What do you suggest for long term investing?

[Quoc414]

I'm not looking into day trading or anything. Can ETFs be long term? I just want something that I can keep putting my money in and get something back in the long run... Index fund?

[bjl584]

Credit Union: Balance :$13,342 at 10% min. pymt $378
Credit Card 1 : Balance: $9411 min. pymt $170
Credit card 2 : Balance: $5075 Min. pymt $75
Student loan: Balance : $8500 Min. pymt $92


Above are the debts that you listed that you currently have from another thread. I would advocate that the best use of your money right now would be to pay these down.

Once that is taken care of, does your employer have a company sponsored plan? (401K, etc.?) If so, there will be a menu of fund options to choose from.

Or, you can search the internet for one of the thousands of funds out there. Pick ones with a solid track record and a low expense ratio.

[Petunia 100]

Yes, ETFs can be long-term. It depends which ETFs you have chosen.

If your employer has a retirement plan with a match, always invest enough to get the full match. After that, attack your consumer debt.

[uRabbit]

Agreed. Do not invest until your debts are gone.

[Scanner]

I partially agree - retire consumer/credit debt. Then invest while floating student loan debt and/or auto loan (is that the credit union?).

If everyone waited until all debts were retired before beginning investing, they'd be starting at Age 60.

[Quoc414]

yeah, I just wanna put a little in and invest somewhere while I'm still young. Of course i'm going go agressive on reducing my debt but that doesn't mean I can't invest anything at all right? I have my 401k already but I want something more, maybe a Roth?

[jpg7n16]

yeah, I just wanna put a little in and invest somewhere while I'm still young.

And why do you want to invest while you're young?

Most likely, it's because you've heard about the miracle of compound interest - and you want to make it work in your favor.

Well compound interest does work - and it can either work for or against you.

If you start investing today, you can start compounding 7-11% returns for many years to come.
But with your credit cards, you are already compounding 15-24% expenses against you for many years to come.

Of course i'm going go agressive on reducing my debt but that doesn't mean I can't invest anything at all right? I have my 401k already but I want something more, maybe a Roth?

Well you can - but the question is more, should you?

I always say that you should take the company match, no more no less, while getting out of high interest rate debt. "No less" because the company match is an immediate 100% return on investment (if/once fully vested).

But "no more" because you keep building up investments generating possible 7-11% when you could have used that money to eliminate debts charging guaranteed 15-24%.

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And I'll do a math example, just to put some figures with the concept.

Let's use your $9411 balance CC, and we'll give it a normal interest rate of 19% (pretty standard credit card). Imagine it was your only debt, and you had $500/month of cash available for paying debt and/or investing.

So you have 2 options:
1) pay the $170 minimum each month and invest the rest ($330) to get a good headstart on your investments
2) pay all $500/month to the CC, and then begin investing when you're done paying it off

Paying $170/month to the CC would take 133.1462 months to pay off, so this is our baseline and timeframe until both scenarios are left with no debt and a portfolio.

Option 1: Pay 170/month to CC, invest 330/month at 7-11%. After 133 months, you could have no debt and between $66,152.07 and $85,324.16 of investments (7% and 11% returns, respectively)

Option 2: Pay 500/month for 22.5 months, then invest 500/month for the remaining 110.5 month. After 133 months, you could have no debt and between $77,397.93 and $95,126.79 of investments (7% and 11% returns, respectively).

Paying off the high interest rate debt can raise your net worth by between $11,245.86 and $9,802.63 over the same timeframe. (The lower the investment returns, the higher the benefit of paying off debt early)

Because the principle holds true - put the most money you can towards the highest available interest rate at any given time.

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This is where my priority list comes from:

1 - take the company match, no more, no less [instant 50-100% return, depending on company match rules]
2 - pay off any high interest debt 6%+ (snowball from highest rate, to lowest) [6%-25%+ guaranteed]
3 - up retirement to 15-20% of your income [7-11% expected, but not guaranteed]
4 - pay off remaining debts [<6%, guaranteed]

This method puts the highest amount of money towards the highest available interest rate at any given time.

[timnz]

Invest on property and land in growing rural area.

[ez1]

I read a lot about people saying you have to get rid of debt first then invest. The key is ultimately your net worth (assets minus liabilities). If you can grow your assets faster than you grow your liabilities, you are improving your net worth.

If your debt is a low percentage, and not just promo rates or variable rates that are temporarily low, then feel free to go for some investing with your money. But if your debt is anywhere above 8-10% range, you will be hard pressed to find an investment with an after-tax return better than that - definitely not guaranteed anyway!

[mcfroggin]

I just did a post on this on my website. My favorite stock long-term that is safe - PG

[supercar]

Just answering your question here. Can't talk about your debts.

Look at TNA -- 3 Times Small Cap (Russell 2000) Ex: If Russell goes up 1%, TNA goes up 3% and vice-versa.

Also look at XIV -- If the fear factor in the market decreases, XIV moves up. This is inverse of VIX. VIX is the volatility index (fear factor). So, in a volatile situation like the last few weeks, all you have to do is buy XIV , sit back and relax, because the market can't be this volatile in the whole year for more than a few weeks.

[LMA]

Real estate, real estate, real estate.

Whenever the word investing comes up everyone by default thinks stock market. But real estate is a proven long term investment.

[DRILLINDK]

Just answering your question here. Can't talk about your debts.

Look at TNA -- 3 Times Small Cap (Russell 2000) Ex: If Russell goes up 1%, TNA goes up 3% and vice-versa.

Also look at XIV -- If the fear factor in the market decreases, XIV moves up. This is inverse of VIX. VIX is the volatility index (fear factor). So, in a volatile situation like the last few weeks, all you have to do is buy XIV , sit back and relax, because the market can't be this volatile in the whole year for more than a few weeks.

I would stay far, far away from leverage etf's like TNA, TZA, FAZ, FAS, etc. They are designed for short term day trading and swing trading. They lose a small percentage of their stock price to "slippage" every day. So they are not a long term investment vehicle.

[krantcents]

I like income property. Now is a good time to buy with interest rates so low.

[ez1]

Absolutely an ETF can be long term. Are you looking to do just one security? If so, you might consider a no-load mutual fund that you can regularly contribute to without additional trading fees. Something like a target date fund might work. But my personal preference is not to stick my money in anything and leave it absolutely untouched. I prefer something called "tactical asset allocation" where you move in and out of your desired asset allocation depending on set conditions. For simplicity you could do the Ivy Portfolio method, for example. Move your money into the ETF when it closes above its 10-month closing average on the last trading day of the month. If it closes below that, you move it to cash. You could do this for several different funds if you don't want all your money in one place (which I would agree is an unnecessary risk). Over time, the Ivy Portfolio method has beaten 'the market' handily.