Investing Question - What else? Enlighten me please.

[84porsche]

I have been a fan of buying certificates of deposit (CDs) for the past couple of years while the interest rate was around 5%. Can you guys enlighten me on what else is a good safe place to put a little cash now that the rate is dropping.

Are T-bills a worthy investment? Stocks?

I am still under 30 but would like to make some sound investments in addition to 401k etc. Any tips?

[Porsche-O-Phile]

Assess what your risk tolerance is.

If you're under 30, I'd be looking at investment options that are way more high-risk/high-return than bank CDs, but that's just me.

[pwd72s]

Jeff gave good advice...at your age, you have plenty of time to outride the ups and downs of the market. Vanguard has a "targeted retirement" fund...Others have dubbed it a "no brainer" fund. You tell them your targeted retirement date...they do the stocks/bonds blending for you. At first, more heavily into equities (stocks) than bonds because stocks are traditionally where the real gains are made. Then, as you get closer and closer to retirement, they switch more over to the top rated bonds side...

Want to learn more? Lots of reading out there.

www.vanguard.com

[Rich76_911s]

At under 30 people are going to tell you to put your money in a riskier portfolio.

You could open an IRA or a Roth IRA. The difference between the two is essentially when you get taxed, now or later.

Once money is in your IRA though you are penalized for taking it out. You can take money out of an IRA to buy your 1st home (only your first home so if you already bought a house it is a no go). But if you take $ out before you are 60 something you get penalized.

Inside an IRA you can invest in several different classes of assets. From treasuries to mutual funds you can pick and choose depending on your risk / return levels.

I'm turning 30 in a couple months and I have a Roth IRA with Vanguard. They seem to do a good job without charging too much. I don't own a home yet so I will probably use my IRA savings towards that. If the housing market ever gets itself back at some reasonable level.

[Moneyguy1]

Mutual funds may be the answer for you. Janus or T. Rowe Price both have funds that vary in risk and as a benefit, they have the advantage of full-time professionals in charge. If you find one or more that interest you, the only advice I would give is to ignore the short-term changes and invest on a regular basis to take advantage of dollar averaging.

There are those convinced that they must be the ones to pick their stocks themselves and they can "time" the markets. I have found this to be too time consuming and in my case, too nerve wracking. Let the professional run the show. I will take the potentially slightly lower returns for the comfort.

[Dueller]

Whatever you do don't get into day trading.

[HardDrive]

As many have already stated, you could afford a bit more risk at your age.

The big thing with investing it to not lose your head. Its crushing to see and investment go down in value. But if you are making rational decisions, and placing your money in funds with a long term track record of growth, you don't need to react to every swing in the market.

I'm currently taking a bath on Whole Food Markets (yeah, the one ****** stock I decided to buy because of those Motely Fool a55holes, and its in the tank). Am I selling? No way. The thing is, I'm NOT taking a bath unless I foolishly sell and lock in my losses. The long term prospects for Whole Foods are good.

Day trading is a fools game. You can make money at it, but you have to sit all day with your eyes glued to the computer screen, and you have to be prepared to absorb HUGE losses. Frankly I think your better off in Vegas.

I do trade, but its more of a year to year type of thing. When I buy a stock I expect to keep it at least 18 months.

I sold almost all my stock in December because it was obvious we were headed for the toilet, but my current holdings are:

BRK.B (Berkshire Hathaway B stock)
VWO (Vanguard international fund)
WFMI (Whole Foods)

[RWebb]

Like Paul, I also favor Vanguard for mutual funds. They have very low expenses (which rob your returns) and the company is actually owned by the shareholders. Fidelity is also good.

Generally, the returns you get are correlated with the risks you take. Cash has little risk (but you are almost guaranteed to lose money over time to inflation) - that includes CD's. Bonds are next (and there are various types), with stocks giving the most return for the greatest risk.

If you pool a bunch of stocks, the risk is reduced - hence the mutual stock fund.

As noted above, avoid crazy things like day trading, commodities, derivatives, etc.

You will also want to shelter your money from taxes. That means start an IRA right away - call Vanguard and tell them you want to start an account and an IRA. The next question is Roth vs. Traditional. Talk to the Vanguard rep about your current tax bracket and ask for their advice.

Also, pack away as much of your salary as you can in a 401k or whatever retirement benefit plan your company has. And solo business can also set up a nice fat 401k - including one that consists solely of selling off your used car parts on say Pelican or eBay. It has to be a real business, not just a hobby, but IIRC the test is whether you attempt to make a profit. Not a huge barrier. The IRS will actually help explain this to you.

Start that IRA ASAP - before April 15th & always put in the max. for your age bracket.

LAST:
Whether you are liberal or conservative politically, you will want to be fairly conservative in your expenditures, but reasonably liberal in your investments.

[hpservertech]

I'm in my 30's and very heavy in bonds. have some stock, but it's a majority of bonds. So far I have done pretty good over the last 10 years. Haven't been down overall any year.

[Chocaholic]

Yep...nothing but BIG investments for me. I'm talking...are you sitting down?....HIGH two figures. Yessiree.

Seriously...diversify across a range of mutual fund choices and forget about it. I've used Janus for years and have been very pleased.

[VincentVega]

Great fund to get your feet wet, Vanguard STAR (VGSTX) . I started putting away ~$100/mo when I was 18 and it's turned into a nice little stash, I'm 32 now. Surely it's not the end all, or the best/only option. For me a balanced, fairly conservative fund with nearly $0 in fees was a great intro into equity investing.

Max out the 401k and roth if you qualify.