help on investment plan for 24 guy. Thank You


W

woaud2ebay

hello, i'm 24 who wants to invest $300~400 on stock or fund. I figured
that i wouldn't start to putting money in the market before i know how
the stock and fund market works. So i was reading couple books about
stock and fund and watched some movie about it. Now i think i'm about
the ready to invest money, but i still want to hear some suggestions
from person's experience.
Here's how i'm going to invest money, please check it and tell me what
would be best option.
* plan to invest 300~400 / monthly
* just open up the account on Sharebuilder.com (is it good site to
use??? if not, any good site that suggest??)
* start on Stock or Fund?

Hopely hear helpful suggestion from you.
Thank You~~
 
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J

jIM

I have a sharebuilder account. Depending on how often you monitor
things, it may or may not be a good move. I don't monitor much and I
like Sharebuilder, but I prefer to use stocks with play money, not long
term money. I make more money in mutual funds most years.

The most imortant issue is to start setting aside the $400/month now.

question- do you have a 401k? if not, I would look into saving into
401k, this money will come right out of your paycheck.

question 2- do you have an IRA (Roth preferred, traditional is OK as
well)? If not, I would add money to an IRA (up to $4000 per year for
many people).

question 3- what other accounts would you consider with taxable
investments? Sharebuilder would fall into this category once my 401k
and Roth were being maxed out.
 
J

joetaxpayer

hello, i'm 24 who wants to invest $300~400 on stock or fund. I figured
that i wouldn't start to putting money in the market before i know how
the stock and fund market works. So i was reading couple books about
stock and fund and watched some movie about it. Now i think i'm about
the ready to invest money, but i still want to hear some suggestions
from person's experience.
Here's how i'm going to invest money, please check it and tell me what
would be best option.
* plan to invest 300~400 / monthly
* just open up the account on Sharebuilder.com (is it good site to
use??? if not, any good site that suggest??)
* start on Stock or Fund?

Hopely hear helpful suggestion from you.
Thank You~~
For this monthly amount, as a new investor, you'd be best off with a low
cost index fund, which you may need a bit more than $400 to get started,
but the additional deposits would be easy. I'd suggest an S&P index
fund, and then once it's up to about $5000, start a small cap fund
purchase. In general, individual stocks are not the way to start
investing. You need quite a few stocks to be diversified, on the order
of 20 or so, so it would take a pretty large portfolio to have the
ability to buy round lots (100 shares) of 20 or more stocks.

You didn't mention - are you working for a company that has a 401(k)
plan? Do they match any of your deposits? If so, you should try to put
in enough money to get the matching contribution. If not, you should
consider a Roth IRA. This money (limited to $4000/yr) is not tax
deductible, but will not be taxed when you withdraw it either. This is a
great way to start saving, and you would have the same investment
choices as with non-IRA money, same advice would apply.

Keep in mind, there's no 'one right answer' to such a question. You'll
likely get 3-5 different answers, all of which reflecting the experience
and knowledge of each poster.
Good luck,
JOE
 
G

Guest

Hi. You're already doing the most important thing, starting now.
The early and regular process of saving+investment is more
associated with success than the choice of investments.
That being said, your next step is to realize that you know
nothing about choosing stocks or funds. I suggest that you
therefore should not do that. Most fund managers fail to outperform
the aggregate market growth over the long-term. You can beat
them therefore by buying the market.ETFs such as SPIDERs (SPY)
and VIPERs (VTI) provide easy means to invest with broad
diversification and *low fees and taxes*.
Open a ROTH IRA and fund it to the max. Buy VTI and let
it grow. If you should *have* to use your money for an emergency
you can take out contributions at any time, but ideally you will
keep a growing kernel of savings that will buy you a quality of life
in the now-seeming distant future.
 
B

BreadWithSpam

therefore should not do that. Most fund managers fail to outperform
the aggregate market growth over the long-term. You can beat
them therefore by buying the market.ETFs such as SPIDERs (SPY)
and VIPERs (VTI) provide easy means to invest with broad
diversification and *low fees and taxes*.
On the other hand, since the purchase of ETFs involves
brokerage fees, while they may be great for a few large
purchases (or an annual rebalance or something), they
suffer pretty badly if one is making regular, small
purchases (ie. the OP's $300/mo). Even if he pays
as little as 5% per trade, he's taking a 1.6% hit to
buy in.

Others have mentioned that we don't know enough about the
OP's whole situation (ie. access to 401k, whether he has
some cash savings, etc).

But If he's decided to make regular monthly purchases,
and follows your advice to buy an index rather than
an actively managed fund, he's probably going to be
better off with a regular open-ended index fund on
which he'll have no transaction fees or commissions.

The VTIs have an expense ratio of 0.07%.
The investor-class open-ended shares of same (VTSMS)
have an expense ratio of 0.19% - a very small difference,
and as soon as he's accumulated $100,000 in it (or some
other formula vanguard uses for one's total assets there),
they get converted to Admirial shares (VTSAX) with
an expense ratio of 0.09%.

It'll be quite a few years before the difference in expense
ratios here make up for the commission hit on regular $300
purchases.
 
S

SD

For this monthly amount, as a new investor, you'd be best off with a low
cost index fund, which you may need a bit more than $400 to get started,
but the additional deposits would be easy. I'd suggest an S&P index
fund, and then once it's up to about $5000, start a small cap fund
purchase. In general, individual stocks are not the way to start
investing. You need quite a few stocks to be diversified, on the order
of 20 or so, so it would take a pretty large portfolio to have the
ability to buy round lots (100 shares) of 20 or more stocks.
As I mentioned in mimf, check out fidelitys simplestart IRA. You can invest
smaller amounts with automatic investment plans.

Also this round lots stuff is outdated. You can buy 1 share or 5 shares or any
number of shares of almost any public company you want and easily trade them.
Just so that you don't pay too much in commissions, make sure you buy and sell
atleast 1000$ worth of stock.

As you are a young investor, you can start with the small cap or mid cap index
and not the large cap because those offer better returns in the long run and
that is more important than short term volatility for you. You can get the large
cap later. You should consider emerging markets also when you begin to diversify.
 
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G

Guest

Hi Bread, you're right. We agree that a low-expense fund that
represents a broad market index can be a superior alternative
to the ETF for the same market index. I think we both agree
also that these index-based funds or their ETFs are an
excellent way to get market performance and diversity, and
should be a core for one's stock market exposure.
Joe
 

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