SavingsTalk.com

200pips

I work in the retirement plans field and understand the importance of saving for retirement as well as investing in a way which yields the best return for my retirement. I realize being young, I can absorb high losses and still have time to make up for it. However, I am too conservative and I feel I may be on the losing end with my 401k.<br /><br />ME - I am 28, 100% vested and currently defer 10% of my pay, which is roughly $45K annually. Currently, I have it invested 100% in a Money Market with Fidelity at a measly interest rate. I also have a Roth IRA, roughly $7K in a 5yr CD. Aside from these two plans, I have minimal liquid savings and zero credit card debt (my only plus :) ). I do have a mortgage and an automobile loan. <br /><br />To sum up, I need to gain confidence and invest better. Any suggestions?<br />Hi Duck,<br />Please re-read. I do not work in investments. I work with retirement plans. I also don't make $450K, drop the 0. <br /><br />Thanks.<br />

alien

Let me get this straight. You're 28 and you make $450,000 a year investing for other people and your asking yahoo for financial advise?

chicago_bull

You don't need to 'gain confidence and invest better'. You are feeling jealous of investors that take bigger risks and see bigger returns.

You are miles ahead of most folks your age. You will be able to retire early at this rate, and enjoy life. If you want to try something with a little more risk, try buying a rental property. Prices are falling because of the mortgage crunch. It's an investment that has a 'set' real world value. It can provide cash now (in the form of rent) as well as future equity in the home.

save123

Sounds like you work in the retirement plans field but not as an investment banker or advisor; otherwise you would invest in what you advise others to do. I suggest you should talk to the investment advisor at your company. They can help you to decide. Since you have an account with Fidelity, check out some of the mutual funds with 4 stars or better Morning Star rating with annual returns of about 8 to 12%. They are usually safe. Dow Jones Index average is about 12% annually in the last 30 years.

Good luck.

big$saver

You already know that you ar letting your money underperform. You have &quot;lazy&quot; money - it isn't working hard. The only money that is probably working hard is your home, but that is a long term investment.

I would suggest a few things. First, the 401k money market is not a good option. A better option is to invest it in a good index fund. While an index fund does have its ups and downs, over time they will be close to the overall growth of the stock market, and you are looking for long term growth there.

The Roth IRA is good, but having $7k in a CD whenyou have minimal liquid savings is a very bad move.

In my mind - first task is to fund into an appropriate MMF 6-12 months of expenses. That way if a disaster hits and you have limeted income for awhile, then you have funds for emergencies.

Second, I would first look at what type of investing you might be interested for long term financial growth. It might be stocks, real estate, or other ways. Any of those sound interesting? if so, go in search of a mentor. Find someone who is already successful in investing in the areas you are interested in. Sometimes you can find investment clubs where people can help you. But the main thing is to find someone who can occasionally hold your hand, and occasionally give you a slap when you need it.

The main thing, is you are in a position where you can make mistakes and still recover from them. So don't be worried about making a mistake. We all do. You are not a failure if you make a wrong investment decision. Realize that good investment means taking on some risk, and realize that the world will not end, and you won't be held up to public ridicule.

You can do it. So do it.

BOB+

You are not chicken, you are sensible. Do not listen to the hot heads here. Investing is not gambling. Put you money in 4 income type mutual funds with recognized, successful,managers (on this consult a financial adviser if you have to, or search the Morning Star website).

Cash deposits and bonds give a high initial return (5% - 7%) which remains static and is continuously eroded by tax and inflation. The above funds by contrast, will give you an initial income of about 3.5%(after tax), which will keep growing in real terms, as well as increasing capital value.

This will carry on indefinitely into your old age and will be there for your children and their children.

natali

There is nothing particularly wrong with being conservative. I am myself. But you do tend to be what I would call too conservative. My wife was also. But now she has taken a few steps towards a more balanced approach with a lot of prodding from me and her broker. At one time she was 95% cds. Now maybe 20%. Of course the sorry cd returns have helped a lot. She now has about 6 different mutual funds and even one stock.

I do not know what options your 401k allows you. Some have good options and some not so good options. Fidelity though does have some good choices if they are available to you. What I would suggest is taking a small portion of your 401k, I leave the portion up to you, and investing it in a relatively conservative equity based fund such as Fidelity Equity Income Fund. It is a relatively diversified and conservative fund. A year from now if that proves better than the yield on your money market account, move a little more to another Fidelity Fund that is not too aggresive. Maybe Fidelity Diversified International Fund (I think it is closed to new investors but it might be available to your 401k).

There are two things you need to keep in mind. One is that inflation is eating away at your 4.5% money market return at a rate of 3.5% annually according to the government that likes to lie. And the dollar is becoming worth less every day. You have two options to fight these trends. One is to invest in equities and the other is to move your investments overseas.

kevin

Oh i see, the 45k is your salary, not the 10% of your salary your investing. Mutual Funds are good for long term investing when you dont want (or dont have time) to keep track of individual stocks. Many of them have 10 year avg. returns of 10% or better. Which is much better than any CD or Money Market you will find. Roth IRAs are also good, which you can have Mutual Funds in your IRA. You may not have to pay taxes on your earnings.

Minsk

At your age, your retirement plan should be at least 75% in equities. If you were 75, I would say put your money in a money market and CD's.

Go to a brokerage firm (Fidelity, Schwab, etc) sit down with an agent. Put your moneys into equities (if you don't have the time and education - stick with mutual funds), I would suggest 25% foreign, 25% in an index fund, 25% in a high growth fund, 25% in a value fund.

Over time the return of the market is 8-12%. You have a long period of time where you should expect (on average) to get that return.

Don't listen to the real estate guy. Real estate is not a passive investment. Your primary residence isn't an investment - it's a place to live. Secondary real estate must be cash flow positive.

Remember, you don't pay property taxes on equities, you don't have to heat or cool equities, you don't have to put a new roof on equities, and you don't pay mortage interest on equities.

alien

I suggest that you pay off your mortgage and your car loan before you start making any investments. You'd have to make risky investments in order to get more profits than the interest rate you are paying for your loans. And you'd be risking a lot more than just your investment money.

There is always a possibility that you will loose your job and have trouble paying for your mortgage and your car loan. If the economy goes bad and you loose your job, then your investments may decline in value and you may have to sell them right there and then in order to avoid loosing your house and your car too. You may end up loosing everything in a situation such as this. And that's why it's a good idea to pay off your loans as soon as possible before risking your savings on some investments.