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Author: mithrandiryod Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75384  
Subject: Question about my investment strategy. Date: 9/16/2008 12:58 AM
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I currently have a Roth IRA and a standard investment account. I am 24 years old and am attempting to save a fixed amount after my Emergency fund is fully funded at 50% one years salary for emergencies, stashed in a MMA.

Roth IRA:
The basic idea is for the main investment account to be the retirement
account with the all work for all basic investors and for those who
have fixed amount of investing for every month or every six month on an accrual to cut down on transaction costs. The percentage stocks are basically mixed as follows:
----------------------------
|:High Growth Stocks: (50%)|
|:Small Cap Stocks: (30%)|
|:Value Stocks: (20%)|
----------------------------

Standard Investment Account:
To the secondary investment account will be labeled the small cap
investment stock which will have an investment cap right now of $300
eventually to $1,000.
----------------------------
|:Small Cap Stocks: (90%)|
|:Value Stocks: (10%)|
----------------------------

Are there any comments on if I should change this approach?

thanks,
-mith
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Author: Hohum77 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63822 of 75384
Subject: Re: Question about my investment strategy. Date: 9/16/2008 3:40 AM
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I currently have a Roth IRA and a standard investment account. I am 24 years old and am attempting to save a fixed amount after my Emergency fund is fully funded at 50% one years salary for emergencies, stashed in a MMA.

Having a Roth IRA and having an Emergency Fund are both admirable goals.
But let's step back for a moment.

- Does your employer have a retirement plan?
- If so, are you contributing to that plan?
- If the plan has matching contributions, you should be contributing to
at least the match, before you start Roth contributions.

- Roth contributions can be withdrawn penalty-free. There is no reason to not visualize the two in parallel. So if you consider the Roth IRA contributions as the last portion of your Emergency Fund, you can fund the Roth with the idea that it also serves as part of the Emergency fund in the initial stages. Continue growing the Emergency fund as a separate pool of month.

Standard Investment Account:
To the secondary investment account will be labeled the small cap
investment stock which will have an investment cap right now of $300
eventually to $1,000.
----------------------------
|:Small Cap Stocks: (90%)|
|:Value Stocks: (10%)|


Very little point of this, if you don't have your Emergency fund, then retirement account funded. The numbers you are indicating ($300 - $1000) make it a terrible idea. Get your emergency fund started, fund your Roth IRA. Baby steps, do those first and prepare the foundation.
The investment account can come later. Starting at your age, compounding can work in your favor.

Hohum

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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63823 of 75384
Subject: Re: Question about my investment strategy. Date: 9/16/2008 9:31 AM
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I find it remarkable that with the markets in such decline, you are worried about asset allocation. How about 100% cash for now?

Of course, people will say that is market timing, and it is impossible. Those of us who are in cash because we have timed the market just laugh. We have not lost money.

There may be some bargains out there now, but only if we do not slip into a recession, which would certainly cause the markets to go lower.

An agile trader may find some decent trades, and some investors may find "value" in some stocks at this time.

So far as I am concerned, the risk is just way too great, and I have seen "value" evaporate rather quickly. Some people saw "value" in Lehman.

AIG will almost certainly go bankrupt, and Washington Mutual will probably be the next crisis. After that, what? Nobody knows, but it is not likely to be good.

Of course, many people have made money in this market by being short. I have friends who have done very well with the "short" ETFs. I view it as one of my failings that I have not taken that opportunity.

Anyway, the bottom line is that you need to look at market conditions before you invest. Then you need to look at the individual investment vehicles and pick the best ones for the moment. Then you need to continually re-evaluate.

Some unfortunate woman called Cramer the other night to say that she had owned Fannie and Freddie preferred stocks, which essentually no longer exist. I feel sorry for her, but the fact is that if you do not monitor your investments, this is what can happen. Nobody with any sense has held any of that stuff for quite some time. Simply too much risk.

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Author: mithrandiryod Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63825 of 75384
Subject: Re: Question about my investment strategy. Date: 9/16/2008 9:50 AM
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Alright, Thank you for the remarks on the market. I'm certainly not putting anything in at the moment, but I'm talking about an investment plan for the future. Looking at it now, those numbers for a standard investment account do seem rather ludicrous. I am however focusing more on funding my ROTH and Emergency Fund First. However, your comments raise another question, I did not know that the ROTH could be withdrawn penalty free. I was under the impression this was not possible with any IRA unless you were using the proceeds for Education or for first time home purchasing. I know that you can pull your money if you want, but I was under the impression that penalties would be incurred. Even if I could withdraw penalty free, I would only do so in the event of last resort, as I would with a standard IRA.

My Question then becomes, is this a good investment profile in terms of diversification at my age? Also I am currently investing with Firstrade for my investment accounts. They have $6.95 trades, but don't allow all of the investments that I would want during my research of some TMF recommendations. Should I stay with this Broker or should I be looking elsewhere?

As far as the market goes, I understand it's down, but I'm not here to totally knee jerk. I'd like to think I'm in for the long haul on my IRA. That doesn't mean I won't bail, but I just don't know when I should. I know that the economy heading for a "recession" is a pretty good indication. I know losing 25% of my investment is a pretty good indication, I just don't know when the market will go up, and I would like to think I have a good deal of risk tolerance being younger. That said I'm not putting anything into the market right now, I'm just not taking anything out.

-mith

PS: Sorry for the long post, and in answer to a previous question, My employer doesn't have a Retirement Plan so I went ahead and started my own, hoping with the power of compounding and starting early, I'll have a decent nest egg by the time I'm ready to stop work.

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63826 of 75384
Subject: Re: Question about my investment strategy. Date: 9/16/2008 10:03 AM
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Some unfortunate woman called Cramer the other night to say that she had owned Fannie and Freddie preferred stocks, which essentually no longer exist. I feel sorry for her, but the fact is that if you do not monitor your investments, this is what can happen. Nobody with any sense has held any of that stuff for quite some time. Simply too much risk.

Bill Miller? Leggs Mason Value Trust? Oh, yeah, stupid investor who just proved that stocking picking isn't as easy as some suggest.

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Author: mrparrotfez Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63831 of 75384
Subject: Re: Question about my investment strategy. Date: 9/16/2008 3:20 PM
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Sounds smart to me. Just make sure that your buys are sufficiently dilutive of commission. My own rule is to make purchases in sizes that will render the commission cost 1% or less. So at Scott, for example, where commission was $7 last time I looked, you'd want blocks over $700. At Fidelity I pay $10.95, so I look to buy $1100+ blocks.

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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63837 of 75384
Subject: Re: Question about my investment strategy. Date: 9/16/2008 5:57 PM
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Bill Miller? Leggs Mason Value Trust?

Used to be a good manager. Look at his fund now - down 40% over the last year. No reason to think of him as an example of anything good. Somebody said he lost his touch about the same time as when he bought a yacht. I cannot verify that one, but he sure lost his touch.

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