Contribute your .02 on helping me save.

[saving_is_creepy]

After reading everyone's posts it has really inspired me to save, I'm really excited about finding this forum!

Ok, to the hypothetical question:

I'm 26 now and I know I can sock away $30000 a year. My question to you is how to best invest this money. I plan on saving at least this much every year for 10 years. Should I go mutual fund, cd, ira? What would be the best way to get the most return on my money? What would you do ?

[34saving]

Re: Contribute your .02 on helping me save.

The first $4,000 in mutual funds IN an IRA (actually a ROTH IRA). Then fund your 401K (403b) completely. Then plain old independently held (and taxable) mutual funds. Keep a few thousand in a high interest savings account for an emergency fund.

[saving_is_creepy]

Re: Contribute your .02 on helping me save.

Thanks 34, I figured a ROTH IRA would be apart of the equation. What about the rest? You'd put it all in a savings account? My savings account doesn't return much, cds are at 5%. What about a ING Global Real Estate Fund?

[Broken Arrow]

Re: Contribute your .02 on helping me save.

Wow. I wish I could sock away 30k each year!

I think saving accounts are best served only as a place to park your emergency fund and money you may need in the very near future. Otherwise, there is no sense in maintaining that level of liquidity when you can get better returns elsewhere.

I like your name, by the way. It's funny. Once upon a time, I would think that too. Actually, I would probably be slightly insulted, as if assuming that money is somehow more important than living a quality life. But, now that I'm a little bit older, I realized that saving for the future is indeed an important component of a quality life.

I hope you will enjoy your stay here.

[Aleta]

Re: Contribute your .02 on helping me save.

After funding your retirement to the max that you can, I would find an index fund,(i.e) Vanguard or Fedilty and start investing in something like a Total Stock Market Index Fund or an S& P 500 and go with a company that has no loads, low fees, and of course is more tax advantaged because they don't buy and sell all of the time. You can also ladder CD's too. Plus you can have a money market account to access at any time that you want. If you don't already have an emergency fund of 3-6 months, that would be a good amount of money for you to keep to the side.

[Ima saver]

Re: Contribute your .02 on helping me save.

I agree, put your first $4000 in a roth Ira and then i would open an Index 500 fund with Vanguard with the next $3000 and add to it. An emergency fund of 6 months living expenses should be kept in a money market that pays at least 5%. Glad you have started saving!

[JBinKC]

Re: Contribute your .02 on helping me save.

Personally, I agree withe the comments by other by putting it into a mutual fund with a little emphasis for growth and emerging markets and however, in the meantime I would would bone up how to select your own stocks because the rewards will be much larger if you have the proficiency and time to do so.

[scfr]

Re: Contribute your .02 on helping me save.

If you do not already own your own home, you may want to think about buying one, putting at least 20% down. You could then apply a portion of your savings to paying down your mortgage early.

[kv968]

Re: Contribute your .02 on helping me save.

Congrats on being able and willing to save 30K/yr. Everyone's advice here seems spot on. However no has said anything about what to invest with in your Roth IRA. I would suggest that you might want to look at a Target Retirement Fund from either T Rowe Price, Vanguard or Fidelity. They are kind of like one stop shopping for retirement investments. Then in the meantime, if you're so inclined, you could learn more about investing and the different options out there and could construct your own portfolio if you'd like. And if not, sticking with the Target Fund would be just fine.

[Ima saver]

Re: Contribute your .02 on helping me save.

Yes, saving towards a house down payment is a good thing also.

[HalMd]

Re: Contribute your .02 on helping me save.

I would go for a diversified mix of mutual funds. If it is not in a retirement account (IRA, 401k, etc.) then you have to be careful because you might have a tax bill each year.

Most trading sites (Fidelity, TDAmeritrade, etc.) have portfolio recommendations. They will suggest some mix including index funds in large-cap stocks, plus some bond funds and some international, and a little cash and small-cap.

[disneysteve]

Re: Contribute your .02 on helping me save.

I think there have been some good suggestions, but nobody has asked the most basic questions. What is this money for? Is it all for retirement? Do you have an emergency fund? Do you own your home? What other needs might this money be needed for - a new car, perhaps? Do you have any debt? Are you eligible for an employer-sponsored retirement account?

These are all thing you need to think about before deciding how and where to invest your money. And what you do can and will change over time as your needs change.

[saving_is_creepy]

Re: Contribute your .02 on helping me save.

See, I knew this forum was awesome, so many responses. Now I'm overwhelmed =)

First, I want to say, that I don't have 30K now, from what I've figured I can save that by the end of 2007. This is based on auto deducting a portion of my paycheck every month before I can touch it. I own my home at the moment and my roommates are helping me pay for it

The money is for me to retire on and have a nice savings for whatever in the future. The way I figure it, I don't see any point until waiting until I'm 65 to enjoy life. Hell I might not even live that long. The thing is I don't need much to live on so I might as well save as much as possible. I have very little debt and I dont need a new car (I love my 93 accord) . Also, I know it sounds crazy but my employer doesn't match 401k's. I just don't want to wake up in 10 years and find myself in serious financial trouble. So from others here have suggested I should start with:

Roth ira and max out the contribution.( I here this is going up soon?...)
Mix of mutual funds
Index funds
6 month/emergency money
A money market account
A good dose of financial education.

All of your posts have led me to researching and there's a lot to learn! Do you all have recommendations for good financial advisors I can speak with?

[disneysteve]

Re: Contribute your .02 on helping me save.

The thing is I don't need much to live on so I might as well save as much as possible. I have very little debt and I dont need a new car (I love my 93 accord)

I think it is great for someone to be thinking this way at 26. Keep in mind, however, that life changed. Should you decide to get married and start a family, your expenses can rise significantly.

As for the car, it's great that you are happy with yours, but be realistic about how long a 14 year old model is going to continue giving you trouble-free service. I'd definitely be starting a "car fund" with some of your savings so that when the time comes to replace old faithful, you don't need to borrow any money to do it.

[saving_is_creepy]

Re: Contribute your .02 on helping me save.

Steve,

Well said. I think I'll sock money aside for a vehicle should the need to arise. Do you use someone like Edward Jones?