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Author: pife2u Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 27450  
Subject: need lots of help Date: 11/6/2003 11:29 AM
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Here it goes....... I'm an absolute noob at this stuff. The main reason I'm here is because the company I work for took away our pension, and the 401k they have isn't the greatest I've ever seen, so I'd like to start investing on my own to make sure my wife and I don't go broke when we're older. I already have an IRA(axp new dimensions), and I am already investing in a mutual fund(pioneer class A), but I don't have much money in either of those. What I'm hoping to accomplish is to start buying some stocks using the advice from this site and build up a decent portfolio to supplement my retirement. My questions are........

1. Should I get a broker, or use Ameritrade or something of the sort?

2. Should I save up a larger sum of money and buy alot at once, or could I buy a few at a time, hope they go up, and then sell and buy something else and continue this cycle? The reason I ask this is because I don't have alot of money to put down all at once.

3. Is the IRA and the mutual fund I'm investing in worth a crap, or should I check into others? Neither one seem to be doing what I'd call "great" recently, but both seem to have done well over the long haul. Anyone have any insight on those two?

4. If I were to post the funds that are in my 401k, could someone help me to decide which ones I should put my money in?

Like I said, I don't know much about this stuff, and I'm sure I have proven that by my questions. I have over 20 years before I retire, so it's not like I need big gains fast, but I would like to make sure I can retire comfortably(who doesn't?) I also have 2 children that I hope to put through college(they're 12 and 10 years old), and that's the other reason I want to start getting some more money invested.

If anyone could help me to get started, or guide me to some decent investments where I can start off small and work my way up, if that's possible, I'd greatly appreciate it, and I hope I'm in the right place to do such a thing!!! Any help would mean alot to me!!!
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Author: ControlFool One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5795 of 27450
Subject: Re: need lots of help Date: 11/6/2003 12:07 PM
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Hello pife2u,

3. Is the IRA and the mutual fund I'm investing in worth a crap, or should I check into others? Neither one seem to be doing what I'd call "great" recently, but both seem to have done well over the long haul. Anyone have any insight on those two?

I'm just starting out doing my own investing (since Mar 2003), too, so I'm not sure how much help I can be. However I do have experience with AXP New Dim - and it isn't good experience. It is not even keeping pace with the S&P500, and according to my Quicken alerts, it charges higher fees and is not as tax-efficient as similar funds. It is not very highly rated by Morningstar. I've seen recommended many times on this board the no load S&P500 index fund from Vanguard (sorry I don't have the ticker symbol, but a search of this board will probably produce it).

I hope this helps.
Good luck and God Bless,
ControlFool

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Author: wcfenton Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5796 of 27450
Subject: Re: need lots of help Date: 11/6/2003 12:46 PM
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Greetings pife2u...



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Author: Eldrehad Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5797 of 27450
Subject: Re: need lots of help Date: 11/6/2003 1:07 PM
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The main reason I'm here is because the company I work for took away our pension, and the 401k they have isn't the greatest I've ever seen, so I'd like to start investing on my own to make sure my wife and I don't go broke when we're older.

The Fool is an excellent resource, and it looks like you've taken the most important step of all - taking control of your own personal finances.

You said that the company 401k isn't the greatest. One question I'd ask you... is there any company matching at all? If so, even if the offerings are not what you might hope, the matching will virtually always more than make up for them.

401k, IRAs (traditional vs. Roth), taxable investments... it all gets so confusing, doesn't it?

There are plenty of articles and resources on all of these here at the Fool. If you go to the homepage, over on the left you'll see a long list of topics. Sounds like you might want to start by reading what you can on the subjects of investing basics, 401k's, IRAs, mutual funds... just take a look at what's there and dive in.

From my experience there is generally one path that works well for many people (though not all) - and you'll want to read and learn and make sure this works best for you, because it very well might not.

I think following these steps in order will work out pretty well for many people planning for retirement.

#1: Get out of debt, especially high interest credit card debt.
#2: Build an emergency fund (so you can avoid having to repeat step #1).
#3: Invest in a 401K up to the point where you max-out on company matches.
#4: Invest in an IRA (traditional or Roth, depending on your circumstances) up to the maximum.
#5: Finish maxing out 401k contributions (you've already maxed-out on matching at this point, but at least you're still getting tax deferral).
#6: Invest in a taxable account.

My fellow Fools might see this differently - and again, there is no one size fits all approach - including the approach above! I simply offer it as a starting point and an idea of what would work for many people - but everyone's situtation is unique.

I would strongly encourage you to read what you can on all of these topics, and if you have any questions along the way I'm sure there will be plenty of people to help you out.

Regards,

Eldrehad




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Author: wcfenton Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5798 of 27450
Subject: Re: need lots of help Date: 11/6/2003 1:13 PM
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Greetings pife2u...

Sorry...That was the shortest post I've ever made.

---------------------------

Let me start over:

1) First of all, I believe you should take this slowly and learn as much as you can about investment options before you change anything. Everybody seems to be an expert when it comes to someone else's money!

2) Next,I would forget about trying to find individual companys/stocks to invest in before you really have spent a significant amount of time getting yourself up to speed as I mentioned.

3) I would initially concentrate on passively managed, no-load, broad-market, low fee index funds. These type of funds can bring a reasonable return over time with a much smaller risk then individual stocks. One that comes to mind right away is Vanguard's Total Stock Market Index Fund (VTSMX). A very good starter fund. (Try not to start off with too many funds for cost reasons if nothing else).

4) Next, I would think about which vehicle I would utilize to carry my investments. Personally, I believe that the "ROTH" IRA is the best choice. This type of IRA has a great deal more flexibility then a traditional IRA. I would study/compare the two before deciding because only you know what your long-term goals are.

5) Then, I would figure how much I wanted to invest each year and periodically (maybe once a month) I would invest into my account. (Dollar Cost Average).

6) Lastly, I would get in touch with Vanguard and ask lots of questions and solicit their help:

http://flagship2.vanguard.com/web/corpcontent/scatRetOV.html

These are very basic suggestions. I am not a professional, but I do believe this to be a good starting point for most people who haven't spent any time learning about investing. I wish you good luck!

Regards,
Bill




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Author: pife2u Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5799 of 27450
Subject: Re: need lots of help Date: 11/7/2003 11:47 AM
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Thanks for all of the help, I appreciate it!!!

The company does match on the 401k.....100% on the first 3% and 50 on the next 3%. I am currently putting in 8% of my pay. I have my money going into a mix of things in the 401k, which leads me to the next question. I was reading the info on the 401k's on the home page that you told me to read, and it basically says to put your money in an index fund, if you have one in your 401k. We have 2 index funds in our 401k, so should I put all of my money in those?? We also receive company stock, but I think we only get that if we're investing in that in our 401k as well, so should I put some money in the company stock just to get a match?? The company stock isn't all that hot either, but is it worth it to put in just to get the match??

It's Timken stock, and it hasn't been doing so hot lately, anyone care to give any insight on what it might do after the Torrington acquisition?? I don't want to put money in company stock and then have it pull an Enron type move, so any insight there would be greatly appreciated as well. I look forward to hearing from you soon. Thanks!!

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Author: gridert Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5800 of 27450
Subject: Re: need lots of help Date: 11/7/2003 12:17 PM
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My general rule is to never turn down free money (given that the catches are ok). Generally put in enough to get the match. Beyond that is up to you.

On the two index funds issue, it really depends on the overlap between the funds, and the expensive ratios. If the funds are both covering the same index's then go for the no-load, lower expensive ration one. If you only have 2, I am willing to bet one is covering the S&P500 index. This is generally a good one to have. Look at what indexes the funds are covering, and the loads/expense ratios. Hard to give further advise without more info.

On the company stock, that's a tough issue. Generally do what allows you to sleep at night. If you are worried about it, put the money someplace else.

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Author: Eldrehad Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5801 of 27450
Subject: Re: need lots of help Date: 11/7/2003 1:07 PM
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The company does match on the 401k.....100% on the first 3% and 50 on the next 3%. I am currently putting in 8% of my pay.

So, if I understand you correctly, you get matching up to a total of 6% of your pay (100% on the first 3%, and 50% on the next 3%). First, allow me to say that your impression that your company's 401k 'isn't the greatest' might be worth a second look. The matching your company gives you is more generous than most employers.

You are presently contributing 8% of your pay? That means you are taking full advantage of the matching (you've put in the 6% and are taking advantage of all the matching available) - an excellent start.

Depending on the individual investor, it sometimes makes sense to contribute beyond the point where one gets matching (in your case I'd be talking about that last 2%, the difference between 6% and 8%) - but I've never run into a situation where turning down matching was the best option (unless one is having major debt problems, or something that is very much out of the ordinary). So, my impression (not knowing much about your individual circumstances, so I could well be wrong) is that no matter what else you do you should probably keep your 401k contributions at at least 6% of your pay. Now, that difference between 6% and 8% - might that money be better off in, say, a Roth IRA? It might be, but that will take a little more digging. In either case, you are off to a solid start.

We also receive company stock, but I think we only get that if we're investing in that in our 401k as well, so should I put some money in the company stock just to get a match??

Well, that depends. You said you get 100% for the first 3% contribution, and 50% on the next 3% contribution. Will you actually get additional matching for contributing additional money and buying company stock? Or is the matching you are currently getting all that you can get, and it's just a matter of how much you allocate to this fund, that fund, or company stock?

If there's additional matching available, I'd seriously consider it. Even if not, if you want to invest in company stock, that might be something to consider. Please remember though, for every Microsoft employee that made a bundle investing in their employer's stock, there's an Enron employee who got absolutely creamed. That seems like a decision that you are going to have to make for yourself, but just know that investing in any one stock (even your employer's) is going to be a more volatile and riskier endeavor than investing in an index fund.

Generally, investing in individual stocks is something that in my opinion beginning investors are probably best served to avoid - it takes a lot of diligence, reading of financial statements, etc. Again, though, it's up to you, and if you are leaving additional matching that you could be getting on the table, it might be worth the additional risk.

I've been investing for a while now, and I also have a pretty good grasp of business and financial statement fundamentals (I have an MBA and work as a financial analyst). My personal portfolio is invested about 50% in index mutual funds, and about 50% in a small handful of individual stocks. I view the index mutual funds as the foundation of my portfolio - and that's all I had up until just a few years ago. Lately I've begun 'branching out' into individual equities, but the foundation of my portfilio will likely always been in index mutual funds.

And quite frankly, there is nothing wrong with index mutual funds being the starting point and the ending point for many investors' portfolios. In fact, unless someone has a real desire to read and study financial statements, this might be the best approach. I personally enjoy reading financial statements - for me, it's fun. For many others, they'd rather be playing golf, flying a kite, or a number of other things - content to simply dollar cost average into some low cost index mutual funds, and spend their time on other things.

Regards,

Eldrehad



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Author: FuskieFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5804 of 27450
Subject: Re: need lots of help Date: 11/7/2003 3:57 PM
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S&P 500 index is good. I am big on small cap value right now too. But look at the overall options available, compare expense ratios, annual returns this year, 3 yrs, 5 yrs and more. Your goal is to invest for the long term. Unless you get special consideration, I would stear away from company stock. You know your company best - if you feel you are working for a potential enron, stay clear of the stock. But if you think that a market recovery will pay big dividends for your company, then get in on the ground floor. Be aware, however, that most 401Ks do not actually give you shares in your company but shares in a mutual fund that buys exclusively shares in your company. In other words, you get a share of the fund without the priviledges of ownership.

Check out the Mutual Funds section in Fool School for more on how to pick them.

Fuskie

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Author: canamrugby Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5815 of 27450
Subject: Re: need lots of help Date: 11/9/2003 4:38 PM
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Outside of my 401k, I have only just started looking at investments myself. I've read all of the replies to your post and they look right on the money to me!!! Nice to know their's friendly people out there. I've already picked up a couple of other things about funds.

1 - Watch out for no-load funds that charge that awful 12b1 fee. Totally unnecessary from my point of view.

2 - High turnover in a taxable fund can eat up your return.

3 - If your investing in funds to start, avoid the brokerage fees and call the fund directly. Most have an 800 number you can call.

-canam

Original Message

Subject: need lots of help
Author: pife2u Date: 11/6/03 11:29 AM Number: 5794

Here it goes....... I'm an absolute noob at this stuff. The main reason I'm here is because the company I work for took away our pension, and the 401k they have isn't the greatest I've ever seen, so I'd like to start investing on my own to make sure my wife and I don't go broke when we're older. I already have an IRA(axp new dimensions), and I am already investing in a mutual fund(pioneer class A), but I don't have much money in either of those. What I'm hoping to accomplish is to start buying some stocks using the advice from this site and build up a decent portfolio to supplement my retirement. My questions are........

1. Should I get a broker, or use Ameritrade or something of the sort?

2. Should I save up a larger sum of money and buy alot at once, or could I buy a few at a time, hope they go up, and then sell and buy something else and continue this cycle? The reason I ask this is because I don't have alot of money to put down all at once.

3. Is the IRA and the mutual fund I'm investing in worth a crap, or should I check into others? Neither one seem to be doing what I'd call "great" recently, but both seem to have done well over the long haul. Anyone have any insight on those two?

4. If I were to post the funds that are in my 401k, could someone help me to decide which ones I should put my money in?

Like I said, I don't know much about this stuff, and I'm sure I have proven that by my questions. I have over 20 years before I retire, so it's not like I need big gains fast, but I would like to make sure I can retire comfortably(who doesn't?) I also have 2 children that I hope to put through college(they're 12 and 10 years old), and that's the other reason I want to start getting some more money invested.

If anyone could help me to get started, or guide me to some decent investments where I can start off small and work my way up, if that's possible, I'd greatly appreciate it, and I hope I'm in the right place to do such a thing!!! Any help would mean alot to me!!!


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Author: IlanBigfoot Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5867 of 27450
Subject: Re: need lots of help Date: 11/21/2003 11:55 PM
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Allow me to chime in with what I hope is decent advice...It's what I'm doing and I've been following the Fools for a few years now.

Your first task as a newbie is to NOT jump in with both feet, trip over a little problem, and then get discouraged. You've got 20 years, so use your first year to LEARN. Don't worry about beating the market, just don't lose too much money taking risks you can't handle! After that you can shoot for the gold.

First to answer questions:

"I already have an IRA(axp new dimensions), and I am already investing in a mutual fund(pioneer class A), but I don't have much money in either of those. What I'm hoping to accomplish is to start buying some stocks using the advice from this site and build up a decent portfolio to supplement my retirement. My questions are........

1. Should I get a broker, or use Ameritrade or something of the sort?"

A big YES to discount brokers. I have used Firstrade, BrownCo, & Etrade, they are all fine. Look for one with low account transfer fees, trading fees and no annual fee. But frankly I'd stay away from individual stocks until you know a bit more, just stick to your S&P500 or Total Market index fund, bond fund, and money market.


"2. Should I save up a larger sum of money and buy alot at once, or could I buy a few at a time, hope they go up, and then sell and buy something else and continue this cycle? The reason I ask this is because I don't have alot of money to put down all at once."

A big NO to either of these options. The problem with the first choice you give is you don't have the ability yet to know if you are paying too high a price. Answer: don't buy all at once, so there's less risk. Second choice is poor because, again, you don't know yet what are good entry and exit points, and you'll probably get too excited and end up eating your returns with trading fees.

Instead, buy a little regularly and DON'T sell until you know why you are selling. This is called Dollar Cost Averaging. Make sure you are putting regular dollar amounts in (like $500 every month) not regular share amounts (20 shares/month) and put enough in so you are paying less than 2% in trading fees. (I.e. if you are paying $12 to buy, buy at least $600 worth) Otherwise your fees will eat your return. This goes for index funds and individual stocks.

"3. Is the IRA and the mutual fund I'm investing in worth a crap, or should I check into others? Neither one seem to be doing what I'd call "great" recently, but both seem to have done well over the long haul. Anyone have any insight on those two?"

Basically all mutual funds are crap if you are picking randomly. Until you know more, you only need two funds, a stock index fund like Vanguard's Total Stock Market Index or SPY (Spiders) and a bond index fund (Vanguard again!). Until you learn more, follow Ben Graham's advice and put half your money in each.

BTW if you don't know better, your IRA should be a ROTH.

"4. If I were to post the funds that are in my 401k, could someone help me to decide which ones I should put my money in?"

Again index funds, and maybe a very little bit of cash, say 10%.

You said you are getting matching funds with your 401k, that's great! I wouldn't put money in OVER the matched amount until you've got the $3000 for your ROTH IRA (and your wife's, too) and paid any big bills (say over 8-10% interest rate). Then you can put more in.

Hope this helps and is simple enough to understand! This next task for you is to read a good book, I very much recommend Ben Graham's The Intelligent Investor. $20 paperback and you can read it over and over.

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