Looking to start investing long term need some advice

**scfr** · 01-22-2008, 05:17 AM

Welcome to Saving Advice!

The Vanguard STAR Fund has a minimum of only $1,000. You can make additional investments of $100. And you can avoid the annual fee if you opt for electronic delivery of statements.

Since it's a balanced fund, a mix of stocks/bonds/short-term reserves, this fund might be too conservative for a guy who enjoys daytrading. However, it is a way to get started in mutual funds with a lower minimum.

**lucasrd** · 01-22-2008, 07:15 AM

you can go to morningstar.com and use their fund screener...you can filter by minimum investment

**LancerSEguy** · 01-22-2008, 04:28 PM

thanks for the advice, should be checking out morningstar today, may wait a little and watch for a bit as the market continues its downslide.

**adaway** · 01-22-2008, 04:53 PM

LancerSEguy,

I've been looking into IRA options recently. If your interested in something like the all in one package retirement funds, T.Rowe has them for different years (2035, 2040, 2045) and for IRA's the min. to open is 1,000. Subsequent deposits min. is 50/month. There might be a transfer fee in general and also one if the fund is not kept open for a certain time period so I would research this first.

**InDebtInDC** · 01-22-2008, 05:42 PM

Originally posted by LancerSEguy View Post

I am currently in the military and I invest a small amount into the TSP offered by the Army (which from what I am told is not the greatest) I plan to keep putting a small amount away a month (around 100) there and I would like to invest another 200-300/month somewhere to try and start on my way to improving my savings. I currently have 1500 to start with and have been watching GE for the next few days and was thinking of investing through them since they seem like a safe bet, although I know investing in one stock is not the way to go. I would just like any advice anyone could provide.

I don't know how many others here have experience with TSP, but as a military participant you have the best retirement benefits with TSP in my opinion.

If I were you, I'd contribute as much as I possibly can into the TSP up to the IRS limit. Since you have hazard pay, all of this pay is excluded from your W2, which means you have no maximum limit on investment to the TSP.

If you have anything left over, put it into a Roth IRA. When you leave service, you can rollover your TSP into any IRA you want or leave it where it is.

Anyone else with TSP knowledge, please feel free to comment.

**Taribor** · 01-22-2008, 11:09 PM

Originally posted by InDebtInDC View Post

I don't know how many others here have experience with TSP, but as a military participant you have the best retirement benefits with TSP in my opinion.

If I were you, I'd contribute as much as I possibly can into the TSP up to the IRS limit. Since you have hazard pay, all of this pay is excluded from your W2, which means you have no maximum limit on investment to the TSP.

If you have anything left over, put it into a Roth IRA. When you leave service, you can rollover your TSP into any IRA you want or leave it where it is.

Anyone else with TSP knowledge, please feel free to comment.

TSP gets a bum rap because it is government run, so the jokes are almost too easy to pass up, but it is a low cost, well run 401k equivelant that serves the purpose pretty well. The only bad thing (unless something has changed since I got out) is the military does not receive any matching funds (due to their already nice retirement) while those of us in non-military federal service receive 5% matching funds plus a 1% automatic contribution.

That aside, since he is already most likely in a lower tax bracket, receiving tax-free income, and not receiving any matching funds (I think), I don't think it would hurt to take a look at a Roth (USAA, a military oriented company, will let you open one in just about any of their funds for $250).

I would think that since you don't need a tax break now, then contribute your already tax-free hazpay/exclusion zone funds into a roth and let them grow tax free...seems like that is essentially contributing to a ROTH totally tax free (this is more of a question than advice).

Best advice would be to join USAA and take advantage of their free financial advice, they will steer you pretty straight.

**Skooby** · 01-23-2008, 05:16 AM

About the TSP, I just put all of my funds in the G fund today, at least until the market recovers.

**illinigamer** · 01-23-2008, 06:46 AM

Originally posted by LancerSEguy View Post

thanks for the advice, should be checking out morningstar today, may wait a little and watch for a bit as the market continues its downslide.

I would recommend against "watching for a bit" to try and time the market. I would start buying as soon as you find a fund you like, especially if you will start making regular contributions. If you wait for the market to recover, say 5%, that is 5% you could have gained. Trying to guess the direction and timing of the market will more than likely cause your returns to drop significantly.

**jIM_Ohio** · 01-23-2008, 07:58 AM

Originally posted by LancerSEguy View Post

Hello everyone,
I am starting late in the savings game. I started trading in the stock market about 2 or 3 years ago mostly day trading with a very small amount of money just to see how everything works. I did pretty well up overall a few hundred after taxes. I finally have managed to pull myself out of credit card debt of 13k thanks to 15 months in Iraq (2 months to go!!) after being a dumb 18-22 year old. I am now 24 and really have nothing saved at all. I am looking to start investing for growth and retirement.

I am currently in the military and I invest a small amount into the TSP offered by the Army (which from what I am told is not the greatest) I plan to keep putting a small amount away a month (around 100) there and I would like to invest another 200-300/month somewhere to try and start on my way to improving my savings. I currently have 1500 to start with and have been watching GE for the next few days and was thinking of investing through them since they seem like a safe bet, although I know investing in one stock is not the way to go. I would just like any advice anyone could provide.

This is a great forum have been reading it on my free time here for the past week or so. Sorry for the lengthy first post.

EDIT: I am starting to think a mutual fund would be best, but I cant seem to find a relaible one that will take a 1500 min investment. I was looking at fidelity but they all want 2500. With the current market situation I am guess maybe I should wait and just leave it in my Sharebuilder money market account for the next month or so.?

You need a better plan than just choosing one fund, or stating you want to save for retirement. Paying down 13k of credit card debt is a great accomplishment, and saying you want to invest is a good next step.

You need to take that next step further and learn about investing. Several issues.

1) Taxes. The TSP lowers your current tax bill and defers taxes on all gains, interest and dividends until you retire. Good move. I have a 401k and send 11% of my paycheck to this. My wife sends 6% to her 401k. IMO this is the core of your savings plan. Delay paying taxes until humanly possible is my advice.

2) Choices and intelligence. There is more than one way to skin a cat. If you choose to invest outside the TSP, look to see if you are eligible for a Roth IRA. A Roth requires you to pay taxes now (comes back to item #1), but never pay taxes on gains, interest or withdraws for the rest of your life. Using the logic that you pay taxes when taxes are lowest. More than likely you earn less now, so tax rates for you now are as low as they'll ever be. Pay taxes when taxes are lowest (comes back to #1).

3) realize there is no holy grail with investing. #1 and #2 contradict each other (read the parts in blue). I do both (Roth IRA and 401k). They each have pros and cons. Know your plan and stick to it.

4) Learn about investment risks.

Inflation risk
principal risk
interest rate risk
government risk
currency risk

then invest in things which counter the risks as you see fit. This is called asset allocation. If you end up selling out to avoid one risk, you will often see another risk come up to bite you. The most common example of this is someone avoiding principal risk, then losing half their money to inflation. The reverse is also true, if you take on that inflation won't beat you, you must put principal at risk, and you could lose 50% of your principal.

The more time you have, the fewer any of these risks will actually hurt you bad anyway.

If you choose funds without an asset allocation, it's like being in an army without a commander in chief. You won't know what to do, and you won't know who to take orders from.

**Taribor** · 01-23-2008, 09:13 AM

Originally posted by jIM_Ohio View Post

1) Taxes. The TSP lowers your current tax bill and defers taxes on all gains, interest and dividends until you retire. Good move. I have a 401k and send 11% of my paycheck to this. My wife sends 6% to her 401k. IMO this is the core of your savings plan. Delay paying taxes until humanly possible is my advice.

.

I would normally totally agree, but in this case I'm guessing his tax bill for the year will be next to zero as I believe they still get tax-fee pay in those areas (that may have changed). If that is the case, he doesn't need the tax advantages of the TSP as there are not many taxes to defer, if any. I would put the cash into a roth. Put tax-free money into tax free account.

**InDebtInDC** · 01-23-2008, 10:32 AM

Originally posted by Taribor View Post

I would normally totally agree, but in this case I'm guessing his tax bill for the year will be next to zero as I believe they still get tax-fee pay in those areas (that may have changed). If that is the case, he doesn't need the tax advantages of the TSP as there are not many taxes to defer, if any. I would put the cash into a roth. Put tax-free money into tax free account.

That makes sense. If he maxes out his Roth, what option does he have left?

Should he stick the remaining amount in the TSP, or a regular investment account? What would the cost of capital gain in a regular taxable account be as compared with the TSP?

**InDebtInDC** · 01-23-2008, 10:35 AM

Originally posted by Taribor View Post

those of us in non-military federal service receive 5% matching funds plus a 1% automatic contribution.

You may want to check those figures:

TSP Features ch 4, Understanding Agency Contributions, 2007-08-28

**LancerSEguy** · 01-23-2008, 04:11 PM

Once again thank for all the advice and it has been very helpful. I have been trying to learn as much as I can before jumping in although I would like to start it soon. I have been looking into a few options. I think I will leave my TSP along and continue my contributions every month until I get out or retire then roll them into an IRA (I wish the military would match in some way.)

I have decided to go with an IRA most likley through E-Trade just based on their performance and ability to invest in a wide range of funds. As far as mutual funds go I have been researching in the time that I have during the day and am thinking of going with AMCPX or AMRMX based on relativley safe performance and strong holdings.

I currently dont know where I will be when I get back to the states so my contributions to both will only likley be around 300/month combined until i settle into my new post when I return and then adjust from there. Thanks again for the all the advice and input from everyone I hope I am headed in the right direction.

**Balco9** · 01-23-2008, 09:51 PM

Watch Jim Cramer on CNN 6pm est....
He also just came out with a new book.
He is sooooooooo on it and knows his sh*t...

Looking to start investing long term need some advice