Oh PS - I’m a nearly complete newbie at investing. I never understood it all, never trusted stocks. Yes, I’m sorry. And thanks again.
My recommendation for investing related questions is Bogleheads
Huge amount of knowledgeable people and will steer you clear of Wall Street BS
Right now he has moved a lot to cash (US Treasury Notes) in anticipation of a market crash. He is the world's largest holder of Treasuries right now.
When he starts buying put it into an indexed fund. Warren seems to like VOO.
The older you get the less risk you need. I have half of mine in “safe” low interest investment. 1/4 blue chips and 1/4 riskier higher return stuff which is more volatile. If you check your portfolio every day and worry when it drops 5% then steer clear of risky. I use what ever earnings to supplement my SS and live frugally.
If you’re just starting out, avoid individual stocks.
Establish an account with a reputable broker, Schwab or Vanguard would work. Put your funds in a large cap index fund with a low expense ratio. Set it to reinvest dividends and forget it.
You shouldn’t enter an advisory contract without knowing the fee structure!
Does this guy have trading authority or just make suggestions to you and then execute them? Recipe for disaster if he operates the account on his own.
Long term money market funds will at best keep up with inflation, that is, hold their value but not grow in real terms. However, they are not a bad place to hide for a while if the market seems turbulent with a downside bias.
There are many more questions to be asked here.
Finally (and I have a decent investment portfolio and amount of market kowledge) who is Dave Ramsey?
Go to a company like Fi-del*ty and let their wealth management team in Boston help you with your investments, or invest in their ‘actively managed funds’ that have low management fees.
Never worked with Dave Ramsey before, but some of the things he says on his radio show lack information.
Everything he says seems very conservative and anyone buying in should never exit their front door.
there are risks and possible rewards. You need to understand this and there are no risks.
Is this one of the “Smartvestor” affiliates? They are supposed to be teachers, so they should be overloading you with information on “who/what/when/where/why/how”.
Managing other’s money is big business. Ramsay uses his show to promote his interest in a financial management firm
I don’t know his firm’s practices, but I dont believe Ramsay is a crook, and I imagine they will steer you into relatively safe and “industry accepted” investments - for which they will take a percentage and/or earn a commission from the seller of the product.
It looks like once you are in their firm, their goal is to upsell you on various financial products, like home/car insurance, life insurance, annuities, etc....
Decades ago, when just starting my career, I too did not study stocks, bonds or financial products. I focused on my profession, and decided to give a monthly part of my check to a “money manager” at a local money-management firm.
2-3 months later, after signing up, I called my “manager” to ask some questions, and found out he quit his job to ride a motorcycle around the USA for a year. I was a little peeved because I realized “I guess he wasn’t really as concerned about my financial future as he said.” My bubble was broken.
Having said that, the company he worked for still exists, and the funds he promoted, while relatively high-commission, are still around. I kept putting some money into these funds, even to today, as kind of a controlled experiment. The return has been OK, but after fees, no better than what I could have done myself buying some simple index funds.
As such, I found it better to take the plunge and educate myself on all financial decisions and products.
I inherited some stocks from my father. It was enough that I thought that I should use a financial advisor. I barely look at it. We talk once or twice a year.
His goal is to beat the S&P which he does consistently. A few years ago, the S&P was down 16%. My money was down 11%. I score that as a win.
I also have a 401K. I realized my advisor was doing a lot better than I was so I closed it out and moved the existing money over to his management.
Anything new is in a higher risk fund.
My inheritance was all stock. My dad was a long-time investor in a company I later went to work for. Something I had no idea about until after I took the job.
It’s a very stable growing company so I did keep that stock. It’s tripled in the last few years.
If it's a 401K/403B/457 (or Roth counterparts, which is almost always preferrable), set it and forget it. If it's in a Roth IRA or tax deferred IRA or plain ol' taxable account, then each month when you invest, put your investment for that month into whichever mutual fund has the lowest balance (buy low). (SEP IRA's in my opinion are great for gig workers, but treat them like a 401K in that it's difficult to change the investment options each month when you invest form your budget. So in a way, treat a SEP IRA like a 401K in which you just set up the investment percentages of your portfolio once and just use that each time you dump money into it.)
Later when you retire, when you withdraw (no more than 4% per year), withdraw from the funds that have the highest balance (sell high).
The above is exactly how I manage 3 generations of my family's investments. Almost all of them we direct into Roth IRA's/Roth 401Ks while working (tax breaks later when withdrawing during retirement) with excess beyond the limits going into plain ol' taxable accounts. A couple of very high income gig workers, so they go into SEP IRA's with excess going into plain taxable accounts. For those workers, when they have a low income year (low tax bracket) we convert part of their SEP IRA money to Roth IRA (a taxable event, but they're in a low tax bracket that year) and the money from then on grows tax free.
I have never worked with Ramsey. I’ve listened to him a fair amount, not purposefully, but because his radio show comes on when my radio is on and I just leave it.
I would call his investment and money approaches to be very, very conservative and I have no reason to distrust them/it.
I think you could do a lot worse. It’s hard to argue with his overall idea of retiring with a paid off house, no debt, and a big pile of savings.
Everything he advocates is well founded and well explained.
There are two things I disagree with him about:
1: He hates, detests credit cards, refuses to have one. He likes debit cards. I think that is a mistake, because credit cards generally have MUCH better fraud protection than debit cards. He advocates the way he does because he is talking to a great unwashed audience who generally do not pay off credit cards and lose control of their credit and get into hot water with their spending, which CC’s encourage.
2: He believes that you do not buy a house until you can buy the thing with a mortgage that eats no more than 25% of your monthly net income on a FIFTEEN year mortgage. For most people, that is not feasible. But, I understand why he thinks and advocates that way.
In terms of your investment(s), a great deal depends upon your age. Most investors (myself included) cannot conceive of the power of very long term investing and the power of compound interest. There is no intellectual tricksterism than beats those two factors, and there is zero requirement to think about them, they happen on their own. Just the way it is.
I don’t think you’ll go wrong with Ramsey, in any way.
If you don’t have much background in investing (as you say) then Ramsey is probably even better for you than a random financial advisor whom you do not have the tools nor understanding to evaluate properly.
one word: plastics ...
seriously though, investing depends upon your retirement horizon, risk adverseness, and amount of money you can afford to lock-up and/or lose ...
retirement long way off: capital gains matter more than dividends ...
retirement eminent: reduce risk and shift to dividend yielding stocks ...
defer as much taxable income as long as possible via 401K/403B/IRA, so always match maximum amount of any corporate contributions to 401K/403B/IRA ... in general, best to self-manage 401K/403B/IRA accounts whenever possible and usually avoid plans that require investing in company’s stock unless company is a blue chip and pretty much guaranteed to be a growth type of company
always invest in ETFs rather than mutual funds because of horrific tax complications of mutual funds, excepting that doesn’t matter in 401K/403B/IRA accounts
never put your funds in the hands of an investment “manager”, which means you’re going to have to bite the bullet and educate yourself about investing, the markets, the economy, and the various economic sectors like tech, petroleum, natural resources, food production, manufacturing, etc., etc. ... for long term, market index ETF funds aren’t a bad way to go unless/until you’re VERY savy about investing ...
for self-managed investment accounts, your best bet is to use schwab.com ...
live below your means: smaller home, fewer toys, and buy name-brand pre-owned cars from honda, toyota, et. al., and drive until the wheels fall off ... learn to cook, avoid eating out excessively ... do your own lawn work and learn how to do as many of your own repairs as you feel confident in doing ... youtube videos are a fantastic source on how to repair specific items ... amazon and others are great sources for parts as long as you can avoid the worst of the chinese crap ...
avoid debt except for a house and a car; never build up credit card debt: use credit cards for convenience only and autopay them off every month ...
[that’s all i can think of right now off the top of my head]
“2 - Would you put all your eggs in one basket?”
Well that’s a definite no. :-) You want diversification and thoughtful asset allocation.
Investing is like anything else. Take some time learning about it and most of it begins to make sense.
A key learning early on for me was to diversify and invest in baskets of stocks and bonds, e.g. index funds. Index funds and the broad stock market have generally outperformed many professional investors.
I like “lazy investing” which is dollar cost averaging into a basket of index stock and bond funds. When you are young you can be more aggressive with equity levels as you won’t need the money for a long time so you can deal with downturns. I was into equities 80% or more for many years and then cut back as I neared retirement.
Let the funds sit there and multiply for decades. It certainly worked for me as I was able to retire reasonably early.
Of course this only works well if you save a good chunk of money in the first place, e.g. 20% or more of your paycheck. Some have trouble with this, think they are smarter than pro’s and look for get rich schemes.
Get lots of input and make up your own mind as you will have to live with the consequences. It is great that you are seeking advice. Never stop learning.
https://www.bogleheads.org/wiki/Main_Page
I’m quite conversant with Ramsey and many other personal finance peoples. The constant bashing of Dave Ramsey is unwarranted, the reason I say this is because his teaching about how to think about money is correct. It is true that he doesn’t go deep into investing, however, he shines when it comes to getting rid of debt.
Currently the stock market is down and many people are starting to panic. My spouse and I put $4500 per month into our investments and we are not in a panic. Why? Because we have no debt, an 8 month emergency fund and a paid for home. We have this because we took Dave Ramsey’s advice and got rid of our debt. If the market went to zeros and I lost my job, my home is paid for and I have money saved. Buy low, sell high.
Anyway, others have mentioned the bogleheads. This is good advice. There are several books by the bogleheads good reading. They talk about Vanguard but if you have a 401K that is a great place to start. Mine is with Fidelity so I have a good mirror of the bogleheads 3 fund portfolio in low cost index funds. A little bit of reading to get an understanding of how this is done is well worth the time.
Happy saving and investing!
My nest egg is diversified... Scary to think this is where diversity is good.
Current market looks like shxt but I’m guessing a year from now I’ll be ok considering as bad as it is today we’re still up 2800 over a year ago.