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Posted by Will on March 12, 2007, 10:53 am
I, currently don't have any money in the market. I am looking for a
way to start. I have a little debt left from college (around 12k)
and
am 25 years old and I am about to get married. I have been reading
books like those from Jim Cramer and others like Rich Dad, Poor Dad.
I would like to know where to start in how to get into the market
with
discretionary income or through credit with the intention on paying
it
back once gains are made.
Should I wait until I have maxed out my 401(k) with matching and my
yearly IRA contributions before I even think about putting money into
the market on my own or go for it, because I am young and can make up
any potential loss made? I am excited about the idea of getting into
the market, but everywhwere I turn I don't see myself getting any
closer, because once I pay off my debts, then comes a house and then
comes saving for future children...I am thinking I should start now
before my goals once combined with my future wife's get distorted
into
achieving for the next generation and not my own. I would like to
work smarter and not harder. With that said, I would like your
advice.
What is a good amount to start with? Jim Cramer states that $10,000
is a good number. What do you think?
What would be a good service to use? Should I go the way of Rich
Dad,
Poor Dad and go with a broker and pay him/her well for their advice
in
helping me get gains? Or do you think I will be overlooked with so
little money? Should I open up an e*Trade account or BofA Brokerage
account with low fees for trading?
How did you get your start in the market?
I would appreciate any and all advice that I get.
Thanks.
-Will
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Posted by PeterL on March 12, 2007, 12:23 pm
> I, currently don't have any money in the market. I am looking for a
> way to start. I have a little debt left from college (around 12k)
> and
> am 25 years old and I am about to get married. I have been reading
> books like those from Jim Cramer and others like Rich Dad, Poor Dad.
> I would like to know where to start in how to get into the market
> with
> discretionary income or through credit with the intention on paying
> it
> back once gains are made.
>
> Should I wait until I have maxed out my 401(k) with matching and my
> yearly IRA contributions before I even think about putting money into
> the market on my own or go for it, because I am young and can make up
> any potential loss made? I am excited about the idea of getting into
> the market, but everywhwere I turn I don't see myself getting any
> closer, because once I pay off my debts, then comes a house and then
> comes saving for future children...I am thinking I should start now
> before my goals once combined with my future wife's get distorted
> into
> achieving for the next generation and not my own. I would like to
> work smarter and not harder. With that said, I would like your
> advice.
>
> What is a good amount to start with? Jim Cramer states that $10,000
> is a good number. What do you think?
>
> What would be a good service to use? Should I go the way of Rich
> Dad,
> Poor Dad and go with a broker and pay him/her well for their advice
> in
> helping me get gains? Or do you think I will be overlooked with so
> little money? Should I open up an e*Trade account or BofA Brokerage
> account with low fees for trading?
>
> How did you get your start in the market?
>
> I would appreciate any and all advice that I get.
>
> Thanks.
>
> -Will
Well, your 401K can be, and should be, part of your overall investment
portfolio. I would pay off debt (what's the interest rate?), max
401K, save for an emergency fund, then think about saving money for
investment. A simple rule, don't spend more than you earn.
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Posted by woessner@gmail.com on March 12, 2007, 1:08 pm
> or through credit with the intention on paying it back once gains are made.
First piece of advice: What you're describing here is called investing
on margin. It is not for beginners. Heck, it's not even for
intermediates like me. So I would advise you to stay very far away
from investing on margin until you have a lot of experience under your
belt.
> Should I wait until I have maxed out my 401(k) with matching and my
> yearly IRA contributions before I even think about putting money into
> the market on my own or go for it, because I am young and can make up
> any potential loss made?
I think you're a little confused, here. Chances are that at least
some of the money that you put in your 401k and/or IRA is going "into
the market". How much depends on your fund choices. It could be 0%
if you're investing solely in bonds and cash equivalents, but I'm
guessing that's not the case.
Without knowing the details of your situation, it's hard to give
specific advice. But I can offer you pretty generic advice that works
well in many situations. First of all, make sure you contribute
enough to your 401k to get your employer's full match. Even if your
employer "only" offers a 50% match, that's a return you won't get
anywhere else. After that, start paying off any high-interest (> 6%),
non-deductible debts you have. This includes credit cards, personal
loans and car loans.
If you manage to do all that, you'll be WAY ahead of most of your
peers. The next step is to set up an emergency fund. A simple,
reasonable goal is 3 months of take-home salary. Stash this in a safe
place like a high-yield savings account or a money market fund. Make
sure you're getting a reasonable amount of interest (> 3%) so that you
don't lose value to inflation.
After that, I would start saving for a house. A house is a fantastic,
but expensive, investment. Besides, you have to live somewhere.
Ideally, you'll want to have at least a 20% down payment to avoid
private mortgage insurance (PMI). Depending on where you live, that
may not be reasonable, given the hyper-inflated cost of housing in
many areas. With a 10% down payment, you can probably get a 2nd
mortgage to avoid PMI. A 5% down payment is pretty much the bare
minimum.
Only after you've done all that would I advise getting more heavily in
to stocks. I would recommend starting up a Roth IRA before putting
more money in to your 401k. If you max out the Roth IRA, then start
contributing more to the 401k. If you max out your 401k... well,
you'll definitely be in what Kramer calls "Mad Money" territory. :-)
So there's a pretty basic sketch. Like I said, that's pretty much the
generic advice I would offer anyone. I will also echo PeterL's rule:
Spend less than you make. The most important thing is to save. Only
after you accomplish that do you need to start worrying about how and
where to invest.
--Bill
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Posted by jIM on March 12, 2007, 1:23 pm
> I, currently don't have any money in the market. I am looking for a
> way to start. I have a little debt left from college (around 12k)
> and
> am 25 years old and I am about to get married.
> I would like to know where to start in how to get into the market
> with
> discretionary income or through credit with the intention on paying
> it
> back once gains are made.
>
> Should I wait until I have maxed out my 401(k) with matching and my
> yearly IRA contributions before I even think about putting money into
> the market on my own or go for it, because I am young and can make up
> any potential loss made?
>
> What is a good amount to start with? Jim Cramer states that $10,000
> is a good number. What do you think?
>
> What would be a good service to use? Should I open up an e*Trade account or
BofA Brokerage
> account with low fees for trading?
>
> How did you get your start in the market?
>
I would not leverage debt to invest in the market. A difficult year
could wipe out 30%, and some 3 year periods might reduce you by 50%...
so watch using leverage. makes you feel good on way up, could make
you panic on the way down.
How much (as both % of income and overall amount can you invest each
year)? If only 1k, your options might be limited to mutual funds/
ETFs, if more, you can consider stocks and DRIPs (IMO).
For me, it's 11k. ~7k of this goes into 401k (10%) and another 4k
goes into my Roth. All in mutual funds.
The rest of discretionary money I have goes to paying down mortgage.
To get started, look at Fidelity, Vanguard and/or T Rowe Price for
ideas. Look at your 401k offerings for more ideas. T Rowe allows you
to start with $50/month. Not sure on minimums at other places. If
you want to invest in taxable accounts, consider a tax efficient
mutual fund, DRIPs, discount brokers, ETFs and other possibilities.
The 401k comes out pre-tax, your employer may match, that is a good
bang for the buck.
Roth IRA has other features which make it attractive. Tax free
withdraws of gains, access to contributions pre retirement and no RMDs
to name 3 advantages.
If you only did 401k and Roth, you would be doing a GREAT job.
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Posted by W. Wells on March 13, 2007, 8:39 am
The first thing I would do is put the Cramer book away.
> I, currently don't have any money in the market. I am looking for a
> way to start. I have a little debt left from college (around 12k)
> and
> am 25 years old and I am about to get married. I have been reading
> books like those from Jim Cramer and others like Rich Dad, Poor Dad.
> I would like to know where to start in how to get into the market
> with
> discretionary income or through credit with the intention on paying
> it
> back once gains are made.
>
> Should I wait until I have maxed out my 401(k) with matching and my
> yearly IRA contributions before I even think about putting money into
> the market on my own or go for it, because I am young and can make up
> any potential loss made? I am excited about the idea of getting into
> the market, but everywhwere I turn I don't see myself getting any
> closer, because once I pay off my debts, then comes a house and then
> comes saving for future children...I am thinking I should start now
> before my goals once combined with my future wife's get distorted
> into
> achieving for the next generation and not my own. I would like to
> work smarter and not harder. With that said, I would like your
> advice.
>
>
> What is a good amount to start with? Jim Cramer states that $10,000
> is a good number. What do you think?
>
>
> What would be a good service to use? Should I go the way of Rich
> Dad,
> Poor Dad and go with a broker and pay him/her well for their advice
> in
> helping me get gains? Or do you think I will be overlooked with so
> little money? Should I open up an e*Trade account or BofA Brokerage
> account with low fees for trading?
>
>
> How did you get your start in the market?
>
>
> I would appreciate any and all advice that I get.
>
>
> Thanks.
>
>
> -Will
>
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