Do any of you buy stocks/mutual funds?

[Amanda]

Originally Posted by lucky81698

That sounds like a really cool job you have. What type of degree do you get to do that kinda stuff?

Honestly I feel fortunate to have learned so much about investing and retirement planning, but finance can be a bit boring sometimes!
I have the type of personality that would fit with a less conservative company. Oh well, it pays the bills!

AS for my deree, I just have a bachelor of science degree from a university. The people who move up at my company have their Master's so that's something I've considered.

[Amanda]

Originally Posted by lucky81698

I have about $3,000 left, do you think it is better to dump it all at once or do the monthly investment?

Not sure I want to give you 'advice' on that. I have to be careful since I don't have a license to advise people!

[lucky81698]

Michelle,

I had no idea what I was doing either. My dad opened an IRA a LONG time ago for me. Unfortunately, I never put anything into until the last couple of months. He picked a really good one, I couldn't get into it now if I wanted to, but since I already have it, I cans till invest in it. When I was younger I tended to blow my my money on clothes, vacations, etc while my younger brother invested his. He now has a ton of money...I don't!

If your husband is offered a 401K, take advanage of it. As soon as Bill was eligible way back when he was making $13.83/hr at Continental Expresss, he joined. Even when he went over to CAL and took a huge paycut, he still put in 10% of his pay, even though it wasn't much, like Amanda said it's better than nothing. A couple things I have learned about retirement is, NEVER borrow/withdraw early from it and never invest in your own company stock! The Boggleheads is a good book to read about investments and explains how mutual funds work. I can't recall the name of another book I read, but the idea in the whole book was Pay Yourself First, meaning to have money put into savings before you even see it! It has worked well for us so far.

But if you saw my bank account, I don't think it would fill a tube sock!

[lucky81698]

Originally Posted by Amanda

Not sure I want to give you 'advice' on that. I have to be careful since I don't have a license to advise people!

No problem! I'm more of the stretching things out, but then my dad says to just buy it if I want to buy it! So since I did that with the other money, maybe I'll just do the stetch out thing with the rest! So I have both!

Is your BS in something specific? I know mine is in Aeronautical Science (basically useless unless you are a pilot) and always thought they had to have something after the BS!

[TheWife]

Ok, so here's another question. Dh was working at a different place a few months ago, and they messed up and had him signed up for 401K when we didn't want it because it was a short-term job. So they took out like $16 by the time he quit, and now I get all these statements and crap in the mail like twice a month. Is it ok to call them and just ask for our money back? I know it's only a small amount, but it's kind of annoying to have this random $16 investment, I'd kind of like to just wait till he's at his long term career and then start having the contributions made and not have some other account I have to remember about.

[Amanda]

Originally Posted by TheWife

Ok, so here's another question. Dh was working at a different place a few months ago, and they messed up and had him signed up for 401K when we didn't want it because it was a short-term job. So they took out like $16 by the time he quit, and now I get all these statements and crap in the mail like twice a month. Is it ok to call them and just ask for our money back? I know it's only a small amount, but it's kind of annoying to have this random $16 investment, I'd kind of like to just wait till he's at his long term career and then start having the contributions made and not have some other account I have to remember about.

Yes definitely call them and ask to terminate the account since it's only $16 and it is a previous employer. Normally if you leave a company and have less than $5k they will cash you out automatically.

Keep in mind that you won't receive the full $16- there is mandatory Federal 20% withholding and state taxes if you have them.

[Amanda]

Originally Posted by lucky81698

Is your BS in something specific? I know mine is in Aeronautical Science (basically useless unless you are a pilot) and always thought they had to have something after the BS!

Nope just a business Mgt degree! Many people at the company graduated with finance or economics though.

Also any IRA can be "good". An IRA is jusr a vehicle to put money in, much like a retirement plan. For an IRA YOU decide what funds go in there, plus you can have a brokerage added to the IRA so you can buy individual stocks and bonds too.

[czechmate]

Amanda,
Since I'm a SAHM, I take at least 10% of my DH take home pay and put it into MY personal savings account. Would I be better off putting all of it into a mutual fund or half into savings and half into mutual fund or something else? I understand you cannot "advise" me, but what you would you do with my millions?

Thanks,
Jen

[roz]

Wow, I take a few days off in Cape May (a very romantic time was had by all!) and come back to a two page thread!

I've always paid myself first. My first $500 IRA was opened in 1978! Then when 401(k)'s were introduced at my company, I signed up. I've been doing it ever since.

Your investing depends on your goals and your risk tolerance. There is an inverse relationship between stocks and bonds. When the stock market is up, the bond market is down and vice versa. So, as we age, we begin to add bonds to our portfolio to mitigate the risk.

A bond is a debt of an entity--government, authority or corporation. So when your school district decides to build new schools, they float a bond issue, for example. When Coca Cola wants to build new plants all over the world, they float a corporate bond. Some companies, like Microsoft, have so much cash, they have zero debt. Bonds pay interest. The riskier the bond, the more interest they have to pay in order to attract investors. There are also zero coupon bonds (bonds used to have coupons and people would go to their safe deposit box and clip them to get their interest from the bond issuer) which don't pay interest, and are thus sold at a lower price. You might find a $10,000 zero coupon with a maturity date in five years selling for $7500. In five years you get $10,000. Bonds are rated according to their credit quality. For example S& P ratings include:

AAA and AA: High credit-quality investment grade
AA and BBB: Medium credit-quality investment grade
BB, B, CCC, CC, C: Low credit-quality (non-investment grade), or "junk bonds"
D: Bonds in default for non-payment of principal and/or interest

It doesn't pay to hold tax free municipal bonds in a retirement account since it is growing tax free anyway. But they can be a good balance to a private portfolio, particularly if they are laddered (a series of bonds bought with successive maturity dates so that they all don't come due at once).

Since debt is repaid before equity, there is an expectation of a lower rate of return than on equities or stocks.

The lowest rate of return expected is on things that are guaranteed--savings accounts backed by the FDIC and government securities that are backed by the full faith and credit of the good old USA.

Stocks, or equities, don't pay interest. They may or may not pay dividends. Old Blue Chip stocks that pay dividends are favored by those that need income coming in to support their retirement. Companies that are in the growth mode, will take their profits and reinvest them in the growth of the company. Therefore they pay less in dividents. Microsoft was like that in the early years. Then they built up so much cash, they started paying dividends. Everytime a company pays out a dividend, they reduce the value of the company (dilute it) because they are taking their assets (cash) and paying it out.

In looking at equities, I like to fill in the grid of the Morningstar style box:

http://corporate.morningstar.com/uk/...FactSheet_.pdf

The style box is applicable to both domestic and foreign stocks. And don't forget that we live in a global economy.

One can mirror the index funds without buying a fund by buying Spiders (S & P 500) or Diamonds (Dow Jones Industrial Average).

Or you can buy mutual funds. There are many. I've set up my company's 401(k) to automatically default to a lifestyle fund that is based on the age of the participant if they fail to elect their own investments. Reading a prospectus is not all that daunting because they are written in plain English. You should look at the objectives of the fund, the main investments, the stability of the fund manager. Morningstar and other rating firms also evaluate the funds. Morningstar will tell you where the fund is within its class of funds. For example a fund ranked 2 out of 673 funds in its class might be a wiser choice than a fund ranked 500 out of 673 funds.

The tools Amanda posted are good for determining your risk tolerance. You should reallocate your investments every year. For example, if you decide you want your portfolio to have 20% bonds, 80% stocks that are divided into 30 % large cap, 20% international, 25% mid-cap and 25% small cap, look at it at the end of the year. If one sector has out performed the others, you won't have the balance you decided was your risk-tolerance.

There are also Roth IRA's and now, Roth 401(k)'s in which the investment is made with after tax money, grows tax free and you don't pay taxes on the account when you withdraw it upon retirement.

Jan, the Pension Protection Act of 2006 allowed for a transfer of an IRA to a non-spouse beneficiary. This went into effect in 2007. Prior to that, it was a taxable event to the beneficiary. Thus, I had to pay taxes on my mom's IRA that she left to me.

Jen, you know that as a SAHM you are also eligible to have your own IRA?

Michelle, in 2004, the IRS issued final regulations that allowed employers to liquidate balances below $1,000 for terminated employees and automatically rollover balances between $1000 and $4,999 into IRA's. The former employer will probably do it automatically, but you can call them to nudge it along. Amanda is right on in that they must withhold 20% in tax. And if it's not rolled over into a qualified plan within 60 days, a 10% penalty is assessed which is paid when you file your income tax next year. It's not a big deal at $16, but it is there.

529 Plans are excellent tools for college savings. They are good because, if junior decides not to go to college, you can use it for yourself for school or for another child, or you can withdraw it an just pay the taxes on it.

[lucky81698]

Originally Posted by roz

Jan, the Pension Protection Act of 2006 allowed for a transfer of an IRA to a non-spouse beneficiary. This went into effect in 2007. Prior to that, it was a taxable event to the beneficiary. Thus, I had to pay taxes on my mom's IRA that she left to me.

Jen, you know that as a SAHM you are also eligible to have your own IRA?

529 Plans are excellent tools for college savings. They are good because, if junior decides not to go to college, you can use it for yourself for school or for another child, or you can withdraw it an just pay the taxes on it.

Just try explaining that to Fidelity and the lawyer and accountant handling my fatherin-law's estate! He only left his retirement fund and listed "estate" as the beneficiary. As it is right now it would not have mattered since he died before the min required distributions. If he was older, and had left it to individuals, Bill would have had his life expectancy to deplete the account. Now it has to depleted in 5 years, due to the age at time of death and the fact that it was left to an estate and there is no life expectancy of an estate. I have given the attorney quotes about the tax laws and the info from Fidelity's own website yet they still are clueless. I hope they figured it out by now. Distribution need to be taken by 12/31!

As a SAHM you can put $4,000 into your own IRA, but that counts towards the max that Bill puts in too. So, if he puts the max amount in, I can still put $4,000 in but it is just not tax deductible. I'm thinking I might be better off putting it into a regular old mutual fund if there is no tax advantage and then I would be able to get at it if I wanted without any penalties for early withdrawal.

If you have a 529 and don't use it for any type of schooling don't you have to pay penalties on top of the taxes? Not sure about that, and I know they tried once to change the tax law on those so I am leary about them.