones investing portfolio. I have a few investing books and this is pretty much chapter one of every one of them.
 
Dreadsox said:
You could day trade like me...hehe....my .92 Cent Gold Stock from three years ago is now a $36.00 Stock.....

I've thought of playing that game. But I certainly wouldn't consider this a long-term investment strategy; more like a visit to the casino. In other words, whatever I'd set aside for day trading, I'd be prepared to completely lose.

So...where/how do you do that? :wink:

Melon
 
s. from california told me that he had just lost half a million in a day. at the time of the dotcom crash. so i´ll just say.. take care. i´d prefer real estate.
 
whenhiphopdrovethebigcars said:
s. from california told me that he had just lost half a million in a day. at the time of the dotcom crash. so i´ll just say.. take care. i´d prefer real estate.

Well, that's it. I'd never put down any substantial amount of money, and if it required substantial amounts of money to even get into the game, I'd have to decline even starting.

Real estate doesn't look all that desirable these days. It's quite expensive.

But back to the index funds, I've read about those. That's probably the first step I should take beyond the 401K.

Well, I've been thinking out loud in this thread. Thanks everyone for their contributions so far.

Melon
 
In the long run, real estate is the better investment. But Melon is correct, the prices are too high at the moment.

Have you maxed out your 401K investments? Also, does your employer offer other savings vehicles?

It sounds like you are on the right track in terms of mutual fund research. Also get personal references for investment managers used by others at your company.
 
melon said:
Do you know what the fee normally runs? And if I didn't pay for financial advice in this route, what route would you suggest for the most sound and unbiased advice?

No idea since I've never been in a position to pay lol. I imagine like most professionals (i.e. lawyers or accountants), there would be an hourly fee that could range from $200-350 or maybe they have a set price for a specified financial "package" - setting up a realistic budget and savings plan etc.

Doing your own research is probably the most sound and unbiased advice you're going to get and you're doing great so far!

melon said:

Good point. But what's considered "average" in terms of management fees?

Been a while since I've paid close attention but averages depend on the type of fund (equity vs bond etc)....but generally anywhere from 0.5% - 3.25% of the volume of a fund in a given year comes directly off the bottom line as management fees of any reported gains.
 
Management fees........shoot for less than 1% for an actively-managed domestic stock fund. For an index fund, less than one quarter of one percent. Indexing may not be sexy but is probably the best way to start.
 
melon said:

But back to the index funds, I've read about those. That's probably the first step I should take beyond the 401K.

Normally I'd say that's a good idea but I think the S&P 500 is as overheated as real estate at the moment and headed for a loooong bear cycle.
 
Well, it looks like the main thing I have taken from this is that I should probably do plenty of my own research and become very acquainted with the markets first.

Thankfully, I'm not an idiot when it comes to the current market/political climate, but I'm not as fluent as I'd like to be.

On that note, are there any publications/books that anyone would suggest? "Publications," for me, also includes magazines and newspapers. There's an awful lot out there, particularly in terms of books, and just perusing through Amazon.com, there's also a lot of bad advice out there. Any suggestions would be appreciated.

The good news about all of this is that I feel like I have more of a grip on where I should go from here. Much thanks! :)

Melon
 
melon said:

On that note, are there any publications/books that anyone would suggest? "Publications," for me, also includes magazines and newspapers. Melon

Yeah - like you said there's an overload of information out there. The Wall Street Journal, Investor's Business Daily, Businessweek, Forbes, Fortune, etc. The list goes on and on.

Eventually you might also want to take a look into exchange-traded funds (ETS) such as ishares - www.ishares.com. These are basically funds traded like stocks, and offer a lot of variety - overseas markets as well as domestic, etc.
 
Melon,

You also have to factor in how long you want to keep your money wherever it is you put it.

The market is relatively unstable now (not steadily inclining, and not steadily declining) that said, you may want to look at some alternative options to stocks, bonds (yuck), and mutual funds.

You could look into Certificates of Deposit (CD's.) Most banks offer them and right now you can get very good rates on these.

Basically you buy a CD with a guaranteed return interest rate, let it sit for however long the term is, and when it matures you are paid your money back, plus the guaranteed interest.

What is nice about CD's is you know what you will get at the end of the term versus a stock that you have no idea where it will go.

I am recommending these to whomever I talk to because I think it is a good way to diversify a portfolio.

Why?

If you look at different indicies in the market today you will see varying rates of return. I think in the past couple of months the rates have been roughly 3-6%. The S&P 500 as an example is at 4.99% YTD.

Now these numbers fluctuate and could be almost anywhere at any time. There are so many factors that effect the market (oil, war, etc...) any of these, let alone a combination of them, can bring these returns way down.

But not a CD. A CD is an FDIC insured purchase that no matter what happens in the market, the bank pays you what is guaranteed as an interest rate. What makes these even more attractive is that now you can buy CD's with maturity dates anywhere from 6 months and up.

ING for example (great bank, great products) offers CDs from 6 to 60 months with rates of 4.75% to 5.25%.

Now some may say that it is not the best thing to buy because you can ONLY make what is guaranteed as your rate, but since the market has been so fluid for the past year, it sometimes makes sense to lock in a return. No risk. And the biggest idea here, I guesss, is that the returns these CD's are offering are the same the market can give you on a good day these days, and it is guaranteed with no risk.

It is worth a few calls, and no I do not sell CD's and am not in finance, but I do own some and watch my stocks very carefully. It makes me feel good that I have them there to guarantee me making money if some of the stocks do not.

On a side note, and while I am rambling, I have to recommend ING as a savings account. Not only is it very easy to use, but the rates they offer for savings accounts blow away almost all other traditional banks. Hell the interest rates they offer (currently 4.15%) rivals the market on a good day.

Call your bank and see what kind of interest they are giving you on your checking or savings acocunt. It is probably somewhere between .25 and 1.0% ING is offering 4.15%. That is a big difference.

Check them out.
 
Back
Top Bottom