38 yo newbie NEED ADVICE TO START

[jasonfreedom]

If you have 4 children, you probably don't have a whole lot of time to research investing.

The safest, least time required, time-honored investment is an S&P 500 index fund, with low cost basis. Vanguard and Fidelity are my favorites.

If you DO have time to research investments, pick one vehicle and learn everything about it. Right now I am interested in crypto - a controversial choice. Real Estate is a popular option. Stay away from day-trading, forex, commodities, and anything uber speculative. You're not likely to beat professional money managers, or the S&P 500, in trading stocks - unless you apprenticed under Ben Graham or somebody. But that leads me to...

Find a mentor. I cannot stress this enough. I have a crypto mentor, a kid who is MUCH younger than me. I don't pay him, but I've earned his attention because of how seriously I take his advice (and also I give him findings from my own research). VERY IMPORTANT - a real mentor will not charge you money. Any "wealth coach" who charges $200 per hour is a fraud. A real mentor is already a multi-millionaire and will help you because he/she wants to, not because they need another client.

Lastly, it's a marathon not a sprint. You're unlikely to go from 0-$10 Million in 6 months. Even the cockiest crypto kid I ever met (not my mentor), took 3 years to accumulate $5 million. And he got lucky. Can you see sticking with this avocation for at least 10 years. If not...you'll hate it.

My personal favorite investing mindset book is The Millionaire Next Door.
But others here probably have better advice than me.

 

[jasonfreedom]

One thing not in previous posts:

Be sure to keep some cash liquid for a rainy day, such as a job loss or major house/auto repair. 3-6 months living expenses is recommended, depending on your circumstances. With 6 mouths to feed and house, I'd aim for 6 months of expenses.

Is this really useful? I'd rather be debt free, have 3-6 months worth of CREDIT, and put my money to work for me.

For an $80k salary, say $60k after taxes taken out...holding $30k in a 0.1% savings account, T-Bills, or rotating CD's for rainy day fund is a huge opportunity cost loss.

 

[teetee]

Start investing by becoming debt-free. Any suggestion here won't take responsibility for the risk you are carrying so if you put the money in, then the market crashed, you lose your job, then you will likely go through bankruptcy and lose your car and your house.

Take the debt risk off the table then at least you have a house and a car to fall back to.

Not to mention the psychological / emotional benefits and the interest savings you get from being debt free.

 

[OldShooter]

... If you DO have time to research investments, pick one vehicle and learn everything about it. Right now I am interested in crypto - a controversial choice. Real Estate is a popular option. Stay away from day-trading, forex, commodities, and anything uber speculative. You're not likely to beat professional money managers, or the S&P 500, in trading stocks - unless you apprenticed under Ben Graham or somebody. But that leads me to...

Find a mentor. I cannot stress this enough. I have a crypto mentor, a kid who is MUCH younger than me. I don't pay him, but I've earned his attention because of how seriously I take his advice (and also I give him findings from my own research). VERY IMPORTANT - a real mentor will not charge you money. Any "wealth coach" who charges $200 per hour is a fraud. A real mentor is already a multi-millionaire and will help you because he/she wants to, not because they need another client. ...

@shawnhersh, this might be the worst advice to a new investor I have seen posted online. At least it is the worst advice I have seen recently, both IMO of course. Stick to the reading I suggested in post #2 and you will do just fine.

The idea of a "crypto mentor" did make me smile, though. If you are attracted to that sort of thing, you might enjoy the first few chapters of "Extraordinary Popular Delusions and the Madness of Crowds" (https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds)

 

[pb4uski]

....For an $80k salary, say $60k after taxes taken out...holding $30k in a 0.1% savings account, T-Bills, or rotating CD's for rainy day fund is a huge opportunity cost loss.

I agree with your point, though there are other alternatives like online savings account that pay ~1%. I never had an emergency fund while working... I had money coming in, plenty of credit card capacity and could always just redeem investments if I needed to... but it never happened.

However, the first part is way off... OP probably keeps almost $72k/90% of gross... 7.65% for payroll taxes, 2.77% for Ohio state income taxes and 0% for federal income taxes due to child tax credit if his only income were $80k salary.

 

[jasonfreedom]

I agree with your point, though there are other alternatives like online savings account that pay ~1%. I never had an emergency fund while working... I had money coming in, plenty of credit card capacity and could always just redeem investments if I needed to... but it never happened.

However, the first part is way off... OP probably keeps almost $72k/90% of gross... 7.65% for payroll taxes, 2.77% for Ohio state income taxes and 0% for federal income taxes due to child tax credit if his only income were $80k salary.

Maybe I've lived in New Jersey for too long

 

[rickster55]

Only Investment Guide You Will Ever Need. by Andrew Tobias (paperback) Best and easiest read Investment book I have come across. A little elementary for most on this forum but perfect for you. My 38 yo daughter just finished reading it and I'm working on a test based on it for her to take.

 

[RockLife]

Your comment about market highs is well warranted. It makes me more than a little nervous to throw +\- $80,000 into this market. Given you can’t time the market, do I really have a choice?

There is an article out there about a theoretical investor who repeatedly put money in at market peaks (the worst market timer around) and still made significant gains, far better than sitting on cash (which just loses ground to inflation). I can't remember the author (Kitces maybe?) but it's worth trying to find.

Assuming you don't need this money until retirement, and if you can live with yourself when the next crash happens, you'll be well ahead in the long term. Just know there IS a next crash and don't let it get in your head. Your mutual fund investments will rebound and you will be ahead before long.

Cheers, and welcome to the team!

 

[2177V]

Current interest rate is 3.75%. I am in the process of working with my lender to lower, I believe to 3.25%. No fees. I put a large amount down on my home. Through appreciation over the years it’s worth about $450k.

I ended up with the cash simply from saving. I work in the oil & gas/utility field and some employers had 401k options and others did not when I was a contractor. I do not have an IRA or Roth.

My 2 cents:
Your Mortgage of 3.75% will protect you against inflation. If inflation is more than 3.75%, you win.....because your monthly mortgage payments are fixed. The last inflation numbers are 5%.

Open a traditional IRA or a Roth IRA. The maximum contribution per year is about $6,000. A traditional IRA allows you to reduce your taxible income by $6,000 which means you will pay less taxes. However, since you already have a lot of dependents, I am not sure there is a good benefit so you need to review your tax return. That is, what happens if your taxible income is reduced by $6,000 and compared your reduced taxes with your current taxes. The taxes on a traditional IRA kick in when you withdraw.

Roth IRA is funded by post taxed money and, unlike traditional IRA, there is no tax when you withdraw. This appeals to people who prefer to pay taxes now and they benefit from a tax free Roth IRA withdrawal in the future.

My opinion: A dollar saved at your age raising a family may mean more to you than a dollar when you are in your sixties and your kids are financially independent.

I like Vanguard for a traditional IRA or a Roth IRA because the fees are low. Go to their webpage and explore your options. A company IRA may be better because some companies help with the contributions to the IRA as an employee benefit.

Invest in an S&P500 index fund for the IRA because in the long term, S&P500 has done well and you will not need to withdraw money for 20 years plus. Do not fret about any downturns because the market always recover. When you get within 10 years of retirement, you should consider bonds for liquidity since Bonds do better than equity during a bear market so bonds can act a safety net. If you are going to invest in a taxible account (or outside of an IRA), then you should have some bonds for liquidity.

 

[Extra Medium]

Only Investment Guide You Will Ever Need. by Andrew Tobias (paperback) Best and easiest read Investment book I have come across. A little elementary for most on this forum but perfect for you. My 38 yo daughter just finished reading it and I'm working on a test based on it for her to take.

I love the idea of giving a test (and maybe pre-test before reading) for my 15 y/o DD! I'm such a mean dad; I told her that today I expected her to pick up all the clothes off her floor and read the first 20 pages of Factfulness, by Hans Rosling.

I also recently bought new copies of Your Money or Your Life (by Vicki Robin) and The Simple Path to Wealth (by JL Collins). I want to have them around the house for passive perusal, but am likely to assign them to her during summers or winter breaks before leaving for college. Plus, I may want to review them again myself. I really recommend them both for new orientees at my work, always admitting that though they are easy to read, and can be very valuable, I do recognize that this advice was not asked for!

 

[OldShooter]

Only Investment Guide You Will Ever Need. by Andrew Tobias (paperback) Best and easiest read Investment book I have come across. ...

I have that on the recommended reading list for my adult-ed investing class, but with the comment: "A quick tour of almost everything you could do, almost none of which you should be doing."