There is some great advice on this website. Thanks to all who contribute. I am a 33 year old married mother of 1. My husband and I are just getting into the investing game, a little late, but better than never. My husband has a ROTH IRA and some mutual funds with Primerica. Now, it is my turn.

I would like to open a ROTH IRA, but I am not sure with who... I've heard Fidelity and Vanguard. My husband is with Primerica, don't know anything about them except his financial lady is pushy... The confusing part is once I open an IRA I've read that I have to choose what to put in it and that is where it does not make sense to me. My husband has a ROTH AND mutual funds, so I don't get... How do I know what to choose?.... who charges the lowest fees?... do all companies charge a % rather than a flat fee?....I'm low risk because of my mother (nickle machines in vegas!), but have been reading that I should not be too conservative. I still have a good 20-30 years till retiring.

I also have a 401K plan at work that I have not started. My company does not match anything; they just offer it. Is it worth it?... I know you absolutely CANNOT touch it without penalties, right? The money does come straight out of my check and I wouldn't spend it because normally if I have money I'll spend it!

I'm 33 and married with 1 child and 1 step-child. We are going to purchase a home by the end of the year. We have a savings balance of about $10,000. I have about $500-700 a month to invest. I do know that I should put the full $3000 into the IRA which means I have already paid taxes on the money, right? Ugh... I am such a beginner. But I know it is so important just to get started!

My husband and I are opening a joint savings account should I open an ING Direct 2.1% account rather than just a savings?... I know your "portfolio" should be diverse, but I don't even know where to start. We have a Suze Orman book that I am trying to read, but I have a baby and work full-time oh... and have a husband to take care of so time I don't have. Recommend any quick read books or magazines... ANY help would be very appreciated. Thank you so much!!!!

wow, great description of your situation. you've given us a lot to go on.


The key difference between your husband's Roth with Primerica and yours, which you would probably start with Fidelity or Vanguard, is that you won't have a pushy financial lady, just an 800 number to call when you need help. That can be good and bad, but I think it's mostly good. Some people really like to have a face to associate with their account, and sometimes an in-person rep is really good at holding your hand through thick and thin. Then again, many are narrowly focused sales people without any real understanding of the broader financial picture, and talking with them can do more harm than good.


Lots of people wonder if a Roth IRA is "a good investment," when in actuality it's not an investment at all, it's just an account type that gets special tax treatment, regardless of what you invest in inside the Roth. Once you settle on Fidelity or Vanguard, you will indeed have to choose one of their mutual funds to invest your contributions in, and they will help you with that when you call them.


Without a company match, there are only two reasons I would consider the company 401(k): (1) if you and your husband are each putting $3,000 into Roths each January and still have long-term money left over to invest, or (2) if you know yourself well enough to say that forced savings through payroll deduction is the only way you will ever really save.


You need two things: an emergency fund and money for the down payment. I'd recommend keeping this separate from your checking account money, and tell yourself that emergency money really is for emergencies, not impulse buying or vacations. A money market fund, like the ING Direct account you mention, is a good place for this, but Fidelity and Vanguard both offer money market funds as well, so you might as well do it all in one place. (This will be a separate account from the Roth, however.)


Suze Orman's book will probably help, as long as you don't let her convince you that all of your financial problems would be solved if you just divorced your worthless husband. Another favorite that is surprisingly good is Eric Tyson's Personal Finance for Dummies. Best of luck, and let us know what you decide to do.

TY's advice looks pretty good. I will add some of my own flavoring as you need to have some confidence at this early stage that you are on the right track. Feel free to post again as initially as you learn you will have more questions about jargon and choices.

First: take a couple of deep breaths and let the air out slowly! You may have gotten off to a slow start and are bewildered by choices, but you are asking good questions and have come to a good place for general guidance. We will try to walk you through it. You might also want to explore this website using the search engine for "beginner" or "new" or "starter" as you have a lot of company... perhaps 20 or 30 posts a year on "how do I get started".

Some quick takes on what you said:

1. "My husband is with Primerica, don't know anything about them except his financial lady is pushy... "

No reason to place your money with anyone you are not comfortable talking to. There are thousands of choices. It sounds like this woman may not have very good listening skills or is not used to dealing with folks just getting started. You can pass on Primerica or ask to speak to someone else.

2. The confusing part is once I open an IRA I've read that I have to choose what to put in it and that is where it does not make sense to me.

You are correct. A Roth or IRA is just a container and your first decision is who to select as "custodian", that is the institution that keeps track of your funds. The investment choices are what is placed inside the container. The main choices for custodian are: mutual funds, brokerages and banks. Banks tend to lean towards CDs or more traditional mutual funds (and they sometimes will herd you towards those that charge you a commission and give them a financial benefit). I suggest direct connections to mutual fund families or using mutual funds though a brokerage for the beginner.

The choice of custodian often narrows the choices of your possible investments. But before you get stuck on that point, read on.

Investment choices: I highly recommend that novice investors start out with NO LOAD mutual funds. A mutual fund is a company that creates a portfolio of many investments and by buying "shares" of the mutual fund, you essentially own a little tiny bit of many different investments. The "many different investments" is often called diversification. NO LOAD means a fund that does not charge an up front or tail end commission to participate. (Note all funds have some kind of annual expenses that take a little off the overall performance... more about this later)

There are thousands of these kinds of mutual funds. More specifically, I am going to recommend that you choose an INDEX fund such as Vanguard's S&P500 fund... but there are many competitors at other firms. INDEX means that the fund is based upon someone's list of stocks rather than based upon actively investigating companies and making individual stock choices. The problem with actively managed funds is that there is a real shortage of very smart people who can truely pick the winners year after year, but trying to do so eats up a lot of money in salaries, travel expenses and commissions. The index fund uses a simple desktop computer to make purchases. Expenses are very low relative to an actively managed fund. A commonly cited "fact" is that index funds beat about 80% of all actively managed funds each year. I would like to tell you I have the data to support that statement, but I have yet to find a rock solid source. Needless to say, even the actively managed fund analysts do not appear to dispute that conclusion. Owning an index fund means you spend less time thinking about buy/sell or market timing and should be happy with the overall performance of the market. It works for a lot of people.

3. "My husband has a ROTH AND mutual funds, so I don't get... How do I know what to choose?.... who charges the lowest fees?... do all companies charge a % rather than a flat fee?"

As you might now see, Roth is a separate issue from investments (mutual funds in your husband's case). I think you are refering to how do you make a pick of which fund. It is both a good question and perhaps a misleading one. With many things in life you want the BEST ONE. With investing, it is not possible to know what will be best over any specific time period. But.... you don't really need BEST. Many broadly based mutual funds will serve you well, and I think that the INDEX version will serve you best initially. Why? First, because you do not need to know a whole lot about investing to get started. Second, the annual expenses of INDEX funds that are NO LOAD are often under 0.25% which means you keep almost all of the annual performance. Vanguard is currently the lowest cost INDEX fund company, but there are many others that are chasing down the annual costs trying to keep up with this industry leader. Perhaps 5 years from now, after you have built up your assets, you will be ready to consider other choices. One good fund is all you need to get started. Focus on learning about investing the first few years not worrying about performance.

4. "I'm low risk because of my mother (nickle machines in vegas!), but have been reading that I should not be too conservative. I still have a good 20-30 years till retiring."

Correct! You may retire anywhere from mid 50s to late 60s depending upon your assets, type of career, and health condition. What many folks forget is that they don't spend their entire retirement nest egg in 1 year. If you retire at 63 and live to 93 (I don't think that is a huge stretch by any means) then you may be investing some of your funds for closer to 60 years than the 30 you mentioned.

Please do not compare slot machines or the lottery to investing. Both have an element of un-predictable. However, investing is based upon concepts of capitalism and economic growth where you are investing in the future success of the economy. Because of your long term planning horizon of 30+ years, you should be taking reasonable risks. In investing, many folks strive to average around 10% annual return each year. Most years are up, some are down.... but over the long haul investors expect a better world ahead. Over the past century, through a bunch of wars, the depression, and more recently terrorism the investors long term approach has generally held up. You don't need to wager on long shots to get that 10% annual return. A portfolio (a basket of many investments) that is slightly biases towards growth stocks will generally get the job done. No guarentees, but the probabilities are heavily in your favor.

Gambling is mathematically a fools game where your long term outcome is negative. The more you gamble the more you lose. I find it interesting in the high level of self deception of gamblers. Take a roundtrip bus to a casino and you will see everyone giddy with excitement. On the return trip, somehow virtually everyone was a winner. Not likely.

What can you expect if you and your husband start today with $3k + $3k in Roth contributions and invest with a slight bias towards growth? After 30 years, the two of you would like see combined Roth assets of around 986,000. Since those are future dollars, they won't be worth as much as a million today, but it will still be a sizeable pile of mulla.

5. I also have a 401K plan at work that I have not started. My company does not match anything; they just offer it. Is it worth it?... I know you absolutely CANNOT touch it without penalties, right? The money does come straight out of my check and I wouldn't spend it because normally if I have money I'll spend it!

With no match, I would recommend the Roth approach. What is all this talk about "touch it"? Resist I say! The whole purpose of a tax shelter like the Roth or the 401k is that the money is tax sheltered. If you want to have that great nest egg three decades from now, you need to enforce some financial discipline on yourselves. The 401k plan document will tell you what you can and cannot do. Ask again at the office and make sure there is no match. Sometimes firms start a match after you have logged a full year.

6. I'm 33 and married with 1 child and 1 step-child. We are going to purchase a home by the end of the year. We have a savings balance of about $10,000. I have about $500-700 a month to invest.

I concur with TY. While you should try to start your Roth now even if you can't fully fund two of them, you absolutely must start building a larger reserve. Think in terms of how much money you could burn through in 6 months if you lost your jobs. Most of millioinaires I know don't own new cars, expensive watches, furs, or summer homes.... but they sure do have the confidence that cash reserves and a well funded retirement brings. Often they achieve their financial success by playing "great defense" - being very careful about their spending.

Home ownership is both a better way to live for most people, AND a long term strategy for building wealth. Like investing, there are no guarentees, but over the long term, most folks build up equity in their homes. Go for it.

7. "I do know that I should put the full $3000 into the IRA which means I have already paid taxes on the money, right? "

Correct if you are talking about a Roth account. If you don't want to do the $3k right away, consider setting up a montly withdrawal program to build your IRA throughout the year. That is often called "dollar cost averaging" and has some advantages.

8. "We have a Suze Orman book that I am trying to read, but I have a baby and work full-time oh... and have a husband to take care of so time I don't have. "

Arghhh. I am no big fan of Suze Orman. Too much popular rhetoric and glib self promotion for my tastes. I believe in training people to thing rather than trying to be a geru for the masses.

Go to the library and read a few issues of Kiplinger Financial Mag. which costs about $15 per year. It covers 20s and 30s, new home buyers and rookie investors. You can take a few years to build up your expertise if you adopt the 1 or 2 hours per month routine of reading about business, Roths, investing, homeownership, credit, etc. that is well covered by Kiplinger. You might also find the March edition of Consumer's Reports to be useful. There is always a good article explaining investment choices and indentifying some funds with solid performance.

Good luck. And post again with your questions or to let us know how you are doing.

You can get a quick idea of the content of Kiplinger Financial by visiting their web site at www.kiplinger.com

A quick search showed a number of sites on the web where you can sign up for a 1 year subscription for under $10! Now that is a bargain... hopefully, no strings attached.

You guys are awesome! I had no idea the quick response I would get. Thank you so much. I really appreciate it.

Ty and John

Ideally I would like to have a financial person to hold my hand through this whole process, but the lady from Primerica has on numerous occasions called me by my husband's ex-wife's name and asked how the teaching was going since she was a teacher. The other issue was when he set up his automatic withdrawal from his checking account weekly because he gets paid weekly they withdrew FOUR times the amount they were supposed to. I am still trying to get back all of the overdraft charges AND even though he has her personal service we are stuck dealing with head office in NY to straighten this out. Do these people get more of a percentage of your earnings then if you were to go on-line or call an 800 number as I am going to do?

Ty

Your definition of an IRA really helps me to understand the difference between having an IRA and investing in mutual funds. Because my husband has three seperate accounts with Primerica, I was confused. Of course that is easy to do, but I have common sense.

Regarding having extra funds to invest after fully funding a ROTH IRA, yes we will be able to do that even after an emergency fund for the new house we are going to purchase. What do you recommend?... I am most likely going to put $100 a month into my 401K even though they don't match it because I would NOT even blink in eye missing come straight out of my check. Who knows... maybe over 20-30 years that may build into something?... other than that can I play the market a little bit with the company I go with in the IRA?.... do they also offer conservative options such as CD's (I know they get nothing right now), bonds, mutual funds (are mutual funds stocks? sorry if that is a stupid question)

Oh by the way, I'm not divorcing my husband as Suze would probably recommend because he is actually the one who started all this money saving stuff AND it was his uncle who is 75 and STILL working manual labor because they did not save anything. They are trying to rely on their children. I do not want to put that burden on our children. I'm assuming we won't be able to collect Social Security until we are 99. I will try the magazine and book for dummies. That is definitely me, but as you guys have said in other threads its just getting started.

John

So, I am going to look for a NO LOAD Index mutual fund, right?.... Fully investing $3,000 a year. I'm going to speak to my company (small medical clinic) and ask to have them match a certain percentage instead if I stay with the company for an extended amount of time. They like me! I will resist the URGE to spend and/or touch my accounts. I'm going to look at Vanguard and Fidelity and see which one I like (understand) better. I promise to never compare gambling and investing again. I promise. I'm on my way to the library for Kiplinger's.

One more question, can I use the ROTH as an Emergency ONLY account or should I have a separate savings. It seems to me you want your money to be working for you while you aren't using it?....

Again, you guys are awesome. What are your backgrounds? Are you in the financial field? Thank you for using your time to help people like me. My husband and I are really looking forward to building towards the future.

Hilarious! Nothing wrong with wanting personalized help, but in the investment world you have to be cautious for two reasons: first, it's going to cost more, and second, the rep may not know much themselves beyond the products they sell. A quick look at Primerica's website was enlightening. The whole focus seemed to be on getting people to sign up as salespeople, almost like a Mary Kay thing. This quote from their website is priceless: "People from all types of work backgrounds are in high demand." In my humble opinion, offering sound investment advice might be easier for someone with an investment background.


Probably a good idea. Forced savings is a great thing, and a 401(k) is usually the next best thing to a Roth for long-term money.


The short answer is yes, mutual funds are stocks. At least, mutual funds are by far the most common (and most appropriate) way for regular people to invest in the stock market. A "mutual" fund is just a way of pooling your money with other people's and giving it to a manager to pick stocks for you. It gives you economy, diversification, and professional management. Not to confuse things, but there are also bond mutual funds and even money market mutual funds. All of these are available for your Roth IRA. (John G recommended an index mutual fund, and that is a great place to start if you can force yourself to leave it alone through the market ups and down.)


Thanks! There are a lot of very competent people on this board, so stop by often. I'm a CERTIFIED FINANCIAL PLANNER™, which is a good credential to look for if you're thinking about hiring someone to help you. Even then, the CFP™ doesn't by itself mean you're getting sound financial advice, but it at least tells you you're working with someone who's committed to the industry and not likely to start selling makeup accessories next year. The best thing you can do is what you've already started, and that is educating yourself.

Oh, and how's the teaching going?

TY said: "The short answer is yes, mutual funds are stocks."

Hey, we don't believe in short answers here! Actually, mutual funds can include stocks or bonds. Some of the various "flavors" include: sector (a specific industry), "value" (things perceived to be trading at a discount to peers), growth (rapidly growing companies), Blue Chip (old name for big, well known companies), international, country specific, "Technology" (anything with digital stuff, electrons and remote controls!), small cap (companies whose total number of share x share price is relatively small), mid cap, large cap, balanced, blend, short term, "opportunity", contrarian, INDEX..... you get the picture. They invent new ones every month. More choices than some local library's book count.

Point 2: Yes, you can use a Roth as emergency savings in the sense that you can always withdraw contributions without a tax consequence. Not recommended by me, but better to get started in some way then to keep postponing action.

Point 3: Yes, simplified Roth plan is just start with a basic index fund. You can't do this stuff perfectly, so don't fret over slight differences in fees or performance. You can probably stay with a basic index fund for many years. Keep it simple, look at the statements just a few times a year, and start working on learning more about all things financial. After a while, you will see that YOU are a key player in the process. It is your money. Sure, ask for advice from different sources, but don't give up on what you can learn about making decent long term investments.

Point 4: Background. Two degrees from prestigous universities, never worked in either field that I majored in. (As in baseball, you need to be able to hit the curve balls that come your way) Second person in my family to go to college, first to get a graduate degree. Eight years as a consultant. Eight years in corporate planning. Started three different businesses. Ran a 4th for a while for a friend. More or less retired 10 years ago at the age of 43 to devote take over some of the household burden for my wife and to more actively work on various investments and community volunteer work. Over 25 years of investing experience including: common stocks, LLCs, private placements, mutual funds, IPOs, options, REITS, short positions, etc. Once made a $35 million dollar investing mistake... but that is another story for some other day. Attended the original Woodstock... I still do fun things.

Kattpar ~ great posts, you gave use a lot of info to work from and had a wonderful sense of humor.

I don't share John's disapproval of Suze Orman (though I do agree there's lots of self-promotion, and if you listen to her show, her voice can seem rather nagging). However, her FAQ on financial affairs, The Road to Wealth. It covers a wide array of topics in a easily understandable manner. There aren't other books by Suze Orman that I recommend: all of her other books are basically redundant with and inferior to The Road to Wealth.

I also don't recommend Kiplenger's, or any other financial magazine, for that matter. A waste of money, imo. Most of the stuff is ads, and a whole bunch of the information is completely irrelevant to the personal investor. I remember one issue of Kiplenger's talking about a wealthy family that had used off-shore trusts for years to avoid taxes, and how now things were falling apart due to family-conflict. My question is, who cares? How is learning vaguely about these loop-holes that used to be useful, but no-longer are, and are now closed, and learning about the history of one family that exploited them going to help me?

My advice to learn about financial matters is to use the internet. There is so much good information that you can get for free. Here's my recommendations for web-sites and books:

• The Road to Wealth
• Common Stocks and Uncommon Profits and Other Writings
• The Intelligent Investor
• Security Analysis: The Classic 1940 Edition
• The Interpretation of Financial Statement
• American Association of Individual Investors
• Fidelity Investor's Weekly
• RothIRA.com
• Fool.com
• FinancialSense.com
• Quicken.com

Software: Various software-programs can help you track your personal finances. For Windows, the only ones I know of are Microsoft Money and Quicken. Each of these programs seems to get worse and worse with each edition (just take a look at the reviews from one year's edition to the next year's). There's also QuickBooks, a real accounting program, which uses double-ledger accounting, but this program is expensive (over $100). If you use GNU/Linux, you can use GnuCash, a free double-entry accounting system. (if you use GnuCash, I recommend installing it using your distribution's package-system).

DH - my recommendations were made based upon the person who originally posted the initial question... in this case a person who has yet to start serious investing and has asked a whole range of very basic questions. They are starting from scratch. Ten recommendations of things to read (I agree most are good sources) is very likely to overwhelm them. Books on stock evaluations and how to read a corporate financial report are way over the head of a beginner investor.

Remember the customer, and tune your responses to their level. You may not like Kiplinger Financial, and it is certainly not an all purpose completely encompassing source. But it is written for the raw beginner to novice reader. Frankly, the Consumer Reports articles in March are more condensed and perhaps better focused on the begining investor. CR is all about mutual funds, boiling down the 10,000 funds to a manageable list of perhaps 100 to consider and explaining the basic jargon.

The problem with most books on investing is that they focus on stock picking, charts, economic indicators and look back narratives of some prior investment. I don't see how that helps a person with limited time and rudimentary knowledge of investing who should probably be focusing on mutual funds.

Remember the customer. Lets not misdirect folks because we are not sensitive to their level of knowledge and experience.

Your right, John...some of the sources on my previous list are probably beyond what a beginner wants...thus, my condensed list of books and websites:

• The Road to Wealth
• Personal Finance for Dummies. This is a new one I found on Amazon; I'm not putting it here to be insulting. The "for dummies" series of books is great for an introduction to any topic, I used it when I first started using Linux.
• Fool.com
• Fidelity Investor's Weekly

Note: You can use Half.com when buying books if the book you want is available there. Personal Finance for Dummies is available on Half.com as is The Road to Wealth. If you buy from Amazon, look at their used-books offerings for discounted prices. (a financial book is a financial book, whether it has a few scuffled pages or not).

hi there. I dont even know how I got to this site, but I find it very interesting. I would love to get some advise on saving for a house. Im planning to buy in a year, have $5,000.00 to put into a savings plan or something that might help me earn $$$$$$$. I'll also have $100.00 or possible more to put into a monthly savings. Im trying to earn money for a down payment. I dont know to lose my $5,000.00. I would assume savings, cds or t-bills would be my only option. Since your'll all so expert on this subject I was wondering what you thought. Any ideas for me. thanks. looking forward to hearing from anyone with advise/wisdom.

Your question is a little off topic for this site - but here is the quick response.

Your timeframe is too short for most investments like mutual funds or stocks. I would suggest that you look at the CDs offered by your local bank, savings & loan or credit union. You are not going to earn much with a 1 yr CD, but almost all of these accounts are insured against a loss of principal. If you need more flexibility on when you are going to take you funds, consider a money market account. Talk with these kinds of institutions and let them know your plans... they may be able to offer you some flexibility if you flip to a mortgage from them.

If you are a first time buyer, it may be productive to also talk with realtors and builders. Some cities/counties have special programs for first time buyers. Programs like this from for profit businesses are likely to be equivilent to the "$5000 trade-in on any car" promotions... a discount against a bloated price. But, it is worth exploring.

thank you JohnG for your wisdom.