Help i Just signed up. [Where to start?]

[gold5050]

Very new to investing. I am with schwab and have saved $5000. $ 3000 in a regular account and $2000 in a roth account. took for ever to save. i would like to find ways to invest with out loosing it in the first month. im not a good day trader personality and i dont want alot of fees with funds. the options are limitless and i dont even know where to start. I am overwhelmed. and all the talk of the Fiscal cliff has me more concerned than a long tailed cat in a room full of rocking chairs.


Any ideas would be helpful..

Thanks gold5050....

[LadyGeek]

Welcome! I understand your concerns and strongly recommend reading this post: The "Fiscal Cliff." What to do?

(Please avoid political dissusions. See: Future Tax Rate Questions are Off Topic Until Congress Acts)

[NYBoglehead]

I would also read the wiki on the 3-fund portfolio and familiarize yourself with index investing. Most posters on this forum are index fund investors who advocate for a buy and hold, long-term investment approach.

[jbyoun1990]

......

[LadyGeek]

Read the wiki, start here: Getting Started

Take your time. If you have any questions, just ask. Post them here so all of the information is in one spot.

When you are ready, try posting your portfolio in this format: Asking Portfolio Questions

[nisiprius]

Very new to investing. I am with schwab and have saved $5000. $ 3000 in a regular account and $2000 in a roth account. took for ever to save. i would like to find ways to invest with out loosing it in the first month. im not a good day trader personality and i dont want alot of fees with funds. the options are limitless and i dont even know where to start. I am overwhelmed. and all the talk of the Fiscal cliff has me more concerned than a long tailed cat in a room full of rocking chairs.

Don't worry about the fiscal cliff. It's serious but it's being overdramatized. The financial world is not going to come to an end on December 31st any more than the physical world did on December 21st. If it happens, it won't be sudden, it will be gradual. It won't be a cliff, it will be more like slowing down for some really really bad broken pavement, creeping 20 mph through some construction zone where you'd expected to go 65.

Before you make any investments, spend some quality time looking at growth charts and understanding the risk and reward relationships of stocks, bonds, and cash and how you personally feel about them.

Don't get hung up on distinctions between one kind of stock fund and another, one kind of bond fund and another, not yet. Not until you feel you understand the different behavior of stocks, bonds, and cash.

Almost any mutual fund company has far more fund choices than anyone wants or needs. I'm going to use only Schwab examples because you're at Schwab. I'm basically explaining the approach. It's one of many very reasonable approaches. You should look at four Schwab mutual fund choices and only those four. Don't look at any others until you've really spent some time clicking around their website, reading the descriptions, downloading and glancing over the Summary Prospectus even though you won't understand it, and letting those four soak in. Pay a lot of attention to the growth charts.

Here are the four funds.

1) A money market fund. I think the one you'd be using is Schwab Investor Money Fund--is that where you "saved" your money?

2) A total bond market fund: Schwab Total Bond Market SWLBX.

3) A total stock market index fund: Schwab Total Stock Market Index, SWTSX.

4) A total international stock market index fund: Schwab International Index Fund, SWISX.

You may not want or need all four of these funds, and your big decision will be your asset allocation, how much of each to invest in. Be aware that the sad, sad reality is that despite all the time it took to save up your money, when you invest it in securities like stocks and bonds--whether it's individual stocks (no, don't do that) or stock and bond mutual funds--it will fluctuate, by quite a lot. All the time you've been saving, the total you've seen has only gone one way: up. As soon as you invest in a stock or bond mutual fund, you are going to see it go up and down, and it may go down quite a lot.

The reason you need to soak yourself in the growth charts is to get a real gut feeling for how big those swings are.

For example, here's Schwab's growth chart for the bond fund, SWLBX (solid blue line)

Here's the chart for the stock fund, SWTSX. Important: look at the axis. From 2008 to mid-2009 that fund lost half the money in it. And yet, overall, over ten years, it made money.


The higher the percentage of your portfolio that's devoted to stocks, the larger those fluctuations are going to be.

You must accept those fluctuations. Do not berate yourself for guessing wrong when it happens, and do not get to thinking that someone could have consistently guessed right and only been in the market when it was going up. The best thing you can do is to be very careful about limiting your stock exposure to the amount you, personally, can tolerate.

[gold5050]

Thank you all for the info so far. it looks like i was correct. im in a deeper ocean with more valleys than i can count. i will have to do alot of reading. this is like work... does it ever get fun.... or is fun only gauged by success in the market.

[pkcrafter]

Welcome,

Don't worry, you can and will climb the initial and most important part of the learning curve much more quickly that you think. Read the getting started link and maybe this online primer will help. If nothing else, it will reinforce what you read here. For some, investing gets fun, but I'm not sure if it's supposed to. If you doing it right, it might just appear boring.

http://investingroadmap.wordpress.com/


Paul

[LadyGeek]

If you don't understand something, please don't hesitate to ask. Remember that you've posted in an investing forum whose members eat this stuff for lunch. Don't be intimidated - the hardest questions to answer are the ones not asked.

As for the "fun" part, it depends on your perspective. The skills you learn now will more than pay for itself for the rest of your life. OK, let's take a small first step:

- What funds are in your "regular account"? IOW, what are the fund names which appear on your statement? The same for your Roth account. (Don't list personal info or account numbers, just the names)

The idea is to get us enough information so we can help you. When you are ready, take a crack a filling out the information shown in Asking Portfolio Questions and post back here. You don't have to know all the answers. Let us know what you are having problems with and we'll work on it together.

[zaboomafoozarg]

this is like work... does it ever get fun.... or is fun only gauged by success in the market.

Haha, for some reason I consider it fun, as do many others here! And I don't gauge success by beating the market, I just try to make sure my investments are 1) diversified, 2) low-cost, and 3) at the right risk/reward level for me.

And honestly, a disinterest in the nitty-gritty of investments will probably make things easier for you in the long run. You should definitely learn enough to develop a sound investment plan, but if you stop there and invest money without watching and worrying about it it will be pretty hard to screw up! We are often our own worst enemies when it comes to tweaking investment plans - "the greatest enemy of a good plan is the dream of a perfect plan". I get tempted to tweak mine pretty frequently, but have to force myself to take it easy and stick to the plan

So, in a nutshell, a good plan for starting out is:

1. Learn the basics of investing (here's a great book: http://www.amazon.com/Bogleheads-Guide- ... 0470067365)
2. Determine a sound investment plan that you can stick with
3. Change your investments to follow the plan
4. Stay the course!

And feel free to ask any questions here that you may have along the way!

[gold5050]

I was out of town. sorry it took so long to respond. i will read some of the recomended stuff. i will post some more.. thanks to all.

[fickle]

Thank you all for the info so far. it looks like i was correct. im in a deeper ocean with more valleys than i can count. i will have to do alot of reading. this is like work... does it ever get fun.... or is fun only gauged by success in the market.

The human mind, I am convinced, is hard-wired to enjoy what we know about, so the more you learn, the more you will enjoy it. Try to make it more about learning about finance than "my personal stash". That helps take the fear out of it. I found Eric Tyson's Dummies book a painless way to start. Investing for Dummies comes to mind.

[DiscoBunny1979]

Thank you all for the info so far. it looks like i was correct. im in a deeper ocean with more valleys than i can count. i will have to do alot of reading. this is like work... does it ever get fun.... or is fun only gauged by success in the market.

-------------------

The first and most important thing in the beginning is one's savings rate. Success to me is having a goal of how much you will save and devote to "investing" hopefully in either your 401K, ROTH or Traditional IRA. I prefer to nibble at buying shares and I do that by having my ROTH IRA purchases on autopilot (automatic investing) every Friday of each week. Now that I'm over 50, that means for me $125 each week is a purchase of my ROTH IRA Fund (STAR Fund). I don't care about anything, except for the fact that I've made a contribution. That's the goal. I would suggest to a newbie that one's savings rate is most important and therefore planning, having a goal, for 1 year's savings plan, 5 year's savings plan, 10 year's plan is important. For instance, if you could contribute to an IRA to put to the max of $5500 next year, I would plan now to make those adjustments to your income so that by the end of the year the money has been contributed. It doesn't really matter what fund or funds you choose, as long as you contribute to your savings/investments goal on a regular basis.

Many on this board, including myself have dabbled in individual stocks and have learned that timing the market is very difficult. You more or less have to be at the right place at the right time AND possibly know more than the wall street professional to determine if one stock is a better 'value' than the next. ANY stock can tumble out of the sky based upon any type of news OR no news at all. Therefore, you are correct in setting up an approach that favors one or two low cost well diversified funds (and unlike others on this board, it doesn't have to be an Index Fund as long as it's low cost). But in my opinion, since savings into that investment account is really more important than anything else, the first 5-10 years should be concentrated on hitting the account with fresh dollars regardless of how things might seem. It's the purchase of shares over time during their hills and valleys that will provide the basis for hopeful gains in 30-40 years. Just my two cents.

[gold5050]

As im reading i wonder is the forecast for the us market up or down. easy to guess hard to say im sure. do i think about this stuff or should i just go in to the index funds....i would hate to enter in to the peak of the down trend? i could use a crystal ball about now ....( we all could im sure.) i need help with my line of thinking.........

[Nahum]

Do not worry about when it is a good time to buy. If you are saving for retirement then the most important thing is to save no matter if the market is up or down.

Do not time the market, pick stocks, pick expensive mutual funds.

Do invest in index funds, save periodically, keep it simple, and rebalance yearly.

Invest using the schwab index funds and read the wiki. I recommend going to youtube, search "financing life" with Rick Van Ness, his 10 videos each are less than 6 minutes long but his explanation is very clear and easy to understand. I think he pretty much explains what you find in the boglehead wiki.

good luck.

[Peter Foley]

Discobunny 1979 hits the nail on the head.

I would suggest to a newbie that one's savings rate is most important and therefore planning, having a goal, for 1 year's savings plan, 5 year's savings plan, 10 year's plan is important. For instance, if you could contribute to an IRA to put to the max of $5500 next year, I would plan now to make those adjustments to your income so that by the end of the year the money has been contributed. It doesn't really matter what fund or funds you choose, as long as you contribute to your savings/investments goal on a regular basis.

I added the bold.

Therefore, you are correct in setting up an approach that favors one or two low cost well diversified funds (and unlike others on this board, it doesn't have to be an Index Fund as long as it's low cost). But in my opinion, since savings into that investment account is really more important than anything else, the first 5-10 years should be concentrated on hitting the account with fresh dollars regardless of how things might seem. It's the purchase of shares over time during their hills and valleys that will provide the basis for hopeful gains in 30-40 years.

The only thing I would add is that you need to have some sense of your risk tolerance. If it is low and you would therefore sell in a market drop, you need to start out with a balanced approach (conservative asset allocation of 50/50?)to be comfortable. Hopefully it is high which would allow you a better chance for above average returns over the long haul. Once you go through a recession with money in the market you get a better sense of your real risk tolerance. If you are lucky you will learn in one recession. It took me two.

[ruralavalon]

1. Save as much as you can initially.

2. Consider a simple 3 fund approach for broad diversification (to reduce risk), Wiki article link: Three-fund portfolio .

3. Decide what stock/bond mix you want, Wiki article link: Asset Allocation , and Wiki article link: Domestic/International .

4. Since your accounts are already at Schwab, use the 3 low-expense (to increase your net retutrns) Schwab funds already suggested, namely:
Schwab Total Stock Market Index Fund (SWTSX), er = 0.09%
Schwab International Index Fund (SWISX), er = 0.19%
Schwab total bond market index fund (SWLBX), er = 0.29%

5. Don't waste any effort trying to guess when the "best time" to begin might be. Ignore all the hype in the financial news.

6. Do some reading on the wiki, Wiki article link: Getting Started .

[gold5050]

i will just save and contribute into the funds once a month will prob be the best way. is there a day that is the best usually. 3rd wed.. 2nd fri.... something along that line of thinking.

[LadyGeek]

The best time is whenever you pay your monthly bills. This puts you on a regular cycle - you'll have everything together - pay bills, invest, check budget, etc.

The hardest part is to start and get everything setup. After a few months, it will become a regular habit - a good thing.