| Getting Started - Need Advice |
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CrazyCarl
First Time Poster
Cash: $ 0.25
Posts: 1
Joined: 25 Jul 2005
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| Getting Started - Need Advice |
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I just stumbled upon this site today and it seems to be really helpful. I'd like to explain my situation and get advice from you all.
I'm a 21-year old civil engineering major at Clemson University. I'm getting married in less than 2 weeks on August 6. My fiance' is my age and also is receiving her degree in civil engineering. She will graduate in May '06, and I will graduate the following December.
I would like to think that we have been very disciplined with our money for being as young as we are. Our parents gave us good advice and we have been blessed from them all our lives.
As of our wedding day, we will have about $37,000 ranging from checking, US savings bonds, stocks, and CD's. We will have no debt and we do not need to worry about expenses until May '06 when my fianc'e graduates. We are lucky enough to have parents that will cover our expenses until one of us graduates.
My question is: Where should our money go right now? Should we take, say, $28,000 and put that money away into stocks and bonds and have the rest of our money in more liquid accounts?
Right now I'm leaning towards doing just that. I'd like to take $26-28,000 and put 60% of that into stocks and mutual funds and the other 40% into bonds. I don't want to my money to grow quickly necessarily. I'd just like to have steady, good returns over the long term. I'm interested in saving for the long term. I've read that stocks produce, on average, about a 8-9% return, while bonds are closer to 4%. I realize that stocks fluctuate all the time and are riskier, but it's a great investment as long as you stick it out for a long time.
Does this all seem realistic? I was told a 60/40 stock to bonds ratio was good for my wife and I since we are very young and can afford the risks. Also, I wouldn't know what stocks to invest in to begin with. I know we should buy some mutual funds since those are less risky, but what about companies. What kind of research do I need to be doing and how do I find out if the investment is safe for the long haul?
My wife has a job lined up when she graduates in May. We're expecting a starting salary in the $38-42,000 range, and hopefully I can start at that in December or January as well. We know we need to max out our 401(k) accounts and not touch those to avoid the tax penalties. We will also be tithing 10% of our salaries to our church. We probably will not want to buy a house anytime soon.
I've tried to educate myself the past few months with finances via the internet. There is a lot of information out there but I really need advice from others regarding my personal situation. If anyone can help me out then it would be greatly appreciated.
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Mon Jul 25, 2005 5:57 pm |
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PFFrank
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Cash: $ 3.00
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Joined: 22 Jul 2005
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The big question is are you sure you won't need that money in the next 3-5 years? Are you planning to buy a house after you're married? Would this money be for the downpayment? Do you have a 6-month emergency fund yet?
My suggestion would be to figure out the above questions first. IF you come to the conclusion that you still have $28K that you'd like to invest for the LONG TERM (10+ years), I would recommend investing in almost all equities, more specifically good mutual/index funds. Being so young, there really is no need (in my opinion) to have the 60/40 split you read about. I would just be sure the funds that you purchase are diverse (large, mid, small cap, international, etc).
Hope this helps.
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Mon Jul 25, 2005 7:50 pm |
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sayyes
Preferred Member
Cash: $ 11.60
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Joined: 02 Jul 2005
Location: Newport, RI
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Your assessment of 8% returns with stocks and 4% with bonds is realistic.
Here is my advice:
1. Determine how much of your savings you are not going to need in the next 5-10 years.
2. Invest that money in something that you feel comfortable with. Being that you are so young, I would suggest going 100% with stocks or pretty close to it. I like ETFs, which are like mutual funds except they trade on the stock market. Here are some ETFs that I like. You could look into them and decide which one(s) you feel the most comfortable with:
DVY (invests in dividend paying stocks, and you will get a check once a year from them and only have to pay 15% taxes)
IVV (invests in the S&P 500 and has lower fees than SPY)
SHY (invests in short-term bonds)
3. The rest of the money should reside in a high paying money market or savings account. Take a look at the link at the bottom of my post to find an online bank that is paying a very high interest rate on their money market and savings accounts. They are FDIC insured so they are as safe as any bank in your hometown.
Many people want the silver bullet answer to investing and money management. The truth is, it's different for everybody. You need to find the right mix of risk and safety so that you'll see the returns you want AND be able to sleep at night. If you feel that 60/40 is the way to go, then it probably is.
The best advice I can give you is to do your homework and invest only in things you understand.
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Mon Jul 25, 2005 8:38 pm |
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MattL
Senior Member
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Joined: 25 Jun 2005
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PFFrank is right. Before you can decide where to invest the money you need to figure out WHEN you will need it. The longer the time until you need the money, the more aggressive you can be. I would split the money into amounts according to when you need it, then choose the appropriate invest based on that.
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Tue Jul 26, 2005 1:31 pm |
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