No. of Recommendations: 2
Welcome, remleduff. Glad you could join us.

You seem to be off to a good start and doing well.

By getting into disciplined saving and investing (pay yourself first) while you are young, you stand an excellent chance of accumulating enough to retire early or earn your freedom to do whatever you like while you are fairly young. Keep up the good work.

Most people learn to gradually increase their saving rate. The easy way is to put a portion of any raises you received into savings.

Your $7000 savings account is not a bad emergency fund, but what kind of yield does it earn? Are your credit cards debt free? If yes, you can use your credit cards credit limit to cover you in most emergencies and then invest your savings in something that pays higher yield. I like bond funds--espeically NQS, Nuvene Select Muni bond fund, a closed end fund. Buy on dips when its $0.96/yr fed tax free will give you close to 7%, for most of us that is over 9% taxable. But be careful about rising interest rates. Don't hurry, but be ready on dips or when interest rates finally stabilize.

After maxing your 401K and IRA, the next target for most are taxable investment in the Long Term Buy and Hold (LTBH) style. By selecting those with low dividends and capital gains, you pay taxes only at low dividend rates or capital gains rates--usually only when you sell. This is the best you can do to minimize taxes. Plus it gives nice flexibility to use these funds for a downpayment on a house.

Your goal of 25% savings rate is admirable. Personally, I would consider the house an investment. So any money used for downpayment or to pay principal is part of that 25%.

On returns, yes most investors are best off to select a few mutual funds and stick with them through thick and thin rather than try to move your funds with fads in the market. You will probably only do that right about half of the time. And you can run expenses up with no major benefit. Still, as you become more successful at picking good investments--mutual funds or stocks, it becomes tempting to put more funds into those investments. Most should maintain about 50% in an S&P 500 Stock Fund or a Total Market fund. So don't over do it, even when things are doing well. Keep your diversification. But by being selective and staying on top of things, you can improve your returns.

Good luck. And Fool On!!
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