24, Ready to start smart investing!

[Andy.N]

Hello everyone. I graduated college last May and started working as an engineer in North Little Rock, AR in June 2010. I have been doing some research on investing and thought it would be a good idea to join a forum so that I could get more specific feed back on my personal situation. I don't plan to use it as a shortcut for doing my own homework. However, I believe it will be beneficial and I'm sure there are plenty of members here with experience that are willing to share knowledge. My overall goal is to make smart invests that will lead to considerable wealth so I may retire near 2045 and be able to spend lots of time traveling. Currently I make 40k, I expect to make more in the future but would not be surprised if most of my working career was in the 50-80k range. My first task is to deciding how to best allocate my assets within my ROTH IRA. I will start a more detailed thread discussing my ROTH quandaries in the fire and money section. Thanks, and I hope to enjoy the forum!

 

[MasterBlaster]

Andy.N

welcome to the forum.

My advice would be to save as much as you can. The money you save at your age will have many decades to snowball. When you start saving young the money grows much more than if you wait until you are older to start saving.

Life throws lots of challenges that ensure you'll have to make some tough choices. Just make saving a priority and you'll do just fine.

Per where to put it. At your age a broad based equity fund l(ike a total stock market fund) or broad based balanced fund would do the trick. Those retire-date funds also give a pretty good broad based exposure.

 

[travelover]

Welcome. Retired engineer here. Good advice above. Put your long term money in a total US or total world stock index fund and let it ride.

if you haven't found the Bogleheads, you may like what you see. They are well respected here. Bogleheads Investing Advice and Info

 

[unclemick]

Do not think. A very dangerous activity for engineers - especially when it comes to investing. 1996-2006. Hormones is hard to quell - tennis, golf, fishing, spectator sports perhaps.

Buy Vanguard Target Retirement 2050 or 2045 using auto deduct from checking and for heavens sake - don't watch the market.

If you absolutely must read a book - which I don't think is necessary - Bogle's The Little Book of Common Sense Investing.

heh heh heh - the above is tongue in cheek/hindsight based on exactly what I DIDN'T do for 40 years. . Being an engineer was kinda fun though.

invest early, often and stay the course.

 

[Andy.N]

Thanks for the welcome replies, it appears some of experience promote buying investing in few broad funds opposed to multiple more specific sector funds. Historically it looks that emerging market indexes out perform broad diverse funds over time, and I do not plan on taking money out for about 30 years so the voltility doesn't scare me. But I would diversify with other funds of course, I'm just wondering if there is an error with my though process, if I lump my money together I can get one vanguard fund at admiral shares. Maybe that is the rout I should go for my ROTH.

 

[urn2bfree]

1) DIVERSIFY -dont put all your eggs in one basket/type of investment - with just a few index type funds with LOW COSTS like Vanguard or if you can DFA and let it ride -
2)ASSETT ALLOCATION-have some bonds but at your age mostly stock investments with slow gradual shift as you get closer to your target
3)REGULARLY REBALANCE portfolio to keep the assett allocation at your target
4)DON'T PANIC- STAY THE COURSE-feel free to add more when you can on the inevitable dips--you make it back faster that way
5)AVOID investment traps -like whole or universal life insurance--insure only as much as you need as term insurance then drop it-your money is much better invested yourself than thru an insurance company
6) Do consider tax implications- in where you put your money--like expenses, taxes eat at your returns

 

[unclemick]

Thanks for the welcome replies, it appears some of experience promote buying investing in few broad funds opposed to multiple more specific sector funds. Historically it looks that emerging market indexes out perform broad diverse funds over time, and I do not plan on taking money out for about 30 years so the voltility doesn't scare me. But I would diversify with other funds of course, I'm just wondering if there is an error with my though process, if I lump my money together I can get one vanguard fund at admiral shares. Maybe that is the rout I should go for my ROTH.

Buying a Target Retirement you are getting a mixture of funds for your age reflecting 'their' the fund house's best research. To mis-quote Clint Eastwood - are you smarter than they are? Or more accurately 'do ya feel lucky?'

I had some thrills and chills, read more books than I care to admit, spent some windfalls when I shouldn't, and took it in the nose a few times, 1966-2006. I'm a slow learner. In the end - Bogle's folly(S&P 500 Index) da original, became the horse I rode in on - dollar cost averaged into my 401k early and for a long time.

heh heh heh - Jan 2006 strictly target retirement in retirement. Plus a few good stocks - for the hormones. If you are male resistance is probably futile.

 

[pimpmyretirement]

Assuming the goal is getting money during your early accumulation phase, it is better to prioritize building a strong offense / defense. You don't have enough money to make an optimal investing strategy matter. An extra 1% return against $10k is only a hundred bucks.

Three tips:

1. Keep your living expenses similar to what they were in college for as long as possible. Your peers will spend like crazy, don't copy them. A savings rate of 50% or more is attainable.

2. Learn to play office politics. Compensation has very little to do with performance. Do a satisfactory job at work, then focus your extra energy on learning to play the game. Become well liked and find a mentor to sponsor you up the corporate ladder. This is the ticket to a big paycheck.

A great intro to the politics:

Coleman Management Consultants, Inc.

3. Put your skills to work in an industry that has large profit margins. You will do the exact same work and get paid much more than your peers. This book provides a nice overview on identifying such businesses:

Amazon.com: The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market (9780471686170): Pat Dorsey, Joe Mansueto: Books

Financial independence is attainable within 15 years, if you really want it.

 

[DblDoc]

Thanks for the welcome replies, it appears some of experience promote buying investing in few broad funds opposed to multiple more specific sector funds. Historically it looks that emerging market indexes out perform broad diverse funds over time, and I do not plan on taking money out for about 30 years so the voltility doesn't scare me. But I would diversify with other funds of course, I'm just wondering if there is an error with my though process, if I lump my money together I can get one vanguard fund at admiral shares. Maybe that is the rout I should go for my ROTH.

But it should. Just because you plan to hold it a long time does not eliminate the risk. I like EM, but I only hold a 5% slice that I rebalance into and out of to maintain my asset allocation. The balance of my equity holdings are in broad domestic and international index funds.

DD

 

[Andy.N]

great, I'm loving all of the advise thanks everybody! Keep it coming!

 

[MBAustin]

Andy - Just the fact you are asking these questions puts you in the top 5% (maybe higher) of those your age and will serve you very well in the future. Working well (that means working hard AND working smart), LBYM and saving the rest gives you options in your 40s & 50s in all kinds of ways. Go for it!!!