Announcement

Collapse
No announcement yet.

Investing questions

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Investing questions

    New to investments here.

    My company matches 6% of my contribution to 401K. 3% cash match, and 3% investment match. It's a good number, but they don't advise you at all (which I'm not complaining about, because that's what makes investing so fun, right?).

    But I have forgotten what little I once knew in college about stocks and so I have it set to put all 3% investment into the company stock.

    So, yeah. That's where I'm at and wondering if I should spread out the 3%? If so, how?

    What are EFTs? I heard these might be a strong option if you're not looking to touch your investments for 30 years or so. Is this true?

    FWIW, the company is Verizon. So maybe I should just keep it going to their stock? Maybe just loading up with one massive company will be the most beneficial in the long term? Or maybe it's boring and won't return much because who knows if they'll be better off now that they are in 30 years? IDK.

    Really, any advice will help and be appreciated.
    Last edited by kuehnja; 02-14-2014, 07:20 AM.

  • #2
    Originally posted by kuehnja View Post
    New to investments here.

    My company matches 6% of my contribution to 401K. 3% cash match, and 3% investment match. It's a great number, but they don't advise you at all (which I'm not complaining about, because that's what makes investing so fun, right?).

    But I have forgotten what little I once knew in college about stocks and so I have it set to put all 3% investment into the company stock.

    So, yeah. That's where I'm at and wondering if I should spread out the 3%? If so, how?

    What are EFTs? I heard these might be a strong option if you're not looking to touch your investments for 30 years or so. Is this true?

    FWIW, the company is Verizon. So maybe I should just keep it going to their stock? Maybe just loading up with one massive company will be the most beneficial in the long term? Or maybe it's boring and won't return much. IDK.

    Really, any advice will help and be appreciated.
    I'm a complete novice to investing and can tell you that the bolded is probably one of the worst things you can do. If this is your retirement we're talking about, then putting all of your eggs into that company's basket is risky. You cannot guarantee what will happen over the next 30-40 years. If anything goes wrong w/ Verizon and they tank, then literally your entire retirement tanks with it.

    I've never had a problem with people investing in their own company stock, but at least be smart about it and spread it around. With that said, I'm sure there are plenty of others on this board who are much more educated on this subject than myself.

    Thanks for starting this thread btw. I've recently had some investing questions as well and wondered what the pros on this site had to offer.

    Comment


    • #3
      Originally posted by BleedBlueGold View Post
      I'm a complete novice to investing and can tell you that the bolded is probably one of the worst things you can do. If this is your retirement we're talking about, then putting all of your eggs into that company's basket is risky. You cannot guarantee what will happen over the next 30-40 years. If anything goes wrong w/ Verizon and they tank, then literally your entire retirement tanks with it.

      I've never had a problem with people investing in their own company stock, but at least be smart about it and spread it around. With that said, I'm sure there are plenty of others on this board who are much more educated on this subject than myself.

      Thanks for starting this thread btw. I've recently had some investing questions as well and wondered what the pros on this site had to offer.
      Thanks for the advice. I think I'll leave 1% with VZ and spread out the other 2%. I did a little research and eft seems to have a good reputation.

      Comment


      • #4
        I agree, spread that portion out across stocks and bonds. In my former job, I was issued stock as an annual bonus. At one time I had about $150K in company stock. It had climbed from about $30 to $60 in just a few years. Then the CEO decided he was smarter than everyone and it plunged to $7.00 per share. This was before the economy soured.

        BTW............If they are matching 6%, then I would put 6% in every paycheck. Especially while your young. It might be a little painful just starting out, but I guarantee you you'll find a way to make due and by the time you're ready to retire (and I've been long gone lol), you'll have a small fortune.

        Comment


        • #5
          I'd recommend checking out the Morningstar.com forums, especially the section for beginners. Conventional wisdom will be to learn, save as much as you can, max out tax-advantaged accounts (401k with full company match, IRA), and spread your investments around as many non-correlated asset classes as possible (domestic stocks, intl stocks, bonds, cash, maybe commodities/real estate). These days, there are many great options for getting broad exposure to different asset classes, for low fees.

          Comment


          • #6
            Originally posted by Irish#1 View Post
            I agree, spread that portion out across stocks and bonds. In my former job, I was issued stock as an annual bonus. At one time I had about $150K in company stock. It had climbed from about $30 to $60 in just a few years. Then the CEO decided he was smarter than everyone and it plunged to $7.00 per share. This was before the economy soured.

            BTW............If they are matching 6%, then I would put 6% in every paycheck. Especially while your young. It might be a little painful just starting out, but I guarantee you you'll find a way to make due and by the time you're ready to retire (and I've been long gone lol), you'll have a small fortune.
            Would you be willing to invest my real money in exchange for reps and vbucks? FYI, i do contribute 6% of every paycheck. It hurts to see on that pay stub, but I know it's the right move.

            Comment


            • #7
              So for the time being before I learn more about this, I change my 3% from all to my company, and put it as this:

              25% - Small Cap US Small Group
              25% - Internaional Company
              30% - Blended fund investment Verizon Fund 2055
              20% - Bonded Managed Income PIM Real Return


              Is this a good start?

              Literally no idea what this means. I take it these are mutual funds since I don't pick specific companies? FWIW, Fidelity handles our 401K.

              Man, I'm ignorant about this stuff.

              Comment


              • #8
                Originally posted by kuehnja View Post
                Would you be willing to invest my real money in exchange for reps and vbucks? FYI, i do contribute 6% of every paycheck. It hurts to see on that pay stub, but I know it's the right move.
                I just sent you a PM.

                Comment


                • #9
                  Whne you are young and starting out in your profession it is vital that you find a way to invest. Give up that daily coffee, pack a lunch instead of eating out, etc. It may not seem like a lot, but at a minimum I would invest enough to get the company match. That's free money for you. I started investing 10% at the age of 26 and received a 6% company match. Luckily my company offered several different investment options so I chose aggressive growth funds. I have since diversified my portfolio to help with the overall risk factor. I have also been able to up my contribution level to over 18% of my pay. I still get a 6% match from my company as well bringing my total investment to 24%. I am 46 years old now and with a conservative growth estimate of 7% on my investments, I will retire with enough in savings to live very comfortable. That would not have occured if I had not started at 26. I am not really qualified to give investment advice, but there are several out here who are. Other investment tools include Roth IRA's which grow tax free and are good options to explore.

                  Comment


                  • #10
                    Originally posted by T Town Tommy View Post
                    Whne you are young and starting out in your profession it is vital that you find a way to invest. Give up that daily coffee, pack a lunch instead of eating out, etc. It may not seem like a lot, but at a minimum I would invest enough to get the company match. That's free money for you. I started investing 10% at the age of 26 and received a 6% company match. Luckily my company offered several different investment options so I chose aggressive growth funds. I have since diversified my portfolio to help with the overall risk factor. I have also been able to up my contribution level to over 18% of my pay. I still get a 6% match from my company as well bringing my total investment to 24%. I am 46 years old now and with a conservative growth estimate of 7% on my investments, I will retire with enough in savings to live very comfortable. That would not have occured if I had not started at 26. I am not really qualified to give investment advice, but there are several out here who are. Other investment tools include Roth IRA's which grow tax free and are good options to explore.
                    Roth RAs are a great option, but they aren't necessarily tax free, the money you put in is already taxed.

                    Kuehnja,
                    1. Make sure you take full advantage of the company match; it's free money.
                    2. I would focus on a target retirement fund (probably 2055 in your case) or some index funds that track the S&P or the Total Stock Market, only invest in a bond fund if you aren't currently in a target retirement fund. You should have a pretty aggressive asset allocation at your age and you don't want too much bond exposure. At your age, I'd suggest an allocation of 80%+ equities at the minimum.
                    3. After your match, if you'd like to invest even more, you should turn to Roth IRAs as Tommy mentioned. Roths are taxed as you put the money in and tax free upon retirement. This is attractive because presumably you will be getting taxed at a higher rate when you're older.

                    Comment


                    • #11
                      Originally posted by tussin View Post
                      Roth RAs are a great option, but they aren't necessarily tax free, the money you put in is already taxed.

                      Kuehnja,
                      1. Make sure you take full advantage of the company match; it's free money.
                      2. I would focus on a target retirement fund (probably 2055 in your case) or some index funds that track the S&P or the Total Stock Market, only invest in a bond fund if you aren't currently in a target retirement fund. You should have a pretty aggressive asset allocation at your age and you don't want too much bond exposure. At your age, I'd suggest an allocation of 80%+ equities at the minimum.
                      3. After your match, if you'd like to invest even more, you should turn to Roth IRAs as Tommy mentioned. Roths are taxed as you put the money in and tax free upon retirement. This is attractive because presumably you will be getting taxed at a higher rate when you're older.
                      Those target retirement funds are usually much too conservative (i.e. bond-heavy). I know the old "invest in bonds the same percentage as your age," but there's no reason why a 20 or 30-something should be in bonds whatsoever because he can absorb the risk in the market. Plus, in a low interest rate environment, bonds have nowhere to go but down. Rates will rise eventually which will devalue all the bonds acquired at the prevailing low rates we see now.

                      My mix, if anyone cares. I'm 24M, married, no kids.

                      20% each.

                      SEQUOIA FUND
                      FIDELITY CAP APP UNITIZED
                      FIDELITY DVRS INTL UNITZD
                      VANGUARD INST INDEX PLUS
                      BARON GROWTH UNITIZD

                      Comment


                      • #12
                        Originally posted by wizards8507 View Post
                        Those target retirement funds are usually much too conservative (i.e. bond-heavy). I know the old "invest in bonds the same percentage as your age," but there's no reason why a 20 or 30-something should be in bonds whatsoever because he can absorb the risk in the market. Plus, in a low interest rate environment, bonds have nowhere to go but down. Rates will rise eventually which will devalue all the bonds acquired at the prevailing low rates we see now.

                        My mix, if anyone cares. I'm 24M, married, no kids.

                        20% each.

                        SEQUOIA FUND
                        FIDELITY CAP APP UNITIZED
                        FIDELITY DVRS INTL UNITZD
                        VANGUARD INST INDEX PLUS
                        BARON GROWTH UNITIZD
                        It's easy to have a bullish strategy during a bull market. I think every young person should have minimal bond exposure for diversification purposes (I have ~10%).

                        Comment


                        • #13
                          Originally posted by tussin View Post
                          It's easy to have a bullish strategy during a bull market. I think every young person should have minimal bond exposure for diversification purposes (I have ~10%).
                          To each his own, I suppose. My perspective is that it's ALWAYS a bull market when we're talking about retirement accounts for a young person because the "market" is 40 years long. Every 40-year market in history has been a bull market.

                          Comment


                          • #14
                            Kuehnja: you and I are direly opposed on everything, but I'll tell you what worked for me.

                            a). take the company's offered money every time [i.e. matching funds];

                            b). pay attention to wizards [at least until you get married or have other relationship responsibilities --- go all in on the Market.] In the long term the market will thrash anything else around --- if it tanks the whole deal is a catastrophe, and American Big Money will not let that happen. I think it was somebody like Mark Twain who said: if you live in a Capitalist economy you better become a Capitalist. If you have a wife and kids, it's still a better long term deal, but pressures will probably force you to think more conservatively. When drops occur, just don't panic and ride them out. Some monster like Verizon is probably bulletproof.

                            c). despite the fact that Verizon is probably bulletproof, it's still the smart move to spread out. These decisions depend upon what your internal workings are like. If you're going for the gold rings, just hit the supermonsters like Microsoft, Amazon, Google, but mainly the uber-base of everything, the energy sector. Also, if you're hip enough, the vital areas of the materials base. Civilization can't continue without the underlying energy and materials [ex. aluminum, iron, copper], so they rumble on. Basics if you want "steady"; electronic toys if you're a futuristic gambler.

                            Another way to go, which most do not, is to find a "package" of what are called "social choice stocks". These stocks are the sort of things which don't overtly violate people's sensibilities who are advocates for things like environmentalism or social justice causes [they are still big companies, just ones with no overt kickass style activities]. On the surface they sound like economic losers, but they have been my choice for years, and they always have taken losses much less seriously during downturns than the Devil-take-the-hindmost stocks.

                            I was an somewhat underpaid teacher all my life. By going the way above, I retired with nearly exactly one million dollars in my retirement account.

                            For what it's worth. OMM

                            Comment


                            • #15
                              My retirement
                              Storage
                              Land
                              Rental property
                              Ira's (suck)
                              I have some stocks which I have done very well with over the last 10 years or so. I also have a whole folder full of stocks that are currently worth nothing or are in bankruptcy ect. Its risky no matter how smart you are or what you know.

                              Stocks are so risky and almost crazy to invest in unless you are willing to spend at least 10 hours weekly doing homework on the market. But they can also make you liquid money right now.

                              I invested several thousand dollars in siri several years ago when it was trading near its low. Right before the merger with XM. It went up like crazy and is still trading for what I consider an under valued price. Anyway I sold enough to buy my cabinets and countertops when I built my last house. 22k worth. I had 1260 dollars in the cabinets. Yes you read that right. Plus it is still saving me today and will be for 20 more years. Because it was money I did not have to borrow. So I look at it as I am making 3.425 percent on that money every year.

                              Moral of the story I guess is saving for retirement is great, most don't do it and that is a huge part of what is wrong with our country. So max out the match on your 401k
                              take advantage of the roth IRA option. But invest some for now. Do some work read some books and just make time to educate yourself with a couple sections of the market. Don't bet the farm on it and get in over your head though. Live poor and retire wealthy in my opinion sucks!

                              Comment


                              • #16
                                Originally posted by Old Man Mike View Post
                                Another way to go, which most do not, is to find a "package" of what are called "social choice stocks".
                                If you go that route, you really need to do your research about what exactly they're using as their criteria for "social choice" because it might not agree with your perspective on the matter. Some funds might take a "green" route and only invested in companies that are helping the environment. Others (see the Timothy Fund) might take a "Christian" approach and not invest in companies that promote abortion, pornography, alcohol, tobacco, gambling etc. A lot of those funds use criteria that are so strict that it's difficult for them to keep pace with the market and aren't (IMO) worth it.

                                Another consideration about socially-conscious funds is that there's no benefit to a company if you invest in their stock. You might think tobacco is one of the biggest evils in the country, but if you decided to invest in a fund that held Philip Morris, you can rest in peace knowing that none of your money actually GOES to Philip Morris. They got all their cash from the transaction at the time of their IPO, and any subsequent transactions are just between investors. You're not helping that company or supporting what they stand for if you hold a mutual fund that carries their stock, you're just betting on the long-term growth of that stock from which you yourself will benefit.

                                Unrelated, but it came up and I haven't commented: I'd stay away from single-company stocks, even something large like Verizon, unless you're getting some kind of preferred employee pricing (i.e. 5% discount or something like that). It's just too risky and nobody is truly "too big to fail," especially if your trust lies with politicians. Nobody thought that Standard Oil or Enron would ever go belly-up either, but shit, as they say, happens.

                                Comment


                                • #17
                                  Read Rich Dad Poor Dad. Assets vs liabilities.

                                  My portfolio:
                                  Real Estate....cash flow rentals
                                  Stocks - very diversified
                                  Gold/Silver - wealth preservation against a weak over printed $

                                  Also, there is a guy names Dave Ramsey....he has a talk show...great stuff. Do a google search and listen to his sound advise...
                                  "The good lord put eyes in front of your head rather than in back so you can see where you're going rather than where you've been." Lou Holtz

                                  Comment


                                  • #18
                                    Originally posted by NDFANnSouthWest View Post
                                    Read Rich Dad Poor Dad. Assets vs liabilities.

                                    My portfolio:
                                    Real Estate....cash flow rentals
                                    Stocks - very diversified
                                    Gold/Silver - wealth preservation against a weak over printed $

                                    Also, there is a guy names Dave Ramsey....he has a talk show...great stuff. Do a google search and listen to his sound advise...
                                    I'd also read Millionaire Next Door.

                                    Don't buy real estate until you can pay cash for it.

                                    (I personally don't like precious metals because if everything goes bad enough where you need them, nobody will want to buy them simply BECAUSE it's "that bad".)

                                    Comment


                                    • #19
                                      Originally posted by wizards8507 View Post
                                      I'd also read Millionaire Next Door.

                                      Don't buy real estate until you can pay cash for it.

                                      (I personally don't like precious metals because if everything goes bad enough where you need them, nobody will want to buy them simply BECAUSE it's "that bad".)
                                      Excellent suggestion....
                                      "The good lord put eyes in front of your head rather than in back so you can see where you're going rather than where you've been." Lou Holtz

                                      Comment


                                      • #20
                                        Thank you all for your opinions. If I coud rep each of you I would.

                                        Comment


                                        • #21
                                          Originally posted by kuehnja View Post
                                          New to investments here.

                                          My company matches 6% of my contribution to 401K. 3% cash match, and 3% investment match. It's a good number, but they don't advise you at all (which I'm not complaining about, because that's what makes investing so fun, right?).

                                          But I have forgotten what little I once knew in college about stocks and so I have it set to put all 3% investment into the company stock.

                                          So, yeah. That's where I'm at and wondering if I should spread out the 3%? If so, how?

                                          What are EFTs? I heard these might be a strong option if you're not looking to touch your investments for 30 years or so. Is this true?

                                          FWIW, the company is Verizon. So maybe I should just keep it going to their stock? Maybe just loading up with one massive company will be the most beneficial in the long term? Or maybe it's boring and won't return much because who knows if they'll be better off now that they are in 30 years? IDK.

                                          Really, any advice will help and be appreciated.
                                          This shouold answer all your questions in a clear and concise way:

                                          <iframe width="640" height="360" src="//www.youtube.com/embed/VsEpjTcWkyw?feature=player_detailpage" frameborder="0" allowfullscreen></iframe>
                                          I'm too drunk to taste this chicken.

                                          Comment


                                          • #22
                                            There are alot of ppl that argue against precious metal...and I see both sides of the argument. However, when the fed reserve continues to print money....what will happen...supply and demand...right? I hope the $ never crashes however I want to be prepared if it does.
                                            "The good lord put eyes in front of your head rather than in back so you can see where you're going rather than where you've been." Lou Holtz

                                            Comment


                                            • #23
                                              Originally posted by NDFANnSouthWest View Post
                                              There are alot of ppl that argue against precious metal...and I see both sides of the argument. However, when the fed reserve continues to print money....what will happen...supply and demand...right? I hope the $ never crashes however I want to be prepared if it does.
                                              Ammunition and tobacco.

                                              And land, too.

                                              Comment


                                              • #24
                                                I would recommend diversity and not putting it all in Verizon. The key is to eliminate or marginally reduce systematic risk which is done by diversity. There are many ways to do this through indexes or mutual funds. I personally think the Vanguard is a great index particular the one that follows the S&P500. Keep in mind there is no right or wrong answer, the question is how risky are you and what are your goals. It seems you are young so I would recommend being moderately aggressive however be sure that your portfolio is diverse so don't put it all in Verizon.

                                                Comment


                                                • #25
                                                  Originally posted by jerboski View Post
                                                  I would recommend diversity and not putting it all in Verizon. The key is to eliminate or marginally reduce systematic risk which is done by diversity. There are many ways to do this through indexes or mutual funds. I personally think the Vanguard is a great index particular the one that follows the S&P500. Keep in mind there is no right or wrong answer, the question is how risky are you and what are your goals. It seems you are young so I would recommend being moderately aggressive however be sure that your portfolio is diverse so don't put it all in Verizon.
                                                  Good advise...look at Enron. smh
                                                  "The good lord put eyes in front of your head rather than in back so you can see where you're going rather than where you've been." Lou Holtz

                                                  Comment


                                                  • #26
                                                    In three words:

                                                    railroads and marijuana

                                                    Comment


                                                    • #27
                                                      Not sure if you're familiar with the site Kuehnja, but Reddit is a site with a lot of good info to consider for questions like these. You could check out subs like /r/investing or /r/personalfinance

                                                      Good luck with your investments!

                                                      Comment


                                                      • #28
                                                        There's some really good advice in this thread. I'd pay close attention to what wizards, old man mike, and goose tranio said. I'd add in my thoughts but they more or less echo what has already been posted.

                                                        In a nutshell though, you want to be diversified (don't put it all on Verizon) and assuming you're in this for the long-haul, you want the vast majority of your portfolio to be made up of equity securities (stocks). Don't be afraid to put part of your portfolio in an international mutual fund as well. Americans tend to be afraid to invest internationally but it's been proven that having a portion of your portfolio in international stocks reduces risk.

                                                        Comment


                                                        • #29
                                                          Originally posted by NDFANnSouthWest View Post
                                                          Good advise...look at Enron. smh
                                                          Cant even imagine being an every day employee at Enron when their CEO and executive team was telling all their employees to continue buying Enron and investing in the company when they knew what was going on and all the debt they were hiding. Blows my mind

                                                          Comment


                                                          • #30
                                                            It is my honest opinion that anybody who wishes to invest their money should read A Random Walk Down Wall Street by Burton Malkiel. It gets dry, but it's incredibly insightful.

                                                            Comment


                                                            • #31
                                                              Originally posted by zelezo vlk View Post
                                                              It is my honest opinion that anybody who wishes to invest their money should read A Random Walk Down Wall Street by Burton Malkiel. It gets dry, but it's incredibly insightful.
                                                              Great book! I also like the intelligent investor by Benjamin Graham

                                                              Comment


                                                              • #32
                                                                I'm 30 and currently have my investments allocated as such: Aggressive Growth, Growth + Income, Domestic Growth, and International (25&#37; each respectively). The good ol Dave Ramsey way.

                                                                However, I have heard from numerous people that this isn't necessarily the best way to invest and that Dave, while great on getting out of debt advice, is less intellectual about his investing advice. Although, his KISS approach is pretty much fool proof. Get in, stay dedicated, and never sell low (ride out the bear markets...don't time the market). Investing for retirement is a marathon. And any successful investor will tell you that.

                                                                I'm currently reading The Boglehead's Guide to Investing. So far, great book. It may cause me to re-allocate all of my investments. And I second reading Millionaire Next Door.
                                                                Last edited by BleedBlueGold; 02-14-2014, 02:25 PM.

                                                                Comment


                                                                • #33
                                                                  Originally posted by BleedBlueGold View Post
                                                                  I'm 30 and currently have my investments allocated as such: Aggressive Growth, Growth + Income, Domestic Growth, and International (25% each respectively). The good ol Dave Ramsey way.

                                                                  However, I have heard from numerous people that this isn't necessarily the best way to invest and that Dave, while great on getting out of debt advice, is less intellectual about his investing advice. Although, his KISS approach is pretty much fool proof. Get in, stay dedicated, and never sell low (ride out the bear markets...don't time the market). Investing for retirement is a marathon. And any successful investor will tell you that.

                                                                  I'm currently reading The Boglehead's Guide to Investing. So far, great book. And I second reading Millionaire Next Door.
                                                                  My belief is to let the financial intellectuals do their financially intellectual investing and I'll do it the simple way. If someone is ASKING for investing advice, it means they probably don't have the technical training in finance and accounting to understand the so-called intellectual approach in the first place. It's much better to understand a simple approach than go with something elaborate and sophisticated that you don't understand. The other guys treat personal finance as a mathematical exercise and ignore human behavior.

                                                                  Comment


                                                                  • #34
                                                                    One thing I'm fairly sure of: once Yellen stops pumping, get your retirement $ out of the large-cap funds.

                                                                    Comment


                                                                    • #35
                                                                      The OP was about 401k decisions for an admittedly less than informed young investor.

                                                                      1) Always get the free money (i.e. company match) - this was stated by others but worth repeating. Not many options in life for IMMEDIATE 50&#37; or 100% return on an investment. If your employer is $ for $ on the first 6% then they are better than most and you need to take advantage of that.

                                                                      2) Investments - KISS - 50% S&P 500 fund, 25% Small/Mid Cap US, 25% International. Some may say this is too risky but consider you are starting from $0. Since you have very little at risk at this stage, basic dollar cost averaging works to your favor with the risky assets.

                                                                      3) Sleep on it - Leave your account alone. You have a 30 year time horizon so you don't need to be looking at your account daily and making changes more than once a year. 401k investors shoot themselves in the foot more often than not by being overly active and chasing performance.

                                                                      4) Bonds - 401k plans investment options for bonds usually range from bad to worse. I could get on board a 10% allocation if your options weren't most likely loaded with government bonds and longer term bond. I would leave them out for 3-5 years and reconsider them when you rebalance at some point down the road. With interest rates as low as they are and the options you likely have to choose from, absolute returns are likely to stink in that area for a while.

                                                                      Comment


                                                                      • #36
                                                                        Originally posted by Irish Houstonian View Post
                                                                        One thing I'm fairly sure of: once Yellen stops pumping, get your retirement $ out of the large-cap funds.
                                                                        Never! MOAR stimulus!

                                                                        Comment


                                                                        • #37
                                                                          As for Dave Ramsey - Save like Dave Ramsey...just don't invest like him - Sep. 26, 2013

                                                                          the title of the article sums up my views precisely. I enjoy his radio show but any time he spouts off on investing it makes me cringe.

                                                                          Comment


                                                                          • #38
                                                                            Originally posted by RDU Irish View Post
                                                                            The OP was about 401k decisions for an admittedly less than informed young investor.

                                                                            1) Always get the free money (i.e. company match) - this was stated by others but worth repeating. Not many options in life for IMMEDIATE 50% or 100% return on an investment. If your employer is $ for $ on the first 6% then they are better than most and you need to take advantage of that.

                                                                            2) Investments - KISS - 50% S&P 500 fund, 25% Small/Mid Cap US, 25% International. Some may say this is too risky but consider you are starting from $0. Since you have very little at risk at this stage, basic dollar cost averaging works to your favor with the risky assets.

                                                                            3) Sleep on it - Leave your account alone. You have a 30 year time horizon so you don't need to be looking at your account daily and making changes more than once a year. 401k investors shoot themselves in the foot more often than not by being overly active and chasing performance.

                                                                            4) Bonds - 401k plans investment options for bonds usually range from bad to worse. I could get on board a 10% allocation if your options weren't most likely loaded with government bonds and longer term bond. I would leave them out for 3-5 years and reconsider them when you rebalance at some point down the road. With interest rates as low as they are and the options you likely have to choose from, absolute returns are likely to stink in that area for a while.
                                                                            I agree with everything you said except the bolded. There are funds out there that can beat the market. For example, the Sequoia Fund.

                                                                            Sequoia Fund, Inc.

                                                                            Comment


                                                                            • #39
                                                                              Originally posted by RDU Irish View Post
                                                                              As for Dave Ramsey - Save like Dave Ramsey...just don't invest like him - Sep. 26, 2013

                                                                              the title of the article sums up my views precisely. I enjoy his radio show but any time he spouts off on investing it makes me cringe.
                                                                              That article isn't about what Dave Ramsey teaches, it's about one of Dave's Endorsed Local Providers. The article states:

                                                                              So how was the advice? Smiler recommended I invest in American Funds' target-date fund, which carried an upfront 5.75% load.
                                                                              Dave would NEVER suggest investing in a target-date fund. Ever. The ELP is obviously going against Dave's principles and the author of that article is using him as a strawman to bash Dave himself.

                                                                              Comment


                                                                              • #40
                                                                                I read somewhere that it takes 60 some years for an investor to actually prove that he/she could beat the market. The same could probably be said of funds. Keeping pace with the market is the expectation, beating it is a bonus.

                                                                                Comment


                                                                                • #41
                                                                                  Originally posted by zelezo vlk View Post
                                                                                  I read somewhere that it takes 60 some years for an investor to actually prove that he/she could beat the market. The same could probably be said of funds. Keeping pace with the market is the expectation, beating it is a bonus.
                                                                                  Sequoia's been doing it since inception in 1970. 44 years ain't too bad, but I get your point.

                                                                                  Comment


                                                                                  • #42
                                                                                    Originally posted by wizards8507 View Post
                                                                                    That article isn't about what Dave Ramsey teaches, it's about one of Dave's Endorsed Local Providers. The article states:



                                                                                    Dave would NEVER suggest investing in a target-date fund. Ever. The ELP is obviously going against Dave's principles and the author of that article is using him as a strawman to bash Dave himself.
                                                                                    This brings up a question I've been meaning to ask. I used one of his ELPs and they had me transfer my Roth IRA from Chase and my non-retirement investment account from Vanguard to American Funds. I also set up my wife's Roth IRA w/ AF. I have actually heard numerous times where Dave throws out a plug for AF and also mentions that some front-load funds are worth the cost. However, I have heard elsewhere that AF's yearly fees are what really put strain on the growth of your portfolio when comparing it to Vanguard. Does anyone have any insight on this? If this is accurate, it really frustrates me that I chose the wrong place to set up my investments. I definitely understand the thought of using no-load, low fee funds...but are those always the best? That's basically what Vanguard promotes.

                                                                                    Comment


                                                                                    • #43
                                                                                      Also, a lot of people use Index funds in their portfolio. Can someone point out to a novice what those are exactly and how I can determine if a fund I'm investing in is in fact an Index fund?

                                                                                      Edit: I'm assuming it says Index in the name...as I'm finding out by searching through Vanguard's list of funds.
                                                                                      Last edited by BleedBlueGold; 02-14-2014, 03:43 PM.

                                                                                      Comment


                                                                                      • #44
                                                                                        Originally posted by wizards8507 View Post
                                                                                        I agree with everything you said except the bolded. There are funds out there that can beat the market. For example, the Sequoia Fund.

                                                                                        Sequoia Fund, Inc.
                                                                                        No idea what is available in the Verizon 401k but I don't see Sequoia Funds very often in any plans I review. Virtually all 401k plans have an S&P Index fund which is a fantastic bread and butter investment. The selection process is such that plans tend to sell high and buy low for true value adding managers.

                                                                                        Why no Sequoia in 401k plans?
                                                                                        1) over 50% of assets are in the top 10 holdings, 15% in one company would be an instant disqualifier for most plan providers.
                                                                                        2) Not a major fund family, without the sales force they are not equipped to sell themselves to the consultants that plug funds into 401k plans.
                                                                                        3) Style boxes - consultants are overly focused with filling in style boxes on the 401k lineup, funds that "go anywhere, do anything" fall of the map pretty quick
                                                                                        4) Performance - they want funds that won't crap the bed relative to their benchmarks on a year to year basis. Managers that add value are usually off the beaten track and will rarely mirror a benchmark, both good and bad. The bad years result in getting kicked off the plan due to short sightedness.

                                                                                        Its pretty much the same way most mutual fund wrap programs work. Buy high, sell low for managers rather than really staying committed to a process long term to reap the benefits.

                                                                                        Comment


                                                                                        • #45
                                                                                          Originally posted by wizards8507 View Post
                                                                                          I agree with everything you said except the bolded. There are funds out there that can beat the market. For example, the Sequoia Fund.

                                                                                          Sequoia Fund, Inc.
                                                                                          Another great fund that generally beats the market long-term is Formula Investing U.S. Value Select (FNSAX). It's based on Greenblatt's magic formula investment strategy focusing on low P/E, high ROIC companies.

                                                                                          Anyone that is interested in investing should really read his books, mainly You Can Be A Stock Market Genius and The Little Blue Book.

                                                                                          Comment


                                                                                          • #46
                                                                                            Originally posted by BleedBlueGold View Post
                                                                                            This brings up a question I've been meaning to ask. I used one of his ELPs and they had me transfer my Roth IRA from Chase and my non-retirement investment account from Vanguard to American Funds. I also set up my wife's Roth IRA w/ AF. I have actually heard numerous times where Dave throws out a plug for AF and also mentions that some front-load funds are worth the cost. However, I have heard elsewhere that AF's yearly fees are what really put strain on the growth of your portfolio when comparing it to Vanguard. Does anyone have any insight on this? If this is accurate, it really frustrates me that I chose the wrong place to set up my investments. I definitely understand the thought of using no-load, low fee funds...but are those always the best? That's basically what Vanguard promotes.
                                                                                            The whole ELP thing is nothing more than pay for play. Advisors pay Ramsey to provide, not just clients, but pre programed sheep. You don't even have to do what Ramsey generally says, just invest their money and they will think you are an outstanding Christian because Dave Ramsey lets you affiliate with him. Just like the guys who use their church to rip off widows.

                                                                                            I will admit, it is a tough market for a retail investor to navigate. Interview 100 financial advisors and you might find 100 different ways to manage your investments.

                                                                                            As for A share (5%+ upfront loads), I have two main reasons to dislike them 1) wham bam, thank you mam; what is the ongoing motivation to service that client? The advisor is getting mostly paid upfront and very minimally (.25% per year after a year) ongoing. 2) You end up stuck in that fund family forever and any recommendation to change has incredible conflicts of interest in play.

                                                                                            C share mutual funds cost about .75% more per year on internal expenses and have a 1% sales charge if sold in the first year. The advisor gets paid 1% per year. They now have the same motivation as you, grow this thing so they can make more money per year. They also are building a business instead of only putting food on the table if they can make a sale. If they think you can make more money in a better fund, they can make the change after one year with minimal transactional expenses. Sure the break even is around 7 years but the liquidity and proper incentive structure is more than worth it IMO.

                                                                                            I could go on with the screwed up incentive structures inherent in the industry of financial advice but I have to wrap up so I'm not late for dinner.

                                                                                            Comment


                                                                                            • #47
                                                                                              These posts are a reason why I'm glad I read A Random Walk for a class. Most managers are slightly less clueless than us laymen and the different strategies to "beat the market" are practiced by a lot of people. I mean, if you can beat the market that's great, but I'm skeptical that you're not just getting lucky.

                                                                                              Comment


                                                                                              • #48
                                                                                                Originally posted by BleedBlueGold View Post
                                                                                                Also, a lot of people use Index funds in their portfolio. Can someone point out to a novice what those are exactly and how I can determine if a fund I'm investing in is in fact an Index fund?

                                                                                                Edit: I'm assuming it says Index in the name...as I'm finding out by searching through Vanguard's list of funds.
                                                                                                In this context, an index fund is basically a mutual fund of the stock market as a whole. The most common measure is the S&P 500. Basically, if the S&P 500 goes up 2%, the index fund also goes up 2% because it is built from the stocks of the same companies. The advantage of an Index Fund is that they usually have very low expenses. It's possible for a "managed" fund to "beat the market," but they come with expenses to pay the managers and analysts that build and administer the fund. Index funds can basically be managed by computers.

                                                                                                Comment


                                                                                                • #49
                                                                                                  Originally posted by wizards8507 View Post
                                                                                                  In this context, an index fund is basically a mutual fund of the stock market as a whole. The most common measure is the S&P 500. Basically, if the S&P 500 goes up 2&#37;, the index fund also goes up 2% because it is built from the stocks of the same companies. The advantage of an Index Fund is that they usually have very low expenses. It's possible for a "managed" fund to "beat the market," but they come with expenses to pay the managers and analysts that build and administer the fund. Index funds can basically be managed by computers.
                                                                                                  The key here is how is the fund "indexed"?

                                                                                                  If you look at most index funds, a lot of times, they end up falling short in performance to whatever it is they were indexed on. The reason for this is two fold. First, they cannot perfectly mimic the index from a weighting perspective. They are usually pretty darn close, but are not perfect, which leads to performance and risk variance. Again, the variances are small, but they are there. The other reason is expense. Even though they are low expense, they still have expense where as the index in of itself, does not.
                                                                                                  Last edited by Ndaccountant; 02-14-2014, 04:34 PM.

                                                                                                  Comment


                                                                                                  • #50
                                                                                                    Once upon a time, I had passed Series 7, 63, and 6 licenses. I used to invest in the stock market, but no more. I don't even take the match with my company because even with the free money, I can beat it long term by staying out of the stock market.

                                                                                                    To each his own, and I won't tell you not to invest in the 401K. This is just what I do.

                                                                                                    The problem with the stock market is that, historically, it is casino gambling. I can tell you as an former investment advisor we always used to quote the 40 year window, 12&#37; annualized return, etc etc..

                                                                                                    Now, to do so is criminal in my opinion. Given the historically unprecedented money printing by the Fed, the weak economy, the number of unemployed, total public debt, runaway deficits, lack of industrial production, and international hatred of the US dollar, the future prospects of the US stock and bond markets are pointed down and not up.

                                                                                                    Learn your 100-year market history before you invest. Whatever happened in the last 40 years means squat for the next 40 because the factors are different, that I can guarantee you :)

                                                                                                    I can also tell you for a fact that the best long term investment in the US has been productive farmland, especially during economic downturns. Productive farmland has a higher rate of return during recessions and depressions than gold and silver does. Also, most states give you an AG exemption on taxes for hay production. All you have to do is find someone to mow the grass, they take the hay for free (their profit on labor), and you pay almost zilch in property taxes. It's free money, solid growth, and they ain't making any more of it ;)

                                                                                                    I have such an investment in my home state, and I feel like I am robbing someone.

                                                                                                    Good luck!
                                                                                                    Last edited by wyvrn; 02-14-2014, 05:48 PM.

                                                                                                    Comment

                                                                                                    Adsense

                                                                                                    Collapse
                                                                                                    Working...
                                                                                                    X