gold5050 wrote: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.
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.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.