See if he can buy Vanguard ETFs.

What will you guys suggest to someone that just started working for maybe like $1k per month?

Put 10% of the amount in Roth IRA?

I'm predicting a downturn in the market and am thinking about moving about $70k from aggressive mutual funds (mostly US equity) to bonds for a while, is this strategy worthwhile?

What are your monthly expenses? do you have any savings? I would say start a emergency fund first.

no idea. nobody knows whether a downturn in the market is going to happen. what percentage of your total portfolio is the $70k ?

What is your plan if after you move the $70k from equity to bonds, equity keeps going up and bond yields rise? What is your plan if things according to plan and equities tank say 20% ? ie when do you rebalance back?

If you are predicting something, why are you asking what you should do?

Market timing is a bad idea.

unless you're right

My monthly expenses are fairly low probably $150ish. Not much, probably half a grand.

Emergency fund is basically just like putting money inside the bank right?

In what ways would a roth ira be better than a 401k?

You have to ask yourself a few questions when employing this strategy, but the overall answer is "no". I'd always suggest to people to passively invest. Period investments (X amount of money every 2 weeks), always buying whether in a downswing or an upswing. If you have a very long timeframe, then I'd say go for the most aggressive funds and just don't worry about it. In fact, I'd say put it all in stock funds (the more volatile/high risk ones) and just let it ride for 30 years. Obviously you can adjust any of these variables (I've caught some flak for my advice, but it's what I do and I believe the time horizon will negate the short term risks) depending on your comfort level. Forget active investing unless you truly have an edge, and if you do, you should stop whatever your doing and just become a trader.




Google "Roth IRA vs 401k" and read through a few articles and figure out whats best. Roth's do offer some nice flexible options, but 401ks usually have a match involved. Also, one day you might be phased out to qualify to put money into a Roth. If you're in a high-paying field it can easily happen.

"Roth IRAs also offer beneficial provisions for first-time home purchases and college expenses. The point is that investors may prefer the Roth IRA for its flexibility and lower fee structure. In either case, both the Roth IRA and Roth 401k allow you to store this money where it will never be taxed again."

Thanks. I ask because my work no longer matches our 401k contributions. Was wondering if I should continue with that or transfer/start a new roth account. I definitely don't make a lot of money though and recently purchased a condo, so I already have a mortgage.

Generally IRAs offer far more choices, flexibility, and lower expenses. If no match, then I'd definitely max the IRA and then do any more in the 401k.

Also, note that many 401k now have the option of Roth or Traditional. I have, for example, a Roth 403b.

i took the info in this thread and ran with it.

http://www.bogleheads.org

check out the wiki there

check out bogleheads guide to investment and BH guide to retirement.

you sound very young so good on ya for being on the ball even thinking about this stuff.

emergency fund first- 6-18 months of living costs depending on job stability. So basically- save money and while you're doing that- educate yourself on the step after establishing your emergency fund.

good luck.

6 to 18 months is insane and ridiculous and the opportunity cost will be massive.

4-month emergency fund is adequate for nearly everyone. That's what I have.

18 months seem like way too big of an E fund but on the other hand 4 months seem way too little for a single income family with kids.

Think the traditional 6 to 12 month rule is fairly good.

Suze Orman says 6-8 months.

6-8 still seems high.

Take your current average expenses, times it by 4. If you get laid off or what have you, I'm sure you'll be finding all sorts of ways to cut out any possible expenses - you can probably make that 4-month average last 6-7 months if you really need to. Any more money than that is just going to be sitting there where you could have invested it or used it to pay off higher-interest loans for example.

There's no right answer. It's a matter of comfort level. 6 months is the standard number you hear, but it just depends.

It seems that no one mentions investment property here. Is there a reason for that? Everyone I speak to has it as the number one investment option.

I assume this may be geographical, as this is primarily a US thread and maybe property has been tainted due to recent events? I'm in Australia Fwiw

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Yeah. Matter of comfort for sure. If push came to shove, my 401k now would cover me a year (2 years in so far). But I never count that as my money (saved or banked) as that's for retirement. But I'm at about 4.5 months EF. Was a lot more before my condo, but I made the decision to buy now vs saving for nothing (apartment to apartment) and buying all new everything. Just thinking lately if I could do more or things differently.

meh, i had the caveat- depending on job stability. according to the bls- ~37 weeks between jobs is the mean.

roughly 9 months.

18 is high, but 12 is definitely not unreasonable.

edit- US BLS that is.

Rental properties can be great, but they also come with a lot of additional risk, time/effort investment, and potential headache.

I think mostly they're not talked about ITT because a) it focuses on the market, and b) it focuses on beginners, and it's a lot easier to point a beginner in the direction of Vanguard Fund XYZ than to buy, manage and maintain a rental property.

Hi, may I know what is a opportunity cost?


I am 21 and is still studying. Decided it's time for me to find a part time job as I am getting bored with poker(Burger money so not really alot).

Thanks for all the insights.

Opportunity cost is something that you're missing out on because you've done something else. By doing A, you've lost the opportunity to do B.

For example, lets say you put 12 months living expenses into a savings account instead of 6 months living expenses. The advantage is that you have a bigger safety net. The disadvantage is that you could be making more money by putting those funds into bonds or equities. That extra money you're missing out on is the opportunity cost of having a larger emergency fund.

It can apply to anything. Taking a vacation in the middle of the summer can be great, but the opportunity cost is that you miss out on the WSOP. Etc etc.