clueless about investing

[shallowgal]

I just inherited $15,000.00, and I put $500/month into a savings account. That account has about $5000 in it. I want to put this $20,000.00 into some sort of account (401K? Annuity?) where I will not be taxed on it, and can continue to put $500/month into it, but that will yeild a higher interest rate than my regular savings account. I also want something that I can withdraw out of sometime in the next 5-10 years.

Anybody have any suggestions?

[Mr. Breeze]

5% plus at the banks now is hard to beat. Might look into IRA's.

[SPECtackle]

Just remember that you spell investment, RISK! Depending on your age, either the IRA or an annuity may pose taxable events to access in 5-10 years. A top performing growth fund is probably you best best,as you will have relatively small taxable capital gains and or dividends during your holding period although "top performing" may well mean significant taxable gains upon eventual sale, if you are lucky. If you will be 59 1/2 within your 5-10 year liquidation time frame, an annuity may be a good choice but I would be careful to not get one that requires "annuitization" and I would look for a surrender penalty period you can live with, 7 years is probably typical. A good variable annuity should provide some of the the growth sub-accounts you need for the performance you desire. You will never get where you are going in a savings account and although Mr. Breeze's 5% at the bank may sound good, it would be hard to some by based on my most recent look, especially for the amounts you are talking about. A fixed annuity might provide the 5% mentioned but it is hard, if not impossible to get where you want to be with any type of debt holding. Equity is what gets there, allbeit over time.

[Mr. Breeze]

E-Trade is offering 5% for a 1 year CD right now. $1,000 minimum. Shop around online to get the best bank rates.

[Sow Trout]

Over the long term stocks have averaged about 10% gain per year. Much better than 5%. DO NOT buy an annuity. The money it makes will go to someone else, not to you.

[chrisnitro]

check out ING, they have some good accounts..

[Bobby Miller]

5-10 year liquidity means you probably can't go duck taxes. Do you have a 401K account at your place of work? If so, there should be a manager who can talk to you about risk and return. If you want to play the market yourself, understand a few key concepts.

investing vs speculating
diversification and portfolio effect
beta
variance
earnings smoothing (and other finc statement hygiene tools)
managed vs indexed funds
corporate governance and EVA
real vs nominal rate of return
yield curve - this nugget is huge on a 5 -10 year horizon.

Yahoo.com finanance will cover all of these definitions in the glossary. Money mag and wsj.com will give examples of where "the rubber hits the road" with current examples.

Learn at least one industry besides the one where you work right now. You can make a return on growth or on selling short if you know an industry.

Always remember: If you act on bad advice or incomplete information and things go bad, who pays for it???

[Sharkbite]

I'm a financial advisor and my thoughts are that if you are not comfortable investing money on your own you should avoid any advice given off a board like this and find an advisor for yourself that you trust that has your investment goals in mind. There's a ton of them around and I typically suggest shopping around as you would for a doctor or good mechanic.

I'm not going to bash anyone's ideas here. I'm sure that everyone here as great ideas and suggestions, keep in mind they are their own ideas and suggestions that fit their own personal goals vs. their own personal risk tolerances. Find a professional to help you build your own portfolio. Lastly, you also won't find any advisors giving you anything past the advice I'm suggesting due to industry regulations that you learn on your first day. The only thing I would say is that from the information you've laid out so far, I wouldn't be comfortable saying any of the above recommendations are what I'd suggest.

Please feel free to PM me if you have any more specific questions as to where to find a reputable source of investment advice. I don't work with individual clients anymore, but would be happy to help you find a firm that does.

Best wishes & tight lines,
DJ

[Sow Trout]

If you choose to go to an advisor, be sure he is paid hourly and not based on commisions from things he sells you. It can create too much conflict of interest.

[Sharkbite]

Advisors aren't paid hourly. If they are, they aren't good ones. Think about it...if a broker is good enough to warrant getting as much as they get paid (some make several hundred thousand per year) giving good advice at a good sized firm, why would they give it away for a few bucks an hour?

99% of advisors get paid either through commissions, fee based accounts (they charge you a % of the amount they manage for you), or get paid from the mutual funds, annuities, etc they put you into. Don't hesitate to ask about charges. If they say "I'm not getting paid to do this" or brush past it quickly, go somewhere else, the person is lying unless it's a money market account.

Best wishes

[Sow Trout]

So if that advice is so good why do the unmanaged indexes beat the majority of managed mutual funds? Surely they get the high dollar advice.Advisors aren't paid hourly. If they are, they aren't good ones. Think about it...if a broker is good enough to warrant getting as much as they get paid (some make several hundred thousand per year) giving good advice at a good sized firm, why would they give it away for a few bucks an hour?

99% of advisors get paid either through commissions, fee based accounts (they charge you a % of the amount they manage for you), or get paid from the mutual funds, annuities, etc they put you into. Don't hesitate to ask about charges. If they say "I'm not getting paid to do this" or brush past it quickly, go somewhere else, the person is lying unless it's a money market account.

Best wishes

[Sharkbite]

There are thousands of funds run by countless numbers of managers. Some are good, many are bad. There's a lot of reasons funds are bad . It could be because of portfolio manager turnover, style drift, the fund allowing day trading so they are required to keep large amounts of cash to cover distributions, high investment turnover causing large capital gains, imbedded capital gains from previous owners, etc. In addition to that the majority of funds out there are stacked against an index they have little correlation to when you look at the actual investments (ie balanced funds vs S&P 500). A good advisor should be able to deciper between a good investment and a poor one....thus getting you a good return and earning his commission or fee.

And besides, who cares what % the majority make, you should only care what you make.

Keep in mind that some people understand all of the above and have a ton of time to watch their investments, and if that is the case, by all means, run to Vanguard or Etrade or wherever it is you go to do your investments. For the rest out there there are people that do it for a living and just as a doctor, an attorney, or a mechanic...deserve to get paid for their job.

Sure you can buy a book that explains how to remove your own appendix, and I'm sure if enough people tried it, many would do a great job at it. But I'm sure that there's thousands of people that would also die from the attempt.

Again, this brings us back to my original post and back to the beginning question of the post titled something about "Clueless about Investing." If you don't know how to do it, hire a professional that is good at it and has your goals in mind to do it for you. You'll typically do much better then asking for advice at a cocktail party.

[Mr. Breeze]

The person that started this thread has never responded, so.....guess she went to Vegas! lol

[Sharkbite]

That'd be one way to avoid commissions!

[SPECtackle]

Vegas avoids any capital gains for most folks too! Too bad you can't roll thoses losses forward.

[Sow Trout]

Sharkbite,
Are you saying that advice one could get from Vanguard would be less than professional? Don't their analysts work in the same manner others do at advisory funds?

[Sharkbite]

Sow-
PM Sent. We're getting a little off track here and I don't want to hijack the thread any more then we already have. Please PM back with any response.
DJ

[flatscat1]

Vanguard, or any mutual fund really, employs analysts to evaluate and manage particulars of mutual funds. For instance, analysts for a large cap growth fund have to monitor large cap companies, make tactical trades and ensure the fund stays within its stated size, style and objectives. These analysts are surely professionals, but they are neither responsible for nor have any contact with their investors.

It is the job of a financial advisor to evaluate risk, goals, objectives and construct a diversified portfolio (of mutual funds, stocks, hedge funds, private equity, commodities, fixed income, etc.) that is catered to each individual investor's specific situation......all in an attempt to help increase the probability of achieving one's goals, whatever they may be.

So in short, mutual funds don't typically provide advice or comprehensive planning.

[Bobby Miller]

I liked the part where sharkbite invited us all over for a cocktail party. I'll bring my portfolio of tiny umbrellas and lottery tickets. We can talk about the inebriant frontier and the CAPM.

I almost have my MBA. Where, before, I believed I knew everything; now I know I know everything!

b