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Author: KenBarton Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: New investor, am I on the right track? Date: 11/6/1999 1:42 PM
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I started investing earlier this year into individual stocks and later a mutual fund. I just opened an Roth IRA account that will be invested into a Fidelity mutual fund (Fidelity Adv Equity Growth A). Also, I'm currently investing 6% into my company's 401k plan, besides a bank savings account.

I max the IRA with $166, direct deposit $100 into the mutual fund (Alliance Primere Growth Class B) and now only contribute to the individual stocks (Oracle, AOL and Cisco) when I have extra money.

I turned 30 last month and hope to retire at 55. Does this investment path make this feasible? HELP!
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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15177 of 75383
Subject: Re: New investor, am I on the right track? Date: 11/6/1999 5:13 PM
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In my opinion, it is barely feasible. You are talking about putting away something like $4000 a year, and yearly payments of that amount, if you can earn 10% per annum on them, will produce $400,000 total in round numbers in 25 years when you are 55.

Suppose then you plan to die at age 85. Then, with a slightly lower interest assumption, you are looking at a payout of maybe $2750 a month. This number has you dying with $0.00 in your estate.

Again in my opinion, I think it's great that at your age you are putting away as much as you are, and thinking for the future. Chances are you'll have more to save later, when (we expect) your income increases. I think you're really on the right track.

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Author: GrayWulff Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15178 of 75383
Subject: Re: New investor, am I on the right track? Date: 11/6/1999 5:22 PM
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KenBarton,

Welcome to TMF.

Are you on the right track? Sure you are! The most important thing is to begin regular savings. You've done that. You're in the stream, now you have to evaluate whether you're saving enough and investing it in the best way for yourself. That's a bit harder to do, but it's not that hard.

I'm a little concerned about your choice of mutual funds. Both funds have good performance over the past few years, beating the S&P500; but they also have loads, high turnover rates, and rather high annual expenses. Personally, I won't touch funds with loads of any kind. There are almost always comparable no-load funds available, so why pay some salesman 4 to 5% of your hard earned money.

I think you should compare your funds to Vanguard's VFINX and VIGRX. Get prospectuses and calculate carefully. VIGRX will be the best comparison for these two funds because it is also an aggressive fund and will have comparable risks.

TTFN,
GW

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Author: TucsonTravis Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15181 of 75383
Subject: Re: New investor, am I on the right track? Date: 11/6/1999 7:52 PM
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4k a year is about 4k better than the average american saves! One question, why are you contributing 6% to your 401k. What is the maximum you are allowed to contribute under your plan? Does your employer match or contribute on your behalf also? To me, depending on your income and tax bracket, I would ALWAYS max out my 401k prior to making other investments, especially if say your employer matches 0.50 on the dollar, not only do you put more money in, but your employer also puts more in on your behalf. Also, that tax sheltered contribution will give you a hand on those damn taxes! Further, anything you put in that 401k could be withdrawn without any penalties under IRC 72t (substantially equal payments) at any age. So if you do have a whopper of a couple years end up with millions in that tax sheltered account, you can still retire early, despite conventional wisdom on 401k withdrawls. One more thing, take a risk now, your only 30 and could easily recover from 5 horrible years, and odds are that you'll still come out alot farther ahead!

Good Luck... Travis

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Author: ChuckONeil Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15194 of 75383
Subject: Re: New investor, am I on the right track? Date: 11/7/1999 11:16 PM
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KenBarton

Not to sound like a broken record, (do thirty year olds remember records?) but you are on the right track. I'm impressed with your forward looking plans for your future. I wish I'd had more of a vision like that when I was young.

My recomendations are somewhat different than many on this board.

I'm told I sound "preachy" because I recomend The Motley Fools Books. I think they are excellent and I recomend them. Lest I am acused of making the same mistakes I earlier was acused of, let me say that I consider reading these books a prerequsite to fulling understanding what I am about to say.

You may be in good mutual funds that beat the S&P 500 index. But generally, mutual funds do not beat the index. IMHO I think one should expect to do better than average. Remember the index is an average. The Motley Fools demonstrate several strategies that have historically beat the average. It requires a little more effort on your part but it apears to be doable.

If you can earn greater than 10%, you will be able to retire comfortabely at 55 if you save at the rates you intend to.

The simplest strategy, the Foolish Four, has historically returned over 20% per year.
When you retire, analysis has shown, based on history that you can sustainably withdraw 6% per year and maintain purchasing power (adjust withdrawals for inflation). To withdraw $50,000 per year you will need a portfolio of $833,000 in todays dollars.

Based on history, investing Foolishly should give you a return on average of over 20%. I think this should do the trick.

Others disagree with me and may even claim I am giving reckless advice here. I don't think so but its your choice. At least give the Motley Fools strategies a good looking at.

So I suggest you read the books, learn more and understand the risks associated with the strategies. Then decide for yourself.

Chuck

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Author: ChuckONeil Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15208 of 75383
Subject: Re: New investor, am I on the right track? Date: 11/8/1999 1:49 PM
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KenBarton

I've been having second thought about your situation. While you are putting 6% into your 401K plan, you don't give any indication of how much that is. You also didn't give any indication of how much you expect to have when you retire at 55.

Anyway, I just purchased a financial calculator and learned how to operate it using your situation.

You have 25 years to grow your nest egg to 834,000 to be able to sustainably withdraw 50,000 per year (both in today's dollars)

Inflation over the past sixty years has averaged about 4.19%. Remember this is an average. Sometime in the next 25 years, we can expect one or two periods of much higher inflation. During those periods, it will be tough just to hold your own.

I assume that by investing foolishly you can earn about 20% per year. The RP4 earned 24.6% in the twenty five years ending in 1997 and 19.84% in the thirty five year period ending in 1997. Rember this too is an average. There are times when you will earn more and other times when you will earn less or even experience a loss.

Pluging all these numbers into my handy new calculator, you need to save $3,347 per year. I used a 16% return, 20% less inflation of 4%. So if all those assumptions are close to your actual experience, you should do just fine.

Chuck

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Author: mamaearl Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15221 of 75383
Subject: Re: New investor, am I on the right track? Date: 11/8/1999 11:37 PM
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if you're comfortable with your investment plans and learn to clean the shaft from the grain of investment opinions,"facts", etc. go with it. your judgement and self-education is %-wise just as good as most professional. just make sure you have some lee-way or some rainy day money!!! VERY IMPORTANT!!! i had a great plan and was permanently injured 9 years ago, in 2 years (2002) i would have been able to retire. instead, within 2 1/2 years i had to liquadate everything and lost my house,pension,insurance...every-thing you could ever imagine. my close friend had a great job, and i spent a year nagging get a 401K,IRA,investments,etc.--and 2 1/2 years ago they were no longer able to work! BUT they took my advice and they still have everything they started with plus
some investments that will hopefully keep growing for the next 12 1/2 years until they are 59 and can get the most benefit out of the investments.
verbose i am, but keep to your plan, make sure you can tolerate the risk/downside/? and if you have a trusted accountant,etc. check from time to time with them... but remember it's your money, your future,your
responsibility-- no matter how good the "pros" are they
will not take the action to replace your$ if the market turns, your investment dives, etc. ... sometimes
they do say i'm sorry. mamaearl

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Author: Roxx Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15244 of 75383
Subject: Re: New investor, am I on the right track? Date: 11/9/1999 8:27 PM
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only if you really enjoy peanut butter and jelly.

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