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No quick fix just some suggestions....
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Posted by TKC (more from TKC) on Wed, 8 Dec 2004 14:11:51 Share Post by Email
In Reply to: Any investment gurus care to help a novice (long)?, McTeague, Tue, 7 Dec 2004 18:20:20
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Your current income and the fact you have savings put you above a lot of people. I presume you don't have any debt you need to pay off especially credit card debt. If so, use you savings to pay part or all credit card balance off right away.

I don't know where you live so I don't know the housing prices in your area. If the condo market is reasonable, you may consider doing that instead of a house. You do get tax benefits in so doing, as Uncle Sam pays for part of your mortgage.

If you want to save more now instead of spending it on a house or a big ticket item. Then you have to consider stock market with some fixed income mix (i.e. short and intermediate term bonds or bond type instruments). Periodic investment is probably the best approach even if you are willing to put in most of your savings into the bond and equity markets.

Unless you are a speculative person, I would suggest you invest in index funds of various type. You could do a mix of S&P500 index, small to mid cap index or simply do the total market index. You could put some into foreign stock index funds as well. Some money into I-bonds (inflation adjusted bonds) would also be a good idea. Once you have opened up a number of accounts, do automatic periodic transfer from your bank to a couple of these accounts. If you don't see the money sitting in the bank, you don't spend it.

You don't have to start with too many accounts or fund types, start one or two like a S&P500 fund and a bond fund then build them up gradually by periodic investment.

For bonds or bond funds, you need to remember one fundamental rule, when the Fed raises interest rate, the bond fund price or bond price falls. So unless you hold the bond or bond funds for a reasonable amount of time, you can lose the principal even if you get a higher rate of return due to the higher rate. Long term bonds get affected the most so you may want to consider a shorter term bond with a lower yield.

Don't invest all of your savings, you never know what the job market is like or have some cash ready for emergencies. You mentioned that you have kids, I presume you are paying child support. You may want to consider saving for their college as well but *NOT* before your retirement money. You need to save for your retirement **FIRST**. You also want to consider setting up an IRA or a Roth IRA.

If you are not familar with these terms, do some homework. Go to the local libary and read on some magazines (Money, Forbes, or even Consumer Reports) about investing. Use Google and go to some of the large mutual fund companies, such as Vanguard, Fidelity, etc..

As for hiring a financial advisor, unless you or a friend knows a really honest one, I would stay away from these people. There really isn't much they can advise you on that you cannot find out yourself. Besides, it is better to understand these matters yourself rather than relying on someone else who may not have your financial interest in mind.

Best of luck and be consistent and it is better to start now than never.

posted by 12.42.232...
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