New to investing

[Empty Wallet]

Hello, I am new to the site and was hoping I could get some help. A little info about me: I am 25 years old and currently have a 457 plan that I contribute to at work. I also have a pension plan from the same job. So hopefully my retirement is covered with these but I would like to know what to do with extra cash. I have an Ingdirect savings but as you all know the rates are not very good right now so I would like to move it into something with better rates but am not sure where. Would bonds be a good idea? Or what about a money market mutual fund?

I was also thinking about investing in stocks or index funds since I keep hearing that right now is the time to buy since shares are cheaper. I still need to learn more about investing though. If anybody can recommend a good beginner investing book please do.

[snafu]

Investing for Dummies, easy to read, easy to understand primer. Before buying a Mutual Fund [MF] check the Management Expense Ratio [MER], Dollar Cost Averaging [DCA], and No Load, No Fee Index type.

[jIM_Ohio]

I would do the following-

research your pension- how is your benefit determined? Years of service, average of last X years pay (or y% of last X years of pay) and is the pension COLA (Cost of living adjusted).

Decide (define) what retirement is. Is it living in house with spouse, traveling the world, stop working as soon as humanly possible (or even earlier), is it leaving a fortune for the kids or something else...

all of these factors would impact the statement below:

Save 20% of your gross pay. 15% to retirement and 5% to short term needs.

The pension represents a portion of the 15%. Your employer is probably "obligated" to pay 5% or 10% to the pension fund on your behalf each year. You should be contributing the remainder (to achieve 15% total) to the 457 or an IRA.

The 5% to short term needs is required for all people. Some people might want this amount larger (maybe they are self employed or employment is not stable).

The main premise here is live on less than you earn. If you save 20% you are living on 80%, and that is the basic premise to financial independance and having choices later in life.

[Empty Wallet]

Thanks for the replies.

About the pension: the benefit is determined by years of service, average full time pay for last 36 months and formula is 2% @55 years old. My employer contributes 7% to the pension. So if i work until I am 55 I will get around 30 years of service. Which comes out to 60% of pay I think.

I just calculated what percentage I am contributing to the 457 and it is around 17% of my gross pay. that is pretty close to the numbers you suggested so I think I am on the right track.

I was just looking at rates for some money market funds and they seem to be pretty low too. So should I just leave my extra savings in the Ingdirect account?

[blankcheck]

Thanks for the replies.

About the pension: the benefit is determined by years of service, average full time pay for last 36 months and formula is 2% @55 years old. My employer contributes 7% to the pension. So if i work until I am 55 I will get around 30 years of service. Which comes out to 60% of pay I think.

I just calculated what percentage I am contributing to the 457 and it is around 17% of my gross pay. that is pretty close to the numbers you suggested so I think I am on the right track.

I was just looking at rates for some money market funds and they seem to be pretty low too. So should I just leave my extra savings in the Ingdirect account?

money market FUND of Money Market ACCOUNT?

Fund = like any other mutual fund, except it is supposed to have low volatility, usually has a low return rate (still can be higher than most saving account rates). However, as the current situation has shown, these can also generate losses like any other fund.

Account (also called MMA for short) = minimum starting amount, stable rate like a savings account.

you can browse some major rates in the stickied topic "online savings accounts and current rates" updated by poundwise.

General common advise is to build an emergency fund of about 3-6 months (or 9-12 if you're so inclined nowadays) of expenses in a stable account. If you're set with that, then you can put longer term money into stocks/bonds/mutual funds as you see fit.

sites like bankrate.com, cnnmoney.com, smartmoney.com, fool.com, and kiplinger.com all have plenty of articles on basic saving, investing, etc.

Hope this helps.

[Empty Wallet]

Yeah I was talking about a money market mutual fund. Thanks for clearing that up. The one that I was looking at was vanguards prime money market fund which is at 0.91%. That is less than my Ing direct savings. but if this is my emergency fund I should just leave it there than right? Are bond funds a bad idea for an EF? just asking because I saw that they still have a higher yield.

Besides all that, After lots of reading and research I think i'm gonna invest in a vanguard VTSMX mutual fund. If anybody has any other suggestions please let me know.

[jIM_Ohio]

Thanks for the replies.

About the pension: the benefit is determined by years of service, average full time pay for last 36 months and formula is 2% @55 years old. My employer contributes 7% to the pension. So if i work until I am 55 I will get around 30 years of service. Which comes out to 60% of pay I think.

I just calculated what percentage I am contributing to the 457 and it is around 17% of my gross pay. that is pretty close to the numbers you suggested so I think I am on the right track.

I was just looking at rates for some money market funds and they seem to be pretty low too. So should I just leave my extra savings in the Ingdirect account?

Just to clarify-

your employer puts y% of pay into pension
and you put 17% into 457? How is 457 funded? By amounnt or percentage?

I'd like to know the percentage put into 457 as a function of your salary.

If the pension is going to be worth "60%" of your pay when you retire, you need a plan for the other 40%.

The easiest way is to
a) save 20% of your salary (this way you are living on 80%)
b) have that savings provide the other 20% of your income

[feh]

Given the crash that has occured the last 7 months, this is an excellent (perhaps once in a lifetime) chance to invest. If you don't need the money for at least a few years, I suggest buying equities. The more the better.

Do you have a Roth IRA? A traditional IRA? Even if all your retirement options are maxed out, you can still open a taxable account.

[Empty Wallet]

From what I understand my employer pays 7% of base salary towards the pension. they are also paying 5.5% into the 457. Now the 17% that I was talking about is just what I am putting into the 457. Not counting employers contribution. I choose how much to deduct from each paycheck and that is where I got the 17% from.

Forgot to add that I do not have an IRA. I am just looking for something to invest in outside of retirement accounts. Something that might make me a little extra money beside my salary from work. I am comfortable with taking risks so that is why I think I will invest in a stock mutual fund.

[ReformedAdvisor]

Be careful if you try to find a professional advisor

I am also new to this site. I like the community atmosphere here and you will get a lot of helpful advice. I'll pass along mine...

If you want some one-on-one advice about investing, please be very careful who you chose to meet with to discuss your savings strategy. I am a former financial advisor and I can tell you the industry is 10% advisors and 90% product salesmen! A bad advisor can wreck your financial future.

[lemarquis]

Have you considered peer to peer lending? Do a search for how to make money with peer to peer lending. You'll find all the information that you need.

[DFrancis]

good books

The coffeehouse investor is a great beginning book for investors. A new addition has just come out.

[conancare]

Hello, I am new to the site and was hoping I could get some help. A little info about me: I am 25 years old and currently have a 457 plan that I contribute to at work. I also have a pension plan from the same job. So hopefully my retirement is covered with these but I would like to know what to do with extra cash. I have an Ingdirect savings but as you all know the rates are not very good right now so I would like to move it into something with better rates but am not sure where. Would bonds be a good idea? Or what about a money market mutual fund?

I was also thinking about investing in stocks or index funds since I keep hearing that right now is the time to buy since shares are cheaper. I still need to learn more about investing though. If anybody can recommend a good beginner investing book please do.

Hi,

As you are very new to the stock market , it always recommendable to initially start investing on Mutual funds, which will help you to gain knowledge as well as incomes.

Regards
Conan

[devatha]

five rules for successful stock investing, one up on wall street.
read all (good and bad)the amazon web site comments for the above books apart from reading these books. Also read all the comments of who took my money from robert of rich dad series. learn about financial statements using keys to reading annual report, reading financial reports for dummies, accounting coach web site (you can learn online without paying). read warren buffer shareholder letters at berkshire hathaway website.

[Shane Watson]

From the looks of you, I can say that you are looking for something safe. Lower the risk, lower the gain. There is a competitive intelligence in finding the better option. Bond is good but Mutual Fund has safer cash flows. Go to different institutes and see if you can find anything special.