edaw31
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Location: Jacksonville, FL
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| Newbie needs direction |
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I am a real estate appraiser and formed an S Corp in Feb of 2007. After getting settled in and doing pretty well (especially for this market) I am looking to start planning for retirement and start investing in general. I would like to know what you all suggest as a starting point. I would like to spread my additional funds over a money market account, some kind of retirement fund (401k, IRA etc) and then invest in some mutual funds etc with a brokerage account. The thing I do not know is what percentages to put in each. Say I have 2k a month to put in each.
I am completely green with investing so any help would be great. I am 28 BTW and live in Florida if it matters.
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Wed Oct 24, 2007 8:44 pm |
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Apollo
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| Re: Newbie needs direction |
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If you have 2k a month I would put 1k into a Money Market Account to get your emergency fund in place which should consist of at least six months if living expenses (unless you already have one).
Put the rest into a (ROTH) IRA for retirement purposes.
Personally I would put all of it into global equity markets but that's because I know there is no other form of investment that can give me higher returns.Most people will say it is too risky but I have to disagree with that. I won't recommend that for you since you're not a professional investor.
Its no secret that I dislike mutual funds which is one reason why I haven't mentioned them here.
To be honest out of all the options that you listed I only use MMAs from time to time.
There is no right or wrong strategy when it comes to allocation of funds or investment strategy, just a good and a bad one.
If you're open to a more 'aggressive' strategy as well as to a conservative one your allocation will change again.
Make sure you have an emergency fund in place and after that it comes down to personal preference.
Most people included so called 'financial advisors' will tell you to play it safe, stick with mutual funds, etc.
Personally, I play it smart rather then safe.
It is all a personal choice.
It is not smart to play it safe but it is safe to play it smart.
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Wed Oct 24, 2007 9:33 pm |
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edaw31
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Apollo, lets say I already have the emergency fund set up. Then how should I allocate? I would consider myself pretty aggressive. Thats why I use the MMA to have a basis of something safe and liquid.
I hate the feeling of putting a ton of money into something I can't touch till I am 59.5. I am hoping to do well enough to retire before then. Although I am learning the tax benefits of this.
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Wed Oct 24, 2007 9:46 pm |
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Apollo
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If you already have your emergency fund in place and you consider yourself 'aggressive' and are open to investment strategies outside of the 'mutual-fund approach' then I would put 1k into you MMA until you have 5k and then start to invest in global equity markets.
You have two options:
1. Do it all alone - Be prepared to loose when you start but the expereince you will gain is priceless. You're young so time is on your side. If you start out alone never get emotionally attached to your investments and always have an exit strategy in place before you enter any trade. Be disciplined and stick to your stratgey. You'll get knocked down in the beginning but you have to get back up, if you don't you may as well go ahead with a mutual-fund, follow the crowd and be left out of many great opportunities.
2. Sign-up with a company that helps you with your investments - You will have to pay a fee for that and be carefull as there are many companies out there that are not worth the money. On the other side here are also good companies out there. Usually you have to pay for good advice as many companies offer specific advice only to clients.
Its really your choice and depends on personal preference.
I want to leave you with three things to keep in mind:
1. Don't listen to brokers, they will push their product wich in many cases will benefit them more then they will benefit you.
2. Analysts are the worst stock pickers - don't listen to their advice.
3. In general, mutual fund managers are the worst professional investors.
Remember:
There is no right or wrong investment strategy just a good and a bad one.
It's up to your definition of what a good strategy is comprised of. Don't get scared by the crowd which will yell 'something' is too risky as risk is associated with lack of knowledge and understanding.
Hope this helps. If you need specific info feel free to PM me.
It is not smart to play it safe but it is safe to play it smart.
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Wed Oct 24, 2007 10:24 pm |
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coaster
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edaw31, one thing to keep in mind when asking for advice on internet message boards is that in order to provide you with personalized investment advice, one needs to be appropriately licensed and registered. We can only provide you with general advice or with our opinions on what we'd do if we were in your situation.
Seeking advice is commendable, but perhaps what you need to do now if want specifics as to what you should do is to seek out a fee-for-service financial planner who will do a detailed survey of your financial situation and goals and provide you with those specifics you're looking for. I recommend a fee planner because if you go to one of those "free financial analysis" guys they'll only try to sell you commissioned financial products.
Your other route is to learn to do it yourself, which is very rewarding, but takes time, effort, motivation, and interest which many people don't have. Maybe after meeting with a financial planner who can get you started you'll want to do that. Frankly, with your current background, you've probably already got a head start. You just don't know it yet. 
Best wishes and good luck!! 
~Tim~
Eye Candy : Why Whimsy
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Wed Oct 24, 2007 11:48 pm |
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pf101
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What coaster said is absolutely correct. but I'll throw my $.02 in anyway.
I understand your desire to not lock up your money until your 59.5, however to get the best returns, long-term investments are usually the best option. But, before you do anything, you need to figure out what your short, mid and long-term goals are. You need to get a general idea of how much money you're going to need when so you know how to allocate your investments appropriately. The further out the need date the more aggressive you can be.
You should consider opening an IRA (preferably a Roth and possibly a SEP as well) and putting as much in there as you can for your retirement, particularly if you have the money now. As you get older, your expenses will likely increase so you may have less to invest for retirement. Better to get it in and working for you now so if you have to cut back later (if you have kids or for another reason) you can do it without putting your retirement at risk.
If you have additional funds to invest, or for shorter term goals, then I'd go with a taxable account.
As far as what to invest in, it's not really possible to give you an asset allocation without much more info. But, as a general recommendation, I'd look into target retirement funds. These are great for people who are learning but don't know enough to manually allocate their money or for people who don't want to learn how to manually allocate their money. Whichever camp you fall into, they can work for both temporary investments (until you educate yourself) or permanent.
I'd also recommend reading The Automatic Millionaire.
As far as retiring early goes, you're going to need money for the rest of your life so if you plan on retiring early you're going to have to do much savings outside of retirement accounts so you shouldn't need to touch that money before 59.5, you can just use your taxable accounts first. There are also ways to get at that money earlier. With a Roth, you can access contributions at any time and with other accounts you could potentially set up a substantially equal periodic payment program to get at the money without penalty. But really, if you don't have enough saved in taxable accounts to cover your retirement before you get to 59.5 then odds are really good you don't have enough saved to afford to retire early.
Good luck.
Personal Finance 101
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Thu Oct 25, 2007 5:02 am |
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Apollo
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Personally I think financial planners are a waste of money as I think their advice and recommendations are worthless.
I think you're better off with some research and come up with your own financial plan.
I do have to admit that I am amused by the advice roughly 90% of the so called 'financial-planners' advice.
There may be some good ones out there but I think they cater more to the high net-worth individuals.
The once that the middle-class have access too (at least in most cases) are just that at best...middle-class.
Once again, that is just my opinion. You're better off not waisting time and money on a fiancial planner. Their advice is common sense and the majority really underperform just about everything.
It is not smart to play it safe but it is safe to play it smart.
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Thu Oct 25, 2007 9:05 pm |
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coaster
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Except it's SOOOOOO hard for the novice investor to follow common sense. He tends to follow his emotions. The advice of even a mediocre financial adviser is often going to be better than what he does on his own.
~Tim~
Eye Candy : Why Whimsy
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Thu Oct 25, 2007 9:11 pm |
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pf101
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I agree with Apollo. Better to spend a few hundred on a good library of finance books to read/reference than a few hundred on a financial planner. It's the teach a man to fish theory. If you learn to manage your money then you're in control and always will be. If you rely on someone else to manage it for you then they're in control and always will be.
But Coaster is also right that too many newbies get emotional about their money. It's why I recommend to people that they look at their account no more often than every 6 months.
Personal Finance 101
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Thu Oct 25, 2007 10:10 pm |
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edaw31
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I think I should at least start some kind of an IRA. As a self employed individual am I better off with a SEP IRA or a Roth?
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Thu Oct 25, 2007 11:31 pm |
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coaster
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I'd say a SEP because you can put more into it, but I'm not familiar with all the trade-offs. Mandy, you got a take on that?
~Tim~
Eye Candy : Why Whimsy
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Fri Oct 26, 2007 12:08 am |
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pf101
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If you qualify for a Roth, I'd do that first and then go for the SEP. Particularly since you're doing well and will probably only do better meaning eventually you'll probably be disqualified from the Roth. It's the same theory as if you were contributing to an employer 401k...
1 - put in enough to max out employer match
2 - max roth
3 - max 401k
4 - contribute to taxable
That's the savings rule of thumb and since #1 doesn't apply to you, you can go right on to #2.
It's good to diversify your investments no only with type of investment but also with type of taxation. It gives you more options in the future when it's time to start drawing down your money.
Personal Finance 101
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Fri Oct 26, 2007 5:05 am |
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Apollo
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It may be hard for a novice investor not to follow emotions but they should learn one day and the sooner the better.
If you always run to so called 'financial planners' and follow their poor recommendations you will always face the same problems... not to know what to do next and you will always depend on someone else to make a smart financial decision.
The majority of financial planners will give their clients very poor recommendations and most of the time try to push products which will benefit them more then their clients...just like brokers.
Personally I think financial planners belong to the 'investment-tools' any investor should avoid.
It is not smart to play it safe but it is safe to play it smart.
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Fri Oct 26, 2007 2:45 pm |
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pf101
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Cash: $ 62.25
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Location: Portland, OR
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Apollo,
Your constant bashing is really getting old. I'm also not a fan of paid investment advice - which is why I won't provide it - I think there is automatically a conflict of interest (including the type of paid advice that YOU offer). However, not every financial planner is bad. There are plenty of good ones out there, they're just harder to find, and they promote investing in a way you don't like (mutual funds).
Just because planners recommend mutual funds (which statistically are best for the vast majority of investors) doesn't mean they're bad, it means they recommend a different way of investing. And, there are some people who just *don't want* to learn and don't care if they're paying a bit more, they want someone else to deal with it. In those cases, IMO, it's up to us to provide the most education possible so they make a good choice in advisers and don't get screwed by the bad ones. But to generally say that all financial planners are bad and give poor advice is akin to me saying all men are dogs. Both are generalizations which makes them inherently untrue.
Also, the "so called" thing is really insulting. There's a lot of education and training that goes into being a good financial planner and the good ones do actually do it because they care about other people, trite as that may seem to you. I'm curious to know what certifications/licenses you have that make you a qualified investment adviser (since that's what you are).
I just find it a bit hypocritical for someone who has a company who offers paid investment advice to be constantly slagging off on others who do the same. Why is your company ok to buy investment advice from but not any other? Just curious why your investment advice is great but everyone elses automatically sucks because they get paid to give it...
To be perfectly honest, I find most of your posts to be spammy. In almost every one you say something along the lines of "you should invest in global equities using advice you get from a reliable source" with an implied 'like me' tacked onto the end. You never come right out and say "please, oh please hire me" but that's really how it comes across - at least to me. I think your conflict of interest (promoting using a company to help with equities picking) is just as big as the conflict of interest that goes along with selling any investment advice. I'm curious to know what your justification is as to why it's ok for YOU to sell investment services (on a board where there's supposed to be no spam) but not ok for others to do the same. My guess is that you're going to jump to the returns thing, but IMO that's a cop out.
Sorry for ranting so much but it's the same thing over and over and it's getting old. To me I just keep hearing you say "people who tell you to invest in a way that's not like me give poor advice" which is just wrong. It's not automatically bad, it's just different and you saying it's bad is, IMO, arrogant and offensive.
Salesmen who slag off the competition rarely look good to their clients, they just look like jerks who don't respect other people and customers rarely want to work with people when the KNOW that the person they're working with talks shit about others. Kinda makes a customer wonder what the salesman might be saying about them.[/b]
Personal Finance 101
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Fri Oct 26, 2007 3:59 pm |
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coaster
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Just to interject a note here that it's up to the forum moderators to determine what's spam and what's not. Many members are here to promote something or other and that's fine so long as they follow the guidelines they're given. Nothing here is outside the guidelines. But we also have another guideline and that's "respect your fellow posters" so I hope that feelings here are kept within that guideline as well.
~Tim~
Eye Candy : Why Whimsy
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Fri Oct 26, 2007 4:21 pm |
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