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Originally Posted by creditcardfree
As a beginning investor, I would stick to mutual funds and branch out to individual stocks if you find it interesting enough to do the research. Dividends are reinvested in mutual funds too, although not all stocks pay dividends.
I would continue your 401k and consider increasing the amount you contribute, max out my roth for both 2006 and 2007, set up an emergency fund of at least half your income in your GMAC account,...from there it depends on what your goals are.
If you have a short term goal to get a new car or furniture then I would keep some of the money in the GMAC account, but allocated towards these goals.
If you have long term goals (other than retirement) of more than 5 years, such as a newer home, or lavish vacation than you may want to buy mutual funds in a regular mutual fund account. The money would then grow faster than in your GMAC account and it would be available for goals that are before retirement. The earnings on this type of account would be taxable every year and gains would need to be paid at the time you sell the shares.
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Lots of good advice all around, thanks again!
For the time being I just want to stick to mutual funds and index funds to get my feet wet, though the idea of researching individual companies is interesting to me and could prove to be something I will enjoy.
I had not considered increasing the amount of money going into my 401k, I'll have to think about that. Problem is beyond 6% there is no match, so its just me putting more money in. This is money that could be going elsewhere, but then again what "elsewhere" offers the tax deferred benefits of a 401k. Something to chew on there.
Emergency account, check. I'll make sure to keep 6 months living expenses there.
At this time, I have no short term goals for a new car, furniture, etc. I have my hobbies (fountain pens, audio equipment, books) but I fund my hobbies on regular income leftover after necessities (food and bills). I also have no particularly long term financial goals, but then again who knows what may happen. Not a bad idea to have some money invested in some slightly more liquid areas (i.e. not a retirement account).
Thanks for the link to the Stein book, cbird, looks interesting, plus I've always been a Stein fan. I'll poke around on the Motley Fool as well, I've heard about that site many times but never spent much time on it except for a project once in high school.
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Best of luck to you. Take things slow if necessary. This is a great gift you have received and it's important that it blesses you to the highest degree possible.
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I've been incredibly blessed. I'll definitely heed your advice about taking things slow. Easy does it.