Feb
I'm 22 years old and with the money I'm now making I'm ready to start contributing $5,000 annually into a Roth IRA. I’ve been looking at Vanguard, but I would like to know who you would suggest for me and what type of funds I should invest in? I plan on retiring in about 40 years or so (age 60-65) with comfort.
Any advice would be very much appreciated!
Answer:
Early begin is great. Vanguard is my favorite fund family. They’re known for low-cost. Every dollar you do not spend on expenses is another dollar in your retirement fund.
At 22 you can afford to take some risk and over a 40 year period, you are very apt to rewarded for taking risk. However, you’ll have extended periods of time during which you lose money. Do not take more risk than you can tolerate.
Vanguard's website has tools to help you establish an appropriate mix.
Roth IRA's are also great wealth accumulation tools. However, most people pay little in taxes in retirement so the tax-free nature of a Roth IRA is not as appealing as it sounds. You want to have some taxable income in retirement. Regular IRAs have some advantages for those who will be in a lower tax bracket in retirement than they’re now.
If you google Roth IRA you’ll find a lot of information the pluses and minuses of Roth vs Regular IRA. Contributing to a 401(k) can be a great way to accumulate funds that will be taxable in retirement and can compliment a Roth IRA well. Some 401(k)s grant Roth contributions as well.
The most important element of achieving long-term financial security is to do a lot of little things right consistently over a long period of time. Starting early and using Vanguard funds is a great start. Developing good spending habits will pay massive dividends over time.
Be careful about your use of insurance. Some insurance is necessary, but you’ll go broke if you try to insure everything. Insurance companies make money by collecting more in premiums than the pay out in benefits. The less you participate in this, the superior. You will be superior off suffering a few losses from time to time than trying to insure everything.
Answer:
All else being equal, tax-free is superior than taxable. Roth IRAs are tax-free, but they are funded with after-tax dollars. Regular IRAs and 401(k)s are funded with before-tax dollars. Using both is most efficient. No taxable income in retirement wastes deductions and low tax rates.
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Answer:
John,
You're wise to start investing early in your career. Investing has many facets including return on investment and risk. There are several different types of investments including stocks, municipal bonds, corporate bonds, mutual funds, and so on. Nobody can give you an intelligent answers, because there are too many variables.
Each of the Vanguard funds has its own risks and rewards. If, for example, you invested in the Diversified Equity fund, your return would have been .57% return on investment since inception. The energy fund would have returned 13.29% return on investment since inception. However nobody has a crystal ball. What if a foreign government nationalizes the energy assets in its country? How would that effect your investments?
John, I would begin by educating myself on the economic, financial, and psychological aspects of investing. There is an excellent primer on investing called Investing for Dummies. Please don't be offended by the name. For Dummies is a publishing company which puts out hundred of titles. They contact with authors who are knowledgeable, and have the ability to put concepts into plain English. This won't make you an investment expert, but it will give you the background to ask questions and understand the answers. Use this background to read more specialized books on mutual funds, psychological aspects of investing, factors that effect supply and demand, and so on.
Good luck, John.
Answer:
The easy answer is put your IRA contributions into an age-adjusted fund. This means that over time, as your investing needs change the composition of the fund changes to reflect that. Example, as you approach retirement, the fund shifts automatically to more bonds than stocks in order to minimize the danger.
If you’ve access to an employer sponsored retirement plan, like a 401k, utilize it first. The contributions made would be pre-tax which, over time, can make a massive difference in your investment.
tips on investing for retirement:
http://www.ehow.com/how_5266215_start-sa…
Answer:
Good move on your part. Begin reading articles about fund, investments , taxes, etc. I don't know enough to tell you what to invest in though Berkshire is good. It just split so you can afford it. Look at Vanguard as it is a discount brokerage.
Answer:
Low-risk, low-yield is all I have the ability to say with today's market.
Answer:
You’re smart to plan early. I would open a scottrade, td ameritrade, or etrade. You could buy index mutual fund, ETF (exhanged-traded fund) which very cost effective.
Meanwhile, educated yourself about investing, make the decision on your own:
To study the financial market, you’ve to take in 4 step processes in finding your own investment:
1/ Fundamental analysis: how the economy work, the FED, the OPEC, Inflation, Economic calendar,Job data, Leading economic indicators, CPI, PPI, GDP, Consumer sentiment index, The yield curve ( very accurate predicting the recession), Housing Begin. On the micro basis, checking out the balance sheet, cashflow, income statement of the comany, valuation of the company through
P/E, PEG, P/S, P/B, dividend, how management effect the company. TELL YOU WHAT TO BUY/SELL
2/Technical Analysis: How charts work, charts indicators , momentum indicators, janapanese candlestick. TELL YOU WHEN to BUY/SELL.
3/Sentiment Analysis/ Contrarian analysis( tell you to avoid CROWD Mentality):
Check out Bull/Bear ratio, Vix ratio(Fear index), Put/Call ratio. So you can make wise decision when taking the profit of your investment
4/ Seasonal cycle: Everything in this life involving cycle. Stock market is no exception. Learn how presidential election cycle , stock seasonal cycle can effect stock market.
couple website you should check out:
http://www.stockcharts.om
http://www.incrediblecharts.com
http://www.pring.com
Couple good book you should check out:
Stock Trader's Almanac by Jeff Hirsch
Technical Analysis For Financial Market by John Murphy
All About Market Timing
EDUCTAED YOURSELF, YOU WILL MAKE YOUR WISE DECISION ON YOUR OWN.
I did it on my own. I’m 36. When I started my job at 25. 11 years later. My 401k is about 100,000.00. My Roth IRA is 22,000.00. My Cold hard cash is 30,000.00. It wasn’t a show off but if I can do it, so can you
Lastly, Stay out of Credit Card debt. Spending less than you earn. You’ll live less sressful in life.