|
rizuhbull posted:ah, ok. So aside from the difference in that your employer is also putting money in, can you invest with a 401k like you can with an IRA? And you can lose everything in an IRA if you invest poorly with it, right? Why invest with an IRA account versus using ameritrade or something similar?
|
#
?
Apr 23, 2015 02:02
|
|
|
|
| # ? May 27, 2024 11:33 |
|
|
pig slut lisa posted:I was asking about where you got the .25%, but I think warderenator correctly identified the reason.
|
|
#
?
Apr 23, 2015 02:27
|
|
|
rizuhbull posted:An annual return of 6-8%? From what? If it's from the investments, isn't that assuming that they do well? That's not a safe return assumption, is it? Cause if so, why isn't everyone doing it? I think that's a fairly safe assumption for a long term investment, one of the experts will correct me if I am wrong. Because people think the newest iPhone, 500 channels of television, and a new car are more important.
|
|
#
?
Apr 23, 2015 02:34
|
|
|
rizuhbull posted:An annual return of 6-8%? From what? If it's from the investments, isn't that assuming that they do well? That's not a safe return assumption, is it? Cause if so, why isn't everyone doing it? Historically, the stock market has returned something like 6-8% per year over its lifetime. You really should read at least one of the books in the OP. It will be the best ~$15 you have spent in a long time. Why isn't everyone doing it? Because Americans are horrible savers and if it were up to the denizens of this thread, everyone would be doing it.
|
|
#
?
Apr 23, 2015 02:38
|
|
|
pig slut lisa posted:Can we update the OP to include the Stock Series at jlcollinsnh? I feel like telling people "read a whole book" is not always the best way to start them off when they come in with basic questions. Parts I-VI of the Stock Series are especially good for someone who's just beginning their exploration. GoGoGadgetChris posted:...or even Bernstein's own (author of Four Pillars) short eBook "If You Can": FWIW, my preference for new investors is "If You Can" (I had never heard of it til GoGoGadgetChris posted it but it's great). The Stock Series is probably reading assignment #2.
|
|
#
?
Apr 23, 2015 02:41
|
|
|
MickeyFinn posted:Historically, the stock market has returned something like 6-8% per year over its lifetime. You really should read at least one of the books in the OP. It will be the best ~$15 you have spent in a long time. Ropes4u posted:I think that's a fairly safe assumption for a long term investment, one of the experts will correct me if I am wrong. So should I play around with investopedia's simulator? Assuming I finish the Neatest Little Guide book and read up on more tutorials, what should be my next step? A Roth IRA with Vanguard or Fidelity? Any other homework y'all think I should do? What should be my goal for this year regarding investments?
|
|
#
?
Apr 23, 2015 03:18
|
|
|
rizuhbull posted:What should be my goal for this year regarding investments?
|
|
#
?
Apr 23, 2015 03:28
|
|
|
rizuhbull posted:Sounds too good to be true. Then again, I don't have cable or a smartphone. Something that really helped me start investing was the hypothetical story of Bob the world's worst market timer. Basically by investing in index funds made up of the entire stock market, even if you consistently invest at the worst possible times you can still come out ahead. I also really like a recommendation I got early to never invest in anything you don't understand. Before you open an IRA either with an investment firm like Fidelity or Vanguard or your bank you should spend some time really looking into it. The most common recommendation for investment strategies is the boglehead style three fund portfolio, I would start there.
|
|
#
?
Apr 23, 2015 03:32
|
|
|
rizuhbull posted:Sounds too good to be true. Then again, I don't have cable or a smartphone. Read the suggested articles. If I could give 23 year old me advice it would be to invest as much as possible and kick off the corporate train at 50.
|
|
#
?
Apr 23, 2015 03:55
|
|
|
pig slut lisa posted:FWIW, my preference for new investors is "If You Can" (I had never heard of it til GoGoGadgetChris posted it but it's great). The Stock Series is probably reading assignment #2. Agreed, and I updated the OP. Thanks!
|
|
#
?
Apr 23, 2015 04:27
|
|
|
slap me silly posted:Agreed, and I updated the OP. Thanks! Yeah, I know you did and I appreciate it  I was just bumping it here because we were falling into read a book mode and I always worry that that turns new people off.
|
|
#
?
Apr 23, 2015 04:29
|
|
|
If the choices are either spending it, putting it into a bank account to earn really low interest, and contributing to an IRA, definitely go with the IRA. Put it in a target date fund and let it sit there until you learn what to do with it- at least it will be appreciating.
|
|
#
?
Apr 23, 2015 06:34
|
|
|
rizuhbull posted:An annual return of 6-8%? From what? If it's from the investments, isn't that assuming that they do well? That's not a safe return assumption, is it? The US Market has had a real (after inflation) return rate of almost 7% a year for 140 years. That's pretty much what you can call a safe assumption (possibly the only safe assumption) when talking about (equity) investing. Investing in the broad US market is, in essence, a bet that the the US will not suffer catastrophic failure in the intermediate future. If it does, and you live in the US, you will probably have more pressing concerns than your retirement portfolio. Note that you may not get 7%, you may get less during the 20 or 30 years your in the market, or maybe you will get more, 7% is an average. An individual stock can fail, it happens all the time, even to the biggest and the best of them. Whole market sectors can, and will go belly up. The entire US Market though? Eh, I don't see it. Some parts will go down, other parts will go up and in general the market as a whole will most likely increase over time (losers can only go to 0, winners can go up infinitely in theory). The real risks to the whole market are pretty remote. What if it doesn't increase? What if it goes down? Well, it's the whole market, if the whole market is going down then everything is going down so, relatively your still probably doing ok, businesses are still going to make products and sell them and thus make money. Historically, stocks have been an adequate deflation hedge in real terms. rizuhbull posted:Cause if so, why isn't everyone doing it? e: I want to be clear. Buying an individual stock is about the single most risky thing you can do in equity investing. For a very long time, buying individual stocks was almost the only way to interact with the market (unless you had a lot of money to buy into an actively managed fund). It's only within the last few decades that broad market index investing has existed as a thing and even less that small individual investors could partake in it as a reasonable cost. It's the aggregate of thousands of individual stocks performance together that makes index investing so powerful. The law of averages and binomial (risk vs return) distribution if you will. e2: VVVV The market goes up because companies are profit making enterprises and the losers can only go down to 0 (and be removed from the index) while the winners can go up infinitely. A stock price is a best guess estimate of the future earnings of a company. The market would fail if it was only the influx of new outside money propping it up (i.e. a bubble or a ponzi scheme). Suggesting that the entire US economy for 140 years is a ponzi scheme is not reasonable. Murgos fucked around with this message at 16:25 on Apr 23, 2015 |
|
#
?
Apr 23, 2015 14:28
|
|
|
rizuhbull posted:An annual return of 6-8%? From what? If it's from the investments, isn't that assuming that they do well? That's not a safe return assumption, is it? Cause if so, why isn't everyone doing it? The market continues to go up because new money is coming into the market, so I'd say that everyone who can do it is.
|
|
#
?
Apr 23, 2015 15:13
|
|
|
I will likely be moving on in the near future from a job where I have a 457(b) (both ROTH and traditional). I know that 457s have some unique properties like taking distributions at any age after leaving the job, so I'm wondering what my best option will be. My initial thought was rolling the ROTH part into my ROTH IRA and waiting to see if whatever new job I end up with has good 401(k) options before figuring out what to do with the traditional part. Is there anything obvious that I'm missing or should take into account when making this decision? The current investment options as a whole aren't great, but we do at least have three index funds that total up to something decent: SSGA Total Stock (Dow Jones Total US Stock Market Index) - 0.02 expense ratio SSGA Global ex-US (MSCI ACWI ex-USA index) - 0.42 expense ratio SSGA Passive Bond (Barclays US Aggregate Bond Index) - 0.31 expense ratio Additionally, am I reading correctly that I could still contribute the maximum $18,000 to a 401(k) even if I've already been contributing to the 457 this year? It's a little hard to tell, since all of the examples mention an employer that offers both types at the same time.
|
|
#
?
Apr 23, 2015 17:52
|
|
|
Correct me if I'm wrong, but the books in the OP seem to be geared towards an American audience. I know plenty of the principles being discussed will be applicable to people everywhere but can anyone recommend some good reads that are maybe written for the UK?
|
|
#
?
Apr 23, 2015 19:46
|
|
|
Check out http://monevator.com/ and Smarter Investing by Tim Hale(http://www.amazon.co.uk/Smarter-Investing-Simpler-Decisions-Results/dp/0273722077)
|
|
#
?
Apr 23, 2015 21:14
|
|
|
MickeyFinn posted:Historically, the stock market has returned something like 6-8% per year over its lifetime. You really should read at least one of the books in the OP. It will be the best ~$15 you have spent in a long time. You should probably plan that future returns will be lower. e:  Murgos
|
|
#
?
Apr 23, 2015 22:36
|
|
|
The Leck posted:
Yes, if your company offers both, then you can contribute 18k to a 401k or 403b, AND 18k to a 457. I learned that last year via this forum and I am eternally thankful!
|
|
#
?
Apr 24, 2015 02:25
|
|
|
I just think it's crazy that you can expect to make $700 a year with 10k worth of investments. A coworker of mine (same age) actually showed me his bank account of 18k and we were talking about investing today at work. He works his rear end off at two min wage part time jobs but isn't paying for school or a car like I am. Nice to know that there are other people as young as me thinking ahead. Aside from compounding, is there any other ways of snowballing a return? Probably not unless you were to get into real estate or something similar, right? What's to stop you from taking out a loan and investing it? The interest rate on the loan would be greater than any return you could gain from the market? \/\/ drat those liberals! Trying to keep the job creators down I tell ya. So I'd want a Roth IRA if I can qualify? Instead of a traditional. One you pay taxes when you take the money out eventually, the other is when you put it in, right? Roth is tax-free, even though the money you put in is taxed beforehand, and traditional is tax-deferred, which just means it's taxed when taken out. And a final question. A Roth IRA can only have earned income contributed, but how is that enforced? Do I need to present pay stubs showing at least the amount I wish to contribute? I see no reason I wouldn't qualify. rizuhbull fucked around with this message at 03:56 on Apr 24, 2015 |
|
#
?
Apr 24, 2015 03:16
|
|
|
rizuhbull posted:Aside from compounding, is there any other ways of snowballing a return? Probably not unless you were to get into real estate or something similar, right?
|
|
#
?
Apr 24, 2015 03:42
|
|
|
Past results don't guarantee future returns.
|
|
#
?
Apr 24, 2015 03:56
|
|
|
ohgodwhat posted:Past results don't guarantee future returns. Ironically applies to all other options for what to do with your money too. So be a good Bayesian and remember that past results do inform expectations of future returns. As for the Roth IRA: another benefit is that you can withdraw any contributions without penalty. That's not to say you should put your emergency fund in a Roth IRA, but you very well could open one at a bank and place your fund in a Roth IRA savings account to make sure you hit the yearly max out (you have until April of next year). You can also withdraw up to 10k I'm earnings after 5 years penalty free towards a home purchase. Both of those things should be taken with a grain of salt. An important part of passive investing is protecting yourself from what you can't control and maximizing what you can. You can't make the market gain or lose, but you can cut expenses, save more, minimize your tax burden, etc.
|
|
#
?
Apr 24, 2015 06:01
|
|
|
rizuhbull posted:What's to stop you from taking out a loan and investing it? I remember a really cool thread about this from bogleheads.org: https://www.bogleheads.org/forum/viewtopic.php?t=5934 The dude was a finance student who had the idea that borrowing a huge amount of money and investing it in the stock market while you're young is actually safer than following the conventional strategy of investing money as you earn it. His reasoning was that using leverage early would protect you from the possibility that stocks could perform well when you're young but have a small portfolio, and that stocks could perform poorly when you're old and have a large portfolio. He began this strategy around the end of 2007, and he was forced out of the market by margin calls by the end 2008 with over $200,000 of debt. Its a bad idea, don't do it.
|
|
#
?
Apr 24, 2015 06:57
|
|
|
I want to elaborate on the "The stock market goes up because new money is coming always coming in" idea. It's a common misconception but it's completely wrong because the stock market is a zero sum game. For every stock bought someone had to sell it. For every stock sold someone had to buy it. For every dollar put in there is a dollar taken out. Valuations of stock prices increase (decrease) because of the work done (or not done) by the companies to make a profit and the speculation of the stock purchasers that the value of the company will rise (or fall) to meet the new higher (lower) price. But that new valuation has to be realized by the act of selling the stock which another investor, for what ever reason, has to buy. The price you see on the stock ticker is the last price that someone sold (or bought) the stock for. The net value of the stock market did not change because of the transaction. The only (?) time that I think new money actually could be said to come into the stock market is during an IPO or sale of primary stock. That money goes immediately to the company offering the stock who is under no obligation to pay it back at any time. However the purchasers of the stock are getting ownership of a portion the company and, usually, an expectation of future payments of a portion of the profits of the company (dividends). e: VVV I said that. How much of the growth of the US Market (for example) is due to that effect? e2: I'll answer my own question in 2014 NYSE helped raise ~70 billion in capital via new offerings. In 2014 the market cap of the NYSE rose by ~4 trillion dollars. The effect of offerings on the whole market is trivial. (data according to NYSE press releases via google and nysedata.com) Murgos fucked around with this message at 18:07 on Apr 24, 2015 |
|
#
?
Apr 24, 2015 13:24
|
|
|
That's not correct. Stocks as opposed to derivatives such as options and futures aren't zero sum precisely because of primary issuance. You could take a snapshot of the market(s) over any length of time and see an imbalance between inflows and outflows.
|
|
#
?
Apr 24, 2015 13:43
|
|
|
Also injection effects in the economy do exist. If a bill is passed that provides funds to, say, car dealers to subsidize buying inefficient vehicles off of the road and it is financed through printing money, the car dealer industry will face real short term returns until the inflation has disbursed across the market. So if you do poo poo like Q2, you are providing a large return from injection effect on financial firms, which will partially manifest in lower fees and more capital returns being reinvested, which will raise market prices (without raising the US median income, for instance). It will also partially manifest in those firms having a higher stock price because their margins increase, with a ton of bleed over effect. The negative side of this coin is that anyone without money in the market is a net loser, and one of the heuristic reasons for investing in the stock market is absolutely that in the long run federal policy is to prop up market activity. Doesn't mean all growth is money. Just means that it's easier to inject new money into the financial industry and easier to track it when you do, so that's where they do it (also special interest reasons but that's more about timing these injections and their magnitude vs whether they'll exist at all).
|
|
#
?
Apr 24, 2015 13:58
|
|
|
I make no claims about the intercessions of politics. That said one of the primary purposes of the government (according to the constitution) is to "provide for the general Welfare" which has always meant to provide incentive for economic activity whether via trade agreements or tariffs or what ever means congress deems reasonable. But that's not limited to the market, that's a fact of life of doing business in (or with) the US (or any country). That the effects of that policy (requirement) show up in the market should not be surprising it being representative of the economic output of the country. But that is changes in valuation, it still has to be realized by a sale and purchase and doesn't refute my point.
|
|
#
?
Apr 24, 2015 15:35
|
|
|
How the Stock Market Works
|
|
#
?
Apr 24, 2015 15:40
|
|
|
So I recently learned that I can pay ahead on my ridiculously high interest rate car loan. Why didn't I know that? I make bad decisions sometimes. Once I determine if there are any fees or penalties associated with it, I think I'm going to pay off the entire $11,000 this year. I'm curious, though- I initially wanted to max out my Roth IRA contribution because once the year passes, you lose the opportunity, but I also opened a Roth 401k at my current employer that I don't plan to be at for more than another couple years at most. Wouldn't that roll right in to my IRA once I leave the company? The only issues I can imagine are not being able to withdraw funds because they've been transferred over, not contributed. But there's a 10k cap on that and I'll have contributed a lot more than 10k once I'm eligible. Other than that, just the possible taxes/fees involved in transferring over. Moneyball fucked around with this message at 21:45 on Apr 24, 2015 |
|
#
?
Apr 24, 2015 21:42
|
|
|
401k questions: - Intern for 7 months this year, currently 3.5 months deep - I've maxed out my Roth IRA $5,500 this year - I want to deposit a large sum of money into a 401k - I've looked up my 401k options and it seems there is only ONE set of plans available - Fidelity T. Rowe Price Retirement funds (based on your age), about 0.76% expense ratio. - I get no match from my company 1) Is it worth investing into high(ish) expense ratio 401ks like this? What is the cutoff where I should just be dumping money into something like S&P 500 or some other non-tax-sheltered account? 2) Can I lump-sum deposit the full 2015 maximum into a 401k if I've only been working at the company for a few months/won't even be here in another 3? What are limitations here? 3) How should I go about future plans of rolling over this account into a lower ER account? Blinky2099 fucked around with this message at 00:06 on Apr 25, 2015 |
|
#
?
Apr 24, 2015 23:31
|
|
|
Blinky2099 posted:401k questions: I suppose you could set your 401k contribution at a very high percentage of your income in order to contribute as much as possible in the next several months. I don't think any 401k plans allow lump sum contributions. Then when your internship ends you could roll over the 401k into a traditional IRA and buy whatever you investments you want. Or like you said you could just buy something like a total stock market fund in a taxable account. It really depends on whether you want to be able to access the money before you retire.
|
|
#
?
Apr 24, 2015 23:38
|
|
|
warderenator posted:I suppose you could set your 401k contribution at a very high percentage of your income in order to contribute as much as possible in the next several months. I don't think any 401k plans allow lump sum contributions. Then when your internship ends you could roll over the 401k into a traditional IRA and buy whatever you investments you want. Great, thanks -- I did just that. I did manage to find a sneaky spartan fund that was available (they default to a terrible ER fund and make it difficult to switch). The max I can deposit is 90% of my paycheck, so I'm going to do that. One last question: Should I do the traditional 50/50 split between pre-tax and roth, or should I weight a lot more on Roth (maybe 20/80 or 0/100) since I'm only working 7 months and thus expecting my tax bracket to only go up?
|
|
#
?
Apr 25, 2015 00:08
|
|
|
Most of the thread seems to favor Roth IRAs over traditional IRAs. Are there *any* circumstances where a traditional is a better option? I'm in the 15% tax bracket and can take the full deduction on a traditional IRA, and I don't really foresee myself being in a higher tax bracket upon retirement. Am I still going to come out ahead paying taxes now instead of 30+ years in the future (if I even live that long)?
|
|
#
?
Apr 25, 2015 00:11
|
|
|
Sleipnir posted:Most of the thread seems to favor Roth IRAs over traditional IRAs. Are there *any* circumstances where a traditional is a better option? I'm in the 15% tax bracket and can take the full deduction on a traditional IRA, and I don't really foresee myself being in a higher tax bracket upon retirement. Am I still going to come out ahead paying taxes now instead of 30+ years in the future (if I even live that long)? I personally do Roth and will until I am above the 28% bracket, and at that point I'll reconsider. My models have shown me that it will be slightly better to do Roth at all levels, but it can vary. Everyone has an opinion on this.
|
|
#
?
Apr 25, 2015 00:47
|
|
|
Blinky2099 posted:One last question: Should I do the traditional 50/50 split between pre-tax and roth, or should I weight a lot more on Roth (maybe 20/80 or 0/100) since I'm only working 7 months and thus expecting my tax bracket to only go up? If you do split things up make sure that the smaller side is big enough meet the minimum investment on the kinds of funds you would like to buy. I would just choose roth or traditional and go 100%. Lots of little accounts is annoying imo.
|
|
#
?
Apr 25, 2015 00:58
|
|
|
Roth 100% (at least for now, this year) it is. Thanks.
|
|
#
?
Apr 25, 2015 01:00
|
|
|
What's the point of getting a 401k over a Roth if your employer isn't offering to match anything? What's the difference? \/\/ Thanks.
rizuhbull fucked around with this message at 02:51 on Apr 25, 2015 |
|
#
?
Apr 25, 2015 02:47
|
|
|
rizuhbull posted:What's the point of getting a 401k over a Roth if your employer isn't offering to match anything? What's the difference?  is very good at describing all of them.
|
|
#
?
Apr 25, 2015 02:51
|
|
|
|
| # ? May 27, 2024 11:33 |
|
|
rizuhbull posted:What's the point of getting a 401k over a Roth if your employer isn't offering to match anything? What's the difference? \/\/ Thanks. Main advantage is the 401k allows you to sock away more pre-tax money each year. Whether you go with a IRA or Roth you are limited to $5500 total contributions each year. With a 401k you can go up to $18000 pre-tax. OP has good advice, Max 401k, go for a IRA and then go for a taxable account if you have any fun money left.
|
|
#
?
Apr 25, 2015 06:14
|
|
