Investments

[EnigmaticParadigm]

Since there are many posters here that are over the age of 25-something, in a decent career, etc, I was wondering what you all do to prepare for the future. Real estate, mutual funds, stocks, insurance, CDs, bonds, mm accounts, 401k, IRA, roth IRA, etc?

Next year I will be able to actually start putting money away since school will be D O N fucking E (well, almost). Was especially looking for suggestions on pre tax savings.

What have you all managed to do thus far?

[roosta]

stay out of real estate...on a side note is it just north dakota or does it seem like everyone and their fucking brother are real estate agents now? something like over 1 million real estate agents in the US now.

Rooster

[EnigmaticParadigm]

Yeah. I know several people that dropped out of school to get their real estate lic so they can get rich (just like the nice people told them). It will be sad to see them after the bubble bursts; some quit some pretty good jobs to do this .

Hopefully they'll go back to school.

[Dintorr]

Real Estate is still the best way for the average joe to make a lot of money. In my experience it takes a lot of time and effort, however, and may infact turn into a full time job. I have quite a few relatives that own rental property, warehouses, commercial buildings, etc. and all of them put in a lot of hours managing it all. IMHO, being a real estate agent is about as much "being in real estate" as a car salesman is "in the auto industry." Unless you're the owner it just doesn't count in my book. YMMV of course.

Outside of that, I recommend doing the usual retirement planning activities; invest as much as you can in a 401(k), open a Roth IRA, put 3-6 months of salary into a savings account, etc. A good 401(k) will have a nice selection of mm funds, bond funds, mutual funds, etc. for you to chose from so it's possible to diversify your portfolio pretty well from the start. I know you specifically mentioned pre-tax savings, but studies have shown that post-tax retirement plans, i.e. Roth IRA, actually outperform the pre-tax plans every time. Just FYI.

I also recommend opening an account at someplice like eTrade so you can "dabble" in the stock market whenever you get that hot tip or just have a gut feeling about something. It's a great way to learn about the cyclical nature of stocks.

Also, find a software program that lets you track your investments and can give you trends and growth information. This is a fantastic way to see your money accumulating and actually working for you behind the scenes. MSN Money has a good one available for free right here. The only thing I don't like about it is I have to manually enter my information into it, but it only takes a few minutes once a month so it's not really too bad.

Other than that, just remember ... money you make > money you spend. I know it sounds simple, but I have a lot of friends that make $100k or more and still can barely pay the mortgage every month. Be smart.

[Zaniel]

Just remember that tax entity structure != investment asset.

Decide what tax / legal structure you're going to use first and consider all the issues regarding liquidity, access and time horizon. Then worry about what it's actually going to go into.

[Ashes Emberblade]

Rental property is a nice way to make money, but as an earlier poster said, it can be time consuming.

I prefer the stock market. Buy some stocks with good dividend yields when they're down. This can net some very good money long term. Just don't get into the stock market abruptly or on a whim, it can be very unforgiving. Research a lot before you get in, and get in slowly.

[Phoenix]

To be truthful, a machine gun might be a great investment.

Back in 1986 right before the manufacture of new ones was banned, a M16 would run you around $500-600.

Today they will run you $12,000 to $15,000.

[Jabberwhacky]

When I saw this thread, I noticed the last poster was Phoenix and thought "Ooh goody, investment advice from Phoenix; I wonder what that's gonna be like?" and I gotta say you did not disappoint.

[Mkopec1]

You dont have to spend huge amounts of time doing real estate. You just have to be smart about it. How bout land?

Since I assume you live in a cyty type area, think of this, the metro area around the main city has been steadily growing outward, the "suburbs". If you have enough foresight as to where this movement is going in the next 20 or so years, you can buy a plot of land there.

Example, My father in law bought 10 acres in a farm community about 40 miles outside of Detroit for $50K in the early 80's. Now this place is starting to boom. $500K houses going up on 1 acre parcels there. And his land could easily fetch $250K for the whole 10 acres, or even more if he split it up into smaller chunks.

All this with absolutely no time investment whatsoever.

Real estate does not have to just be "Buy a house and rent it out"

Enigmatic- buy yourself a house as soon as you can. Its a great tax write off and typically will yield 3%-10% a year appreciation. And will give you a good start credit wise. Plus even if you pay $100-$200 more every mortgage bill, you can build up a nice chunk of equity, also tax deductible spending power when you get a home equity loan. shit I know friends which took out aan equity loan to buy a car, and now they are claiming the interest every year on their taxes.

I remember back to when I was about 21-22 and earning about $50K per year back then and I was getting RAPED in taxes. uncle sam loves single people making alot of money and not owning anything that is tax deductible.

I do the 401K thing, I have been doing it since I was 21 and eligible at work. I typically invest about 10% of my salary to it.

NowI have 2 kids so I have been thinking alot how to invest for their future, maybe some college money.

My dad did the bond thing for us and I guess it worked although your return is not as high as a mutual fund, but what he did is every 2 weeks (his pay period) he would have $100 bond issued to him automatically, cost him $50. Not a bad way to go, but there are other ways that are better, im sure.

[Eomer]

Real estate is a great way to make money long term, but I'd have to say that right now may not be the best time to get into it, depending on the market. It's very rare that property values actually go down across a major market, but with the ridiculous growth in their values across North America, it's entirely possible that the market may stagnate at some point.

The other downside to real estate is that it's not open to everyone, especially a young guy just starting out. Other than your own first home (rent as little as possible, IMO), that is. Otherwise real estate is very much a "takes money to make money" type of investment, and if you don't have the cash laying around to buy a second house or something, then obviously it's not for you.

Personally I haven't really started worrying about it too much yet. I've got 5 digits worth of mutual funds that I've been buying for the past few years. I've maxed out my contribution every year. Not sure how it works in the states with 401k's and all that other jazz, but here basically you just have to have an RRSP plan (registered retirement savings plan) and you can invest up to I believe 18% of your previous year's earnings into it, up to a certain cap (I think they cap it at 20-30k per year, not sure though). Then when it comes to tax time, you deduct your RRSP contributions for the year from your income, so you basically don't pay tax on the money you put into it. So it's kind of a double bonus, that way. You get a tax return, and your money's growing in the RRSP. The downside is that to get the money out, you then have to add it to your income and pay tax on it. The feds get their taxes eventually. The nice thing is that you can also have stocks and so on in your RRSP, not necessarily just mutual funds.

Personally I've found that to be a very easy and effective way to stockpile a fair bit of cash with little effort, and at the same time keep my tax rate down. You don't have to max it every year, and you can carry left over contribution space to next year. For most people with moderate incomes, it's probably the best and safest way to invest money, as it requires little input from them (unless you have a self-directed account like mine, where I pick and choose what funds I buy and so on). I've done very well since I started investing, because the Canadian stock market has pretty much doubled in the past two or three years. At first I was just in a relatively low risk, "balanced" fund and was doing alright. But then I sold most of that, and put it into a stock index fund, a resource fund, and a South American fund and currently my book value of my funds is about 15-20% higher than what I put in originally (gets skewed with contributions coming in at different times etc).

I just hope there's no crash any time soon .

[Aulirophile]

If you want something tangible that isn't Real Estate, you can collect stamps and coins. I know it sounds goofy but good rare stamps/coins never go down in value, always up, and you don't neccesarily need a ton of money to start investing in it. Much like anything else though do a LOT of research beforehand, figure out what you're doing.

If you haven't read "The Wealthy Barber" I suggest you do. Decent plain-speech book about this sort of thing and gives some handy book references as well.

[Lyrical]

In my MBA program, I have enough coursework to be a Mutual Fund Manager, so I will tell you from my perspective:

- In order of investments, the best returns are small cap companies, large cap companies and then real estate, in that order. I favor stocks for this reason. 100 years of quantitative data bear this to be true.

- There is a good deal of data showing that the real estate market is going to bust soon. I'd stear clear of real estate for the next several years. Real Estate is going to wash out soon, but according to some, this will create profitable buying opportunities.

- Stamps and other collectibles are not a good investment any more. Not only do you carry the risk of physical loss (what if your house burns down versus have electronic stock?), but online markets like ebay have killed many segments of the collectibles market. For example, I have collected comics since I was 10 (I am 34 now). Comics that used to be worth $100 in my collection are worth 10. Messing around with collectibles could get you hurt.

I suggest that if you are serious about investing, that subscribing to Money magazine is a great place to educate yourself. Picking a good mutual fund that mirrors the market is the best place to go. Trading individual stocks by yourself takes a ton of work. If you are adamant on trading stocks on your own, there is a service that is called Value Line that statisically has been the most consistent in making good picks over the last several decades.

Stay clear of anyone that tells you that their system will make you a millionaire overnight. Realistically, making anymore than a 12% return on your money is the best you will see. Start investing young. Most people if they invest young (at 25) 10% of their income will be millionaires by the time they hit their early 50's. Stay disciplined, and stick to a budget. In the in your 20's, 10% seems like too much. I started investing at 25, and by age 34, my 401k has built up substantially.


There are two books outside of my MBA curriculum that have impacted me just as much as school has. "Rich Dad, Poor Dad" is a great book, even though he is more gung-ho on real estate then I am. The author tries to relate the strategies that Millionaires teach their kids. In my last career, I dealt with millionaires and billionaires on a daily basis, and I think that he is dead on in his statements. Another great book is called the "Millionaire Next Door," which is kind of like the other book, except that it was written by college professors that tried to quantify what millionaires do in research form. Lots of hard data and numbers versus qualititative stuff. A very reputable book by reputable authors.

Be careful who you take advice from. It always seems like many people selling investment systems are losing their asses. If you have a friend or a relative, check to make sure they are making money and not losing it. Also, 99.99% of the financial books out there are total crap.

[Bralkan]

I'm 21 and have been thinking of starting to invest in a mutual fund. I don't have a lot of spare income (with rent, school, etc) but I have atleast $50(I'd like to have $100 atleast) or so a month I could invest.

Anyone have any suggestions?

Edit: Mutual fund.

[Lyrical]

Honestly, I don't have any suggestions for that range of investments. I finally convinced my rl best friend to start investing, and I think he did his research and was able to find one that let him in for $1000. Its always best to research the fund yourself. I suggest opening an e-brokerage account that will let you keep adding in cash until you can meet a minimum. Also, they have research tools on different funds. Make sure you look at the age of the funds. I wouldn't buy any fund that isn't at least ten years old, because young mutual fund managers may look hot over a few years, and then screw the pooch. It happens more than you think. I look at the returns from the past 20 years up until recent history. Look for long-term results, don't look at a funds' one year return and jump in. You can get burnt by looking for just short-term gains. In the short-term, luck can sway returns too much.

If you get with a job with a 401k, I suggest you go through them first. You can put up to 15% or about $14,000 a year in your 401k without paying taxes. And many companies match your 401k payments up to a certain percentage. Also, some companies pay the fund manager's fees on your behalf. So in many cases, putting $1 in a 401k is like putting $1.50 in other investments. In many cases, it is much cheaper for you to do it this way. Again, over a 30 year career, you will be a millionaire at retirement by putting 10% of your income in your 401k, making 8% a year, and never taking money out of the 401k.

I always suggest to everyone that your 401k be your first investment you do. Work on getting this maxed out, and do this the whole time you are working. Then any extra money can go into businesses, real estate or other investments. You really can't afford out on the tax deductions and employer paid fees.

[EnigmaticParadigm]

Yeah, I think the best way to put your money to work for you initially is find all the tax shelters you can. Screw the Man.

Also, is Janus good for a MF company? I've usually heard pretty good things about them.