Need Help Investing

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Originally Posted by Schneed10

My area of expertise. I can help.

This is kind of a fun time for you, I remember thinking that way when I had just gotten a job. Being a finance major I knew how powerful saving and wise investing could be in the long haul. I enjoyed laying out my plan and executing it.

Here's the master plan:

Priority 1: If your employer offers a retirement program where they match your investments, contribute just enough to get the full match out of your employer. But don't yet contribute more until you work your way through the other priorities below. At your age, you should be 100% stocks. Choose mutual funds, or a mix of funds, that expose you to both international stocks and US stocks, small stocks and large stocks. PM me if you want details on selecting mutual funds.

Priority 2: Build a "nest egg" for emergency funding purposes. Everyone should have 6 months worth of basic living expenses saved. In case you get laid off or have some other sort of financial disaster, you save yourself a lot of money in the long run by using savings to cover those things, rather than going into debt to finance them. So tally up your basic living expenses (don't count video game money, going out money, etc. Just rent + utilities + food + car etc.) and figure out what you need socked away for "just in case." Store it in a money market fund (Vanguard) or a high interest savings account (ING) - you want this money to be very safe, after all it is for emergency purposes.

Priority 3: Reduce high-interest debt. Once you have your nest egg built up, start using excess income to pay down credit cards and any other high-interest loans. If you have student loan debt or a mortgage, just make the minimum payments. That stuff is tax deductible, let that float. Instead pay down the credit cards or other loans till they're gone.

Priority 4: Save for a home. Real estate is one of the best investments you can make in the long term, even if you're just buying a condo. The savings on taxes and the long-term buildup of home equity make it WAY better than renting. As you work towards piling your savings, I'd suggest socking it away in the same account as your "nest egg" fund. If you want to add a little more earning power, consider some lower risk bond funds.

Priority 5: Once the above are done and you're a home owner, it's time to get serious about retirement. While still taking advantage of the full match at your employer (if you have one), contribute to a Roth IRA if you qualify. The long-term tax advantage is most favorable. Open the Roth IRA with Fidelity or Vanguard, and select a mix of mutual funds (domestic & international, large & small). Go 100% stock and prepare to ride the roller-coaster. Combining your 401K and Roth IRA contributions, target a total annual contribution of 10% of your salary.

Priority 6: Once all of the above are going swimmingly, do something bad ass for yourself. Get that BMW. Move to a cooler house, whatever. You've earned it by now.

I'm happy to get into details if you wish. Good luck!

Very good info here. The only thing I would add is when investing in your employers retirement program do not put all you money into the companies stock. Think Enron not only did all those people loss their jobs they lost their retirement saving because they had all their money invested in Enron.