You should invest in stocks, bonds, and money market funds. You want to buy a diversified portfolio of stocks, as individual stocks are too risky. For most folks this means buying mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low cost funds. If you are like most people you will invest part of your money aggressively in stock funds, and part conservatively in money market funds and bond funds. The stock funds average ~10% a year, but vary tremendously from one year to the next. The other funds will get you ~5% with less volatility. Vanguard.com has an on-line questionnaire which will give you an idea how aggressive you want to be.
If your company offers a 401K plan at work, try to invest the most you can. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea.
I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion
Buying a house instead of renting will save you a lot of money in the long run. You don't have to pay rent and you build equity in your house instead. Buying rental property can also be a good investment. However, being a landlord can be hard work, and many people are not good at it. If you don't know how to handle deadbeat renters, you can have trouble.
If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above. You should also have 3-6 months of salary saved up as an emergency fund in a bank or money market fund before trying more risky investments.
Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.
Sources:
http://www.vanguard.com/VGApp/hnw/planningeducation
http://www.dallasnews.com/sharedcontent/dws/bus/scottburns/columns/2007/vitindex.html
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetallocation.htm
https://flagship.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//flagship.vanguard.com/VGApp/hnw/planningeducation/education
2007-02-28 05:58:28
·
answer #1
·
answered by Anonymous
·
0⤊
0⤋
It would take about 25 years to accumulate $3 million assuming a 10% return and $30,000 a year in contributions.
Take your first $30,000 or so and put it in Vanguard Prime Money Market account, which currently pays 5.1%. This is your emergency fund. After that put everything into something like Vanguard Target Retirement 2030 Fund. Ignore the daily ups and downs of the market and just keep plugging away.
I think 10% might be a bit high to expect, but there's no doubt you'll be better off than if you just blow all the money as you receive it.
2007-02-28 14:16:08
·
answer #2
·
answered by Thomas O 2
·
0⤊
0⤋
I recommend a mutual fund or exchange traded fund (ETF) investing primarily in small-company stocks, especially small-company "value" stocks. Over the 80 year period 1927-today (which includes many notable stock market crashes), small-company value stocks have averaged a return of over 13% per year.
Bank accounts, CDs, T-bills just don't cut it if you want to grow your investments. They generally return barely more than the rate of inflation, and after taxes, might even be LESS than the rate of inflation. You can't get ahead that way. In my opinion, those things are only valuable for preserving money you need in the next year or two.
Take a look at the chart for the small-company value ETF with ticker symbol IWN. http://finance.yahoo.com/q/bc?s=IWN&t=my&l=on&z=m&q=l&c=
It's more than doubled in value in the past 6 years (an average gain of roughly 12% per year) during a period that included a bad bear market. It bounces up and down, so it's not a good place for money you need in the next year or two, but for long-term growth, something like this is where you need to invest.
Here's another interesting chart: http://finance.yahoo.com/q/ta?s=IWN&t=my&l=on&z=m&q=l&p=&a=&c=IWM,%5EGSPC,%5EDJI
^GSPC is the S&P 500 index
^DJI is the Dow Jones Industrial Index
IWM is an ETF containing small-company stocks (value and growth)
IWN is an ETF containing small-company value stocks only.
Which would you rather have?
If you invest $30,000 per year for 20 years and get a 13% return on your investment, you'll end the 20th year with about $2.75 million, which is pretty close to what you wanted.
2007-02-28 14:22:55
·
answer #3
·
answered by Dave W 6
·
0⤊
0⤋
Historically, the S&P 500 has averaged almost 11% since its inception about 50 years ago.
If you saved 30k a year for 20 years at an 11% return you would end up only slightly higher than 2 million. Might take a few more years.
2007-02-28 14:14:04
·
answer #4
·
answered by zaphodsclone 7
·
0⤊
0⤋
i would suggest investing into an IRA. You could comprise your IRA with mutual funds like the S&P 500 or the Dow Jones. Both return around 11-12% annualy. If you want to just buy ETF's that is a good way to go too. DIA (The DOW) is a great one, and also SPY (S&P 500) is a great way to go. I personally like the Russel 2000 myself, its full of small cap stocks that have historically returned around 14% a year. That symbol is under IWM. Good luck to you, you are on the right track.
2007-02-28 14:33:08
·
answer #5
·
answered by dkwr14 3
·
0⤊
0⤋
Invest in a cd
2007-02-28 13:56:38
·
answer #6
·
answered by Denny O 4
·
0⤊
0⤋