Ask MetaFilter questions tagged with investing

Student Loans vs. Investing/Saving with a Twist

1901gunner — Sun, 22 Nov 2009 13:11:46 -0800

The paying back student loan vs. investing/saving question - but with a bit of a twist So, I graduated from college back in May, building up approximately $40k in private student loans from Sallie Mae. (Yes, I know; private loans are not the best choice, but I've become much better educated in personal finance now and more wary etc.)

However, thanks to good credit, my interest rate is pretty low (based off the Prime Rate and right now <3%). Nevertheless - it is a variable interest rate, and I imagine it will begin to rise in the somewhat near future.

Since my graduation, I've worked in a part-time job with good pay, and have found a very good full-time position I'm starting next month. Take home will be ~$2k/month, and I live in a very low-cost area.

I've already budgeted dedicating $500/month to paying off my student loan (minimum monthly payment about $270 right now, my grace period just ended).

I know people such as Suze Orman advocate not worrying about paying a whole lot more beyond the minimum when interest rate is low, but since my loan has a variable interest rate, I want to pay down enough before the interest rate becomes more sizable. At the same time, I'm investing in a Roth IRA and building an emergency fund, so I want to allocate sufficient funds there, as well.

My question: What would you do if you were in my shoes? Is $500/month reasonable? I'm not well versed in economics, so I'm not sure how easy it is to predict the Prime Rate's future (I've checked out a couple of forecast sites, but not sure how trustworthy they are)-- is there a certain percentage rate where I should start to look at finding a loan from a bank/credit union to move my student loans into at a fixed rate?

Other details: currently I am funding my Roth IRA at $100 every other week, which hits about half of the maximum limit for the year (but I would like to max it out once my full-time job starts). By the end of the year, I should have about $1,000 in my emergency fund. Also, I just don't like being in debt, and am motivated to pay my student loans off quickly, but reasonably.

Thanks so much in advance! I've been lurking on here for a while and thought some people here might have good guidance for an approach :)

How to invest $30k for 3 months?

trbrts — Wed, 04 Nov 2009 07:09:12 -0800

What are some good low risk ways to invest $30k for about a 3 month period? So, our house is under contract, but, so far we've been unable to find a house that's meeting our requirements. At this point I feel that we aren't going to see anything good until after the holidays. So, we're probably going to switch over to looking for a rental. Rather than just sticking the money in the savings account, I'm open to taking some of it and seeing if we can get some kind of return, but, I don't know anything about investing. So, what are some ways I can invest around $30k for around a 3 month time frame that will see some kind of return. Obviously I can't get too crazy with this money and I understand that 3 months is a pretty short timeframe. Would there be any tax implications in doing this? Thanks in advance.

Television advertisement showing the stock market as a frenzied sideshow

drdanger — Mon, 12 Oct 2009 17:10:10 -0800

Saw a television ad several years ago with fantastic art direction depicting the stock market as a circus or similar frenzy of colorful, somewhat frightening characters. Can anyone help me track it down? I'm guessing I saw this ad on American television about five years ago, but it could have been as early as 2000. The imagery and intensity struck me more like a Fellini movie than like a typical advertisement. It was colorful, kinetic, and showed a shouting, frenzied sideshow of crazy characters. There was the two-faced broker who yelled, "Buy! Buy! Buy" until he did a 180 and his other face yelled, "Sell! Sell! Sell!" There were carnival barkers and blimps and I can't remember what all else. The point, of course, was that the sponsor (Schwab? Ameritrade?) would offer you a refuge from the hysteria. I would love to find a video of this, but alternatively enough information to track it down in the real world (sponsor? agency?) would be enough for my eternal gratitude.

Writing covered calls as a feasible source of income for retail investor?

pakoothefakoo — Fri, 02 Oct 2009 12:39:03 -0800

Writing covered calls as a feasible source of income for retail investor? I've been reading up on options trading, and from my understanding covered calls is a low risk way to generate some profits on your stock.

Is it possible and feasible for a retail investor to make regular income from covered calls? I'm not looking for huge gains, just extra $500 or so there and there.

If yes, then what kind of stock should I be writing covered calls on?

Help me make a deal: I do all the work, he has all the money.

Anonymous — Sun, 26 Jul 2009 16:46:31 -0800

NegotiationFilter: An old acquaintance who I trust is giving me the opportunity to invest in a business in which I would do all the work and he would provide all the financing. The amount of money he is talking about is in the mid six figures. I am quite familiar with the business but have never personally operated at that level (though I have a close friend who has), whereas he knows next to nothing.

He is curious enough about the details that I would have to explain to him more or less exactly what I'm doing and how I'm doing it, but his concern is (for now) more about the given risk and rate of return like any other investment. He would provide all of the starting capital, and I would be doing most or all of the actual work, at least initially.

How should I present myself and what should I offer in order to get the best deal?

(I am thinking along the lines of how hedge fund managers charge their clients, which can be anywhere from 20% to 50% of the profits before passing on the rest of the gains, but hedge fund managers are also heavily invested in their own funds, giving them risk exposure, whereas in this case there is essentially no potential loss to me except the time spent and the opportunity cost. In any case I want to push as much as possible for a percentage-based or commission-like income rather than a fixed payout or salary.)

Fun Money Sites & Games For Kids

maryh — Tue, 21 Jul 2009 02:25:36 -0800

My 7 year old son has developed a passion for money. He enjoys collecting unusual coins and bills, spotting bargains at the grocery, playing 'store' and (yikes) making bets for cash. His favorite character is Mr. Crabs. Finance is not my specialty *snort* so any suggestions for age appropriate sites/activities that revolve around the wise use of filthy lucre will be appreciated. My husband and I are both artsy, broke dopes when it comes to anything financial, so we're not exactly the go-to grownups when it comes to teaching a kid about commerce. I'm impressed by the kid's grasp of monetary value- he's a pretty critical consumer for a first grader- but he's also a bit of a gambler and a wheeler-dealer. I've overheard him making bets with his friends (25¢ heads, double or nothing tails, that sort of thing). Another mom recommended investing websites, but it seems the ones I'm finding are either geared toward older kids or their parents. A good investment game simple enough for a second grader would be right up his alley, if one exists.
I know there are plenty of financial wizard mefites out there; what inspired you when you were a sprout?

Learning about online shares trading very quickly

gttommy — Sun, 19 Jul 2009 08:11:56 -0800

What is the fastest way to learn online shares trading very quickly? Hi, investment newbie here!

I bought "Online Shares Investing FOR DUMMIES" :) and ready to sign up for a trading game or 2 using fake cash. I would like some tips on what investment paths or style I should take to learn quickest?

I suppose an analogy is like being able to drive unlimited cars on a race track and to maximise the opportunity to improve your driving skills you would try interesting things to learn about the dynamics of a car driving, as opposed to driving normally. I think playing it safe I won't learn as much... ?

Any other ideas or suggestions would also be appreciated. Thanks!

Low risk investment advice

blueskiesinside — Mon, 13 Jul 2009 17:23:58 -0800

FinancialAdviceFilter: How to best invest $10,000? We're a newly married couple who have been given some money we want to invest ($10,000). We're looking at a 5 year time frame and the goal of building a nest egg to buy property at the end of that 5 years using what we've saved. There's already money in a savings account, 401k's, and a small amount of stock. We're looking for low risk with decent return. Municipal bonds? Money market funds? CD ladders? Where should we put the money?

Ghost-ridin' da bond market

Mountain Goatse — Fri, 19 Jun 2009 10:31:55 -0800

City of Oakland, California, municipal bonds. How can I buy them? Good/bad idea? Will I be able to ride my scraper down to City Hall and purchase these, or will they be available only through brokerages? What will be the denominations?

I don't use a brokerage, and don't know much about bond investing, but I'd like to support my town with a little gouda. Good idea, or am I thizzin'? Any advice and/or experiences with local muni bonds are very welcome!

Thanks!

What to ask before investing in a feature film?

storybored — Mon, 01 Jun 2009 19:36:05 -0800

A question about investing in an independent film. The filmmaker has done one award-winning documentary. He is now working on a feature film project. He is looking for investors..He has got a letter from a major film studio (signed by a senior vice-president) saying that they are very "interested" and want to be kept informed of the film's progress. This sounds good to me. But how good is it really? How many letters of "interest" do major studios send out? I have plenty of experience investing in public markets, but zero in film. Which is to say i don't even know what questions to ask! So has anyone out there invested in films and what would be some good questions to start with.

Effective Investing for the Dithering Ethicist

Popular Ethics — Tue, 05 May 2009 13:13:42 -0800

Economists vs. philosophers: Is investing in the stock market (specifically mutual funds) a net good or evil? And the bonus question: Where should a socially conscious man of means put his money so that he can retire comfortably without contributing to a growing wealth inequality? Please excuse the GYOB-ness of this post. I haven't studied a lot of economic or social theory, so my current conclusions are formed from a mishmash of internet editorials and unresearched speculation. This is why I would like the esteemed AskMeites to critique my current thoughts on the matter, which are:

1) People buy stocks because they think they'll be able to find other people later who will pay more for them. Absent dividends, this means that continued profit can only come from exponential growth in expectations for a company.

2) This drive for exponential growth in "perceived profitability", coupled with a legally binding obligation to shareholders, forces corporations to eventually ignore all other motivations. This leads to things like massive layoffs, lobbying against regulation, tax evasion etc.

3) The actions of corporations to grow their shareholder value serve to concentrate the wealth of the company in fewer and fewer people's hands. This is driving the current growth in income inequality in most of the world. Why should having money entitle you to more money than those with less?

4) After reading "Why I Fired my Broker", I realized that most investors abdicate their financial power, entrusting it instead to fund managers who don't share the same interests. Given that most funds do no better than the market index, the personal finance industry smells like a giant scam to me.

5) And besides all that, it's an unstable system. You can't keep hoping to profit on exponentially increasing optimism. Most traders don't know the first thing about the companies they're investing in except for the meagre (and manipulated) earnings stats they publish. Instead everyone just follows everyone else - one giant positive-feedback system. It doesn't even do the job (efficiently allocating capital) it's supposed to!

OK, those are the reasons I stayed out of the stock market for most of my life, choosing instead to pay off my student loan and buy treasury bonds and GICs. However last year I sat down to plan my retirement and realized I couldn't make my goal without at least an average 6% annualized rate of return. So I switched sides and convinced myself that the stock market:

- serves an important role in moving capital to enable new technologies

- is an efficient way to price goods

- has some other justifications that I can't remember anymore :)

and I bought a bunch of mutual funds*. Heh, good timing. Now I'm back to square one. I still need to save up a reasonable amount of money for retirement (in 30 odd years), but I'm even less confident now that my mutual funds are the best (in terms of both rate of return, and public good) place to put that money. Am I wrong that the stock market is so bad? Are there any better options?

*They're called "Ethical" funds, but when you go through their holdings you'll find they own the same stock as everyone else. Also their "advocacy" efforts are more than a little underwhelming

Online games for money moguls?

skypieces — Fri, 01 May 2009 06:31:51 -0800

I dig "Mafia Wars" for its investment features. Would love to find more games about modern money-making and investing. I've recently become a fan of Zynga's "Mafia Wars" game, via Facebook. Right now the bulk of the action (fighting battles, collecting loot, etc) is not as much an appeal to me as the accumulation of cash and investment property in the game. An odd side-effect has been that this part of the game engages my brain and I have actually become more productive elsewhere, structuring aspects of the game so that I play less often and maximize the investment return-over-time aspects of the game.

I am looking for other games (preferrably web-based, though I certainly will consider any others - PC games, board games, etc) that are more primarily about wealth accumulation. I do have Kiyosaki's "Cashflow" E-game (PC based) and do like it a lot. And I have seen other board games that are marketed as teaching tools (maybe rightly so) but that I thought were outrageously expensive.

I did see this AskMe thread, but it is from 2005 and almost all suggestions therein are now outdated or gone.

Any suggestions of games featuring financial empire-building (preferably modern)? While I am not as interested in stock market "day trader" fantasy games, I am certainly willing to look into those and any others suggested, since this is a new hobby interest for me.

What steps are needed to managing OPM

erd0c — Thu, 23 Apr 2009 19:03:36 -0800

What are the steps towards managing other people's money? I've been asked to manage other people's money (family and friends) and to act as a fiduciary. What are the responsible acts that need to occur for me to do so? In addition, I do not have a business degree. I do have an opportunity to return to school and obtain an MS in finance or anything else, or get my MBA. This may sound a large undertaking, but this is the first step in a long journey. Thanks.

Questionable securities transaction

Anonymous — Thu, 23 Apr 2009 14:37:47 -0800

Is the following securities transaction illegal? Suppose you have two accounts in which you hold shares of stock. Account 1 is a regular brokerage account. Account 2 is a retirement account.

Account 1 holds 1000 shares of XYZ. You'd like to transfer the shares to Account 2. So, either pre-market or after hours, you place a sell order in Account 1 for 1000 shares of XYZ with a particular limit price. Simultaneously, you place a buy order in Account 2 for 1000 shares of XYZ with the same limit price.

If XYZ is not highly traded during pre-market or after hours, and if you do it right, the shares should transfer to Account 2 and the money should transfer to Account 1, minus commissions.

Obviously, you're not a lawyer. But do you see anything illegal or otherwise problematic with this transaction? It seems like there may be stock price manipluation issues, as well as tax evasion, but I'm not sure.

green roth IRAs du jour

Anonymous — Mon, 13 Apr 2009 20:52:30 -0800

What are some environmentally and socially concious mutual funds that I should be switching my $2k roth IRA to? Since Washington Mutual is switching to Chase, if I figure this out before 4/20, I don't have to pay the $75 transfer fee, so now's the time!

An opportunity, or a pig in a poke?

LN — Thu, 19 Mar 2009 08:21:41 -0800

How do I get the most out of a meeting with a financial advisor I don't particularly trust? I have a meeting this afternoon with a financial advisor at my bank, to discuss investing strategies and wise places to put money in this economy. This meeting was requested by him, not me.

A little background: I dealt with this individual when opening an RRSP for myself eight months ago, and was not at all pleased with how the process was handled. It took a couple of months to get the RRSP set up, because he repeatedly botched the process. Now he wants a meeting with me to discuss my investments (I presume he means the RRSP), but because of past experiences, I am extremely suspicious of him.

Add to this the fact that I am not at all a "numbers person". So much so, the minute he starts talking about the various options the bank offers, my brain ceases to be able to process the information. I might as well be listening to white noise.

I'm prepared to at least talk to the guy, because I understand that it's his job to sell services to the bank's clients, but I want to go in with eyes wide open. I don't want to be sold a pig in a poke!

Financial-savvy Mefites, what are some strategies you recommend for me to get the most out of this meeting?

(This is in Canada, in case that makes any kind of difference)

Hair brain or financial genius???

Carbolic — Fri, 13 Mar 2009 14:18:04 -0800

Is this a hair-brained idea? You are not my financial adviser, trying to time the market is a bad idea, etc. but I've been entertaining making a change to the way the money in my 401K is invested. I've got about 12 years to retirement at 60, I have a defined benefit pension equal to 50% of my current salary and a portable pension that should be worth about $200K by retirement. So here's the Idea... This is the current mix in my 401K:

Vanguard International Value Fund (value stocks from non-U.S. markets) 9.50%

Vanguard PRIMECAP Fund Investor Shares (large- and mid-cap growth-oriented equities) 20%

Vanguard Total Bond Market Index Fund Institutional Shares (Invests in U.S. Treasury, investment-grade corporate, mortgage-backed, and asset-backed securities.) 12%

Vanguard Total International Stock Index Fund (Diversified index portfolio of non-US stocks representing the major developed and emerging equity markets.) 9.5%

Vanguard 500 Index Fund Signal Shares 19%

Vanguard Extended Market Index Fund Signal Shares (mid- and small-capitalization stocks) 9%

Vanguard Wellington Fund Investor Shares (Portfolio emphasizing large- and mid-capitalization value stocks.) 11%

Vanguard Windsor Fund Investor Shares (Portfolio emphasizing large- and mid-capitalization value stocks.) 10%

Now for the hair-brain part. I'm considering, under the assumption that, even if the market has yet to hit bottom, over the next 12 years I will realize greater gains by putting all my eggs in the Primecap and S&P 500 Index funds.

Tell me just how stupid or overwhelmingly insightfull you think doing so might be.

Is a 457 a better way to save for retirement than a 403(b)?

grouse — Mon, 09 Mar 2009 10:11:22 -0800

Is a 457 plan a better way to save for retirement than a 403(b) plan? I work for a state government, and have the option of a 457 or a 403(b) for retirement savings. I'm already contributing the maximum amount that my employer will match into the 403(b). I wanted to add some more and found that I also have the option of a 457. It seems like the 457 is similar to the 457, except that after I change employers I can withdraw the money at any time with no penalty, paying my normal marginal tax rate for that year. This seems like it is a much better option.

The only downside seems to be the limited number of funds I can invest in compared to what's available in the 403(b). Is there something I misunderstand?

Should my recession dollars go into my 401k, or my wallet?

logovisual — Tue, 17 Feb 2009 15:03:38 -0800

Where is my money doing me, and the world, the most good right now: going into a 401(k), or going into my wallet and getting spent? I'm in my mid-twenties, in a stable but low-paying job that I expect to be in for a while (he said, in a fashion that he hopes does not prove ironic). I am basically living paycheck to paycheck in NYC -- not starving, but not really saving in any meaningful way whatsoever beyond my company 401(k), which has quite a good matching program. For the last couple of years, I've been paying the maximum match into my account, and had built up a reasonable little stash (about a third of my annual salary) only to, of course, watch it take a 30%+ hit over the last few months. I only have a couple thousand dollars in credit card debt, which I would like to pay down/off, but the tight squeeze for what's left over from my paycheck doesn't really allow for that.

I was rebalancing my 401(k) into some less aggressive investments today -- I know that I am young, and there'll be plenty of time for a rebound, but there's no sense in wasting money when you know the market is probably still on its way down -- and began to wonder where my dollar is doing the most good for the economy: going into investments, or going into my wallet to be spent on consumer goods? And yes, that definitely is where it would go if I reduced the percentage of my paycheck that goes into my 401(k): food, home goods, etc.

Thoughts on this matter? I am obviously loath to give up much of the "free money" that comes from a company match, but I am also loath to watch every dollar I put into my 401(k) turn into sixty-five cents when it could turn into a dollar's worth of food, or furniture, or entertainment. And on the larger scale, do I help America more by buying a new couch instead of another share of a mutual fund? Should I reduce (not eliminate) my contribution to my 401(k)? Or stick to business as usual and try to make my budget work another way? I'd like to hear some thoughts that go beyond the conventional wisdom of "you should never ever stop paying into your 401(k)," unless you can make me see that argument in a whole other way.

Allocating my assets between mutual funds in my IRA account

stuehler — Tue, 17 Feb 2009 08:06:16 -0800

I have four mutual funds in my IRA account - a Total Market index fund, a Small-cap index fund, an International stock index fund, and a Bond index fund, and I'm trying to figure out how to allocate my assets between them. I've read a little bit about "Modern Portfolio Theory" and the "Efficient Frontier", but I'm struggling to understand some of the math. So, is there a simple way I can test whether a particular allocation is on the efficient frontier? Or, see all the possible allocations on the efficient frontier and choose between them? How do I figure this out? Ideally, I'd love to see a simple enough formula that, given the mean and standard deviation (and maybe correlation matrix), of my four funds, would tell me what allocation is on the efficient frontier. Or, some type of online tool, or an Excel spreadsheet or something. As an aside, I'm not interested in using a financial advisor (I don't have nearly enough assets to justify that), nor am I interested in general rules of thumb ("If you're N years old, you should have an allocation of x% stocks, y% bonds, etc.")

Nothing wrong with that - just seems like this is something I should be able to understand myself.

A lot of what I've found on Google is high-level explanation (e.g., what MPT and EF are), but not the tools to actually allocate between N funds. Or, very sophisticated math that I don't understand.

Of course, maybe I'm wrong - maybe the math is intractably hard. But, maybe not!

Many thanks in advance for any advice or insight!

Help a noob invest with Schwab!

rabbitrabbit — Sat, 14 Feb 2009 00:03:07 -0800

Schwab investment instructions for the complete noob? Just opened a Schwab One brokerage account in conjunction with the Schwab Bank Invest First Visa Signature Card.

First, if anyone has set up a One account recently, what information to you need to have when you call to activate MoneyLink? I hate being unprepared so any foreknowledge of what they need from me before I call would be great. Test deposits into my checking account have already been confirmed, so I'm not sure exactly why they need me to call now.

I want to use the rewards from the Visa which are credited to the account monthly to invest in index funds such as SWPIX or maybe a target retirement fund such as SWERX. How do I set it up to do this? It looks like once I buy into the fund I want, there are automatic settings that I can view and select, but unfortunately I can't see them until I buy in. Can I just tell them to sweep whatever's in the cash account into my chosen fund every month?

Any other experiences you have had with investing using the Schwab One brokerage account would also be welcome. There is so much information out there on investing, it's very hard to cut through all the noise.

I received an inheritance. Now what?

Anonymous — Wed, 11 Feb 2009 10:37:17 -0800

I just received an inheritance. I want to figure out how to invest it, but I'm new to investing - and can't make sense out of this economy. One of my family members passed away last month and left me a fairly substantial inheritance of around ~$25k. I've been spending the past few weeks mourning and now am trying to figure out where I go from here.

I'm 29 and left the corporate world last year to return to graduate school. I was making a decent salary before I left the workplace and have some savings to fall back on... What I want to figure out now is how to make as much return as possible so that I'll have a cushion when I graduate next year.

Everywhere I look, I see interest rates on CDs declining, stock prices plummeting and similar nonsense all around. While I have found plenty of advice around the internet on how to invest, all of it was written before the market went to hell.

So, MeFites... suggestions for short-term investment during a recession?

Does one reduce risk by investing in mutual funds held by different groups?

grouse — Mon, 09 Feb 2009 08:57:48 -0800

Does one reduce risk by investing in mutual funds held by different groups? If I invest in an S&P 500 index fund with both Fidelity and Vanguard is that better than just going with Vanguard? Or is the SIPC protection such that I need not worry about such things? Many responders to this question seemed to indicate having your accounts all in one place would be a good idea because it eases management. That is definitely attractive.

When a Plan is not a Plan

Xurando — Thu, 01 Jan 2009 12:24:36 -0800

Does anyone have a clear understanding of changes to 403b investment rules that become effective today? My wife is in a tizzy as her investments appear to be in chaos. Starting today, new IRS rules take effect that change all 403b plans. My wife has to choose a new plan administrator and new funds. Nobody is able to tell her why this has taken place.

Are there any mefites with a clear understanding of this situation or links to a clear explanation of the why of these changes? If you are affected, what are you doing?

Learning to protect my retirement fund.

mecran01 — Mon, 22 Dec 2008 10:59:31 -0800

Like many people, my retirement fund took a hit when the market crashed. My question is--who should I have been reading before this happened? Who was the consistent voice of sanity telling everyone, "Hey, stick your retirement in something safe RIGHT NOW." Burn me once.