[oicdn]

Quote:

Originally Posted by fordgtlover /img/forum/go_quote.gif Based on my quick and dirty Excel calculations. To start with $3K and invest $400 p/m you would need an average annual return of 10% to get close to a Million dollars over 30 years. (Please correct me if this is wrong) Can anyone tell me where I can average a guaranteed minimum of 10% p/a return over 30 years?

You're forgetting the compound intrest. The rule of 72...imagine with $400/mo getting compounded intrest, you're increasing exponentially.

I think the biggest problem people have with investing is that initial $3k to start up a Vangaurd account. Many poeple simply don't have the $3k to sponge away. I figure it's a much better option than letting it burn a hole in my pocket...

 

[wower]

My first reflex was to think what sources were in the $3k range... but you're smarter than me.

I perfer actual stocks to mutual funds. Some good stocks to look into (depending on your morals):
1) Oil (a bit unstable at the moment, big moves up can mean big moves down).
2) Water companies.
3) Investment banks.
4) Defense contractors.

The quick money is in the good small-caps in these fields but they are more unstable. The large-caps are more stable for the long term.

 

[MusicJunkie]

Quote:

Originally Posted by oicdn /img/forum/go_quote.gif You're forgetting the compound intrest. The rule of 72...imagine with $400/mo getting compounded intrest, you're increasing exponentially.

If you start with $3,000 and invest $400 every month while earning 10% per year, compounded monthly, you would have about $963,000 after 30 years. The tough part is averaging 10% per year for so long.

 

[Uncle Erik]

Quote:

Originally Posted by oicdn /img/forum/go_quote.gif You're forgetting the compound intrest. The rule of 72...imagine with $400/mo getting compounded intrest, you're increasing exponentially. I think the biggest problem people have with investing is that initial $3k to start up a Vangaurd account. Many poeple simply don't have the $3k to sponge away. I figure it's a much better option than letting it burn a hole in my pocket...

Have you checked interest rates lately? The Fed just dropped another quarter point yesterday. You're not going to get a good rate any time soon.

You're better off dropping savings into a decent savings account and a broad based no load index fund.

The rest is being responsible with your money - the cardinal rule is not to pay interest on depreciating assets. Like cars, clothes, big screens, etc. Never, ever pay interest on something that depreciates. If you follow that rule and invest wisely, you'll be fine. I know it's tough with cars (and we do need one) but always get the least expensive good one, or buy something that's older but holds value for collectors/enthusiasts. But don't pay 6% on a $35k car that will be worth $8k in seven years. That just kills you.

 

[oicdn]

Quote:

Originally Posted by Uncle Erik /img/forum/go_quote.gif Have you checked interest rates lately? The Fed just dropped another quarter point yesterday. You're not going to get a good rate any time soon. You're better off dropping savings into a decent savings account and a broad based no load index fund. The rest is being responsible with your money - the cardinal rule is not to pay interest on depreciating assets. Like cars, clothes, big screens, etc. Never, ever pay interest on something that depreciates. If you follow that rule and invest wisely, you'll be fine. I know it's tough with cars (and we do need one) but always get the least expensive good one, or buy something that's older but holds value for collectors/enthusiasts. But don't pay 6% on a $35k car that will be worth $8k in seven years. That just kills you.

I saw that...ironically, we were all talking investments at Chili's when the we were watching the Fed talking about it all. We watched the index go from a steady up 150 points to 8 points at 10 minutes to the close of day...we left so I didn't see what it actually closed at. Crazy, and even though I had no money in the market, it was exciting to watch...call me a nerd, but that was pretty exciting, lol.

Maybe that's the reason I wanna get into it, cause I want a piece of that action...and if I can get a solid future out of it, it seems like a win win situation right? I just need to know WHAT part of the action I want, and I'm getting overwhelmed with all the info out there...looks like I'll be getting that book from Amazon, and doing more talking with my buddies dad...

 

[diogenes]

Quote:

Originally Posted by appophylite /img/forum/go_quote.gif IHowever, I just talked to an investment banker my mother referred to me, and he and I looked over my finances and concluded that at the current point I am in my life, I could afford to transfer all the monies in the CD into a portfolio and not only would I get a better return on it, but if I were to lose it all in a stock market crash, I could still live with the loss. I've been considering it for a couple of months now, and probably going to go ahead with it in the next month or so.

Sorry to pick nits, but why would you ask an IB what to invest in and even worse trust him?
These are the guys that make a book and set IPOs, not manage portfolios, i.e., the biggest salesmen of them all.

 

[G-man]

depends on your situation, but as a long term plan, a house is the first and, and often best investment. i would wait for a few months, and even a year, during which you invest the money and more. when the financial crisis is over (and it seems more likely by the day that there will actually be one) i would get a fixed rate mortgage (if possible, obviously depends on the rate) with no penalty on early repayments. then for the next few years, pay them more and more early, until you have about half the house payed.

then it is up to you, but you can either continue to do this, or get a normal mortgage with normal repayments (which you can chose to be high or low) and then invest in other places. also it depends on you age. it really is kind of pointless buying a house before 25 (arguable, this is my opinion) as you would most likely move due to job or other reasons. one thing you should definately not do is get a house in the next year. you might want to buy one that you might rent out, but this is quite costly, as for the first few months/even years you would have to pay the difference between the mortgage and rent. it is only really viable with a lot of research, and in the long run (5+ years).

Edit: diogenes, you obviously do not know much about investment bankers or banking.

 

[Solan]

Quote:

Originally Posted by MusicJunkie /img/forum/go_quote.gif If you start with $3,000 and invest $400 every month while earning 10% per year, compounded monthly, you would have about $963,000 after 30 years. The tough part is averaging 10% per year for so long.

Just buy Berkshire stock and hope Warren Buffett find the recipe for longevity.

 

[diogenes]

Quote:

Originally Posted by gautam /img/forum/go_quote.gif Edit: diogenes, you obviously do not know much about investment bankers or banking.

Please go on.

Edit:

Now, for the OP.

Do keep in mind I am biased towards certain methods, but I would hold your cash while you figure something out that works and when you expect it to fail. Find some trader’s blogs and forums and peruse them to find something that makes sense to you. Modify what seems to work...it will break given time.

Also, I would recommend not investing money that you *need* but restrict yourself to money that you can lose. There are too many non-linear factors to model within reason.

 

[gilency]

Quote:

Originally Posted by classicalguy /img/forum/go_quote.gif Being a millionaire is not what it used to be. To retire comfortably today, you need much more than $1 million, and by the time you retire you'll need more than one needs today. So get out of debt, and start saving now, and don't listen to all of the stupid people who live beyond their means. The goal of investing is to buy low and sell high. It's a good time to buy stocks when they are relatively cheap, as they are now. Stocks are risky of course, and there are no guarantees, but with current very low interest rates and big market drops, it's a much better time to buy now than it was before the drop. Start putting money into a diversified Vanguard mutual fund until you have a better understanding of the market and want to take more risk for potentially better returns. Also, keep some money in the bank for emergencies, and built that fund too. Track your spending, and reconcile all of your accounts (checking, saving, credit cards, etc). There are on-line sites, or buy an old copy of Quicken or Microsoft Money. You'll need to keep track of everything for taxes. Oh, and be frugal with audio purchases too. It's just as much fun to search out bargain audio equipment as to dump all your money into some gold-plated supergadget, and you can start saving for the things that are really important in life (house, family, education, retirement, etc.)

X2. Very wise advise. Stocks give you the most return if you are in it for the long term (as you should be, especially if you are young). CD's are a bad investment with very low return. (only of you don't want to make money out of your money and want to keep it safe). Vanguard is great because of their very low fees. I just started a Vanguard ($5000.00 each) for my kids, with the goal retirement date ( ie 2035, 2040, etc). Check into Vanguard, do your research, diversify (large,mid and small caps, international, some for bonds according to your age). If you try to time the market you may loose (Warren Buffett does not time it). Just invest regularly, don't worry about market downturns if you have a long term horizon, and don't buy too many toys. Carful with mutual funds with high fees, they will steal your money! I have done very well by being frugal. You will too. Good luck to you!

 

[oicdn]

Quote:

Originally Posted by gilency /img/forum/go_quote.gif X2. Very wise advise. Stocks give you the most return if you are in it for the long term (as you should be, especially if you are young). CD's are a bad investment with very low return. (only of you don't want to make money out of your money and want to keep it safe). Vanguard is great because of their very low fees. I just started a Vanguard ($5000.00 each) for my kids, with the goal retirement date ( ie 2035, 2040, etc). Check into Vanguard, do your research, diversify (large,mid and small caps, international, some for bonds according to your age). If you try to time the market you may loose (Warren Buffett does not time it). Just invest regularly, don't worry about market downturns if you have a long term horizon, and don't buy too many toys. Carful with mutual funds with high fees, they will steal your money! I have done very well by being frugal. You will too. Good luck to you!

That's almost verbatim what my buddies dad said yesterday. He said his Vangaurd minimum is $3K, so was that $5K something of yours, or did they up the minimum?

Another reason I was looking at this route, is it's beats a college fund for my kids. College funds just seem to be an excuse for people to save money and use them if in a crunch time, then feeling guilty for withdrawing money later down the road if needed. Not really a college fund. And most certainly, most college funds are penny ante crap to begin with, hardly enough to sustain somebody through a REAL university. More like an emergency account with a fancy name to make you look like a responsible parent, lol.

So I opted against the college funds so that if my kids do opt to goto college, it'll be paid for by me without me really having to save for college...kinda like a multi-faceted account that's making money is all I'm after. A diversified, international account is starting to sound more and more what I'm after, fairly low risk, with a decent return in the long run. Bonds for some reason just sound like a bad idea...

One thing is for certain, I'm NOT ready to drop the money. I don't want to talk to somebody only to have a fee upon leaving for a consultation, or getting pressured into giving them my money. I want to go in educated, and I want to be holding the ball the whole time.

 

[diogenes]

Quote:

Originally Posted by oicdn /img/forum/go_quote.gif One thing is for certain, I'm NOT ready to drop the money. I don't want to talk to somebody only to have a fee upon leaving for a consultation, or getting pressured into giving them my money. I want to go in educated, and I want to be holding the ball the whole time.

Maybe going to someone who wants an up-front fee to help you in order to minimize conflict of interest might work in your favor?
You have plenty of time, but you might also "play" with your money to see how you react to PL changes.

 

[fordgtlover]

Quote:

Originally Posted by oicdn /img/forum/go_quote.gif You're forgetting the compound intrest. The rule of 72...imagine with $400/mo getting compounded intrest, you're increasing exponentially. ...

I know what compound interest is and the rule of 72. And, no I didn't 'forget' that money compounds, and I'm sure neither did Excel. That's what the FV function does

. Rather than imagine it (or guess as you seem to be doing), I actually calculated it.



I'm not sure what the rule of 72 has to do with this calculation though?

 

[oicdn]

The rule of 72 WAS the calculating... I googled a rule of 72 calculator. Starting with a $3K base, and using a modest 8% interest rate, with 12 monthly installments of $400 per month per year, with it compounding monthly came to $1,230,450 at the end of 30 years. I don't understand how different calculators varied with results, getting results ranging from $920K up to 1.5M...so I used the average median.

In anycase, it's a good return, lol. I'm just trying to get the most out of it all...

 

[classicalguy]

A couple of points. First, Vanguard has a few funds for people with less than $3,000 to invest, including the star fund which is VERY deversified in stocks, bonds, and money market. Not a bad place for someone to start small with monthly investments (maybe a bit conservative for my taste, but a chance to get money into the market with Vanguard's extremely low expense ratios).

Second, 529 plans are a very good idea for college savings. Not only are earnings tax deferred, but all of the income comes out tax free if the funds are used for college. Whether it is a good deal if your kid does not go to college is a different question. You do get tax deferral, but pay a penalty when the income comes out (and you give up the benefit of capital gains rates). Who knows how all of that would balance out. But for college savings, it's great. Plus, some states give a state income tax deduction for contributions. I've been contributing regularly for my daughter, and have built up a significant amount of money for college already (and she has years of savings and compounding to go). Private colleges cost $40,000 per year = $160,000 over 4 years, and more for graduate or professional school. Parents need to plan for this early, or their kids are going to start their working lives heavily saddled with debt. Also, it's important not to get suckered into a lousy high-fee retail broker run 529 plan. You need to do a bit of homework on your state's offerings, and consider the option of an out of state fund.

Third, the rule of 72 tells you how many years it takes for your investment to double with a certain rate of return. You divide the rate into 72. So at a 10% per year compunded, your money will double in 7.2 years. At 5%, it will take 14.4 years. At 20%, only 3.6 years. It's a mathematics trick. It can come in handy for quick and dirty rough calculations. It will take 36 years for your money to double if you put it in a 2% bank account. That should give you pause.