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Author: hep1974 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: where to invest? Date: 12/31/2004 2:34 PM
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hello fools,

i've finally made the jump to the world of IRAs. i just opened an account for my wife and i at etrade. now that we have opened it, i know i have the daunting task of choosing the best index fund that has no-load, no fees and will provide the best balanced growth for the next 30-35 yrs. acoording to the etrade investing questionare, i ended up being placed in the 3rd highest catergory called "balanced growth" which essestially is basically is a balance of low and high-wisk funds. it breaks down my asset locations to:

large cap: 55%
small cap: 15%
international: 10%
fixed: 18%
cash: 2%

i'm very new to this...i want to "set it and forget it" and just watch it grow throughout the years. i realize i will accept some loss, but hope to end up on top. i do not plan to take anything out for at least 35yrs and when i do take it out, i may deplete most of it throughout the retirement years but also hope to provide some income if possible. am i asking too much?

ok, my question (finally)....i don't have much to start off right now ($150) where should i put my money? i was thinking of a s&p500 index fund, but other than that - have no clue where to put that $150 to good use. HELP!

-hep1974
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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43800 of 76237
Subject: Re: where to invest? Date: 12/31/2004 2:49 PM
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Just starting out, I'd recommend using a "Total Market" index fund that includes all developed markets (and all market caps therein). You may have to wait until you have a minimum required balance to buy a fund (often $500-$1000 for an IRA, I think) to buy it.

Once you have one total market index fund, keep adding to it until you have more than enough to buy into four different funds -- large cap, small cap, international and bonds. Once there, you can start considering individual allocations. For example, with $5000 you may decide to allocate $2000 to large caps, $1000 to small caps, international and bonds (just an example, not a specific recommendation). Then as you add to it, you can periodically "rebalance" these allocations to be roughly along the lines of what you think it should be.

When you really start growing the assets (think tens of thousands and up), you have other options, such as additional types of assets (real estate, emerging markets, precious metals, global bonds, micro caps, et cetera) as well as exchange-traded index funds (ETFs)...but DO NOT worry about those yet; those are years (and thousands of dollars) away. You have plenty of time to study and consider your long-term plan, retirement needs and risk tolerance before getting there.

#29

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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: 43805 of 76237
Subject: Re: where to invest? Date: 12/31/2004 4:26 PM
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-hep1974...

i'm very new to this...i want to "set it and forget it" and just watch it grow throughout the years. i realize i will accept some loss, but hope to end up on top. i do not plan to take anything out for at least 35yrs and when i do take it out, i may deplete most of it throughout the retirement years but also hope to provide some income if possible. am i asking too much?

ok, my question (finally)....i don't have much to start off right now ($150) where should i put my money? i was thinking of a s&p500 index fund, but other than that - have no clue where to put that $150 to good use. HELP!

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

From the little you have told us, my thoughts are that you should probably save enough money to start a Roth IRA directly with the low-cost leader of index funds - Vanguard. Personally, I would dump the middle-man. To do this, you will need to save $1,000 to initiate a Vanguard Roth IRA:

http://flagship2.vanguard.com/web/corpcontent/scatSvcsRetIRAOV.html?Entry=spotlighton01

The next thing that I noticed from your post was that you want a "Feed-it-and-Forget-it" type of investment. I personally believe that it would be hard to beat a "Target Retirement" type of fund that is a "Fund-of-funds" including the Total Stock Market Index Fund, the Total Bond Market Index Fund and two International funds to round off a pretty good, diversified portfolio...all with one fund that automatically changes it's allocation (gets less risky by reducing equities in favor of bonds) as you get closer to retirement:

http://flagship4.vanguard.com/VGApp/hnw/content/Funds/FundsVanguardFundsTargetOverviewJSP.jsp?Entry=spotlighton02

I know I sound like a Vanguard Salesman - I'm not! I believe in Vanguard because they are the low-cost leader, they are owned by the investors, and the employees are salaried and not on commission. They are also only second in size to Fidelity which is also a decent fund company. Finally, by way of disclaimer...I do own a couple Vanguard Accounts.

Anyway...take a look.

Regards,
Bill



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Author: trecer Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43806 of 76237
Subject: Re: where to invest? Date: 12/31/2004 5:58 PM
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hep,
Why don't you get a trial subscription to the Champion Funds newsletter? It will give you some great advice on which are the best-managed and best long-term performing mutual funds, and it's certainly a good investment at this moment when you're trying to make this kind of decision. A trial subscription will give you access to the back issues, so it's a rel wealth of information. And it's certainly not the facile short-term performance counsel you'll get from places like Morningstar.

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Author: trecer Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43807 of 76237
Subject: Re: where to invest? Date: 12/31/2004 6:05 PM
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I wouldn't call e-trade a middle man, since they don't charge any fees. But you will need to keep a $5,000 minimum balance, so it might not be the best way to start out. #29 is right that you can just buy your mutual funds directly from the co. in question. And if you really want a single web location from which to survey your mutual fund kingdom, you can always set up your portfolio tracker on the Motley Fool or the New York Times, or just about anywhere (Vanguard will let you do it too).


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Author: thomasr0 One star, 50 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43809 of 76237
Subject: Re: where to invest? Date: 12/31/2004 6:44 PM
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"the world of IRAs. i just opened an account for my wife and i"

hep1974,

Based upon the above wording in your original post, you may have one point a bit confused. You can not have a single IRA for both you and your wife. The "I" in IRA stands for individual. You can establish separate IRA's for both you and your wife. Since you are starting with just $150 you may want to establish one IRA first and designate your wife as the beneficary of that account. Eventually as your investments grow, you can start a separate IRA for your wife.

It sounds like you are asking the right type of questions. My son is also beginning to build his Roth IRA and he will be 21 at the end of January. He has just under $10,000 invested so far. He selected the S&P 500 for his Roth IRA. He has also begun investing a little bit in individual stocks outside his Roth IRA. The recommendation to take a look at the total market index funds is also a good one.

Good luck, Tom

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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: 43810 of 76237
Subject: Re: where to invest? Date: 12/31/2004 7:22 PM
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trecer...

And it's certainly not the facile short-term performance counsel you'll get from places like Morningstar.
------------------

Sorry, but I would have to take exception to your remarks about Morningstar. They are a significant source of unbiased [my opinion] investing information, which, as much as I admire the "Fool", I don't think I could say the same for [again, my opinion] being they have their own line of funds (Champion) that they tout. Morningstar reports on "ALL" funds and therefore is neither "facile" or biased. I believe your comments, therefore, are misleading.

Regards,
Bill

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Author: trecer Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43813 of 76237
Subject: Re: where to invest? Date: 1/1/2005 12:15 PM
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Sorry, but I would have to take exception to your remarks about Morningstar

Morningstar does offer some very valuable services for subscribers, at least once you get deeper into the offerings. What I'm criticizing is the value of their relatively short term ratings on mutual funds. I'm not alone in this criticism by any means. You can't assess the performance of a mutual fund based on a 3-5 year window.

And on the Champion Funds Newsletter, if you've read it and can criticize it with some kind of substance, fine, but I found it very useful when I subscribed. It gives some very solid information on fund philosophy, track record, leadership, etc. The trial subscription is free; worth checking out. I wonder how long it will be around, since it seems like it would be more useful as a one-shot source of info., rather than an ongoing advisement.

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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: 43814 of 76237
Subject: Re: where to invest? Date: 1/1/2005 5:51 PM
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trecer...

Morningstar does offer some very valuable services for subscribers, at least once you get deeper into the offerings. What I'm criticizing is the value of their relatively short term ratings on mutual funds. I'm not alone in this criticism by any means. You can't assess the performance of a mutual fund based on a 3-5 year window.

And on the Champion Funds Newsletter, if you've read it and can criticize it with some kind of substance, fine, but I found it very useful when I subscribed. It gives some very solid information on fund philosophy, track record, leadership, etc. The trial subscription is free; worth checking out. I wonder how long it will be around, since it seems like it would be more useful as a one-shot source of info., rather than an ongoing advisement.

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

I think that the most important things an investor can do is:

1) Learn about how to invest by reading some of the better recognized books on investing such as:
....."The Coffeehouse Investor" by Bill Schultheis
....."The Four Pillars of Investing" by William Bernstein
....."Common Sense on Mutual Funds" by John Bogle
And then following some of the better web sites devoted to investing like the "Fool" and "The Vanguard Diehards":

http://www.diehards.org/

2) Establish an "Investment Plan" based upon personal goals and available investable assets.
3) Set a sensible "Asset Allocation". This is the most important part of a personal investment plan. This can change to some degree over the years, but change should not be a regular, ongoing process or it will defeat it's purpose of being a guide or roadmap that details how an investor should allocate their funds.
4) Rebalance as necessary (about once a year) to maintain the established asset allocation.

So...I wonder whether a newsletter is really necessary? If you have done your homework and initiated your investment plan, then all a newsletter can do is try to convince you to buy something that you do not need.

For the most part, serious investing is not an exciting process of continually jumping to the next hot fund or stock, it's sticking with your asset allocation. In addition, looking back at a fund's history as a part of decision making is a common practice because there is really not too much else to look at, but a fund's history is not a guarantee of future performance. No one can see into the future either, so newsletters that make predictions are guessing - just like everyone else.

As much as I enjoy the Fool...and as much as I have learned as a member of the Fool...I don't think that they can predict the future either. I wish they could, but they can't.

So...how much substance do you need?

Regards,
Bill


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Author: preben Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43815 of 76237
Subject: Re: where to invest? Date: 1/1/2005 6:54 PM
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Great post bill! Here's a rec! Cheers, Ben

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Author: trecer Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43816 of 76237
Subject: Re: where to invest? Date: 1/1/2005 7:34 PM
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newsletters that make predictions are guessing - just like everyone else.

As much as I enjoy the Fool...and as much as I have learned as a member of the Fool...I don't think that they can predict the future either. I wish they could, but they can't.

So...how much substance do you need?


Bill,
Your financial advice is great. I don't disagree with any of it. I started out with the Coffeehouse investor myself. But you still don't reflect any actual knowledge about the Champion Funds newsletter in your comments. You refer in passing to newsletters that "predict the future." That's not what the CF is about. Check it out and see for yourself. I'm still not convinced that it's worth subscribing on a long term basis, but it's at least knowing what kind of content it has. What it's useful for is to help a new investor (who wants to invest in mutual funds) to identify what the philosophies are of different funds. There's actually quite a bit of difference between managed funds. Now, perhaps you don't believe in managed funds; that's fine. But if someone is going to invest in managed funds, the Champion Funds newsletter is at least a good starting point. There are others, too, though.





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Author: hep1974 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43849 of 76237
Subject: Re: where to invest? Date: 1/3/2005 1:40 PM
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to clarify my original post. i opened a separate account for my wife also. so we wach have an account on our own and both we've started out with approximately $150 and will contribute about $50/mo into each account. it sounds like that we will have to wait until we have at least $1000 before we can truly invest into anything right now. it may take us a year or more before we get to that point. the onyl reason we started out with such a low amount is because of other expenses we have to pay (i.e. med school loans, saving for a home, etc.) and that's the only amount we can invest right now.

do i have to wait until i have $1000 or more to invest? i was looking into something i can invest now altho the amount is not as much. i would rather invest a little now instead of waiting until i have more to invest. i don't want to wait - it took me this long to open one so now i want to start. is that possible? for example, to buy a few shares of some market fund or index now and as i contribute more - buy more shares later? bottom line, i just want to know if i can buy some shares now or is it in my best interest to wait until i have more to buy shares?

thanks,
hep1974

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