Savings Bonds. Am I missing something here?

[Ocean Blue]

Some good advice from wiggles92. Here's my two cents; You should be congratulated for even thinking about your financial future! Having a 401k is a great start. Investing can be dwell down to a simple formular, risk vs return. Higher risk = higher return. Since you will have 40 years to go before you're retired, you SHOULD take more risk and invest in capital market (stocks). Stocks, on average has a much higher return than commodities/real estate/bond (Central pet and garden stock was $2.42 Nov17, 2008 it went up to $13.52 on Aug 3, 2009) I know I own this stock . But with stocks, it can become worthless (example; enron) We have been going through tough times since 2008 but if you invested since the market low of March 2009, you now would have double your money. The best strategy to overcome the high and low is to hold for a long term horizon. The worst thing you can do is to put your money in pillow case in which you will lose money do to inflation. Bonds are consider safe and some like muni are tax exempt but offers very low return. Bottom line: Do some research and choose the investment tools and style that suits your needs the best. I've made tons of $ on stocks but have loss enough to buy a nice house. Overall though, I'm still bullish when it comes to investing in stock!

 

[nitrofish1]

Some good advice from wiggles92. Here's my two cents; You should be congratulated for even thinking about your financial future! Having a 401k is a great start. Investing can be dwell down to a simple formular, risk vs return. Higher risk = higher return. Since you will have 40 years to go before you're retired, you SHOULD take more risk and invest in capital market (stocks). Stocks, on average has a much higher return than commodities/real estate/bond. We have been going through tough times since 2008 but if you invested since the market low of March 2009, you now would have double your money. The worst thing you can do is to put your money in pillow case in which you will lose money do to inflation. Bonds are consider safe and some like muni are tax exempt but offers very low return. Bottom line: Do some research and like the investment tools and style that suits your needs the best. I've made tons of $ on stocks but have loss enough to buy a nice house. Overall though, I'm still bullish when it comes to investing in stock!

I see. When I say I have a 401k, so far I only have about 1k in there, and it had to be rolled into an IRA because of me getting laid off.

Go with online trading or should I use a broker? I know online has trading fees and an opening fee but I feel like I'd make more than the percentage a broker would take if I made a large cut. (Ive heard of 500 dollars to open an online trading account, with around 7-8 dollars per trade. Which I would limit trading to a few times a year for that fact, and pay out when high of course.)

I will probably still invest some in 401k if my employer will match my percentage of course, but with matching it only needs to be a few percent to make a decent chunk.


And I apologize wiggles, I was just very skeptical of stocks throughout this conversation but if the return is higher than that of bonds, it's pretty obvious at that point.

 

[TheHolyArachnid]

keep your money in your pocket or safe i would trust nobody with my money

+1

 

[bbortko]

I would stick with mutual funds until you have at least 50k to invest. This allows you diversify withoutout a lot of capital. With a $1,000 your not going to be able to buy enough shares to protect yourself from a company taking a dump. If you find a fund that will get you 8-9% you're doubling your investment every 8-9 years. Also determine how much you want to invest out of each check or whatever period you choose and stick with it. Too many people stop investing when the market is down when in reality the should be buying more than ever because everything is on sale.

 

[Wiggles92]

I see. When I say I have a 401k, so far I only have about 1k in there, and it had to be rolled into an IRA because of me getting laid off.

Go with online trading or should I use a broker? I know online has trading fees and an opening fee but I feel like I'd make more than the percentage a broker would take if I made a large cut. (Ive heard of 500 dollars to open an online trading account, with around 7-8 dollars per trade. Which I would limit trading to a few times a year for that fact, and pay out when high of course.)

I will probably still invest some in 401k if my employer will match my percentage of course, but with matching it only needs to be a few percent to make a decent chunk.


And I apologize wiggles, I was just very skeptical of stocks throughout this conversation but if the return is higher than that of bonds, it's pretty obvious at that point.

I understand your concerns and agree that some caution is needed when investing, so I consider your skepticism to be a good thing since that means that you're more likely to do more research before making a decision rather than just going out & doing something.

A broker will cost you more than doing trades via a website, but the broker can offer you advice (but said advice could be terrible as many have learned the hard way); personally, I'd go for the cheapest website out there and do the research on my own rather than put complete faith in someone who's making money off of you no matter if you gain or lose money.

As it's been said before, for returns & risks, it typically goes stocks > mutual funds > bonds with stocks having the highest returns & risks. Stick to the "buy low, sell high" mentality in order to keep your risks lower & your returns higher. A diverse portfolio is key for minimizing risks as well, so still have a decent amount in mutual funds & bonds; you can always convert your profits from stocks to a safer option, too, in order to minimize your risks & preserve that profit.

I kept a hypothetical spreadsheet going when I was considering jumping into the market (didn't have enough cash to do so), and I came out with double the hypothetical money even after accounting for trade fees & such. Of course then, I stuck to "buying" large quantities of cheap stocks fluctuated a decent bit, so there would have been a large amount of risk involved in my case had I actually invested.

 

[nitrofish1]

I would stick with mutual funds until you have at least 50k to invest. This allows you diversify withoutout a lot of capital. With a $1,000 your not going to be able to buy enough shares to protect yourself from a company taking a dump. If you find a fund that will get you 8-9% you're doubling your investment every 8-9 years. Also determine how much you want to invest out of each check or whatever period you choose and stick with it. Too many people stop investing when the market is down when in reality the should be buying more than ever because everything is on sale.

that 1k is in a retirement IRA. All i can do with it is transfer it to a newer 401k or let it sit for years on end. Can't be withdrawn without losing most of it.

I understand your concerns and agree that some caution is needed when investing, so I consider your skepticism to be a good thing since that means that you're more likely to do more research before making a decision rather than just going out & doing something.

A broker will cost you more than doing trades via a website, but the broker can offer you advice (but said advice could be terrible as many have learned the hard way); personally, I'd go for the cheapest website out there and do the research on my own rather than put complete faith in someone who's making money off of you no matter if you gain or lose money.

As it's been said before, for returns & risks, it typically goes stocks > mutual funds > bonds with stocks having the highest returns & risks. Stick to the "buy low, sell high" mentality in order to keep your risks lower & your returns higher. A diverse portfolio is key for minimizing risks as well, so still have a decent amount in mutual funds & bonds; you can always convert your profits from stocks to a safer option, too, in order to minimize your risks & preserve that profit.

I kept a hypothetical spreadsheet going when I was considering jumping into the market (didn't have enough cash to do so), and I came out with double the hypothetical money even after accounting for trade fees & such. Of course then, I stuck to "buying" large quantities of cheap stocks fluctuated a decent bit, so there would have been a large amount of risk involved in my case had I actually invested.

some of the stocks ive seen have fluctuated a great deal, especially around xmas time. one in particular that i would fancy investing in being Amazon, however with initial stock prices at 200 a pop, the front capital money to purchase those would have to be substantial, but the return of selling them at their high point of 245 each would be premium. same goes for Google and other major internet companies.

I really have considered that idea of what I like to call "funneling". Once interest has matured or the like, transferring it into another safe or safer account for continued interest gains.

Also btw, my subscription to SmartMoney maagazine just had an article about the best online trading based on trading fees, support, flexibility, tools, etc. and number one was Fidelity online trading. it was out of a top ten list. Theyll even let you borrow money from them for the purpose of trading, with the lowest interest rate going to those who wish to borrow more than 500k+, however i wouldnt really suggest playing with money that isnt yours :/ sounds like a big hole youd have to jump in later on.

thanks again.

 

[nitrofish1]

on a side note, my mutual fund that had sit for quite a while with a starting balance of around 3k, jumped in share price just before I was going to withdraw it to an almost 4 figure gain, not too shabby for the principal amount if you ask me. some quarters were scoffingly low down, but once i got that statement that it had jumped is when i was yelling sell sell sell

 

[barberking12]

and whoever said higher risk equals high return that is the worst advice i have ever heard higher risk could also mean lose all your money but its your money if you trust the goverment enough to let them play with your money go ahead but imo i wont even put my money in a bank i pay my taxes and thats all the money i make stays in my safe

 

[nitrofish1]

With the economy the way it is, and looking at my bonds, they are all going to take the 30 years to mature. But it is strange that the bonds I purchased most recently and during the economic downturn have the highest interest rates.

Looks like I need to find those stocks in the small companies that are the most promising. But money that is to be expended is in savings of course yet long term safety I will still find in bonds. Im feeling more of a 50/50 mix than a 60/40 of stocks to bonds. A bit more conservative yet still taking a risk.