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Thread: Different kinds of savings, IRAs and investing

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    Search Different kinds of savings, IRAs and investing

    I'm new to investing, and I am looking for a good way to manage my savings accounts. I currently have an emergency fund that is one month's living expenses, and I am building on that to turn it eventually into a year's worth of living expenses. I also have a "regular" savings account, but what should I do with this money? Invest it? Just let it collect interest? I also have a savings account for short term goals like plastic surgeries, a new car. So, I have 3 different "areas" that I put savings into. Am I managing this well?

    I want to start investing and putting money into and IRA. How much money should go to either per month? I put 50% of my money earned nightly away into those three separate savings accounts that I just mentioned. Should I allocate more money to investments and an IRA (say 10% more)? Or should I just use my regular savings as a base for my investments/ IRA?

    And what are your experiences with a Roth vs regular IRA? I have been reading about what the differences are but it's kind of confusing for me from a stripper standpoint as not all advice on the internet is geared towards independent workers like us.

    Thank you so much for reading

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    Default Re: Different kinds of savings, IRAs and investing

    Quote Originally Posted by dely View Post
    I'm new to investing, and I am looking for a good way to manage my savings accounts. I currently have an emergency fund that is one month's living expenses, and I am building on that to turn it eventually into a year's worth of living expenses. I also have a "regular" savings account, but what should I do with this money? Invest it? Just let it collect interest? I also have a savings account for short term goals like plastic surgeries, a new car. So, I have 3 different "areas" that I put savings into. Am I managing this well?

    I want to start investing and putting money into and IRA. How much money should go to either per month? I put 50% of my money earned nightly away into those three separate savings accounts that I just mentioned. Should I allocate more money to investments and an IRA (say 10% more)? Or should I just use my regular savings as a base for my investments/ IRA?
    I would say you are managing it well as long as you have enough income that you don't feel spread too thin. I can't advise on which investments but savings account interest is generally so low it's negligible. If you can find something with a decent rate of return that's low risk, I'd do that. Many members suggest the 6 month CD option.

    There's no set amount of money to contribute to savings. If you can pay your bills and have 'fun money' left with your 50/50 split, do it. Personally I would just use the 'regular savings' as a base for the IRA or investments right now. You already have an emergency savings and 'fun' savings which are easily accessible should you need them, and it sounds like the use of your 'regular' savings is pretty much just to be a large stockpile... might as well invest it.
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    Default Re: Different kinds of savings, IRAs and investing

    I suggest opening an IRA mutual fund, with automatic contributions. If you're in a high tax bracket, a regular IRA would probably be best, for the tax deduction. If not, then a Roth IRA would probably be a better choice.

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    Default Re: Different kinds of savings, IRAs and investing

    If you make over a certain amount you must do a traditional. However, you can start with a roth and then when you reach the income threshold, you can start a traditional. You do not get a deduction for a roth, but you do for a traditional. You should max out your contribution every year (currently its at $5500 per year) If you are interested in learning more, please pm me.

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    Default Re: Different kinds of savings, IRAs and investing

    Good suggestions from everyone above. Maxing out your annual contribution to an IRA should be your top priority. If you find you are having trouble making ends meet after maxing out your annual IRA contribution, then review your expenses and cut them (not your IRA contribution) until you make ends meet.

    The hard part for the new investor is knowing how to invest the money that you have contributed to your IRA. If you don't know how to invest, then go to a local book store's or local library's personal finance section and look for one of David Bach's (or any other similar author) books.

    Personally, I would recommend that any new investor just keep it simple by avoiding individual stocks (too risky for a newbie) and start out by allocating 60% into a total stock market index fund, 20% into a long-term US treasury (or bond) fund, and keep the remaining 20% in cash or some money market fund. This will help you keep your investing fees to a minimum, which can eat away at your investments over time. As you gain more knowledge and self-confidence in investing, you can change your allocations or investments to one that will help you meet your long-term retirement goals.

    One last piece of advice. If the market unexpectedly tanks (which it will on occasion), then don't panic, but look at it as a buying opportunity with that 20% cash allocation. Good luck!

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    Default Re: Different kinds of savings, IRAs and investing

    Quote Originally Posted by FMA Las Vegas View Post
    If you make over a certain amount you must do a traditional. However, you can start with a roth and then when you reach the income threshold, you can start a traditional. You do not get a deduction for a roth, but you do for a traditional. You should max out your contribution every year (currently its at $5500 per year) If you are interested in learning more, please pm me.

    +1

    I have an account with Vanguard. To figure out which Roth IRA was right for me, I called them and an awesome woman helped me.

    I would start with that and then look into investing in mutual funds and real estate.

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    Default Re: Different kinds of savings, IRAs and investing

    Quote Originally Posted by LAChloe View Post
    +1

    I have an account with Vanguard. To figure out which Roth IRA was right for me, I called them and an awesome woman helped me.

    I would start with that and then look into investing in mutual funds and real estate.
    I second this. Love Vanguard! Great company!

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    Default Re: Different kinds of savings, IRAs and investing

    I third Vanguard! I have a relative that has made millions investing in Vanguard. I plan on opening a few accounts with them in 2016. And I also don't suggest too many individual stocks. Mine really haven't been great unless I watched them continuously. I've done really well with real estate. But I've also lost with real estate. I think an iRA is the way to go. I'm also looking into a Keogh account. And different stock funds with Vanguard.

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    Default Re: Different kinds of savings, IRAs and investing

    I too agree Vanguard is a good place to start. In general, over the long term, stocks outperform other types of paper/precious metal investments. Especially when interest rates are low. Mutual funds are a good way to get a diversified balance of stocks without having to invest a significant amount at a time, and Vanguard has the lowest fees. I also like T Rowe Price for their performance.

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    Default Re: Different kinds of savings, IRAs and investing

    I have an account with Fidelity! Anyone familiar with them?

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    Default Re: Different kinds of savings, IRAs and investing

    Quote Originally Posted by dely View Post
    I have an account with Fidelity! Anyone familiar with them?
    Yes, I have been investing through Fidelity since 2000. I originally went with Fidelity because they have a nice trading platform and a user friendly online interface as well as brick and mortar offices. About 10 years ago I thought about switching to Vanguard because they are known for their low cost index mutual funds. However, I stayed with Fidelity because they also offer a family of low cost index mutual funds ("Spartan") whose fees are comparable to Vanguard's mutual funds' fees. My investments are primarily in Fidelity's low cost index mutual funds. Finally, I will likely stay with Fidelity for the long-term because I use their branded Amex credit card, which gives me 2% cash back on all purchases that I deposit directly into my accounts at Fidelity.

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    Default Re: Different kinds of savings, IRAs and investing

    With a handful of trading days left in 2015, the DOW, the S&P, and the NASDAQ are within a fraction of a percent of where they started at the beginning of 2015. Given added fees charged by mutual funds and ETF's, this means that every buy and hold investor in broad based index funds lost money in 2015.

    In contrast, the #1 performance specialty sector was gun makers. Average gains for major companies like RGR and SWHC were a doubling in share price levels versus price levels at the beginning of the year.

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    Default Re: Different kinds of savings, IRAs and investing

    Cassandra/Melonie,

    Why don't you mention that RGR has lost 25% of its value since Jan. 2014? Over the past two years, buy and hold investors in broad based index funds have done much better.

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    Default Re: Different kinds of savings, IRAs and investing

    E2 is right about this. You have to look very closely at the time frame for any particular issue to decide if it is right for your investment portfolio. Me, I spent the last four years investing in oil and gas mostly. For three years it was great. This year it wasn't. I have held one issue since I first started investing. Overall, it's up over 850% since 2003 when I first bought in. However, if you look at the top of that issue's market in June 2014, to December 2015 you will see an 18% loss. It all depends on the time frame you are looking at. Remember, past performance is not a predictor of the future. The only way you can predict the future of any issue is to look carefully at the company. Buy companies that you understand. Read their prospectus and their annual reports. If they cannot explain to you in simple declarative sentences how they make money now and how they plan on doing it in the future, they will not, let me repeat that WILL NOT make money in the future. They WILL [emphasis added] lose money and it will be your money they lose. The more complicated a company's discussion of its business, the more likely they are either too stupid to pour piss out of a boot if the instructions are printed on the heel, or they are planning on stealing you blind. Either way, take a pass and look for something else.

    HTH
    Z

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    Default Re: Different kinds of savings, IRAs and investing

    Quote Originally Posted by CassandraNJ View Post
    With a handful of trading days left in 2015, the DOW, the S&P, and the NASDAQ are within a fraction of a percent of where they started at the beginning of 2015. Given added fees charged by mutual funds and ETF's, this means that every buy and hold investor in broad based index funds lost money in 2015.
    One more point to add. No buy and hold investor in broad based index funds lost money in 2015, unless they invested their money at the beginning of the year, and cashed out before today, which defeats the purpose of buy and hold. Investors who have been contributing money to index funds regularly, and leaving the money there have done very well. Over the past 6 years, the S&P 500 is up approximately 250%. There are no investments that go up year after year, forever. Over the long term, stocks have always done well.

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    Default Re: Different kinds of savings, IRAs and investing

    As a matter of fact, the S&P and the DOW closed down for 2015. The NASDAQ closed up slightly, with all of the gains being attributable to the Fantasy stocks - Facebook, Apple, Netflix, Tesla, Alphabet ( Google ), etc. As another matter of fact, if you backtrack 6 years and 6 months, the 250% S&P gains you tout turn out to be more like 30%. 30% gains over 7 years isn't much better than the risk-free returns provided by Certificates of Deposit. Time frames matter a lot.

    The important point is that the diversify plus buy and hold investment philosophy you recommend is just one of many. The diversify plus buy and hold investment philosophy is attributable to one Jack Bogle, the founder of Vanguard. Diversify plus buy and hold has worked reasonably well since the early 90's. But the famous disclaimer of past performance not guaranteeing future results shouldn't be disregarded. A parallel investment philosophy that real estate always increased in value also worked reasonably well for quite a few years, but suddenly stopped working in 2008 and generally hasn't worked since !!! Also, Vanguard's mutual funds and ETF's continue to profit from fund fees charged to investors regardless of whether the value of those funds goes up or down. Just saying.

    So far nobody has really talked about IRA's. There are basically 2 types available for dancers and camgirls, Conventional IRA's and Roth IRA's. Both are subject to strict gov't regulations. In essence, both constitute a contract which the person must follow or suffer heavy penalties, but which the gov't can alter at any time. Of the two, Conventional IRA's appear to offer the greatest tax savings, because they postpone income tax due on contributed IRA money until the year that money is withdrawn. Conventional thinking is that, when the person retires decades from now their income level - and thus their tax bill - will be lower than it is in the current year. But this isn't guaranteed in any way by the gov't. Also, access to Conventional IRA money prior to nearing retirement age is heavily restricted and heavily penalized. Roth IRA's do not offer current year tax savings on contributed money, thus they are less subject to withdrawl restrictions and penalties. For dancers and camgirls, decisions about Conventional IRA's, Roth IRA's etc. probably need to take into consideration their current year earnings level and tax bracket, versus expected earnings levels 20 years from now, versus needed earnings levels 40 years from now.
    Last edited by CassandraNYC; 01-05-2016 at 12:07 PM.

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    Default Re: Different kinds of savings, IRAs and investing

    ^^Good to see the Dollar Den of Doom is back.^^ [sarc off]

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    Default Re: Different kinds of savings, IRAs and investing

    Just a quick comment from me on mobile. Last time I checked, CDs were basically useless from an ROI standpoint. Even if you're concerned you'll spend that money unless it's tied up in investments, you'd be better off doing almost anything else with it. I was seeing ridiculous rates, like even if you bought a $5k CD for a ten-year period, you only made $50 or something.

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    Default Re: Different kinds of savings, IRAs and investing

    I put my money last year into Preferred Stocks and Reits. They returned about 5.5% and have done well. I think I posted my portfolio last year if you want to search for it. I am reallocating now and dumping some underperforming foreign etfs. I would avoid bonds like the clap. I like dividend etfs and stocks.

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    Default Re: Different kinds of savings, IRAs and investing

    The only reason I have CDs is for my emergency fund ladder. The yield is terrible right at 1% for a 12 month CD. Ugh.

    Treasury bonds are at 2.17% for a 10 year bond. Pretty bad too.

    Investment grade corporate bonds are running about 1.5% for a two year bond up to just under 4.5% for a 20 year bond.

    Tax exempt muni bonds are 1% for a two year bond up to a little less than 3.5% for a 20 year bond. You have to be in a very high tax bracket or live in a high income tax state to make those yields worth it.

    On the other hand, the S&P 500 dividend yield is 2.14%. Not glorious, but a twice as good as munis, CDs and better than high grade corporate bonds.

    The rate of inflation remains very low. Investor expectation is that inflation will remain low for at least ten years. That has pushed a lot of investors into equities. I have no idea what the next big thing will be. No one does. I do know that a balanced portfolio of companies which a person understands well and companies with solid business plans offer the best long term investing strategy. Unfortunately, if you are looking to your investments to provide a substantial source of income in the next five years, maybe ten, you better be buying a job with those investment dollars. The economy always deals out winners and losers. The best way to improve your odds (and improve them substantially) is to be an inherent value investor. Pay attention to your companies, learn every thing there is to know about them. Get to the point you know their business plan as well as they do. The, invest. Of course that means unless you are a professional investor, you can probably only follow five or so companies. Some people say mutual funds are a way to better diversify. True enough. But, I like to dig into my companies and decide for myself who is worthy and who is not. I like being a CEO too. It's good to be the Queen.

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    Default Re: Different kinds of savings, IRAs and investing

    Quote Originally Posted by charlie61 View Post
    Just a quick comment from me on mobile. Last time I checked, CDs were basically useless from an ROI standpoint. Even if you're concerned you'll spend that money unless it's tied up in investments, you'd be better off doing almost anything else with it. I was seeing ridiculous rates, like even if you bought a $5k CD for a ten-year period, you only made $50 or something.
    Yes! CD's are shit right now. I say IRA and a cash value life insurance policy. You can get a substantial one for a few hundred dollars a month. If you have an "emergency fund" with living expenses and a savings account then you could allocate a little of what you are putting into your regular savings into these two things every month. Essentially the point to a savings account is to have emergency money for living expenses so really you are doubling down on the same thing but not getting any real return.
    XoXo Gia
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    Default Re: Different kinds of savings, IRAs and investing

    My VIP customers who are brokers and financial advisors do this stuff for a living !!!!



    Time will tell how long it will take the diversified buy and hold investors to break even on their January losses.

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    Default Re: Different kinds of savings, IRAs and investing

    For YTD through Friday, February 5, the returns for my S&P 500 (large caps), extended market (mid/small caps), and global (foreign caps) index funds are negative, but their losses are largely offset by positive returns for my long-term US treasury bond index fund and gold ETF. The net result is approximately -2.8% (loss) YTD for my diversified portfolio. To facilitate an apples-to-apples comparison with the above post, my overall return is approximately -4.65% (loss) since November 1, 2014 for my diversified portfolio (versus -15.23% reflected in the above post).

    Shortly after the start of the New Year, I completely liquidated my real estate index fund to realize a gain from 2014 (while I still had a gain) and increase my cash allocation to 20% of my diversified portfolio for future purchases of beaten down stock index funds. I started putting some (but not all) of that cash to work over the past 2 weeks. Time will tell if I started buying beaten down index stock funds too early. If so, then not to worry because I still have plenty more cash to deploy after the next leg down in the stock markets.

    I'm sharing the above not to brag because a -2.8% loss YTD (or -4.65% for the past 3 months) is nothing to brag about although I am glad that I wasn't holding individual stocks like GoPro, Apple, etc., during this recent market downturn. Instead, I am sharing so that others can consider the pros and cons of holding a diversified portfolio of investments for any market environment, which will include the occasional market downturn. Needless to say, I am not losing any sleep at night over this recent market downturn.
    Last edited by Danny Ocean; 02-07-2016 at 06:04 AM.

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    Default Re: Different kinds of savings, IRAs and investing

    yup, GLD shares are up something like 9.8 % YTD ... which could cover a lot of losses in other types of investments. Unfortunately, most mainstream investors consider gold to be a barbaric relic that can only lose money as opposed to a legitimate diversification investment. Disclosure ... I own some GLD shares myself.

    In terms of stocks which contribute heavily to the indexes, both the Fantasy stocks which make up a big chunk of the Nasdaq, and the bank stocks which make up a big chunk of the S&P, have taken heavy losses since the new year. But the broadest index Russell 1000 has also taken a 10+% loss.

    In terms of bonds, indeed US treasuries have gained a couple of percent based on international hot money making a flight to safety. However, other US gov't bonds have issues ( Puerto Rico, Chicago etc. ). And Corporate bonds have lost a few percent as well.

    As I was implying in my earlier post, sometimes the return OF your investment becomes more important than return ON your investment. Along those lines, money invested in CD's or short term money market funds avoided principal losses since the first of the year, and earned a few pennies of positive interest as well.

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    Default Re: Different kinds of savings, IRAs and investing

    OT: Anybody know, or care to guess what "BWY" stands for ? Locale ? Former Club ? Acronym for an expat ?
    I'm right 96% of the time. I don't sweat the other 5% .......................

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