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View Poll Results: Where would you put Lateralus's money?
Stocks
5
16.67%
Mutual funds
12
40.00%
Roth IRA
7
23.33%
In Twikoff's pocket
6
20.00%
Voters: 30. You may not vote on this poll

Invest in Stocks or Mutual Funds?

Old 07-03-06, 09:03 AM
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Invest in Stocks or Mutual Funds?

I have a nice dilemma, I have some spare cash I would like to invest but I don't know where to invest it. I'm divided between stocks and mutual funds; they both have their advantages and disadvantages.

Here are a couple points to consider about my purchase:

1.) Investment will be long term, meaning retirement money.
2.) The stocks I would pick would also be long term; they would be blue chip large cap stocks.
3.) My 401k (which is separate from my spare cash) is all in mutual funds, no bonds or treasury bills.
4.)I'm 34 years old and want to retire when I am 60ish.
5.) I plan to keep on adding money to the investment every month, eventually building a stock or mutual fund portfolio.

Perhaps a Roth? Decisions, decisions.

Suggestions?

Last edited by Lateralus; 07-03-06 at 09:17 AM.
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Old 07-03-06, 09:05 AM
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I guess it depends on how old you are and how long you have till retirement. Mutual funds make you money over the long term, so they're what I'd go with. I might also divide the windfall in half and put half in mutual funds, half in a Roth IRA.
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Old 07-03-06, 09:17 AM
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Originally Posted by Vibiana
I guess it depends on how old you are and how long you have till retirement. Mutual funds make you money over the long term, so they're what I'd go with. I might also divide the windfall in half and put half in mutual funds, half in a Roth IRA.

Good questions, I edited my original post to include new information.
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Old 07-03-06, 09:38 AM
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No Load, low cost Mutual Funds such as Fidelity or Vanguard.
Stocks are lot more riskier than MF's..for my blood at least.

General rule of thumb:
1) Max out your 401K to the company match, if applicable
2) Max the Roth (info for Roth at fairmark.com)
3) Either up the 401k more and/or open a taxable MF.

Something else to consider, is the Savers Tax Credit for the 2006 tax year. Depending on your AGI and filing status you can get a tax credit. See the below chart:
Savers Credit This is a combination of your 401K and IRA's.

Make sure you have an "emergency" fund like savings etc.....

Make sure if you decide to "pick" a mutual fund that you are not overlapping with the 401K mutual fund companies too much, if at all....

Be diverisified!
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Old 07-03-06, 09:38 AM
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If you open a Roth at a brokerage firm like Fidelity or Schwab, you can put it into stocks and/or mutual funds. It sits in a cash account until you decide what to do with it.
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Old 07-03-06, 09:38 AM
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Spiders S&P500 Put your money on a money market fund and every time you have a few thousand, buy a S&P500 spider. The simplest way to invest, even a caveman can do it
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Old 07-03-06, 09:43 AM
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Originally Posted by GMan2819
Fidelity or Schwab
In my humble opinion, those two are some of the biggest thieves in modern financial history only decent choices if you have trouble reading, writing, and with basic math.
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Old 07-03-06, 10:06 AM
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ironically I just bought some stocks this morning in my IRA trading account

nothing blue chip though

casino, sports apparel and a new retail store
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Old 07-03-06, 10:21 AM
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Originally Posted by elperdido
In my humble opinion, those two are some of the biggest thieves in modern financial history only decent choices if you have trouble reading, writing, and with basic math.
Please explain what you mean by that.
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Old 07-03-06, 10:26 AM
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Not sure about Charles Schwab, but Goldman Sachs frequently trades against the stocks it recommends to clients. And back in 1998 they had an outstanding loan to Russia before Russia's debt default. GS was sure there was going to be a default so they got clients to loan Russia over $200 million, Russia used that money to pay back Goldman's loan and then defaulted. The honorable governor of NJ was CEO of Goldman at the time.
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Old 07-03-06, 10:33 AM
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In my opinion, if you're going to ask if you should trade in stocks (higher risk) or mutual funds (diversified and generally speaking lower risk) you should invest in the mutual fund. People who should invest in stocks know it.
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Old 07-03-06, 10:42 AM
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last year I started subscribing to investor's business daily and my stock picking skills improved and so did my returns. Even if you don't follow Bill O'Neill's advice the research tools are more than worth it. They have a database which tracks all public companies. With the basic subscription you have access to their ratings.

A composite rating which covers everything. An EPS rating which tells you the quality of earnings and the percentage of companies it outperformed. A 90 EPS rating means the company's earnings growth is better than 90% of all public companies. An industry group rating, accumulation/distribution which tracks purchases by mutual funds, another rating that tracks ROE, margins a few other things and a relative Strength Rating that tracks performance of the stock.

Anytime I'm interested in a company I look it up and if it's not at least a 90 or so I don't bother researching it since it's a waste of time. They have a big institutional investor business and a lot of pro's use their database.
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Old 07-03-06, 11:45 AM
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My .02 cents - investing in individual stocks back in my fathers day was easy. You bought things like Ford and IBM and you held them until near retirement and cashed out well ahead of game.

Today - it is a whole different ball game. If you want to invest in individual stocks, it requires a lot of effort, research and on going research to make sure your decisions on stock don't go south in a year due to a CEO change or an "accounting error" inside the company. Also, tradiug individual stocks can get expensive with fees and commisions. If you are not careful, you can lose it all.

Mutual Funds were the shit when I first started to invest in the market. You could really analyze a fund manager and fund holdings to the performance and the cost was low. This was the perfect place to be for someone that wanted to do intial research and then forget about it for 10+ years.

Now days, mutual funds are way too fricken pricey. Don't think you 'found a fund with low fees', you most likely just didn't read all the fine print. They have great ways of hiding the fees these days and the "no load" funds are really becoming an extinct animal. The other problem is the taxes, let's say you buy into a fund today and next week the fund manager sells a major chunk of stock, since you now own the fund and all its profits and losses since inception, you have to pay the tax on gains that you didn't see for the last 3 years because you just bought the fund last week. MF's are a really tough world these days and not as simple as they once were.

I personally like ETF's. http://www.fund-track.com/ETFs/ETFs_Main.htm

You pick a flavor (like technology or heath care) and you buy into it similar to a mutual fund (you do pay a transaction fee, but that can be shopped around) in that you don't own just one stock with the buy in, you own a variety of stocks in a sector. The costs are VERY LOW compared to most mutual funds. It is a research it, buy it and forget type investment. Maybe check on it every 5 years or so to see how it is doing. If you are in for the very long haul, it is almost impossible to lose all your money.

Unless you really want to "manage" a stock portfolio, it is the way to go.

Personally, I am going to move money out of the US market. I figure I have until about October to do so. I see the dollar continuing to fall on the world market, so if done correctly (and I am right) I will make profits on the foreign investment AND the exchange rate
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Old 07-03-06, 11:50 AM
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Real estate.

Otherwise, mutuals or spyders.
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Old 07-03-06, 12:26 PM
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plastics
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Old 07-03-06, 06:28 PM
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Originally Posted by kvrdave
Real estate.
Ditto. All that other stuff is a total waste of your time.
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Old 07-03-06, 07:31 PM
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mutual funds
as someone that has a few hundred shares of some decent sized companies I'm not really impressed with having individual stocks

maybe if you had the cash and time to spare to do some day trading on risky low cost stocks that will likely go up a couple bucks a share in one day so you can sell for a quick profit and reinvest in teh next stock that might jump I wouldn't bother and instead would get a stock mutual fund if you still want your money in stocks
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Old 07-03-06, 09:06 PM
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68ShelbyGT500KR hit it right on the nose for retirement investing:
Max out the 401k up to a company match
Max the Roth IRA
Six months to 1 year of emergency bill money - preferably in a Money Market account
Bump up 401k to the max
Then look at real estate or investment portfolio
Keep a good mix of mutual fund types ( small/ mid / large cap - agressive growth/ international/ blue chip etc...) and throw in at least one stock with long term potential.
And remember as you get older diversify from agressive investments to more secure investments - as you approach 50 -60 you shouldn't have all your money in stock - gotta protect it.
and pay off the credit cards - interest is money thrown away.
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Old 07-04-06, 01:25 AM
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I'm actually going to suggest you get yourself a good "fee only" financial planner. He is going to set your risk tolerance, return requirement, address any special tax issues, unique circumstances (like maybe you have company stock) and long and short term goals.

Based on that information, he will build a portfolio for you. I would not take any of the individual suggetions made here without the groundwork. There needs to be a 'framework' to your investments.
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Old 07-04-06, 06:25 AM
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Originally Posted by cruzness
68ShelbyGT500KR hit it right on the nose for retirement investing:
Max out the 401k up to a company match
Max the Roth IRA
Six months to 1 year of emergency bill money - preferably in a Money Market account
Bump up 401k to the max
Then look at real estate or investment portfolio
Keep a good mix of mutual fund types ( small/ mid / large cap - agressive growth/ international/ blue chip etc...) and throw in at least one stock with long term potential.
And remember as you get older diversify from agressive investments to more secure investments - as you approach 50 -60 you shouldn't have all your money in stock - gotta protect it.
and pay off the credit cards - interest is money thrown away.
1.) 401k is maxed out
2.) Maxing out my Roth is probably what I'm going to do. Also the Roth can be my emergency account as after 5 years I can remove anything I put in.
3.) I will be buying a house this year so that is all well and good.
4.) I have no debt.
5.) I'm leaning towards a Vanguard Roth IRA account as I can buy mutual funds from almost anybody though Vanguard.
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Old 07-04-06, 06:31 AM
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Thanks for all the suggestions, I got some new ideas. Definitely going to check out ETF's and Spiders and I know my mom uses a good financial planner maybe I'll use him as well. I would love more real estate but my time is at a premium, I need something I can just drop money in and forget about.

One question about a Roth. If I put $4,000 in this year when can I put another $4,000 in? After Jan 1st or after Tax day in April?

Last edited by Lateralus; 07-04-06 at 06:39 AM.
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Old 07-04-06, 08:13 AM
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Originally Posted by Lateralus
One question about a Roth. If I put $4,000 in this year when can I put another $4,000 in? After Jan 1st or after Tax day in April?
Jan 1st
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Old 07-04-06, 08:34 AM
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Originally Posted by Lateralus
1.) 401k is maxed out
2.) Maxing out my Roth is probably what I'm going to do. Also the Roth can be my emergency account as after 5 years I can remove anything I put in.
3.) I will be buying a house this year so that is all well and good.
4.) I have no debt.
5.) I'm leaning towards a Vanguard Roth IRA account as I can buy mutual funds from almost anybody though Vanguard.
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Old 07-04-06, 10:57 PM
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I actually think that you are in the right place from your original post. Let's assume that the S&P goes up 8% or so each year for the next 25 years. I'm going to be generous and assume that you only invest in an index fund with all of your money.

That's $19K per year, 8% growth over 25 years. That's $1.5 million and you did basically nothing. Now, certainly you'll want more than that, but not a bad nest egg if you live off 5% a year, that's 75K per year in retirement.

That being said, I have a very diversified portfolio because I think that I can beat the S&P over the 30 years I have until retirement. But people have tried to beat the S&P over long periods of time for many years and have lost many dollars doing it. That's why at least 10% of my portfolio will always be allocated to an index fund.
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Old 07-07-06, 10:03 AM
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You know that money put into a Roth can be invested however you want right?

I would say the choice b/w stocks and mutual funds should be made based on how much time you want to spend. If you enjoy researching stocks go that rout, if you just want to put money somewhere and not think about it, pick a fund.

I would perhaps suggest an index fund. ETF's are a great idea.

On a side note, anyone looking for a broker with very low fees on realtime trades, check out http://www.mbtrading.com ($1 limit orders).
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