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I have a Roth IRA at Sharebuilder with individual stocks that I selected. I recently saw that there is a Roth 401K. I would like to contribute more than the $6,500 that is allowed per year. Sharebuilder will only let me have funds like ETF's with a Roth 401K. I only want individual stocks that I select. Had a no yield, or less, 12 year long experience with Ed Jones/Putnam so now I'm taking over the investing. I couldn't do any worse than they did. To make a short story long, my wife and I are self employed and work together. No employees. Is there a broker that will allow me to get a Roth 401K and buy the stocks I want? I think there is an income limit rule on this too but I don't know if that is the gross income of the company, after all deductions or what. I'm reading conflicting stories.
...or is there a better place to my money? Both of us are over 50 and just really starting to save for retirement. The accounts at Ed Jones only totaled about $8,000 so we are way behind.
Any help is much appreciated.
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The Roth IRA is an individual plan; the Roth 401K is an employer's plan.

If you are an individual, the Roth IRA is your only choice. The Roth 401k is not available to you.

If you own your own business and especially if you have employees, you have many options. One is a Roth 401k, but there are others such as Keogh plans. In that case, perhaps others can advise. But your tax man or CPA should be a useful advisor. Fidelity and Vanguard offer such plans, but usually only for large employers. Smaller employers have fewer choices.
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To make a short story long, my wife and I are self employed and work together. No employees. Is there a broker that will allow me to get a Roth 401K and buy the stocks I want?

Yes, they are often called 'solo' 401(k)s or 'single' 401(k)s. If you have a relationship with a broker other than Sharebuilder, you can ask there. Otherwise, you might want to start with Fidelity https://www.fidelity.com/retirement-ira/small-business/self-... or Vanguard https://investor.vanguard.com/what-we-offer/small-business/i...

I think there is an income limit rule on this too but I don't know if that is the gross income of the company, after all deductions or what. I'm reading conflicting stories.

There are income limits. For the Roth portion of a 401(k), you, as the employee, can put in up to $17,500 (plus a $5,500 catch up contribution if 50 or over). The employer can contribute a total of $51,000 or 25% of the business profit, whichever is less. The employer contribution plus the employee contribution for an individual cannot exceed $51,000, not including the catch-up contribution for those 50 or over). All employer contributions must be pre-tax, so they cannot go into the Roth portion of the 401(k).

AJ
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AJ,
Looks like both of those links show investment choices being only funds.
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Looks like both of those links show investment choices being only funds.

Both Fidelity and Vanguard have brokerage arms that offer accounts that can be used to buy individual stocks.

From the Fidelity link:
Investment options A wide range of mutual funds, stocks, bonds, ETFs, and FDIC-insured CDs

I would suggest calling Vanguard to see if you can have a brokerage account attached to a 401(k). I know you can have a brokerage account attached to both Roth and Traditional IRAs and I have seen other people mention buying individual stocks in their Vanguard based 401(k).

AJ
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People get Roth IRA's and Roth 401(k)'s confused all the time. Make sure you differentiate the two when you are reading articles. Roth 401(k)'s basically do not have an income limit, other than you cannot contribute more than your earned income.

It sounds like you want an "individual 401(k) or sometimes people call it a "solo 401(k). Here is the link to Schwab's version, which I have recommended to people in the past.

http://www.schwab.com/public/schwab/investing/accounts_produ...

They definitely allow individual stocks.

You can contribute $23,000 to your Roth 401(k) and so can your wife. The assumption here is that you both have earned income of at least $23,000 each. Earned Income can be complicated so you may want to talk to your accountant. The overly simplified answer is what do each of you pay medicare taxes on? That is your earned income.

You can also make a tax deductible employer contribution. Assuming you are 50 and contribute the maximum to the Roth, then this is capped at $33,500 if you have enough earned income ($134,000).

Make sure that Schwab, or whomever, understands that you are making Roth contributions when the plan is setup, otherwise your taxes will get all messed up.

There may also be annual filings with the DOL when you set up this kind of plan and the assets grow. Again, your accountant may be able to help you.

Hope this helps.
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I emailed Vanguard and they said they don't have an "i401(k)" that allows buying individual stocks.
Are all Solo 401K's like a traditional?
My main objectives are to pay taxes on money as it is invested (not as it is withdrawn later), to have the availability of the highest possible contribution limit, to allow myself and my wife only to participate and to buy individual stocks of my choice. I know that I'm repeating some things I have stated but our Roth's were finally transferred out of Putnam's hands and they are at Sharebuilder doing nothing. I'm trying to make the right decision first, rather than a quick one and have to change it later. Everything I know about all of this I learned in the past 3 months. Between a Roth, Traditional, SEP, Simple and Solo, a Solo seems to have the most features that I'm looking for but I'm still not sure if it is like a Roth or a Traditional(regarding pre or post taxation).
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Solo 401(k)'s can allow Roth 401(k) contributions. At least the Schwab plan document allows them...
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Are all Solo 401K's like a traditional?

Solo 401(k)s can be Roth or Traditional for the employee contribution. All employer contributions to a 401(k) are Traditional. You need to ask the broker what options they offer.

I know that I'm repeating some things I have stated but our Roth's were finally transferred out of Putnam's hands and they are at Sharebuilder doing nothing.

These are Roth IRAs, right? That's a completely separate issue from setting up a new Solo 401(k), either Roth or Traditional. If you don't like the options you have for investing at Sharebuilder, then you need to get them transferred to another broker. If you do like the options, then start investing.

I'm trying to make the right decision first, rather than a quick one and have to change it later.

401(k)s are separate from IRAs. While you should consider them as part of your overall portfolio, there's nothing that would require you to have your 401(k) account at the same broker that your IRA account is at.

Everything I know about all of this I learned in the past 3 months.

It sounds like you are fairly new to investing on your own. Why are you so set on investing only in individual stocks, and not willing to invest in mutual funds?

Between a Roth, Traditional, SEP, Simple and Solo, a Solo seems to have the most features that I'm looking for but I'm still not sure if it is like a Roth or a Traditional(regarding pre or post taxation).

You are trying to compare apples to oranges.

SEP-IRA, Simple IRA and Solo 401(k) are all different types of retirement plans that can be set up for small businesses (along with Keogh accounts).

Roth and Traditional are different types of tax treatments that IRAs and 401(k)s can have, not just those for small businesses. A solo 401(k) can be either Roth or Traditional for the employer contribution. All employer contributions to a 401(k) plan must be Traditional. Therefore, a 401(k) account can have both Roth and Traditional monies for the same individual.

401(k) accounts are separate from IRA accounts, even if they are both 'Roth' accounts or both 'Traditional' accounts. There are separate rules about contributions, contribution limits, distributions/withdrawals, penalties, withholding and protection from creditors. You can do rollovers between 401(k) accounts and IRA accounts, if you want to consolidate everything into one type of account. But in order to maximize your contribution, you probably need to keep multiple accounts, rather than trying to consolidate them all into one account.

AJ
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Whew! That's a lot for me to digest. Sometimes I have to study things before they sink in. You're right about being new to investing. I'm as new as it gets. My broker at Ed Jones forced me into this situation though.
Just to get the ball rolling, I created a joint account at SB, bought a few stocks and my wife asked if they were in a Roth. Umm, well, not exactly. In order to have accounts set up to be able to transfer IRA's (1 ROTH & 1 Trad. for me, 1 ROTH for my eife)from EJ to SB, I created the same type of accounts. After that, per SB, I had to sell stocks from the joint, move that money back in and buy stocks again. So, right now we have my Roth with stocks in it, my trad. with only money and my wife's Roth with stocks in it. The reason I haven't used the trad. to buy stocks is because once you buy stocks to go in it, it will always show n account online even if you close the acct. it's just to keep records of what you did with it.
I know it sounds like a mess but the transfers didn't all happen at the same time so I used whatever was there to get busy buying stocks. The joint and my Roth had money transferred to the from our bank acct. before any of the transfers were completed. I was waiting to convert the trad. to see what I came up with for an acct. that had a higher contribution limit.
I assume the bottom line on info. regarding income, profit, who's the company owner and who's the worker needs to come from tax records. We have faux finishing company where she is named as "
Designer" and I am "Painter". She started the company and I think her name is on the DBA. With those facts in mind, is she considered the employer and I am the employee? Just asking to try to get the different types of accts. we need straight.
We don't really have an accountant or anyone that I can trust to give sound advice. My wife's brother works at Hewlett-Packard as an accountant and does our taxes every year. I consulted with my brothers business accountant once and it would have cost us about $300/month for his services. Way too much for us for a mon-income producing position. I asked him if he could do something to save money on our taxes to justify his fees and, after reviewing the previous years taxes, he couldn't.
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We don't really have an accountant or anyone that I can trust to give sound advice.

I think this is your first big issue.

My wife's brother works at Hewlett-Packard as an accountant and does our taxes every year. I consulted with my brothers business accountant once and it would have cost us about $300/month for his services. Way too much for us for a mon-income producing position. I asked him if he could do something to save money on our taxes to justify his fees and, after reviewing the previous years taxes, he couldn't.

The problem is, your accountant should be helping you set up the accounts correctly and answering the questions like:
I assume the bottom line on info. regarding income, profit, who's the company owner and who's the worker needs to come from tax records. We have faux finishing company where she is named as "Designer" and I am "Painter". She started the company and I think her name is on the DBA. With those facts in mind, is she considered the employer and I am the employee? Just asking to try to get the different types of accts. we need straight.

If you have the account and your company set up correctly, the company is the employer and you and she are both employees. You and she can each make your employee contributions, and the employer (i.e the company) will make their contributions. Employee contributions need to come directly from the employee's paycheck. Employer contributions should come from the company.

If your BIL can't help answer your questions to get that set up correctly, then you do need an accountant, and it's not just to save on taxes.

The joint and my Roth had money transferred to the from our bank acct. before any of the transfers were completed.

Okay, this is scary. You transferred money from your bank account to your Roth IRA? Was this your annual contribution? If not, why were you sending money from your bank account to your Roth IRA?

I really think you need professional accounting/tax help, because you may have made an overcontribution to your Roth IRA. You will need to either get it removed (if you still can from a timing perspective) and/or pay penalties on it.

AJ
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We are a stereotypical mom and pop company. All incoming money goes into one checking account. We don't actually get paychecks. We could but that seems like an unnecessary formality. I try to keep as much money in the checking account at all times as possible. There isn't any back up income anywhere if unexpected expenses arise. Contract workers, materials, designer commissions, utilities, mortgage, etc.. all comes from that account. In other words, our salaries are in that account. It would be the same as if we wrote ourselves paychecks and deposited back into the account, to reinvest in the company. The money that came from that account to deposit in our Roths would be considered some of our salaries. So far, I have put $4,000 in my Roth and $1,000 in my wife's Roth from that account. The IRA transfers contained contributions that were mad long ago. Since me and my wife do the majority of the hands on work there is very little time for accounting/clerical type duties.
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Since me and my wife do the majority of the hands on work there is very little time for accounting/clerical type duties.

Which is another reason why you need someone else to help you with that, in addition to answering your questions about how, precisely, your company/accounts should be set up in order to maximize your ability to save for retirement, which seems to be your goal.

I am not in accounting either, nor do I have a small business. I have looked into setting up a 401(k) for a small business, but the business ended up not being formed, so I have no practical experience. And yet, you seem to be using at least some of my very limited knowledge to further your knowledge, because you don't have source you can trust, and you are seeking to increase your level of knowledge.

I appreciate the fact that you are asking questions, and want to gain understanding. However, you don't seem to be at a level where you have the knowledge that you would need to get everything set up correctly. Unless you want to wait until you can gain that knowledge, at a minimum, with the level of knowledge that seem to have, I would strongly suggest that you consult a professional to ensure that you have your retirement accounts and contributions set up correctly.

If you don't have time to do 'accounting/clerical type duties' I would also strongly suggest that you consider using index funds from a low cost provider as the basis for your accounts, rather than individual stocks. Understanding individual stocks well enough to invest in them well requires a lot of time and research. You would probably be better off financially spending that time working on your business.

AJ
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We have been kind of merely getting by with a minimal amount of accounting for about 10 years and it's stressful just knowing more needs to be done. Finding work and getting it done has consumed so much time. I'm squeezing in time to get our retirement investment going in the right direction at 5-6am and 8-9pm everyday. While most people are either asleep or pleasurably watching TV I am doing stock and related research.
Right now I have invested $5,000 of the money in our IRA's to buy individual stocks and have made $650 in about 3 1/2 months. I don't know if that's considered good but it's a lot better than when a broker that does this as a profession, all day long, was managing it.

The problem I have with any kind of fund it that someone else picked the stocks it contains. There are too many closed door deals that go on than I wouldn't know about, like there were pay offs to get stocks included in certain funds, etc... There is a Motley Fool article called something like "How to make a million in the stock market" that says basically the same thing. Starting this so late in life, I need aggressive companies that want to be sure their stockholders don't dump stocks due to poor performance. I don't just study stock charts. I study the companies, employee moral, whoever is in the driver's seat, etc...

I think you are right about consulting with someone about retirement accounts. That is something that probably only needs to be done one time, getting the accounts set up. I need to get past that part. Schwab sent me a basic email to call them so I think I will do that Monday morning. Sharebuilder's services has been just fine, they just don't appear to offer the type of retirement account I want. They have been extremely helpful to me.
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The problem I have with any kind of fund it that someone else picked the stocks it contains. There are too many closed door deals that go on than I wouldn't know about, like there were pay offs to get stocks included in certain funds, etc...

The concerns you have would apply mostly to managed funds. You need to learn about index funds. They are based on stocks contained in specific stock (or bond) indices, like the S&P 500 or the Russell 2000, for broad markets, or things like Health Care or Consumer Products, if you want to invest in specific sectors. Here's some research you might want to read: https://personal.vanguard.com/pdf/s296.pdf And realize that you can also buy ETF based on indexes, too.

There is a Motley Fool article called something like "How to make a million in the stock market" that says basically the same thing.

You might want to check the date on that article and see if it was dated before TMF started their own managed mutual funds. http://www.foolfunds.com/funds/index.aspx So if you really think that TMF is still espousing a 'no funds' philosophy, they seem to be talking out of both sides of their mouth. Are you sure you want to believe that?

Starting this so late in life, I need aggressive companies that want to be sure their stockholders don't dump stocks due to poor performance. I don't just study stock charts. I study the companies, employee moral, whoever is in the driver's seat, etc...

Aggressive companies that want to be sure their stockholders don't dump their stocks due to poor performance have an incentive to manipulate their earnings. It works well, until it doesn't. Enron, WorldCom, HealthSouth, MF Global..... If you really think that with 2 hours a day is enough to discover those types of issues with only publicly available information, I wish you luck.

I would argue that starting so late in life, you cannot realistically make up for the time that you've already lost, and to try to do so is to engage in gambling. You actually need to be more careful of the investments you make so that you protect the principal you have managed to put away. Doubling down with the small amount of principal that you have may pay off. But like any gambling, in order to get the big payoff you are looking for, there is a lot of risk of losing it all. And with only 2 hours a day of perusing publicly available information, the odds are not in your favor.

AJ
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Right now I have invested $5,000 of the money in our IRA's to buy individual stocks and have made $650 in about 3 1/2 months. I don't know if that's considered good but it's a lot better than when a broker that does this as a profession, all day long, was managing it.

So, you have 'made' (not really, because you don't actually make money until you sell) 13%. The S&P 500 was up about 10% in the last 3 1/2 months. So, you did slightly better than you would have in an S&P 500 index fund. However, with $5000 you cannot be very highly diversified which means that if one of your stocks tanks tomorrow, for whatever reason, you will give up most, if not all, your paper gains. With a S&P index fund, it would take the entire market to drop at least 9% to give up give up most of your gains. It could happen, but if the S&P 500 were to drop that much, I suspect that your individual stocks would also suffer significant losses, also wiping out most, if not all, of your gains, since many times in market declines, the high fliers are also the stocks that drop the most. And if you have more than 4 individual stocks (not nearly enough to be well diversified), even at only $6.95/trade (commission at Sharebuilder) and 1 buy & sell per stock, your commission costs for the position would be $56 - which is more than 1% of your $5,350 current value.

It might work out for you. But with few stocks, you have significant single stock risk, which could wipe out not only your gains, but a big chunk of your principal, too. And in order to own the 15 - 20 individual stocks that a well diversified portfolio generally needs, so you can minimize your single stock risk, it would cost you over $250 to both buy and sell the stocks, even at only $6.95/trade, and single buy/sell trades. In order to keep your commission costs down close to the costs that you can get with index mutual funds, you would have to have a $50,000 portfolio and be willing to hold each of your stocks for at least 2 1/2 years.

AJ
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I thought about the risk of not being diversified but with such a small amount of money to invest my choices are limited. I can't buy much of anything. I started buying individual stocks because I was trying to make the most money I can, as fast as I can to attempt to catch up. I have never been a risk taker with money. It's hard enough to earn so sure don't want to lose any but I started thinking that I probably can't earn enough before I "retire" to live comfortably. I need the money I can save to make money too.
I talked to Schwab and they do offer a 401K with a Roth option. It's not shown on their site because they go to a third party firm to set it up. That firm will customize plans for you. They said a 401k plan for me and my wife is $215/year for the "employer" and an additional $25/year for the "employee". Only other fees are $8.95/trade. That's for a basic plan with no loan option, no adviser assistance, etc... One point about it though, it's only really part Roth. "Employee" contributions are like a Roth, "employer" are like a traditional. That's still better than a regular Roth than only allows $6,500 max., and I can buy individual stocks if I want to.
Regarding the way we contribute and don't physically pay ourselves, they said as long as your tax records show (which they do)that the both of us are getting paid salaries we are fine.
I just have to be sure that my investments make enough money to more than justify the annual fee and trade fees. Another reason to have very aggressive stock choices.
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ramair4,

You wrote, I started buying individual stocks because I was trying to make the most money I can, as fast as I can to attempt to catch up. I have never been a risk taker with money.

The kind of thinking behind that first statement gets lots of people into lots of financial trouble. You are talking about taking more risk.

The second statement contradicts the first. Which one do you think I believe?

At some point taking more risk is just foolishness.

Also, I talked to Schwab and they do offer a 401K with a Roth option. It's not shown on their site because they go to a third party firm to set it up. That firm will customize plans for you. They said a 401k plan for me and my wife is $215/year for the "employer" and an additional $25/year for the "employee". Only other fees are $8.95/trade. That's for a basic plan with no loan option, no adviser assistance, etc.

That seems like a lot of money to me... Probably only worth it if you're planning to max out your contributions. Even then your relatively short horizon to retirement might limit the value of the account.

I'd check other brokers and mutual fund companies before pulling the trigger on that.

I also might be tempted to create a spreadsheet to try to analyze at what point the tax advantage will enough to overcome the annual costs.

- Joel
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I thought Schwabs fees sound a bit high too. I probably can't put enough money in there right now to offset the cost. I was mainly looking for something with a higher than $6,500 limit that is like a Roth, and to be able to buy individual stocks with it. So far, haven't found anyone else that will do that. All other 401k's want me to do the fund scenario. Still have a hard time letting someone else picking the stocks after our 12 year waste of time with Ed Jones.
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I just read that there rare tax implications that I didn't know about, like the less time you keep a stock, bond, etc... The higher the tax rate you pay. If you don't hold on to a stock, for example, for at least 12 months the tax rate can be as high as 35%. Like someone said, buying and selling stocks like a machine gun can cause very high taxes. I can wipe out your gains. Also,l if you have a 401k that you are managing yourself you have to be sure not to over contribute or you will have to pay a 6% penalty.
So, what do day traders do? Do they just try to make trades where the gains will offset the trade fees and taxes? Where is the best place to store the money you make?
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I just read that there rare tax implications that I didn't know about, like the less time you keep a stock, bond, etc... The higher the tax rate you pay. If you don't hold on to a stock, for example, for at least 12 months the tax rate can be as high as 35%.

That's not really rare - that's long term capital gains vs. short term capital gains. Every investor with taxable assets (stock, real estate, bonds, etc.) has to deal with those when they sell, assuming that they sell the asset for more than they purchased it for.

Like someone said, buying and selling stocks like a machine gun can cause very high taxes.

In taxable accounts.

In a 401(k) or IRA account, the taxes will be applied differently. For a Roth IRA or 401(k) (tax free account), taxes are paid on the funds before they are put into the account, and then, assuming you follow the withdrawal rules, you won't be taxed again. In a Tradtional IRA or 401(k) account (tax deferred account), again, assuming you follow the rules, you can get a tax benefit that will reduce your current taxes when you make a contribution, and then, again assuming you follow the rules, you will be charged ordinary income tax rates (not special capital gains rates) when you make withdrawals.

Also,l if you have a 401k that you are managing yourself you have to be sure not to over contribute or you will have to pay a 6% penalty.

That's not just for people who are managing their own 401(k)s. Everyone is responsible for making sure they don't overcontribute. For many people, whose employers manage their account, they don't have to worry about it. However, for people who are in more than one 401(k) plan during the year (because they change employers, or have multiple employers, for instance), they need to be sure they meet the rules, too, or they would have to pay the penalty. Again, not really a 'rare' rule at all. I've changed jobs 3 times in the last 10 years, and have had to manage my 401(k) contributions each time.

So, what do day traders do?

There are special tax rules that apply to traders, if they meet all of the qualifications. Here is an IRS link that explains some of the differences: http://www.irs.gov/taxtopics/tc429.html

Do they just try to make trades where the gains will offset the trade fees and taxes?

I would assume that they would need to aim for gains higher than the trading fees and taxes they will owe. Otherwise, they would have a net loss. The real question would be - How many of them are successful at doing that?

Where is the best place to store the money you make?

Depends on what your goals are, and needs to be considered in your overall portfolio structure. You may want to re-invest in the same asset class, you may want to invest in another asset class, or you may want to put the money aside in a 'safe' asset where you won't lose principal, but you may lose to inflation.

AJ
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ramair4,

You wrote, I thought Schwabs fees sound a bit high too. I probably can't put enough money in there right now to offset the cost. I was mainly looking for something with a higher than $6,500 limit that is like a Roth, and to be able to buy individual stocks with it. So far, haven't found anyone else that will do that. All other 401k's want me to do the fund scenario. Still have a hard time letting someone else picking the stocks after our 12 year waste of time with Ed Jones.

I don't know why you seem to be stuck on buying individual stocks. (I assume you're not talking ETFs here.) It might not be worth paying Edward Jones (EJ) to pick individual stocks for you; but that doesn't mean EJ is the same thing as a mutual fund company. Besides, what makes you think you'll do any better than EJ at picking stocks?

Given your situation - in other words, you're heavily involved in running your own business and don't really have time to learn investing strategies - I'd stick with the basics. I'd probably invest in either a low-cost target retirement fund or I'd create a fairly diverse collection of low-cost index funds (or low-cost ETFs) and try to keep them balanced. Also most of my money would just be invested in a major stock index either through that target retirement fund or some fund like VOO, SPY or IVV. (Much of my own money is invested in an S&P 500 fund.) Any of these approaches gets you fairly safe returns over any reasonably long investment period without paying some company too much money in fees.

Investing in individual company stock is something people should do either when they're young or once they already have so much money socked away that loosing the entire investment won't have a material impact on their retirement. At least that's my view of the world.

- Joel
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I think what you guys are saying about having to spend too much time finding, watching, etc.. stocks is right. I could be spending the working years I have left making money. I was mostly looking for the most advantageous place to store it. I have never been a fan of investing. Money is too hard to come by so I hate to lose any but I thought about the place in the Bible where the 3 guys were given money to do something with and the one that buried it in the ground was frowned upon by the man that gave it to him to invest, or whatever. Not too long after I left home at the age of 18 I was nearly to the point of starvation because I had so little money. That experience, and knowing that we are supposed to be a good steward of God's money, has made me very conservative. If I'm wasting money, I'm wasting God's money. I'm just the manager. I am also determined not to live off of Social Security, like my parents are now. If SS is there when I retire, fine. If not, that needs to be fine too.
If I max out our 2 Roth's that's only 13k per year. That won't be enough. Where do I put the rest? If, for example, I had a Roth and a Traditional IRA is the max contribution per person? Rather than per account? If so, I will need another place to store more money that will be saved for retirement. Not sure if the cost of a 401k can be justified.
Before I wrote this response I read over the thread again because I went over it to fast before and was asking questions that had already been answered. Sorry. Your replies have been very helpful and detailed. Thank you for the time you spend responding. I'm thinking more about those index funds.
Instead of being vague about the stocks I have now, and your wondering about my abilities to pick decent ones, I only have Tesla Motors and Amazon stock right now. I know, I know, it's not diverse but $5,000 won't buy much when it comes to aggressive companies. Today, combined, they are at a 12% gain. They have been as high as over 20% on some days (Tesla by itself has been over 30%). The market is down some right now though.
Eric
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I am also determined not to live off of Social Security, like my parents are now. If SS is there when I retire, fine. If not, that needs to be fine too.
If I max out our 2 Roth's that's only 13k per year. That won't be enough.


You're right. IRAs alone are not nearly enough, even if you were only in your 20s. Being over 50, not wanting to use SS to live off of, and having only $5k in your current investment portfolio? You probably need to be putting away mid to upper 5 figures each year, depending on how long you want to work, and what your expenses in retirement will be.

Where do I put the rest?

Taxable accounts are options, in addition to 401(k) accounts.

If, for example, I had a Roth and a Traditional IRA is the max contribution per person? Rather than per account?

The contribution limit is per person, not per account. Each individual can contribute $5,500, plus a $1,000 catch-up contribution to a Traditional IRA, a Roth IRA or a combination of the 2.

Not sure if the cost of a 401k can be justified.

Well, if you are willing to invest in index funds until you get enough accumulated so that you can be diversified when buying individual stocks, Vanguard's plan costs $20 a year. You don't have to leave your account at the company you start with - you can move to Schwab, or someplace else, later - when you can justify the higher costs to be able to invest in individual stocks.

Instead of being vague about the stocks I have now, and your wondering about my abilities to pick decent ones, I only have Tesla Motors and Amazon stock right now. I know, I know, it's not diverse but $5,000 won't buy much when it comes to aggressive companies. Today, combined, they are at a 12% gain. They have been as high as over 20% on some days (Tesla by itself has been over 30%). The market is down some right now though.

You are gambling, not investing.

AJ
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ramair4,

aj485 has already covered most of it...

You wrote, Instead of being vague about the stocks I have now, and your wondering about my abilities to pick decent ones, I only have Tesla Motors and Amazon stock right now. I know, I know, it's not diverse but $5,000 won't buy much when it comes to aggressive companies. Today, combined, they are at a 12% gain. They have been as high as over 20% on some days (Tesla by itself has been over 30%). The market is down some right now though.

Seriously? I mean those are great companies. But those are not the basis of a great portfolio. In a nutshell, you are speculating and you need more diversification. I would say you're taking a lot of risk here; but to be fair it's only $5,000. And while Telsa might go away as quickly as it came, Amazon will probably be around for a while so it's not quite as risky as Tesla, longer term.

A great portfolio requires a long-term commitment, a strategy that addresses changes in the market, earnings, growth and diversification among other things. You can certainly get that from a handful of individual stocks. But it's less time consuming to use index funds, which is why I recommend them.

And just because you are beating the market TODAY does not mean your picks will beat the market TOMORROW.

Finally, if the market is down, it may be a buying opportunity... Buy low... Think about that.

- Joel
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I'm gambling....because I only have stock in 2 companies? I consider it investing in companies I believe will do well.
Tesla stock might not quadruple but I believe it will double, eventually. At least half of the Teslas sold aren't sold in the US. Even if the US economy crashes it won't kill Tesla. Mr. Musk is a great leader and innovater.
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I'm gambling....because I only have stock in 2 companies?

Yes - they each make up significantly more than 4% - 5% of your total investment portfolio, they are both high flying aggressive growth tech companies (yes, Tesla is a tech company that tries to masquerade as a car company), and tech companies tend to fall hard.

Tesla stock might not quadruple but I believe it will double, eventually.

Or it might crash and burn to zero. Tesla has not shown sustained profitabilty. It has had a single profitable quarter after operating for 10 years. And you apparently bought during or after the rally that accompanied the profitable quarter announcement. You bought high, hoping to go higher. That'a a gamble.

At least half of the Teslas sold aren't sold in the US. Even if the US economy crashes it won't kill Tesla.

Well, based on the Tesla First Quarter 2013 Shareholder letter dated 5/8/13, Tesla said they hadn't delivered any customer cars outside of North America, so that doesn't seem to be consistent with your statement. Be that as it may, Tesla needs to have a sustainable way for their cars to go on long range (500 mile+ roundtrip) trips in it's entire market. If they want to be a world-wide car company, they need to provide that capability world-wide. How much will that cost, and how will they afford it, while still turning profits? If they can't find a way to provide that capability, they are destined to be a niche commuter car company, competing with the likes of the Volt and the Leaf, whose parent companies can afford to sell them as a loss leader, if necessary. Tesla, being a one-trick pony, won't have that option.

Mr. Musk is a great leader and innovater.

Elon Musk also is spending time and money on SpaceX and Solar City. The money he made from PayPal will only go so far, and by trying to be in charge of 3 aggressive growth companies in completely different industries, can he really give all 3 companies the leadership they need?

You didn't say much about Amazon, but you apparently also bought it near it's all time high at the time, hoping it would continue to go higher. It did for a while, but has recently dropped back down, probably to near where you bought it at - which is why your overall portfolio was only up 12% - 13%, while Tesla was up 20% - 30%.

You know - it might work. There are people who hit it big when gambling. But based on the portfolio you have, the amount you have invested and the goals for your portfolio, you appear to be gambling by going for the Hail Mary, rather than grinding it out.

AJ
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Here's the MF article I mentioned previously:

http://g.foolcdn.co.uk/art/download/tmf/1211_TMFUK-10StepsTo...

I read an article about investing vs. gambling on Investopedia a while back so I could provide a reasonable answer to those, like my mom, who might say putting money into the stock market is the same as gambling. The short version is that when you invest you are providing companies with more working capital to increase production, expand, hire more people, etc... Something is actually produced with your money. With gambling, a ton of people give money to a "pot" and a lot more lose than win. The losers end up with nothing.

No matter how much experience you have in investing, you are still guessing. It's a gamble. For, let's say Warren Buffet, it's an educated guess but it is still a guess. A gamble. You don't hear that much about how much he loses. You mostly hear when he gains. When he gains, he gains big but when he loses, it's big too.

I knew I was buying at a fairly high price on both but too many people try to wait until the market is down and never do anything. I waited for 12 years, trusting a broker's experience to increase my money. It never happened. I might not make all the right decisions at first and some of my methods might seem crude but I have help from the One who leads us and guides us into all understanding.

I did a fair amount of reasearch before I decided on Tesla and Amazon. The final ok to go ahead to buy came from our all knowing God. Can't get any better than that for some inside info.

Eric
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Here's the MF article I mentioned previously:

http://g.foolcdn.co.uk/art/download/tmf/1211_TMFUK-10StepsTo......


That's a sales pitch for TMF's Share Advisor Service that they are selling, not 'an article'.

And, as I suggested before, TMF seems to be talking out of both sides of their mouth, as here's a sales pitch for TMF mutual funds http://www.foolfunds.com/philosophy/index.aspx The theory (if you believe the sales pitch) is that TMF mutual funds 'solve' all of the issues that they see with mutual funds, so these mutual funds are not really 'bad' mutual funds like other mutual funds. But they are still mutual funds,

As with all sales pitches, you need to take everything with a signficant grain of salt. You seem to have embraced the part of the Share Advisor sales pitch of "Forget funds and buy individual shares" without any salt.

I read an article about investing vs. gambling on Investopedia a while back so I could provide a reasonable answer to those, like my mom, who might say putting money into the stock market is the same as gambling. The short version is that when you invest you are providing companies with more working capital to increase production, expand, hire more people, etc... Something is actually produced with your money.

I would say that there is an element of gambling in all stock market investments. But the more diversified you are, the more you can mitigate the risk, which decreases the gambling element. With a total portfolio of $5,000 invested in 2 high-flier stocks, you have not only not mitigated your risk, you have increased it.

With gambling, a ton of people give money to a "pot" and a lot more lose than win. The losers end up with nothing.

Enron, WorldCom, Chrysler, MF Global, Pacific Gas & Electric, Conseco, CIT, General Motors, Washington Mutual, Lehman Brothers, American Airlines - to name a few losers that ended up with little or nothing.

AJ
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Well, sales pitch or not it still sounds like some practical thinking to me. #4 is the only point that I can't prove without in depth research. To. me, the rest of it is common sense.

1)Start now (If you never start you will never know if you can make any money by investing)
2)Spend less than you earn (Unless you are rich, you can either have it now or have it later. Every penny you spend now is money that could be invested to grow)
3)Use tax efficient ISA's (IRA's)(To reduce the amount of taxes you pay. Money spent on taxes is wasted investment dollars. Have to pay taxes but try to keep it to a minimum.)
4)Shares beat funds
5)You can beat a flat market (Informed investors don't crash in hard economic times.)
6)Reinvest your dividends (Don't withdraw gains. It takes money to make money.)
7)Think different (Be open minded to new ideas)
8)Thinking big while investing small (Do what you can with the money you have now.)
9)Invest long term and stop over trading (All investments will be up and down. Choose carefully and hold on for the long run.)
10)Hold your nerve (Don't sell at the first sign of a downturn)

My confidence in my decisions is not what it might appear to be. It's confidence in God's abilities and knowing that I hear from Him.

"The person without the Spirit does not accept the things that come from the Spirit of God but considers them foolishness, and cannot understand them because they are discerned only through the Spirit."
1 Corinthians 2:14

I will eventually be buying more than just the 2 different stocks. I'm thinking about getting in sort of early on the 3D printer market. Just have to decide which one(s) to go with.
My wife asked me why I don't buy stock that cost less. I said that lower priced stocks re low for a reason. There's little interest in them. Getting in later uses other people as investing guinea pigs. Investing early has to potential to make much more money but the idea or product might never really take off. Investing later, the market demand gas been proven. It's a better late than never theory.
Eric
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Amazon will probably be around for a while so it's not quite as risky as Tesla, longer term.

Amazon may be around for a while, but they are intentionally operating with no profit margin after all these years to continue to gain share. The markets loves it. For now. Who knows when they might decide they want to see the profits start rolling in. I think Amazon could be as risky as Tesla in that regard.
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My confidence in my decisions is not what it might appear to be. It's confidence in God's abilities and knowing that I hear from Him.

Yes, because only non-believers lose money in the stock market.

PSU
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That wasn't what I said. The quote you included from me was only referring to myself but... if you want to go there, here's the formula for success and prosperity. Not my words but I do believe it:

"This book of the law shall not depart out of thy mouth; but thou shalt meditate therein day and night, that thou mayest observe to do according to all that is written therein: for then thou shalt make thy way prosperous, and then thou shalt have good success."
Joshua 1:8

Eric
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Well, sales pitch or not it still sounds like some practical thinking to me. #4 is the only point that I can't prove without in depth research. To. me, the rest of it is common sense.

Yes, the best sales pitches make a lot of sense - otherwise they have a hard time convincing people to buy into what's being sold.

My confidence in my decisions is not what it might appear to be. It's confidence in God's abilities and knowing that I hear from Him.

Because that technique worked so well for the money you left with the broker.

AJ
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That broker is a relative of my wife. I got married at the age of 36 so I started the married life later than the average person. I had a nearly fatal motorcycle accident at 32 that left me with the complications of a massive stroke. So, first time homeowner, first time marriage with 2 step children, constant possibility of another stroke and/or seizures and trying to appear to be as "normal" as possible to keep a decent job. Those IRA's were the least of my concerns. I didn't know that guy, at all, so I was trusting his and my wife's judgement to manage that money. He was only given one deposit for each account. I wasn't going to give him anymore unless he proved that he would do something with them. Those accounts were somewhat out of sight, out of mind. I didn't have time to deal with them. I didn't ask God what to do with the money or for his direction, until now, and see how it turned out? Soooo, your accusation is false. Not your fault because you didn't know the details.
Eric
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