| Seeking Simple Financial Advice |
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cmknauf
New Member
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Joined: 29 Aug 2015
Location: Chicago
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| Seeking Simple Financial Advice |
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Seeking some simple financial advice.
I have an account with an investment company. Its been about 10 years now and have not made any changes to my portfolio.Thats only because I am afraid to. I fear making a bad investment. Yet my account manager does nothing to help or advise. They have never contacted me to advise on diversification. I feel I am alone and watching my money do nothing for me in return. I am earning less than $1k in dividends and returns per year. Pretty Sad.
So I am reaching out to see what kind of suggestions someone might have. I am thinking about closing the account and moving it somewhere else but not sure where and then what. I am not really sure how to invest. I know I want a small portion aggressively seeking high returns while the remainder invested in low risk and long term investing. A co-worker recommended Vanguard. And my research into other investment companies to manage my money gets no positive feedback. Is it normal for all investment companies to be so shitty? Thanks for the feedback and suggestions.
Account Value is 43k. All invested in stocks.
Sincerely,
Uncertain Investor
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Sat Aug 29, 2015 7:08 pm |
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oldguy
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I would invest it all in the generic US Market (the SP500 Index). That historically has done better than most of the professionals who pick individual stocks (and trade in and out). The longterm return (decades) has averaged about 11%/year. Plus, since the SP500 index is a unmanaged fund the fee is very low.
Is your $43k inside a 401k at work? Or an IRA? Or a personal taxable account?
And are you near retirement? Or a young longterm investor?
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Sat Aug 29, 2015 9:11 pm |
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cmknauf
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Location: Chicago
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Thanks for the response oldguy. I am 36 yrs old. Single. No kids. Looking for solid low risk investment with a decent return. A smaller portion seeking higher but riskier returns.
I dont think my current investment broker offers those kinds of investments services like indexes. I could be wrong because I am really not sure what services they provide. See how well they keep me informed. They never talk to me. And the few times that I have they offer me nothing as far as consultation.
My account is a personal taxable account. I dont have a retirement plan or anything like that. Yes I think about that from time to time. I am more worried my student debt. Thats my biggest financial thorn. It is a bit painful every month.
I have everything invested in stock and its not working out. Looking to diversify by moving the money someplace else.
Can you recommend a good investment broker? Someplace that provides personalized investment strategies.
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Sat Aug 29, 2015 9:34 pm |
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oldguy
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quote:
Looking for solid low risk investment with a decent return.
Risk and return are directly proportional, that's a law of mathematics. So you have to choose the risk level that you are comfortable with. The low risk products pay about 1%/yr, they are designed to provide safe storage of money, but w/o growth (the 1% barely offsets inflation). To get a return that outpaces inflation, you need risk.
A wage earner cannot build wealth by 'saving'. Eg, if you could save $10,000/y for 30 years, you would only have $300,000 - and the $300,000 would have less buying power when you retire.
Conversely, $10,000/yr for 30 years invested at 11%/yr is over $2,200,000. That will provide an adequate retirement in 2045.
IMO, the broker won't be much help. As I said, most brokers cannot beat the return that thhe generic US market index gives you. For the obvious reason - they are buying/selling those same 500 stocks that make up the US market - and they would need to get a consistent 14%/yr (from a market that averages 11%/yr) - so that they can have 3% for their overhead and give you 11%/yr. You'll probably do better by purchasing the SP500 Index on your own.
In general, our human cycle gives us about 30 yrs for wealth-building, followed by a retirement of wealth-preservation. I used 11%/yr products all thru my working years - and after I retired I moved into safer products at about 5%/yr. BTW, you mentioned Vanguard - I've used them for years, a very good company. Their SP500 Index fund number is VFINX.
If you use $10,000/yr at 11%/yr for 30 yrs, the math is the same ($2.2M) whether you use a taxable account, a 401k (pretax account), or a Roth (posttax account). They add to $2.2M but when you're in your 60s & 70s, your taxes will vary. The Roth will be taxfree, the 401k will be taxed at your ordinary rate, and your taxable account will be taxed at the capital gains rate. The taxable account and the Roth are both available to you, how about the 401k?
What is the interest rate on your SL? And how much? (In many cases it is to your advantage to keep it and use your income to invest in the 11%/yr index.) I can calculate it if you have the numbers.
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Sat Aug 29, 2015 11:26 pm |
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Jan
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There is currently no such thing as a "safe" investment there are always risks . The stock markets around the world are in turmoil as the U.S.dollar is collapsing. Unless you have 25 plus years to wait I would not be investing in the stock market right now. A better alternative would be physical Gold or Silver that you keep in your possession. The Canadian Maple Leafs are 99.9% pure or junk silver pre1967 is 80% pure silver and among the safest. There is also a free "gold" bank savings account you can open . Gold & Silver both hold their value and generally do well in bad times. Here is an article that will give you a good idea of what I am talking about : http://www.profitconfidential.com/u-s-dollar/u-s-dollar-collapse/. you can also just look up "currency wars". As for your broker , if I were you I would find a new one.
Once the world has figured out which currency will be the new "reserve" currency (likely the yuan as China has the ability to back their currency with gold) then it might be a good time to get back into stocks and Vanguard does have some good funds. It is always advisable to do your own research.
I wish you the best.
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Sat Aug 29, 2015 11:39 pm |
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cmknauf
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Vanguard was recommended and approved. Okay something I can feel good about.
Jan i agree with the gold/silver. Its been a worldwide currency centuries. And yes the market is completely unpredictable. I have tried and failed despite all my effort, research, and gut instincts. Thats why I backed off on the stocks. I made some poor choices. But what I thought was right turned out to be wrong. Thats what brought me here.
oldguy, thank you for insightful outlook. I promised myself I wanted to start making this little bit of money start working for me after years of no growth. Stock investment based purely on growth isnt working and I dont have the capital to invest in blue chip companies that yield a high return in dividends.
I dont think my employer offers any 401k. They pay me a good salary but they are a small company. And thats okay. The Roth is something I intend to get going once I get this new portfolio built with the new broker.
I would be well off if it wasnt for the student debt. It is quite substantial since I had to pay for my own education. At the time I knew I needed to invest in myself and my future. Fortunately I have a good paying career that should keep me employed into my retirement years.
The interest rates for my private loans are high and all over the map. They are as high as 9%. My subsidized loans are better and seen the debt slowly, slowly decrease over the years. But the private loans I fear will never go away.
The comments Ive gotten so far has really inspired me to make a move and make something happen. Until now I've been afraid of making more mistakes with what little I have. Trying to build it not lose.
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Sun Aug 30, 2015 1:01 am |
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christcorp
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The key to wise investing, is diversity. While I have a 401k and invest in it, I would never simply invest everything in it. Same if I didn't have a 401k and was just doing an Ira with mutual funds. I wouldn't invest solely in it. Too much volatility. I also love physical gold and silver, but I would do just that either.
My suggestions. In order of importance.
1. 6 month emergency fund. Save cash equal to about 6 months of your yearly income. This is to help if you lose your job, need a new hot water heater, major car repairs, etc. charging and loans are not a good choice. This step needs to be done before ALL other savings or investments. ALL.
2. Whatever amount you decide you can afford to save/invest should be broken down into the following. Remember, this is of the amount you want to save and invest. After all bills are paid and any additional discretionary spending. Remember, saving and investing is great, but you still must enjoy life. What the hell good is saving and not experiencing life and waiting until you retire. You could be dead by then. You need to enjoy life too. We will use $1000 per month below just for easy math. You figure out what you can invest and use the percentages.
A. 10% savings. $100. This is for the new tv or car you want. For a vacation. For any major purchase that you don't buy with normal payday money. Again, charging and loans, is not the answer.
B. 30% $300 in a 401k type retirement fund. Pretty diverse. 80% stocks 20% bonds
C. 30% $300 in a Roth IRA. Different types of fund from the 401k investments. International or a specific sector like healthcare, energy, etc.
D. 10% $100 in a bank type investment like CD. Yes, you can still get around 2% if you look.
E. 10% $100 in physical silver. When you get a large enough built up, you can change some for gold if you want.
F. 10% Cash. I don't mean cash in a savings account. I mean real cash, physical, in your hand, in a safe, that you can have instant access to.
Now, there are obviously many caveats. Maybe you don't have a 401k type available. Therefor, you're limited to what you can do. If that's the case, start with an IRA for the tax break. If you haven't maxed that, put the rest in the Roth. There's limits on those. But you can have your own mutual funds too. They don't have to be 401k or IRA type retirement accounts.
Also, you have to be disciplined. The cash on hand, isn't for spending. People think bank issues like what happened in Greece, can't happen to us in the USA. Bull Shiite. It can. Don't be spending the cash you store. Also, don't be spending the 10% savings for things you aren't specifically saving for. Same with the emergency fund. Don't spend some of that because you want a new car you really can't afford.
If you get any large lump sums of money, look into some time down the road, of having a nice piece of land. Nothing to build on right a way. Something you'll have down the road to retire with, or if prices skyrocket, you can sell for a nice profit. Remember also, your best returns today, currently, is to be debt free. A 2-3% car loan, or 5-10% signature or unsecured loan, is more than you'll make saving or investing. When you can buy without loans, credit cards, etc. you're actually making money. Don't forget this.
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Sun Aug 30, 2015 4:18 pm |
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oldguy
Senior Member
Cash: $ 751.85
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quote:
Stock investment based purely on growth isnt working and I dont have the capital to invest in blue chip companies that yield a high return in dividends.
The Roth is something I intend to get going once I get this new portfolio built with the new broker.
I would be well off if it wasnt for the student debt. It is quite substantial since I had to pay for my own education.
IMO, you're making some mistakes (BTDT, lol). First, you need to make wealth-building your priority, the reason is tha "time" is the key factor. Eg, that $2.2M at 30 yrs, is only $712,000 at 20 years - the extra 10 years is IMPORTANT. And whether or not you prepay a SL is UNIMPORTANT compared to giving up that extra $1.5M of wealth.
Investing is a dichotomy. TheTHEORY is complex, there are options, puts, calls, derivatives, futures contracts - methods include Elliot Waves, Fibonni ratios, charts, cup & saucer, stoicastics, break-outs, yada. And you can buy big caps, small caps, penny stocks, Div stocks, growth stocks, etc. But in PRACTICE the market is deceptively simple - buy the generic market index, feed it incrementally, and accumulate, never sell or trade. It is elightening to learn that the market cannot be timed - then you are free to simply invest w/o continually looking for the 'right' stock - or avoiding the 'wrong' stocks. Your plan about "building a portfolio" is simply wrong, in my experience.
There was a study about 20 yrs ago, the Index had grown about 14%/yr for 23 years. Brokers checked client records, the ones that did nothing got the 14%/yr returns. The ones who sold and moved to bonds in dips, and bought back in a yr or so later, got a 2.5%/yr return for the 23 yr period - ie, they snatched defeat out of the jaws of victory. The conclusion was that human intuition is literally wrong on most occasions, the buy/sells were almost 180 out of phase with the market.
Here's the history -
http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html#.VeMv95e8k3h
The return for the most recent 30 years (ending 8/1/2015) was 10.77%/yr. Check a bunch of 30 yr blocks, usually you'll see about 11%/yr.
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Sun Aug 30, 2015 4:37 pm |
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christcorp
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P.S. The numbers I used above doesn't sound like much for investing in each area. But over a 20, 30, or 40 year period, they are quite substantial. Also, there will be times where you have some leftover money. E.g. You have your emergency fund full, your high purchase account for a TV, car, etc. you think is high enough and you aren't buying anything currently. Maybe you have the 10% cash fund at an amount you think is enough, say $5000. If you have leftover, simply split it up evenly into the 401k, or Ira/Roth, and silver and gold. Or if you don't have a 401k and you've maxed the Ira/Roth, spilt between the mutual fund and silver/gold. You get the idea.
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Sun Aug 30, 2015 4:39 pm |
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jkellie56
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Have you tried buying high and selling low? Do you have another investment company where you can invest in case the previous one is suffering a decline? When it comes to investment diversification, it has its own risks. Find out about it and split your investment between stocks from two different investment companies to help reduce the risk to your portfolio.
money finance
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Sun Sep 13, 2015 11:52 pm |
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Brian Smith 1964
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| No, it is NOT Ok for investment companies to be shitty |
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Investment companies are experiencing pretty tough times at the moment. The competition among them is fierce and they spend a lot of resources on customer acquisition and retention. Actually, this is true for majority of industries and businesses. So I am pretty surprised you had such a sad experience with particularly poor customer service. It is not Ok. You should not tolerate such an approach.
If they manage your investments with the help of computer software they still should communicate with you via e-mail or phone calls. Plus, periodic rebalancing should be performed at least occasionally. 1K of returns per year - that's slightly more than 2%. You should definitely change something. Investing is supposed to be more profitable. Research automated investment management firms - may be this will be an option for you. You will have personal cabinet to track investments performance, plus they will communicate with you online.
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Tue Sep 29, 2015 12:32 pm |
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VicVic
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I think, you need to diversify your protfolio by risks. Something like
60% - low risk assets (gold, equities, etc). This will make you feel safe when you are doing other investments and the return is higher than inflation and bank interests rate on your deposit, although not much higher.
40% - higher risk and higher potential income assets. Here comes another important choice: are you looking for max dividends or net worth growth, its usually one or the other. Think about it when choosing sotcks, investment company or fund. i think in your case buying shares in ETF Index Fund may be the best option, if you don't know much about the market. This way you get the average market returns but save on brokerage comissions. Index Funds have equal amount of every stock included in the index and deliver the same ROI as the index.
I would also consider putting 10% of your money to other assets, like currency trading, because when Fed hikes the interest rates the stocks might go down and USD would probably go up even higher than now.
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Mon Nov 23, 2015 8:48 pm |
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EmeraldVA
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Hi cmknauf! Perhaps reading the book Invest to Prosper will definitely answer your questions. I'll give the link of the book. I'm still half-way reading it but I'm learning much. Here's the book.
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Tue Nov 24, 2015 6:53 am |
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