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How can I start investing with a modest saving's account? - Page 2

post #16 of 58
Quote:
Originally Posted by v0rtex View Post
Read Dave Ramsey, he's great for starting out. Follow up with Richest Man in Babylon and Millionaire Next Door.

Ramsey's advice is not that exciting (pay off all your non-mortgage debt, hold 3-6 months expenses in cash, invest 15% into IRAs/pre-tax) but it is solid financial advice.

This is great advice.

Invest this money in a Roth IRA, and leave it there until you retire. The more money you can sock away before you get to old, the better, because of a little thing called compound interest.

I prefer mutual funds for investing, but it's not the only way to go and as long as you understand what you are investing in and don't overcomplicate it, you should be good.

Lastly, PM me your email address and I'll forward you Dave Ramsey's e-Newsletter from today which had some good tips for investing.
post #17 of 58
Thread Starter 
Quote:
Originally Posted by v0rtex View Post
Read Dave Ramsey, he's great for starting out. Follow up with Richest Man in Babylon and Millionaire Next Door. Ramsey's advice is not that exciting (pay off all your non-mortgage debt, hold 3-6 months expenses in cash, invest 15% into IRAs/pre-tax) but it is solid financial advice.
I looked over the reviews of those three books. They sound fairly similar to Rich Dad, Poor Dad, which I've read already. The basic tenets are: 1) Pay off all debts 2) Live below your means 3) Invest 4) Find a passion and monetize it (sorta) 5) Continually educate yourself 6) Be patient I've got 1) covered, but I have my parents to thank for that since I didn't have to take out loans for college. 2) is something I can vastly improve on. I still have a job on campus and save as much as I can, but I do tend to eat out a lot which can cost $$ for a college kid. 3) is what I want to embark on. 4), can't say I've reached that point yet. 5) is currently ongoing. 6), well, okay haha.
post #18 of 58
Quote:
Originally Posted by GreenFrog View Post

Cool. I will look into that. Did you do the same? I searched through some threads and saw that you invest in mortgage REITs. Did you start doing that once you got a job and started having income? Is it even worth it to look at REITs with my capital right now?

BTW, thanks again everyone for the tips!

I opened my roth IRA following the summer before my last year of college (which had the lovely timing of letting me buy in at the bottom of the crash) with something like $2500-3500. It was sweet because up until then I had basically never owed income tax so my initial deposit and all of its interest will never be taxed.

I hold one mortgage REIT and a REIT fund. I might suggest the fund but the single stock definitely qualifies as somewhere between a toy and a gamble and is *not* close to the bulk of my investments. Mostly look at some broad funds stuff like the S&P500 index funds (VFINX or its premium share classes that might be available in a 401k).

When I started working for real, I signed up for the 401k as soon as I was eligible and set up automatic transfers to my Roth every 2 weeks (when paychecks come). 401k should take up to the employer match at a minimum (6% is matched at 50% for me). From there, if your 401k sucks and has bad fund choices...I wouldn't put anything else in it. If it has some decent options, you can balance between it and IRAs.
post #19 of 58
At the moment, I'm not sure I'd worry about "investing $5-10K." That's a bunch of months' expenses, and having liquid and safe savings is nice if you don't know exactly what your income will be.

Now that you've salted that away, by all means think for longer term with new funds. Roth IRA, 401(k), etc. all have virtues especially if you get employer matches. Depending on where your employer plan is invested, you might have all you need to get a core portfolio together. Vanguard, for example, isn't exciting, but will give you diversification at low cost, as well as the opportunity to move into asset classes that look unusually attractive.

For the late 90s through maybe 2006, my 401(k) was in REITs. Then I swapped it into emerging markets and energy. Which wasn't fun when I neglected to do anything about it in 2008-09, but the plan is now a lot larger than it's supposed to be when you start relatively late. (It helped that I had assets outside the plan, and a steady salary.

That was a rare decade, though. Stocks were unusually high, and there were asset classes that were measurably cheaper and could be bought by people who weren't full-time traders. There are fewer havens to choose from now so I wouldn't do a lot of experimentation if you're not an expert in the business. A very basic policy portfolio like what David Swensen lays out in his book for individuals is probably your best bet until you get some really good specific opportunities.

Oh, and mortgage REITs-- you might have inside knowledge on one that makes it worthwhile, but otherwise it's a bet that things will be kind of normal, that risk models won't break, and that managers will remain very competent.
post #20 of 58
Quote:
Originally Posted by GreenFrog View Post
They sound fairly similar to Rich Dad, Poor Dad, which I've read already.

Now there's a damning indictment.
post #21 of 58
Not to hijack OP's thread, but is there any advice for while in school? I am in a grad program and won't be out until age 25 (I am 21 now). So I feel like I am wasting potential earning time with those 3-4 years devoted to studying. I can't start a 401k so what else can I do? I work part time and live below my means, but feel like I can do more besides save money in the bank.
post #22 of 58
^ While you can't start a 401k, a Roth IRA would apply in your situation. Here is how it's similar and different to a 401k: 401k is money invested pre-tax, there's less tax implication if you withdraw the $$ after age 60 1/2. Roth IRAs (individual retirement account) is money invested post-tax (ie: you've already been taxed on that income), but there's no tax implication if you withdraw it at age 60 1/2. That money grows tax free. You can still invest in mutual funds, and depending on your level of investment savvy you can have a professional help you set it up or you can do it through a number of institutions, including Scottrade, Etrade, Vanguard, Charles Schwab, and tons of others. Research and fine one you like that meets your criteria (minimum initial investment, etc.) At your age, you want to look at a spread similar to this: 25% growth 25% aggressive growth 25% growth and income 25% international funds If you are able to put in money each month like clockwork and keep putting it in each month until you hit retirement, shooting for 15% of your income, there's no reason you can't retire with 5-10 million in retirement alone.
post #23 of 58
Thread Starter 
I just opened a Roth IRA account with Fidelity and contributed $2500 with a scheduled contribution of $100 per month. There goes a nice chunk of my savings! lol
post #24 of 58
You're off to a great start. 25-30 yrs sounds like a long time, but it will go very quickly. And then you'll be patting yourself on the back for starting so early.

My favorite investor is Jim Rogers. He's got some great books out there (Adventure Capitalist and some other newer books). You can catch a lot of his recent TV appearances on youtube.
He's been bullish on all commodities for the last 10yrs and been raking the $$$ in. He was also very bearish on Fannie/Freddie and BB banks way before the financial implosion.

Probably the smartest investor (not good short term trader by his own admission) out there IMO.
post #25 of 58
Quote:
Originally Posted by GreenFrog View Post
I just opened a Roth IRA account with Fidelity and contributed $2500 with a scheduled contribution of $100 per month.

There goes a nice chunk of my savings! lol

Great job! As your income goes up over a lifetime you can easily bump up the contribution amount. And when you get married you can double it.
post #26 of 58
Thread Starter 
Thanks for the input guys! Now I'm off to start packing for SPRING BREAK IN FLORIDAAAAAAAAAAAA!! 80 degree weather all week instead of this shitty 30-40 degree Boston weather (although it has been very nice lately)
post #27 of 58
Quote:
Originally Posted by GreenFrog View Post
I just opened a Roth IRA account with Fidelity and contributed $2500 with a scheduled contribution of $100 per month.

There goes a nice chunk of my savings! lol

Nice work.

The key is that now you have an account. You have committed yourself to making small contributions.

This is good. It means you have no mental barriers to investing--when you start working or get a small windfall, you won't waver back and forth on "should I open it with fidelity or vanguard? Should I do X or Y" you can just click a few buttons to make a deposit or adjust your automatic contributions.

This definitely applies to inq89 too--even though you don't have the income or savings to support significant contributions (the Roth is limited to 5K a year anyways), getting started now means that when you get a job you can just say "ah yes, and I will send this much of my paycheck into my IRA" which is significantly easier than trying to find room in your budget after working for a year (you will figure out ways to spend the money if you just dump it in your checking account).
post #28 of 58
Thread Starter 
I'm looking into mutual funds to invest in and I see one highly lucrative aggressive growth fund. It's called Cambiar Aggressive Value Fund with a 17% YTD return and 74% 1-yr return rate. The minimum to invest is $2500, which is exactly how much I have in my IRA. I know the saying don't put all your eggs in one basket.. but damn. I'm really tempted to go all-in on this. But I'm holding back for now because I haven't done any extensive research. I'm guessing most of you are going to say 'no.. you're a newbie idiot and you don't know what you're doing' but damn.. the returns are pretty damn enticing. It has a 5 star morningstar rating and 1000+ 5 star reviews.
post #29 of 58
i need to find a job
post #30 of 58
Regardless, I wouldn't go all-in on it. Of the $2500, I wouldn't put more than $800 of it in that fund, but that's just me.

Also, on mutual funds, I never think about the 1-yr return rate. You want to be thinking 5-yr, 10-yr, or even 20+-yr return rates.
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