Financial Advise

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I have recently finished my college career and obtained a full time position that I make decent money. Next year I am transferring to a differnet region and I will get a substantial increase in pay. I have been married for over a year now and my wife is a nurse who makes decent money as well. We have been putting extra money back into a savings account each month and quite frankly it is not worth the drive to the bank to let them hang on to my money. I do not know anything about investments or anything of that nature. I have an appointment Thursday afternoon with a financial advisor. My questions are:

What are some good questions to qulaify this guy?

Where are some good places to start to look to educate myself on this matter?

What would be my best option for short term investments?

Long Term Investments?

Thanks for all the help!

[crewboss]

the best advice i can give you is to cancel that appointment and make it a priority to learn how to make your hard earned money work for you. your personal wealth is nobody's interest but yours.

1. get a subscription to Kiplinger's and Money Magazine. read every month cover to cover. learn about the most respected mutual fund families and the best vehicles for your money.

2. do you plan on buying your 1st home within a year or 2? learn about the Roth IRA. do not pay anyone to tell you about it, you can access the same information they do for free.

3. do you participate in a 401K or similar IRA through work? does your wife currently contribute? if not, start. it will be less disposable income from month to month, however the money that diffuses to retirement will add up. even if it's only 2%, up to 6% of gross income.

4. you're young. don't invest in bonds. take a chance, stay balanced but aggressive. many times it pays off if you're young.

5. learn about real estate. take the real estate salesperson courses. understand that real estate could be your best investment.


IMO, there's never any reason to pay someone to make decisions with your money. create a budget and stick with it within reason. allow a fixed savings from month to month. read up on which funds to put your money in, remembering that diversification is less important when your young. and when you've saved enough money to invest, let it fly.

put it this way. if your broker's fees are 2% and he puts you into a fund or seperate issue that makes 2% over a given year, you only break even.

who wants to make money to pay someone for making the decision.

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Originally Posted by crewboss

the best advice i can give you is to cancel that appointment and make it a priority to learn how to make your hard earned money work for you. your personal wealth is nobody's interest but yours.

2. do you plan on buying your 1st home within a year or 2? learn about the Roth IRA. do not pay anyone to tell you about it, you can access the same information they do for free.

3. do you participate in a 401K or similar IRA through work? does your wife currently contribute? if not, start. it will be less disposable income from month to month, however the money that diffuses to retirement will add up. even if it's only 2%, up to 6% of gross income.

5. learn about real estate. take the real estate salesperson courses. understand that real estate could be your best investment.

Thanks crewboss.

I have been reading a lot of books on real estate investment over the past few months. I have been wanting to take a real estate class but I have not had much time.

I have the opportuntiy to participate in a Roth IRA but I have not started to contribute, I will fill out my paper work this following week. My wife participates in a 401k, where she works that is her only option.

I have been putting off this meeting with this joker for about 3 months. I keep on cancelling and I was hoping he would catch the hint. I have been putting him off because I have not had the time but now I will put him off for good.

Thanks for the advice crew and maybe I will be able to take a realestate class soon.

Later!

[Bob Smith]

IMO, you are in a perfect position to go out and buy The Total Money Makeover by Dave Ramsey. That will spell out what steps you should take with your money. Its an excellent general overview of your financial situation, then you can fill in the blanks on investing and such. But start with that book, its a quick read (maybe a few hours), and you will be so far ahead of your other graduate friends (and most everyone else, for that matter).

edit: His plan has worked for tens of thousands of people nationwide. Ultimately its common sense, which is something that isnt very common nowdays. I bought my copy on ebay for about $10. http://www.amazon.com/exec/obidos/tg...books&n=507846

[manimal78]

hey bro, if you want to make a decent return without doing a lot of homework, you should probably invest in one or two good mutual funds...Fidelity has a lot of quality funds without loads and very low fees...if you have a good chunk of money to invest now, i would put half into a 5-star fidelity fund and the other half in another 5-star....try to look at the fund's long-term performance. although past performance is never a guarantee of future results, it can give you a decent idea of how well your fund is managed through bull markets and bear markets...a few funds that are ranked highly for 10-year performance, 5-year, 3 year, and 1-year performance are Fidelity Contrafund, and Fidelity Growth and Income Fund ,and Fidelity Capital Appreciation fund..these should give you some decent long-term returns...

let me know if you have any more questions.

Originally Posted by Bob Smith

IMO, you are in a perfect position to go out and buy The Total Money Makeover by Dave Ramsey. That will spell out what steps you should take with your money. Its an excellent general overview of your financial situation, then you can fill in the blanks on investing and such. But start with that book, its a quick read (maybe a few hours), and you will be so far ahead of your other graduate friends (and most everyone else, for that matter).

edit: His plan has worked for tens of thousands of people nationwide. Ultimately its common sense, which is something that isnt very common nowdays. I bought my copy on ebay for about $10. http://www.amazon.com/exec/obidos/tg...books&n=507846

[manimal78]

another thing to look into would be these ETFs, or Exchange-Traded Funds...they're basically mutual funds, but are traded like a stock...you can get ETF's from Vanguard and Fidelity and many other brokerages...many of them, for example, SPY and VTI are like and index fund, although you wont pay the hefty fees that are common with a lot of funds...index funds are basically a vehicle that matches the S&P 500 that seeks to own the wide variety of stocks that are present in the S&P index...through these, you can achieve wide diversification without the hassle of paying a bunch of fees..

Originally Posted by manimal78

hey bro, if you want to make a decent return without doing a lot of homework, you should probably invest in one or two good mutual funds...Fidelity has a lot of quality funds without loads and very low fees...if you have a good chunk of money to invest now, i would put half into a 5-star fidelity fund and the other half in another 5-star....try to look at the fund's long-term performance. although past performance is never a guarantee of future results, it can give you a decent idea of how well your fund is managed through bull markets and bear markets...a few funds that are ranked highly for 10-year performance, 5-year, 3 year, and 1-year performance are Fidelity Contrafund, and Fidelity Growth and Income Fund ,and Fidelity Capital Appreciation fund..these should give you some decent long-term returns...

let me know if you have any more questions.

[soulpower]

Originally Posted by manimal78

another thing to look into would be these ETFs, or Exchange-Traded Funds...they're basically mutual funds, but are traded like a stock...you can get ETF's from Vanguard and Fidelity and many other brokerages...many of them, for example, SPY and VTI are like and index fund, although you wont pay the hefty fees that are common with a lot of funds...index funds are basically a vehicle that matches the S&P 500 that seeks to own the wide variety of stocks that are present in the S&P index...through these, you can achieve wide diversification without the hassle of paying a bunch of fees..

i totally agree. i think that buying an ETF based on the S&P 500 would be an excellent start since i believe the market overall is poised for growth in the next few years. but that is speculation. what you can do is if you invest, watch closely when the ETF goes up or down significantly (won't happen much), then look for the specific company(ies) that moved the most. they are all listed there- you just have to weed them out. during that time you can get a feel for how things are moving at the time, until you feel confident about investing in an individual stock.

just my $.02

SP

[Mark Kerr]

Well, it is awesome that you are already thinking about your financial future at a young age. I wish more of us young people would.

First, let me say that you need to educate yourself. Use the financial advisor for a couple of years, but by then you should be able to control your our finances. It isnt hard, but remember, it is your choice. Like anything, a good financial advisor is worth every penny, but a bad one is terrible. Learn about different investments, and what is right for you. First, you must ask yourself a few questions:

1. What are your financial goals? Are you trying to get a good sum of money together to secure your financial safety and retire at a decent age? Or are you trying to get the largest return on your money possible, and don’t mind risking your money in the process. I assume you are doing number 1.

2. How much of your own investments do you want to control? Do you want to be able to make your own choices regarding all aspects of your finances? Or do you want to make only the major choices, and let the details be settled by a professional?

A few general tips that I think are a great idea for financial success. I like to view my finances in two major, but equally important parts:

Part One - Offense

This is basically income, savings and returns on investment. All money that comes to you from yourself or elsewhere.

To me, savings should be done monthly and automatically. Ask your employer or your bank to set aside a certain percent of your income aside before you even touch it. (Read the book Automatic Millionaire to learn the best way for you.) Also, you should automatically put a certain amount into your IRA, Roth IRA, or 401(k) every month. Also, find out how much (if any) you and your wife's employer will match in regards to that saving. Whatever amount they match, SAVE THAT MUCH, AT LEAST. That is basically a 100% return on your investments instantly.

To me, investing is something you should decide is right for you. Are you aggressive and risky or conservative and safe? How many decisions do you want to make? If you want to be risky, have really high returns, and make your own decisions, then you should be highly educated in investing already, so I am not even going to address it.

If you want to make no decisions, then invest in a target-date fund. That means that the fund manager has a certain year (usually the year you expect to retire) that the fund reaches its maturity. You can put all your money in this one fund, and there is no need to diversify. These funds are not only highly diversified already, but also gradually shift from being heavily weighted from stocks, and slowly shift over to being more heavily invested in bonds as you get older. These funds are awesome, take 1 decision to make, provide good, steady returns, and are already diversified. Just pump a certain amount into it each month and watch your nest-egg grow.

If you want the middle of the road risk, then I would go with something like this, which gives you good returns, but also is diversified enough to prevent a crash. This is just my suggestion and you should do what is right for you:

40% in an Index Fund, something like a fund that tracks the S&P 500. (an index fund attempts to match the performance of the market as a whole. Sounds crappy, but 80% of professional investors don’t beat the S&P 500 in any given year. Sounds crazy but it is true.) Any index fund performs about the same, so find the index with the smallest fees. Vanguard is notorious for being a dirt-cheap investment company, and it basically the index fund that sets the standard.

20% in a Small Cap or Growth Fund. This is a fund that buys only small company stocks or stocks that have the potential for great growth. This fund can have HUGE returns, but can also get lose a lot. Big risk/big reward.

20% in a Bond Fund. Bond funds generally get low returns, but are also practically guaranteed to performance consistently. Low Risk/Low Return. Avoid any bond with the word "junk" in it. Also, avoid "high-yield" bonds.

20% in Real Estate Fund/REIT. Real estate funds have several advantages. They provide good returns, good dividends, but most importantly, don’t follow the market trends. My REIT grew at about 20% the same year that the market dropped like a rock. (2000) Keeps the portfolio balanced and steady.

Although I don’t use Vanguard personally, I think you should go with the Vanguard Company. They have all the funds I described above that you can buy with a no-load (which means no upfront money just to be allowed to be inside of the fund. Like a fund "cover charge.") They also allow you to electronically add money to your account automatically through your bank account, so you don’t even have to send them checks! They are also notoriously low-fee operators, which in the long run means you keep more of your money.

There are other more specific things, but you can read about those.

Part Two - Defense

Basically, this means spending wisely, and not going into excessive debt. Spend a good amount less than you make and don’t buy useless items that don’t appreciate in value or bring income. I would make this part longer, but I am tired of typing and it is kinda obvious.

In short, if it makes you more comfortable and lets you sleep better at night, then use a financial advisor. Good investing not only means getting good returns, but also making rational choices that you are comfortable with. If you do choose a financial advisor, just ask him/her questions that follow the topics of this thread.

I hope I have been helpful. Good luck. Remember, investing for the long term is a marathon, not a sprint. And no matter what you hear at the water-cooler, nobody gets 20% returns every-year. Unless the guy at the water cooler is Warren Buffet or Peter Lynch.

Books I find valuable regarding investing:

Most any good book about Warren Buffet.

Any book by Peter Lynch (who I believe is a better stock picker than Buffet). For basics, he co-authored a book called "Learn to Earn." Great book to begin with.

Rich Dad/Poor Dad and books in the series (I know it is cliché, but they really do give a great general outline of financial freedom.)

Avoid any book about "Options." That is for advanced traders.

Avoid any book about selling short. That is for advanced traders.

I'll leave you with a couple of quotes about smart investing from two of the greatest investors of all time:

"My favorite length of time to hold a stock is...forever." - Warren Buffett.

"Most people who know little about investing always talk about diversifying. The truth of the matter is, if you dont know much about investing and you are making your own investing decisions, you arent diversifying, you are de-WORSE-ifying." - Peter Lynch (paraphrased)

[Mark Kerr]

Also, if you want to educate yourself in investing, but dont have a lot of free time, buy books on tape or CD.

I am obsessed with books on CD or tape, and I listen to them when I drive and when I work out.

I go through about 1-2 books on tape/CD in a week. That is a lot of constructive educating my friend!

P.S. According to "The Millionaire Mind" (if I can remember the statistic correctly), 70% of people with a net worth of over a million dollars claim to spend over 2 hours a week looking over their personal finances but less than 25% of people with a net worth of under 1 million dollars report spending that much time.

Good luck, my friend!

[Bob Smith]

Good advice Mark! I listen to a really good financial radio show for at least 3 hours every day, but I like your suggestion of books on cd (whats a "tape?" ).

IMO, a person should be debt free. Yes, 100% debt free. Very few Americans are, mainly because they cant write a budget and control their spending. I am paying off all my student loans and the little bit I have on credit cards as fast as I can, and once Jewel and I get married it will be a hare's pace! I own my fair share of debt but I plan on having all of it paid off by January 1 of 2006. Guess what happens at that point? I have a ton of cash to use to max out 401k and 403b, Roths, and whatever other investments Jewel and I decide on. My personal financial risk will be virtually zero at that point because if I get laid off or disabled, I know that Jewel would be able to pay the utilities (which would be the only monthly payments) and not have to worry about selling a car or the house. Its huge peace of mind and will allow us to become very wealthy long before everyone else is scraping by on Social Security.

MK, if you havent read/listened to The Millionaire Next Door yet, I would encourage you to pick that up on cd.

[Mark Kerr]

Originally Posted by Bob Smith

Good advice Mark! I listen to a really good financial radio show for at least 3 hours every day, but I like your suggestion of books on cd (whats a "tape?" ).

IMO, a person should be debt free. Yes, 100% debt free. Very few Americans are, mainly because they cant write a budget and control their spending. I am paying off all my student loans and the little bit I have on credit cards as fast as I can, and once Jewel and I get married it will be a hare's pace! I own my fair share of debt but I plan on having all of it paid off by January 1 of 2006. Guess what happens at that point? I have a ton of cash to use to max out 401k and 403b, Roths, and whatever other investments Jewel and I decide on. My personal financial risk will be virtually zero at that point because if I get laid off or disabled, I know that Jewel would be able to pay the utilities (which would be the only monthly payments) and not have to worry about selling a car or the house. Its huge peace of mind and will allow us to become very wealthy long before everyone else is scraping by on Social Security.

MK, if you havent read/listened to The Millionaire Next Door yet, I would encourage you to pick that up on cd.

Thanks. I was actually hoping you would read this and approve. Great minds think alike!

Yes, I have Millionaire Next Door on CD. I have a TON of investing and finance books on CD.

I wouldnt mind sending them to you ( or a burned copy - can I say that? ) if you want. I'll pay postage, it isnt a problem. If you want a list of the books on CD I have, just ask. I'd love to provide one for you. Maybe we could even trade, like an investment book on CD club! If you want to borrow any book, or Book on CD I have, just ask. When it comes to knowledge, I am all for the free love!

[Bob Smith]

MK, ygpm.

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Thanks for all the advice guys.

Mark,

Thanks for taking the time to type all of that great and useful advice. I am goin to try and find me some good books on CD and LEARN.

Thanks once again!

[crewboss]

Originally Posted by manimal78

hey bro, if you want to make a decent return without doing a lot of homework, you should probably invest in one or two good mutual funds...Fidelity has a lot of quality funds without loads and very low fees...if you have a good chunk of money to invest now, i would put half into a 5-star fidelity fund and the other half in another 5-star....try to look at the fund's long-term performance. although past performance is never a guarantee of future results, it can give you a decent idea of how well your fund is managed through bull markets and bear markets...a few funds that are ranked highly for 10-year performance, 5-year, 3 year, and 1-year performance are Fidelity Contrafund, and Fidelity Growth and Income Fund ,and Fidelity Capital Appreciation fund..these should give you some decent long-term returns...

let me know if you have any more questions.

I agree. All excellent funds, I love Contra. check out Vanguard and CGM as well. CGM Focus is one of my best funds right now. Unmatched management, low fees. Great fund to get started with. $2500 initial investment.

[crewboss]

Originally Posted by Mark Kerr

Thanks. I was actually hoping you would read this and approve. Great minds think alike!

Yes, I have Millionaire Next Door on CD. I have a TON of investing and finance books on CD.

I wouldnt mind sending them to you ( or a burned copy - can I say that? ) if you want. I'll pay postage, it isnt a problem. If you want a list of the books on CD I have, just ask. I'd love to provide one for you. Maybe we could even trade, like an investment book on CD club! If you want to borrow any book, or Book on CD I have, just ask. When it comes to knowledge, I am all for the free love!

solid advice MK!!! wow that was a long post!! i would be a little less apt to recommend going with a broker for a couple years, because then when he feels comfortable in managing things himself a couple years down the line, he has to pay gains on everything held through the broker. i completely see where you were coming from though bro, it's a step in the right direction until he can get things under control.

to me, they don't call them brokers for nothing. 99% of them will make you broker.

anyway this is all good stuff. You can NEVER go wrong with Peter Lynch's publications. I am also a big fan of Bob Brinker. peace crew