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Hi,

I have about 30k from my 401k that i am rolling into an ira where ican choose all the investment options. Would appreciate investment ideas.
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juststartingout,

You wrote, I have about 30k from my 401k that i am rolling into an ira where ican choose all the investment options. Would appreciate investment ideas.

You'll probably want to come up with your own investment ideas based on your own reading. Until then, I'd recommend either a market index fund or a target retirement fund.

I assume your roll over is to a stock broker. If so, perhaps one or two ETFs that meet these basic goals. If a fund family (like Vanguard), look for a similar open-ended fund. Of course with Vanguard, you can trade their ETFs without any commissions.

The Target Retirement type fund is an easy choice, especially for a young investor. It lets you pick a target retirement date (in 5 or 10 year increments) and the fund automatically adjusts its holdings from aggressive to conservative as you get closer to retirement. It deals with rebalancing and diversification issues transparently to you, though some of these funds cost more than they should.

Picking an index isn't quite as simple as you might think. At least at some point you will want to mix bonds vs. stocks and conservative vs. aggressive. That's something you can't do with just a single purchase. However if you're young and just starting out, buying something like a broad stock market index is probably a reasonable first choice - at least until you come up with a better plan. (For instance, you can buy shares of IVV at TD Ameritrade for with no transaction fees and it has an incredibly low annual expense ratio.)

- Joel
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It is difficult to suggest anything specific without knowing more about your age, investment goals, risk tolerance, etc. Also I suggest you not look at this investment in isolation, but, rather you should develop an investment plan for all investments including IRAs, 401k, taxable accounts, etc. considering the tax efficient placement of investments. A target retirement fund or perhaps a broad based market index equity fund would be reasonable choices.

Bob
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Age is mid 40s. Investment goal is to grow capital as much as possible with medium to high risk tolerance. What is the difference between standard mutual funds and etfs.
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What is the difference between standard mutual funds and etfs.


In light of that question, I recommend you step away from this message board and NOT take any advice from anyone here.

Not that our advice would be wrong or bad, but there is no way for you to make an informed decision until you get a little bit of education on your options - and asking random questions here is not the way to get it

There are a ton of resources on the internet on mutual funds, etfs, etc. Someone here might be able to recommend a good book (or 3) for you to read as well.

Once that is done, I think you will be in a much better place to start making investment decisions for yourself.
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Go to Google and look up "open ended mutual funds", "open ended mutual funds vs closed ended funds", and "ETFs".

You will find lots of stuff.
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juststartinout,

You wrote, Age is mid 40s. Investment goal is to grow capital as much as possible with medium to high risk tolerance. What is the difference between standard mutual funds and etfs.

Wow. Mid-40's. I'm 47. I'd hardly consider myself to be just starting out. I hate hearing about people that are just starting to save for retirement when they're my age.

BTW, the fact that you don't have a lot saved up probably doesn't mean you should have a high risk tolerance. What a high risk tolerance really means is that you're willing to work longer if things don't pan out.

And the fact that you would ask such a basic question tells me that you have a lot of self-education ahead of you before you start making any sophisticated investment decisions.

However unlike other posters here, I think you are probably ideal for a Target Retirement fund. But you still need to educate yourself about mutual funds and ETFs. While this isn't definitive, I'll give you a quick primer.

Mutual Fund - An investment company, trust or other investment vehicle that issues shares and buys a pool of investments on behalf of it's shareholders.

Open-ended Mutual Fund - A type of Mutual Fund that can issue and redeem shares on-demand. Shares are bought and sold based on a NAV price published by the fund at the end of the day. However, orders for fund shares must be made earlier in the day before the market closes and the NAV is known. An open-ended mutual fund has to purchase and sell assets on a regular basis, which can skew performance relative to it's underlying investments.

NAV - Short for "Net Asset Value". Usually refers the market value of the fund's assets divided by the number of outstanding shares.

Close-ended Fund (aka CEF) - This type of investment company arranges initial private financing to purchase a fixed pool of assets. The company then issues an IPO on a public exchange and shares can be bought through most any stock broker. CEFs only expand through mergers or secondary IPOs. CEFs do not necessarily trade at NAV - they trade on an open exchange which can set a price above (a premium to) or below (a discount from) NAV. It does this usually because of market sentiment ... something that can be wrong, but often is not.

ETFs - This is short for Exchange-Traded Fund. Technically this covers CEFs as well; but most ETFs use a type of arbitrage scheme that allows them to create and redeem shares by swapping shares for a pre-defined basket of investments. Large investment firms do these arbitrage swaps in an effort to make a small profit on the exchange.

ETNs - Exchange-Traded Note. This can be functionally similar to other ETFs; but has some structural differences. In this case, the note is a debt security (like a bond) issued by an investment firm or trust. Essentially it's an exchange-traded bond. The value of the bond depends on market conditions, the value of underlying securities and/or the terms of any coupon associated with the Note. ETNs are more common with funds that hold other debt or futures contracts; but for most investors, the difference between an ETF and ETN is immaterial.

Now that I've really confused you, go search the internet (or at least old TMF articles) and do some independent reading before you come back and ask questions.

- Joel
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Age is mid 40s. Investment goal is to grow capital as much as possible with medium to high risk tolerance.


People never have the risk tolerance they think they have. I good test or thought experiment, go to a casino and gamble with more money than you can afford to lose. Say 3 to 6 months of paychecks/living expenses. Make you break out in a cold sweat just thinking about it?

What do you think can happen in the stock market? You'd hate to be a year away from retirement, or two or three, and have 2008 happen all over again.

At mid 40s, you need to be hitting singles and doubles. Forget about homers and grand slams.

JLC
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JLC,

You wrote,People never have the risk tolerance they think they have. I good test or thought experiment, go to a casino and gamble with more money than you can afford to lose. Say 3 to 6 months of paychecks/living expenses. Make you break out in a cold sweat just thinking about it?

What do you think can happen in the stock market? You'd hate to be a year away from retirement, or two or three, and have 2008 happen all over again.


Agreed.

However for a person in their mid-40s, a 2008-like event shouldn't be 3-6 month's worth of living expenses. Honestly it should be a loss of more like 2 YEARS worth of living expenses if they were fully invested in say the S&P 500.

Now when you first read that, you may react and say something like, But I only have 6 months worth of living expenses! How am I supposed to get to years worth of living expenses if I don't take some risks?

Well it's true you should be taking some risks. But while taking risk might be necessary to earn a "real rate of return" over the long haul, taking a lot of risk can be a good way to guarantee losses.

Instead what's usually missing from the retirement plans of individuals like juststartinout isn't an investment strategy. Its a "saving strategy". If juststartinout had one in place for the past decade or more, I guarantee he'd have more than $30,000 in a rollover IRA.

People must save to retire. Too few do.

- Joel
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juststartinout,

I would take some of the harsh comments with a grain of salt. You are at a position in life and looking to plan for your future. That is all that is important. Learn and make a plan.

For a quick and short read that will give you a lot of the fundamentals for planning a financial future, look at the 13 Steps on the Fool investing home page:

http://www.fool.com/how-to-invest/thirteen-steps/index.aspx?...

Time is an investor's friend. Investing is a life-long task. Don't be rushed into investing in something you do not understand. Know what you are investing in and how it can make money for you.

I recommend you try a 30 day free trial of Rule Your Retirement. They have model portfolios of mutual funds and ETF's that are built for varying time frames before and during retirement. For the 30 days, you have full access to the resources and discussion boards. If you don't like it, call the 1-888 number for member services(top of the screen) and you get a full refund. You may find that much more useful.

Gene
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juststartinout,

I agree about taking the harsh statements with a grain of salt. Like you, I started out rather late -- but I was in my early fifties. I bought at what turned out to be the peak of the 1990s bull market and soon lost (what was then for me) a lot of money. I personally think that it's not so bad to swing for the fences when you are just starting out. You will probably end up losing what seems then -- when you're just starting out -- like a lot of money. But I think that that may be considered as the price of tuition in investing. (On the other hand, if you swing for the fences when you're just starting out, and luckily do very well, then, when your luck turns, you'll probably go on to lose what actually is a lot of money.)

As an alternative to the "hard knocks school of investing," where tuition may be expensive, you may wish to keep a paper portfolio, where you invest on paper and keep track of your gains and losses, before you do the real thing.

Also, at the beginning, it's important to SAVE money -- to live below your means. Not only does this teach some valuable lessons about getting off on the right foot where wealth is concerned, but it serves to build up a necessary emergency fund ("EF" on this site). In addition, you can use the time to read, read, read, all about investing -- which is more free or low-cost learning as there are many useful sources on the web (for example this very site, as well as http://www.investopedia.com/dictionary/#axzz23ivtm100 and http://www.bogleheads.org/wiki/Getting_Started and there are classic investment books that may be borrowed from the library, or bought either new or used.

culcha
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This is where I would recommend you start your reading.

http://www.merriman.com/bestofmerriman/ultimatebuyandholdstr...
Seems to be offline right now, though.

Here's an older version: http://www.advisorperspectives.com/commentaries/merriman_021...


Here's the summary, although you really need the full article to understand the background.
http://www.abcinvesting.com/drill-downs/the-ultimate-buy-and...

FWIW, I wouldn't recommend TMF's "Rule Your Retirement". You don't need to pay anything to get solid advice.
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I think many gave you good advice. Some encouraging. Some harsh. Regardless of your experience or financial condition, compared to theirs, you are where you are and I believe asked for both information and opinions. Answers such as "you're not ready financially or knowledgeable enough" do not mean that you are not trying to obtain both.

1 year ago this month, my wife was given the opportunity to take 1/2 of her 401k and invest it in a self-directed IRA. Her previous choices included bonds, Small, Medium and Large Cap funds (both value and growth), International and Emerging Funds and a tech fund. Also were three composite funds supposedly Conservative, Medium, and Aggressive.

In August of 2011, after splitting the two funds in half, the original funds have grown 13.1%; the independent IRA has grown 61.3%. The independent IRA began with a 50% position of AAPL and a very large position of the "Dogs of the Dow" strategy. Currently those holdings would be equal positions of GE, PFE, INTC, T and JPM. Some DoD followers would exclude the GE position. (JPM was not one of the holdings a year ago. The other four have returned between 26-34% in the past year with dividends reinvested). Of course AAPL has been amazing and has returned 65.5% with subsequent investments on pull-backs (The original positions in AAPL from Aug '11 are 82.68% and 69.67%).

Many will criticize such a large portion in one stock. But when you are first beginning, what is a large portion compared to the portfolio you will have over time. If you're not going to initially concentrate your holdings into a few individual positions UNTIL YOU GAIN more knowledge and a larger portfolio, what is the purpose of an independent IRA? You could just leave the money in the traditional 401k and get Fund and index choices.

I am still a believer in AAPL as a disproportionate amount of a portfolio until it reaches the 750-800 range. The Dogs of the Dow theory is easy, passive and the returns speak for themselves.

Although long, I hope this has helped you. It is just one of the thousands of choices you have (just like your independent IRA). A beginning portfolio of $3,000 in each of the Dogs of the Dow stocks and a sizeable portion of AAPL would be an excellent starting point (IMHO).
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Hello Juststartinout,

I am rolling over about that much too from my 401k. The index funds are doing better than many of the other mutual funds and are supposed to be a good option. Vanguard funds are a cheap and good option. I know from experience that many 'highly rated' mutual funds can do worse than the market.

What IRA company did you decide to go with? Can you tell me why? I am having trouble deciding what to do as far as that.

A financial advisor told me to put my whole 401k into this simple and moderate combination (for a 40year old) recently:
LSBRX 33% (bond)
WWNPX 33% (stock fund)
FMIEX 33% (stock fund)

I am still trying to decide what company I want to roll over my 401k to. I like Charles Schwab because it has many options, a great user interface, lots of information. But they do charge .5% per year in their managed mutual fund plans.

I really wanted to have the Mutual Fund Store manage my money because they get paid based on how much you get paid. But I don't have the minimum $50,000 that is needed for that.

I wish I could find someone to manage my money who doesn't get a flat fee. If my money had been managed well in the past, I know I would have 50,000 saved by now. Since I don't have a lot, I haven't found good options it seems.

Anyone who knows more, please let me know what you think. Thanks!
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A financial advisor told me to put my whole 401k into this simple and moderate combination (for a 40year old) recently:
LSBRX 33% (bond)
WWNPX 33% (stock fund)
FMIEX 33% (stock fund)

Never heard of these. Let's take a look....

Whoa!!!
E/R's: 1.1%, 1.64%, and 0.9% for a bond fund. [[rude comment about this advisor deleted]]

How about VCSH (0.15% ER) or BND (0.10%)?
For stocks, how about FCNTX or VTI?

Looking at a comparison chart of WWNPX, FCNTX, IWM, FMIEX, and VTI, WWNPX shoots the lights out. http://finance.yahoo.com/echarts?s=FCNTX+Interactive#symbol=...

Which means that WWNPX is taking on a very large amount of risk. Which is evident from the 67% loss from Oct'07 to Feb'09. That's a loss of 2/3rds of your money. Can you stomach that kind of loss? I sure can't.

You don't need to pay anything to manage your investments. Not even 0.5% that Schwabs wants. Go back in this thread and read the links I posted.

If you want somebody to manage your money for free or almost free -- it ain't gonna happen. The FA's that will do it for "free" will put you in crappy funds that pay them a commission on the side.

If you want to do zero effort on your part, use one of the portfolios I linked to, or just buy 60% FCNTX orVTI and 40% VSCH or BND.
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