Author Topic: Newbie Q's  (Read 7762 times)

uppy

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Newbie Q's
« on: January 14, 2014, 05:41:53 AM »
Apologies if these questions have been asked before but couldn't find anything on the forums with info this dumbed-down. :)

Also I'll take suggestions for beginning investing books/resources too since I am so new to this stuff. I should add that I have not yet invested $ .01.

First Q: What is the difference, and how easy/fast can stocks be sold vs. returns be withdrawn? We do not plan to touch this money, and ideally will keep adding to it. But worst case scenario...

Q2: Does it make sense for my GF and I (who share expenses) to invest our emergency fund even though we still have SL debt? As I said we need this cushion anyway, but will be paying most other savings towards our SL for the next X number of years. I just thought we should take advantage of the higher returns and maybe use some of that, too, towards the debt.

We are not talking about a lot of money. We will likely only have about $1K in EF when we start. I suppose it would be a fairly safe ratio of index stock/bonds -- depending on accessibility. We are young and willing to take some risk/ride out ups and downs, assuming we do not need to take out this money. Perhaps because it is EF we should just leave it in a savings account?

Khan

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Re: Newbie Q's
« Reply #1 on: January 14, 2014, 05:53:35 AM »
Apologies if these questions have been asked before but couldn't find anything on the forums with info this dumbed-down. :)

Also I'll take suggestions for beginning investing books/resources too since I am so new to this stuff. I should add that I have not yet invested $ .01.

First Q: What is the difference, and how easy/fast can stocks be sold vs. returns be withdrawn? We do not plan to touch this money, and ideally will keep adding to it. But worst case scenario...

Q2: Does it make sense for my GF and I (who share expenses) to invest our emergency fund even though we still have SL debt? As I said we need this cushion anyway, but will be paying most other savings towards our SL for the next X number of years. I just thought we should take advantage of the higher returns and maybe use some of that, too, towards the debt.

We are not talking about a lot of money. We will likely only have about $1K in EF when we start. I suppose it would be a fairly safe ratio of index stock/bonds -- depending on accessibility. We are young and willing to take some risk/ride out ups and downs, assuming we do not need to take out this money. Perhaps because it is EF we should just leave it in a savings account?

Q1: ~1-3 business days, depending on size of the transaction. Shares in an ETF/stock can be sold every day trading is open, which is pretty much every Monday-Friday excluding holidays.
http://www.isthemarketopen.com/
Other options include enabling margin on your investment account, and getting access to a HELOC.

Q2: ... I think investing emergency funds is something people with positive net worth are in the position of asking themselves if they want to do(as it isn't the safest thing to do). People in debt, especially bad debt(>5% interest, not mortgage) should probably pick the low hanging fruit of debt and not investing. Emergency funds are there for emergencies, and investing it makes it less able to handle that job. When you are farther along the path of growing a stache, your net worth becomes your emergency fund, and emergencies become less "emergency".

Recommended books:
Your Money or Your Life
The Investor's Manifesto

uppy

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Re: Newbie Q's
« Reply #2 on: January 14, 2014, 07:02:40 AM »
Thanks Khanjar! That makes a lot of sense.

KingCoin

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Re: Newbie Q's
« Reply #3 on: January 14, 2014, 09:36:52 AM »
I'm not sure what your current setup is, but it would almost certainly be wise to keep your savings, emergency fund, and investments separate from your GF's. There's basically no downside to doing this and potentially significant upside if life gets complicated. Splitting expenses and pooling assets are very different animals.

There's good information over at Bogleheads on investing:
http://www.bogleheads.org/wiki/Getting_started
You could also read something like A Random Walk Down Wall St by Malkiel

Mods, perhaps start a sticky thread for investing resources? Books, online resources, research sites, and brokers could all be listed. This seem to come up frequently.
« Last Edit: January 14, 2014, 10:55:24 AM by KingCoin »

uppy

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Re: Newbie Q's
« Reply #4 on: January 14, 2014, 02:35:29 PM »
I'm not sure what your current setup is, but it would almost certainly be wise to keep your savings, emergency fund, and investments separate from your GF's. There's basically no downside to doing this and potentially significant upside if life gets complicated. Splitting expenses and pooling assets are very different animals.

Sounds like relationship advice to me. I'll be sure to ask if I need any of that, thanks!

I do like your idea about the sticky thread for investing resources.

KingCoin

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Re: Newbie Q's
« Reply #5 on: January 14, 2014, 04:17:50 PM »
Sounds like relationship advice to me. I'll be sure to ask if I need any of that, thanks!

Far from it. I don't know the first thing about you, your GF, or your relationship, nor do I have any reason to comment on it. It's financial advice pure and simple. There are certain situations where you can avoid a lot of potential misery at almost no cost, and this seems like one of them, even if a breakup is a long-shot.  This of course doesn't mean you can't help each other out financially when you need it.

But what do I know, you might have good reasons to intermingle assets with your GF. Feel free to educate me or ignore these comments altogether.
« Last Edit: January 14, 2014, 07:50:43 PM by KingCoin »

wtjbatman

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Re: Newbie Q's
« Reply #6 on: January 14, 2014, 07:42:51 PM »
I'm not sure what your current setup is, but it would almost certainly be wise to keep your savings, emergency fund, and investments separate from your GF's. There's basically no downside to doing this and potentially significant upside if life gets complicated. Splitting expenses and pooling assets are very different animals.

Sounds like relationship advice to me. I'll be sure to ask if I need any of that, thanks!


Stick around for a while, you will get lots of advice that you didn't ask for. I'm guilty of both offering and receiving said advice myself, hah.

prestojx

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Re: Newbie Q's
« Reply #7 on: January 14, 2014, 11:51:05 PM »
I second the Bogleheads.org Board and Your Money or Your Life.

I would add:
The Only Investment Guide ..... by Larry Swedroe
All About Asset Allocation by Rick Ferri
and
Winning The Loser's Game by Charles Ellis
As in amateur tennis "The best way to win is by making fewer bad shots."

I would suggest that you don't even consider investing a penny until you have read and thoroughly digested the above information.

Buena suerte!


uppy

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Re: Newbie Q's
« Reply #8 on: January 15, 2014, 05:30:22 AM »
I second the Bogleheads.org Board and Your Money or Your Life.

I would add:
The Only Investment Guide ..... by Larry Swedroe
All About Asset Allocation by Rick Ferri
and
Winning The Loser's Game by Charles Ellis
As in amateur tennis "The best way to win is by making fewer bad shots."

I would suggest that you don't even consider investing a penny until you have read and thoroughly digested the above information.

Buena suerte!



Thanks prestojx. Looks like a trip to the library is in order! OR: I have been able to find some great personal finance books available for free (legal) download online. I will check on these and report back. Saves the commute and potential late fees :) In the meantime, does anyone else know of places to find these in free ebooks?

aj_yooper

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Re: Newbie Q's
« Reply #9 on: January 15, 2014, 05:58:52 AM »
Rick Ferri commentary can be found online at Forbes and at: http://www.rickferri.com

His book on asset allocation is very clear and usable.  William Bernstein is also a great writer, but his books are much more difficult.

Welcome!

PS:  I also would not co-mingle funds until there is a legal arrangement.  Sharing expenses is different.

Cinder

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Re: Newbie Q's
« Reply #10 on: January 15, 2014, 08:23:33 AM »
We should have a sticky for this kind of stuff.

I was putting together a collection of investing info for a friend, and figured I'd send it to you too!

Quoting one of the posts
"You might be better off in one of the Lifestrategy or Target Retirement funds in the intermediate-term while you learn more about investing."

Here's a good collection of references, roughly ordered for good ordering of data - info
http://www.bogleheads.org/wiki/Lazy_portfolios
http://www.madfientist.com/retire-even-earlier/
http://jlcollinsnh.com/stock-series/
http://www.econtalk.org/archives/2007/04/bogle_on_invest.html


http://www.mrmoneymustache.com/forum/investor-alley/30-year-old-just-starting-out-all-vtsax-or-bonds-as-well/
particularly - http://www.mrmoneymustache.com/forum/investor-alley/30-year-old-just-starting-out-all-vtsax-or-bonds-as-well/msg193892/#msg193892


This describes what marginal tax rate really means - http://www.mrmoneymustache.com/forum/investor-alley/401k-employer-match-vs-extra-pay/msg196609/#msg196609


http://www.bogleheads.org/wiki/Category:Asset_allocation

uppy

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Re: Newbie Q's
« Reply #11 on: January 15, 2014, 05:02:03 PM »
Thanks everyone for the great info. So much info, in fact, that it should take me a long time to get through it all! (Maybe I'll do that while getting out of debt.)

PS:  I also would not co-mingle funds until there is a legal arrangement.  Sharing expenses is different.

Good for you! And to clear all of your consciences, consider me well warned. No further "warnings" are needed ;)

uppy

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Re: Newbie Q's
« Reply #12 on: January 15, 2014, 05:24:56 PM »
P.S. Rick Ferri (in my extremely quick reading of some of his commentary) seems to suggest investing in a traditional IRA before FI, then switching to a Roth after FI. Any other takers on this philosophy? His graph looks nice and pretty...

Cheddar Stacker

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Re: Newbie Q's
« Reply #13 on: January 16, 2014, 01:24:38 PM »
P.S. Rick Ferri (in my extremely quick reading of some of his commentary) seems to suggest investing in a traditional IRA before FI, then switching to a Roth after FI. Any other takers on this philosophy? His graph looks nice and pretty...

Yep. Couldn't agree more. Go to what Cinder posted above, and read the madfientist link he posted which relates to this topic. Pay specific attention to the "getting the money out" of the IRA section. If you do it right, you might not have to pay any taxes ever.

NoStacheYet

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Re: Newbie Q's
« Reply #14 on: January 19, 2014, 10:12:41 AM »
Hi All,
I figured I'd tack my questions to this user since I'm totally spanking new to this forum/site and also have close to minimal knowledge about investing.
Here is my basic situation and questions:

I'm 35 with a partner and no kids.  Currently own a home in IL with 4% 30yr fixed rate loan.  Just bought a new Toyota Prius with a 1.49% financing for 6yrs. and intend to keep it till it dies.  In about 2yrs. my partner and I plan on moving to Portland and buying a larger property so we can do gardening which is our passion.  The house doesn't need to be anything grand since we like being in the yard more.  We would loose money when we try to sell our current house and i will probably have to tap into the invested funds for a downpayment on the new house,  but we may get some money back from the sale in IL since on Zillow the house price is currently estimated about 10k more than our mortgage at the time. 

I actually already have some decent after tax investments with American Funds which i started in 2010.  These are separate from 401k and previous employer IRA accounts which i have with Charles Schwab and Pacific Life respectively. 

My main concern is that even though my American Funds (i will call it AF for future reference) investments are doing fairly well, when i started reading Mr. Money Mustache's advice on investing i quickly came to the realization that i am one of those people with expense ratio of 1.4-1.9% depending on the fund.  Needless to say i want to change that!  As of now i don't want to make a drastic move like pull all my money out of AF and invest them elsewhere, say in Vanguard VTSMX.  I can, however, start making future investments into Vanguard and gradually pull my money out of AF if it seems like it's doing better.

Having said that, the reason i started with AF is because we had a rep come to my work and since i was ready to invest and i went to meet with him individually eventually.  Since i know nothing about investing and though it's going to sound ignorant... , would rather do other things (like gardening)  with my time than read a bunch of books on investment which will put me to sleep and make my head spin, how would you advise me to set up an account that is painless, easy to manage and understand?  Do i just call up Vanguard to ask them?
I was thinking of using VTSMX since MMM recommended it, but if things have changed since he gave this advice should i invest elsewhere?

Also, from what i could tell Vanguard makes you start with 3k.  is that correct? 
Just as an FYI, for now this would be a likely more of a short term investment, but in the future once i start moving out my money from AF then it would be long term. 

Thank you for your advice!




uppy

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Re: Newbie Q's
« Reply #15 on: January 22, 2014, 09:10:57 AM »
Also, to tag onto this post: My recent reading suggests a good place to stash EFs is Money Market Funds, since risk is low, interest is higher than savings accounts, and the money is accessible. Any comments on where to find a good MMF and/or if this is a good idea?

KingCoin

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Re: Newbie Q's
« Reply #16 on: January 22, 2014, 09:33:01 AM »
Also, to tag onto this post: My recent reading suggests a good place to stash EFs is Money Market Funds, since risk is low, interest is higher than savings accounts, and the money is accessible. Any comments on where to find a good MMF and/or if this is a good idea?

Unfortunately, MM yields aren't much higher than high yield checking accounts these days; usually around 0.3%-0.5%. Also, the Lehman collapse was a reminder that you can lose money in this kind of investment.

uppy

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Re: Newbie Q's
« Reply #17 on: January 22, 2014, 02:58:13 PM »
Also, to tag onto this post: My recent reading suggests a good place to stash EFs is Money Market Funds, since risk is low, interest is higher than savings accounts, and the money is accessible. Any comments on where to find a good MMF and/or if this is a good idea?

Unfortunately, MM yields aren't much higher than high yield checking accounts these days; usually around 0.3%-0.5%. Also, the Lehman collapse was a reminder that you can lose money in this kind of investment.

0.3%-0.5%?? Really?

Interesting. It seems the book I was reading was from 1996. I should update my resources. So, is the consensus out here that savings accounts are the best place for EFs?

Cheddar Stacker

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Re: Newbie Q's
« Reply #18 on: January 22, 2014, 03:23:38 PM »
I would keep as little as possible in savings and money markets, but it's a risk/reward preference so you shouldn't do what I do. Consider all your options. Yes, those are about the best you can expect in a savings/money market these days.

I put absolutely no money into any savings/investment vehicle that isn't earning a decent return. Obviously the money I have in stock mutual funds can lose value, but on average I'm confident I will see a return. It's a risk I'm willing to take as I don't expect any emergencies, and I'm ok with cashing out a small portion of my stock mutual fund investments to fund an emergency, even if I have to take a loss.

You can also use a home equity line of credit if you own a home. You can borrow against your 401K. You can increase your income or reduce your monthly expenses. There are various ways to fund an emergency, and most people do not need to keep a large cash hoard to do so. If you're going to keep a large amount of cash, at least look into capitol one 360 and similar accounts to get a better return than a money market or CD, but the more you put in low yield accounts the slower your path to independence.

KingCoin

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Re: Newbie Q's
« Reply #19 on: January 22, 2014, 03:34:23 PM »
So, is the consensus out here that savings accounts are the best place for EFs?

There are almost weekly threads on this topic. I'd do a search. Some banks will offer more like 4% on your first $5-10k or so. You usually have to jump through a number of hoops to get it (minimum credit card transactions, direct deposit, etc.). You'll have to decide if it's worth the marginal $200-400. Beyond that there are CDs, iBonds, and treasuries which will get you around 0.5-2%. There really aren't any good options for low risk, high yield investments. That's the nature of ZIRP.