| What to invest in after maxing out 401k and Roth IRA? |
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Zeppelin688
New Member
Cash: $ 1.30
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Joined: 06 Apr 2005
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| What to invest in after maxing out 401k and Roth IRA? |
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I am a 22 year old who will graduate college and start a job within a few weeks. I will contribute the minimum amount of money in my 401k to get the employer match (they put in 3% without me putting anything in and then they match the next 2% dollar for dollar, so I put in 2%, they put in 5% for a total of 7%, not too bad). I will most likely choose a domestic index fund (like the S&P 500 if my employer offers it), and after that max out a Roth IRA each year ($4000) with probably an S&P Index fund again (I like index funds as you can see). With any extra money left (hopefully between $1000-2000 per year, or maybe more) I would like to diversify a little. I am not talking about bonds or any of that as I am young and my risk tolerance is high. At the same time, I am not looking for an over-aggressive growth fund. I was considering an international fund, as from what I've read they lower the risk while returning comparable returns as an all domestic portfolio. However, there are many reasons why I am hesitant to invest in an international index fund, such as the weak dollar, currency fluctuations, no hard data on international funds actually increasing the return over the long run, and I also haven't seen many international funds that can outdo the S&P 500 index fund's performance over the last 10-20 years. With that said, I've read that European and Asian stocks are good diversification choices because it gets you through US bear markets, but in this day and age of a global economy I am doubtful. I have read differing viewpoints on that topic, but it seems to me that the other major countries stocks (Europe, Japan, China) move almost in tandem with the US's. If the main reason for international investments is to lower risk, then I don't really care, as I probably won't retire for at least 30 years, so right now I can tolerate risk, because over the long term a few bear markets in the S&P won't kill me. Can anyone else give me some compelling reasons to invest internationally? Or give me suggestions for what to do with excess money after maxing out my 401k and Roth IRA? I like mutual funds, preferably index funds due to their low expense ratio, but I am open to other low expense ratio funds as well. And I have checked out morningstar.com and have been using their fund selecting tools, but nothing has grabbed my interest so far.
Capitalism: the unequal distribution of happiness
Communism: the equal distribution of misery
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Wed Apr 06, 2005 4:51 am |
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Zeppelin688
New Member
Cash: $ 1.30
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I live in a very expensive housing market (North Jersey), and so as of now I can not afford my own home (will be renting apartment). I will try and save up in the next few years for a down payment, but in the mean time I would like to save for retirement. What I am really looking for is either a good international mutual fund recommendation, or some other mutual fund, or if anyone has any better ideas of where to put a few grand each year that I won't need for a few years if not decades.
Capitalism: the unequal distribution of happiness
Communism: the equal distribution of misery
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Wed Apr 06, 2005 5:05 am |
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David Briggs
Senior Member
Cash: $ 57.86
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VMT and NQU for monthly income exempt from federal income tax.
CEF and XLE as a hedge against inflation and rising energy prices.
BQY for enterprise capital appreciation and international exposure.
~~David
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Wed Apr 06, 2005 1:02 pm |
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Rolo
Yo' Daddy
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Location: Colorado/Florida
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Why not invest in individual stocks or sector plays with mutual funds?
International: do it. About half of my stuff is international atm. My best performing fund is OSMCX (International Small Cap Value).
"Expect me when you see me."
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Thu Apr 07, 2005 1:25 am |
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Zeppelin688
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Cash: $ 1.30
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Yes, I was thinking about investing in individual stocks, but only after I open my mutual funds. I figure any money I have left over after putting in my monthy mutual fund deposit (~$100-200 per month) perhaps I will buy stocks through sharebuilder or something like that. There was one other really good website that I knew about but I forget the name of it. It was like $4 trades (not immediate trades though). Can anyone think of the name?
Also, if I do decide to invest internationally, I was looking at Dodge & Cox Large Cap Value International. Good solid returns the past decade, but the only thing making me hesitate is the 0.77% expense ratio. I know the average is like 1.5%, but I still like to have it under 0.5%. But besides that it looks like a solid fund. Any other suggestions for international mutual funds?
Capitalism: the unequal distribution of happiness
Communism: the equal distribution of misery
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Fri Apr 08, 2005 3:18 am |
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David Briggs
Senior Member
Cash: $ 57.86
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Joined: 16 Jan 2005
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Were you thinking of Sharebuilder's $4 program?
~~David
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Fri Apr 08, 2005 1:19 pm |
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Zeppelin688
New Member
Cash: $ 1.30
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Joined: 06 Apr 2005
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Yes, I was mistaken, Sharebuilder is $4 per trade, with no minimum, which is why people like it. But there was another site I was thinking of that with a $500 minimum the trades were cheaper. If I am correct, I believe it was like 20 free trades per month as long as you kept a certain minimum balance (around $500-1000 I think). I had this site saved under my favorite places but then I reformatted so I lost it. But I think Sharebuilder will be the best for me to start with, just to dabble a little bit in the stock market.
Capitalism: the unequal distribution of happiness
Communism: the equal distribution of misery
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Fri Apr 08, 2005 1:59 pm |
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Zeppelin688
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Cash: $ 1.30
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Joined: 06 Apr 2005
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I remember the website now, www.freetrade.com. It is a part of Ameritrade, and you get your first 20 trades per month free, and since I don't plan on making many trades a month then this would be good for me. I think the only thing is you have to have a minimum account balance unlike Sharebuilder. unfortunately, freetrade isn't taking on new accounts. so i guess i'll stick with sharebuilder if i do start trading.
Capitalism: the unequal distribution of happiness
Communism: the equal distribution of misery
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Sat Apr 09, 2005 7:21 pm |
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Rolo
Yo' Daddy
Cash: $ 309.70
Posts: 1551
Joined: 13 Mar 2005
Location: Colorado/Florida
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quote:
Originally posted by Zeppelin688
but the only thing making me hesitate is the 0.77% expense ratio. I know the average is like 1.5%, but I still like to have it under 0.5%.
Don't be penny-wise and dollar-dumb.
That is an outstanding expense ratio, especially for a fund that invests internationally.
Also, the only thing that matters is total return. Many funds with higher expense ratios (and even loads) outperform low-cost funds. Total return takes the expenses into account. All that matters is the bottom line.
Personally, I don't do loaded funds and I avoid transaction fees of any kind. I can find top performers for free and I don't pay attention to expense ratios. All of my funds, except one, are in the top 10% of their 3-year category rank; the odd-ball is in the top 20%. They are all in the top 30% of their YTD and/or 1-year category rank.
The aforementioned OSMCX has an expense ratio of 2.19%. It's YTD return is 6.91% and I am up 11% since I bought it in November. I don't think you want to rule out funds like this due to expense ratios. It is money well spent.
"Expect me when you see me."
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Sun Apr 10, 2005 1:18 am |
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khorne55
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I would recommend an after tax annunity. Be careful who you get one from however, fees etc. TIAA-CREF is a good one and it isn't just for teacher's anymore.
http://www.tiaa-cref.org/
Tax deferral is an advantage of an annuity, tax free until you retire and the money can be invested as well. There is also no limit to contributions to an annuity. And you do not have to set up withdrawal by monthly payments when you retire, but it is an option. At retirement you can withdraw all the money If you set up this type of annunity, like at TIAA-CREF. Of course if you withdraw before retirement there is a 10% penalty tax on the GAINS not on the principal.
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Tue Apr 12, 2005 9:34 pm |
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ambelovsky
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I certainly wish my 401k and Roth IRA were maxed out..
http://www.javahive.com
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Wed Apr 13, 2005 5:58 pm |
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Rolo
Yo' Daddy
Cash: $ 309.70
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Joined: 13 Mar 2005
Location: Colorado/Florida
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quote:
Originally posted by khorne55
I would recommend an after tax annunity.
Not much to gain there...those are for guaranteed retirement income after you've built your principal.
"Expect me when you see me."
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Wed Apr 13, 2005 10:09 pm |
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khorne55
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quote:
Originally posted by Rolo
quote:
Originally posted by khorne55
I would recommend an after tax annunity.
Not much to gain there...those are for guaranteed retirement income after you've built your principal.
Tax deferrment is the benefit. Not all annuities are for guaranteed retirement income. With TIAA CREF there are no fees and it is just an account that you can invest in funds or fixed income with monthly contributions or whenever you want. After retirement you can withdraw the money just like you would from a 401k or IRA, no equal monthly installments required.
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Wed Apr 13, 2005 10:27 pm |
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Rolo
Yo' Daddy
Cash: $ 309.70
Posts: 1551
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Location: Colorado/Florida
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Whoa...that's not an annuity the way I understand it. It looks just like a 401(k)...how does the TIAA-CREF work tax-wise/eligibility?
"Expect me when you see me."
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Wed Apr 13, 2005 11:05 pm |
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khorne55
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Cash: $ 1.44
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quote:
Originally posted by Rolo
Whoa...that's not an annuity the way I understand it. It looks just like a 401(k)...how does the TIAA-CREF work tax-wise/eligibility?
Taxes on gains are deferred until withdrawal when you will likely be in a lower income tax bracket unless you have some awesome pension plan. Of course you have compounded tax deferred growth which is nice. TIAA-CREF allows anyone to join except in certain states, TN is one of them. In TN you have to be a teacher or retired teacher to join, there maybe other states as well. You do put after tax money into it so it won't have an immediate impact on your taxes like a 401k which is deducted from your earnings every year. It is more like a Roth IRA. Check the website for more info, I have had an account with them over 5 years now. I opened the account in FL then moved to TN and I am not a teacher so I called them. It isn't a problem, the account remains open and you can continue to deposit money. TIAA-CREF is probably the only annuity I would consider, most are monthly payments after retirement and have huge fees that reek of a scam. The fixed income fund currently draws at least 3.05% guaranteed to March 31, 2006. It is always going up and TIAA-CREF has been around forever. They also have a variety of funds to invest in as well.
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Wed Apr 13, 2005 11:34 pm |
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