I'm willing to save 5K a year for retirement. How should I invest this $417 of monthly saving?

Answer 1

Roth IRA.

Answer 2

You didn't mention how old you are, so I'll assume that retirement is more than 10-15 years away. Are you already fully funding a 401(k) at work? If not, that should be the first thing to consider when building a retirement nest egg. If you're already fully funded, then you should consider the Roth IRA for $4,000 of your savings (if you're over 50, you can contribute $5,000).

As far as where to put the money, much of that depends on your risk tolerance. A pretty easy way to invest for retirement is to buy one of those target dated retirement funds. Let's say you're planning on retiring 20 years from now. You could buy into a fund with a target retirement date of 2026, and the portfolio managers will allocate your stocks and bonds based on the 20 year future date.

I'm a big fan of index funds, particularly if you're investing a certain amount every month. They're cheap, efficient and cause few tax headaches. I wouldn't recommend an ETF because you'll get whacked on all of the fees if you're investing on a monthly basis.

Also, keep in mind your other investments. You should be looking to diversify your entire portfolio, not just retirement assets. It doesn't make much sense to buy more stock in your retirement fund if you're already sitting with 90% of your other investments in stock. The key is to keep your total portfolio diversified and well allocated.

Gee, nothing's ever simple, is it? ;)

Answer 3

You ought to figure out how much risk you can afford and how much effort you can invest into maintence and monitoring, greater growth usually requires acceptance of greater risk or closer involvement.

Example, property management, while giving generally dependable returns, requires both a larger single investment and great amount of personal involvement.

While buying into a stock is completely scalable,buy as little as you wish and sell on a whim - but can fluatate quickly and there is not much you can do if the stock goes into couple bad years.

The younger you are, typically the more of your savings can go into higher risk because you have time to sit out tougher times. But if you are expecting to need it back soon, you need more money in easy to reach places.

If you are going to invest montly, you need to first ask your banker or investment guy how to reduce commission fees and expenses. So that if you find a place place to invest, you'll already know the right way to buy it. For example, some mutual funds allow you to buy a little at time without charging commision and some have different classes of shares that perform differently but have different fees.

Also tax reduction - do you need a traditional ira or roth? Ask you banker or tax adviser so that you don't pay more than necessary in taxes.

Mke sure you are properly insured against catastophic losses and liability suits, talk to your agent.

Finally have your own plan to revisit these people annually. As your life changes, your investment strategy and insurable risk may also need to change. Accept no easy anwers. You will always have to find your own balance of risk, reward, effort and flexibility.

Answer 4

First, because of buy and sell fees, you actually buy no more than once every four months. That will greatly decrease your expenses compared to your principal. Second look into a ROTH IRA. You pay the taxes before you put the money in. If you do well, you might be paying taxes of your $90,000 in principal, but not on your $1 million in profits. Right now you can only put $4000 into a Roth (your buy money might be included). That leaves $1,000 in a non IRA account or use that $1,000 to buy I-bonds. You should have enough money to cover 3-6 months of expenses. That would be your emergency fund. If you don't have an emergency fund, that $1,000 can be used to build your fund.

Now to look at what to get. The magic number range is 5-6 different investments. So maybe 20% SPY (SP500), 20% Latin America ETF, 20% Asia ETF, 20% Europe ETF and 20% QQQQ (NASDAQ 100). If you are under 60, you shouldn't be thinking of bonds. Bonds are not beating inflation plus taxes so that would be a negative investment. Again with the buy and sell fee, you should limit your purchase to one item every time you buy. If you buy two things at once, you are doubling your buy cost which reduces your principle. ETFs are run by mutual fund companies, but are not subject to churning costs or hidden taxes (if a person sells out of their share of the mutual fund, you will pay part of the taxes and it will hit your profits, but you won't see the hit listed seperately on your statement).

Don't bother day trading. A couple of years ago, a guy claimed to me he paid $64,000 in 2004 in buy and sell fees and broke even for the year. I bought and held and my worth went up 23% for that year.

Answer 5

If you don't want to learn about the stock market, then you should invest it in a s&p 500 index fund - Vangaurd has some good ones.

If you want to invest yourself, then the firs thing to do is see what the best investors are buying and selling and why. Check out http://www.top10traders.com - this is a free site that lets you create a portfolio of stocks with $100,000 in "play" money. Each day the site ranks the best performing portfolios, so you can see how your picks perform compared to other investors. You can also read posts on investing from the best traders, as well as share your own investing ideas.

Here are this month's best traders:

http://www.top10traders.com/Top10Standings.aspx

Good luck.

Answer 6

Don't buy mutual funds. There are too many costs that cut into your earnings.

The mutual fund managers have to get paid
The mutual fund employees have to get paid
Finally, your adviser gets a cut for recommending the fund.
Then, you.

Why would you buy an investment that has so many middlemen? Cut out the middlemen and buy stocks. You'll get much better return on your money bc the financial system doesn't take out anything after the first commission.

If you want diversity, do a little research and get it on your own. The Internet has made it too easy for anyone to be lazy. Run a stock screen, like that on Yahoo! Finance, and find good companies to buy stock in, your portfolio will get better returns.

Answer 7

A good plan would be to invest in the cheapest tracker mutual funds covering the US, EU and Asian stock markets, in the ratio of about 5: 2: 1.

But the income from these funds is small and I think a better plan would be to invest in good quality shares (called blue chips) like banks, hotels, oil, investing $834 every 2 or 3 months, aiming to hold about 10 different companies. This will give you good income, safety and diversification.

Answer 8

You need to consider performing a proper asset allocation questionnaire or financial profile.

This will determine:
1. Years left to retirement.
(The shorter the time period - usually means less risk as you will need the money sooner).
2. Risk Tolerance.
(Conservative, Moderate, Moderate-Aggressive, Aggressive)
3. Tax considerations
(Traditional IRA-Do you need a write off now and pay taxes later or Roth - No write off now taxes but retirement gains will tax free).

Based on these answers you will able to pick the funds that meet your requirements.

Answer 9

you need a bucket of good mutual funds. here are some I like okay?

American Funds--- Growth
Janus----- aspen fund
CGM----Real estate

Or just simply spread your money around 4 different funds with AMERICAN FUND COMPANIES or You can go with a no load fund from one of the bigger guys like Fidelity. I happen to like american funds. Go into their growth, international, and mid and small caps. $5k a year will be worth a lot in 20 yrs, good luck

Answer 10

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