I need investment advice - $

[Ringr]

Hey everyone,

2006 has kind of been a new year for me because I now am starting to venture out into the adult world where you are yourself and you don't really have a back to lean on. When you need something or want something, you buy it unless it's a gift. I know it's not going to be too much longer before I move out of my folk's home because I know I won't forever be able to 'mooch' of them.

Right now what I am most concerned about is my future after retirement. When I retire around 65-70, I want to make sure I have some money to use to enjoy the latter years of my life.

My main problem is that I do not know what to invest in.
Whatever I invest in has to start now. The sooner the better, I have had several older people tell me that the best time to start investing is when you're a young adult.

Like I said, I don't know what to invest in...

One of my first thoughts was an age-old one, gold. But I'm not sure if I'd actually want to spend so much money on something so small that costs such a fortune. I'm not sure what gold prices will be in 50 years, they'll most likely go up but the real question is: by how much and is there something better to invest in?

My second thought was the stock market, but I don't know about that either. I've had some classes about basic stock information and how you buy stock and what to look for. I've read about mutual funds, etc. My fear in choosing the stock market as an investment is that I just don't want another Enron to happen, or to choose the wrong stock and get screwed if it goes down severely. It's another gamble.

I also thought about just putting it in the bank. I remember I had a teacher that said if you put in $1,000 every year starting at 18, using the average interest rate by the time you'd be 65 you'd have nearly a million dollars (not sure on how true that is.) But I suppose that's way safer than the stock market or gold.

Land was another thing I thought of. There are a few parcels of land up for sale locally that are between $5,000-$15,000 they range in size of .9 of an acre to 40 acres (although the 40 acre one was mostly swamp land, so yeah I probably wouldn't want to get that.) Where I live the real estate market has skyrocketed. Not only would the land be an investment financially, but when the time comes, I would already have a place to build a house and wouldn't have to worry about that in about 10 years down the line.

Savings bonds, I thought about these as well. But I know they have a slower growth rate than almost anything else (probably because they're the most secure.)

So... I am wondering if there is anyone here that is also in the same boat, or if there are any older members that have experience and can tell me what I should invest in? How can I put my money towards something that will grow into much more money in 50 years? 50 years is a long time, I'm not looking for some one-night success crap, I just want to know what is the safest/best way that I can do to ensure that I am a financially stable retired person by the time I am about 65 or 70.

I know NamePros is the largest domain community on the web, but please don't tell me to invest in domains... I think that's going a little bit off of the traditional investment category. I know people do invest in them, but I personally would rather not at the moment.

Please give me your advice, it would be very useful.

 

[PolurNET]

GIC's are a good way to invest - guaranteed investment capital, so you always keep what you invested unlike the stock market.

If I were you, I'd talk to your nearest bank branch for a personal financial representative. They are trained in these type of things

 

[jeter4982]

I think the best strategy you could have when investing is to diversify. True a lot of investments have a lot of risk, but if you have investmenets in a couple of different places then one can fail, and you can still be alright financially. Personally I'm not sure about Gold or Savings bonds, but I think you will be fine by investing in real estate, the stock market, and then a bank account. Best of luck!

Tom

 

[SharonTucci]

You are doing the right thing thinking about this now.

Most financial books and experts will say you should save 10% of what you make. I'd say, during the years when you can AFFORD to do so, try and go as high as you can. When I was in my late teens and early 20's, I put away 30% of my net income. 10% went into an emergency fund, 10% for retirement (RRSP in Canada) and 10% for equity-based investments.

Banks and GICs rarely will do much for you. With inflation and tax being due, the money you sock away will actually DEPRECIATE over time.

Sitting down for a good hour with a financial planner that does NOT sell investment products will be money will spent for you. What you'd ideally want to do is save within investments that are non-taxable guaranteed returned investments and the lower risk ones since those tend to be taxed at higher levels than equity-based ones. If you are able to get tax benefits (for example with RRSPs in Canada where you can deduct your contributions from your income), you'll want to maximize your contributions.

Mutual funds are a good thing to consider.... I was able to set up many years ago with my bank's investment branch an investment account where I can take as little as $25 to put into any of a number of different funds. I've experimented over the years with different risk level pure equity funds, mortgage funds, money market ones, bond funds, precious metals, etc. Diversification is a good thing. Just be careful to find out what the 'load' is for a fund as well as the management fees because it can make a huge difference in your return. A front load fund will take off X% of your investment off the top. A backload fund will do it if you sell the investment and some have no load at all after a certain period of time. Then no loads have no % gone but they tend to have higher management fees.

Also, if you don't want to get into trying to manage things yourself, many investment services will auto-balance a portfolio for you based on your risk-tolererance level and preferences.

If I were 20 and starting over with investing, what I'd do is take the same 30% and first maximize my RRSP contributions (to get the maximum tax benefits), build up an emergency fund equivalent to 6 months living expenses with at least 5% going to that, putting 5% in equity funds outside of RRSP and the balance going with short-term GICs/money market funds to sock away $ until I had enough for a larger investment (for example, downpayment on house or land). You may also want to consider an investment insurance plan since in most countries those not only can grow tax-free (and you maintain cash value) but if you ever had serious financial troubles down the road, it would be hard for it to be touched unlike other assets.

I can't stress enough the importance of having an emergency fund when designing a personal financial plan. My own educational background is in personal finance and I used to publish a financial newsletter. Because of this, I tend to be the 'go to' person for friends etc when they run into situations. The number one reason I've seen people get into serious financial trouble was because of losing their job or having a major expense come up and they didn't have any emergency funds available to get them through the mess. An important thing about an emergency fund is that you can easily liquidate part or all of it without risk of losing the base value of it due to fluctuations in the market. Penalty-free cashable GICs, money market funds with no load, high interest savings account - these are all good places to sock away emerg funds.

To be honest, I'm appalled that high schools are not yet making at least one personal finance class mandatory yet they force other - less important subjects - on students. I really think that it's important to spend some time educating yourself on this if you consider your financial health to be important.

 

[labrocca]

Bonds are great imho for someone your age. I have some bonds I bought years ago earning me 8.5%


The first chance you get to start a 401k with a decent job...do it. If possible look for a job where your employer will match funds.

 

[verbster]

Like most say, invest the most allowed on pre- and post-tax programs...IRAs, 401(k), etc.

But if you have a little money now, or don't mind low payments....

Take a look around a growing community...look at growth trends, road plans and such, and then buy 5-10 acres far enough away that it is still cheap. If you hold on to it, in 40 years, it will be your retirement.

 

[mrClen]

You may also want to consider an investment insurance plan since in most countries those not only can grow tax-free (and you maintain cash value) but if you ever had serious financial troubles down the road, it would be hard for it to be touched unlike other assets.

yes i totally agree but sometimes insurance companies (i.e. Geico, Progressive) that insure you over the phone will give you an INITIAL quote, which sounds pretty good. But then they'll look up your record and that quote will change. So be sure the prices you're getting are the exact price you're paying when you sign on that dotted line. Got to see different insurance companies price before at http://www.insurancepaylite.com hehe till now statefarm still quotes me way too high :yell:

 

[Ringr]

WOW, just wow. Sorry for the late reply back here, but I never thought I would receive such excellent advice. Thank you all for your posts, I've read through EACH and EVERY one of them - I cannot thank you all enough, thanks!

I think I have made a decision about the investment thing. I actually started looking at land in early September and I think I've found a nice lot. It's out in the middle of nowhere (well actually it's only 5 miles from a town that has a population of 72, ha!) but it's 2 acres on a protected wetland lake (more the size of a large pond actually) and it's listed at $20,000 here in Minnesota. It is absolutely drop-dead gourgeous, here's a few pictures:

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Right now I am in the process of calling local banks to see what they offer for mortgages. I did call Wells Fargo today (the same bank my folks got their mortgage from) but it turns out they want a minimum of like 30% down payment which is like $6,500 or somewhere in that ball park (including closing costs.)

So I'm trying to find a 'cheaper' bank (or one that has a less-percentage down payment minimum) and go from there. I also have no credit history (never took out a loan on anything, never had a credit card or legally owed anyone any debts) so I think I might have to also have my folks co-sign the mortgage for me.

Well I'm praying very hard I get the land, I know there's other people looking at it.. I just hope I'm the chosen one. Thanks again guys!

 

[SEO Montreal]

gic=guaranteed investment certificate. usually guaranteed because they're backed by treasury bonds, so unless the government drastically devalues your currency, they're pretty safe.
Land sounds like an interesting investment if it's available that cheap and prices are booming.
Good domain names might be another idea?
I used to be interested in stocks, but that takes tiiiiime. If you can invest in the real estate, you might consider a cheap subscription to louis navellier's investment newsletter. few hundred bucks for great advice. you can also team up with buddies who want to invest and split the subscription price.

 

[Broker]

Buy Land and wait, dont wait to buy land. They dont make it any more and it will only go up in value.

 

[kev]

nice bit of land. seems like a bargain for $20k

 

[franchise]

Real estate is a very tangible and powerful investment vehicle. The nice thing to remember with real estate is the idea of cash flow.Very few other investments outside of actual business ownership can afford a continuous and significant passive income stream. Getting into real estate and learning as much as you can at a young age can put you on a path to time freedom and financial freedom much sooner than your 60's.

Let your assets work for you....good luck.