this is kind of the opposite of investment advice, but i have a question about how interest rates are calculated. i have a variable rate student loan with an IR of 4.2% right now. Generally are these rates just a % added onto the federal funds rate? I.e., suppose the FFR rises from approx0% to 5% would I expect my rate to rise to 9% or above?

If you rate is FFR + 4%. Yes. I'm not sure what you're asking as you give the answer yourself.

it just says that the loan is a variable rate loan, theres not a ton of info on the website. i could probably find the loan documents somewhere but was just wondering if generally thats what a variable loan meant, or what criteria it generally depended on

Amount to Invest: $200,000 USD. + 20,000 SEP IRA and $4000 Roth IRA

Country you live in: USA

Income: $100-200k last 3 years

Risk Tolerance: medium - strong.

Timeframe for investment: for a long time, I hope

Debt: none

I'm 24 and have been playing poker for the last 3 years making 100-200k each year. I hope this continues, but am trying other things out to protect me in case poker dries up. I have set aside $200,000 and put it into my online brokerage account. Hopefully, I won't need to touch the money. I have the money I need to play poker with online. Also, I have $50,000 or so in my bank account for expenses and for the business I will be starting.

I definitely feel like I should be doing something with this money, rather than let it rot away doing nothing. That said, I suppose I'd be putting myself at the mercy of the upward trend of the stock market if I just toss it into a bunch of index funds...maybe that's smart. Anyhow, I feel like I might try out investing in real estate soon, but won't have much time to do that until 6 months or so. So, I'd like to put my money away at least until then. It could be I keep it wherever it is for year, and use other funds for real estate investing. It could be I take it out in 6 months. But, I need to at least do something with it....right?

So you don't actually have that $150k income yet? Its bad to assume, unless there is some contract already written.

Honestly, until that income is settled and you're working, I'd keep the money in cash. If $150k is really going to be your income, that much money in cash in your account will soon become standard unless you live to the limits of your paycheck. If you really feel you don't need that much in cash for now, I would consider something basic to start, open a taxable account with Vanguard:

65% in VTSMX (Vanguard Total Stock Market US)
30% in VFWIX (Vanguard FTSE All-World ex-US)
5% in VIPSX (Vanguard Inflation Protected Securities)

But in my opinion since you're practically done with school and until you get into a rhythm of knowing how much you'll be able to save each month and how much you need each month so you can set your emergency fund up its probably best to just keep it in cash.

Any money you commit to stocks should not be considered short term that would be pulled out in 6 months, in my opinion. It sounds like you're uncertain about 6 months from now and whether the $200k will truly be needed for the RE? I don't like the idea of committing to stocks with an uncertainty as to when or if you will need that money. I know that kind of statement is sort of blanket'ish and could apply to just about anyone, but in this specific case you have mentioned a distinct possible need.

If you want to have a good return in that real short term but not be exposed to the possible volatility of stocks, I would consider something like Vanguard Long Term Treasury (VUSTX) and/or Vanguard Total Bond Market (VBMFX). If you want to shoot for something higher yield yet but with potential of more volatility I'd look at Vanguard High Yield Corporate (VWEHX)

I have around around $20k to invest that's sat in a UK 3% AER savings account. Likely investment timeframe will be 2-3 years. What yearly ROI% should I expect when increasing my risk from none to a medium level?

I am looking here (Yahoo Finance):

http://finance.yahoo.com/q?s=vwehx

When it says 7.54% Yield does that mean if I put my money in, I would be guaranteed 7.54% after a year of investment? Also, I see Vanguard charges a 1% fee for people that hold onto it for less than a year. So I would get screwed out of 1% if I only held it for 6 months.

Also, would your answer change if I was only planning on investing part of the money in real estate ventures? Maybe half? I'm not positive this is the case, but it's not like I have a concrete plan to invest every penny of that $200,000 in 6 months into RE.

Guaranteed no. Yields are calculated based on the previous payout, so something could change with the payout. History is all we ever have to go on with stocks and yields etc. But a good idea is to check the history of payouts and see how much they have deviated/changed over time. Generally income funds such as this that payout every month do not deviate much however (monthly effective yield of 7.6%/12), but their unit value tends to fluctuate along with stocks. Most Vanguard funds have a redemption fee period also. Plus you'd have to consider taxes.

Knowing future plans weighs considerably into what any financial planning/forecasting is done - especially when it comes to larger sums of money that you would not want tied up or have the short term potential to lose value.

Country: USA
Income: 200k (in 2009)
Risk Tolerance: Highish
Timeframe: at least some longterm, but would be open to other things
Debt: 100k mortgage @ 5.375% fixed, 9k carloan at 7% fixed, 6k student loan at 2.875% fixed.

I'm a poker pro, live w/ my gf who's in grad school currently. She's graduating in the spring and I'm guessing she'll get a job paying at least $40k/yr or something. I've had a financial advisor that I knew from my hometown, who basically just had me invest in american funds mutual funds. But I'm thinking there are prob better things I can be doing on my own. Currently have about 30k set aside for taxes, sitting in a savings acct earning 1.4%. Oh and I can't do any roths, seps, etc. Thanks a lot for any advice.

Select American Funds have been worth the front load and if you can get them in a retirement account sans the load, they are definitely alright funds.

Why can't you do a SEP-IRA?

Amount to Invest: $10,000

Country you live in: USA

Amount to invest following years: probably around 10-20k/year.

Risk Tolerance: medium - strong.

Timeframe for investment: Long time. at least 5 years.

Debt: $10,000 student debt.

I am interested in Vanguard index funds. What kinda funds should I invest in to get my investments started? Is it a good time to start putting money in index funds?

With just 10k, you're pretty limited with Vanguard funds unless you use their ETF's.

With $10k I'd split it evenly VTSMX, VFWIX, VBMFX.

If that student debt is manageable that is. Otherwise I'd advocate using some to pay down the debt.

Do I need to go talk to a financial advisor in order to purchase these shares?

No, you can open an account directly at http://personal.vanguard.com

ty sir.

I am also thinking about investing in New York Life Custom Whole Life insurance with 10 year premium paying period. I have to put down $5000 a year for the next 10 years. I will have the money to put down every year but I was wondering if this is a good investment.

Ok thanks! I'm an investment noob. When you say it's worth the load, are you talking about some fee that I pay/paid when buying American Funds? Also, should I be paying off my house or car before putting money into these kinds of investments? Or maybe just start to pay off the house more aggressively, or what?

I'll respond in a PM. Thanks again for your advice.

Yes, almost all American Funds have a front load that is between 3-5.75% unless they were made inside a 401k. If you weren't made aware of it by that financial advisor - toss him. Granted its in the prospectus - he still should have told you.

Its my opinion that if a load fund can outperform on its CAGR the basic underlying index above its expenses (compunded annual growth rate, an average basically) its worth it.

/education_detour/
Just as a simple example:
Hypothetical growth fund has a 5% load and a .65% expense ratio. You invest $10,000 into it and $10k into an index fund with no load and a .2% expense ratio.

After 10 years of 10% interest the index is at $25,423 and the fund is at $23,084. Clearly the index was a better investment.

Now lets say the funds managers can edge out the index by 2% - the fund is now at $27,642

2% doesn't sound like much, but surprisingly the vast majority of managed funds cannot do it when you factor in loads and expense ratios. The fundamental flaw in active mutual funds is that they are almost universally sold based on past performance. While there is technically nothing wrong with that -most folks are sold on that it will continue to happen when there is no guarantee - thats why index investing is the better route for the majority of investors who just want to have money in the market and not try to pick funds or follow the ups and downs of the market.
/education_detour/

As for debt - I'm a strong advocate of debt reduction first - the stress relief of seeing $0 debt could be euphoric to some - however if the debt is manageable (compared to take home pay) and at lower'ish rates for the type of debt then finding the right mix of investing and debt reduction is the ideal route. If the debt is at higher rates for its type of debt, pay it down as fast as possible - but try NOT to ignore investing if it can be afforded.

The consensus of the forum is that life insurance is largely -EV compared to investing properly yourself. The insurance company is collecting a lot of vig and then investing it into stable places and all you get is 'safety' that doesn't really exist, since you can just do what the insurance company does.

Is it still -EV even after considering the "tax diversification" thing that life insurance has to offer? =/

Amount to Invest: ~~$120,000 to start, with 18kish currently in Simple IRA through Vanguard. I also plan on adding as much to investments as possible.

Country you live in: USA
Income: We will say 100k going forward, with a bit more than half from a standard job.
Risk Tolerance: medium.
Timeframe for investment: Long, but I'd like flexibility in case I decide to buy a house.
Debt: none

I'm 26, and have a regular 9-5 job which provides me benefits and a stable income. I play poker on the side, and this past year have made somewhat dramatic strides in saving because of this. It's allowed me to set up a financial windfall which I'd like to invest with, hopefully adding to it assuming poker keeps going well.

I currently have a Vanguard Simple IRA through my company, which is split via bonds and mutual funds. I dont have any further Vanguard accounts (do I need any?), and the majority of my savings is in savings accounts, garnering little interest.

Future plan-wise, I'd like to use at least a lot of this windfall to buy a home in the coming year or two, but am unsure whether to shoot to buy it outright or finance and hope I can grow my money faster on the side to support payments. Please keep this in mind, as I'd like to remain fairly liquid should my job situation or housing situation change.

Country: USA
Risk Tolerance:Medium/High
Timeframe:Long term
Debt: $0

Almost 2010 which means I can contribute to my Roth IRA again. I'll qualify to put in another $5K next year. I am only 19 but have been contributing the last three years, the max each year, and as of now it's all in VHGEX. Wondering what people think about that fund. Should I keep putting it all there? At what point do you start diversifying something like this? What would you recommend?

I am interested in thoughts on opening a SEP-IRA for the 2009 tax year. I am 24, newly married, recently graduated from a Master's program and am playing poker professionally. This year my earnings will be approximately 120K while next year I expect 200K+. My wife currently earns 45K as a high school teacher with very high job security. Our monthly expenses are around 4-5K a month (southern California).

We have a lot of student debt. I'm curious if we should be using all of our extra income to pay down the debt or should I put some away for retirement. We would like to buy a home in the next 5 years as well, although staying in southern California may make this impossible.

Country: USA
Risk Tolerance: Medium/High
Timeframe: Variable
Debt:

Loan principals followed by interest rates (for both me and my wife)

$16,000 - 6.8
$8,750 - 5
$11,600- 1.88
$5,500 - 6.8
$6,400 - 7.5
$20,000 - 2.48
$2,000 - 6.8

We currently have about 30K in savings plus 25K as my 6 month living expenses emergency fund.

Thoughts? If a you recommend opening a retirement account, I'm interested in funds that I can invest in and forget it. Would the Vanguard target retirement funds be appropriate?

Do you need any more? Depends on where you want to invest your money. You can open a regular taxable investment account with Vanguard. I've lately been very much a Vanguard advocate, but starting to realize I should be presenting other options for people also. Fidelity and T. Rowe Price are great companies also that have no load investment options like Vanguard though they do have higher expense ratios then Vanguard.

In an answer to another person in the thread previously I stated that I believe a large lump sum of money decision should be made before investments are made if you know that decision is coming soon. Unless you know for sure a house is 5+ years away, you may want to keep a significant portion in cash, CD or short term bond fund (Vanguard ETF ticker BSV or Vanguard fund VBISX) and out of the stock market.

Using 120K I'd consider the following:
Set aside $10k to keep as cash. Perhaps put it in Vanguard's Prime Reserve Money Market (VMMXX) or a local Money Market account.

The rest ($110k) I'd consider:
60% Total Stock Market (VTSMX)
15% Developed Markets (VDMIX)
15% Emerging Markets (VEIEX)
10% Short Term Bond (VBMFX)

Focus on paying down the debt as a priority - don't let it consume all of your remaining take home pay unless you can afford it however. Focus on extra payments towards the largest interest bearing accounts by dollar amount.

If you truly do want to "set and forget" then indeed Target Retirement funds are the only way to go. It will manage the investment mix of foreign and domestic stock and bond ratios.

Is that $30k in savings some additional you want to invest in a taxable investment account or is that something that has built up overtime due to paying minimums on the debt amounts? What I'm getting at is, you probably can afford to use a considerable chunk of that to eliminate a good portion of the various debts you have accumulated and in the process of doing so, be able to rebuild that account value by not having to make debt payments.