Investing the $$$ I have?
October 17, 2012 9:54 PM Subscribe
Help me invest my money in ways that might be less obvious than the normal CDs or stock market.
I'm looking for information on the following:
1. Mutual funds - my dad did this for me when I was a kid but now I need to know how to do this on my own. Is there somewhere I can "get training" on this?
2. Methods that are less obvious than the usual CDs for the small amount I have currently. Later when I can play around with $20,000 at a time they'll be more useful, but unless there's some magic way (is there some site out there that can do the legwork for me?) I can find a bank with a better interest rate on amounts like $500 and $1000, these aren't as helpful to me.
3. I'm currently with Navy Federal and also have a TSP account (and have as much training as I could want for TSP, so I'm good there).
I am, amusingly, not that great with math, but I can understand the "if you do this with your money, this is what happens" part of finance managing. I just need the resources to tell and show me how to do it. I figure calculators and critical thinking can help me out with the rest until I can make enough money to hire a much smarter guy or gal to handle this for me someday.
Thank you (so incredibly much)!
*Bonus points if you include both videos AND graphs on the visual end.
I'm looking for information on the following:
1. Mutual funds - my dad did this for me when I was a kid but now I need to know how to do this on my own. Is there somewhere I can "get training" on this?
2. Methods that are less obvious than the usual CDs for the small amount I have currently. Later when I can play around with $20,000 at a time they'll be more useful, but unless there's some magic way (is there some site out there that can do the legwork for me?) I can find a bank with a better interest rate on amounts like $500 and $1000, these aren't as helpful to me.
3. I'm currently with Navy Federal and also have a TSP account (and have as much training as I could want for TSP, so I'm good there).
I am, amusingly, not that great with math, but I can understand the "if you do this with your money, this is what happens" part of finance managing. I just need the resources to tell and show me how to do it. I figure calculators and critical thinking can help me out with the rest until I can make enough money to hire a much smarter guy or gal to handle this for me someday.
Thank you (so incredibly much)!
*Bonus points if you include both videos AND graphs on the visual end.
Response by poster: Ah, gotchya..
Okay well, less obvious to me would be again, the better sites that find the best online savings accounts and CDs and other possible things in that line (I just don't know what I'm looking for).
And no, I didn't know that about mutual funds.... *Awkward grin* It's why I'm asking. I don't quite remember how they work but I'm sort of looking for some....trusted learning sites or training or something on figuring it out, rather than just googling it.
And if anyone knows what other -military- investments are available to me, I'd appreciate it.
posted by DisreputableDog at 10:30 PM on October 17, 2012
Okay well, less obvious to me would be again, the better sites that find the best online savings accounts and CDs and other possible things in that line (I just don't know what I'm looking for).
And no, I didn't know that about mutual funds.... *Awkward grin* It's why I'm asking. I don't quite remember how they work but I'm sort of looking for some....trusted learning sites or training or something on figuring it out, rather than just googling it.
And if anyone knows what other -military- investments are available to me, I'd appreciate it.
posted by DisreputableDog at 10:30 PM on October 17, 2012
Navy Fed usually has 1 or 2 CD options available at higher rates. My husband handles that end of things, so I am not sure what is currently available, but they generally have one "high interest" CD option, though it may have a minimum that is outside your current available cash. That may be a place to start.
posted by chiefthe at 10:34 PM on October 17, 2012
posted by chiefthe at 10:34 PM on October 17, 2012
Investor.gov offers an unbiased introduction to investing from the SEC. It can't recommend any one course of action, but since you don't know what a mutual fund is and are hesitant to google (???) it may be useful to brush up on some terminology first.
posted by acidic at 11:50 PM on October 17, 2012 [1 favorite]
posted by acidic at 11:50 PM on October 17, 2012 [1 favorite]
A mutual fund is essentially a large group of people who invest in a basket of funds. The basic premise is that if I have $1000, I can't really afford to diversify too much with that money. I might buy one or two stocks and that's it. However, if I get 9 of my buddies involved and we each have $1,000 we can afford to buy 10 or 20 securities with our $10K. So now I have a 1/10th share of our 20 securities which reduces risk in the stock market considerably.
Mutual funds range from zero management - like the index funds mentioned above which basically track a financial index like the dow jones to really highly managed that move in and out of stocks quite frequently. The higher the amount of management, the higher the fee charged. Index funds are popular because you pay a smaller management fee and they simply track the market. There's a lot of evidence out there that on average, fund managers are no smarter than any other investor and therefore typically don't out/under perform the market anyways so why pay the higher management fee.
My personal portfolio has two index funds (A canadian and a European) and an income focused mutual fund. The income fund I like because it focuses on bonds and investment income rather than appreciation of shares so there's not a lot of volatility in the unit price and i get ~5-8% effective interest rate per year. Most banks and investment firms have fairly good websites explaining what their various funds and investments are all about. The short version is look for a no-load fund with a management expense ratio that is as low as possible. When you're starting out avoid specialized funds (such as science and tech or minerals) unless you REALLY understand those markets, I would personally avoid investments that are heavy in China... not enough rule of law over there and some pretty shady business practices to boot.
As far as less obvious stuff goes, what kind of debt are you carrying? Everybody always forgets about debt, but repaying debt is one of the best investments you can make. It's one hundred percent risk free and provides a nice return; especially once you factor tax considerations in. Consider that to earn a dollar of after tax money you have to work hard enough to earn $1.27 (assuming a 27% tax rate). If you save a dollar on loan interest, it's already after tax so it's like earning 27% on your dollar. Not as glamorous as investing, but very practical. Builds your credit, did I say risk free already?, and frees up more money to do things you want to do.
posted by Beacon Inbound at 11:58 PM on October 17, 2012 [2 favorites]
Mutual funds range from zero management - like the index funds mentioned above which basically track a financial index like the dow jones to really highly managed that move in and out of stocks quite frequently. The higher the amount of management, the higher the fee charged. Index funds are popular because you pay a smaller management fee and they simply track the market. There's a lot of evidence out there that on average, fund managers are no smarter than any other investor and therefore typically don't out/under perform the market anyways so why pay the higher management fee.
My personal portfolio has two index funds (A canadian and a European) and an income focused mutual fund. The income fund I like because it focuses on bonds and investment income rather than appreciation of shares so there's not a lot of volatility in the unit price and i get ~5-8% effective interest rate per year. Most banks and investment firms have fairly good websites explaining what their various funds and investments are all about. The short version is look for a no-load fund with a management expense ratio that is as low as possible. When you're starting out avoid specialized funds (such as science and tech or minerals) unless you REALLY understand those markets, I would personally avoid investments that are heavy in China... not enough rule of law over there and some pretty shady business practices to boot.
As far as less obvious stuff goes, what kind of debt are you carrying? Everybody always forgets about debt, but repaying debt is one of the best investments you can make. It's one hundred percent risk free and provides a nice return; especially once you factor tax considerations in. Consider that to earn a dollar of after tax money you have to work hard enough to earn $1.27 (assuming a 27% tax rate). If you save a dollar on loan interest, it's already after tax so it's like earning 27% on your dollar. Not as glamorous as investing, but very practical. Builds your credit, did I say risk free already?, and frees up more money to do things you want to do.
posted by Beacon Inbound at 11:58 PM on October 17, 2012 [2 favorites]
Some typical sites that I've used to find the rates are the BankRate site and the DepositAccounts blog - they do blog posts about banks and rate changes but you can also use the links on the site to look at a ranking list of top CD, money market, and checking account rates at any time.
However, if you're not sure what mutual funds are yet, I suggest you read some personal finance blogs first to educate yourself. One I have liked in the past is Get Rich Slowly but there are many more of them. You might enjoy the GRS Video Contest Winners blog posts for tutorials on things.
If you have less than $20K to invest then you may want to consider rewards checking accounts as an option. They tend to earn higher interest rates than many other types of account if you meet their requirements (like having a direct deposit to the account, and making a certain number of transactions on the account). The interest rate drops off after you meet a certain limit. These are usually found at local credit unions.
Being in the military you should have full access to USAA. I'm not sure how they compare to Navy Federal but perhaps someone else can weigh in. They don't have the best interest rates but the customer service can't be beat. I use them to keep the money I'm holding that's not invested at any given time.
You say you have a TSP, but have you maxed out a Roth IRA as well? I'm assuming you are eligible, if so, look into this!
posted by treehorn+bunny at 1:07 AM on October 18, 2012 [1 favorite]
However, if you're not sure what mutual funds are yet, I suggest you read some personal finance blogs first to educate yourself. One I have liked in the past is Get Rich Slowly but there are many more of them. You might enjoy the GRS Video Contest Winners blog posts for tutorials on things.
If you have less than $20K to invest then you may want to consider rewards checking accounts as an option. They tend to earn higher interest rates than many other types of account if you meet their requirements (like having a direct deposit to the account, and making a certain number of transactions on the account). The interest rate drops off after you meet a certain limit. These are usually found at local credit unions.
Being in the military you should have full access to USAA. I'm not sure how they compare to Navy Federal but perhaps someone else can weigh in. They don't have the best interest rates but the customer service can't be beat. I use them to keep the money I'm holding that's not invested at any given time.
You say you have a TSP, but have you maxed out a Roth IRA as well? I'm assuming you are eligible, if so, look into this!
posted by treehorn+bunny at 1:07 AM on October 18, 2012 [1 favorite]
"The World's Easiest Guide to Retirement Accounts" from I Will Teach You To Be Rich - includes graphs!
Get Rich Slowly's post listing A Collection of Financial Literacy Resources - includes 20 video tutorials on basics of investing!
posted by treehorn+bunny at 1:20 AM on October 18, 2012
Get Rich Slowly's post listing A Collection of Financial Literacy Resources - includes 20 video tutorials on basics of investing!
posted by treehorn+bunny at 1:20 AM on October 18, 2012
The go-to site for stuff like this is How Stuff Works. Here is its description.
posted by yclipse at 4:28 AM on October 18, 2012
posted by yclipse at 4:28 AM on October 18, 2012
If you're open to the idea, there are still high-interest checking accounts out there. If you meet the requirements (usually receiving a direct deposit and using your debit card X times each month), they make substantially more than CDs for amounts up to $20,000 (sometimes more).
However, if you're happy with your current checking account and don't want to change your habits, a CD is obviously a lot easier.
posted by toastedcheese at 4:31 AM on October 18, 2012
However, if you're happy with your current checking account and don't want to change your habits, a CD is obviously a lot easier.
posted by toastedcheese at 4:31 AM on October 18, 2012
Oops, forgot to link to the definitive "find a high-interest checking account" website: https://www.checkingfinder.com/
posted by toastedcheese at 4:31 AM on October 18, 2012
posted by toastedcheese at 4:31 AM on October 18, 2012
IMO, you are very unlikely to do better than a balanced TSP portfolio. Just invest in an index fund.
posted by empath at 7:19 AM on October 18, 2012
posted by empath at 7:19 AM on October 18, 2012
Couple tips I would suggest:
1. If you have any debt I would recommend paying that off first before you start trying to invest. You will never make more than most credit cards are charging you!(Keep a liquid nest egg in a savings/interst bearing checking for emergencies)
2. Fatwallet finance forums keep track of CD/Checking/Credit card interest rates that can help you find the best rates Finance Forums for the more safe invests.
3. If your looking for slightly higher returns than current CD/Checking rates which right now are terrible you may want to look into Prosper.com don't invest anything you can't afford to lose and spread your money out in small amounts over multiple loans. I have been doing small loans with them since 2005 and have averaged 10-12%. PM me for a signup link and I will split the commision with you!
posted by tke248 at 10:42 AM on October 18, 2012
1. If you have any debt I would recommend paying that off first before you start trying to invest. You will never make more than most credit cards are charging you!(Keep a liquid nest egg in a savings/interst bearing checking for emergencies)
2. Fatwallet finance forums keep track of CD/Checking/Credit card interest rates that can help you find the best rates Finance Forums for the more safe invests.
3. If your looking for slightly higher returns than current CD/Checking rates which right now are terrible you may want to look into Prosper.com don't invest anything you can't afford to lose and spread your money out in small amounts over multiple loans. I have been doing small loans with them since 2005 and have averaged 10-12%. PM me for a signup link and I will split the commision with you!
posted by tke248 at 10:42 AM on October 18, 2012
I've been investing in Lending Club over the last two years and am averaging a 10.5% annual return. It's taken some initial study time to figure out the platform and create set your criteria for loans but it seems to be working for me!
LendingClub
posted by Paalen at 2:32 PM on October 30, 2012
LendingClub
posted by Paalen at 2:32 PM on October 30, 2012
Vanguard is the most reputable of the index and low-cost or no-load funds.
USAA has good resources for financial planning and investment education.
You can always walk into a Navy Federal office and talk to their in-house staff.
posted by the man of twists and turns at 1:31 AM on November 13, 2012
USAA has good resources for financial planning and investment education.
You can always walk into a Navy Federal office and talk to their in-house staff.
posted by the man of twists and turns at 1:31 AM on November 13, 2012
This thread is closed to new comments.
Similarly, it isn't really clear why "obviousness" is a criterion for you. The most obvious things to do with a small amount of money are to invest in the best online savings account you can (there are websites to help you compare rates) or the best online CD you can (again, websites). These things are obvious because the alternatives don't produce higher returns, or else produce them only at the price of great risk.
posted by willbaude at 10:22 PM on October 17, 2012