Mutual Funds

I work in the mutual fund industry - I am not a financial advisor so I will not advise you where exactly to invest your money.

Some one mentioned a minimum investment requirement. This is not true of many mutual funds. Often times it is as low as $50 if especially if you are willing to invest either monthly or quarterly. Myself, I started by putting $50 a month into a fund. I highly suggest that you invest a straight amount monthly. Since you said that for the most part you could invest $40 a week why not start with 2 mutual funds at $50 each a month? The reason that investing monthly is highly suggested rather than a huge lump sum here and there is that it smooths out the ups and downs - lowers your risks.

I would gear my investments toward the amount of time you want to invest - longer term look toward growth funds, shorter terms bond funds. Many mutual fund companies also have advisors you can speak with directly - and any advisor should be able to gear you toward the type of fund depending on how long you want to invest and what sort of risks you are willing to take.

I would steer away from highly leveraged funds - they are tempting because of the high returns, but unless you are savy they are very risky. My initial guess for you would be a growth fund and perhaps a balanced (equity and bonds) to start, but really ask an advisor. Look at the total returns - 3 and 5 and ten average returns and also the expense ratios - try to find funds with low expense ratios that means the fund is not paying lots of money on various expenses.

If you plan on having your money in for more than 5 years, then a back load fund does not matter - that is a fund that charges you a fee if and when you take your money out - usually it runs from about a 5 or 6% to 0% over a period of 5 years - so that if you take out your money within a year you are charged 5% of the amount, 3 years - 2% and after 5 years no charge.

Another place that no one mentioned to look is at morningstar. Morningstar will rate funds according to what they consider the top funds in a certain category. Like the top growth funds, large cap funds, etc.

There is just so much information on this that I could go on and on.

One thing for sure - if you are looking to earn money - do not invest in a CD or money market. The interest rates are low (higher than savings, but low), there is little risk, but you will not make money. Money markets are great if you will need to make large purchases here and there and may need access to your money. At least you earn some money on it - I would not use these for investment purposes.

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i certainly agree with what linkat has posted .
since shewolf has no experience in dealing with mutual funds ,
it might seem reasonable for her to simply start saving on a regular basis in a "separate" account - it might also help her better understand her own financial situation , such as : how much she can comfortably set aside REGULARLY over a longer period of time , say five yeras .

after she has gained some feel for her own financial situation and learned something about mutual funds , shewolf could start getting into some mutual funds geared to HER specific circumstances .

(thinking back : i learned the hard way about forty years ago - luckily didn't lose much money in the process , since i didn't have that much invested :wink: ).
hbg

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I have a different take on saving for retirement; start as soon as possible. My wife and I started to put away 15 to 20 percent of our earnings from early in our marriage when tax codes made it easier. I believe in starting as early as possible to start investing in mutual funds that have a decent return for the long term. Funds such as Vanguard Mid Caps and Vanguard Small Caps have a pretty good record on returns, and Vanguard is rated one of the best for small fees with above average returns. The real key to investment is diversification based on age and risk factors. Take more risk while young, then slowly convert more into bond funds as you age. No tricks to investing; start early and be consistent in your contributions towards your retirement.

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cicerone imposter wrote:

I have a different take on saving for retirement; start as soon as possible. My wife and I started to put away 15 to 20 percent of our earnings from early in our marriage when tax codes made it easier. I believe in starting as early as possible to start investing in mutual funds that have a decent return for the long term. Funds such as Vanguard Mid Caps and Vanguard Small Caps have a pretty good record on returns, and Vanguard is rated one of the best for small fees with above average returns. The real key to investment is diversification based on age and risk factors. Take more risk while young, then slowly convert more into bond funds as you age. No tricks to investing; start early and be consistent in your contributions towards your retirement.

You are absolutely right! The earlier you start, the more you benefit. Unfortunately for many people your philosphy won't work as they are already heading toward retirement.

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Quote:

Unfortunately for many people your philosphy won't work as they are already heading toward retirement.

when i read a newspaper financial advice column where people approaching retirement reveal that they still have a huge mortgage outstanding , i shudder .
of course , since i don't know their life story , i avoid making judgements .
i haven't walked in their shoes !
hbg

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If anybody plans correctly, they will have paid off their mortgage, and have no loans outstanding when they retire. They would also have saved enough to retire after retirement in the manner they lived before retirement.

Many people fail to plan ahead.

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Quote:

Robert Burns: "The best laid schemes o' mice an' men / Gang aft a-gley."

:wink:
hbg

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A financial adviser acquaintance once told me to make sure to finance my retirement before anything else. His point was that you could borrow for your child's education, for instance, but you can't borrow your retirement needs.

Shewolf, setting aside $40.00/week will certainly make a difference over the years. If you find yourself with additional discretionary income you can increase that amount bit by bit. One thing I did was to start small ($15/week in 1975) but then every time I got a raise in pay I would take half that amount and apply it to my retirement reserves. I was still increasing my discretionary income, but by half of what I was receiving. The other half went into tax-deferred retirement savings. What started as $15/week eventually grew to many times that, and it was mostly painless.

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JBP brings up an excellent point; if you start early to invest into your returement fund, it's not difficult - and it gets easier as the years go by, because you never live above your means.

I know we were fortunate, because we both worked most of the time, but we also didn't sacrifice living a comfortable lifestyle. We bought several nice homes (2 new, 1 duplex rental, and 1 older), went on vacations, and funded our children through college, and still saved enough to live comfortably in retirement.

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You are living my goal CI Wink

The whole point of me starting this now is that, according to statistics, I have already lived 1/2 my life.
Ill be damned if Im going to work the other half as well.

40.00 a week will only go up from here.
That is what I can afford right now to get me started.

Once my photography takes off, that will help contribute at least 100 extra a month.
But that is a ways down the line.

Do you think it would it be smart.. to open a small savings account to put my weekly investment allowance into now? Until I have a larger sum to open a money market account / mutual fund with?

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shewolf, Do whatever is "comfortable" for you to do now. If a savings account is what you think is best for you, there's nothing wrong with that choice.

Some mutual funds have minimums, while some requires very small amounts to start/open.

Never forget the one principle of investing; diversify. Always try to have some emergency cash available that you can tap into in an emergency. Otherwise, the rest should go into your "retirement investments."

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The emergency savings account has already been established.

It is 3 months worth of bills.

well.. right now it is a bit less thanks to 2 flat tires in one day .
but that is what that account is for Wink

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shewolfnm wrote:

You are living my goal CI

The whole point of me starting this now is that, according to statistics, I have already lived 1/2 my life.
Ill be damned if Im going to work the other half as well.

40.00 a week will only go up from here.
That is what I can afford right now to get me started.

Once my photography takes off, that will help contribute at least 100 extra a month.
But that is a ways down the line.

Do you think it would it be smart.. to open a small savings account to put my weekly investment allowance into now? Until I have a larger sum to open a money market account / mutual fund with?

If you want to start now and invest as you should - you can open for as little as $50 a month. If you rather go the lump sum (which most financial advisors would not suggest), you can open many with as little as a $1,000 maybe even less.

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shewolfnm wrote:

The emergency savings account has already been established.

It is 3 months worth of bills.

well.. right now it is a bit less thanks to 2 flat tires in one day .
but that is what that account is for

I would also suggest putting that emergency savings into a money market account - it would yield more interest and with the ability to write checks on it. There is a minimum amount of risk (very small) as it could lose prinicple, however, any mutual fund company with even an ounce of ethics would not allow it to lose principle - if it would fall below the $1 per share value, the company would reimburse the difference - not worth losing its rep over the small amount of money.

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I was ready to open an account...
In fact , that is why I am online today..

and ya know? I keep seeing penalties.

Like -
Withdrawals
There are no IRS penalties for distributions taken after age 59½. However, IRS penalties do apply if any of the following conditions are met:

* If you do not take the Required Minimum Distribution (RMD) by age 70½
* If you take the money before age 59½, you are subject to a 10% penalty

However, there will not be a penalty if the withdrawal is made for one of the following reasons:

* Higher education expenses for you or family members
* Qualified first-time home purchase expenses up to $10,000
* Death or disability of the account owner
* Certain medical expenses and health insurance premium payments of unemployed individuals and un-reimbursed expenses exceeding 7.5% of adjusted gross income (AGI)
* Withdrawals made in equal installments over the account holder's life expectancy

Fees & Commissions
$40 annual IRA maintenance fee.

What is above is for a traditional IRA through my bank.

My question is, are these types of penalties across the board?
Or do they vary with the financial institution you choose?

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a roth ira sounds like it MIGHT be what I need... but, it is an investment account that I have to stay on top of?

Meaning, I have to dictate what to invest in?

Is there an account that i can just put my money into, and walk away.. while it grows?
Like a savings account? Laughing

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shewolfnm wrote:

I was ready to open an account...
In fact , that is why I am online today..

and ya know? I keep seeing penalties.

Like -
Withdrawals
There are no IRS penalties for distributions taken after age 59½. However, IRS penalties do apply if any of the following conditions are met:

* If you do not take the Required Minimum Distribution (RMD) by age 70½
* If you take the money before age 59½, you are subject to a 10% penalty

However, there will not be a penalty if the withdrawal is made for one of the following reasons:

* Higher education expenses for you or family members
* Qualified first-time home purchase expenses up to $10,000
* Death or disability of the account owner
* Certain medical expenses and health insurance premium payments of unemployed individuals and un-reimbursed expenses exceeding 7.5% of adjusted gross income (AGI)
* Withdrawals made in equal installments over the account holder's life expectancy

Fees & Commissions
$40 annual IRA maintenance fee.

What is above is for a traditional IRA through my bank.

My question is, are these types of penalties across the board?
Or do they vary with the financial institution you choose?

These are standard statutory penalties. They were written into the original law that created the IRAs provisions of the tax code to prevent people from withdrawing money from retirement accounts for other purposes (i.e. buying a car, etc..).

The only fee/penalty that you might find to be different from bank to bank is the annual maintenance fee. Many banks don't charge one at all.

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shewolfnm wrote:

a roth ira sounds like it MIGHT be what I need... but, it is an investment account that I have to stay on top of?

Meaning, I have to dictate what to invest in?

Is there an account that i can just put my money into, and walk away.. while it grows?
Like a savings account?

IRAs (either standard or Roth) can be self-directed or not. If it is self-directed you can control what the funds are invested in. If it isn't self-directed then the investment house/bank will tell you right up front what the interest is that they pay on the account. IMO, you are almost always better off with a self-directed account. They usually give you a choice of 20 or so mutal funds as a minimum and if nothing else you can direct that it all be invested in a money-market fund (usually one of the safest types of funds) and you'll get about the same returns that the average bank will pay. (Which, right now is about 5.4% APY)

The up-side of a self-directed is that as you become more knowledgable you can move your funds around and can easily average 12% or better annually. The difference between 5% and 12% over 30 or 40 years can be pretty large.

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btw, in addition to some of the other investment sites others gave you I'd recommend http://www.bestmoneyinfo.com/

The guy that runs this site has a great investment show on one of the local radio stations here in Boston and teh info they provide comes from some of the best Financial Advisors in the business.

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Quote:

The up-side of a self-directed is that as you become more knowledgable you can move your funds around and can easily average 12% or better annually.

for someone like me, who still doesnt even know the definations of diffrent types of investment accounts, would that still be worth looking into?

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