Investing for beginners

[Timm250]

I'm surprised no one has mentioned ETFs. Similar to mutual funds but trade on the open market like a stock.

 

[dougtrr2]

There is a lot of advice given. You have to do what works best for you. I don't want to have to keep checking on my investments and adjusting depending what is going on in the world. I would rather hire a financial advisor to do that for me. In simplistic terms you could just invest in an indexed mutual fund that is invested in the S&P or other other index. But then your rate of return would exactly reflect the market, good or bad. With a financial advisor there are strategies that can reduce those fluctuations. If you go with an advisor, pick one that you are comfortable with. Ask blunt questions about his fees. But I remember a response Dave Ramsey had about fees on 401ks. Essentially he said "It isn't the fees that are the problem, it is the fact that the 401k isn't funded in the first place."

As a side note on 401ks. I found out by accident that once I reached the age of 59 1/2 I could roll my 401k out of my employers plan into a qualifying 401 without any penalties. I could do that once a year. Most employer plans are limited in choices. Once I found that out in moved my 401 to my financial advisor. I thought I heard something about it actually being a federal law that applies to all 401's but I didn't check it out.

Doug in SW IA

 

[dalola]

Investing *properly* is tricky, due to nearly unlimited personal variables & goals. Plus, you're getting a late start. You can't afford to make mistakes.

Financial advisors seem to get a bad rap, and rightly so in many cases. But there are many good ones out there, and they can be very effective in helping maximize an individuals portfolio, especially those intimidated & uneducated about investing.

My suggestion would be to ask around locally, trusted friends, family, local reputable businesses, for a respected advisor, and set up a meeting.

There are many, many personal questions you'll need to address, before any plan can be set forth. Good luck!

 

[hawkeye08]

Clark Howard has some podcasts also that explain investing..

 

[/pine]

Anyone shorting travel, leisure and lodging issues ??

 

[MinnesotaEric]

There is a lot of advice given. You have to do what works best for you. I don't want to have to keep checking on my investments and adjusting depending what is going on in the world. I would rather hire a financial advisor to do that for me. In simplistic terms you could just invest in an indexed mutual fund that is invested in the S&P or other other index. But then your rate of return would exactly reflect the market, good or bad. With a financial advisor there are strategies that can reduce those fluctuations. If you go with an advisor, pick one that you are comfortable with. Ask blunt questions about his fees. But I remember a response Dave Ramsey had about fees on 401ks. Essentially he said "It isn't the fees that are the problem, it is the fact that the 401k isn't funded in the first place."

As a side note on 401ks. I found out by accident that once I reached the age of 59 1/2 I could roll my 401k out of my employers plan into a qualifying 401 without any penalties. I could do that once a year. Most employer plans are limited in choices. Once I found that out in moved my 401 to my financial advisor. I thought I heard something about it actually being a federal law that applies to all 401's but I didn't check it out.

Doug in SW IA

If I was to invest in an index fund, I'd invest in a dividend index fund so I'd always outperform the market because of the dividend exposure.

 

[TnAndy]

IMO... there is no real "investing" on Wall St. All the big money makers pump and dump, Day trade, HF trade..all in effort to make money right now. The suckers i.e. "Long term investors" give them the money to play with, and have no recourse when things fail.
..The stock market is a suckers bet. ..A very select few make a very large amount of money..the rest get peanuts. Several years ago I cashed out every single equity I had and bought real estate... best thing I ever did for my financial future.

I have found the same thing thru the years. At one time, the small investor could do OK....today the market is so rigged, you'd be better off walking into any casino and playing against the house. Real estate has been very good to me, with precious metals as a long term place to park funds.

 

[kenmac]

I have had my Advisor for many years. I couldn't have run my business, invested, and known what to do as far as tax advantages available to me

Different advisors charge different rates. Mine gets .5%.

On another note. If you choose to use an advisor. Find one that is a Fiduciary

 

[WoodDuck]

I'm surprised no one has mentioned ETFs. Similar to mutual funds but trade on the open market like a stock.

I've started purchasing more ETFs the last few years in my private IRA. Usually much lower net expense fees than normal mutual funds, while being invested in the exact same underlying stocks and securities, at the same percentages of ownership, as competitive mutual funds. ETFs are not an option in my 401K plan at work, only mutual funds to pick from in it, so I usually don't buy mutual funds in my private IRA. Mainly buy ETFs with a few "premium" stocks for that account. I actively trade around some of my base positions as well; selling off part of my position shares in something when the price is really high, then buying those same shares back when a major price drop comes. (Like last week, I increased my position on several items Thursday and Friday, because the price was significantly lower than my cost basis on those items.) The trick is: not to be 100% invested when a buying opportunity arises. If all your cash is all tied up in the market when things "go into the red" like they did last week, you can't buy any of the bargains unless you sell something at a loss, or deposit more money into the account. (If possible. There are caps of how much money you can add to some types of accounts, such as Roth IRAs.) If you've already contributed the max to an account, and all the cash is "in-play" in the market when a pullback occurs, you just have watch everyone else buy the bargains while you sulk about it. Been there, done that.

 

[KennyG]

If you've already contributed the max to an account, and all the cash is "in-play" in the market when a pullback occurs, you just have watch everyone else buy the bargains while you sulk about it. Been there, done that.

But if you're not fully invested (at least to your target equity share, which generally shouldn't be 100%), when the market unexpectedly jumps higher, you miss on that end. It's a trade off and I'd rather just have my chosen money in the market and let it take care of itself. Market timing is for people who want to spend a lot of time watching the market.

 

[WoodDuck]

But if you're not fully invested (at least to your target equity share, which generally shouldn't be 100%), when the market unexpectedly jumps higher, you miss on that end. It's a trade off and I'd rather just have my chosen money in the market and let it take care of itself. Market timing is for people who want to spend a lot of time watching the market.

I use automated triggers to do most of my trading. If I see the price is getting good on a quality item, I'll set a trigger to buy X number of shares when it hits Y price, then I'll set another trigger to sell it after it has went up to as high as I think it will get before it begins to sell off again. Sometimes its days, sometimes months. The trade triggers will stay in effect until you cancel them. Sometimes I don't set a trigger to sell it back at all, if its something I think I'd like to keep for years to come. Takes about 30 seconds to set up, and I'll get an email and text if any of them are triggered. No need to boil my blood pressure watching a screen full of numbers bounce around all day. I wouldn't last a month as a day-trader; I'd have an infarction of some kind watching those high frequency trading computers manipulate the short-term prices the way they do! LOL!

 

[MinnesotaEric]

I use automated triggers to do most of my trading. If I see the price is getting good on a quality item, I'll set a trigger to buy X number of shares when it hits Y price, then I'll set another trigger to sell it after it has went up to as high as I think it will get before it begins to sell off again. Sometimes its days, sometimes months. The trade triggers will stay in effect until you cancel them. Sometimes I don't set a trigger to sell it back at all, if its something I think I'd like to keep for years to come. Takes about 30 seconds to set up, and I'll get an email and text if any of them are triggered. No need to boil my blood pressure watching a screen full of numbers bounce around all day. I wouldn't last a month as a day-trader; I'd have an infarction of some kind watching those high frequency trading computers manipulate the short-term prices the way they do! LOL!

That's a good way to trade--especially with stop losses that stay effective for 180 days. I got stopped out of many of my positions when the market bailed out of a window on the way down and I sat on the cash until I started buying mREITs with both hands yesterday when the kinds of things I like to own just felt stupidly oversold in light of relatively safe dividends, the ability to go to the Fed's Discount Window, and low risk of dilution from secondary offerings. Dumb luck also prevailed when one of my biggest positions in preferred got called and I had been sitting on the money for five weeks waiting for the opportunity to reinvest.

 

[BoylermanCT]

Investing 101:

Buy low, sell high, get gain. The easiest way to end up with a small fortune is to start with a large one.

And I'm in the financial services industry. I manage a team that oversees the day to day operations of 15,000 retirement plans totaling $30B. That was two weeks ago. Now its $20B!

 

[MinnesotaEric]

Investing 101:

Buy low, sell high, get gain. The easiest way to end up with a small fortune is to start with a large one.

And I'm in the financial services industry. I manage a team that oversees the day to day operations of 15,000 retirement plans totaling $30B. That was two weeks ago. Now its $20B!

Are redemptions so high that everybody is selling no matter the cost? Wednesday felt like a big fund was blowing up and just offloading everything including the crown jewels into what are normally thinly traded markets overwhelming them to ridiculous lows.

A 30% hair cut is index level losses. Is everything generally passively managed? ?

 

[Richard]

Can anyone recommend the best way to start investing for beginners? For example, opening an account with TD Ameritrade or Fidelity? Broad topic I know, just would like someplace to start. Thanks!

Both are fine firms. Disclosure: I once worked at TD.

 

[Richard]

With a Roth, employees make contributions with post-tax income, but can make withdrawals tax-free.

Can be withdrawn tax free after reaching the age 59 1/2 AND the account has existed for at least 5 years

(can't open one at age 58 and pull all out at 60 tax free.... have to wait until 63. Actually you CAN pull the after tax principle out without tax....only the earnings are hostage.

 

[Richard]

I second the vote for 401k, especially if the employer will match it.

If one has a Roth with match..... the match has likely NOT had the taxes paid by the employer....and YOU (the recipient) hasn't paid taxes on the match, so, by definition, the match can't go into the Roth side of the 401K. The match dollars will be taxable later in life unless you roll them out to an IRA and convert said IRA to a Roth.

 

[Richard]

well trained, in-house investment advisor, likely with a finance or accounting degree.

About the only thing you can presume is they will have passed a securities exam.

One of the most successful brokers I've ever known, never went to college.

 

[Richard]

consider a traditional IRA, rather a 401(k) or 457, whatever a 457 is.

A 457 is "essentially" the same as a 401K with a couple differences:

1. You can't borrow from it
2. No Roth Option
3. The BIG difference....... there is NO 10% penalty on early withdrawal


I'll sometimes ask the crowd I'm talking to (usually with their HR present) "Mr. HR....please cover your eyes for this next question..... (hahahahaha) Now, (to the crowd) is there ANYONE here that plans by design, on leaving PRIOR to age 55???"

Why? A 457 might be a good bucket to put some "walking cash" into. Not that it's a GOOD idea but if you leave and think you will just take the funds from your 401K to say, move to Montana, then maybe it's more prudent to use the 457 and at least avoid the 10% penalty.....

Early withdrawal is usually a bad idea

 

[Richard]

The problem with active management is the managers of actively-managed funds like to churn stocks when nothing is going on and this winds up as "slippage" to your profits in the form of increased fees.

An actively managed account usually has a charge as a percent of account value (say 1%).... therefore "churning" is usually not an issue as any stock trading expsnese are part of the management fee.

Interestingly, if you have an actively managed account and they SIT on it for too long, they can get into trouble for "reverse churning"..... meaning, taking the fee without doing ANY trades!!

In today's day & age, most managed accounts will be full of funds and not individual stocks although I suppose an exception to that can be found.