Help Learning About Investing

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
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Topic Author
illinoisguy
Posts: 9
Joined: Fri Feb 14, 2020 2:45 pm

Help Learning About Investing

Post by illinoisguy » Fri Feb 14, 2020 2:55 pm

I am a brand new member here (45 years old) and am looking for some advice on where to go to start learning about investing. I know almost nothing about investing (although I have had a 401k for approximately 20 years that I contribute to from every paycheck to with Vanguard. Current investment is in Target Retirement 2040 Trust fund). I need to decide if my current investment amount in my 401k is correct, if I should change the fund it is going to, and if I should consider splitting some to an IRA. I also would like to start investing a small amount (maybe $50 a month or so). Is there a good site that I can go to start learning? Thanks!

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BolderBoy
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Location: Colorado

Re: Help Learning About Investing

Post by BolderBoy » Fri Feb 14, 2020 3:05 pm

illinoisguy wrote:
Fri Feb 14, 2020 2:55 pm
Is there a good site that I can go to start learning? Thanks!
You are on the very site you seek. The forum has a wiki. I would start there.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

mega317
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Re: Help Learning About Investing

Post by mega317 » Fri Feb 14, 2020 3:13 pm

I'd also recommend Bogle's Little Book of Common Sense Investing. That changed my life.

I have to say if you're making regular contributions to a Target Date Fund in a 401k you are way ahead of the average person already. Good work.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

Topic Author
illinoisguy
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Joined: Fri Feb 14, 2020 2:45 pm

Re: Help Learning About Investing

Post by illinoisguy » Fri Feb 14, 2020 3:26 pm

Thanks to both of you. I only have about $135k saved in my 401k so I have a long way to go. We also have a lot of debt. My wife is a teacher so will collect a pension. All of these factors complicate how much we should be saving/investing.

lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: Help Learning About Investing

Post by lakpr » Fri Feb 14, 2020 3:39 pm

Well, i will give you a brief summary of the Boglehead philosophy. May be save you hours of reading.

1. Max out all tax-advantaged space you have. Meaning $19.5k for this year in your 401k / 403b. If your wife works, ditto.
2. Max out all your Roth IRA space. $6k for you, $6k for your wife -- even if your wife does not work, you are allowed to contribute $6k for her.
3. Accelerate the principal payments on your mortgage.

My preferred order is (2), (1) and (3); some might take issues with contributing to Roth before contributing fully to Traditional space, so (1), then (2) then (3) is also equally suggested.

We can get into nuances, but this will be the gist of your first action points. If you have been contributing money into the 401k for the past 20 years and the balance is only $135k, it's clear that you have not been maxing it out all these years.

loosechange
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Re: Help Learning About Investing

Post by loosechange » Fri Feb 14, 2020 3:42 pm

Welcome!

Consider a planning tool like YNAB (you need a budget). This has made a world of difference for my wife and I when it comes to decisions about spending.

Also recommend the book Simple Path To Wealth along with Bogles Common Sense Investing.

mega317
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Re: Help Learning About Investing

Post by mega317 » Fri Feb 14, 2020 3:47 pm

When you get a basic level of knowledge it would be helpful to return and post your situation completely according to this template
viewtopic.php?t=6212
We especially need more information on the debt.

lakpr: I do want to make one editorial to your post which is many real people can not actually max their 401ks, or two of them, and the teacher might also have a 457 which would mean 3 x 19.5k.
Definitely without question, if at all possible contribute enough to get any available match.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: Help Learning About Investing

Post by lakpr » Fri Feb 14, 2020 3:50 pm

mega317 wrote:
Fri Feb 14, 2020 3:47 pm
lakpr: I do want to make one editorial to your post which is many real people can not actually max their 401ks, or two of them, and the teacher might also have a 457 which would mean 3 x 19.5k.
Definitely without question, if at all possible contribute enough to get any available match.
Not at all ... I accept that this is a valid critique. My point is only that, before you think about investing in any taxable account (Robinhood, wealthfront etc. that ask for micro deposits like $20 or $50 per month ...), don't waste time. That money is better spent in deferring to the tax-advantaged space first. That's where you get the most bang for your buck. Any taxable investing should be looked at only after maxing out that available space.

[ A healthy emergency fund, 3 to 6 months, expected to be in place first of course ]

Topic Author
illinoisguy
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Joined: Fri Feb 14, 2020 2:45 pm

Re: Help Learning About Investing

Post by illinoisguy » Fri Feb 14, 2020 3:55 pm

Thanks all! I will definitely start reading and will post back in the required format once I am done.

Also, mega317 is correct.....there is no way we can currently max out 401k at this point.

We currently have no emergency fund.

lakpr
Posts: 3945
Joined: Fri Mar 18, 2011 9:59 am

Re: Help Learning About Investing

Post by lakpr » Fri Feb 14, 2020 4:36 pm

illinoisguy wrote:
Fri Feb 14, 2020 3:55 pm
Thanks all! I will definitely start reading and will post back in the required format once I am done.

Also, mega317 is correct.....there is no way we can currently max out 401k at this point.

We currently have no emergency fund.
What's your monthly expenses? Can you take a hard look at them and identify fat that you can cut?
[ You don't have to respond to me, just ask yourself that question. High-fee internet plan? smart phones? etc... ]

Not having an emergency fund scares the bejeezus out of me. That should be your first and foremost priority, at least get it up to 3 months worth of expenses. If you can identify and cut fat from your expenses, the task of achieving 3 months of expenses becomes so much smaller and easier ...

Topic Author
illinoisguy
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Joined: Fri Feb 14, 2020 2:45 pm

Re: Help Learning About Investing

Post by illinoisguy » Sun Feb 16, 2020 8:48 am

Thanks! I have been using Mint off and on for a couple of years. I have set a budget in it but we always seem to go over it due too abormal expenses. A lot of this has to do with expenses due to our kids.

Topic Author
illinoisguy
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Joined: Fri Feb 14, 2020 2:45 pm

Re: Help Learning About Investing

Post by illinoisguy » Tue Feb 18, 2020 1:40 pm

I am working on writing out my financial situation per the template mega317 posted in this thread. I am wondering how much detail should I include. For example, should I be giving approximate amounts of debt, payoff dates, monthly payments etc? Thanks!

lakpr
Posts: 3945
Joined: Fri Mar 18, 2011 9:59 am

Re: Help Learning About Investing

Post by lakpr » Tue Feb 18, 2020 1:44 pm

illinoisguy wrote:
Tue Feb 18, 2020 1:40 pm
I am working on writing out my financial situation per the template mega317 posted in this thread. I am wondering how much detail should I include. For example, should I be giving approximate amounts of debt, payoff dates, monthly payments etc? Thanks!
In general, the more information you can give us, the better tailored the responses are going to be. Not payoff dates on debt, but perhaps how much was the initial balance when you took out the debt, how many monthly payments you made so far, how many months remaining, and of course, the monthly payment amount required

Topic Author
illinoisguy
Posts: 9
Joined: Fri Feb 14, 2020 2:45 pm

Re: Help Learning About Investing

Post by illinoisguy » Tue Feb 18, 2020 1:56 pm

Thanks! I just don't want to jeopardize security/privacy. Never can be too careful in this day and age!

snailderby
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Re: Help Learning About Investing

Post by snailderby » Tue Feb 18, 2020 2:47 pm

Welcome to the forum! If you have time, consider checking out one of the books listed in the wiki: https://www.bogleheads.org/wiki/Books:_ ... t-up_books.

Unladen_Swallow
Posts: 410
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Re: Help Learning About Investing

Post by Unladen_Swallow » Tue Feb 18, 2020 3:26 pm

illinoisguy wrote:
Fri Feb 14, 2020 2:55 pm
I am a brand new member here (45 years old) and am looking for some advice on where to go to start learning about investing. I know almost nothing about investing (although I have had a 401k for approximately 20 years that I contribute to from every paycheck to with Vanguard. Current investment is in Target Retirement 2040 Trust fund). I need to decide if my current investment amount in my 401k is correct, if I should change the fund it is going to, and if I should consider splitting some to an IRA. I also would like to start investing a small amount (maybe $50 a month or so). Is there a good site that I can go to start learning? Thanks!
Target Retirement account is just fine (most have low fees). Just make sure and maximize your contributions each year. If you did nothing else, this would be enough IMO.

Like another poster suggested, start reading the wiki.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

mega317
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Joined: Tue Apr 19, 2016 10:55 am

Re: Help Learning About Investing

Post by mega317 » Tue Feb 18, 2020 3:40 pm

You don't need to post anything that makes you worried about privacy. Post what you're comfortable with, if we want more we can ask.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

Topic Author
illinoisguy
Posts: 9
Joined: Fri Feb 14, 2020 2:45 pm

Re: Help Learning About Investing

Post by illinoisguy » Wed Feb 19, 2020 10:08 am

I am working on my financial situation per the template mega317 posted and am wondering what the correct way to calculate my tax rate for federal and state would be? I searched in the forum but there are no recent posts on how to do this. Thanks!

retiredjg
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Re: Help Learning About Investing

Post by retiredjg » Wed Feb 19, 2020 10:11 am

Can't believe nobody has posted this link yet.

https://www.bogleheads.org/wiki/Getting_started

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ruralavalon
Posts: 17349
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Location: Illinois

Re: Help Learning About Investing

Post by ruralavalon » Wed Feb 19, 2020 10:25 am

Welcome to the forum :) .

illinoisguy wrote:
Wed Feb 19, 2020 10:08 am
I am working on my financial situation per the template mega317 posted and am wondering what the correct way to calculate my tax rate for federal and state would be? I searched in the forum but there are no recent posts on how to do this. Thanks!
The Illinois state income tax rate is 4.95%

Here are methods you can use to estimate your federal tax bracket. First estimate your "taxable income". Moneychimp, "Tax Calculator". Or if your income etc. is fairly consistent from year to year, then look at your 1040 tax return for last year for your "taxable income". Then use your "taxable income" to estimate your "tax bracket". Moneychimp, "Federal Tax Brackets".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
illinoisguy
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Joined: Fri Feb 14, 2020 2:45 pm

Re: Help Learning About Investing

Post by illinoisguy » Wed Feb 19, 2020 11:01 am

Emergency Funds: None
Debt:
Mortgage – Approximately $225k left on 30 year fixed at 4.375% (32 years until payoff). Monthly payment (including taxes and insurance included) $2,200.
Second Mortgage – Approximately $45k left on 30 year fixed at 10% (22 years left). Monthly payment of $465.
Credit Cards – Approximately $20k at 12.99%
Student Loans – Approximately $4k at 6.3% (November 2020 payoff) Monthly payment of $310
Approximately $95k at 6%. Currently in voluntary forbearance.
Car Loans – Both cars are paid off.
College tuition for kids is covered.
Tax Filing - Married Filing Jointly
Tax Rate – Federal 24% for 2020; State 4.95%
State of Residence - Illinois
Ages - Myself: 45; Wife: 40
My 401k –Current balance approximately $138k with Vanguard - Target Retirement 2040 Trust I I am currently contributing 7% of pre-tax (just increased from 6%). Employer matches 100% of my contributions between 0 and 1%, then 50% of my contributions up to 6%
Wife’s 403b – Current balance approximately $12k – Invested through Franklin Templeton. Currently contributing $100 a month.
Illinois Teacher’s Pension – My wife has been contributing for over 10 years.

ScubaHogg
Posts: 217
Joined: Sun Nov 06, 2011 3:02 pm

Re: Help Learning About Investing

Post by ScubaHogg » Wed Feb 19, 2020 11:02 am

retiredjg wrote:
Wed Feb 19, 2020 10:11 am
Can't believe nobody has posted this link yet.

https://www.bogleheads.org/wiki/Getting_started
+1

User avatar
Blister
Posts: 140
Joined: Fri Feb 17, 2012 8:59 am
Location: Tennessee

Re: Help Learning About Investing

Post by Blister » Wed Feb 19, 2020 11:42 am

There are a few things I would suggest and am sure others will chime in.

I would keep my 401k at 6% to get all the match. Thats free money.
Also the rates you are paying on your 2nd mortage and credit cards are fairly high and I would put as much money as possible in paying off those. You are guarenteed a 10% and 12% return there and you probably would not make that investing.

You should also try to establish an emergency fund of 3-6 month expenses to avoid carrying a credit card balance in the future.

Once you do those things then increase your retirement savings.
Everthing works out in the end. If it doesn't then its not the end.

retiredjg
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Re: Help Learning About Investing

Post by retiredjg » Wed Feb 19, 2020 12:11 pm

Your original question was about investing. At this point, investing is the least of your worries. Your problem is debt. You cannot invest your way out of debt.

First, build up an emergency fund of $1k. Don't touch it except for real emergencies.

You need to stop all voluntary savings and pay off the high interest rate debts. It makes no sense to invest when you are paying out interest rates as high as yours. You are paying out more in interest than your investing is bringing in.

The exception is putting money into the 401k to get a match. You definitely want to put in 1% but I'm not sure I'd go all the way to 6% even with a 50% match. I'd probably put in something like 3% to 4%, but you pick your number as long as it is not over 6%.

This means you need to reduce your 401k savings and your wife needs to stop contributing to her 403b. For now.

Stop using the CCs even if that means going without things you want. Pay off the $20k at 12.99%. When the student loan is paid off, put that $310 a month to the CC. When the CC is paid off put everything into the second mortgage until it is paid off. Even the second mortgage is costing you more than you could expect to make with investing.

Then refinance the 30 year loan if you can.

You are in a bit of a mess. :( And it is not because you don't make enough money. If you are really in the 24% bracket, your income is not small. You have a spending problem, not an income problem. Figure out what you can live without and make it happen. Otherwise, you will always be digging yourself out and you will never be able to retire.

How can your student loan be $95k with a payoff this coming November?

lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: Help Learning About Investing

Post by lakpr » Wed Feb 19, 2020 12:15 pm

retiredjg wrote:
Wed Feb 19, 2020 12:11 pm
How can your student loan be $95k with a payoff this coming November?
The way I read it .. two student loans. One has a balance of $4k, and with regular payments will be paid off Nov-2020.
The other one is in voluntary forbearance (2nd line from the post), has an interest rate of 6% and balance of $95k

retiredjg
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Re: Help Learning About Investing

Post by retiredjg » Wed Feb 19, 2020 12:20 pm

You're probably right. :happy

Topic Author
illinoisguy
Posts: 9
Joined: Fri Feb 14, 2020 2:45 pm

Re: Help Learning About Investing

Post by illinoisguy » Wed Feb 19, 2020 12:57 pm

Thanks for all the responses. The assumption was correct......two separate student loans.

retiredjg
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Re: Help Learning About Investing

Post by retiredjg » Wed Feb 19, 2020 1:10 pm

I think you might be a good candidate for the Dave Ramsey approach to getting out of debt. I believe it is called Fiinancial University or something along that line. Often offered by local churches, but I don't believe there is a religious component to the program.

Ramsey's program is reported to be very successful at getting people out of debt. It's different from what I suggested above, but it works. Many swear by it.

Few if any here would suggest that you use Ramsey's approach to investing though. Debt? Yes. Investing? No. Good luck!

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Sandtrap
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Location: Hawaii No Ka Oi , N. Arizona

Re: Help Learning About Investing

Post by Sandtrap » Wed Feb 19, 2020 1:17 pm

illinoisguy wrote:
Fri Feb 14, 2020 2:55 pm
I am a brand new member here (45 years old) and am looking for some advice on where to go to start learning about investing. I know almost nothing about investing (although I have had a 401k for approximately 20 years that I contribute to from every paycheck to with Vanguard. Current investment is in Target Retirement 2040 Trust fund). I need to decide if my current investment amount in my 401k is correct, if I should change the fund it is going to, and if I should consider splitting some to an IRA. I also would like to start investing a small amount (maybe $50 a month or so). Is there a good site that I can go to start learning? Thanks!
Steps:
1
Find folks who are really sharp and experienced with personal investment finance that help others (mentors) at no charge because they love what they do and are good at it. Old guys and some young guys that have the book knowledge but also have walked the talk and gone through thick and thin and came out ahead.
2
You can read all the books you want but without experiential knowledge, it's useless as applied to you.
So, work with the young or old experienced smart person (mentor) who helps folks for free, to create various long term financial strategies based on your personal financial scenario right now. (learn by doing)

Where do you find these kinds of people that donate their time doing this? :?:

Right here. :beer

Here's the process:

GETTING STARTED
https://www.bogleheads.org/wiki/Getting_started

Portfolio Review Request
https://www.bogleheads.org/forum/viewt ... =1&t=6212

j :D
Wiki Bogleheads Wiki: Everything You Need to Know

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ruralavalon
Posts: 17349
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Location: Illinois

Re: Help Learning About Investing

Post by ruralavalon » Wed Feb 19, 2020 1:31 pm

You have a debt probem, not an investing problem. Stick with the target retirement fund in his 401k.

Paying off your large, high interest debt is a priority even over establishing a 3-6 months emergency fund. Put $500-1,000 in a savings account for true emergencies, and attack the outstanding debt. The debt you already have is an emergency.

Reduce contributions to his employer's 401k plan to the 6% necessary to get the full employer match. Stop contributions to her employer's 403b plan (unless there is an employer match offered). Redirect that money to paying off debt.

Take a close look at your spending to find areas where you can cut. Be ruthless in cutting your spending. Consider using a budgeting app like Mint or YNAB. Redirect the savings to paying off debt.

Look into refinancing the mortgages to secure lower interest rates.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

snailderby
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Re: Help Learning About Investing

Post by snailderby » Wed Feb 19, 2020 3:00 pm

1. Contribute just enough to your 401(k) to get the full employer match.

2. Focus on reducing your spending and paying off these debts ASAP:

$20K at 12.99%
$45K at 10.00%
$04K at 06.30%
$95K at 06.00%

3. See if you can consolidate some of these loans at a lower interest rate.

4. After you've paid off the debts listed above (the 4.375% mortgage is a lower priority), you can turn your attention back to investing.

BuyandHold37
Posts: 26
Joined: Wed Apr 25, 2018 9:29 am

Re: Help Learning About Investing

Post by BuyandHold37 » Wed Feb 19, 2020 4:25 pm

Go to FINRA and sign up for the Security Industry Essentials exam. Buy the study materials from Kaplan or Perfect Pass.

Google SIE and FINRA

sylph
Posts: 14
Joined: Fri Jul 12, 2019 10:02 am

Re: Help Learning About Investing

Post by sylph » Wed Feb 19, 2020 6:49 pm

Very first thing is to start a budget and stick to it. Use any budgeting app for atleast 6 months and account for every dollar. Try eliminating things which are "good to have" instead of "needs" until high interest debts are paid off.
https://www.daveramsey.com/everydollar is a good one.

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