Building Wealth......where to start?

[longtime_lurker]

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@icyhot wrote:
Thanks so much for you guys insight. Question, since my loans are still in deferment cuz I'm in school, once I do an IBR, will that consolidate them all into one account? They're all about 20 separate loan accounts from the same issuer

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Slightly off-topic, but I have to ask - how does that happen?! My one education loan from GLSEI/Dept. of Ed. is just a loan and they just increase the loan amount. I don't get separate loans. I even transferred from a community college to MSU, and my servicer stayed the same and there was no split in the loans.

To answer your question, though - no it will not consolidate the loans. 

[icyhot]

Darn it, ok. Well I take out a different loan every semester, sometimes 2. And they all report separately

[ttleigh]

My loans were like yours, all separate. You will need to consolidate first then start your plan. If you start making payments and then consolidate it may wipe away your payment credits. I gather you are doing the public service loan forgiveness program? I think it has something to do with the consolidation being a whole new loan. I don't know if servicers vary on this but for me I had to apply for consolidation and then apply for Ibr

[ttleigh]

If you have a state job will you have a pension plan? I would also look into whether there is any match with a 401k/403/457

[Anonymous]

Since most topics have already been covered in the past replies, the only thing I can tell you is the following:

There is absolutely NO way...and I'll repeat it....NO WAY you should be conservative while investing at your age. You are in your early 20's, be as aggressive as you can. You have at least 42-45 years to compensate for market volatility. If you have no knowledge on investing, pick a "Target Date" of Lifestyle fund, particularly the ones offered by Vanguard. If your employer has a 401(k) with a match, take advantage of it.

[longtime_lurker]

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@Anonymous wrote:

Since most topics have already been covered in the past replies, the only thing I can tell you is the following:

There is absolutely NO way...and I'll repeat it....NO WAY you should be conservative while investing at your age. You are in your early 20's, be as aggressive as you can. You have at least 42-45 years to compensate for market volatility. If you have no knowledge on investing, pick a "Target Date" of Lifestyle fund, particularly the ones offered by Vanguard. If your employer has a 401(k) with a match, take advantage of it.

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While that's (in theory) true, allow me to present two counter arguments to this (I'm 22, FYI)

1) If one is skittish about losing a lot of money in a downturn, they may act irrationally and sell low. This is a double loss, but it does happen because people are hardwired to cut their losses.

2) Some investments will end up being used before 65/68/70/whatever. For example, my HSA is invested 60% stocks/40% bonds. Am I losing out on some market gains with this allocation? Sure. But I also know that health issues could happen at any time, and it would be EVEN WORSE to have to withdraw funds to pay for procedures during a downturn. The same is true for people who use their Roth/traditional IRAs as a vehicle to save for a down payment on a house, pay for education, etc. 

In summation, I think one really needs to evaluate honestly how much restraint they will have when they market drops 45% in one year. If someone shows real hesitation and discomfort with the idea of losing so much money in a downturn, they should not be pressured into 100/0 or 90/10 allocation. The best thing anyone can do is just regularly save for their goals and retirement.

[Anonymous]

1. You are totally right on this . As you mentioned, people are hardwired to minimize losses instead of projecting bigger potential gains. The absolute worst thing you can do is buy and sell irrationally or try and time the market. Of course the risk of setting up a 80-20 or so allocation is much bigger, but at a young age you should definitely see the bigger picture. You have so much time to compensate for volatility, that it's not logical to be ultra conservative. I would say 70-30 is not bad, 80-20 is ideal, 90-10 and 100-0 are definitely not. Again, my point of view and you should always evaluate your own risk tolerance before investing, many tools are available to do so.

2. This is why you should have an emergency fund established before fully commiting to investing. Retirement money should be used for retirement ONLY, that's why you get penalized for early withdrawals. IRA's and other retirement vehicles are not meant to be used as a way to save for a down payment or a health emergency. Although it is true that life can throw some unexpected scenarios at you, I would recommend setting up an emergency fund worth of a few months of expenses first before allocating a big chunk of your paycheck to investing. 

Again, best thing you can do is evaluate your risk tolerance. Try doing one of those questionnaires available in Vanguard, John Hancock, or MassMutual. These evaluations should be done periodically (IMO every 3-5 years), you would be amazed on how your risk tolerance can change as you grow older.

[Anonymous]

Do you know what the subject of the post mentioned was the you said was an "EXCELLENT 13-14 page paper explaining the best way to invest"?

Or do you have a link to it?

Thanks in advance!

[Blodreina]

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@Anonymous wrote:

Do you know what the subject of the post mentioned was the you said was an "EXCELLENT 13-14 page paper explaining the best way to invest"?

Or do you have a link to it?

Thanks in advance!

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It is the 3rd post of this thread.