Do you invest your $$ yourself...

[shamrock]

...or do you use a Financial Advisor?

Not really aviation related, but I'm curious.

I've managed to scrape together some money (on FO pay if you can believe it!) and i'm looking to get started. I also ask because based on some research I've done, I think my parents are getting ripped off by their advisor.

 

[USC***]

If you're young (say twenties) you want most of your investments in high risk mutual funds. As you get older (closer to retirement), you want to move more and more of your money into less risky funds (bond funds, money market,....) If your a long way to retirement, it is actually a good thing if the stock market drops so you can by more shares for your dollar.

Personally, I rarely invest in individual stocks, and wouldn't recomend it unless you have plenty of time on your hands and do the research yourself. Even then there are no guarantees.

A good book which gives some easy to understand advice about saving for retirement (along with other money questions) is "The Truth about Money" by Rick Edelman. Or his second book, "The New Rules of Money." You can probably find them in a library. The author is a financial advisor in Northern Virginia.

As for mutual fund companies, there are plenty of good ones. I use Vanguard personally, because there index funds have pretty low fees compared to other companies, and the service is pretty good, but there are plenty of other good companies to use.

 

[satpak77]

REQUIRED READING

First:

In a Bull Market, you want to be in stocks/mutual funds. NO SECTOR FUNDS ("Fidelity Healthcare", etc) since sectors rotate in and out of favor every 3 months.

In a Bear Market, you want to be "all cash" on "standby" or at least in US Treasury notes earning 3-5%.

DO NOT DO NOT DO NOT (am I clear?) be IN MUTUAL FUNDS while the market is TANKING. DO NOT.

The exception to this is a few "Short Selling"/"Bear" Funds that exist, one offered by ProFunds.

Go to Barnes and Noble/Amazon, and buy these 3 books, REQUIRED READING for a new investor.

http://www.amazon.com/exec/obidos/A...5209369/sr=2-1/ref=sr_2_1/002-3098116-9552853


http://www.amazon.com/exec/obidos/A...5209369/sr=2-2/ref=sr_2_2/002-3098116-9552853


http://www.amazon.com/exec/obidos/A...5209412/sr=2-1/ref=sr_2_1/002-3098116-9552853


On commuter pay, you might want to go to public library and check them out (no disrespect, been there done that brother, I am with you)


Good luck

 

[bart]

Mutual funds are a complete waste of money. The only thing they do efficiently is bill fees. Either buy individual securities or index funds.

Or pay some clown 1% to 2% of your investment each year to perform no better or worse on average than the index funds.

The choice is yours.

 

[DorkProp]

My investing strategy is a good mix of index mutual funds. I use Vanguard because of their low fees. I agree with the poster above that index funds are the way to go. Managed funds historically under-perform the market 80% of the time. So with an index fund you will never out-perform the market, but you will never under-perform either. And you won't be paying the "load" to some number cruncher in a business suit.

If you want a good tutorial about index fund investing, go to www.vanguard.com I'm not advertising for them, but they have the largest selection of index funds anywhere, and one of the Vanguard co-founders, John C. Bogle, pioneered index funds.

If internet research does not suit you, I highly recommend the book, "Sound Mind Investing," by Austin Pryor.

http://www.amazon.com/exec/obidos/t...002-3523473-2792027?v=glance&s=books&n=507846

About seven years ago, when I was still in college, my father died and I received a modest inheritance. I had no knowledge about investing or money management, but I knew that if I wasn't careful the money could be gone in a flash. This book was a wonderful education about investing, particularly index-investing. I followed the sample portfolio of Vanguard funds that it suggested. I've kept that same portfolio for seven years now, after adding a few other index funds to the mix, and still feel confident in my strategy.

And that's the key: finding an investment strategy that allows you to sleep at night.

 

[Swass]

Some annuities (variable) can be decent choices, but these are for folks who are very conservative (350 driver need not apply )

Index funds are a super way to go. You must choose a broker or financial planner wisely, they will sell you whatever plan is running a special at where they work or worse yet, whichever sales contest they are trying to qualify for in their region. I used to be one of those guys, watch out, they don't have your best interest in mind. PM me if you want details and/or advice about financial planning or employee benefits.

 

[satpak77]

Ditto on Index Funds

Ditto

again, repeat, stay away from "Sector" type mutual funds

also stay away from "load" funds.

DO NOT BUY INTO Peter Lynch propagando, "you cant time the market", "stay in for long haul" etc

Peter Lych was manager of Fidelity Magellan fund, and wrote 3 bestsellers (scooped up by American public), all in the late 80's, early 90's, advocating the above ideas. So it is no surprise that most of America believes his nonsense.

Mutual funds best interest is to KEEP PEOPLE IN, if people pull funds out, that hurts the fund and also the fund manager's pay is usually tied to the amount of funds managed and also performance of the fund.

Read my earlier post and buy those 3 books, also go pick up a copy of Investors Business Daily and start learning

When its your money, you are PIC. The average person absolutely can learn to invest, it is very do-able. It just requires commitment and study.

Good Luck

 

[Gulfstream 200]

Just an opinion...

Mutual Funds are a complete waste of money.

anyone in thier 20s/30s who uses them is crazy.

Why pay hidden fees when you can pick 5-10 stocks yourself and hold them. no fees attatched. no buying and selling. no middle man.


If you are in love with them (????) look at what they own and buy those %s of stocks.

 

[CitationCapt]

Investing

I agree with G200.

There are countless approaches to investing and almost limitless numbers of books written, many by folks who richen their wallets selling books and seminars to you and I.

In 1996 I sent Paine Webber packing, and rolled my IRA's and transferred taxable investments over into an online brokerage. At the time I bought Berkshire Hathaway at $22,000 per share against the PW broker's advice. That stock climbed to $83,000 (A shares), then I sold it. In the end, investor advice runs the whole gamut. You can hire a financial advisor, but beware of the fees and the quality of service. I stayed away from this.

I have been in control of my investments since 1996, all through online brokerages. I have bought mutual funds, stocks, options, CD's, you name it, all through an online brokerage. If I make an investment mistake, it is my fault. This might sound strange, but I like that.

Mutual funds take time to settle, so if the fund takes a nose dive, you won't be able to react as quickly as with selling or buying stocks online. It seems that some people buying mutuals don't want to bother tracking their gains or losses. My wife is an example of that and she has lost money over the last 10 years, all while contributing more dollars to the same funds with the hope that they will eventually come back, but as of yet have not.

I lost faith in the buy and hold strategy a long time ago, especially with the market activity of two years ago. This is a different market in my opinion than a long term buy and hold market.

Individual stocks work for me, as I take the time to do the research. Some online brokerages (Ameritrade, Schwab and others) have some great screening tools to help with research.

Commission rates are competitive with the online brokerages, with some depending on trade volume as low as $7.

Be careful not to get so wrapped up in trading that you chase stocks and the market based on news items and message boards.

See these sites for more info on online trading and opening an account:

www.ameritrade.com www.schwab.com

Good luck and start early!!


CC

Disclaimer: None of the above information should be utilized in making your own investment decisions.

 

[starchkr]

If you are young go stocks...

if you are older go... well i really have not been there yet, so i do stocks.


Very easy to manage yourself. Don't let yourself get trapped into having to hold them for long periods of time either. Since i opened my trading account in the end of November last year (2.5 months ago) i have manged a modest 40% return on my money. I trade often... every few days, not day trading. I have had 3 of my smaller picks profit 100% or greater and 1 returned over 400% in 3 days. I want to see a manager sell you a fund that will even touch half of that. Just be smart.

 

[AeroBoy]

I'd suggest buying stock in a company that allows you to buy direct, without having to use a money-hungry stock broker or trader. One such company is General Electric (http://www.stockbny.com/ge/directps.asp)--GE is just an example, I'm not offering stock-buying advice--but there are many more companies that allow you to do this. If you do go to the above link, click "company list" in the upper right hand corner and then change the country to the U.S. (the page deafults to Argentina?!?!) and look for the companies that have a check mark under the "buy direct" column for companies where you can buy stock without excessive fees/charges.

Good luck.

 

[Gulfstream 200]

well....opinions are like a$$holes right??!!

best advice yet BY FAR ---

Start Early!! - take it out of your check BEFORE you get it. even if its only 100 bucks a check.

I still say mutual funds are a complete waste and I do believe most middle class pilots who may have 50-500K invested can do it themselves NO PROBLEM!

 

[LAZYB]

DRIPS

...are not airline managers, but like AeroBoy was talking about - buying direct, sometimes with a discount, and Dividend Reinvestment. Coke, Conagra, Pepsi, a lot of big companies. Some have modest fees. Others like McDonalds have pain-in-the-ass fees. Disney stopped theirs because it was too expensive, whilst they were paying the CEO $100s of millions.

 

[de Pez]

Several posts here discuss the advantage of buying individual stocks. They are accurate, however there are several potential disadvantages as well, including lack of diversification...For example, if you can only afford to purchase 5 stocks, then you are exposed to some degree risk associated with those companies and their respective sectors. (i.e. if all of your stocks are in the transportation sector, and the price of oil increases, obviously that will have a negative effect on your choices) This is one of the advantages of an index fund. You have the good diversity with one purchase into a given fund each month. (Dollar cost averaging)

Another consideration is taxes. The new long term capitol gains tax will tax any capitol gains on stocks held for greater than one year at 15%. If you buy and sell stocks on a weekly or monthly basis, then you will be taxed at your regular income tax level (as high as 35%).

Regardless, if your company has ANY kind of matching 401K contribution (even 10% on the dollar or lower), you should contribute to that first to the maximum available...Effectively it's guaranteeing you a 10% return... Something to consider.

 

[SuperFLUF]

Get a financial advisor.

Unless you want to spend all your time reading about the latest fund info, market info.....etc.

I just started using one last year and I wish I would have done it sooner.

IMHO a fee based (non-commision) financial advisor is the way to go. My advisor charges $60/hr for the acutal work done on your plan. Meeting and discussion time is free. My intial plan was 6 hours and it will only be a couple of hours twice a year for reassesment and redistribution after that. The fees are tax deductable.

Its about more than just retirement planning, financial advisors help you with all facets of money management. Retirement planning, how to be most efficient with your money now (insurance, loans, debt.....etc), college savings options, tax efficiecies now and in the future.....etc. Everyone's situation is a little different and needs adjustment as circumstances change.

For me, I have mutual funds that reivest dividends in the 401k and exchange traded index funds that do not reinvest the dividends (for tax savings) in my taxable account, all balanced in a total portfolio not individually. Since I started early, I shouldn't need the additional savings of an IRA and the way the tax laws work on my 401k it will not be a tax advantage at retirement time to use an IRA anyways.

You should at least sit down for a free initial consultation with a financial advisor before you make a decison to go it alone. You just might find that it's worth the $$$ to have a professional help you manage your finances.

 

[SDF2BUF2MCO]

Paper Tiger?

This question is for those of you that are in the know (or claim to be anyway!). I don't completely understand stocks. I look at them as being nothing more than a paper tiger. It reminds me of trading a sports card. Using a baseball card as an example, let's say I paid $20 for some player's rookie card in 2003. This player had a good first year and is projected for stardom. In 2004, he has a MVP year and his card value goes to $200. However, in 2005 he is a run of the mill player so his value goes down to $100. To me stocks do pretty much the same thing. You are hedging on whether or not the company will perform well. The stock certificate is nothing more than a trading card. Granted, you have ownership "rights" and the stock may pay dividends, but other than that I don't get it. What I am I missing?
BTW, I'm in a 401K "high risk" plan and it has been doing well but I don't understand it the way I should. Thanks.

 

[Redneck]

SDF2BUF2MCO,

Yes stocks values do vary in the short term, but in the long term, successful companies will make more money and therefore so will its shareholders. Think about if, if people never made money on their investments, why is their a stock market? And because of those gains and losses in the short term in individial stocks, we buy multiple stocks to diversify our holdings, so if a few of the stocks we own are dropping in price, the ones who are gaining or holding steady in price to lessen the impact. Its the advanced version of "dont put all your eggs in one basket" if we spread our eggs over many baskets the impact of 1 basket dropping and breaking the eggs in it is less than if that basket had all the eggs. And to explain your "high risk" portfolio, to get higher returns, one must invest in companies that have greater risk to get higher returns. Investing in a new company for example. If the new compoany succeeds, you will stand to make more more than say you had invested in general electric, but you also have to accept that there is a higher risk the company will fail and you will lose your money.

 

[knelson]

For those of you who fall into thecategory of having a hard time getting money together to invest, such as myself, I would like to recommend a book. It's called "The Richest Man in Babylon". Some excellent advice in there about saving money, paying debts, and general information about how to handle money. I know it's a little off-thread, but if anyone reading this thread is simply wondering where to come up with some extra money just so they can start investing, that book is a good start.

Kevin

 

[crxpilot]

I use iShares S&P 500 (AMEX: IVV) which have an expense ratio of 0.09%. Its made me lotso money so far.


See:

http://biz.yahoo.com/fool/040109/1073678160_1.html

 

[starchkr]

sdf2buf2mco...

Yes stocks are like your trading card. Yes they both can vary in value over time. And yes you can make or break it with both of them. However the key is finding that rookie stock which has an MVP year and selling it immediately after that year, not worrying about holding it to see if it has another banner year, because as you state it might have a bad year and lose half its value. Now realize, that year could be a few days, a few weeks or even a few months in stock time, or you might decide to hold it for a few years. One thing i have learned is that when you buy, you set a sell price, and no matter what you dump it at that price. Set both a high and a low for that dump. Then move on and either count your loss or reap your reward... that is basically what you 401k is doing, only they tend to hold securities for long periods, which has some disadvantages, but some advantages as well.

If you are going high risk in your fund, try managing some money on your own with online trading and see if you can beat your funds return, most likely you will be able to without problem.