No 401(k) match at work... how should I invest?

Question

I am starting a new job and getting paid pretty well... I am young (below 30) and want to buy a house in the next few years (probably 2-3). I know NOTHING about investing money and was wondering where I start. I was told not to put money in my 401(k) because my employer doesn't match so I should take it somewhere that will give me a better return. Any suggestions??? Also is it worth getting a financial adviser? THANKS IN ADVANCE!

Additional note I just thought of... I have massive student loans, some of which have an interest rate of 8%... do you suggest paying those off first? aka will they increase at a quicker rate than my investments will? Thanks again!

Answer 1

Let me preface that we would probably need to know more. At ground zero, you should take the time (probably a Saturday or Sunday) to visit a local bookstore and browse through the personal finance and investing sections. I would recommend authors like David & Tom Gardner, Suze Orman and Dave Ramsey (those are the popular authors and they all have positive and negative aspects). You should read up on deferred-tax plans such as 401ks, IRAs and Roth IRA in order to get a better feel to the tax benefits and restrictions each plan has (and your ability to invest, dependent on certain income limitations).

Also familiarize yourself with what mutual funds, index funds and exchange traded funds are. This is your future and your money that you will depend on for retirement, your house and your children's future. The time invested to familiarize yourself about investing for retirement will be money will spent. If you are interested in eventually investing in individual companies, more homework is needed and you should look at your local community college or state school's business department to see if they offer an introductory class on accounting, finance or taxation. This way, you'll have the bedrock knowledge you'll need to sharpen your skills on evaluating securities and funds like how to read a balance sheet, an income statement and notes to financial statements in annual reports.

This is something you can probably do on your own without a so-called "financial adviser" if you have about an hour a month to go over things. If you earn a large amount of money, then an experienced professional would be a good option but beware of the salesmen and "financial engineers" that will push you toward under performing, high -expense load mutual funds.

Answer 2

There are a lot of variables here. My first question would be how good is your 401K? Some are very good and some stink. What investment options are available to you? If you have a decent plan I would lean towards the 401K. I like the idea of having pre tax money come out of my check hence I never see it and am not tempted to spend it.
I also like investing in a Roth. In a few years you will find it easier to withdraw money from a Roth than most 401K's to purchase a home. Money you put into a Roth is after tax money but the gains are tax free. With a Roth you can put your money almost anywhere, hence you can probably get a better return. Since you will probably start with a modest amount of money be aware that most investment houses charge a fee for small accounts. I will make two recommendations here. Excelsior Funds has a $500 minimum. With no annual fees last I checked. Their fund Value & Restructuring symbol UMBIX has out performed the market for years. Another is Gabelli specficaly their asset fund symbol GABAX. With Gabelli it takes $1000 to open and they charge $10 per year until you have over $25,000 (you can own ten of there funds and still only pay one $10 fee). There are other good places to invest do some homework. My advice is avoid fees and loads they will eat your gains alive!
For learning more I do like some of the names mentioned by other posters but I really like Bob Brinker whose URL is listed below.
Some of the other posters here have given you excelent advice as well.
Best of luck.

Answer 3

I would be careful with the advise you were given. Just because a company doesn't give a match, does not mean that your 401(k) is not a good investment. First of all, any money that goes into your account goes in before taxes. So if you put in say $100 a week, it may only make a difference of $80 a week in your paycheck, because you get taxed on less money. Check out the 401(k) options available to you, find out what the return on investment has been on those options over time. Then decide if the plan looks good.

Answer 4

Not as much as if they were matching. If this is the case, first max out your Roth IRA. After that the advantages to putting money in a 401k with out a match is that: 1) it makes you save more and its something you won't notice gone in your checks that you get because it will be taken out before hand rather then you having to put the money aside which would increase the possibility that you spend your "investment" money on something you don't need, 2.) your interest still grows tax deferred until you take it out (assuming when you retire) which at that time you will pay taxes on it, 3.) depending on what your 401k provides some provide investing options that other individuals can not get into (closed funds). If you like your options theres nothing wrong with putting money into a non-matching 401k, just make sure you max your Roth first and also make sure you are not looking to delve into other investment opportunities which might tie up this money (ie Real Estate) because besides a few exceptions you will have your penalty for taking out early distributions.

Answer 5

I have a free downloadable book on retirement investing at my website. Click on my profile and read the info to find the site. Or, if you have other questions, feel free to email me at [e-mail]

Even if your employer does not match, a 401(k) can still be a good option, so long as the costs of the funds are low enough. With a 401(k), you have the advantage of automatic contributions from your paycheck. Do not underestimate this advantage. The key to building retirement wealth is to make regular contributions. Paycheck withdrawals ensure that this happens and that you automatically budget for the contributions.

If you want to start a retirement account yourself, an IRA can be started with many different firms, such as Vanguard or Fidelity.

A "better return" will only be obtain by taking higher risks and by keeping your costs low.

A financial adviser? If you want one, get one that charges for your time; a fee-based adviser. Do not take advise from an adviser associated with an investment firm, as they will be biased. IMO, you are your own best adviser ... as long as you have the tools to understand investing.

Answer 6

Starting young is going to pay off for you. A house is a good investment if you have the income to support it. I'd invest in a Roth IRA and put the money into index funds. You will do this with post tax income but when you withdraw at retirement the earnings are tax free. After you've maxed that out the Roth I'd invest in the 401k.

Answer 7

I would max out a Roth IRA (see Fidelity or Vanguard for opening an account) up to 4000 a year if you are single or 8000 if you are married. Then if you have extra money I would go ahead and invest in your 401k because you are deferring the taxes until you retire. If you max that out then I would suggest some tax managed funds but that is only after you have maxed both the Roth and normal 401k.

Answer 8

You can guarantee a return of 8% by paying off the student loans. That will also relieve a ton of stress. Its worth it. It will look good on your credit report when you go to buy a home too.
Then fully fund a ROTH IRA with index funds. Study "Money" magazine to see how much of each type of fund to buy. At you age it will be mostly in stocks.

Answer 9

There is definitly better ways to invest then 401(k).
There is a heap of stock sites that offer good advice and do the work for you.I like http://pennystockcentre.com
and i have found the best is http://goldenbullpicks.com
i am with them and they make it very profitable!
Theres a few so do some research.

Answer 10

max 401k anyway