Posted: 10/28/2007 9:04:52 AM EDT
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I need some financial/investing advice. I just graduated college with my BS and I am now 1/2 through my first year of Grad school to get my Masters. With lots of help from family and ton of scholarships I have managed 5 years of college with no debt to my name. I even have a new truck that I just paid off last month, still no debt. I have worked since I was very small and have held a job ever since. I now have 15k sitting in savings and I need to do something with it. I have 2 years until I receive my Masters degree and then I will actually need the money. So I have about 2 years that I can do anything with this money. I am not financial savy so please take me for a noob because I am. I feel very sure I want to start a Roth IRA. Is this a good idea? And how much do YOU think I should invest this year? Lots of people tell me to invest in International Index Funds. With a current weak dollar this doesn't make sense to me. But if you think it is a good idea please tell me so. There are also Money Markets and CD's, but don't know too much about those either. Can anyone give me any advice/tips? Thanks |
Haha. How did I know this would be the first reply?  Although I think that would be a wonderful idea, I don't think I would ever sell them.Same thing with ammo. IF I stocked up on it now to sell it in 2 years, I would probably shoot it all before then. |
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See a professional financial planner. One who works for a flat fee not a percentage of your account. Tell them your goals, your comfortablity with risk, time fram, and any other relevant information. THey will better be able to help you acheive your goals than some guy on the internet who is telling you to buy stock in some random company. You dont do your own surgeries, nor do you handle your own legal issues, you use a professional. Why is money any different? IM me if you have any more questions James |
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Consider how you want your estate to look in 60 years. Start that planning now, including insurance and so on. Speak to a FEE-BASED specialist in those areas. It may be expensive, but with the proper framework in place, you will look around at 45 and say "Damn! I have $600k in the bank and $300k in my 401k!" and when you are 65 you will not have to work anymore or eat into your estate and you can leave your grandchildren a lot of cash. See a professional and think about it for a few months. But think about it in terms of the next four generations. One of my grandfather's friends used to say "I write for my estate" when asked why he still continued writing books into his later years, when it was a chore. If you think of investing in terms of how rich your great grandchildren will be, you are on the right track. You want to make sure that at the end of your life you are fully insured and able to cost your family (and your estate) not one thin dime and when the estate is settled you have so little left in your name (not in a trust or corporation) that it amounts to a few paperback novels, unused toiletries, and the food in the mini-fridge in your hospital room. Over the last seven years, I have had a ton of older relatives pass away at 90+ (as seems to by typical in my family) and every single one of them was pleased as punch that their estate was completely handled well before they went into their final decline. And because almost everyone in my family keeps all of their mental faculties all the way down, this was quite clear in conversation. That and the sheer glee of knowing that they had done everything legally possible to deprive the Federal government of tax revenue. That also seemed to really cheer all of them up. You want to be in that position, trust me, with nothing weighing on your mind but seeing your grandchildren when you know that you are dying. Plan out your finances properly, inclduing the transition from employee to retiree, and you can be worry-free at the end of your life. ETA: You should also be aware that the economic situation over the next ten years may be a little strange. Some modest deflation and a sharp correction in the stock market (20% or more) would not be much of a surprise. That is not normal, nor is a very weak dollar. The 1970s might be a good example, but with deflation and deflationary bracket creep downward instead of inflation. |
Thanks for the advice. I just figured with a low risk low return investment I wouldn't make any profit if I were to hire out a financial advisor. I will look into it though. Thank you |
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See a financial planner...... BE VERY CAREFUL OF WHO YOU PICK! Outlay the costs. The individual i work with charges a 1.5%/year fee for his service ,he's worth his weight in gold. I have a ROTH IRA set up with him, i started last year and my account has something along the lines of a 20% return after fees. I also have a IRA set up with edward jones, my company pays for it to be open and matches 1:1 investments....I have LOST MONEY with them, the stocks they sugguest are good, but the fees are astronomical! Be very careful! |
Ok, now I am a little depressed. I'm only 22, I don't want to think about "dying" just yet, even though I know I probably should. damn |
Don't think about the dying part. Think about the part where your great grandchildren own most of four counties because of the financial groundwork you laid. |
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I have a question on the Roth IRA. Say I put 4,000 into one tommorow. Is there a monthly/quarterly limit you must add the next year? Or can you just put in however much you want (under the max limit) For example, this year I put 4k in, will I be able to put 0$ next year? (of course I wouldnt do that, but just hypothetical) Also, I see there is a 110k max income for investing in Roth. With my masters degree I should be earning more than that in 7-10 years. So what would happen to my Roth after I make too much $$$ to add to it? |
A Roth IRA is a no-brainer. You can add up to $4K for this year before you file your income taxes, and then up to $5K next year. That would be about $100 a week. As to what to put it in... I started mine with an S%P 500 index fund. No load, no fees, I don't need to become an expert at any particular financial sector... just bet long on the American economy. If that turns out to be a bad bet, I'll have bigger problems than just "not enough money". After I accumulated more than a few nickles, I started to diversify into some different funds. Save early, save often. Get started now and you have a real shot at retiring at 50. |
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If you expect to use/ spend this money in 2 years, I would not suggest going the Roth IRA route, as there are penalties for early withdrawal (there are exceptions-education and buying a first house). As suggested before, you should probably talk to a financial adviser. |
Yes, but you should also pay taxes on it. If you aren't paying taxes on that sort of income, you are also not taking advantage of a SEP IRA, which can let you put away 20% of your 1099 income just like a 401k. You need to talk to someone who does this for a living. You should do everything legally possible to reduce your tax load. Start early. |
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Forgot Edward Jones and the other planners which will only offer you high cost, load mutual funds. Do research yourself, save some coin, and have control over your money. Look into Vanguard, T Rowe Price, Fidelity - those are the big three no load carriers. Investing isn't difficult, you just need to study a little and know what your goals are. Every year max out your Roth IRA and 401k in that order....any money you have left over allocate into no load mutual funds and have some set aside for an emergency. If you get really savy in the future, then you can start playing the HANS, CRDN, CMG, RIMM, ISRG, MA, ICE, and so on. If you don't know what those mean, then stick to mutual funds for now. |
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you're a college grad working on a masters. you're not an idiot You only have $15k you don't need a financial advisor. Financial advisors are not stock picking wizards. You need to go open an account on etrade (or where ever) Establish an IRA Do a little reasearch. Pick whichever mutual fund meets your needs. |
Do you have at least six months of expenses in a savings account? Do you currently have a small life insurance policy? Health insurance? A small liability insurance policy? Short term disability? Do you have a will? Multiple copies? Get all of that covered first. Then, speak with a financial planner about a)a SEP IRA since you seem to have some cash income, b)a tax attorney about filing on that income over the next few quarters to make it look like it is recent, c)a Roth IRA with the money remaining, d)some money to set up an LLC to do whatever it is you do via a limited liability shell so that you can further protect your investment in your future, and e)some money to pay a book keeper to set up your accounting so that you just plug in money and get complaince with worker's comp insurance and taxes and you know when your bills will come do and how much you will have to pay and so on. Once you have all of that done, look at mutual funds. For the SEP and Roth, just focus on an index fund with limited real estate and banking exposure, like defense or food production. First things first. In a few years, look hard at trust structures and getting as much insurance as you can afford as early as possible and expanding your cash reserves to two years of expenses. And then you can start investing. ETA: I would strongly urge you to avoid any funds that have a strong real estate or banking exposure, and that includes Fannie and Freddy. |
Nevermind, I thought he looked familiar...Mad Money guy 
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The SEP-IRA recommendation makes no sense since you're not self employed. Even if you were, your income is probably too low to be overly concerned with taxes. The last thing you need to do is hire a tax attorney, establish an LLC (wtf?), or hire an accountant to do anything but file your taxes. Your financial situation right now couldn't be simpler - no need to complicate it. The Roth is the smart thing to do. Index funds that represent broad market sectors are a good way to start, Vanguard has a lineup of low-cost no-load funds and exchange traded funds (etf's). Allocate your money among domestic stocks, foreign stocks, commodities, bonds & real estate. You can do all of this with traditional open-ended index funds and etf's. I would wait until you've accumulated more funds to start working with an advisor. At some point it will make sense to bring in alternative asset classes and strategies that may be difficult to find and understand yourself. In the meantime, a simple allocation across the asset classes mentioned above is easy to do and will give you growth with much less volatility than investing all your money in a domestic stock index fund. Rebalance once/year or when a particular asset class gets significantly out of whack. EDIT: I just noticed you said you'll need the money in two years. Forget all of the above. Put the money in t-bills, cd's or keep it in money market. Do not put the money in a Roth or any other type of IRA - you can't withdraw it without penalty until you're 59-1/2 years old. The reasonable amount of upside on $15,000 for a two year period doesn't justify the risk of loss in my opinion. |
He's working for cash (in the OP). If you declare and file, you can use a SEP to shield some of that money. The advantage of setting up a legal framework now is that it's cheaper. I am assuming that he wants to make a lot more money later. |
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Don't listen to TV talking heads. Numerous studies have shown that the more face time a certain theme gets (Tech stocks in 90s, Real Estate, Japan, etc.) the more they are wrong/overextended, and the more you should disregard their advice. If "Good Morning America" is talking about how XYZ is such a good trade then you should probably do exactly the opposite of their advice. |
All he said is that he's worked since he's young and has saved some money. A SEP is specifically for the Self Employed. Regardless, he would still be better off funding the Roth if he didn't need to use the money in two years. Since he does, forming an LLC, buying nine different types of insurance, putting a tax attorney on the payroll, worrying about workers comp, etc. is a bit of overkill don't you think? He's a student with $15k and a pickup, this is not a complex estate planning scenario. |
It isn't now, but at a minimum he is getting exposure to what he needs later. And later usually arrives a lot faster than people think. In any event, my advice is worth what he paid for it. |
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Holy fucking shit. I have no advice to you - but I commend your discipline coming out out college with 15k in savings. I hope you had some fun too! I worked through college, went to an affordable state school, and still ended up in debt and with Credit Cards. I had some fun, though! |
Well now I want to invest 4k in a Roth before April and I want to invest 4k into ETF's, Index etc. which will be a long term (10 year minimum) for me. I will still have around 8k to use when I get out of school (plus what I earn before I graduate). So I basically have 8,000 that I want to invest long term. Have Roth and the other half into something else. I have no idea what. There is some good advice being given, but frankly some of the lingo is way over my head and is obstructing my ability to comprehend the advice. So I obviously have a lot of reading to do. Thank you all for the advice! |
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Easy to Understand Instructions of the $15K do this in this order: 1) 7K into no load money market mutual fund for emergencies 2) 4K into Roth IRA no load mutual fund 3) 4K into non qualified no load mutual fund funds should be allocated based on your risk tolorance. That was easy. I do this all day every day.  ETA for someone young, if you are OK with risk on your investments and flucuation of 20-30% per year, I think you shoud allocate the Roth IRA as 30% International, 40% Large Cap, 30% Small Cap. Do not talk to ANYONE who is on commission, they will screw you. Better no load deals are out there. I know of a no load Money Market Mutual Fund with a 7 day yeild 4.51% as of today, 4.91% 1 year return as of last month. You should also start a term life insurance policy. |