AUSanchezz, that is a good question. It really depends on how risky the investor is. some people want to put all their money into stocks, while others are a little more anxious and want to add bonds for protection. Another thing to consider is whether you have needs for the money soon. If you have money for a down payment on a house or something coming up, keep it in cash. If you are going to be using the money and cannot keep it in the market for at least 2 years, do not invest it. That being said, someone who is younger can be more aggressive in their retirement accounts as they cannot access them for many years.
Randy - sorry, and my crystal ball broke several years ago. That said, what are you investing for? short- or long-term goals? That, and your supply of Tums and the advice of a planner who has your best interest in mind should provide a good answer for you.
Hi Randy. I don't recommend trying to time the market. If you are investing for retirement and at least 10 years away, I wouldn't worry about it. The important thing is to establish a target portfolio mix and rebalance when it gets out of whack (5%).
Steve Moore has a question about investing on one's own...
Steve, I would recommend Vanguard. They have low cost mutual funds that are highly rated by morningstar. They provide a large universe of funds and you can create a well diversified portfolio using them.
Sure, Steve, several: Schwab, T.D. Ameritrade, Fidelity, Vanguard, Scottrade all offer service, low costs and no-load/index/ETf funds - Vanguard and Fidelity offer funds from many sources, not just their own.
Hi Steve. I have to agree with Curt. Those are all good broker/dealers for your needs. For the non-professional stock picker, indexed mutual funds and ETFs for tax efficiency are the way to go.
a followup comment from our Twitter follower...
Let's switch gears a bit...
Alex R has a question about an annuity purchase made by his mother...
Adrian, I think that RE should be a small part of your portfolio, maybe through a REIT or even if you only own your own home. However RE is a very expensive, Illiquid, and high maintenance investment. I would think carefully before
investing a large portion of your net worth in RE.
Hi Adrian. Real estate can be a good way to supplement your total investment portfolio. If you don't want the headache of being a landlord, small amounts of Real Estate Investment Trusts (REIT) mutual funds could do the trick. But if you want to be a hands on landlord, make sure you do your homework first.
Adrian - unless you have a strong background in real estate investing - lots of experience - I suggest that you investigate the wide world of Real Estate Investment Trusts. No midnight calls about broken water heaters, no problems with evicting tenants who haven't paid in months, etc. I speak from painful experience! REITS are simple and easy, and you can leverage them a lot if you wish, to boost returns, although I would be very cautious there.
Alex, without knowing more information about the situation its hard to say if it was a bad decision. If this is a variable annuity check to see what the surrender schedule is. Its usually after 7 years of the purchase date you can surrender the policy without exiting fees. She may also be able to withdraw 10% a year without incuring this penalty. Id talk to the annuity company about this.
Hi Alex. Rich is correct, the devil is in the details on annuities. The important thing is to ensure that her income is covering her expenses.
I hate to say this, Alex, and it is highly likely that the CPA got paid for selling this annuity - the 13 year penalty period is to allow the insurance company to recover the commission paid. Annuities in and of themselves are not bad, but they are frequently mis-used, as it may be in this case. Consult with an independent planner and you may want to seek revocation of the deal.
eagle has a question that I think many of us face -- how to know if you are on track for retirement...
plus a couple followup comments from eagle...
Eagle - offhand, I'd say no, you haven't saved enough. google "retirement planner" and use one of the many software programs to get a definitive answer. Vanguard and Fidelity both have free, simple but good programs. I can't give you a definitive answer, not knowing what it costs you to live, what you earn, when you plan to reduce/stop working, etc., and even if you were a great investor, you total would only be about $800,000 in 12 years (age 60) which would produce only about $40,000 a year. Of course I don't know at what rate you are saving, so I haven't taken that into account.
Eagle: 30-40 different funds? Yikes! You really only have about 8 funds given the inevitable over-lap of the underlying holdings. Get thee to a planner ASAP!
a followup comment from Adrian...
Hi Eagle. A lot of retirement savers underestimate what they will need for retirement especially those who do not have the luxury of having a pension. Keep up the good work by saving beyond the 401k match. During retirement plan on withdrawing no more than 4% to 5% per year to ensure that you don't run out of money during retirement.
Let's switch gears again, to the topic of 529s
Id check first off with your State to see if they give an income tax deduction for contributions...also if you qualify for it.
here's another question to add
into the 529 mix...
Charlotte - with 13 or 14 years to go, both are attractive; however the tax advantage at withdrawal makes the 529 plan draw ahead - money that comes out of the plan paid directly to the school is completely tax free.
Eagle, The problem with investing in so many funds is that many of the funds you have, comprise of the same companies so you may not be as diversified as you think you are. Talk to Fidelity and have them show you how to use the on-line "Analysis Tool". Once you know where you are invested, then begin to consolidate your funds. Don't invest in aggressive investments until you know what you have and only then, there's no reason to be over-agressive.
any thoughts on this followup question from eagle?
Curt, a followup question
Rich, can you take this question from Tom
about tapping a 401(k)?
You don't have to do the pre-pay option; you can simply make deposits each year, the same way you would do with your IRA. The tax benefit of the 529 is the same whether contrasting IRA or 401k
Curt, could you take this question about estate planning?