General Lee
Veteran Member
Can anyone recommend the best way to start investing for beginners? For example, opening an account with TD Ameritrade or Fidelity? Broad topic I know, just would like someplace to start. Thanks!
Investing for beginners
- Thread starter General Lee
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RNeumann
Elite Member
This guy has good info... ignore the first 10” if you are so inclined.
Dave Ramsey Explains His Investing Process - YouTube
I can say it’s worked for my wife and I. Have a plan, work the plan.
Dave Ramsey Explains His Investing Process - YouTube
I can say it’s worked for my wife and I. Have a plan, work the plan.
jeff9366
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Determine if your employer has a 401(k) retirement plan. Join it.
A 401(k) plan is a company-sponsored retirement account that employees can contribute to. Employers may also make matching contributions.
There are two basic types of 401(k)s—traditional and Roth—which differ primarily in how they're taxed.
In a traditional 401(k), employee contributions reduce their income taxes for the year they are made, but their withdrawals are taxed. With a Roth, employees make contributions with post-tax income, but can make withdrawals tax-free.
Employer matching
Employers who match their employee contributions use different formulas to calculate that match. A common example might be 50 cents or $1 for every dollar the employee contributes up to a certain percentage of salary. Financial advisors often recommend that employees try to contribute at least enough money to their 401(k) plans each to get the full employer match.
A 401(k) plan is a company-sponsored retirement account that employees can contribute to. Employers may also make matching contributions.
There are two basic types of 401(k)s—traditional and Roth—which differ primarily in how they're taxed.
In a traditional 401(k), employee contributions reduce their income taxes for the year they are made, but their withdrawals are taxed. With a Roth, employees make contributions with post-tax income, but can make withdrawals tax-free.
Employer matching
Employers who match their employee contributions use different formulas to calculate that match. A common example might be 50 cents or $1 for every dollar the employee contributes up to a certain percentage of salary. Financial advisors often recommend that employees try to contribute at least enough money to their 401(k) plans each to get the full employer match.
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RalphVa
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I second the vote for 401k, especially if the employer will match it. My wife has been really good at picking things. In fact, Fidelity is one that has been a really good one. There are all sorts of funds though in every area. We finally went with a financial advisor in NJ and then went with a different one when we moved from Singapore to Baton Rouge. Have stayed with the guy we went with in Baton Rouge. He's in Thibodeaux, La, and his firm has really done well. We've been in Va for nearly 20 years and still stick with the Thibodeaux guy. Actually went with him when we took the lump sum for retirement. Did not want to mess up with putting it in the wrong place and having tax problems, etc. The Thibodeaux guy deals with Ameriprise stuff. Depends on what your goals are and tax situation, etc. as to what funds you select. They know; you don't. Just have to find a good agent.
Ralph
Ralph
Fuddy1952
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How old are you?
That's important to know.
jeff9366
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Your LOCATION shows Mid-Atlantic.
T. Rowe Price is headquartered in downtown Baltimore, near the inner harbor. During 1974 I rode my 1969 BMW motorcycle from Washington, D.C. up to T. Rowe Price at 600 East Pratt Street, Baltimore, and after speaking with a advisor for a half hour opened an Individual Retirement Account (IRA) with $250 hard earned dollars in the form of cash.
Mutual Funds, Retirement, and Investing Services | T. Rowe Price
Vanguard, the largest mutual fund family in the USA, is headquartered in Valley Forge, Pennsylvania.
Mutual funds - Investing in a mutual fund | Vanguard
Make an appointment and either of these funds will welcome you to headquarters and introduce you to a patient, well trained, in-house investment advisor, likely with a finance or accounting degree.
I retired at age 58.
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GeneV
Elite Member
401k is the way to go if your employer offers it. If you're self-employed (and w/o payroll employees) you could open a solo-401k for yourself as well as your spouse. Otherwise, you could also do an IRA. Actually, in any case you could also do an IRA if you have extra income to spare. With an IRA, mutual funds are probably the easiest/safest way to invest.
If it's an employer 401k, you usually have no choice on who manages it. With the others, you could choose an actual person or a robo-advisor (basically, a computer program which monitors your account and does the various trades). Robo-advisors are generally cheaper, and they work fairly well. However, not all investment firms offer it.
Generally, easiest way to to split up investments is via "target-date", most firms offer that in one form or another. Basically, you go through an online interview, state when you plan to retire, how comfortable you are with various swings in the market, so forth, and your account manager (robot or human), splits your investment between stocks, bonds, and cash accordingly. Stocks are risky, bonds not so much. The inverse to that is that stocks bring bigger potential returns whereas bonds give you smaller returns. Target-date investing splits all that up so that you're more in stocks when you're farther away from retirement, and mostly bonds when you're closer to start drawing your retirement income. But if you want to play it safe, you could ride it mostly bonds the whole way through...the interview process I mentioned above factors that in. And also you're not stuck with it, you could change the split whenever you want by retaking the interview.
I'm no expert, I may be wrong on some of that, but I'm pretty sure I'm close. Personally, I have a solo-401k which is robo-advised. I have an E-trade account for that. It's not the cheapest in terms of account fees, but they were one of the few who offered solo-401k's at the time, so I just stayed with them.
Don't be afraid of it, it's really not all that complicated nowadays with these programs, and you don't need to know all the minute details and be able to read the daily stock reports like serious investors do. I still don't. Basically, end of the day, if you see dow/nasdaq/s&p in the red, that's bad. In the green, you're good.
If it's an employer 401k, you usually have no choice on who manages it. With the others, you could choose an actual person or a robo-advisor (basically, a computer program which monitors your account and does the various trades). Robo-advisors are generally cheaper, and they work fairly well. However, not all investment firms offer it.
Generally, easiest way to to split up investments is via "target-date", most firms offer that in one form or another. Basically, you go through an online interview, state when you plan to retire, how comfortable you are with various swings in the market, so forth, and your account manager (robot or human), splits your investment between stocks, bonds, and cash accordingly. Stocks are risky, bonds not so much. The inverse to that is that stocks bring bigger potential returns whereas bonds give you smaller returns. Target-date investing splits all that up so that you're more in stocks when you're farther away from retirement, and mostly bonds when you're closer to start drawing your retirement income. But if you want to play it safe, you could ride it mostly bonds the whole way through...the interview process I mentioned above factors that in. And also you're not stuck with it, you could change the split whenever you want by retaking the interview.
I'm no expert, I may be wrong on some of that, but I'm pretty sure I'm close. Personally, I have a solo-401k which is robo-advised. I have an E-trade account for that. It's not the cheapest in terms of account fees, but they were one of the few who offered solo-401k's at the time, so I just stayed with them.
Don't be afraid of it, it's really not all that complicated nowadays with these programs, and you don't need to know all the minute details and be able to read the daily stock reports like serious investors do. I still don't. Basically, end of the day, if you see dow/nasdaq/s&p in the red, that's bad. In the green, you're good.
drssg
Veteran Member
I think a good way to get started is to find a local financial advisor. Personally, it would drive me insane to attempt to make investment decisions on my own. There are about a billion different options with different strategies, goals, and risks.
A good advisor would start by assessing your current state, goals, risk tolerance, etc..
A good advisor would start by assessing your current state, goals, risk tolerance, etc..
jeff9366
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Independent financial advisors, any size, any place, are expensive. Most, not all, have their fees deducted directly from your capital, so it is difficult to determine your cost for their advice. Advisors are paid with your money, from your accounts, in up markets and down markets.
I have a T. Rowe Price annual report before me. For the X X X X X FUND, annual direct investment expense ratio is 0.64% per year.
X X X X X FUND - ADVISOR CLASS annual investment expense ratio with an intermediary independent financial advisor is 0.91% per year.
Assuming the long term growth rate for stocks will be 4% over inflation, a nearly 1% annual fee is a killer. Deal direct.
During my final fourteen working years my employer paid 100% of the 401(k) fund expenses, in addition to making a 3% match on 6% contributions, so on the funds within the 401(k) the employee expense ratio was not 0.91% not 0.64% but 0.00%. Not all employers are so generous.
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Fuddy1952
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Not to discredit advisors, but any middleman is cutting into your investments and advising what gives them commissions.
You can buy directly from Fidelity, Vanguard, etc. Age is important along with many other factors: risk tolerance, goals, timeline, etc. Becoming debt free allows greater investing.
If you're working, max out an IRA contribution. As mentioned a Roth and SEP IRAs look into. With the recent market drop starting now may work to your benefit, but you may want to "ladder", i.e., $1,000/month instead of $12K all at once (although most mutual funds do have a minimum initial investment).
Fidelity for example has good FREE advisors to help guide you through what suits you the best.
You can buy directly from Fidelity, Vanguard, etc. Age is important along with many other factors: risk tolerance, goals, timeline, etc. Becoming debt free allows greater investing.
If you're working, max out an IRA contribution. As mentioned a Roth and SEP IRAs look into. With the recent market drop starting now may work to your benefit, but you may want to "ladder", i.e., $1,000/month instead of $12K all at once (although most mutual funds do have a minimum initial investment).
Fidelity for example has good FREE advisors to help guide you through what suits you the best.