stock market/financial ?'s

[PANDFAN]

I don't know where to begin....i am 32 married 4 young kids(4/5/6/7) and want to explore some kind of investments...my wife has a pension plan being a state worker and i have a 401k...we make an average income and never really seem to be "getting ahead"...i would like to get into putting some money into the market....where does one even begin w/...i figured some of my fellow irish envy members could point me in the right direction......thanks in advance

 

[NDBoiler]

<iframe width="640" height="360" src="http://www.youtube.com/embed/1_rDtmT246s?feature=player_detailpage" frameborder="0" allowfullscreen></iframe>

 

[BobD]

GET THIS BOOK AND LISTEN TO NOBODY ELSE'S ADVISE.

 

[NDBoiler]

On a more serious note I would recommend the following, which I have found to be successful for me and my family:

1. Diversify your portfolio - make sure your 401k investments are spread over a range of investment types, such as agressive/conservative/moderate mutual funds, some international stocks, and bonds.

2. If you are looking into long term retirement savings, playing the stock market is probably not the best way to go. You want consistent yearly returns, so that is why a diversified blend of investments is the best way to go for long term investing, some may be up and others down, but you won't have all your eggs in one basket. You can probably afford to be a little more aggressive at a younger age than than in your 50s and 60s though.

3. Do your own research - Check history of company/fund performance over a period of years/decades if possible. Also know what the future strategies are for the funds/companies you may want to invest in and evaluate it for yourself.

4. Develop (and stick to) a monthly budget. This will help you determine how much you can afford to contribute to investing. I personally have had success with the Dave Ramsey program, but it has its quirks and some folks are understandably not big fans of it. But if you are willing to be super disciplned about your family finances, its basic blueprint can lead you to be very succcessful with your money.

5. I am not a financial advisor, but I did stay at a Holiday Inn Express last night.

 

[Irish Houstonian]

My take would be:

(1) Put more in your 401(k) if you aren't maxed -- you can't use it now but its favorable tax treatment makes it a good savings vehicle. You can borrow against it too, in emergencies.

(2) Save more. It's almost impossible to seriously augment a worker's salary just through "the market". You have to either save more or earn more, and earning more tends to be beyond your control.

(3) If I had to pick one relatively safe, value stock right now, I'd say Apple (AAPL) looks pretty cheap for the long-term. (But I'm no better at stock-picking than anyone else, fwiw.)

 

[PraetorianND]

My advice would be to use a trusted financial adviser to manage your investments.

Chances are you are not an expert, nor are most of us on this board. Leave it to someone who does this for a living.

That being said, do your due diligence to make sure that they are top notch and their fees are not too high.

Also, as Houstonian said, make use of vehicles with favorable tax treatment and do your best to save more.

 

[irishpat183]

Go ROTH. You pay now, but at our age (I'm 31) the benefit is tax free on the way out.

 

[phork]

Get a financial adviser, period. Posting stuff on random message boards and seeking answers will kill you.

Apples stock has lost about $300 in less than a year, try again.

The stock market, however, over a 30-40 year span, has done nothing but go up. Long term investment you are looking good. Don't expect monster returns but you'll have a nice nest egg when you retire.

 

[Ndaccountant]

The first thing you need to do is save. It sounds like you have started that. The first thing you need to save for is an emergency cash fund if you have not done so already. The amount you need depends on your comfort level of how quickly you think you could get a new job if you were laid off or how much insurance you have incase you were injured. Typcially speaking, 3-6 months of expenses is the norm.

Once that is established, you should contribute enough to your 401k to receive the maximum match that your employer provides (if they provide a match). After that, contributing to a IRA (most likely a Roth) is the best step. You should probably be saving 10-15% of your pre-tax income for retirement. As others have mentioned, I think diversification is key. In all, over the last 15 years, the 7twelve portfolio has provided the best returns. See for yourself here on the detail. 7Twelve Portfolio: The Model The best way to do this is thru mutual funds for investors with les that $250k in investing assets.

Finally, use 529 plans to fund your college savings. Morningstar.com has a great review of 529's.

If this seems overwhelming for you and you are not confident and comfortable with what you are reading, hire an advisor that your can trust that does not work off of commission.

 

[Veer option]

Congratulations, stock investing done smartly is a great source of income to use now or investing for future retirement.

My tips:
1. Cover all your bases. Make sure you are on top of all your debt, mortgage, cc bills, school loans etc

2. Create a savings account that has at least six months of income in case you or your spouse is ever out of work. Some people say have at least a year of savings.

3. Start building your investment money stash. Be mentally prepared to lose at least some of it.

4. What is your overall risk tolerance? Are you prepared to lose short term for long term gains, or do you want stable income with not much growth?

5. If you want someone to develop an investing strategy for you. Shop for a financial adviser that has your interests long term and short term in mind. Personally, I like the ability to get my adviser on the phone and be able to discuss trades with him. He also gives me quarterly updates on market conditions, how my accounts are doing and what dividends I will have coming in. In my experience, you pay more for a brick and mortar financial adviser but its a nice feeling that you have someone looking out for you.

6. If wanting to go solo(online trading), start reading about stock investing right now. There are many great websites to understand lingo, types of trading, market analysis and they also have virtual stock trading simulators.

7. If you open a brokerage account either online (Etrade, Scott Trade) or with brick and mortar, (Charles Schwab, Merrel lynch, Wells Fargo etc) create a faux online trading account (market simulator) so you can play around with different strategies or invest in companies and see how you do. This can be good and bad, for instance my fake trading account has out performed my real life investing account by a large margin.

8. Remember you are buying a company not just a stock. This is important when doing research into companies.

 

[PANDFAN]

appreciate the feedback from everyone! thank you

 

[irishpat183]

The first thing you need to do is save. It sounds like you have started that. The first thing you need to save for is an emergency cash fund if you have not done so already. The amount you need depends on your comfort level of how quickly you think you could get a new job if you were laid off or how much insurance you have incase you were injured. Typcially speaking, 3-6 months of expenses is the norm.

Once that is established, you should contribute enough to your 401k to receive the maximum match that your employer provides (if they provide a match). After that, contributing to a IRA (most likely a Roth) is the best step. You should probably be saving 10-15% of your pre-tax income for retirement. As others have mentioned, I think diversification is key. In all, over the last 15 years, the 7twelve portfolio has provided the best returns. See for yourself here on the detail. 7Twelve Portfolio: The Model The best way to do this is thru mutual funds for investors with les that $250k in investing assets.

Finally, use 529 plans to fund your college savings. Morningstar.com has a great review of 529's.

If this seems overwhelming for you and you are not confident and comfortable with what you are reading, hire an advisor that your can trust that does not work off of commission.

I don't agree. 529's seriously narrow what you can do. I'd rather use an Index Universal Life product.

529's can only be used for college...what if your child doesn't go to college? Then youre on the hook for a huge tax liablity when you pull it out. Also, they're not protected from market volitilty and can lose value. Lastly, depending on their value, you may not qualify for additional financial aid if you need it as it's not "invisible" to FASFA.


Index UL is a much better option and can provide a tax free income if your child decides college isn't for them. And it's protected and cannot lose value.


Just a thought

 

[gkautz10]

I just received an offer from Edward Jones to enter their financial advising program. I will get back with you in about a year.

 

[Emcee77]

On a more serious note I would recommend the following, which I have found to be successful for me and my family:

1. Diversify your portfolio - make sure your 401k investments are spread over a range of investment types, such as agressive/conservative/moderate mutual funds, some international stocks, and bonds.

2. If you are looking into long term retirement savings, playing the stock market is probably not the best way to go. You want consistent yearly returns, so that is why a diversified blend of investments is the best way to go for long term investing, some may be up and others down, but you won't have all your eggs in one basket. You can probably afford to be a little more aggressive at a younger age than than in your 50s and 60s though.

3. Do your own research - Check history of company/fund performance over a period of years/decades if possible. Also know what the future strategies are for the funds/companies you may want to invest in and evaluate it for yourself.

4. Develop (and stick to) a monthly budget. This will help you determine how much you can afford to contribute to investing. I personally have had success with the Dave Ramsey program, but it has its quirks and some folks are understandably not big fans of it. But if you are willing to be super disciplned about your family finances, its basic blueprint can lead you to be very succcessful with your money.

5. I am not a financial advisor, but I did stay at a Holiday Inn Express last night.

Boiler, can you say more about this? Is there a particular book you used?

My wife and I have both changed jobs and had our first baby in the last year, and our budget needs to be reworked. This is the beginning of a major financial overhaul for us. If anyone else knows of any other good sources of advice for household budgeting/basic family financial planning, I'd appreciate it.

 

[pumpdog20]

I have a system that I like to call "Baby Steps"

Baby step 1: Save $1,000 for an emergency fund.

Baby step 2: Pay off debt using the Debt Snowball method. Regardless of interest rates, take your debt and pay the minimum on all except the smallest one. Take any extra payments to pay that off first. Once that is done proceed to the next smallest and so forth. (all debts other than mortgage)

Baby step 3: Save enough money to cover 3 to 6 months of expenses.

Baby step 4: 15% of household income into Roth IRA and pretaxed income vehicles (401 k or b).

Baby step 5: Save for kids' college

Baby step 6: Pay off house early

Baby step 7: Build wealth and give


Ok, these aren't my creations. This is the Dave Ramsey plan. If you'll not familiar, I highly recommend him for getting out of debt only. He's not much help with financial instruments. He's more of an archaic, only pay cash type, but helps millions of people, and once you get out of debt, you can move on to a financial advisor to sock away for retirement.

Real Debt Help - Get out of debt with Dave Ramsey's Total Money Makeover Plan - daveramsey.com

 

[IrishJayhawk]

Go ROTH. You pay now, but at our age (I'm 31) the benefit is tax free on the way out.

Financial Advisor + Roth = A start to success

 

[BleedBlueGold]

Read the Total Money Makeover by Dave Ramsey and contact one of his Endorsed Local Providers for investing help.

Following Dave's plan to get out of debt (and stay out), along with building wealth is pretty much fool proof. It's common sense.

Check him out. You won't be disappointed.

Edit: I posted this before reading a few others have already mentioned Dave's plan. Trust me, it DOES work. You just have to follow the steps. They're not always easy. They're not always fun.

"But if you live like no one else now, later you can live like no one else." -Dave Ramsey


If you go over your finances and find out that you are in fact ready for Baby Step 4, contact one of Dave's ELPs. They're there to help. Endorsed Local Providers - daveramsey.com

 

[WakeUpEchoes]

Pay someone to help you with it.

Or go my route, put 3K in Scottrade as a sophomore in college and lose half of it day-trading penny stocks.

 

[Ndaccountant]

I don't agree. 529's seriously narrow what you can do. I'd rather use an Index Universal Life product.

529's can only be used for college...what if your child doesn't go to college? Then youre on the hook for a huge tax liablity when you pull it out. Also, they're not protected from market volitilty and can lose value. Lastly, depending on their value, you may not qualify for additional financial aid if you need it as it's not "invisible" to FASFA.


Index UL is a much better option and can provide a tax free income if your child decides college isn't for them. And it's protected and cannot lose value.


Just a thought

Well, the 529 should come after IRA contributions since your Roth IRA contributions (not earnings, just contributions) can be used for college. That is option number one, but you can run into problems maxing out the Roth before covering both needs.

That being said, it has been awhile sine I looked at UL compared to 529's. Each has there pro's and con's and often that is dependent on each family situation. But, historically speaking, I have never heard someone pitching perm life insurance for college saving that wasn't selling it.

I can see where some people might think what you said. There is a nice balanced view on it in the article belowas well as one from US News. Generically speaking, my personal view are that you shouldn't purchase life insurance for college funding unless you need life insurance. Additionally, if you are looking to kill two birds with one stone, your time frame plays a big role. Often times the VUL has front loaded expenses, minmizing the growth of your basis. This makes it harder to generate returns equal to the market. Finally, depending on the insurance plan, if you lapse a premium payment, there can be big ramificaitons.

How Can Cash Value Life Insurance Be Used To Fund Your Child’s College Education?Family Wealth Management

Life Insurance: Avoid Universal and Variable Policies - The Smarter Investor (usnews.com)

 

[IrishHokie22]

This is sort of up my alley, so I'll try to help in any way I can. I doubled majored in Finance and Accounting, and am finishing up my Master's in Accounting as we speak. I'm only 24 however, and have very little experience, so you may be better off taking my advice with a grain of salt. (lol)

First thing you really need to is ask yourself "what are my goals"? Investing without any sort of real plan could prove to be a costly endeavor. Are you looking for something to retire with in around 25-30 years? If so, investing in a diversified portfolio of predominantly stocks is a great idea. In the long run, stocks do well (I think around 7-8% per year, don't quote me on that). In the short run however, they're extremely volatile. Whatever you do, do NOT invest in the stock market looking to get a quick win.

Investing takes discipline. Following your portfolio daily and worrying about whether you gained or lost on the day is the worst thing you can do. Don't get involved in day trading either; transaction costs will likely wipe out any gains you make.

I could get more specific, but you're already having a ton of information thrown at you. BobD recommended "The Intelligent Investor", which is a great read for beginner investors. It's not terribly technical and will give you a much better understanding of sound investment theory. As others have said, I would recommend getting a financial adviser. An adviser will help you realize not only what your goals are, but how you should go about achieving them. You'll have to pay a little more for his or her services, but it would likely be worth it since you're new to investing. Whatever you do, just realize that investing isn't a "get rich quick" scheme and you will HAVE to show patience. In the long run however, you're going to come out ahead.

Hope that helps!

 

[irishpat183]

Well, the 529 should come after IRA contributions since your Roth IRA contributions (not earnings, just contributions) can be used for college. That is option number one, but you can run into problems maxing out the Roth before covering both needs.

That being said, it has been awhile sine I looked at UL compared to 529's. Each has there pro's and con's and often that is dependent on each family situation. But, historically speaking, I have never heard someone pitching perm life insurance for college saving that wasn't selling it.

I can see where some people might think what you said. There is a nice balanced view on it in the article belowas well as one from US News. Generically speaking, my personal view are that you shouldn't purchase life insurance for college funding unless you need health insurance. Additionally, if you are looking to kill two birds with one stone, your time frame plays a big role. Often times the VUL has front loaded expenses, minmizing the growth of your basis. This makes it harder to generate returns equal to the market. Finally, depending on the insurance plan, if you lapse a premium payment, there can be big ramificaitons.

How Can Cash Value Life Insurance Be Used To Fund Your Child’s College Education?Family Wealth Management

Life Insurance: Avoid Universal and Variable Policies - The Smarter Investor (usnews.com)

Of course. It all depends on your situation.


I just like the flexablity of the life insurance. And I'd never mess with Variable life...What's the point?

And you're absolutely right about time frame.

 

[chicago51]

When I get my Prudential dividend check for $8.00 every quarter it is the highlight of my year.

I actually got some other stocks that pay me more. When I get the prudential stock I just can't help think "you are going through the trouble to send me a check for $7.98 reallly?"

 

[BleedBlueGold]

When I get my Prudential dividend check for $8.00 every quarter it is the highlight of my year.

I actually got some other stocks that pay me more. When I get the prudential stock I just can't help think "you are going through the trouble to send me a check for $7.98 reallly?"

Why don't you set it up to reinvest the dividends then?

 

[nlroma1o]

Why don't you set it up to reinvest the dividends then?

Bingo! If you don't plan on touching it, no reason not to set up a dividend reinvestment plan. Granted, you still pay the taxes on them, no avoiding that.

 

[scUM Hater]

First of all get a vasectomy.

 

[Old Man Mike]

Here's an old man's advice: You are full of obligations beyond yourself [wife, four kids], so unlike most others on this board you can't really be a wild-west gunslinger. So, slow and steady is the way.

1). Create a rainy day nestegg. Peace-of-mind is worth more in terms of quality-of-life than any flashy toys. Savings first;

2). Get debt-free and stay there. Chasing the stupidities of American consumerism is a oneway four-lane highway to a brick wall for any but the lucky. Simplify your life. Your happy healthy family is the source of long term happiness for you;

3). THEN, once your system is stabilized, you, as a talented, intelligent person, can begin to accelerate your entry into the capitalist world. If you can afford one, an advisor is nice; if you can't, a great retirement organization will suffice. As a teacher, there was one available to me, TIAA-CREF, and it treated me VERY well. You don't instantly "get rich" with these things, but you're there for the long-haul. [I am "worth" {what a joke THAT language is!} about $1 million now with my plan. Not so spectacular as those old magic words make it sound, but NO WORRIES].

4). My plan had choices. You could rock-and-roll with potentially-high-yield investing, or go low with bonds, or a variety of things. I went all stock market because I knew I was in it for the long haul, and the juggernaut called the Global Economy could not be stopped for long, given statistics. BUT, I went for a program called "Social Choice Investing". [eliminating certain types of businesses judged by criteria as bad planetary citizens. This was a morality thing with me.] To my surprise, that type of plan was more resistant to volatility and generally lost less in downturns, while earning almost as much in growth times. So I sit here in nice little Kalamazoo with no debts and a million bucks in the bank.

5). Patience and creating a lifestyle based on people rather than things was the key for me. The "money" started slow, but it accelerates as you get older and need the security.

Blessings to you and your family, young man.

 

[NDBoiler]

Boiler, can you say more about this? Is there a particular book you used?

My wife and I have both changed jobs and had our first baby in the last year, and our budget needs to be reworked. This is the beginning of a major financial overhaul for us. If anyone else knows of any other good sources of advice for household budgeting/basic family financial planning, I'd appreciate it.

I have a system that I like to call "Baby Steps"

Baby step 1: Save $1,000 for an emergency fund.

Baby step 2: Pay off debt using the Debt Snowball method. Regardless of interest rates, take your debt and pay the minimum on all except the smallest one. Take any extra payments to pay that off first. Once that is done proceed to the next smallest and so forth. (all debts other than mortgage)

Baby step 3: Save enough money to cover 3 to 6 months of expenses.

Baby step 4: 15% of household income into Roth IRA and pretaxed income vehicles (401 k or b).

Baby step 5: Save for kids' college

Baby step 6: Pay off house early

Baby step 7: Build wealth and give


Ok, these aren't my creations. This is the Dave Ramsey plan. If you'll not familiar, I highly recommend him for getting out of debt only. He's not much help with financial instruments. He's more of an archaic, only pay cash type, but helps millions of people, and once you get out of debt, you can move on to a financial advisor to sock away for retirement.

Real Debt Help - Get out of debt with Dave Ramsey's Total Money Makeover Plan - daveramsey.com

Yeah, pumpdog's got it. Dave's most well known book is The Total Money Makeover, which outlines those steps as well as provides simple worksheets to setup your budget. If you don't want to buy the book, just search for his spreadsheets online, you can get excel files very similar to his plan, although I recommend at least gettign the book so you understand what his methods are based on. He also has another book called Financial Peace that is similar. Dave's philospohy is Christian-based, so many churches offer his "group budgeting" program called Financial Peace University. If you get his book and spreadsheets, it's probably not necessary to do FPU. In my opinion FPU is more geared as a support group for folks who are new to budgeting and are in some significant debt looking for a way out of it. Dave also has a radio show too, but he tends to get a little carried away on it with marketing his products IMO.

 

[ClausentoTate]

This chart in Ackerman's class really lit a fire under my ***.

A Fully-Funded Roth IRA At Age 18 Could Net You 3.5 Million Dollars - No Credit Needed

The more you save at a younger age, the more you have for the future. Save big and live a normal life instead of buying that new piece of technology and you can really get your money's worth later in life.

I am also a fan of PIMCO and VANGUARD funds. Steer clear of most things with a management fee.

 

[chicago51]

First of all get a vasectomy.

This has to be the best advice given on this thread lol.

 

[Ndaccountant]

This chart in Ackerman's class really lit a fire under my ***.

A Fully-Funded Roth IRA At Age 18 Could Net You 3.5 Million Dollars - No Credit Needed

The more you save at a younger age, the more you have for the future. Save big and live a normal life instead of buying that new piece of technology and you can really get your money's worth later in life.

I am also a fan of PIMCO and VANGUARD funds. Steer clear of most things with a management fee.

One other thing for younger people. As your wages grow, sock away a portion of the growth instead of spending it (assuming you have already paid off debt and have a safety net). Trust me, that will really pay off well.