Home Forums Miscellaneous Topics Stock Market and Investing Investing for dummies

I posted this in the campfire and someone recommended I move it down here….. didn’t know this sub forum was here lol….


Is going through a brokerage firm like Morgan Stanley, Merrill Lynch, etc. the way to go? I’m talking about maybe 2-3k to start and 500 a month after that?

Other than an annuity fund through work, a pension, a few different life insurance policies and real estate, I don’t know chit about stock market type investing….. I’m looking for easy but not something with a bunch of hidden fees….. I don’t mind paying a guy up front for his knowledge but don’t want to get swindled. Thx.

open an E-trade account or an Vanguard account online.... it's stuipd easy and you can move money between your bank and the investment account when needed with ease...
You can set up automatic withdrawals from your checking set for every payday if you wish... it works really slick... and over time the money really stacks up and can begin to be a problem.

I agree, I'm also a Vanguard guy, but Fidelity is also very good. I'd take a look at Index Funds at least initially to save costs over the long haul.

The transactions to and from your checking account are seamless and IMHO "dollar cost averaging" investing is the way to go.

I'd do some research on ROTH IRA's while you're at it. Before I retired in DEC I had my work TSP (401K) maxed and was fully funding 2 ROTH IRAs though Vanguard. Now that it looks like I'm stuck in the 22% tax bracket due to pensions, I wish I had fully funded the ROTHs a lot earlier and gone with the minimum to max out my matching in the pre-tax TSP.

I've had Fidelity Investments accounts for a long time, but I am sure I could be happy with Vanguard as well. It is very easy to set up accounts, move money and purchase stocks, mutual funds, and ETFs commission free (in most cases).

Figuring out the right investments is the harder part for anyone because it depends on goals, risk tolerance, time line and taxes. I would start by reading The Psychology of Money: Timeless Lessons on Wealth, Greed and Happiness by Morgan Housel to get the right mindset. Then maybe read some stuff by John Bogle (the founder of Vanguard) and/or Peter Lynch (former Fidelity fund manager). Ultimately, it may not be a bad idea to take some financial planning outreach courses at a local community college or even pay for a few hours of time with a fiduciary (one who works for you and does not get paid when he sells you something) certified financial planner to give you some ideas.

Most people can be happy and fine over time in S&P 500 index funds (e.g. SPY) or total market fund index funds (e.g. VTI). It's simple and spreads the risk. Just be positioned to ride through a downturn without cashing out, and keep investing during it.

Avoid getting involved with any full service advisors that are going to charge you an annual assets under management fee. If you feel you need advice, there are fee only advisors that charge by the hour. If you go over to the https://www.bogleheads.org/forum/index.php forums and post up your whole financial picture, you'll get some good guidance from experienced do-it-yourself investors.

I am a dummy, but I have been immersed in the market for 25+ years. I DO know some things not to do. Personally, I have had bad experiences with 'financial advisors'. As near as I can tell, a financial advisor is basically a salesman who get's paid for directing your investment...he gets paid by you, and he gets paid commissions by his parent company. If his company is pushing stock or fund XYZ this month...that is what he will recommend to you. He has NO LEGAL obligation to do what is best for you. If you go to a brokerage house and work through a fiduciary...he is obligated to work on your behalf. His fees will be higher (maybe not in the long run).
I started with Edward D. Jones, they were not crooks, they were just stupid. Apparently there is no criteria or test standard for opening a Jones franchise. You might get someone who is smart and savvy and will work for your benefit...I got the opposite.
As an example, eventually I stumbled through word of mouth into the door of Stifel Nicolaus, been there 18 years...very happy with them. I am only interested in dividend money flow, and instead of him advising me when I am shopping, he researches maybe 5 or 6 corporations and presents me with their prospectus...and I choose what best fits my investment objective. This is working very well...I sailed right through the 2008 'crisis', fat and happy. And having picked mostly preferreds and equities...there should be a nice sum for my kids when I croak. Unlike most guys here, I am not a fan of funds, I'm all individual stocks, handpicked, in a wide array of industries that actually produce widgets or oil energy...and yes, I have left a lot of money on the table by staying out of banking, insurance, real estate and tech....but that's just my preference.

I always figured ...if an investment advisor knew what he was doing.....he could invest his own money and be successful.

I have had Vanguard for 30 years... I only have one account there now as they have become WOKE.
I have a Schwab Account also ....I can walk into their office and get help immediately.

No one even knows where a Vanguard office is.

Thank you all, sounds like I need a financial advisor…. I’m in a pretty unique situation with a semi-short time (20 years) to achieve the best possible outcome. Better off than most but still not as well protected as I need to be.

Lots of moving parts and possible scenarios to plan for….. overwhelming lol 🤦🏻‍♂️

Take 1 bite at a time.

I was/am lucky in that due to my BS in Business MGT I HAD to take a bunch of finance/accounting classes. Back then we were playing the market using a computer simulation as part of the classwork. IF it hadn't been for that I'd have gone the financial advisor route, (one with fiduciary responsibility).

Investing is kind of like planting trees; the best time was 20 years ago, the next best time is today/tomorrow.

Good luck with it.

I appreciate it…. Definitely need to do something in the near future. Forgive me for not wanting to put it all out there on a public forum.

I went with one of the big house investment firms 30+ years ago. They have made me hugely successful. And I don’t know what they are charging me, but again my bottom line has grown far beyond my wildest dreams.
.

You don’t need a financial advisor.

Start today by creating a ROTH Ira at one of the majors (vanguard, fidelity, etc). Fund the Roth from your checking account and invest the money in something like the S&P 500 or the Total Stock Market Index. Set up an automatic monthly draft from your checking into the account.

That will get you 99.9% there.

Generally I agree, but for those that haven't gotten into the market it can be helpful, especially IF they have crunched all the budget numbers and have a good visualization on where they stand. Some folks need a nudge and a dose of reality when an outsider says; IF you don't do "X" this is where you'll end up..

I really like Vanguard's S&P500 Index it's done well over the long haul.

Chuck, I won’t quibble, if you don’t quibble with the point that many people are intimidated by the idea of going to an “investment advisor”, and therefore never get started at all.

Either way you go, start NOW!

Dutch,

ZERO quibbling! I agree there's plenty of info available free to get the basics down on investing. The ROTH IRA with an Index Fund through a company like Vanguard, with monthly contributions is the easy button and it works..

That I'd start immediately as you suggested.

I think some people don't want to see a 3rd party for the same reason some folks don't want to go to the Dr., they just don't want to hear bad news..

Thank you…. Finished it up today with Vangaurd. Roth opened up and auto pay set to max contributions…. Also stuck another 2500 in a EFT…. We will see how it plays out 🤣

I wanted to buy a piece of land or something else but realized I need more liquidity for my wife if I kick the bucket…. I do have life ins. But saddling my wife/kids with a piece of bare land seems like it would be a hassle?

Thank you all again.

Like usual, Dutch is worth listening to. OP didn’t give lots of details about his situation. If he has a 401K option at work, he may be leaving free money on the table by not using it.

Other basics still apply. Keep some $ available for short term emergencies. Carry adequate life and disability insurance in case of catastrophe. I prefer to live debt free and sleep better that way. Above all, educate yourself so that you understand your savings and investments. That way you’ll know good advice from bad.

Edited to add: With apologies to those more advanced, the book “Personal Finance for Dummies” is a great basic read.

I went through the same decision analysis.

Have 80 acres now, and wanted to put an offer on another 40 adjacent mine.. but, it's all pasture and by the time I got it to where I wanted it for deer hunting I'd have spent substantially more in money and time.

So my solution is just to go on a guided hunt per year in addition to my local hunting.

When looking at the ROTHs, you can also fund a Spousal even if she's not working. That's what I did about 5 years out from retirement. I had already maxed out my TSP (401K) with catchup along with my ROTH IRA, so I just opened a ROTH for my wife and maxed that out too.

Good points, all.

Just some more thoughts.

Making sure your spouse is ok after you pass is part of the process, and the approach depends on where you are in your journey to financial “critical mass”.

Before you’ve built up enough assets, term life insurance is the proper tool to ensure she doesn’t have to buy the “better Alpo” cookbook when you exit early. Once you have substantial assets (enough to live off the investment returns) the life insurance can be dropped.

I would not leave land or other real estate over stocks, two reasons. One, your spouse may not be savvy about the real estate game, dealing with tenants, those type of things. Two, simply because it’s so binary: you can sell a couple of thousand dollars worth of stock to replace a roof, but you can’t sell a tenth of a rental house.

Do some reading and educate yourself. Also, jump in and make some mistakes like the rest of us! Just learn from them. Screw an advisor! They are after your money. Nobody has the vested interest in taking care of your money that you do.

Vanguard or fidelity. 500 mutual fund with a growth attitude. Keep putting money in don't pay attention to it. 20 years it will average 10 t0 22 % return. Easy peasey

Meant 10 t0 12

I'm squarely in the "do it yourself" camp, myself......... HOWEVER.

People who are not familiar with the stock market, mutual funds, etfs, REITS, IRAs, Roths, After-tax IRAs, etc, etc TEND to be susceptible to fear the volatility of their investments. Some, far too many, will end up pulling their money out at the lows and jumping in at the highs.

For those not familiar with market volatility and nervous about "losing everything in the market", an advisor that can keep them from doing something irrational will be cheap at twice the price.

The key word, however, is advisor. Not someone who tells you what to do, or worse, does it for you; someone who gives you advice on what you should do.

ROTHs are great, but I'd advise most people with normal income to max out the 401K first. It's almost always better to pay taxes later. Right now, what goes into my 401K would be taxed at 32%. I'd much rather have that money invested for long term growth than give it to the government. Investing pre tax also allows you to invest more and have the same disposable income. Most likely, when I withdraw it my rate will be well below that 32%. Of course, everyone has different needs and goals and a ROTH may be the perfect thing. Whatever you do, do it. Fund your retirement first.

In short, pay taxes when your tax rate is lower and take tax deferments when your tax rate is higher. For most people, you pay higher rates while working full time and lower rates when retired. Of course, it's a gamble that future tax rates won't change significantly, but it's still good odds retirement tax rates will be lower.

At the very least, putting in the company match on a 401K is the first move. But maxing a 401K contribution, IMO, is the third move.
Second move is to max contributions to a ROTH IRA. Spouse should do the same. If spouse is not working set up a spousal ROTH IRA and max it.
If one's MAGI is exceeding the contribution limit, then skip to step #3.

I'd have to think if one is in a 32% bracket they are well over the MAGI limit for ROTH contributions.

The ROTH IRA has multiple benefits over simply maxing out 401K contributions.

I am not a CFP.

As to which to do first, or second that is, does depend on your current tax bracket. I expect to be in a 10% lower bracket in retirement, so the tax deferment is the best bang for my buck now. If I was expecting the same or even higher tax bracket in retirement, the ROTH would certainly be a better option after meeting the employer contribution limit. Some ROTHs are limited by salary and others aren't. Most ROTH 401K or similar plans don't have the same restrictive salary limits of a ROTH IRA. There is still the limit for overall 401K contributions, so again it depends on tax status as to which is the better investment.

One thing a lot of people miss is the ability to do a solo 401K when self employed. Many people just assume a version of ROTH is the only option, but the limit for the solo 401K is higher than normal because you get to contribute your portion plus the employer portion.

Regardless of which route, just do it. Most people wait until close to retirement age to even think about retirement finances. You should be thinking of retirement in your 20s and pick a job and plan to get you there. Start thinking of it in your 50s and you're probably working til you're 75.

We’re getting pretty deep in the weeds here, but a few points.

1). If you are above the income limit for ROTH, just do a back door ROTH.

2). If you do the math, the total you end up with in your pocket is pretty close to the same between traditional IRA and ROTH.

There are two important differences. First, if you max out a ROTH VS a traditional, the net effect is that you invest more in the ROTH, as much more as your marginal tax rate. If you have the funds, or you need to play catch up, that gives ROTH the nudge.

Second, no RMD’s. So you can let it ride as fits you best.

Now, the interesting part is when you combine the two. Putting half in ROTH means that come withdrawal time, you can set your own income by drawing from one or a combination of both. Half in Traditional means the RMD’s are half. If you draw, for example, 50/50, your reportable income drops by that much. If you have a year with one time income, take the (small) RMD and use the ROTH to keep the taxable income down.

Same goes on the savings side. In a good year ( bonus, severance, short term cap gains, recapturing depreciation on a sold asset, etc) max out the 401K traditional and an individual and spousal IRA. Bad year? Toss it in a ROTH. Really bad year? ROTH conversion.

In other words, using both the ROTH and the traditional gives some options that are handy to have.

One strategy is to do your conversion from Trad 401K to Roth in early retirement when you can really keep your income down and stay in a low tax bracket when paying for the tax on the conversion.

It's the route I'm taking.

I retired 31DEC this year, due to pensions I'll be in the 22% tax bracket (down from 24%). In theory this will be my lowest earning year, so I'll convert about $100K this December, then probably $25-50K each DEC for the next few years at least. I'll start collecting SS next year and that will put me about in the middle of the 22% bracket, so I've got a little room to maneuver. I'll use a high yield savings account to pay the taxes, so the conversion remains 100% rather than pay withholding taxes from it.

The retirement funds aren't really needed, I'm just moving stuff around to tax free income/dividend funds.

Everyone keeps assuming I have a 401 k….. I do not. I have a pension plan that we are not able to contribute to.

Congratulations on the pension. They are not common anymore. I told you there’d be debate about Roth vs Traditional IRA’s. They are both good. Vanguard is the low cost standard for investing. Others may be good too. Use mutual funds. Stock picking is for experts and fools. You’re neither of those.

And the basics still apply. Pay off consumer debt first and avoid it in the future. Keep an emergency fund readily available. Be sure you have the right amount of the right insurance. Be sure the house is paid off before retirement.
Best wishes. It sounds like you’ll do fine.

You can still invest. My wife and I both have military as well as federal civilian pensions, plus what we have invested. The pension is great but it's still nice to have another source of income if needed. I really don't plan to use my investments on a monthly basis. More for big expenses, like when the HVAC goes out or when it's time for a new car.

Definitely start saving for retirement no matter what age you are or what savings plan to use. If you are looking for a good guide to get started I recommend that you read the book The Simple Path to Wealth by JL Collins. Your library probably has a copy that you can read for free.

I am using Fidelity and they have been great for my company 401k but I was always a self investor chosing the mutual funds I want. After I retired I realize I have all of my money in 401k and cannot touch it lol. So my advice is to put some money in dividend stocks and earn regular income the more you add over time. This is what I am doing. But of course I do not have to touch my 401k for now so this helps.

Once you consider the lack of purchasing fees, yearly capital gains tax, and advisor fees, I've found it very hard to beat an index fund like S&P 500 or NASDAQ for total realized returns. It's also so easy a caveman could do it. Just open a Fidelity account, choose a fund, and set it up to make equal monthly withdrawals from your checking account. Set it and forget it.

Big money is in gold followed by silver...

By any chance do you pay into it? Not "contributions" per se, but deductions that help pay for your pension?

The reason I ask is that I paid into the .GOV FERS for a little over 15 years, it wasn't very much and money was deducted from my pay. When I started receiving that pension there's zero withholding coming out. Took a bit of research to sort out "why", but due to the FERS deductions being post tax, there's no taxes being withheld or paid on the 1st $20K of my GS pension.

It might be something you want to keep an eye on, IF you have contributions like I did.

I know some states treat pensions differently for income tax purposes, but are you saying for Fed income taxes you are exempt on the first $20K and then taxed at the normal rate thereafter? When you filed your retirement paperwork for FERS, is there an election to contribute taxes at a higher rate? I assume that's a specific number based on your actual contributions?

My contribution rate for FERS is 0.8%, my wife's is 3.1% and new hires are at 4.4%, so I would imagine that exempt amount would vary by quite a bit from person to person? Do you know what formula they use to determine what amount of your annual FERS benefit was from the post tax contribution?

Do you get an annual 1099-R that shows the difference in what was actually taxable?

No, sorry I wasn't more clear.

Just the initial $20K (actually $18,762.89) this year as that's what I paid into FERS with post tax money. You can look at your final LES and figure that the total amount you paid into FERS is what you'll receive tax free.

It took a little while to sort it out due to moving from DFAS & CPAC folks to CPO Retirement services. A friend and I retired on the same date, requested withholding, but none was taken out. The reason is buried in the fine print of the final retirement paperwork you'll receive from CPO. Retiring from the army, was much, much simpler and straight forward.

And yes it does vary quite a bit, by FERs contribution rate pay grade. I retired as a GS13 Step 10 and my FERS on my last LES was $39.83 per PPD (.08%).

I've since added an additional $200 in withholding to avoid the combined total of our 3 pensions VS withholding and the ROTH conversion I plan on making in DEC.

Luckily KS doesn't tax .gov pensions, so there's that at least.

Are you currently with DoD/Army? If so, you should be able to access the GRB platform. There is a good calculator that will help you sort out how much you'll get, ins and other stuff. It even calculates what your sick leave will convert to:

https://platform.chra.army.mil/IdentityProviderCertificate/Home/Index

My estimates came out exactly to what my net pension is.

Thanks, I'll check out that calculator. My FERS started with DOD but will end with VA. Plan to start drawing the beginning of 2030 and should have a little over $26K of my own money in it. My wife will start drawing her FERS in 2031 and we both will start our military retirement in 2031 as well. Four different pensions to get figured out but at least we have some time.

Since they're all .GOV, I'd be shocked if the VA folks don't have a similar system, they're probably straight under the CPO folks.