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Originally Posted by Russell
I'm finally taking the time and interest to learn about investing and this stuff is not easy to understand. I've read 3 books in two weeks, several online articles that I thought would help me answer my questions but the more I read the more questions I have.
I'm hoping one of you guys can help me with a few questions:
1. Interest rates are rising and Charles Givens' strategy says to start moving out of stocks and into money market funds. What are your thoughts on this strategy ?
2. How different are money market funds from bond funds ? From what I've read, money market funds invest in short term bonds. Bond funds also invest in bonds so is it safe to assume that both are similar ? If so, why does Givens think that bond funds should used when the interest rate is declining and money market funds should be used when the interest rate is rising ?
3. I read somewhere that its not a good idea to buy mutual funds towards the end of the year, something about dividends and capital gains that you'll have to pay ? Not sure what the difference is between dividends and capital gains
Here's my situation:
1. I want to move my rollover IRA (sitting in FFFEX) into something better. I was thinking of some sort of an index fund (VTI ?), despite my (bad) experience with VTSMX and VIVAX in the last couple of years. I figure in the next 30 years VTI can probably ride out the ups and downs of the market OK.
2. I also have my 401K sitting in mostly stock funds and the performance in the last couple of years has been pretty good despite the limited choices of funds to pick from. However, again since the interest rates are starting to rise should this be moved to mostly bond funds or should I let it ride the market out over the next 30 yrs ? Current investments are in FBIDX FCNTX FEQIX FRSGX NBGEX POVSX TEDMX
3. I also have a Roth account that I recently switched from index funds (VTSMX, VIVAX) to an energy fund PSPFX and its doing really well...for the moment anyway.
4. Finally, I want to start investing outside of the retirement accounts as well. I'm not worried about taking risks for greater returns since I'll start out small. Most books and articles favor mutual funds. Also, some of the stocks I was eyeing are at their 52 wk high already...some higher. Am I getting into it at a bad time and make the classic mistake of "buying high selling low" ?
I know I probably asked a few questions that are either difficult to answer or people don't feel comfortable answering and that's OK. I'm not going out and buying stuff, I'm more looking for your opinions as to what you would do if you were in my shoes.
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Russell,
If you invest in stock mutual funds outside of retirement accounts, I would suggest opening an account with the Vangaurd group and I would use the no load mutual fund - total stock market Index. Index funds are a sampling of the market and not a sector fund (as your energy funds). Index funds are tax efficient (not much tax on these), low management fees (some as low as.20% instead of some funds being 1% or greater. Another good fund family is Fidelity but you need larger amounts to open an account. Most of Vanguards funds are $1000 to open. I would either dollar cost average per month or contribute when there is a dip in the market. If you have a money market with vanguard, you can just transfer funds into your account on line.
What ever fund family you pick, look for no load, no brokerage fee and low expenses.
Fully fund your roth each year too.