Stocks, Funds what are your best investments?

[rawlins87]

What's the best way to open a Roth IRA? I've spoke with the personal bankers at chase before and that is about all the experience I have on the subject.

[smashweights]

What's the best way to open a Roth IRA? I've spoke with the personal bankers at chase before and that is about all the experience I have on the subject.

 

First task is to ensure that a Roth IRA will be the best choice for you.  Do some research on Traditional vs. Roth IRA. For most folks who aren't in top tax brackets right now, Roth IRA will be the better choice.

 

Next, figure out what mutual funds/ETFs you want to own in your Roth IRA (Fidelity, T. Rowe Price, Vanguard, etc).  THEN open an account with the investment broker that has the most of those funds with NO transaction fees.  IE: if you plan on owning a lot of Vanguard funds, open your Roth with Vanguard unless Chase happens to offer many Vanguard funds with no transaction fees.  This will save you losing out on fixed amounts of your investment through transaction fees because many investment brokers charge a fee to purchase funds not within their family.  As for how, I know Vanguard and Fidelity have very simple online setup and easily link with your bank account.  And yes, you can have Roth IRAs at multiple brokers if it will benefit you, but your yearly contribution limit is the same.

 

IMO, if you have no idea what you're doing, open your account with Vanguard directly and invest in the Target Retirement fund that matches up with your expected retirement date.  Regularly invest while you figure out your strategy then change up your strategy once you feel confident.

Edited October 25, 2013 by smashweights

[aforrest4]

P&G.

 

It grows, pays dividends, and splits every once and a while.

[Zorro]

What's the best way to open a Roth IRA? I've spoke with the personal bankers at chase before and that is about all the experience I have on the subject.

Just go to fidelity.com and open one.  It's like creating an account for this forum.  And a roth IRA is a great option for everyone...except the folks who have an adjusted gross income over the max of 116k  per year  (i believe this figure could be wrong).  it's higher for married folks...just saying.

[madcat6183]

Also with 401k's, you can take control of where the money is being invested. I moved all o mine into a different fund that I heavily researched. 20% ytd gains in my 401k.

Yeah I have to do something with mine, really just need to look at it, not sure why I don't, not like I'm busy at work.....  Okay fine, I will today, you guys talked me into it.  Well after I hit Red Robbin for lunch and a few beers.

[Gump]

You can switch over your traditional 401k to a Roth 401k if your employers plan allows it.

[rawlins87]

How much would you guys invest (% of pay) if an employer matches up to 85%?

[rawlins87]

^^^For 401k

[smccrory]

How much would you guys invest (% of pay) if an employer matches up to 85%?

 

As much as I could afford into growth-oriented equities and ETFs if I'm young, or a progressively blended portfolio of large-cap and mid-cap stocks and bonds as I get into my 40s.

[smccrory]

Oh, and when the market gets s***y, increase your contribution levels as much as you can comfortably afford to do so.  Those who doubled-down after the crash of 2008 are singing pretty brightly today, whereas those who pulled out then, guaranteed their losses.

[bloodninja420]

Totally agree with Smashweights on the superiority of passive indexing. The actively managed fund industry is something of a sham. Stats just dont lie regarding those managers' underperformance. Spend 30 minutes doing your diligence to see this is true, and stop letting these people bleed your savings dry.

I love to do my own equity valuation work, but I dont delude myself that with a few hour of research and spreadsheet modeling I am going to outsmart the collective knowledge of the market. Although Apple trading at a 7.5 PE multiple over the summer was too good to ignore...

[smashweights]

How much would you guys invest (% of pay) if an employer matches up to 85%?

 

Rule of thumb is always invest in employer match up to the maximum first.  This is guaranteed returns that you get immediately.  Free cash.  Though, I'm not entirely sure what you're asking.  Will your employer match your 401k contributions $ for $ up to 85% of your TOTAL pay?  AKA: if you earn $1000 per paycheck, they'll match your $850 contribution with $850 in contributions?

 

Oh, and when the market gets s***y, increase your contribution levels as much as you can comfortably afford to do so.  Those who doubled-down after the crash of 2008 are singing pretty brightly today, whereas those who pulled out then, guaranteed their losses.

 

Have to disagree here.  This is market timing and it's a terrible practice.  In hindsight, it's a no brainer that pouring money into the stock market in 2009 WOULD HAVE been a brilliant move.  However, here's a quick example to show why this is a practice many try and the vast majority fail at:

 

This is the S&P 500 Index (.INX) for the last 10 years.  Assume you were trying to employ your strategy of buying lots of stock when the market tanked.  For this example you have to imagine you are looking to invest at each colored arrow, meaning you know all the price points BEFORE the arrow and NONE of the data after the arrow.  At the yellow arrow, the market has dropped fairly well for about the past year.  Should you pour in extra money here?  If you did, it would take you 4 years just to break even!  But maybe you waited, now you hit the green arrow 6 months later, market is even lower.  That's 1.5 years of declining!  Time to put extra $$$ in?  Nope.  3.5 years to break even.  But assume you held out again, the HUGE tank of late 2008 hits.  Now you look like a genius for waiting to go all in!  But is blue arrow the right time to pour in?  If you did, a few months later you reach red arrow.  Holy crap the market is still tanking and sharply.  At the lowest point of that red arrow, you have NO IDEA if the market is gonna keep plummeting, as it actually did if you were to consider investing at the purple arrow, or recover like it really did.  It's virtually impossible to predict where you were heading at each point on the graph.  If it were as easy as many assume, most people would be rolling in dough from investing in 2009 right now.

 

If you instead just ignored the market and kept making fixed contributions every month and held your assets, you would have some purchases at each arrow, $100 at yellow that takes a long time to recover, $100 at red that explodes in value.  People that invest with strategy overwhelmingly outperform people who try to time the market.

 

If you MUST get your fix of trying to buy low, one strategy you can employ is called dollar cost averaging, and you can use it with any stock, mutual fund, etc.  The idea is this: rather than invest a fixed amount every paycheck, you decide IN ADVANCE that your investment account WILL be worth a certain amount more each month and buy or sell accordingly.  Here's an example:

You own $4,000 in a mutual fund.  Instead of investing $100 each month, you decide your portfolio will increase $100 monthly.  So if the market shoots up and you have $4,100 next month when it comes time to contribute, you buy nothing.  If it drops and you have $3,500 next month, you buy $600 of your fund.  If it skyrockets and you have $5,000 next month, you sell $900.  In this way, you are buying low and selling high WITHOUT trying to time the market.  The key to this is it is NOT influenced by predictions, trends, etc.  If you look at the graph, this strategy would yield pretty good results.  At yellow arrow you'd be investing a decent amount, at blue you'd be buying big chunk, and at red you'd be buying even more to maintain your portfolio value.  Obviously it's not that simple, there are drawbacks particularly when selling outside of a tax-sheltered account, and you may not have the funds to pull it off in a major crash like 2008, but hopefully you get the idea.

 

Anywho, hope this helps!

Edited October 25, 2013 by smashweights

[smashweights]

I love to do my own equity valuation work, but I dont delude myself that with a few hour of research and spreadsheet modeling I am going to outsmart the collective knowledge of the market.

 

This is precisely why I don't speculate.  By the time the data to make decisions is in my hand, super computers trading 1000s of times per second and investment managers who devote their entire day to researching this stuff have already poured over the info I just got and have begun buying/selling and changing the price of a stock.

Edited October 25, 2013 by smashweights

[smccrory]

Smash I don't think we're disagreeing - I knew I'd hold my positions for another 20 years. The point I was making is don't bail when everyone else is just because everyone else is. With passive index funds, stay the course during down times and you'll catch the gravity shot.

[smashweights]

Smash I don't think we're disagreeing - I knew I'd hold my positions for another 20 years. The point I was making is don't bail when everyone else is just because everyone else is. With passive index funds, stay the course during down times and you'll catch the gravity shot.

 

I didn't think we were, but it sounded kinda like it. :-P

[Zorro]

If you instead just ignored the market and kept making fixed contributions every month and held your assets, you would have some purchases at each arrow, $100 at yellow that takes a long time to recover, $100 at red that explodes in value.  People that invest with strategy overwhelmingly outperform people who try to time the market.

 

Time the market is impossible.  There are people on wall street who make careers of it.  Us on a riders forum won't do any better over the long run.

 

So, this is the best advice on this thread.  Good post!