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@Anonymous wrote:
@SouthJamaica wrote:
@Anonymous wrote:Say I wanted to start with $1000. What should I do with it?
There are so many variables. For each person there is a different answer to that question.
Among the factors you should consider
-whether you can afford to lose it Yes; I'm not looking for anything extremely risky though.
-whether you might need to access it in the near future No, I still have emergency savings.
-whether you're comfortable doing research, and if so how much Tons, I'm really just looking for a nudge in the right direction.
-whether you're comfortable actively monitoring, and if so how much I login to some of my bank accounts every day to watch...
-how old you are < 21
-how healthy you are Average?
-what your goals are Buying a house in ~10 years with a minimal mortgage (I'd rather be able to buy with only a HE loan)
-what your income is I'm a full-time student, so not great
-what assets you have Enough to want to invest the $1000
-how you see the macroeconomic picture and its future I don't think the market maintain the current growth... thus why I'm weary to go straight to such funds
etc
The suggestion of a good no-load, low-fee, mutual fund family is a good suggestion
because within that framework it's easy to switch from certain types of investments
to others
In view of your answers, I think you should research no-load mutual fund families and pick
the fund family that's right for you. Then put the initial money in a money market fund and
keep adding to it. Then when you feel like diversifying, you should move money around
among the funds, You should do lots of research on the various financial markets, and
on economics, and keep up with developments before you move anything from the money market fund into the
riskier funds.
If you don't have a Roth IRA account opened yet, I would use this as an opportunity to get
one opened. A Roth is nearly universally useful and having one open will greatly simplify depositing
additional money in the future as it becomes available. The psychology of making it easy to
"do the right thing" in the future is an important part of developing consistent good habits.
I'd recommend a discount brokerage as the best custodian for a Roth IRA ; Schwab, Fidelity, TdAmeritade
and Vanguard are all good discount brokers I can vouch for. Schwab is my personal choice. A
discount brokerage is a much better place for a retirement account than a credit union or
bank because discount brokerages have the entire universe of investment options available at
the lowest cost.
Once you have a Roth account open, I'd put that initial deposit into a low cost mutual fund; either
a target date fund or a Total stock market index fund. You want to always be aware of the costs and fees
of whatever you choose to invest in.
One of the useful features of a Roth is that you can withdraw the money you have deposited without
penalty if needed. Money earned inside the account generally has a penalty if withdrawn before age 59.5.
I have considered the balance of deposits in my Roth to be part of my emergency fund for over 20 years.
It is a mental accounting type thing that has allowed me to be comfortable running somewhat leaner on
my cash balances than I otherwise would have. I've been lucky and never had to dip into my Roth
balance for emergencies, but it was there if it would have been needed.
@Anonymous wrote:
@Zimmerman wrote:Just an idea but if you are ok with high risk then I would think about Cryptocurrencies (bitcoin, litecoin, ethereum). I wouldn't invest more than you are willing to lose. Everyone has an opinion on these but the fact is that nobody knows what will happen in the longterm.
That isn't investing that is gambling.
Bitcoin took a 30% drop TODAY...
@bada_bing wrote:If you don't have a Roth IRA account opened yet, I would use this as an opportunity to get
one opened. A Roth is nearly universally useful and having one open will greatly simplify depositing
additional money in the future as it becomes available. The psychology of making it easy to
"do the right thing" in the future is an important part of developing consistent good habits.
I'd recommend a discount brokerage as the best custodian for a Roth IRA ; Schwab, Fidelity, TdAmeritade
and Vanguard are all good discount brokers I can vouch for. Schwab is my personal choice. A
discount brokerage is a much better place for a retirement account than a credit union or
bank because discount brokerages have the entire universe of investment options available at
the lowest cost.
Once you have a Roth account open, I'd put that initial deposit into a low cost mutual fund; either
a target date fund or a Total stock market index fund. You want to always be aware of the costs and fees
of whatever you choose to invest in.
One of the useful features of a Roth is that you can withdraw the money you have deposited without
penalty if needed. Money earned inside the account generally has a penalty if withdrawn before age 59.5.
I have considered the balance of deposits in my Roth to be part of my emergency fund for over 20 years.
It is a mental accounting type thing that has allowed me to be comfortable running somewhat leaner on
my cash balances than I otherwise would have. I've been lucky and never had to dip into my Roth
balance for emergencies, but it was there if it would have been needed.
Right now, because my income is so low, I don't see the tax advantages of an IRA. Am I missing something?
I didn't read through all the threads, but this is my investing strategy and is has served me well over the years. I buy stock in companies that I frequent. I use a service that allows me to buy dollar amounts not share amounts. In other words, i invest $50/week and end up with 3.57 or 4.23 shares of said stock. They reinvest dividends for free and the commision is $3.95 per trade.
As to buying where I shop, if you frequent Costco, then buy that stock. Every time you shop there you're paying yourself. Mcdonalds, Starbucks, Wal Mart, target, all similar principles.
I also can't be against the earlier advice of a mutual fund. Put enough there until you have 6 months of living expenses socked away then switch to salting away in an IRA. you're never too young to put money in a tax free place to grow.
@Anonymous wrote:
@bada_bing wrote:If you don't have a Roth IRA account opened yet, I would use this as an opportunity to get
one opened. A Roth is nearly universally useful and having one open will greatly simplify depositing
additional money in the future as it becomes available. The psychology of making it easy to
"do the right thing" in the future is an important part of developing consistent good habits.
I'd recommend a discount brokerage as the best custodian for a Roth IRA ; Schwab, Fidelity, TdAmeritade
and Vanguard are all good discount brokers I can vouch for. Schwab is my personal choice. A
discount brokerage is a much better place for a retirement account than a credit union or
bank because discount brokerages have the entire universe of investment options available at
the lowest cost.
Once you have a Roth account open, I'd put that initial deposit into a low cost mutual fund; either
a target date fund or a Total stock market index fund. You want to always be aware of the costs and fees
of whatever you choose to invest in.
One of the useful features of a Roth is that you can withdraw the money you have deposited without
penalty if needed. Money earned inside the account generally has a penalty if withdrawn before age 59.5.
I have considered the balance of deposits in my Roth to be part of my emergency fund for over 20 years.
It is a mental accounting type thing that has allowed me to be comfortable running somewhat leaner on
my cash balances than I otherwise would have. I've been lucky and never had to dip into my Roth
balance for emergencies, but it was there if it would have been needed.
Right now, because my income is so low, I don't see the tax advantages of an IRA. Am I missing something?
Roth 401k/IRAs are best contributed to when making low income. The idea behind Roth and 401k is you can pay taxes on it now, or you can pay taxes on it when you withdraw it. If you start saving early, the likelihood of you having more income in retirement than you do currently is very, very high.
In such a case, it's very advantaged to put in money while paying 10-15% tax rate on it than it will be to withdraw it later at a 25-28% tax rate.
If you *know* you will withdraw less in retirement than you make now, then a Roth is a bad idea. If you *know* you will withdraw more in retirement than you make now, Roth is an excellent plan. Roth provides the highest advantage to those who make less now than in retirement and put as much as they possibly can in as early as they possibly can.
As an example, if someone can put $5500/year into a Roth while making $40,000/year, they will pay somewhere in the neighborhood of $800 in taxes on that $5500. If its left to grow for 30 years, that $5500 can grow to $50,000 or more. If you make $40,000/year for 5 years and contribute $5500/year, you're now around $250,000 in retirement. $4,000 paid in taxes for $250,000 in withdrawable income? Even capital gains rates don't come close to matching that.
I would have to agree with some on this post. The Roth IRA is the way to go.. However, and I could be wrong or it could change in the future. I believe you can not withdraw funds you invest in it until the five year mark.
You can go several ways with this.
All of these choices carry risk.
Open a Roth IRA with traditional brokerage house. I would look for the low trading fees. Invest in Funds. There are some funds the specialize in dividends. As you mentioned you would interested in.
OR
Pick your own stocks or funds based on your analysis.
OR
Another, I think overlooked strategy is NOT buying options, but Selling options. You would be looking for premium without purchasing stock by selling put options on stocks the pay dividends that you would want to own. So even if the stock dropped below strike price on expiration, you pick up the stock for less than the price you were originally looking at it. Once getting the stock, you can hold it, or write/sell call option to collect premium at what you purchased it for or more than what you purchased it for. There is a platform to do this cheaply call Tastyworks. It requires some research whether your a fundamental researcher or technical researcher or both on your stocks.
Bonds, IMHO may be in a bubble. But the good thing about them is, if a company gets in trouble and has to file CH11. Usually the bond holders get paid first. Almost always the common stock holder is out of luck.
OR
You can go with a diversified approach of 50% stock no loads funds, 25% Gold Funds, 25% bond funds. Reallocate based on your opinion of current market risk.
It all depends on what your risk level is. I use or have used several of these approaches.
At the end of the day, no one knows when a crash will happen. The market could go to DOW 50K, it could do a correction of about 15 to 30% reduction or it could do another black swan and loose 50% value. One thing I think you should know is rising interest rates hold stock down, generally not good for them on the whole. However there will still be winners with in demand products and services, if you can find those diamonds in the ruff.
It just depends on your tolerance for risk. If you can't tolerate the risk then you are looking at conservative investments, federal bonds, savings account earning 1% most of which currently are not keeping up with inflation.
IDK, maybe I am just full of it. Hope something here helps. I applaud you for thinking about this at your age, and hope you apply that action to execute what ever you decide is best.
Here's a summary of what folks are saying up till now.
* There's a lot of consensus about why a Roth is ideal for someone like you. They are right.
It sounds also like you might not fully understand why a Roth is different from a conventional IRA. Google that and read up on it. You are correct that a conventional IRA doesn't help you much, since a conventional IRA would give a tax deduction on your next income tax (i.e. when you fill out your income taxes in Feb of next year). A Roth is different. You don't get any tax break now. But all that money will continue to grow tax-free and you'll never pay taxes on it ever (aside from what you might pay this year).
* Once you have opened the Roth, I encourage you to place it into an easy diversified fund. Vanguard (for example) makes some very low-expense Target funds. Another option is to simply place it in a money market fund within the Roth (which is 100% safe but will make you almost nothing).
* Then spend the next ___ months learning about investing. Getting tips from strangers on the internet is a bad substitute from reading solid inevstor-friendly overviews to the subject that will get you fully grounded. The Bernstein book I mentioned is well reviewed and is targeted directly at a young investor.
* Then when you really understand a lot more about investing, you can begin moving that money to other funds if you like. (Though frankly a Target 2040 fund will be better than what 90% of Americans are doing with their money.)
at 21, 100% in equities in high qualities stocks or stock fund. With 10 year time horizon to buy house, this is what i would do.
The problem is stocks are currently high in relative value terms, so waiting for them to get cheaper might be good idea.
@Anonymous wrote:Here's a summary of what folks are saying up till now.
* There's a lot of consensus about why a Roth is ideal for someone like you. They are right.
It sounds also like you might not fully understand why a Roth is different from a conventional IRA. Google that and read up on it. You are correct that a conventional IRA doesn't help you much, since a conventional IRA would give a tax deduction on your next income tax (i.e. when you fill out your income taxes in Feb of next year). A Roth is different. You don't get any tax break now. But all that money will continue to grow tax-free and you'll never pay taxes on it ever (aside from what you might pay this year).
* Once you have opened the Roth, I encourage you to place it into an easy diversified fund. Vanguard (for example) makes some very low-expense Target funds. Another option is to simply place it in a money market fund within the Roth (which is 100% safe but will make you almost nothing).
* Then spend the next ___ months learning about investing. Getting tips from strangers on the internet is a bad substitute from reading solid inevstor-friendly overviews to the subject that will get you fully grounded. The Bernstein book I mentioned is well reviewed and is targeted directly at a young investor.
* Then when you really understand a lot more about investing, you can begin moving that money to other funds if you like. (Though frankly a Target 2040 fund will be better than what 90% of Americans are doing with their money.)
didn't mean to include creditguys post... it was accidental... lol