Any suggestions on how to invest 1k a month, which will be used for an IRA later on...

[vi edit]

Ok, work doesn't offer a 401k....yet, so I have to take investing into my own hands.
I did the math and visgf and I can pretty easily stick away $1000 a month and after paying off all the bills and hanging onto a nice little bit of pocket change.

We both want drop 2k (so 4 grand total) into our own IRA's. You can do this all the way up until March right?

Right now, we just have a savings account for a bank set up. I don't want to live w/ the 2% interest that I get from that. Do any of you that have some investing knowledge have some suggestions....besides sending it to you

Thanks.

 

[Napalm381]

First off, how much risk are you willing to take?

 

[vi edit]

Minimal to moderate. I just need to make sure that we have 4k saved up by the time IRA time rolls around. I'll assume some risk, but I don't want to stick my neck way out there.

 

[BiB]

I'm guessing you want a pretty low-risk thing - you are young and can afford to wait for your investments to turn into big bucks without having to risk. Right now I'm sticking coin into a mutual fund and getting a yearly average of about 12% on it which isn't bad at all. Its MD Management which I can use because doctor is a physician but I would think any good mutual fund can pull off a similar rate.Short term some may be worse/better, but I can expect a good build over years and years. I'm 22, gonna be a rich old bastard !

Bib

 

[kranky]

May I suggest you search the archives for some threads in OT called "Investing 101" - there was a ton of good information in there.

This is hard to answer since I could go on for a long time, but in brief:
You must first set a goal - what are you investing for? That will steer what you choose to invest in. My guess is since you want an IRA you are looking at investing this money for retirement. That means an aggressive growth mutual fund, IMHO. People might recommend specific funds, but the rankings change so often that this year's hot fund is next year's dog. I much prefer a fund that has a long-term history of steady performance, and I don't care if it ever ranked number 1. Funds take on the characteristics of the fund manager so if the manager changes, it's likely the make-up of the fund investments (and correspondingly the performance) will change - good or bad.
I believe you can actually invest up to April 15th (tax day) of the following year. But, the sooner the better.
There are penalties for overcontributing to IRAs so watch for that.
Don't invest your IRA at a bank or any other institution that doesn't allow you to choose among a multitude of investment choices.
You will be well-served in spending some reading time learning about investment fundamentals now, so you will be more confident in the future. Believe me, it's not that hard, except for learning some new terminology, and I am extremely grateful that I learned about this stuff in my early 20's. People at work ask me all the time about what to do with their 401(k) money, because they don't understand it. Then they end up taking the "safe" option (guaranteed income) which is "guaranteed" to ensure they don't have enough money for retirement.

Good for you that you are starting now! It will make a tremendous difference down the road.

 

[Napalm381]

A money market account sounds like it might be the thing for you. Or perhaps just a basic index fund (S&P500 mebbe).

 

[vi edit]

Same plan here BiB. I just graduated from college this past spring, and my girlfriend will be entering Pharmacy school next fall. I figure if we can save this much right now, things are going to really get good once she graduates a w/ a Dr. of Pharmacy degree

We're going to be two rich old bats.

 

[BiB]

vi_edit Same boat - finished schooling in January, GF done nursing in about 18 months but I'm sticking away 10% of income right now (even at my current almost beginner's income its enough to make $1 million in 40 years without increasing my yearly investment rate). I've convinced her to do the same when money is around, so we will be multi-millionaires! Hehe Its only after reading The millionaire Next Door that I really thought about this.

BiB

 

[denali]

First of all you don't have put the $2000 into an IRA all at once. You could put in $166.66 every month and end up with $2000 for the year. The deadline for contributions is April 15.
You also need to decide what kind of an IRA you want, I would suggest a Roth IRA but others maybe better depending on your wants/needs.

As to where to invest I would suggest first of all that you pay off any debts that you have other than home before investing anything. As far as banking is concerned you should be able to get 6% for your money in a money market account.
NetBank

For your IRA since you don't want much risk I would suggest an Index Fund of the US stock market. Something like Vanguard Total Stock Market Index. This should more or less mirror the US stock market as a whole.

Since you are both young you might want to consider investing more aggressively but you will have to decide how much money you are prepaid to loose.

The one thing to remeber about investing is that starting early with less money is better than starting latter with more, time is your friend with compounding intrest.

 

[vi edit]

While I won't be able knock out all of my loans/debts, I will take care of two of them this year.
I'll be able to knock out one car loan, and one of my student loans. That still leaves one car loan and one student loan. The other car should be paid off by the middle to end of next year and the other student loan probably won't be paid off for at least another year(it's about 13 grand)

We are currently looking at American Express Financial Advisors. We can set up mutal fund accounts and IRA's through them. I would never look at a bank as a "long term" investment solution.

I plan to save up the money through the year, and then use whatever is left over after the IRA's to pay off the first two of the 4 loans.

 

[BiB]

I don't necessarily think that paying off all loans first is the best idea. I owe about $20k but only paying 8.5% interest on it. My mutual fund is making 12%. Sure thats not gauranteed, but if I ever need the money it is there. Moreover, given that any money I throw into my Mutual Fund RRSP Is tax deductible - and I can use that money tax-free on my first house purchase, well then after doing the math I'm making a _lot_ of interest on my mutual fund. I don't plan to have my credit line paid off for 4 years, but after perhaps two years I'll have as much in mutual fund as I owe on credit line...

Additionally when its time to get any financing handled with a bank I think they'll be quite impressed that a 22 year old has had the discipline to shove away 10% of their income a year

BiB

 

[vi edit]

BiB, between my girlfriend and I, we owe 55 grand. It's almost scary to think about And we are renting. We haven't even applied for a home yet.

Also, you hit on my reason for wanting to invest it now, and then put it down later. If I'm making more on interest than my loans are, then I'm making money.

BTW - what do you mean by your Mutual Fund RRSP is tax deductable?

 

[Blain]

Are you going with a ROTH IRA or the standard IRA? The ROTH will not allow you to deduct the deposits, but will let your investments grow and be withdrawn tax free. With the standard IRA you can deduct now, but will have to pay when you withdraw the funds.

I'd second the money market account for short term "parking". You could setup a "self-directed IRA" through a broker. That way YOU have control over how your funds are invested. You can still invest in XYZ mutual funds. You can also invest in individual stocks or bonds if you like. In a self-directed IRA you are the boss. If you get cheap trades you can day-trade to your hearts content. And no need to worry about the tax man every year!

 

[vi edit]

Probably a ROTH. I'd much rather pay for the taxes now, instead of later.

 

[warlord]

you want a really good piece of advice? go see a professional. I know it sucks to have to pay them money, but I set up my account with Merryl Lynch, and it was the best thing I did. The guy I'm with calls me back if he was busy when I called, and he also always takes the time to explain anything I don't know or understand. I pay them a fairly small amount a year in fee's and make a ton of money best thing I ever did with my money.

 

[denali]

Vi, I wasn't suggesting the bank as a "long term" investment but as a place to park your money until you decide what to do with it 6% is better than 2% you are currently getting. Also it's not a bad place to leave several months worth of living expenses. I would suggest that you check with AmEx and see what commisions they are going to charge you. You can do all of this on your own and without paying any commisions. Of course if you are getting valuable investing insights from AmEx then paying them something is understandable.

BiB, one reason often overlooked when living debt free is that you are beholden too no one. While you currently might be making more on your investments than you are paying in intrest on your loans, what would you do if the market fell by 25% in 1 or 2 days? I have never heard of a mutual fund that you can invest in tax deductible and then use the money to buy a house tax-free could you give me a link to more info?

 

[BiB]

vi_edit

Well I'm shoving money into this mutual fund of mine which I have set as an RRSP. Since money put into RRSP's (Registered Retirement Savings Plan) is not supposed to be taxed when I take my after-tax take home income and invest that at the end of tax year I get the difference, so its tax deductible there. BTW I'm $20k in debt, gf will be $20k also, so no worries

denali

In Canada at least when you have money in your RRSP anytime you take that out it counts as income, which is then taxed. However when making a deposit on your first house you can use some of that RRSP money and it will not be taxed. You're right the market could tumble like that, but chances are that it won't, and we aren't talking about a major amount of money anyway. Its worth it I think to have some sitting aside in case I need it, and to use as a house deposit like I mentioned there.

BiB

 

[glenn1]

Mutual funds are good, and if you're choosy, a lot of individual stocks would be great for an IRA account as well. For funds, make sure you pick a no-load (no sales charge fund), and don't get too fancy. Index funds (ones that invest in a large basket of stocks, or that mirror a market index like the S&P 500) are great choices, with minimal requirements for having to watch them closely on a regular basis.

Should you go the individual stocks route, I would stick to more established, solid companies to invest in, not the latest .com company to come down the pike. Investing in something like Pfizer or WalMart might not sound terribly exciting, but is nice, safe, and steady.
Here's some stocks i have in my Roth IRA right now, and i think worth taking a look at:
Paychex, Inc. (PAYX)
America Online (AOL)
MCI WorldCom (WCOM)
Merck, Inc. (MRK)
Walt Disney (DIS)

If you want something with a bit more kick, but some more risk in return, here's a couple of potentials:
Mercury Interactive, Inc. (MERQ)
ADC Telecommunications (ADCT)
PE Biosystems, Inc. (PEB)

Best of luck to you. The best investment advice i can give to you is always endeavor to keep learning more about investing and investing techniques. If you're starting investing young, that bodes very well for your future wealth.

 

[Diatomic]

I'm sure there are a lot of places you can look on the web, but my favorite is Motely Fool. They have a lot of information and you there's a forum there too.

Ben

 

[jjm]

Both Vanguard nad Fidelity have lots of information on setting up a regularly-scheduled investment plan for an IRA. I would suggest Roth. With a Roth, you have the potential of never having to pay any taxes at all on the money you earn. Before you start socking money into long-term savings, though, make sure you at least start to set aside an emergency reserve and savings for near or medium-term goals, like buying a house or car.

 

[Shazam]

vi_edit: An RRSP is similiar to a Roth IRA in the U.S. Except if I remember correctly Roth IRAs are never taxed at source or withdrawal. Gawd, what a deal!

BiB: The one disadvantage of the homeowner's plan (what you're talking about) is that you must repay your RRSP eventually. Keep this in mind.

 

[denali]

Shazam A contribution to a Roth IRA is after tax money but not taxed when withdrawn.

 

[Shazam]

Ahh, thanks.