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Best and safest ways to invest money.

 
 
dou2ble
 
Sun 5 Jun, 2005 02:14 am
I recently joined the Army and want to invest the signing bonus that came with it. I'm a total noob to this stuff so if anyone's got good suggestions and has experience in this field please post what you know.
Thank you.
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Type: Discussion • Score: 29 • Views: 15,029 • Replies: 40
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jespah
 
  1  
Sun 5 Jun, 2005 02:55 pm
Depends on your tolerance for risk (someone with more knowledge of this will be along, I'm sure, to give a more definitive answer).

Bottom line, though, is you need to do some research. Relying on others - even well-intentioned others who (a) have your best interests at heart, (b) know a lot about many different types of investments and (c) aren't trying to make a buck off you - is a pretty passive way to handle your money.

Let's look at investments like anything else you buy, say, clothes or a DVD player or a car. No one can know what you like, so letting other people pick is pretty much a guarantee that you won't get what's best for you. I realize you did not word your inquiry that way, but I advise caution and a good grain of salt when it comes to any investment advice you get for free from people who don't know you.

How do you do research? A few possibilities:
(1) Go to www.fool.com and get to know the place. That's the Motley Fool. They cover most forms of investments, such as stocks and bonds. They also have some educational content so you might want to check that out.
(2) Go to your bank. Yes, your bank, and find out what investment services they offer. Keep in mind they are going to try to sell you what they have to offer, but it is a way to get some free information.
(3) Consider the amount of risk you'd like to shoulder. What kind of risk? What am I talking about? Well, some investments carry more of a chance for profit than others, and some carry more of a chance for a total loss, even of principal, than others. Based on your age, your family (e. g. if you have kids to support), your financial goals (school, a house, etc.) and your and your family's overall health (e. g. you could find yourself dealing with nursing homes soon if your parents are elderly), think about how quickly you need to make money, how much you need, and whether you can gamble on perhaps losing all or a substantial part of it.

Finally, consider investing in something you believe in. There are funds for all sorts of things, and a lot of them have similar goals, risk factors and historical profit margins. So you might want to consider an investment fund which supports your goals, e. g. sustainable growth in the rainforest, that kind of thing. This isn't strictly necessary but it is a consideration for a number of people.

Like I said before, someone with more experience in this area will be along soon, I'm sure, but in the meantime, welcome to A2K!
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fishin
 
  2  
Sun 5 Jun, 2005 03:20 pm
"Best" and "safest" aren't necessarily what you want in investments. Sometimes the two will conflict with each other - as I think might be the situation in your case.

If you recently joined the Army you must be fairly young and generally you can tolerate a lot more risk in investing the younger you are.

Use the site Jespah provided and do some research on building a balanced portfolio and how you should look at the risks of the various types of investments.

Since you are in the military I'll give you two other resources to look at. As, Jes mentioned about asking around at your own bank - take a look at USAA and The Pentagon Federal Credit Union.

USAA has some very highly rated mutal funds that you can take advantage of and Penfed has some of the best current rates on Certificates of Deposit.
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Linkat
 
  2  
Mon 6 Jun, 2005 07:59 am
I do work in the financial field and will give you general overall information - but like others said there is lots of information out there and it is difficult to fit your needs without sitting and discussing each point.

Overall - I would suggest a few types of mutual funds. I would not put all my money into one type, but would look for a few to diversify. The one thing that mutual funds do already to a certain degree is to diverisfy your holdings. A mutual fund typically holds a variety of stocks and/or bonds depending on the goal of fund. For example, a growth fund would invest in growth type stocks and you would want to invest in this type of fund if you are looking for long term investments. A bond fund would fit in more for shorter term goals (less than a year, or two - 5 years) all depending on the investments of the mutual fund. Typically what you would do is look at your personal goal and risk level - once that is determined you would invest a certain percentage in each type of mutual fund. The advantage of investing in different types of funds is if the market is up - your growth funds will be doing well, whereas if the market is going down and you need to get money now, you could take it out of your fixed income investments - that are typcially more stable.

Another big suggestion I have and most financial planners suggest is to dollar cost average. Which is basically instead of investing a large amount of money on day one, invest a portion each month. Many mutual funds can be set up where as low as $50 a month per fund can be automatically withdrawn from a checking account or money market account each month and invested. The advantages of this is that you minimize risk. If you invest all your money in day one - and it happens to be a day where the market is up then it could take quite a while for your value to increase. Investing a smaller portion each month decreases this and unless you want to try to time the market (which I highly do not suggest).
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dou2ble
 
  2  
Tue 7 Jun, 2005 02:12 am
I'm 24, not as young as most recruits, but still young enough to start investing and taking some risks. Today I opened up a checking and savings account with Wells Fargo, required by the army, and I asked to speak with their financial consultant. That should happen within the next couple weeks. Before I ship off for basic on the 23rd. I had some basic knowledge of mutual funds before but your thorough explanation answered a lot of my questions. And I'll definitely check out that website, USAA and Penfed.

Thanks guys for takin the time to respond. Much appreciated.
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yitwail
 
  2  
Tue 7 Jun, 2005 02:34 am
if i could add a couple of things not mentioned in all the excellent replies, if you decide to invest in a mutual fund, go with the ones that have a low expense ratio, especially "no load" funds, so your money isn't spent on things like advertising. another interesting option is dividend reinvestment programs, or DRIPs as they're sometimes called. with these, you can dollar-cost average, that is, invest a small, fixed amount each month, and not have to pay brokerage fees, while buying stock in a large company. finally, if you want some safety with stocks, look for stocks that pay a decent dividend, like a REIT, perhaps. that way, even if stock price goes down, you'll at least be collecting a dividend. good luck. Smile
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Thomas
 
  2  
Tue 7 Jun, 2005 03:20 am
dou2ble wrote:
Today I opened up a checking and savings account with Wells Fargo, required by the army, and I asked to speak with their financial consultant. That should happen within the next couple weeks.

When talking with a bank's financial consultant, I would watch out for claims that their fund is consistently outperforming the market, and be very skeptical of them. After all, if the stocks in your banker's fund are such a bargain, why would anyone continue selling them to your bank at a bargain price? (Don't ask me, ask them!) Personally, I have become very skeptical of anyone who claims his stock market fund can beat the index, and have consequently invested all my savings in passively managed, exchange-traded index funds (ETFs). Because they passively follow some chosen index, their management fees are low, unlike those of other mutual funds; because they're exchange-traded like stocks, you can always get hold of to your money when you need it. And because they follow the index, your risk is no more and no less than the market risk.

If I were in your place, I would invest half my money in a passively managed, exchange-traded index fund pegged to the Standard and Poor 500. That gives you the potential to have your assets grow in the stock market. The the other half I would invest either in an ETF tied to a corporate bond index, or in inflation-indexed treasury bonds. That sets a floor to the worst-case risk you are taking. (Yahoo has an ETF page that can help you pick.) Most importantly, I would be very skeptical of anyone who gave me stock tips. Wink
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Linkat
 
  2  
Tue 7 Jun, 2005 07:39 am
Yitwail makes some good points on looking for low expense ratios and ideally no-load funds. However, don't simply look at the expenses, look at the historical returns and if investing for a longer term, don't let a short term loss (current 1 year total return) deter you, look more at the 5 year return and even longer term. Also if you are investing for growth and not looking for getting some current return, always reinvest the money - you get advantage of getting a return on the reinvested amounts as well. You can still dollar cost average in mutual funds while collecting on dividends and/or capital gains if you want, although I don't suggest it - I would recommend having all your payouts reinvested. One note, you will still have to claim these earnings on your taxes whether you reinvest or not.

The issue with the type of investment yitwail is speaking about like a REIT or even many utility type stocks is that even if they are paying a steady dividend, it could be a return of capital which means - they are paying you back your own money that you invested. So if the value goes down, they still pay the dividend, however, it was from your original money paid into the security and not on any earnings. Also you should prefer to receive capital gains or growth of your security/mutual funds over dividends. Dividends are taxed at a higher rate and also if your mutual fund/security does not need to pay out a capital gain or dividend and instead the value increases, you are deferring your tax payments. At 24, I would suggest a higher percentage in growth funds, but your financial advisor will tell you this. I really happy to see that you made that appointment - that is really the best way to go.

Thomas makes some great points - of course an advisor with a particular company or bank is going to tout their own investments first, however, many banks also have the ability to assist you investing in other mutual funds. There is no need to simply rely on the advisor too on saying whether their funds have beaten their comparable index or not as now it is required to show on the annual reports, the comparable index returns to the fund's returns - they are even shown in the same chart - usually within the first few pages of the annual reports. And there is no fudging with these numbers as they are highly regulated and all funds must comply with a specific way to calculate the returns.
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Craven de Kere
 
  1  
Wed 8 Jun, 2005 02:30 pm
dou2ble is a buddy of mine. He's off to Mexico for a week and I don't know if he'll be able to respond.

I do want to thank those helping and also add that I think more basic advice would be more helpful to him.

The jargon being tossed around might need some explaining and a very basic overview of common investment options would probably be really helpful.
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dou2ble
 
  1  
Wed 15 Jun, 2005 03:47 pm
Yitwail, I like that dollar-cost average thing. I've read all the suggestions but i guess with practice and time I'll understand it completely. Thomas, I will definitely keep in mind ur advice when talking with the financial consultant. Linkat, thanks for explaining the REIT in more detail for me.
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roger
 
  1  
Tue 12 Oct, 2010 11:27 pm
Gold. Oh yeah, always invest at the top of the market. Buy high, sell low, and make your profit on volumn
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Miller
 
  -1  
Sun 24 Oct, 2010 04:37 am
Since this thread first appeared, the US has entered a very prolonged and dangerous recession.

If you know very little about investing, best to keep your money in safe investments like money markets, CDs, and US savings bonds.

In 8-10 years, we could be on the upswing agian.
0 Replies
 
johnjordan576
 
  0  
Tue 6 Nov, 2012 09:46 pm
@dou2ble,
its good you invest the signing bonus its really helpful to your future.there are several plans for investment .you can invest in insurance policies or in share market.
0 Replies
 
nelsonhimes
 
  1  
Mon 7 Jan, 2013 01:54 am
@dou2ble,
Thanks for the information but my only question is that does it really worth?
roger
 
  1  
Mon 7 Jan, 2013 02:12 am
@nelsonhimes,
yes, sometimes.
0 Replies
 
noahherman11
 
  1  
Fri 15 Feb, 2013 04:01 am
Thank you all very useful information for me.!
0 Replies
 
carlosc2dbz
 
  1  
Wed 31 Jul, 2013 08:57 pm
@dou2ble,
There is no safe way, long term investing can give you higher returns. You could open a Lending club account which has the highest stable returns I have seen. Only risk is company could go bankrupt. So good luck.
0 Replies
 
divinelopez68
 
  1  
Fri 25 Oct, 2013 08:49 pm
@dou2ble,
When you are investing, try to background check of that certain company.
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forextraordinaire
 
  1  
Wed 30 Oct, 2013 01:14 am
@dou2ble,
You can buy stocks however the best thing is to get in touch with a foreign exchange trader to invest your money better.
0 Replies
 
AngelaLee
 
  1  
Mon 18 Nov, 2013 06:13 am
@dou2ble,
Thanks for giving information about saving money. Really i was searching for this post. I am doing privet job i want to save money for our family.
 

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