Mutual funds and ira, cds

[cantrell]

I am thinking of getting a mutual fund because the best cd out there I need to deposit 10000 for a 2.55 apr percent and that would give me $255 a year and I would have to wait 5 years to touch it. Anyone used mutual funds with success? I am saving money to pay off debt faster. Thank you

[Jungel]

You need to look at the interest rates.
Typically you are paying more interest on your debts then you will make in the market. If you have CC debt you are likely paying 10-20% interest maybe more. If you can find an investment with that return go for it. Otherwise it is recommended to pay down your debt before trying to invest.

Also, mutual funds charge a lot of fees. even if the return is good the fees eat into your income. Do some research the internet has tons of resources.

[Cinema]

NO NO NO

Unless you are putting money into an IRA for tax avoidance purposes, don't do it.

This is going to require a lot of research on your part because it's not appropriate for a single blog post. BUT, basically you should be investing (when it comes to stocks and commodities) in ETFs and Index Funds. Mutual Funds are financial products created by banks and investment groups to TAKE YOUR MONEY. Sure, you will make a few percent. But so are they, and with your money!

ETFs are Electronically Traded Funds. These are like mutual funds except the commission percentage is often .5% or less. You'll need to buy these yourself and not through a broker, but it's very easy and can be done online.

ETFs are very diverse. They can be made up of stocks, commodities, real estate, bonds, etc. You can find ETFs that are very broad, say an ETF that is an index of the entire dow jones, while another ETF could be made up of stocks from only oil drilling businesses. Another ETF could be gold or one for all types of precious metals. You get the idea? You can customize your portfolio as you please and pay bottom barrel prices to do it.

Go for Index Funds

What is an Index Find you ask? An IF is a group of stocks, bonds, or commodities, that spans an entire industry or market. For instance, instead of buying 20 different stocks on the Dow Jones Market, you could purchase the index, which is all of the stocks on the Dow Jones as a whole put into one index fund. You know that number the media reports on when talking about "the Dow?" That's the current price of the Index. All the stocks on the Dow Jones put together into one product.

So why is this important?

You can dig up the specific research, but it is a proven fact that Index Funds beat actively managed funds (mutual funds) pretty much all of the time. This is because Mutual Funds put your money into a handful of stocks and bonds that the bank wants you to buy. They have multiple motives for selling you a mutual fund beyond making you money. An Index Fund is less biased since you aren't trying to pick specific winners and losers, you're buying the entire index with the belief that it will rise in value overall.

WAAAAAY more to discus but you gotta do the learning yourself. Start with the above. ETFs and Index Funds. Do your research.

[Cinema]

One more thing.

That IRA - What type are you talking about?

There are two types of IRAs you can use to shelter your income from taxes.

Roth IRAs and SEP IRAs.

Pretty much every American can put money into a Roth IRA to shelter it from taxes. If you are self employed or own a business, you can also put money into an SEP IRA that also shelters your money from taxes.

So if you are doing it for these reasons, then usually you are making the right move.

But traditional IRAs that are tied to mutual funds... NO!

[Methos]

I am saving money to pay off debt faster. Thank you

How does that work?

It only works if the interest you make off your savings is higher than the interest you pay on your debt. Which isn't happening, ever. If you're gambling with some funds in the stock market that's different. Just make sure whatever you risk that you can lose it all and still sleep at night.

If you have a job that provides a 401k with a match... the rule of thumb it to put the minimal amount in to get 100% or your employer match. That's typically 2-5% of your pay check. Beyond that max out the Roth up to the limit per year (if you can). But before you do either pay off any high interest debt.

I will say the only reason to save before throwing it all at debt is if you have zero liquid assets. I think everyone should have at least 6 months worth of $$ saved up. 6 months meaning whatever it takes for you to live your current or similar lifestyle. If you can have a year or more, even better.

[Methos]

To add to what Cinema said, I typically invest in ETFs in my Roth and 401k. Some EFTs made up or large cap. some medium, and some small. Also some emerging markets. The idea is to spread the risk. This is where you need to do your own research and figure out what you think is the best investments.

I also think it's worth having some investment outside the banking system all together in practical commodities. These are items that hold their value and people will be willing to trade for when money becomes worthless. Silver, guns, and ammo come to mind. Things as simple are lighters will be worth their weight in gold when no one can just go to the nearest gas station and buy one.

[Index]

I hate to be the dick, but there's a lot of misinformation here.

Go for Index Funds

Strongly agree. Index fund simply means it tracks an index instead of a fund manager trying to predict the future.

ETFs are Electronically Traded Funds. These are like mutual funds except the commission percentage is often .5% or less.

Mutual Funds are financial products created by banks and investment groups to TAKE YOUR MONEY. Sure, you will make a few percent.

This is completely incorrect. Mutual funds and ETF's are essentially the exact same thing. ETF = Exchange Traded Fund. An ETF is nothing more than a mutual fund that you can trade in real time like a stock. Many funds have both a traditional fund and ETF option. Your money is going to the same place regardless of which one you buy. Many serious investors avoid ETF's altogether since they promote market timing and trading, which generates fees. They're very trendy right now and financial institutions love them because they charge for trades - they make money regardless of whether you win or lose. One major benefit to ETF's is no minimum balance so it's easier to get started when you have less cash available.

An expense ratio of .5% is really on the high side for most index funds.

But traditional IRAs that are tied to mutual funds... NO!

Not true. Again, ETF's and mutual funds are the same thing. Pick the flavor that suits you. The big difference between a Roth and a Traditional is when you pay the taxes, now or in retirement. Both are exempt from capital gains.. A traditional IRA is essentially the same as a 401k. There are differences, but negligible in this context.

I am strongly against actively managed funds and agree that fund managers are the ones who win long term, not the investor. You're making a claim against all mutual funds and I can't tell if that was your intention, or you meant to specify active management.

I think everyone should have at least 6 months worth of $$ saved up.

Strongly agree. I've told everyone who's asked me about investing to build up an emergency fund first.

I am thinking of getting a mutual fund because the best cd out there I need to deposit 10000 for a 2.55 apr percent and that would give me $255 a year and I would have to wait 5 years to touch it. Anyone used mutual funds with success? I am saving money to pay off debt faster. Thank you

The absolute most important thing to consider is your time horizon. You mentioned 5 years, does that mean you plan to cash out and spend it then? If not, when do you plan to spend it? 1 year? 10? In retirement? That answer should define your risk tolerance which will ultimately pave the way for how you invest your money.

Here's my advice, read this book: http://www.amazon.com/If-You-Can-Millen ... 098878033X. It's $6 on Amazon and a very short easy read. I bought several copies that I give away. This book also recommends several other books if you want to continue reading. I also recommend anything by these authors: Jack Bogle, Bill Bernstein, Rick Ferri or Taylor Larimore.

Honestly, a seduction forum is probably not the best place to seek investing advice : )

[johnjm22]

You need to pay off your high interest debt BEFORE investing.

As far as investing goes, the conventional advice is to dollar cost average into a passive low fee index fund(s). You can do this via an ETF or a MF. One is not inherently better than the other. You have to evaluate each fund on a case by case basis.

The Vanguard SP500 Index fund (you can get is as an ETF or MF) is widely regarded as one of the best funds available to small time investors. As an ETF, the expense ratio is only .05%.

I recommend this book for novices: http://www.amazon.com/Will-Teach-You-To ... 0761147489 It's simple, straight forward, succinct, and contains updated actionable advice.

One other thing to consider: If you have an entrepreneurial outlook, you may want to stay liquid (hold large amounts of currency) instead of tying up your money in the market. The cash will not earn a return, but being liquid allows you to take advantage of opportunities when they arise. Think big.

[Cinema]

Well, this thread proves that you gotta do your own research. You'll find 1000 opinions.

I am not a heavy trader, I am a buy and forget investor. My trades are 5-10 year bets, long term. I buy when I hear things like "all time low, or industry in free-fall." So consider this when choosing your advice.

And yes, I was referring to actively managed mutal funds. Which is what any respectable banker or financial advisor is going to push retail investors into because that's how they make the big bucks.