Author Topic: Investing Advice for a Beginner?  (Read 2974 times)

Cheryl

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Investing Advice for a Beginner?
« on: March 21, 2015, 05:19:53 PM »
Here's my situation: In the last year I've gotten my first grown up job (teaching, making about $45k/yr), gone car free, and joined Mr. M's devoted cult.  In other words I've gone from living paycheck to paycheck, with a car loan, having to borrow money from my (extremely patient) parents when "emergencies" came up... to having no debt and ten thousand extra dollars I'm not sure what to do with.  Not much, I know, but it's only my first year and it hasn't even been a whole year and my spending is going down all the time!

So, what do I do with the money?  Some portion of my paycheck (I think $500/month?) is already going automatically into the school's 403b plan (er... that's a retirement fund thing, right?) but beyond that I'm clueless.  I'm usually pretty good about diving into my own research but I'm hesitant to in this case because (a) I think a lot of the "information" out there will be disguised advertisements, and (b) I think a lot of the advice out there will be from the same people advising saving 10% of your income.  I'd much rather get advice from you people!

I know the difference between bonds and stocks, and I know it's important to diversify.  Beyond that it's all a blur.

Any advice?  Small words are appreciated : D  Any good sources of information you can recommend?

FuckRx

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Re: Investing Advice for a Beginner?
« Reply #1 on: March 21, 2015, 06:06:25 PM »

In my opinion investment advice is best obtained over at the bogleheads forum. You can post all your details and they will give some great advice. Your income sounds solid, congrats. You can keep more of it by sending as much as you can to your tax-deferred accounts like your 403b. You also happen to qualify for a deductible IRA, some here don't because their income exceeds the cutoff. Your max for your 403b should be 18k this year. Does the place you work for match by any chance? I used to get a 403b but they didn't match and heck I never even maxed it out but I made a little less than you then.

Stocks and bonds, that's a good start. If you don't know much about investing yet there are a few good books out there, James Dahle, William Berstein, John Bogle and I'm sure a few other good ones that I can't recall. When you first start out try to stick with index funds (passive mutual funds). They are cheap to own, don't end up causing a lot of tax hits. Later when you learn more you can expand into individual stocks and more "exotic" things. You can buy shares of such an index fund that will hold a percentage of various markets, such as a broad hold of US stocks, broad international stocks, broad bonds etc... you can keep anything in your tax deferred accounts (403b, 401a, 401k, keogh) because you won't get a tax hit right now. But certain things tend to be better for taxable accounts (that would be a private brokerage account held at Fidelity/Vanguard/Charles Schwab). Oh and Schwab sucks donkey balls! I have been very happy with Vanguard and there is a good amount of nepotism towards Vanguard that you'll encounter on most of the great sites out there aimed at us amateur investors. 

Congrats on getting rid of the car by the way!

Indexer

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Re: Investing Advice for a Beginner?
« Reply #2 on: March 21, 2015, 06:42:59 PM »
Great to hear you are already off to a great start.

First I would check: https://www.bogleheads.org/forum/viewtopic.php?f=1&t=6211
And:  https://personal.vanguard.com/us/insights/investingprinciples

403b/401k/457s:  Retirement plans allow you to put money in, get a tax deduction, and then the money grows tax free.  The downside is that its hard to get the money back out before age 59 1/2.  Now if you are concerned about getting the money out to retire early there are ways around that, namely a roth conversion ladder, but that is advanced for right now.

IRAs work very similar but you set them up individually instead of through your employer.

Check the funds in the 403b.  If you want give us a list along with the 'cost' of each fund, and we can point you in the right direction.  Hopefully the costs or low, but they can vary.  If the costs are 'high' then you probably only want enough in the 403b to get the match and then start maxing out IRAs.

Easy option:  If the plan has a mutual fund already set based on your age and expected retirement date you can use that until you learn more. 

Quote
I know the difference between bonds and stocks, and I know it's important to diversify.  Beyond that it's all a blur.

You are probably going to get the most diversification at the lowest cost using index funds.  Do to the lower costs index funds tend to outperform active mutual funds over the long term.  Active funds can beat the market here and there, but they normally aren't consistent.  The research also suggests that most individual stock pickers do even worse. 

Something else to keep in mind is that the market fluctuates and that is normal.  If it goes down 20% that is not only normal, but its a great time to start adding to your accounts.  The worst thing you can do is try to jump in and out of the market when it is going down.

Once you make it past the basics I would d further research into:   Roth conversion ladders.  Asset Location(tax efficiency). 

tj

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Re: Investing Advice for a Beginner?
« Reply #3 on: March 21, 2015, 08:12:24 PM »
Could do a lot worse than 100% VWELX.

Frankies Girl

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Re: Investing Advice for a Beginner?
« Reply #4 on: March 21, 2015, 08:24:10 PM »
http://jlcollinsnh.com/stock-series/
^this is what made investing understandable for me - best EVAH!


Murdoch

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Re: Investing Advice for a Beginner?
« Reply #5 on: March 21, 2015, 11:49:50 PM »
Great start Cheryl.
No need to rush anything. If you've got the basics of living below your means, and are saving a decent percentage of you income then you are on the right track to earlier retirement.
I'd recommend spending a month of two reading about investing. Bogleheads (as suggested above) is a great group, and their Wikihow page is awesome. But there are plenty of other places to go too. Read around, find what makes sense, and develop an investment plan that you can work with going forward.

For myself I read Jack Bogle, William Bernstein, and Bogleheads, before finding MMM, and whilst MMM is the best for keeping costs low and being happy, the others were (IMHO) a better source for investing education.

Good luck,
Murdoch

thedayisbrave

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Re: Investing Advice for a Beginner?
« Reply #6 on: March 22, 2015, 08:27:31 AM »
Also, this is a terrific resource for those just starting out: http://www.etf.com/docs/IfYouCan.pdf.

Good luck, you'll be fine :)