OK, so Now What??

**34saving** · 05-14-2005, 08:39 AM

Re: OK, so Now What??

I know this pain! (A few years ago I qualified for matching on a 403b plan only to find one company in a list of about 20 would actually handle an annunity, which is what my employer required . . .. blah blah yuck.) I did notice ING handles Roths . . . maybe that might be a good place to start? (Mine is with eTrade, but their interest stinks on cash. The only good part is that I can pick my own mutual funds and stocks . . .of course, that's the bad part too.) Don't do anything until you're comfortable. You don't need to fund a Roth until April of 2006 to have 2005 contributions to it. Good luck!

**Tree0164** · 05-14-2005, 02:12 PM

Re: OK, so Now What??

Torch
You can set up a Roth IRA at Fidelity or Charles Scwab. I find both easy to work with.

You can put it in cash money market until you are ready to decide and after you do your research.

Also do you have an emergency fund? What about a car? House downpayment?

**terry1156** · 05-14-2005, 03:55 PM

Re: OK, so Now What??

my suggestion to all here has always been to go with an index fund to get your feet wet. An index fund buys all the stocks in a certain index (such as the S & P 500) so there is not need for you to learn all the nitty gritty from day one. Since what these stocks due is usually reported on the evening news, you can tell how your investment is doing very easily.

The best part is the S & P out preforms like 70% of all fund managers over a 5 year period and because it is an index, the fees are very low compared to managed funds. It gives you the opportunity to learn more about how stock work and get you started.

I think the Roth IRA is an excellent idea. Everyone should invest in one!

**al0061** · 05-15-2005, 08:34 AM

Re: OK, so Now What??

Thanks for the advice and encouragement, everyone.
I guess my first goal is to stop panicking about my lack of retirement planning until now. Better late than never, right? Panic doesn't solve anything, right?

I was checking out online investment firms on JD Powers and Associates website, and the best by far was apparently Scottrade. Does anyone have experience with them? They have the highest customer satisfaction rating.
Fidelity and BrownCo seem to be second in the ratings.

Then there's always USAA. They usually have high customer ratings on everything. (I'm a member.)

OK, as to what you said, Terry, when you refer to managed funds, are you talking about mutual funds? So investing in an S&P index fund usually has better returns, long term, and fewer fees/costs?

USAA seems to have several Index funds. Maybe I'll look into those.

I have a headache again.
Thanks for the guidance, though. I'll keep plugging away and try to understand one thing at a time.

Torch - aka al0061

**obi_positive** · 05-15-2005, 11:56 AM

Re: OK, so Now What??

Go no-load, low expense ratio, index fund for easy, peace-of-mind investing. Vanguard, Fidelity and T. Rowe Price are about the best. Personally, I'm happy with my Vanguard 500 Index Fund, invested directly with Vanguard.

Motley Fool (fool.com) lists several no-load index funds on their website. I use the free resources on Morningstar.com to learn more about general investing, retirement planning, research individual funds for expense ratio and return data, etc. Morningstar gives all funds a one- to five-star rating that you see many brokerages reffering to.

**terry1156** · 05-15-2005, 03:36 PM

Re: OK, so Now What??

Originally posted by al0061

OK, as to what you said, Terry, when you refer to managed funds, are you talking about mutual funds? So investing in an S&P index fund usually has better returns, long term, and fewer fees/costs?

Yes. If you are looking at mutual funds, always make sure that you check out the fees. The usually run from 2% or more which can take away a lot of any gain you get from them. Index funds, because they mirror what is in the index charge a lot less in fees.

When mutual funds advertise, they shout out their returns over the period that makes them look the best. Over the long term, most funds fail to beat the S & P 500. That is why if people are just beginning to get into stock investing, it's a great place to start.

Then as you learn more and if you feel you'd like to pick some stocks on your own, you can do so.

**jmjj215** · 05-16-2005, 07:57 AM

Re: OK, so Now What??

Originally posted by terry1156

Yes. If you are looking at mutual funds, always make sure that you check out the fees. The usually run from 2% or more which can take away a lot of any gain you get from them. Index funds, because they mirror what is in the index charge a lot less in fees.

When mutual funds advertise, they shout out their returns over the period that makes them look the best. Over the long term, most funds fail to beat the S & P 500. That is why if people are just beginning to get into stock investing, it's a great place to start.

Then as you learn more and if you feel you'd like to pick some stocks on your own, you can do so.

There's a great article on my website about just this:

Active vs. Passive Investing

My personal experience w/ Vanguard has been exceptional. They're also the industry leader in low mutual fund fees and they pioneered the idea of the index fund (John Bogle is the guy that pioneered it if I am remembering correctly).

**al0061** · 05-28-2005, 12:41 PM

Re: OK, so Now What??

Hi all,
Going back over this thread, I failed to answer some questions from Tree0164. I don't have a specific emergency fund, but I do have some money to fund it, once I figure out how much I need. I imagine I'll use one of the high-yield savings accounts (Ing/Emigrant) as a recepticle for those funds. (Right?)

I do have a reliable (so far) 1995 Ford Ranger with about 110,000 on it. I'm happy with it, and despite seeing very cool vehicles all the time, I'll stick with it. I paid it off at the beginning of the year.

I have two very old motorcycles, one of which I'll be selling to a friend in the next few months, when I get the overheating problem fixed. I'm keeping the other one. (Just got it for a song, and it doesn't overheat like the other, so I can actually ride it. Woo Hoo.)

I don't have a house down payment set aside, but we rent from DB's mom, and will eventually buy from her, probably for a steal. I'm hoping that, when ready to do so, I can find a zero-down loan. I've never owned a home, so I'll be asking you guys questions on Mortgages, when the time comes. Maybe I'll have saved even more by then, and will have money to put down.

I'm wondering lately if I should just start looking now, before rates go up. What are your opinions on mortgage rates??

Right now, I'm facing possible dental work. After that, all my money will go into savings/Roth/etc. Still, all I've done so far is the savings account thing. I'll be able to save at least a thousand a month. (Wow, that still sounds soooo wonderful.)

So, I've been doing more research and learning. Thanks, obi_positive for the Morningstar site tip. I went there this morning, signed up for the free registration, and went right to the learning link. I started learning the basics about Stocks. I've finished with four of the twelve courses in the Stock Curriculum. It takes about 10 or 15 minutes for each course. They also offer Funds, Bonds and Portfolio curricula. Learning alot. I plan to do them all.

I'm also looking into the Index funds. I've checked out the Vanguard funds. Still don't understand all I see, but I'm learning. Looked at Fidelity too, but I think Vanguard has more to offer in Index funds, and I think the information is just a bit easier for me to read than Fidelity. Somehow, that matters.

I have some questions: Could someone please define, in English, what 'Small-cap, Mid-cap and Large-cap' means? And value vs growth funds? And load vs no-load? I've just never understood these things.

Thanks to Terry, I now understand what an Index fund is. Those sound like a good place to start.

jmjj, I started reading the 'Active vs Passive' article on your site, but it was too far over my head, until I learn more about the language of money. I'll probably try reading it again when I get through more of the Morningstar courses. Thanks for the link, though.

You're all very kind and patient, and I appreciate your insights.

Torch - aka al0061

**34saving** · 05-28-2005, 12:53 PM

Re: OK, so Now What??

Well, I'm not an expect either so others can feel free to correct, but . . .

Could someone please define, in English, what 'Small-cap, Mid-cap and Large-cap' means?

Small cap = little companies with (hopefully) lots of growth potential. Riskier because they might go completely down the tubes.

Large cap = big companies that probably won't grow very fast but are more secure. More large caps pay dividends.

Mid cap = inbetween those

And value vs growth funds? Value = more security. Growth = possibility of higher return, but generally more risk.

And load vs no-load? I've just never understood these things.

Loaded funds charge a % to get in (or out) (or both). Generally no-load funds are the way to go . . . .esp. if you're just starting out.

**jmjj215** · 05-28-2005, 01:37 PM

Re: OK, so Now What??

Generally no-load funds are the way to go . . . .esp. if you're just starting out.

That's right. But be aware (later on maybe) that there are some load funds that are load because the managers there are good. Just food for thought.

Great explanations on the L,M,S - cap question. Cap is short for capitalization, and comes from the term 'market capitalization'. A company's market "cap" is its total shares of stock outstanding multiplied by the price of the share at any given moment. Just wanted to expand on that a bit so you can get a bit of a bigger picture. Investing is cool isn't it? So much cooler than spending money

**al0061** · 05-28-2005, 01:48 PM

Re: OK, so Now What??

You guys Rock! It's becoming less and less Greek to me.

I'm sure investing will be very cool, once I actually begin. For now, saving rather than spending is very cool, and being out of debt is downright miraculous!!

Any thoughts on the need for immediacy in researching mortgages?

Torch

**baselle** · 05-28-2005, 11:04 PM

Re: OK, so Now What??

I can tell you what value and growth are - they are two specific strategies for picking company stocks.

The value strategy is to pick good companies whose stock price happens to be cheap; you buy it and wait. Maybe the CEO got carried away in handcuffs; maybe the products haven't been selling to Wall Street's satisfaction; maybe the service isn't sexy and cutting edge. People are selling/not buying the stock because they are nervous. Are they justified?

The growth strategy is to pick relatively small companies and wait for them to turn into the next really big thing. Think Walmart in the 70s, Microsoft in the 80s. But will the company turn into the next big thing or go bust? Would you be kicking yourself or saying 'whew" in 20 years for not buying Google?

As far as researching mortgages - research them all you want. Most of the new flavors are interest only mortgages which seem to me to be nothing but a terrible, terrible deal. Real estate seems so overpriced right now, a bit like what stock prices were in the late 90s. Far better to save your money for a down payment, even if you go zero-down. Then at least you're sitting on a pile of cash which will keep you from being house poor and help you sleep at night.

I think you are in a great situation - its time to think about what your goals are and when you want to pursue them. For instance, stocks and mutual funds are perfect to finance long term goals - 10 years or more in the future. Your retirement, for instance. Intermediate goals - 5 years or so - you want secure savings from high(er) interest accounts, CDs, savings bonds, some dividend stocks. Short term, where the $ money might have to be liquid - where ING and other high interest savings accounts come into their own.

FYI - do you have the ability to start a 401K/403B? And does your company match? That would be your next goal.

**al0061** · 05-29-2005, 08:20 AM

Re: OK, so Now What??

Hi Baselle,
Thanks for the clarification of value vs growth.

The over-valued real estate situation is indeed rampant, from what I've heard. But I'm in a unique situation, where I could be buying this townhome from DB's mom, at quite a bit below what other townhomes are selling for in this neighborhood right now.

I did some research on USAA mortgages this morning. It all sounds pretty good. I might be ready to buy in as little as 6 months. I have no interest in 'interest-only' loans, just your basic Conventional ones. I'll be taking your advice and putting aside down payment money while I'm taking care of other things. Then in 6 months, I'll start the process. Luckily, Mom's not in a big hurry to sell, and she'll treat us better than any other seller would.

In answer to your question about the 401/403's, no. I work for an extremely small company of about 8 people. Been there since '99, and we've been working hard to make it grow. My boss has been struggling to keep the company afloat, and it's finally starting to pay off. We've hired two more people, and a couple of contractors. So there's no money for retirement plans. Yet. I'm hoping, but it doesn't seem likely in the next 5 years.

I agree. I Am in a great situation, and for the first time in my life.

Hmm. Goals. I have so many, and they're so disorganized. Your comment has really made me think about it.

Aside from magically winning the lottery, I guess my goals, large and small would be these:

Find out why my teeth feel funny, and get it fixed.
Get new lenses for my scratched-up glasses.
Get Long Term Care coverage. (Probably from AARP. )
Keep saving as much as I can, while I keep learning about all my options.

Then:
Use some savings as a down payment on our place.
Use some savings to put into a Roth IRA.
Use some savings to create other investments for retirement.
Keep some savings as an Emergency Fund.

And finally, figure out how to use all my frequent traveler points to plan a nice vacation for next year. (My airline is notorious for making this very difficult. My hotel chain, not so much.)

Wow. Lots to do. Just putting the basics down in writing like this is very helpful to my head, which has been swirling with all this new stuff for a month.

Then there's that Lottery thing....

Thanks again.
Torch

**baselle** · 05-29-2005, 06:48 PM

Re: OK, so Now What??

Torch said:
"Then:
Use some savings as a down payment on our place.
Use some savings to put into a Roth IRA.
Use some savings to create other investments for retirement.
Keep some savings as an Emergency Fund. "

I'm quoting this funny, because this site isn't letting me do this the regular way.

Your goals are well stated and interesting because one of them (the Roth) is a vehicle for several of your goals. You probably know by now that you can put after tax dollars into a Roth IRA, & that the dollars that you put in aren't taxed, and if you leave in the profits (interest, capital gains, dividends) until 59 1/2 they aren't taxed either. Its what makes it a great retirement vehicle. Did you also know that you can do that as a first time home buyer?

Means that creating and shoving money into that Roth is probably your second priority. It will move you forward on a couple of goals. The 3-6 month emergency fund first to help you with teeth, eyes, and sleeping at night, as well as getting the secure interest coming from the Internet-only bank. When you hit the emergency fund goal that you decide on, move the overflow into your Roth and the mutual funds you'll have inside.

A lot of other posts talked about the type of mutual funds - if it were me, I'd say go with a broad index fund whose index makes sense - the S&P 500 say, or the Russell 5000. You're not going to be able to time the market, and with a broad, diversifies index like this there will be great companies in the index and there will be crappy ones. You can't control that. What you can control are the fees that the mutual fund will charge. Make sure that those are the lowest they can be. Vanguard and Fidelity funds are lowest (around .15 - .18%). Don't consider anything with a fee above 1.0%, and if you see anything with 12B-1 fee, flee.

You might also want to consider a few treasury bonds (like I-bonds), just to counter the risks associated with stocks. They always earn money and will keep you from panicking when stocks go down.

BTW, that lottery thing? If you win big, you still have to do all this anyway if you want to keep most of it, so you might just as well learn when the stakes aren't so high.

OK, so Now What??

OK, so Now What??

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Login

OK, so Now What??

OK, so Now What??

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment

Comment