Beginning to Invest Save; Strategy?
- Thread starter PacSER
- Start date
Congrats on the savings. First thing I would advise is that you do not bother investing unless your credit cards are paid off. If you are carrying any balances, pay those off before you bother looking into an investment. That is a guaranteed 10% return.
If you do have your credit cards paid off, make sure you have $10,000 or so in a savings or money market account. While that does not offer any real return directly, having that kind of money liquid will allow you to replace the washing machine or A/C when it goes out without having to take on new debt. Plus, having 3 or 4 months worth of expenses in savings is a great feeling.
If you already have the $10,000 in savings, and you have a family, buy a good term life insurance policy. That is the best yet least "sexy" thing you can do at this stage in your financial life. If you are unmarried or already have a good life insurance policy, then you are now ready to consider an investment.
A good investment to get started with would be a relatively conservative mutual fund, plenty to pick from. I would probably recommend one of the Amerifunds products. They've had good returns over the past few years, and are reasonably priced.
DEFINITELY GET WITH A CERTIFIED FINANCIAL PLANNER while your are learning the ropes.
By the way, I am not a financial planner or broker, just a guy that went through all of this a couple a years ago myself. Good luck!
If you do have your credit cards paid off, make sure you have $10,000 or so in a savings or money market account. While that does not offer any real return directly, having that kind of money liquid will allow you to replace the washing machine or A/C when it goes out without having to take on new debt. Plus, having 3 or 4 months worth of expenses in savings is a great feeling.
If you already have the $10,000 in savings, and you have a family, buy a good term life insurance policy. That is the best yet least "sexy" thing you can do at this stage in your financial life. If you are unmarried or already have a good life insurance policy, then you are now ready to consider an investment.
A good investment to get started with would be a relatively conservative mutual fund, plenty to pick from. I would probably recommend one of the Amerifunds products. They've had good returns over the past few years, and are reasonably priced.
DEFINITELY GET WITH A CERTIFIED FINANCIAL PLANNER while your are learning the ropes.
By the way, I am not a financial planner or broker, just a guy that went through all of this a couple a years ago myself. Good luck!
PacSER
500+ Posts
Appreciate the very informative response.
I had wondered if it was too early to try investing. Especially, with so little money. Now, I think you set a reachable target to get too before investing. I had planned to just save for awhile but I did not want to miss out on investing, if it was an appropriate time. I did want to make sure I had the 1% deductable for the house insurance. I have looked into life insurance but not seriously. I will pursue that option. Thanks again.
I had wondered if it was too early to try investing. Especially, with so little money. Now, I think you set a reachable target to get too before investing. I had planned to just save for awhile but I did not want to miss out on investing, if it was an appropriate time. I did want to make sure I had the 1% deductable for the house insurance. I have looked into life insurance but not seriously. I will pursue that option. Thanks again.
crayon1973
500+ Posts
try putting tiny little adds in classified adds sections of magazines
-do you own your home? If not, thats where I would start. Buying real estate, especially if you are going to live there, is one of the best things you can do. And rates are very low right now and they look like they'll be going up over the next few months.
-do you own your home? If not, thats where I would start. Buying real estate, especially if you are going to live there, is one of the best things you can do. And rates are very low right now and they look like they'll be going up over the next few months.
although $2000 may not allow you multiple options right now, I would remind you that investment extends beyond cash, stocks, bonds and insurance.
Real estate and private business opportunities should be considered as you diversify (granted, you may be 5, 10, even 20 years away from such investments, especially the more risky type). The one thing that really bothers me about financial planners (most I've met anyway) is that they think cash, stocks and bonds consitute the entire universe of investment options. NOTHING could be further from the truth.
Other than that, the advice from the two posters above is solid advice.
Good Luck!
Real estate and private business opportunities should be considered as you diversify (granted, you may be 5, 10, even 20 years away from such investments, especially the more risky type). The one thing that really bothers me about financial planners (most I've met anyway) is that they think cash, stocks and bonds consitute the entire universe of investment options. NOTHING could be further from the truth.
Other than that, the advice from the two posters above is solid advice.
Good Luck!
crayon1973
500+ Posts
oh yeah, and whatever you do, DO NOT BUY A F-CKING BAR IN NY....
um... sorry... I was venting.
um... sorry... I was venting.
LazyEngineer
500+ Posts
I am 30 and for the past 5 years, my wife and I have been having an investment contest with our Roth-IRA accounts. We each invest the maximum each year (highly recommended). Every year she cranks hers into SPY (a fund that tracks the S&P 500 that can be traded like a stock). I put mine into whatever individual stock or fund I feel is best. So far she is KILLING me.
I have just about decided that dollar cost averaging into SPY is about the best thing you can do. You get a decent dividend and it seems like the perfect balance of risk vs. reward over the long term (30+ years).
I have just about decided that dollar cost averaging into SPY is about the best thing you can do. You get a decent dividend and it seems like the perfect balance of risk vs. reward over the long term (30+ years).
Its pretty hard to beat the S&P 500 if you're investing in your average large cap fund. I try to find a fund that is ranked 4-5 star on morningstar and has a good consistent return over time.
The Vanguard S&P 500 (VFINX) tracks the S&P 500 and is pretty much the same as SPY.
If you do a little research you can usually pick funds that beat the S&P 500 for ex:
Buffalo Small Cap
Dodge & Cox
T Rowe Price Mid Cap Growth
all of these have beaten SPY significantly in the past 5 yrs. If you're young and can handle moderate risk I would use the S&P tracking funds as a third to half of your stock funds and use the rest for moderate to aggresive smallcap/midcap funds.
The Vanguard S&P 500 (VFINX) tracks the S&P 500 and is pretty much the same as SPY.
If you do a little research you can usually pick funds that beat the S&P 500 for ex:
Buffalo Small Cap
Dodge & Cox
T Rowe Price Mid Cap Growth
all of these have beaten SPY significantly in the past 5 yrs. If you're young and can handle moderate risk I would use the S&P tracking funds as a third to half of your stock funds and use the rest for moderate to aggresive smallcap/midcap funds.
A great alternative investment can be a good fixed Universal Life policy. I have several clients who put away money in them to ultimately suppliment their retirement income. The things that you want to look for in a good policy are the minimum interest rate ( I wouldn't go with anything less than 4%), and you'll want to make certain that the policy is set up right in order to maximize cash growth. The good points are that the cash grows tax deferred and you will always gain. The bad is that it's a long term investment. You're looking at a minimum of about 15 years before you can access the full cash value. The cool thing is that you can also access the cash before age 59 1/2 without paying taxes on it --through policy loans. The caviat is that in order for this to be a viable investment you need to do it before you're 50, and you have to be in good health.
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