Investing

Vilgan_sl said:

Are there any forms of investing that are considered higher risk, but expected value/ROI goes up to compensate? I remember wishing I had 20k to dump into BoA when it was at 6$, because it seemed like the odds heavily favored buying some stock and if I did end up losing my 20k it wasn't a bid deal. With 25-30 years until retirement, it seems like there might be good places to make money that carry higher risk than an older person would be willing to live with. However, I have no clue what those opportunities might be.

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Bonds are the easiest vehicles to correlate risk vs. return without taking a position. The coupon values are stated clearly, and there are several agencies that can inform about credit risk. If you wish to purchase the actual bond itself, you have the stats on the company, cash on hand, NAV, and so on. If you want higher return, buy from companies with riskier stats/credit (junk). One strat is to buy emerging market junk bond funds, to distribute risk of default.

You can also increase leverage to increase return (and risk) for many investments such as stocks, real estate, options, futures and so on. However, much of this is pure speculation. Unless you have inside knowledge of whats going on, you have a 50% chance of making/losing money.

Vilgan_sl said:

Are there any forms of investing that are considered higher risk, but expected value/ROI goes up to compensate?

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100% stocks from emerging markets / developing countries. Probably as risky as you can get without outright speculation (in which case you might as well bet your money on black). Worth it? I wouldn't do it... but to each their own.

You might just want to consider a globally diversified stock index and invest 100% in that. Stocks have higher expected returns, but also have higher variance - so greater ups and downs.

Junk bonds are another option that is rather risky. I don't know whether your expected return with those would be higher than with stocks, though.

Only advice I would add:

Set a schedule to check and rebalance your fund's as needed every quarter.

Don't listen to CNBC make the plan work the plan to meet your goals.

Check your goals on a regular basis. What you think is important at 30 might not be so important at 40.

Don't under estimate bonds- do some research on what all the talking heads you see on T.V. invest in. You might be surprised how bond heavy some of them are. If you do go bonds set-up a bond ladder. You can buy bonds direct from the US Treasury online no cost

http://www.investopedia.com/terms/b/bondladder.asp
http://www.treasurydirect.gov/

Check out sector rotation strategies if you plan on only investing in mutual funds

Stay true to your values and comfort level, don't take extra risk if you can't afford it. You wouldn't play Tiger Woods in a game of skins any more then you would take on a hedge fund manger. Keep in mind there are people who wake up everyday with the sole goal of taking your money via a trade. Your loss is someone's gain

http://www.amazon.com/The-Intelligen...7710839&sr=8-3



I would read this book. It will give you the most sage advice anyone could tell you.

I would also look at investing in index funds. The theory being you will never be able to beat what the market is doing unless you are extremely lucky. Historically markets will make ~5%-10% which is good return on your investment.

Vanguard is mentioned many times in this thread. Why them? Everyone just had good experiences with them? Any other companies out there? Just kind of curious of some options.

Crone_sl said:

Vanguard is mentioned many times in this thread. Why them? Everyone just had good experiences with them? Any other companies out there? Just kind of curious of some options.

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They pretty much invented low cost index funds, and still generally have the lowest MER's. That's the reason they get mentioned so often.

What Eomer said. Also, their interface is absolutely fantastic for personal investing. I have my bank account directly linked (no middle man) every pay day I login, transfer $500, call it a day. They also give all kinds of webcasts / seminars and post videos and articles relating to all kinds of investment things (if you're into that) and have great tools for monitoring and tracking your losses / returns. With graphs!

Family has a couple 529s setup through American Funds that I think has all that stuff, never hear about them though. I never pay attention because I'm not funding them, but doesn't everyone have a decent web interface these days?

I'm recently married. My wife is a first year school teacher and I'm a low man on the totem pole in banking. In the next year we'll be almost doubling our salary. ( going from ~55k/yr to 95k/yr (pre tax)) We rent right now, and have been trying to aggressively pay down debt (her Student loans, a car, some cc's from the wedding, etc ). Ultimately, we want to be home owners but we don't have anything for a down payment so far. We both contribute to our employer match on 401k and 403b respectively. We have no IRA established.

How would you all weight forsaking additional investing to build funds for a down payment ( 30 - 50k ) for a home, vs Maxing a contribution on 2 IRA's for I dunno the 4 years it would take to save the money. On the surface it would seem like investing would be the no brainer, but if we don't have a down payment on a home we get a FHA mtg with PMI from no down payment, and probably more in excessive interest / pmi as an opportunity cost in place of investing.

You are low man on a totem pole of banking? So your a Bank teller that cant do math?

Otherwise your question seems straightforward as comparing the asset growth between the two situations...

Since neither one changes when you purchase the house... they just change your assets from one point to another...

You should not have to put down that much money being a first time home buyer, especially in a place like Columbus. FHA loans for 1st time buyers offer down payment options for as little as 3.5%. You can also look into buying a HUD home. I say this because your wife is a teacher and will probably qualify for the good neighbor program with HUD. This program could take an additional 50% off the price of the home if you live there for three or more years. You can also borrow money from your IRA to make a down payment on a home.

Mythas_sl said:

I'm recently married. My wife is a first year school teacher and I'm a low man on the totem pole in banking. In the next year we'll be almost doubling our salary. ( going from ~55k/yr to 95k/yr (pre tax)) We rent right now, and have been trying to aggressively pay down debt (her Student loans, a car, some cc's from the wedding, etc ). Ultimately, we want to be home owners but we don't have anything for a down payment so far. We both contribute to our employer match on 401k and 403b respectively. We have no IRA established.

How would you all weight forsaking additional investing to build funds for a down payment ( 30 - 50k ) for a home, vs Maxing a contribution on 2 IRA's for I dunno the 4 years it would take to save the money. On the surface it would seem like investing would be the no brainer, but if we don't have a down payment on a home we get a FHA mtg with PMI from no down payment, and probably more in excessive interest / pmi as an opportunity cost in place of investing.

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Agripa_sl said:

I say this because your wife is a teacher and will probably qualify for the good neighbor program with HUD. This program could take an additional 50% off the price of the home if you live there for three or more years.

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This is a hell of a deal if you qualify for it. I have a couple firefighter friends who have taken advantage of it in the past few years. It used to just be 20% off after 3 years, now that it's been bumped up to 50% it's an absolutely crazy deal. Decent homes can be in pretty limited supply since they have to be HUD homes, and the competition for them can be pretty fierce. One of my firefighter friends put in requests for about 15-20 different homes before he finally got one. I'm not sure if it's like this everywhere, but here in KC there doesn't seem to be any sort of waiting list based on time waiting, it's just purely random. It's like they just draw names out of a hat each time a house is available and there are multiple requests. He got randomly beat a few times by people new to the program putting in for their first home request, while he waited a year and a half or so to get a house. The process can be a little frustrating, and your options are a little limited on the homes you can choose from, but getting a house for half price is HUGE, and thefact that you can sell it after 3 or 4 years and get what you really want isn't a long time to wait.

Crone_sl said:

Vanguard is mentioned many times in this thread. Why them? Everyone just had good experiences with them? Any other companies out there? Just kind of curious of some options.

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As mentioned, their funds tend to have the lowest costs - and they track their respective indices very accurately. On top of that, Vanguard is investor-owned, so all the "profits" go right back to you.

Crone_sl said:

Family has a couple 529s setup through American Funds that I think has all that stuff, never hear about them though. I never pay attention because I'm not funding them, but doesn't everyone have a decent web interface these days?

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You'd be surprised... my god forsaken bank (PNC) recently switched from Flash to HTML 5, which didn't do much to boost speed: half the time I'm on that site it's loading some shitty tool that I couldn't care less for. Takes me half a dozen clicks to get to basic account activity (amazingly, it takes 2 more clicks after clicking on a link titled 'account activity'), where you cannot see more than one calendar month on a screen - and just about all the space is taken up by useless graphics for people with ADHD.


Also, I think discounts on houses for teachers/firefighters/whatever are utterly ridiculous policy.

Soriak_sl said:

Also, I think discounts on houses for teachers/firefighters/whatever are utterly ridiculous policy.

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I think it's pretty reasonable for teachers, maybe not so much for firefighters or police though. It's hard to attract decent teachers to work in an inner-city school district. The 'burbs pay more and are easier to work in to boot. Something like this is needed to get most horrible inner-city districts back to a decent level.

Now firefighters and police, probably not so much. A couple of my firefighter friends had cushy jobs in suburban FDs, but they specifically asked for transfers down to the inner city because it was more exciting(more calls). You're dealing with a completely different situation and type of person in those jobs than you are teachers, I'm not sure you need to offer that housing deal to most FD/PD employees.

Something like 70% of firefighters are actually volunteers. I don't really see anything unreasonable about that when they work for free.

Don't borrow money from your retirement fund. You can never get time back and the last thing you want to do is pay interest against past savings. I agree with having your wife look at options through the teachers union, my GF who I bought a house with is a teacher was a life saver. Also don't get hung up on PMI you can get out of it in a fairly short period of time with planning.

I'm curious for all you experts...
So i put 15% of my gross into my retirement and my employer matches 3% dollar for dollar and another 2% at half a dollar. At least I think that's how it works.. Anyway.. I have my 10% going into a retirement fund for 2040. This year they offered a Roth IRA.. I decided to put 5% in that. The matching contributions are split between both I assume. I'm wondering if I'm making the right choice by spreading the money out this way?

Hmm nobody? I'm thinking it might be best to Put 10% into my Roth IRA and 5 into the 401k? Would it better to try and max out the roth every year at $5500?

If they offer a match into your roth, then your tax burden will rise when you account for the total amount that goes into the roth (including the match). I would really clarify if the matching contributions are split between them, I would not make this assumption, as one of the main attractions of a 401k vs. a roth is the employer match.

Convo_sl said:

I'm curious for all you experts...
So i put 15% of my gross into my retirement and my employer matches 3% dollar for dollar and another 2% at half a dollar. At least I think that's how it works.. Anyway.. I have my 10% going into a retirement fund for 2040. This year they offered a Roth IRA.. I decided to put 5% in that. The matching contributions are split between both I assume. I'm wondering if I'm making the right choice by spreading the money out this way?

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Keep in mind that if they are matching you with stock you will want to reinvest that stock into other funds offered in your 401k or you will end up with an unbalanced portfolio.