Rapture

Here's another "what should I do with my money" thread...

I have a considerable amount saved up in my savings account with my bank, but the interest rates are god awful. Set up a meeting with the bank's financial adviser, he recommended I invest as much as I can into this:
http://www.google.com/finance?client=ob&q=MUTF:SCIPX

and here's an alternative he also suggested (not as strongly as the first):
http://www.google.com/finance?q=FGTI...UIj3D6aoiALveA

Either of these look appealing? Again, these are funds the adviser suggested, nothing I personally picked out. Both of those seem to be like 60/40 bonds/stocks

I already have a 401k set up with my company, contribute a bit to that each month. I could be doing more with it, but the past few quarters I feel like I'm losing $.70 for every dollar I put in. Since I'm so young I guess my allocations are bit more aggressive/risky.

I'm looking for something relatively safe. I'd definitely want something safer than what's going on with my 401k, however I'm fine with a decent amount of risk. I am looking for something long term, but would it be smart to really do any semi-aggressive investing at this point? I have a considerable amount of funds (for my age, I suppose), however since I'm new to investing I'd like to keep it somewhat low for the time being. Maybe 8-10k?

Just in general, I'm getting dead tired of getting $1.25 a month in interest on my savings. Like .007% interest. CD rates don't even match inflation. What to do?

Rapture

Lol scratch that interest percentage. That was just a random guess. I believe it's more like .0039 or something. Somewhere in that ballpark. Horrible

AZuser

You mentioned you have a 401K. How about an IRA?

If not, I'd start there first.

Then if there are still funds left, keep some in a high yield savings for emergencies.... enough to cover 3 - 6 months of expenses. Advantis Credit Union is still paying a 3.0% APY as I mentioned here in this thread

If there's still any left, put that either into those funds your advisor mentioned or something else. Personally, I would do this.

aznboi2424

iTrader: (10)

Roth IRA. Basically a savings/CD for retirement. You won't get taxed on the interest either. Contributions are maxed at 5k/year. Can't touch it without penalties till you retire or buy a house though. Get more interest by opening the Roth online through banks like ING or Ally. Chain banks give crap interest and I've given up on them long ago. The only money I keep in there is for immediate spending.

Anachostic

I'll offer a couple of my own, and give numbers from my IRA to back them up.

http://investing.money.msn.com/inves...bingiaquotebtn

I have ~$17k in this fund. It gives me ~$130/qtr in dividends and has appreciated $1500 since April, 2011.

http://investing.money.msn.com/inves...bingiaquotebtn

My old fund, FTYIX, somehow converted to this fund recently. They seem to have the same performance. I have ~$9k in this fund and it gives me ~$45/mo in dividends. It's appreciated ~$1000 since November, 2011.

For comparison, I have ~$10k in a Capital One saving acct and get ~$5/mo from that. If I had extra, I would invest more in these funds outside of my retirement acct.

doopstr

Tell your guy that when it out performs the S&P500 that you will consider it.
http://finance.yahoo.com/q/bc?s=FGTI...=SCIPX%2C^GSPC

Look into VFINX. If you want some bonds too then buy some VBMFX. I don't really recommend the bonds right now because the interest is so low but it is a relatively stable fund. Don't just blindly load into VFINX or any fund for that matter. The market has had quite a run lately. It may pay to slowly load into the fund over a year.

Rapture

Wow holy crap. Yeah screw those two funds

I'm definitely considering both an IRA and just sending my savings over to Ally or some place like that. Even my local credit unions only offer like 0.01% on a savings.

I guess if anything as far as investing (bonds, stocks), I'm looking for something along the lines of a "confidence booster" as of right now since I'm entirely new to all this.

LaCostaRacer

What's going to happen to those bond funds when (not if) interest rates rise? Answer: they will get slaughtered much like they did in the early 80s.

Why don't your simply buy BRK/B and call it a day? You won't get that type of appreciation holding a bond fund. The other thing I would seriously look at is SLV.

Dan

You can take out $$$ penalty free after the money has been in for (5) years. My $0.02 is a Roth IRA invested in AMRMX.

Rapture

lol I read that as "Why don't you just buy my personal favorite stock and be done with it?"

I mean, you don't seriously think that's all it takes to convince someone, do you?

Anyways, as of now I'm considering just dividing it between an IRA and just a high interest CD or savings. I dunno....

aznboi2424

iTrader: (10)

No such thing as high interest anymore lol

Rapture

Apparently 1.24% is the best I can get with a savings or CD... A lot of the stocks I've seen have too much yo-yo activity going on. Lose 5%, gain 5.2%, lose 3, gain 3.1, etc. That's kinda why I'm thinking of just leaving it in a savings or CD.

LaCostaRacer

You asked for advice and it has been given to you. You have a brain and I suggest you use it to discern good from bad advice. Only time will tell who gave you the best advice so please write down the prices of the SLV(31.12) and BRK/B (87.15) shares and see what they are in 5 years time or longer.

While you're at it jot down the price of TLT(120.96) that mimics long term bonds and see how that one does in 5 years time too. It doesn't take a rocket scientist to predict how those 3 stocks will perform in the long term- just a little knowledge of economics.

If you checked out that BRK/B stock your would find out that that stock is Berkshire which is run by the most successful and richest man in the world. Warren Buffet has been in this game for more years than you and I have been alive and he and his managers have been consistent winners. If you're looking for long term (retirement) savings, you will be hard pressed to beat BRK/B in the long run, but feel free to try-with your CD!

Good luck in whatever you wind up doing. Just remember money in a savings account with these low interest rates is actually losing money, but to each his own.

I really don't care if you take the advice or not. I also rarely ask others and certainly nobody on a car forum for financial advice- that's what my brain is for.

dmikon

Fire your adviser. Seriously, he/she is either getting paid on commission (conflict of interest), and/or a moron. There is never a good reason to invest in a fund with 2%+ expense ratio.

What is this money for? If it is for retirement, max out your tax advantaged options first, such as your 401k and IRA. If it is for short term purposes, such as a house down payment, safety comes first - return of principal outweighs return on principal.

You suggest contradicting ideas, first you say you want safety, even more than in your 40% bond 401k mix, then you say you can tolerate a moderate amount of risk. Your 401k already has a moderate amount of risk, if you want less risk, you need safer investments, or a more conservative allocation. If you want a simple hands-off fund with wide diversification and more safety, consider Vanguard Target Retirement 2010 (VTENX). It has ~43% stocks. If you want something even less volatile, there's Vanguard LifeStrategy Income (VASIX) with ~20% stocks. If you want even less volatility, consider an all bond fund, or cash (CDs, savings, etc).

Remember, risk and reward are proportional, i.e. if you want more return, you have to accept more risk, similarly, you cannot have high return and low risk. If reducing risk is your primary concern, you have to accept potential lower returns.

I would also highly advice not going with individual stocks or things like silver/gold. Why? The whole risk/reward I mentioned above. While buying a single stock provided you with the opportunity to make a lot more than say a diversified mutual fund, it also provides you with an opportunity to lose your shirt. It's your money, so feel free to gamble, but realize that's what you're doing.

Ken1997TL

Rapture, if I'm not mistaken you're in Oregon as well. I'd also consider some municipal bonds, I have several through Deschutes County at 7.75%. Granted the county is firing people left and right to pay for them. I've seen several lately around 6%

Rapture

and yet here you are giving financial advice on a car forum. So what does that make you? Holy crap, man. I was just yanking your chain, I wasn't even badmouthing your advice, just saying "just invest here and do nothing else" won't convince me to dole out my money. Would it convince you? Didn't think so. I definitely don't need 6 paragraphs of your PMS.

dmikon-- Yeah, he wasn't like a personal advisor or anything, just an advisor with my bank. I'm allowed 1 free advising session, and I think I just wasted it And yeah I'm thinking I might put a chunk of it into my 401k. I just got a statement and I have much less money in it than I realized. However my 401k is pretty aggressive. It's got like a 2050 target maturity. Following what you said about balancing it with something less risky, that's why I was considering something pretty conservative like an old fashioned savings, however not much looks appealing.

Ken -- Yeah I was actually considering going for something local. I haven't done a lot of looking around outside of community credit unions, tbh. Even their rates for IRAs aren't really that great at all. I would rather do something local that than an online-only bank. Is there a lot of commuting to and from involved, or can a lot be done remotely? iirc Deschutes County is like a 2 hour drive from Portland, isn't it?

LaCostaRacer

^ You have a magical way of encouraging people to give you advice, don't you?

You first got a short answer and that wasn't good enough for you. You then got an extended answer on some specifics of the earlier advice and that is called both too long and also PMS'ing. As the 'Soup Nazi' use to say on Seinfeld: No more soup for you!

Enjoy that 1% return in a 3% inflationary environment. I'm sure that will make for a very comfortable retirement in 37 years.

Ken1997TL

Rapture, I did everything through my Edward Jones advisor, no travel needed

Rapture

Cool. So naturally step one is get a better advisor. Internet searches for banks in Bend just brings up a slew of results about foreclosures.....

dmikon

Step one should be to educate yourself better on investments. Step two, which is highly optional, is to get a flat fee advisor, i.e. one that is paid for their advice, and not on commission.

Also, Edward Jones seems like a pretty bad place for your money to be. I think they all work on commission too. Here's a good thread with some interesting links:

http://www.bogleheads.org/forum/viewtopic.php?p=737961

Ken1997TL

Mine is usually flat-fee and waives many of those fees too. It simply depends on what you're getting into. Your mileage will GREATLY vary, I am fortunate to have an adviser who is competent and has similar thoughts on the economy.

dmikon

Does he/she get commissions from selling funds to you? Also, if you wouldn't mind, could you share the fund names/tickers they've advised you to invest in?

Ken1997TL

He gets a flat fee. Mostly he just lets me know about municipal bonds in Oregon.

On my own, I've invested in Apple, Google, Ford, Honda and several companies that specialize in oil drills.

dmikon

What investments does he recommend aside from muni bonds? I think he still gets a commission by the way.

Ken1997TL

He doesn't. Everything is upfront, flat fee.

He's advised several biotech firms, I don't recall which. While they have lots of potential, I'm sticking with energy firms that are either US/Canada based or Norwegian.

dmikon

Seems like their Financial Advisor compensation page clearly indicates commission:

http://careers.edwardjones.com/us/fa...ion/index.html

Ken1997TL

That would be true. They can also waive such commissions. And he does.

dmikon

When you follow his recommendations, do you place the trades through him?

Ken1997TL

If it was his idea, then yes. The man has to pay his bills

Sometimes I just pay him to double-check my thinking.

dmikon

From what I've read they charge a % commission on equity trades. So if you invest, say $10,000 in some biotech he recommended, he'll take a % commission when you place the trade.

The problem is not that he is getting paid, the problem is conflict of interest. If he gets commissions, are his recommendations the best for his pocket, or for yours?

Ken1997TL

Again, he doesn't work for commission for me.

dmikon

Another problem is how much you're paying for the trades. I found this commission schedule for Edward Jones:

2.5% for trades less than $6,000
2% + $30 for trades between $6,000 and $10,000
1.5% + $80 for trades between $10,000 and $25,000
1% + $205 for trades between $25,000 and $100,000

So if you invest $10,000, you pay $230 upfront. That is a lot of money to spend on a trade...

dmikon

You said "If it was his idea, then yes. The man has to pay his bills", so if he recommends you invests in XYZ and you buy XYZ through him, it's for free? You just pay him a fixed fee to tell you to invest in XYZ?

Ken1997TL

I don't pay that...

Ken1997TL

Not sure why you care so much about my finances anyway.

dmikon

It's related to the OP's original query and your mention of how your EJ advisor is good. I'm just offering a counter point for the OP to consider, in case he decides to get involved with EJ. The point is, like I said, conflict of interest. Even if you advisor does not charge you the commissions, he still gets paid on commission. So you never know if he gets paid for recommending certain investments. For example, he might be told "hey, you get a 2% cut off every dollar invested by your clients in firms A, B, and C", he then waives the upfront commission for you, but then gets paid once you invest by the firm. Not good.

Ken1997TL

And who knows, maybe YOU are a competitor to Edward Jones?

So, all advice should be scrutinized.

dmikon

I'm a competitor to Edward Jones and yet I recommend educating oneself and avoiding advisors altogether, if possible? I'm not sure that makes sense.

Ken1997TL

I basically have avoided the commissions. I simply happen to have a friend who IS an adviser. It was my idea to pay him. His advice has easily paid for itself many times over

dmikon

You should disclose such things upfront.

It's one thing to say you invest with an Edward Jones advisor, and it's entirely another to say your friend helps you invest, who happens to work for Edward Jones, who you just voluntarily give money to :wink: