Starting out with investing in stock market

[greenskeeper]

With $1k extra per month I'd max out one ROTH IRA account ($458/mo).

With the remainder I'd pre-pay additional on the car (actually I'd sell it and get something with cash) or mortgage.

[disneysteve]

With the remainder I'd pre-pay additional on the car (actually I'd sell it and get something with cash) or mortgage.

You would prepay a 0.9% car loan rather than investing in another Roth or starting a college fund?

[scfr]

2 recommendations:

1. Do a bit of reading to learn about investing. I think that "The Millionaire Teacher" by Andrew Hallum is a very good basic primer for new investors. Your local library may have a copy that you can check out. If not, I think it would be worth paying for (currently $12.63 on Amazon for the 2017 edition). https://www.amazon.com/Millionaire-T...dp_ob_title_bk

2. Investigate your 401k plans. One place to start is to check the Brightscope rating.https://www.brightscope.com/ratings/# You'll want to know whether or not you have good plan before deciding whether to contribute more to your 401(k).

[snafu]

Terrific suggestions to get the best results for your money. I hope you'll look at the details on your quarterly reports to track it's value since onset and name your employer's retirement program and it's fees. Those points help with next step for ROTH IRA or adding a personal retirement program like those offered by a low cost, well managed firm like Vanguard.

I too believe it's important to keep a few hundred dollars, cash hidden in the house. In an emergency, electric power is often cut so ATMs and CCs don't work, cash is necessary. [Do not hide cash in Master bedrm, it's the 1st place thieves search!]

I keep a $ 2,000. cash 'float' in our regular bank account as easily accessible EF only because it eliminates charges for services we use regularly. With stable employment, it is suggested you add all basic operating expense like mortgage, utilities, all loan payments, vehicle operational costs, food, internet and multiply by 3 as basic, bare bones, easily accessed savings for 3 months loss of income.

The remaining EF sum can do double duty to start ROTH IRAs contributions, invested in a low fee, well managed Mutual Fund or ETF [Exchange Traded Fund] with potential to compound over time. [$ 5,500. each annually]. As noted, the principal can be withdrawn without penalty.

As you become more comfortable with investing, you will likely enjoy researching and buying individual stocks.

[thomasdan]

Sorry guys, Been Busy at work.

Wasn't able to log in yesterday.

But I checked this morning and my 401k is WF TARGET 2050 CIT E3.

I'm sure when I started filling out paperwork years ago when I started my job. I didn't really understand what I was picking.. Fast forward today, I still don't know what I'm investing in my 401k.
Please let me know if this is a good investment or if I need to change it. If I do need to change it to something else, how do I do that? and what should I change it too?

AS far as my vehicle. I will not sell it. It's been amazing for my family and I don't regret it. It's comfortable and it's been awesome for outdoor activities. Plus, the 0.9 doesn't hurt to have.

We do keep some cash at the house. Not a lot though. But enough to feel at ease if something happens.


Thank you for all your response.

[thomasdan]

Terrific suggestions to get the best results for your money. I hope you'll look at the details on your quarterly reports to track it's value since onset and name your employer's retirement program and it's fees. Those points help with next step for ROTH IRA or adding a personal retirement program like those offered by a low cost, well managed firm like Vanguard.

I too believe it's important to keep a few hundred dollars, cash hidden in the house. In an emergency, electric power is often cut so ATMs and CCs don't work, cash is necessary. [Do not hide cash in Master bedrm, it's the 1st place thieves search!]

I keep a $ 2,000. cash 'float' in our regular bank account as easily accessible EF only because it eliminates charges for services we use regularly. With stable employment, it is suggested you add all basic operating expense like mortgage, utilities, all loan payments, vehicle operational costs, food, internet and multiply by 3 as basic, bare bones, easily accessed savings for 3 months loss of income.

The remaining EF sum can do double duty to start ROTH IRAs contributions, invested in a low fee, well managed Mutual Fund or ETF [Exchange Traded Fund] with potential to compound over time. [$ 5,500. each annually]. As noted, the principal can be withdrawn without penalty.

As you become more comfortable with investing, you will likely enjoy researching and buying individual stocks.

Can you give me a good investment that has a low fee, well managed Mutual Fund or ETF [Exchange Traded Fund] with potential to compound over time?

and can you explain in layman's term what compound is? does my 401 k do that?

[thomasdan]

I was going to mention that, too. When the only savings you have is your EF, it probably should just be in a high-yield savings account. Once you reach the point where you have other investments, you need to broaden your concept of what constitutes your EF. Look at us. We have a portfolio that's worth over 900K. We have cash (actual physical cash) in a modest amount on hand in our home for instant access, we have a surplus in our checking account of a few thousand dollars, we have an online savings account, we have some Series I bonds, we have taxable mutual fund accounts and individual stocks, and then we have our retirement accounts (Roth, 401k, 403b). So there are many layers of money that we could access if needed.

You mention that you have a taxable mutual fund account and individual stocks.

Where I'm confuse is.. isn't that for retirement?

or do you just invest in those for extra income?

Sorry if that is a stupid question.

[thomasdan]

2 recommendations:

1. Do a bit of reading to learn about investing. I think that "The Millionaire Teacher" by Andrew Hallum is a very good basic primer for new investors. Your local library may have a copy that you can check out. If not, I think it would be worth paying for (currently $12.63 on Amazon for the 2017 edition). https://www.amazon.com/Millionaire-T...dp_ob_title_bk

2. Investigate your 401k plans. One place to start is to check the Brightscope rating.https://www.brightscope.com/ratings/# You'll want to know whether or not you have good plan before deciding whether to contribute more to your 401(k).

Thank you for the links. I'll read up

[disneysteve]

my 401k is WF TARGET 2050 CIT E3.

WF stands for Wells Fargo. That's the name of the investment company.

Target 2050 means that it is a fund that automatically adjusts from more aggressive investments (growth oriented) to more conservative investments (income oriented) as you get closer to the target date (2050 in this case). The thinking is that as you near retirement, you want to be taking less risk with your money because you have less time to recover any losses.

Currently, that fund is 88.19% in stocks, 9.89% in fixed income (bonds), and 1.92% in cash. If you look up the fund at Wells Fargo's website, you should be able to find the breakdown of when and how it adjusts over time.

The fund has a year to date return of 9.14%, a 3-year average annual return of 5.47%, and a 5-year average annual return of 10.75%. That's certainly not bad. The annual expenses for the fund are 0.08%, also not bad at all.

[thomasdan]

WF stands for Wells Fargo. That's the name of the investment company.

Target 2050 means that it is a fund that automatically adjusts from more aggressive investments (growth oriented) to more conservative investments (income oriented) as you get closer to the target date (2050 in this case). The thinking is that as you near retirement, you want to be taking less risk with your money because you have less time to recover any losses.

Currently, that fund is 88.19% in stocks, 9.89% in fixed income (bonds), and 1.92% in cash. If you look up the fund at Wells Fargo's website, you should be able to find the breakdown of when and how it adjusts over time.

The fund has a year to date return of 9.14%, a 3-year average annual return of 5.47%, and a 5-year average annual return of 10.75%. That's certainly not bad. The annual expenses for the fund are 0.08%, also not bad at all.

Awesome.

Thanks for breaking it down like this for me. So for now, I will leave it alone.

Btw, I'm investing 6%. Should I increase it to 8 or even 10?

OR use the money to invest in Roth and leave my 401k at 6 %

and when you get the chance. Can you answer my question a few post up regarding taxable mutual funds and individual stocks?

Thanks for your help

[disneysteve]

I'll post more when I have time. I'm working until 9 tonight. I wrote my last post on my dinner break.

[disneysteve]

can you explain in layman's term what compound is? does my 401 k do that?

compounding is the process of your investment growing over time because you earn interest and then the interest earns interest and so on.

Let's say you invest $1,000 in an account that pays 10% interest (wouldn't that be nice).
At the end of year 1, you earn 10%, or $100 interest.
At the end of year 2, you earn 10%, but instead of $1,000 there is now $1,100 in the account so you get $110 interest.
At the end of year 3, you earn 10%, but there is now $1,210 in the account so you get $121 interest.
That goes on and on year after year after year, multiplying your return over time.

And yes, your 401k investment does that. If you look at the transaction history on the account, you should see either quarterly or at least annual transactions (typically in December) where the fund paid interest and capital gains that got reinvested to buy additional shares.

[disneysteve]

You mention that you have a taxable mutual fund account and individual stocks.

Where I'm confuse is.. isn't that for retirement?

or do you just invest in those for extra income?

Sorry if that is a stupid question.

There are no stupid questions - only stupid answers .

I did not have access to any retirement plan other than a Roth until this year, so I was extremely limited in how much I could invest in an actual retirement account. I'm old enough to remember when the IRA limit was $2,000/year. Even now, the $5,500 limit is pathetic if that's all you can do. The recommendation is to invest at least 15% of your income for retirement so if you earn more than $37,000, the Roth is not enough.

So we needed to invest outside of retirement accounts and just earmark that money for retirement. We don't get any tax advantage that way but it's all we could do. We no longer contribute to those accounts since I now have a 401k.

[disneysteve]

Btw, I'm investing 6%. Should I increase it to 8 or even 10?

OR use the money to invest in Roth and leave my 401k at 6 %

There's not a 100% right answer to that question. There are pros and cons to each and you'll probably get varying opinions.

Personally, I'm a fan of paying the taxes now (the Roth account) and never having to pay taxes again. With the 401k (unless you have access to a Roth 401k), you avoid taxes now but will have to pay taxes in retirement at whatever the tax rates are at that point.

I think it's a good plan to have a mix of taxable and tax-free income in retirement, which would mean having a 401k and a Roth.

Another issue is that with a Roth, you have total control of where you invest your money. With the 401k, you are limited to the investment choices they offer.

So we do both. We max our Roths each year and I contribute to my 401k.

[greenskeeper]

You would prepay a 0.9% car loan rather than investing in another Roth or starting a college fund?

absolutely. I hate debt. That's why I would sell the car and get a vehicle with cash, that way I'm not working for my car.

With the remainder I'd pre-pay additional on the car (actually I'd sell it and get something with cash) or mortgage.