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Mutual fund suggestions/help?

I have about $1000 that I'm looking to invest in mutual funds. This is the first point in my life that I'm financially in a spot where I have extra money to invest and I'm not sure where to start. I'm 31, not married/no kids. Where do I find out more about particular mutual funds? Also, can I find this info and do this myself or do I need to enlist an advisor?

Jun 04, 2012 by Ada from Butte, Mt in  |  Flag
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George Cones, JD Level 20

Dear Ada,

Great to see that you are thinking about saving now, at an early age. You told us you are thirty, but there is some other information that would be useful in answering your question.

Do you think you are going to been needing or using this money in the near-term or mid-term?

    Are you planning to be using the money to buy a house, for example?

Do you have a 401(k), 403(b), or other similar plan at work?

Are you maxing out on your 401(k) contribution?

Without this information, we can only go through a hypothetical checklist, as follows:

If you don't plan to touch this money until you are over 59 1/2 years old, you would be better off contributing the maximum possible to your 401(k) plan, 403(b), or other "deferred compensation plan," if you have one. In your deferred compensation plan, your contributions are pre-tax, that is you don't have to pay taxes on the contribution, so your taxable compensation is reduced which lowers your taxes. In addition, the assets in your plan grow tax deferred, so you don't pay any taxes on asset growth until you begin taking money out of the plan (in your case almost 30 years).

Assuming that these are your only assets at this point, If you plan on using this money before 59 1/2, then you should consider opening an account at a firm like Vanguard. At Vanguard you can find many low-cost well diversifed funds. Therre are funds that own most of the stocks in the US, and the World stock markets, as well as bond funds that do cover the same broad markets, or funds that cover all stock and bond markets. Once you you have enough assets in a few years, than you may want to consider finding a fee only advisor.

Remember also, that many 401(k) plans provide for plan loans, which may make investing in the 401(k) plan the more attractive investment choice, even if you would like to be able to get to a portion of the plan assets.

Comment   |  Flag   |  Jun 04, 2012 from Wilmington, DE

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Ada - you can certainly invest on your own. Morningstar.com is a good source for information on investing and, in particular, on no load open-end mutual funds. You can research options there and then visit the respective fund company website for more specific information on the funds of interest to you. It is reasonable to consider a diversified fund rather than individual stocks and, within funds, to consider a somewhat conservative fund such as Vanguard Star, Berwin Income Fund or FPA Crescent Fund. The process of researching your funds should be a good educational experience. Good luck!

1 Comment   |  Flag   |  Jun 04, 2012 from Clinton, NJ
Michael L. Wilson, MBA, CFP®, CRC®

Vanguard is an excellent place to start Ada. The company provides excellent investor educational materials, and it provides low-cost funds for your investments.

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Flag |  Jun 04, 2012 near Orland, IN

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Ryan Level 19

I would suggest starting to look at some of the no load funds available at Vanguard, T. Rowe Price, and Fidelity as a starting point. Each firm's website has a wealth of information. Many funds require a bit more to get started but some will accept investments of $ 1,000 such as Vanguard's STAR fund. This is a pretty good fund for many investors but be sure to read the key points about any fund before making an investment. You could also open up a low cost account with Schwab, TD Ameritrade, or a similar discount brokerage. Each of these firms would have access to a wide variety of mutual funds that might be suitable for your needs. And if this is longer term money, it would pay you to become familar with the Roth IRA or Traditional IRA. Good luck in your research and decision making.

Comment   |  Flag   |  Jun 04, 2012 from Gettysburg, PA

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Ada, there are definitely investment options out there for your $1,000. You might look into asset allocation mutual funds at www.morningstar.com so that you can get some diversification but you only have to purchase one fund. One example is Permanent Portfolio (PRPFX). However, what is more important is that you develop a savings plan to establish a larger investment base. Until you save a larger base investment returns are not going to make a huge difference. It sounds like you are in a good position to begin this journey. Good luck!

Comment   |  Flag   |  Jun 07, 2012 from Abilene, TX

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