Help for a 40 year old....

Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date Help for a 40 year old.... black 03-17-2007  Re: Help for a 40 year old.... joeNOSPAM@bea.c... 03-17-2007  Re: Help for a 40 year old.... darkness39 03-17-2007  Re: Help for a 40 year old.... darkness39 03-17-2007  Re: Help for a 40 year old.... Logan Shaw 03-17-2007  Re: Help for a 40 year old.... black 03-18-2007  Re: Help for a 40 year old.... Sandra Loosemor... 03-17-2007  Re: Help for a 40 year old.... bowgus 03-18-2007
Posted by black on March 17, 2007, 2:52 pm OK...I admin that I am not a money wizard!! There I said it. I have ideas but can never seem to implement them. Therefore, we have a good amount of money in the bank but its not earning us anything. This is my story! I am a 42 yr old married man with a 7 year old kid. We make a decent living and have a house that has about $100000 in mortgage left. My wife and I make about $160000 total/year. Our cars are paid for and we have very little debt (knock on wood) other than the mortgage. Back a while ago, I made some bad investments that took my confidence down in investing. Due to many factors which included procrastination, emotion attached with a certain company, assuming that the stock will go up eventually even when the stock dropped 80% and the most important of all, not knowing that there were stop orders and the like and not being able to use all the tools in my Datek account back in 2000. Made the mistake of not investing in 401k until 2003 and then started dumping about $15000, which in 3-4 years time has grown to $88,000 With all of that lousy history, fast forward to 2007, we have quite a bit of money in the bank in a money market account that earns about 4-5% interest. I feel that I have let us down by not educating myself and investing wisely that would have almost had our money doubled or tripled. I keep thinking that I have missed so many opportunities that I will not be able grow the money like it could have back in the last 6-8 years. The main things that prevent me from taking another crack in investing wisely is the thought of losing money like I did when I invested in some of those stocks. What are some of the steps that one would have to take if they are in my position other than talking to a financial analyst, to whom we have spoken but this guy pushes things like insurance and the like which are profitable to him. I would appreciate any and all advise. Thanks black Posted by joeNOSPAM@bea.com on March 17, 2007, 4:59 pm > OK...I admin that I am not a money wizard!! There I said it. > I have ideas but can never seem to implement them. Therefore, we have > a good amount of money in the bank but its not earning us anything. > > This is my story! > > I am a 42 yr old married man with a 7 year old kid. We make a decent > living and have a house that has about $100000 in mortgage left. My > wife and I make about $160000 total/year. Our cars are paid for and > we have very little debt (knock on wood) other than the mortgage. > > Back a while ago, I made some bad investments that took my confidence > down in investing. Due to many factors which included > procrastination, emotion attached with a certain company, assuming > that the stock will go up eventually even when the stock dropped 80% > and the most important of all, not knowing that there were stop orders > and the like and not being able to use all the tools in my Datek > account back in 2000. Made the mistake of not investing in 401k until > 2003 and then started dumping about $15000, which in 3-4 years time > has grown to $88,000 > > With all of that lousy history, fast forward to 2007, we have quite a > bit of money in the bank in a money market account that earns about > 4-5% interest. I feel that I have let us down by not educating myself > and investing wisely that would have almost had our money doubled or > tripled. I keep thinking that I have missed so many opportunities > that I will not be able grow the money like it could have back in the > last 6-8 years. The main things that prevent me from taking another > crack in investing wisely is the thought of losing money like I did > when I invested in some of those stocks. > > What are some of the steps that one would have to take if they are in > my position other than talking to a financial analyst, to whom we have > spoken but this guy pushes things like insurance and the like which > are profitable to him. > > I would appreciate any and all advise. Thanks > > black I recommend you read a book or two to get a quick education: 1 - Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor by John C. Bogle 2 - Asset Allocation: Balancing Financial Risk by Roger C. Gibson Then you will know more, and also you will know what you *don't* know, and avoid lots of mistakes, including paying advisors to get you into loaded funds, annuities, and insurance schemes. Joe Weinstein ======================================= MODERATOR'S COMMENT: Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted. Posted by on March 17, 2007, 7:38 pm > OK...I admin that I am not a money wizard!! There I said it. > I have ideas but can never seem to implement them. Therefore, we have > a good amount of money in the bank but its not earning us anything. Mutual Funds for Dummies and Financial Planning for Dummies are both helpful. My general thoughts are: - work out how much you need for expenses, etc. It is normally prudent to keep at least 6 months of living expenses (including mortgage) in a 'cash' account (MM Funds, CDs etc.) - make sure you have enough term life insurance and disability insurance to cover you in situations of death or serious illness (including benefits provided by your employer) Assuming you have a normal retirement profile (ie seeking to retire between 60 and 65, no special health or family issues) and you feel you are making adequate college provisions for children etc. then - subject to that, maximise your 401k contributions, at least to the point of getting any company matching, investing, if possible, in a low cost index fund. Ideally, a low cost index fund and a low cost international index fund (70-75% in the former, 25-30% in the latter). You don't want to make investments in a lump sum, you want to make investments steadily over time, on a month by month basis. If there is a range of index funds on offer, what you want is the fund that 1). matches or tracks the widest index possible (ie if possible more than the Standard and Poors 500 index) and 2). has the lowest possible fees and Total Expense Ratio. - IRAs are a separate issue, as I am not an American based investor, I leave that to others to consider Remember paying down your mortgage is also an investment, and one which gives a certain rate of return (the interest rate of your mortgage, adjusted for the tax benefits and the tax you pay on investment income). Posted by on March 17, 2007, 7:38 pm > > I would appreciate any and all advise. Thanks > > black I would add, a good long term bet is 8% per annum from such a stock index fund as I suggest in my other post. And that fund will beat at least 2/3rds of the funds out there. It is a pretty safe bet that it will do at least as well as 2/3rds of the funds out there. 8% doubles your money every 9 years. Posted by Logan Shaw on March 17, 2007, 7:38 pm black wrote: > I am a 42 yr old married man with a 7 year old kid. We make a decent > living and have a house that has about $100000 in mortgage left. My > wife and I make about $160000 total/year. Our cars are paid for and > we have very little debt (knock on wood) other than the mortgage. If you have very little debt, you are more of a 'money wizard' (to use your term) than half the people living in the United States. ;-) > Back a while ago, I made some bad investments that took my confidence > down in investing. Due to many factors which included > procrastination, emotion attached with a certain company, assuming > that the stock will go up eventually even when the stock dropped 80% > and the most important of all, not knowing that there were stop orders > and the like and not being able to use all the tools in my Datek > account back in 2000. Just like anything, getting something out of the market requires putting something into it. Specifically, if you are trying to beat the market, you can't expect to do that unless you know something more than an average investor, because everyone else is trying to make as much money as possible as well. For your outcome to be different than everyone else's, you have to be doing something better than them. (Or you have to be lucky, but luck is not a *strategy*.) Therefore, to be rational about investing, you have to make a decision. Either you put lots of effort into becoming better than the average investor and shoot for above average, or you don't, and you shoot for average. If you choose the latter, shooting for average, you want a simple approach that is very likely to approximate average returns. Shooting for average definitely means diversification, because diversification pulls you more towards the average, which is the goal. Uncomplicated mutual funds (like index stock funds, but not limited to that) could be a part of the solution. > With all of that lousy history, fast forward to 2007, we have quite a > bit of money in the bank in a money market account that earns about > 4-5% interest. You should definitely do something about that. :-) I suppose the two obvious approaches are to either go pay someone to help you choose a strategy, or just choose a simple, reasonable strategy yourself, one that is an improvement over a bank account but would be easy to convert into something a little more optimized later. - Logan Similar Threads Posted Portfolio Mix for an 85 year old woman June 25, 2007, 12:33 pm Tax year for Roth conversions September 22, 2008, 2:04 pm 0% interest $100K loan for a year? October 8, 2006, 7:06 pm How to Calculate 3 year ARM Payment After Adjustment November 30, 2006, 5:01 am How to invest 300k for a 40 year old who needs to live off of it. 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