the market is down

[Tykimeister]

For those of us who are younger than 25 years old, would right now be the best time to start a mutual fund? Everyone knows the market is in trouble and hope isn't really in focus yet. I keep hearing my father, step-father, grandpa, etc. talk about how their 401K is down some 30-40%. Would this be a prime time for a youngster to jump in the market? Obama stated that the market will probably get even worse before it gets better, but when the market is down, especially really down, wouldn't this be the best time for someone younger to buy some mutual funds? Or do people think the market will get even worse in the next year or two?

Any advice would be greatly appreciated.
Ty

 

[Notmuchlonger]

Not sure. Maybe this time its different. Possibly this country is heading towards the worst time ever in its history and maybe it wont recover.

However...


If I was 25 knowing what I know now. I would invest in the stock market.

 

[NW-Bound]

It is not a bad time to start out with some small investments. Of course we hope the market will stabilize soon. But even if it drops some, at least you will have experienced a bear market, so when the next one comes later in your life, you will know what it feels like. At least now, you would not lose as much in absolute dollars as some of us are experiencing now, with the 30-40% loss translating to several hundred Ks, or even greater than 1M. Sure, one would hope to get a portfolio that size some days, and it's better to learn the bitterness of a bear market when one still does not have much to lose.

 

[dex]

"It is darker before the dawn"

Pick good mutual funds and dollar cost average into them.

If I were your age I would be out trying to find those "Girls Gone Wild". They didn't exist when I was 25. But don't marry them - you'll loose half your savings.

 

[Bestwifeever]

Conventional wisdom says yes, in increments (every payday, for example), in mutual funds to keep expenses and risk down. Personally? I would wait and park that money somewhere else for the next six months. But agree that at 25 you can stand the excitement of the current volatility

 

[Tykimeister]

If I were your age I would be out trying to find those "Girls Gone Wild". They didn't exist when I was 25. But don't marry them - you'll loose half your savings.

This has been a lesson I learned watching my parents get divorced and my father always reminding me to use a condom. I think I'll just end up adopting kids and hiding the "girls gone wild".

 

[Tykimeister]

Conventional wisdom says yes, in increments (every payday, for example), in mutual funds to keep expenses and risk down. Personally? I would wait and park that money somewhere else for the next six months. But agree that at 25 you can stand the excitement of the current volatility

With stocks being so far down, wouldn't a high risk mutual fund make better sense since the market will likely go up in the next 5-10 years? Hopefully a lot up!

Also, what are some fair expense rates should I look for when choosing a company to start a mutual fund? Don't take me as ignorant, I have taken personal finance classes in college, but I want to get opinions before I jump in the pool. I talked to a friend of mine tonight who does audits for the government and he said to look inot Edward Jones.

 

[Notmuchlonger]

Dont adopt kids. They take money. Just be a bachelor and stick with the girls gone wild. Much more fun.

 

[Tykimeister]

Dont adopt kids. They take money. Just be a bachelor and stick with the girls gone wild. Much more fun.

Agreed. Every man (well almost every one) said if they could do it all over again they never would get married.

 

[Texarkandy]

..... Would this be a prime time for a youngster to jump in the market? Obama stated that the market will probably get even worse before it gets better, .....

I don't have an answer to your question, but a thought did jump to my mind reading your question:

Rule #1: Never take financial advice from a politician.

 

[Tykimeister]

I don't have an answer to your question, but a thought did jump to my mind reading your question:

Rule #1: Never take financial advice from a politician.
Rule #2: All financial advisors are politicians.

Yes, but look at what Clinton (a Democrat) did for America while he was in office for 8 years. I think the economy was doing quite well back then. Hell, our national debt even went down (or up, however you want to look at it) a little. Maybe Obama will have fiscal policies that will bring things around.

 

[Bestwifeever]

Go to Vanguard.com and play around. You can read somethings there about the expense ratios and also about risk, and research individual funds.

Someone else (okay, almost everyone else here ) can answer you better than I about risk in mutual funds. You are right in that you have a long horizon and can be less risk adverse than dinosaurs like me.

 

[dex]

Yes, but look at what Clinton (a Democrat) did for America while he was in office for 8 years. I think the economy was doing quite well back then. Hell, our national debt even went down (or up, however you want to look at it) a little. Maybe Obama will have fiscal policies that will bring things around.

Politicians have very little affect on the economy. They ride the business cycles. Don't get sidetracked by politicians.

Every government has eventually bankrupted the majority of their citizens.

 

[ERD50]

Yes, but look at what Clinton (a Democrat) did for America while he was in office for 8 years. I think the economy was doing quite well back then.

Not to get too SoapBoxy here, but some would say "look what the economy did for Clinton". It's pretty tough to sort cause/effect out of this. (Further discussion should probably go to the SoapBox).

To the OP - yes, I'd dollar cost average in as much as is feasible each paycheck. I don't say this because I know anything, I say this because I don't know anything (about which way the market will go). Make sure you have a good emergency fund - very important in these times, esp.

-ERD50

 

[Tykimeister]

I'll have to go along with Dex comment.



Remind me please what specifically did Clinton do that was responsible for that economy?
(and that question is not saying I'm a GWB fan either)



And what are those? Specifically, I mean?
(& not saying I was a McCain fan)

I was quite young at the time, but I don't remember our economy being in such shambles when Clinton was president. Nore did he have to make decisions based on 9/11 and other unfortunate events that put much strain on our economy. But back to the topic and not my weak opinions concerning politics. I don't blame GWB for all our problems, but with a new president coming aboard, I do hope for change and for things to get better. Thus being the reason I'm interested in starting a mutual fund while the market is low and hoping things will get better.

 

[Frugality_of_Apathy]

That's because Clinton caught the tech bubble two years into his first term and it didn't pop midway through 99 and descended until the end of 2002. Bush caught the housing bubble which had the unfortunate side effect of a 5 year delayed poison pill in the form of 5/1 ARMS making the descent much quicker. The bottom of the tech bubble was right around DOW 8000 just like the DOW has dropped to now.

From 2000 until 2005 nobody was hiring and it sucked looking for a job. Under Clinton unemployment was over 5% until 2 years into the tech bubble.which is just about the time bush's unemployment rate went below 5% compared to the housing bubble.
The only real difference economically is the housing bubble was much larger.

 

[Linney]

Also, what are some fair expense rates should I look for when choosing a company to start a mutual fund? Don't take me as ignorant, I have taken personal finance classes in college, but I want to get opinions before I jump in the pool. I talked to a friend of mine tonight who does audits for the government and he said to look inot Edward Jones.

Why did your friend recommend Edward Jones? If I was starting out again I would be looking at Fidelity or Vanguard, both of which have a number of mutual fund offerings with reasonable expense ratios.

--Linney

 

[Dawg52]

"It is darker before the dawn"

Pick good mutual funds and dollar cost average into them.

If I were your age I would be out trying to find those "Girls Gone Wild". They didn't exist when I was 25. But don't marry them - you'll loose half your savings.

Similar to Dex but with the market possible sucking for years to come, I would DCA in your local cat house. At least you will get something out of it. Of course I'm heavily medicated at the moment so proceed with caution.

 

[CuppaJoe]

Why, back when I was your age I totally rebelled against the oldsters who said you can lose your shirt buying mutual funds. I bought the $100 minimum, and every once in a while added the additional $25 minimum. And guess what, bear market arrived big time, went on forever and a day. So I developed a philosophy: investing in stock funds is like throwing your money away. I thought tossing money over my shoulder was amusing and kept on doing it. Then sooner than you would expect, I turned 40! Took a look at the balance and guess what, bull market! I needed to diversify.... The rest is history.

 

[Bestwifeever]

Tykimeister, Vanguard, Fidelity, TRowe and others have several Target Retirement mutual funds that are tied to your projected retirement year--their holdings get readjusted automatically no matter who is president . Take a look at one of those too for part of your money, if you want to diversify among a few funds. The ones for 30 or so years from now would have mostly stocks and more risk, vs. the target funds for more current years.

 

[BluesWannabe]

Agreed. Every man (well almost every one) said if they could do it all over again they never would get married.

There's time for both (going wild and settling down) ... the fun is different, but if I could do it over again, I would do the same thing - get married to a wonderful woman!!

Also, if I were under 25, I would make sure I had an emergency fund in cash/extremely short term bonds, and then I'd be investing every penny I had in the stock market... dollar cost average in if that makes you feel better (and of course, if that is how you must do it, like in a 401K).

I'd invest and then leave it alone until I was 40... then I'd add some bonds...

Good luck!

 

[Nords]

With stocks being so far down, wouldn't a high risk mutual fund make better sense since the market will likely go up in the next 5-10 years? Hopefully a lot up!

Our 16-year-old has been putting every penny of her salary in her Roth IRA (an international equity index) and sending an additional $60/month to a taxable small-cap value equity index. Of course she gets a great deal on room & board, too, so it's easy for her to be excited about these 40%-50%-off sales.

Also, what are some fair expense rates should I look for when choosing a company to start a mutual fund? Don't take me as ignorant, I have taken personal finance classes in college, but I want to get opinions before I jump in the pool. I talked to a friend of mine tonight who does audits for the government and he said to look inot Edward Jones.

You can easily invest in Fidelity or Vanguard funds with 0.10% expense ratios-- or even less. I'd say that 0.25% is a good goal and 0.6% the absolute highest expense ratio I'd consider paying.

I think many many auditors should look into Edward Jones-- if you give them your money then you will certainly get an education in personal finance. Once you've decided on your asset allocation, stick with Fidelity or Vanguard or Schwab.

 

[Sue J]

My son is 24 and he's been watching the market for a while, thinking it's time to do something already with his growing savings. So he paid off his car and in October he opened a Roth IRA and bought Vanguard VFINX (S&P 500 Index mutual fund) and set up for an additional monthly investment. He's reading a lot about investing and learning a lot.

At a young age it's hard to think about the long view.

 

[oma]

My son is 24 and he's been watching the market for a while, thinking it's time to do something already with his growing savings. So he paid off his car and in October he opened a Roth IRA and bought Vanguard VFINX (S&P 500 Index mutual fund) and set up for an additional monthly investment. He's reading a lot about investing and learning a lot.

At a young age it's hard to think about the long view.

Sue, your advice is exactly what I'd tell the OP. Stock index fund (total stock market, internation, or SP 500) with low expense ratio - with dollar-cost-averaging.