Can someone give me the rundown of investing?

Discussion in 'Fred's House of Pancakes' started by Higgins909, Nov 10, 2018.

  1. JimN

    JimN Let the games begin!

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    Higgins, if all you have is $200 to invest stay with one of the on line banks like Ally or Discover for the significantly higher rate and the same FDIC insurance.

    Contribute enough to your employer's 401(k) to qualify for any matching funds. Free money can't be beat.

    Perhaps the nerdwallet and motley fool sites may be helpful. Robert Shiller's Financial Markets course at MIT is available for free. Schwab holds free seminars in their offices. There are more choices now than when most of us started out and fees are much lower.

    Usle may be on to something. American Water is down 2% from its all time high and Middlesex Water is off 6%. These sleepy utilities have become growth stocks.

    Many companies allow direct purchase of their stock with low minimum requirements. I recommend looking at your local utilities. Start small, reinvest the dividends, and let the account grow through dollar cost averaging. There is a tax advantage to receiving qualified dividends over ordinary dividends but that is another discussion for another day.

    Nobody times the market with any consistency. I will caution against buying into an index fund close to a top in a bull market. The roller coaster drops as well and it can take a long time to recover 30%, 40%, or 50%.

    We can't tell you what will work best for you but we can tell you what has worked for us and what hasn't. The only way to quickly and easily double your money is to fold it in half. A "get rich quick" scheme only makes the schemer rich.

    As with everything else, there is a lot of good information out there and there is a lot of junk.

    At least you are asking questions which is the first step on the path.
     
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  2. Zythryn

    Zythryn Senior Member

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    Lots of good advice above.
    I want to reinforce the one about avoiding 'get rich quick' schemes. They almost always work, for the guy that gets you to follow his scheme ;)
    Time is the most powerful tool when investing. Use it. Doesn't matter if you start with $10/month, start.
    Read up, learn about investing. Stocks are nothing to be afraid of, but, be well diversified and study the companies you choose to invest in if you go that route. ETF funds are another good option.
    Whatever you do, don't day trade, you want to make your choices and stick with them, unless the fundamentals change. I make about one or two trades a year. Every time you make a trade it is costing you money and/or taxes.

    But even in a basic savings or money market account, that interest will grow, and left untouched, compound annually.

    Also remember two things:
    1) This advice is worth exactly as much as you paid for it.
    2)I am not a financial advisor.

    Congratulations on investigating this earlier, rather than later :)
     
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  3. padroo

    padroo Senior Member

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    Any dollar you already have is yours, the one you earn you have to pay taxes on.

    Better to save a dollar than to earn one.
     
  4. stevepea

    stevepea Senior Member

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    Buy low, sell high.
    Test tomorrow. :)

    Even if you just have a little money now, here are some random tips for you, for both now and in the future.

    Seven things:
    (1) No "get rich quick" schemes. If it sounds too good to be true, it is.

    (2) Open up a tax-sheltered IRA account as soon as you can, while you're young. Where you want to put your money is your choice (bank CD, stocks, mutual funds, etc) but you're allowed to contribute up to $5,500 max each year into an IRA ($6,500 max when you turn 55). Even if you only have $500, open one up and do it.

    Regardless of how you invest it, for IRAs, I like the ROTH IRA better than the traditional IRA, especially if you're younger. Don't be tempted by the instant tax break of a traditional IRA, you'll pay for it later. The younger you are, the better a ROTH IRA is.

    Simply put, if you open a regular IRA, you get a little tax break NOW... but later will have to pay taxes on everything you earn on it until retirement. Traditional IRAs also have a bunch of restrictions (like being forced to take the money out & pay taxes on it every year once you reach a certain age). But on a ROTH IRA, while you won't get the tax savings now, there will be NO MORE TAXES on anything you earn on it ever again (and there aren't as many restrictions, like having to take the money out at a certain age).

    Say you invest $5,000 in an IRA this year, and say 20 years from now that $5,000 has turned into $17,000. With a traditional IRA, you'll get a tax break this year for the $5,000 contribution you make, but when it comes time to retire and you take the money out, you'll then have to pay taxes on that $12,000 profit you made by investing it wisely over 20 years.

    If you instead opt for a ROTH IRA, you won't get a tax break this year for investing that $5,000, but will never have to pay any more in taxes... and if that $5,000 turns into $17,000 when you retire, you won't have to pay a penny more of taxes on any of it (including the $12,000 profit you made).

    At any rate, however you want to invest the funds, open up an IRA NOW while you're young, even if you only have $200. Just like a checking or savings account, you can have multiple IRAs at multiple places in multiple catagories (CDs, stocks, savings accounts) as long as you don't contribute more than $5,500 total a year.

    (3) If you want to do CDs, look at credit unions. They'll pay MUCH higher than banks (and Texas credit unions can often pay some of the highest rates). Have a look at this website: http://www.depositaccounts.com/blog where people post CD specials from around the country, and you can check out various CD and savings account rates throughout the US.
    If you want to do stocks/mutual funds, look at a place like Vanguard, where the expense fees for mutual funds are much less than a place like T Rowe Price or Fidelity.

    (4) Don't gamble or play the lottery. Investing is gambling, and that's enough. Realize that that is what it is, and do it wisely. Don't let it consume you. There will be times when your investments soar, and times when they crash. Don't be emotional or react with emotion. Don't be greedy. Go for the LONG HAUL. Do research, but past performance does NOT necessarily mean similar performance going forward.

    (5) Research and data can only go so far. Which is why you should diversify not only among stocks themselves, but with your entire portfolio. Most investments have risks. The rewards may be greater with stocks (which have risks) than, say, a bank/credit union CD (which has no risks). But it's a good idea to have at least a part of your investments in things without risk. Personally, some of my own retirement money is in stocks, while other is in plain old credit union CDs.

    (6) Once again, just because "Investment X" may have soared for 4 years, doesn't mean it won't crash. Put your money in different pots.

    (7) WARNING! If you ever find yourself with more money to invest than you're allowed to put into an IRA ($5,500/yr) or other tax-sheltered account -- in other words, if it's TAXABLE money you want to invest, and you're looking at mutual funds, put them into INDEX funds rather than MANAGED funds (if it's IRA or tax-sheltered money, it doesn't matter). The reason is, if you don't, you'll be paying lots of taxes literally for nothing. Here's why: managed index funds and ETFs are constantly changing which stocks they hold throughout the year, as the managers buy and sell different companies to try to get you a better return (even though data shows over the long haul, an index fund usually does just as good or better than a managed fund). But even if YOU don't do a thing, the fund's manager buying and selling all throughout the year makes you liable for all kinds of capital gains taxes each time they buy and sell within the fund. But an INDEX (or passive) fund pretty much just holds what they have, without all the buying and selling within the fund, so you'll get a much smaller capital gains tax bill each year. I can't stress this enough. If you put taxable money into a fund that has a lot of turnover (where the fund owner is constantly changing the companies of stock that is in the fund) you'll get a large capital gains tax bill each year because of it -- even if the stocks tank and go down in value.

    So for example, if you invest $50,000 of taxable money in mutual funds with high turnover rates, you might have to pay taxes on $4,000 worth of "capital gains" for those funds each year because of all the buying and selling within the funds (even if the value of the stocks goes down!) The $4,000 (or whatever it is) will be taken out of your account, then immediately put back in -- but you'll have to pay taxes on that $4,000 that was taken out for a second, regardless if the value of your investment has gone up or down. (It'll take too long to explain why this is, but that's the reality). While INDEX funds, or funds with a low turnover rate, will still give you some tax liability, it'll be FAR less, like maybe owing taxes on $280 each year instead of $4000 each year.

    So if there's a fund with a high "turnover" rate that you like and want to invest in, it's best to use IRA/tax-sheltered money for those, and use your taxable money for INDEX (or low turnover rate) funds. Look at a fund's "turnover rate" -- (it's always published) -- the smaller number the better if you're using taxable money (Again, this applies only to investments with TAXABLE money, NOT in an IRA or tax-deferred account).
     
    #24 stevepea, Nov 13, 2018
    Last edited: Nov 13, 2018
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  5. Prius Maximus

    Prius Maximus Senior Member

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    Yeah, I meant investing in stocks is not a good move unless you have money to spare. 401k is a great investment.

    No, it wasn't one stock, I had 4 or 5 - but they were all tech stocks. So I guess that was still all my eggs in one basket.
     
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  6. jerrymildred

    jerrymildred Senior Member

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    Yup! I imagine I can guess about when that happened. Sorry you got caught in that.
     
  7. bisco

    bisco cookie crumbler

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    what do you do for a living? if you aren't going back to school, have you considered a trade? most are very lucrative once you know the job and start your own company. plumbers around here make more than doctors.
     
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  8. mikefocke

    mikefocke Prius v Three 2012, Avalon 2011

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    I once saw a chart listing about 10 investment categories of things you might have invested in maybe 30 years ago. Each column was ordered from best investment for that year at the top to worst at the bottom. It was absolutely amazing to see how one strategy that worked one year was probably not going to work the next and certainly not over the long term would it be at or near the top every year. Every category was in both the top and bottom third over that time period. Diversify. Even in mutual funds, you can have large companies (Large Caps), Mid Caps and Small Caps. Then international with developed and developing countries.
     
  9. Scribe

    Scribe Junior Member

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    It depends too if you have time, if you are 20 something, then risky investments can pay off because they may work or not but you can change it up, if you are 40ish you start looking for safe harbor investments. I need my money to live on so I have pretty bullet proof investments that will pay COL increases and last until we both die and if there us anything leftover go to the children and select charities.

    Posted via the PriusChat mobile app.
     
  10. bat4255

    bat4255 2016 Prius v #2 and 2008 Gen II #2

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    Another thought.

    Who made the chart?

    The seller?
     
  11. sam spade 2

    sam spade 2 Senior Member

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    Several people have mentioned this and I think it needs some clarification.

    A 401K IRA is a savings account and is NOT an "investment" , in itself.

    Within the IRA you still need to choose what investments to put your money INTO.
    A simple bank savings account (money market fund) is the simplest.
     
  12. Starship16

    Starship16 Senior Member

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    He hasn't said what he does for a living.

    His company may not even offer a 401K plan, or similar. We are assuming. (And Sam is correct, you have to be knowledgeable about what to place in that account. Read & learn.)

    And he said he has only $200 to start with?

    I agree with the suggestion of having a simple online savings account. 2.25% interest is better than none, from a local bank.

    Everything else might be way over his head at this point.
     
  13. bisco

    bisco cookie crumbler

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    buy low sell high
     
  14. Starship16

    Starship16 Senior Member

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    Buy what low and sell what high?

    He flew the coop. He's only 22 and probably working hard, and doesn't have time to spend every waking moment on Priuschatterbug. (Unlike all you old phony millionaires. :eek:;))

    The ONE best piece of advice in this whole thread, was the guy who said to "never ask a bunch of anonymous car-chat weenies for investment advice!!" :LOL: :ROFLMAO: (y)
     
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  15. bisco

    bisco cookie crumbler

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    probably when he made like a tree...
     
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