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Old 02-17-2010, 11:48 AM   #21
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Looking Ahead, I hope your son has a new job very soon and can continue to build his retirement holdings. Good luck to him.
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Old 02-17-2010, 11:53 AM   #22
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I think we need a primer
Here is your primer:

Amazon.com: The Investor's Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between (9780470505144): William J. Bernstein: Books

I suggest not investing a penny until you've read the book twice.
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Old 02-18-2010, 08:34 AM   #23
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In the face of all the evidence that individual stocks are not the way to go and that funds and ETFs of indexes are the way to go (yes, lots and lots of articles and books on all this including the previously mentioned Bernstein books), why oh why are there still questions about picking 3 stocks?

Are folks consciously choosing to shoot themselves in the mouth? What's going on here?

It would have been a different matter if asked to pick 3 ETFs ... that's really trivial for someone starting out and they would be the same 3 ETFs that someone with millions of dollars would own as well.
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Old 02-18-2010, 09:40 AM   #24
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In the face of all the evidence that individual stocks are not the way to go and that funds and ETFs of indexes are the way to go (yes, lots and lots of articles and books on all this including the previously mentioned Bernstein books), why oh why are there still questions about picking 3 stocks?

Are folks consciously choosing to shoot themselves in the mouth? What's going on here?

It would have been a different matter if asked to pick 3 ETFs ... that's really trivial for someone starting out and they would be the same 3 ETFs that someone with millions of dollars would own as well.
It doesn't feel good to shoot yourself in the mouth or humiliate yourself on this forum, but obviously I have done just that by proving that I don't even know enough to pose the correct question to help solve my son's problem.
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Old 02-18-2010, 10:16 AM   #25
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all the evidence that individual stocks are not the way to go
Not everyone knows about the evidence or considers it legit:
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Old 02-18-2010, 10:20 AM   #26
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It doesn't feel good to shoot yourself in the mouth or humiliate yourself on this forum, but obviously I have done just that by proving that I don't even know enough to pose the correct question to help solve my son's problem.
I would wager that 95% of people outside those on this forum don't know what an ETF even is--personally I wouldn't expect a new poster to know that (my DH--valedictorian back in high school--seriously thinks ETF is the spacecraft that ET used in the movie "ET").

Looks like from the posters here that PG is the winner. It might be fun for a 25 year old to watch an investment in this. This won't be the only investment he makes over his lifetime, he just needs to park this relatively immaterial amount of money somewhere. I can name several 25 yo young men who would have paid the penalty to cash out the sum and invested it directly into Budweiser.
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Old 02-18-2010, 11:29 AM   #27
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It doesn't feel good to shoot yourself in the mouth or humiliate yourself on this forum, but obviously I have done just that by proving that I don't even know enough to pose the correct question to help solve my son's problem.
The smartest people, in my book, are those who know when they need to ask a question.
How it is asked is not as important as the fact that it was asked.
There's a lot of excellent knowledge that gets shared here, so by all means keep asking.
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Old 02-18-2010, 11:34 AM   #28
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It doesn't feel good to shoot yourself in the mouth or humiliate yourself on this forum, but obviously I have done just that by proving that I don't even know enough to pose the correct question to help solve my son's problem.
IMO, there are no dumb or wrong questions to ask on this forum.

Some of the answers/comments you get may be helpful and thought provoking leading you in the right direction for your personal situation. Other answers/comments may seem to be sarcastic and intimidating. Don't let the latter get you down. ....

...it sure hasn't stopped me from posting....
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Old 02-18-2010, 12:46 PM   #29
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I am still curious how this "pick 3 stocks" scenario came about. All the media outlets I see about investing and rollovers talk about investing in mutual funds. Indeed, that's about all one can invest in with a 401(k) or 403(b). Most plans do not let folks dabble in individual stocks. I never read an article online or in print that sells "Sell all your mutual funds and buy 3 stocks".

I am sure that Fidelity did not say that he had to invest in 3 stocks in his rollover IRA. I have an account at Fidelity and it talks about choosing an investment strategy and asset allocation ( Fidelity Investments )
With Fidelity just completing an advertising blitz about no commissions with some ETFs, I'm surprised that "buy 3 stocks" is even on the table.

Look how many responses were about ETFs and how many were about PG. It looks like some ETFs would be the winner ... which should lead to the next question to ask.
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Old 02-18-2010, 01:01 PM   #30
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...
He is reading Investing for Dummies....which is exactly what we both are when it comes to investments. However, I think we need a primer.....Investing for Real Dummies!
I would appreciate any thoughts or other alternatives before he makes this move.
Here is a short primer: Investment Guide
Please let me know if you find it helpful.

And how about your own investing? Do you invest in mutual funds, CDs or individual stocks? I'm just curious.
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Old 02-18-2010, 09:05 PM   #31
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This evening my son spoke with another representative at Fidelity and received some good news. He was told that Fidelity will waive the minimum $2,500 initial buy in if he sets up an account builder and makes monthly contributions. So, he will be able to roll his 401K into the Freedom Fund that he wanted.
Leonidas, it was your suggestion that gave us the idea to call back and ask about a waiver...so thanks so much!
The advice you all gave helped us sort through some options and taught us a few things in the process. Thanks so much everyone!
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Old 02-19-2010, 09:38 AM   #32
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I do not understand how one would make monthly contributions if they rolled over a 401(k). You can make monthly contributions to a Roth IRA or a traditional IRA ... if you have earned income, but I do not see that scenario playing out here. If son does not have a new job, no earned income and no contributions allowed. If son has a new job, he will probably not contribute to the rollover IRA, but instead will use his new employer's 401(k) plan. And if he uses his new employer's 401(k) plan, he probably would not be eligible for a tax-deductible IRA and could not make monthly contributions to that rollover IRA. He could open a Roth IRA (with earned income even if he had a 401(k)) but that would be separate from the rollover IRA.

He could convert the rollover IRA to a Roth IRA, but he would have to pay income taxes on the conversion.

Also the Fidelity Freedom funds are funds of funds holding actively managed funds with a rather large expense ratio. They are not the best retirement funds if you can find something else.
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Old 02-19-2010, 01:30 PM   #33
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[QUOTE=LOL!;905820]I do not understand how one would make monthly contributions if they rolled over a 401(k). You can make monthly contributions to a Roth IRA or a traditional IRA ... if you have earned income, but I do not see that scenario playing out here. If son does not have a new job, no earned income and no contributions allowed.

Thankfully, he was offered and accepted a new job this morning.

If son has a new job, he will probably not contribute to the rollover IRA, but instead will use his new employer's 401(k) plan. And if he uses his new employer's 401(k) plan, he probably would not be eligible for a tax-deductible IRA and could not make monthly contributions to that rollover IRA. He could open a Roth IRA (with earned income even if he had a 401(k)) but that would be separate from the rollover IRA.

The new job does not offer a 401K plan.

He could convert the rollover IRA to a Roth IRA, but he would have to pay income taxes on the conversion.

Also the Fidelity Freedom funds are funds of funds holding actively managed funds with a rather large expense ratio. They are not the best retirement funds if you can find something else.

Thank you for this information; I will pass it along to him. He thought these targeted retirement date funds were the way to go.
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Old 02-19-2010, 02:39 PM   #34
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Target retirement funds are an excellent way to go provided the expense ratios are low, that you do not hold them in a taxable account (and really have no taxable account investments), and have the asset allocation (stocks, US, foreign; bonds) that you want (so don't go by the date).

Fidelity has the Four-in-One fund (FFNOX) which is a good fund to use in place of a target retirement fund. It is a fund of index funds.

If you want to get to lower expense ratios, then you should use the Vanguard Target Retirement funds.

If you want to stay at Fidelity, then one can roll-their-own target retirement fund by purchasing ETFs, say one domestic, one foreign, one small-cap foreign and a bond one.

I believe Fidelity may have announced target retirement funds of index funds, but I do not know if those will be available to the general public in rollover IRAs or not.
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Old 02-19-2010, 02:45 PM   #35
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Congrats to your son on his new job, Looking Ahead!
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