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Thread: Investment Questions

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    Default Investment Questions

    I'm coming into a large sum of money soon (over 100,000 not subject to tax because it's from a wrongful death suit). The first two that I got, I got myself out of debt, bought some nice things and put some into real estate, helped out the relatives , set up trusts for my daughter etc.

    Now, I'm ready to invest. I plan on going to a professional but don't know where to look for someone reputable or what questions I'm supposed to be asking.

    Lastly, (and this is probably for Melonie) what would you recommend that I be investing this money in? I already have the basics...regular savings, Keogh Plan, life ins etc. While I can't afford to play super risky, I'd like to be able to use this money to make money.

    Hope this makes sense. Thanks in advance.

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    Banned Melonie's Avatar
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    Default Re: Investment Questions

    DylanAngel, I'm just a dancer with big boobs not a financial advisor - therefore I hesitate to give specific investment advice to anyone. In terms of general financial advice, it sounds like you're on the right track already in the sense that the very best 'investment' is to get out of debt. The second best 'investment' is getting yourself set up with a house and a decent car. The third best 'investment' is setting up the 'necessaries' i.e. a bank/money market account with enough money in it to cover 4 months of normal living expenses, a retirement plan of some sort, and life/catastrophic health insurance.

    If you have met all of these 'basics' and have money left to invest, you then need to answer three questions.
    A. do your investments need to produce regular income, or can you afford to make an investment today that may not pay off big for 10 years ?
    B. is your tax bracket sufficiently low that you don't need to worry about taking a major hit on fed/state/local taxes on earned income, vs being better off with capital gains, vs a high enough tax bracket that tax preferred investments make sense ?
    C. are you willing to invest your own time and brainpower to 'actively manage' your investments, or would you prefer to accept lower risks/returns by investing 'passively' .. where the analysis, buying and selling are handled by someone else ?

    The answers to those three questions will make a great deal of difference in regard to the types of investments (and what type of investment advisors) which might be best suited to your individual situation.

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    Default Re: Investment Questions

    Thanks Melonie. Got all of the basics covered in your post. I guess I'm looking for long term investment with a mind to be able to live comfortably in my retirement so I'm in the latter section A of your post. In addition to what I already have, my new job will be providing a 401K which I will max out (assuming I stay there for 5 years to be vested and have full ownership of the company match) and a flex spending plan which I plan to put all of my bonuses into thereby taking that much off of the top of my earnings and making them not subjectable to tax until withdrawal.

    I guess I'm just confused with what type of financial advisor I need. My life ins. carrier would love to get involved but I'm not too sure about that. This is all a new area to me. Unfortunately, nobody I know has serious investments, so I can't ask them. All they have are real estate and mutual fund investments.

    What type of company do I start researching? Like a Merril Lynch type of thing? (hope that doesn't sound stupid...just giving an example)

    As far as you just being a dancer with big boobs...even the vaguest of advice you have given here has gone a long way to educate women on what they need to do to protect their futures...and it's much appreciated.

    Edited to add: Must have misread some of your post. I am comfortable with letting someone else handle my income and no I'm not in an extremely high tax bracket....I think we're considered upper middle class.

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    Banned Melonie's Avatar
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    Default Re: Investment Questions

    While many posters on SW will probably dispute this, IMHO a Life Insurance Carrier with Financial Services division is probably going to lay out a standard investment 'formula' ... x% in mutual funds, y% in bonds, z% in money market ... which will be safe and conservative but not necessarily the best investments for your own personal situation.

    Admittedly in my own case I do have some life insurance and a brokerage account with the same company ... Prudential/Wachovia. But the ONLY two reasons I use my Wachovia brokerage is A. to buy and sell stocks directly on Hong Kong, Singapore, Taiwan, Israel, South African stock exchanges etc. which is not possible with my 'discount' online brokerage account, and B. to get a piece of IPO offerings where the new shares are usually doled out selectively to the financial houses that financed the IPO.

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    Default Re: Investment Questions

    Gotcha....so I think I'm gonna stick with the "standard formula" for now with my ins. carrier until I get more educated (got lots of reading ahead of me) then, when I'm more comfortable in the financial medium, I'll start to shift things around a bit. At least I'll be doing something with it which is better than it sitting in the darn bank.

    Thanks a bunch...I'm sure I'll need more advice as time moves along.

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    Banned Melonie's Avatar
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    Default Re: Investment Questions

    As I said, the Financial division of your Insurance carrier is not going to steer you too far wrong, but they ARE going to scalp a fair chunk of 'management fees' from your profits. Be sure to read the fine print !!! The returns may not actually beat out the returns available on some online money market and CD offerings ( have a look at and ). Both of these companies also offer a few different types of very low 'management fee' very basic mutual funds.

    Perhaps another good place to start doing research is with the 'mutual fund family' companies like Janus or Fidelity or Rydex. All of these offer bunches of different mutual fund which cater to everything from fed+state tax free bond funds (handy if you're in a 30%+ combined fed/state tax bracket) to very aggressive high risk high return stock funds (no guts no glory) to foreign stock funds (one of my favorites since it diversifies you out of the US$) to sector funds (energy, precious metals, pharma, tech etc.) to standard index funds, standard bond funds, and my all time favorite for 2006 INVERSE index funds (where you can make money when the US stock markets go DOWN !).
    Last edited by Melonie; 12-06-2005 at 04:04 PM.

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    Default Re: Investment Questions

    Sound like great places to start researching. Thanks a bunch Melonie. This is exactly what I needed...a push in the right direction!

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    Default Re: Investment Questions

    Quote Originally Posted by DylanAngel
    Gotcha....so I think I'm gonna stick with the "standard formula" for now with my ins. carrier until I get more educated (got lots of reading ahead of me) then, when I'm more comfortable in the financial medium, I'll start to shift things around a bit.
    Some might consider this a little too basic, but I would suggest heading down to the local bookstore or to Amazon and picking up a couple of the following. It will at least get you familarized with the lingo, basic investing principles, where to shop for the best mutual funds (and where not to), tax implications, and explains it all in layman's terms.

    Forgive the titles, but they've sold millions of these books on everything from Computer Apps to Foreign Languages for a reason.

    Investing For Dummies
    Mutual Funds For Dummies
    Stock Investing For Dummies
    Personal Finance For Dummies

    I'm not financial expert Dylan, but personally speaking, I would avoid investing your money with your insurance carrier for the very reason that Melonie suggested. Most mutual funds that insurance companies offer are 'load' funds, and usually have considerably higher expenses than those you can get at the better mutual fund companies.

    I would recommend any of the following companies for mutual funds, as many of the funds offered by them are 'no load'.

    Fidelity Investments
    Vanguard Group
    T. Rowe Price

    But again, before you stick that money anywhere where your principal could be at risk, I'd definitely check into some literature first then see if you want a financial planner to help you out. You might want to consider some short term CD's in the meantime.
    Former SCJ now in rehab.

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    Default Re: Investment Questions

    Congrats Dylan, you have done great so far. Keep it up. I am personally sceptical of insurance sales people who make make their money reccomending insurance. I would go to a straight-out financial planner over an insurance person.

    There is no urgent need to do a lot soon. You can buy a very low fee S&P index fund and be very close to what you would get from a financial planner for 6 months or so. Few financial planners can beat the S&P after commissions and fees are accounted for and trying to do so in a random six month window is a crapshoot for even a great organizer.

    The odds are a planner would buy a growth and income fund usually large and stable companies without a mass of risk with more-than-trivial dividends. The idea of maxing out the 401k match is very smart. You lose nothing out of pocket if you leave before fully vested except "could have" money.

    I would follow professional advice for at least 80% of the money in the short term, Get your feet wet in small doses while you learn all the ways things work, and do not put more than 3-5 k in any investment you pick until you think you knwo what to do. The one dimension you did not mention which is worth looking into is a Roth IRA where the $'s go in after tax and come out tax free. 401k's go the other direction--$'s go in pre tax and come out taxed when you make withdrawals.

    With a long-term time frame, time is your best friend. Early mistakes are your enemy.

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    Default Re: Investment Questions

    As for financial education, I would like to suggest any/all Trident Press books. They are worth their money and then some! I've own quite a few and sold a few second hand (as I felt I knew what they were telling me and someone else would find them useful)... regardless.. one of my favourite places to source financial education material (improving my financial literacy).

    If you want to keep your money in a 'safe place' whilst you educate yourself why not just put it in a term desposit. Yeh it gives you real meager returns however it is relatively safe place to store your money giving yourself 3 months (90 days) to educate yourself.

    Knowledge is power. Applied knowledge is gold!


    enter: E3167322D9 for your 10% discount

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    Default Re: Investment Questions

    All such excellent advice. Love the Dummies books for everything else...did not dawn on me to read them for this. I'll check out the bookstore this weekend.

    Monty, I know all about the Roth IRA...I used to work for an agency that did the local advertising for Prudential reps and boy did we get swamped for that ad when it came out!!!

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    Default Re: Investment Questions

    Again just a personal opinion, but where retirement funds go ...
    #1 - if you're in a position where you have a 'straight job' that offers a 401k plan with employer matching of contributions, far and away this is the best option for retirement savings (up to the limit of employer matching, anyhow) because the employer is basically handing you 'free money'

    #2 - One you have exhausted 401k match opportunities, additional 401k contributions and/or Conventional IRA contributions 'theoretically' still offer the best option as they allow tax deferred savings and tax free compounding of interest/dividends. However, the 'fly in the ointment' is the fact that these tax deferred plans do not eliminate tax, but merely defer tax until the money is withdrawn. Early withdrawls involve taxes immediately coming due plus penalties to 'recoup' the tax-free compounding. Also, withdrawls at retirement age will count as taxable income as well. Given the current demographic and financial problems of future SSI funding, it is extremely probable that a 'means test' will be applied to future retiree SSI benefit eligibility. This leads to a distinct possibility that every additional dollar you contribute to a 401k (beyond employer matching) or to a Conventional IRA could in fact cost you a dollar in future SSI benefits.

    #3 Roth IRAs involve making contributions of money that is already taxed in the year that you earn it - but do allow for tax free compounding of interest/dividends. Roth IRA withdrawls do not count as taxable income (since the originally contributed money was already taxed). Therefore there is no early withdrawl penalty if money must be taken out of a Roth IRA prior to retirement. Also, if a future 'means test' should be applied to SSI retirement benefits, the withdrawl of money from a Roth IRA should not adversely affect the amount of your SSI check. For this reason I personally prefer the Roth IRA to the Conventional IRA.

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    Default Re: Investment Questions

    In looking over my offer letter that was sent to me last week, I noticed that my company also offers flex spending, something I'm also going to look into. I think I like the idea of taking so much off the top right now.

    It's going to be hard going back to a regular salary, so any chance I have to lower taxes for now seems enticing. As far as taxing upon withdrawal, I'm hoping my bases will be covered enough by then that this won't be such a hardship.

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