Thread: Just Starting Out

I'd check out the Vanguard 2045 fund.

I like RS Funds and US Global Investors funds. I have them through USAA and Scottrade. You can get literally thousands of different funds through USAA and Scottrade. Why lock yourself into one fund family, particularly a mediocre one (USAA), when you can pretty much have access to almost all?

I am 26 and new to investing and understanding the intricacies of the market. I have always been somewhat interested in investing and really became intrigued after taking a finance class in college. I finally am at the point where I am able to start putting some money away for retirement and will be putting $3000 into a mutual fund for 2004. I am not eligible for TSP and do not have a 401k yet because I am currently a contract employee while going to school full time (I am optimistic this situation will change soon and I will be working at my present job full time while going to school part time). I have a high risk tolerance and would categorize myself as an aggressive, long-term investor.Now that you know a little about me I have a few questions I would appreciate your input on:

Having a high risk tolerance is great, cause I think I pretty much do too. Just realize though that higher risk does not always equal higher return, even over a long period of time. Precious metals are an excellent example of that truth; very high risk and mediocre, at best, returns over a long period of time. I think the 50 year return on precious metals is like 2% annual. Conversely, many large cap value funds (considered relatively low risk for stocks) have provided some of the best returns you can find over a long period.

1) Who would you use to start a financial relationship with (in terms of ease of use, customer service, fees/expenses, etc.). I was and am still leaning towards Fidelity, but I was also thinking about USAA - does it really matter who you deal with?

In my opinion, the only thing that is really important is that you find a fund company that has no load funds, and low expense ratios. Both of those do. As you grow your portfolio size, there's no reason to limit yourself to any one particular fund company, even if you're buying directly from them. Personally, i deal directly with USAA, Janus, and American Century. If you're investing for the long term, monies you invest should be left alone for the most part anyway. If you need to adjust your weightings in certain sectors, just use the funds within whatever fund company you have your money invested in.

I dont personally like to use middle men (between me and the fund company) because I learned long ago, very very few people/organizations provide services for free.

Far more important to just focus on saving as much as possible, and selecting the correct asset classes/weightings than trying to find the "best fund company". We know yesterday's best fund companies because we can look it up. Who's to say who will be the best 5 years from now. Case and point, Janus used to be hot stuff 1999 previous. Now they're mediocre at best.

2) Since I am just starting out, is there a fund (or funds) that you would recommend to me given my disposition and current situation? I was considering a fund of funds (Fidelity Freedom Fund 2035 - FFTHX; 2040 - FFFFX) to get started and then adjust my allocation after I have learned a little more. I was also looking into some other USAA funds - Cornerstone Strategy Fund (USCRX); International Market Fund (USIFX); Precious Metal Fund (USAGX) as possible alternatives.

At your age, i recommend any diversified stock fund that has low expese ratio, and no load. Just pick one and leave it alone, regardless of market cap or value/growth strategy. Even if you dont pick next years hot class, over time, you'll get wonderful growth. A 26 year old has no business buying bonds or interest bearing stuff with a 30 year+ investment horizon, IMHO.

3) What can I do to further my investing knowledge so that I can become more savvy and less ignorant?

Irecommend Berstein's "4 pillars of investing". Excellent book. (btw, Berstein would disagree with my all-stock recommendation, but oh well).

Thanks for all of yourinput!

I decided to use USAA rather than Fidelity and chose to split my IRA into 3 equal parts consisting of:

RSVAX, RSNRX & EUROX

I was also intrested in BGRFX and RSPFX, but they were closed to new investors and closed altogether respectively.

When I get enough together I amplaning on opening up a money market account through USAA instead of letting it sit in my savings account. I will also probably get into another fund or two once I have built these initial ones up a bit. Thanks again for your advise.

Just thought I would let you know that I changed my mind onEUROX and decided to go with TAVIX (mostly due tothe expense ratio).

I decided to use USAA rather than Fidelity and chose to split my IRA into 3 equal parts consisting of:

RSVAX, RSNRX & EUROX

Those arn't USAA funds. I imagine USAA will charge you a fee to buy funds that arn't theirs. So that's 2 people you'll be paying; USAA and the fund managers of those respective funds.

Hmmm... I am baffled with your investment outlook and plans. With what I know now, andif Ido not qualify for TSP or 401k, I would definitely learn about real estate investment. Why give your money to somebody else and let them manage it for you when you can manage it yourself. I manage real estate (commercial and residential) and I have to say that I get better return than any mutual funds I know. The best thing about it is that I can do something about my investment (immediately). If my tenant moves out, I aggressively look for their replacements by advertising and talking to other real estate agents. If something breaks, I fix them (or have someone fix them) right away. No one in this forum can tell you that you can do that with any mutual funds. You can write them a letter or pray if the fund price starts to go down but you really can't do anything to fix the problem unless you pull out at a loss. Many people will tell you that real estate is risky. But which one is riskier? Have someone manage your money or you manage it yourself. Many people that says real estate is risky really doesn't have alot invested in it.Getting 20-30-40-50%cash on cash returnin a real estateinvestment is very viable. You just have to do your homework. I am currently negotiating a 4 unit apt now (been going back and forth for almost a month now) and my projection cash on cash return could go froma conservative of 15% or as high as 45% per annum.This is not including depreciation, taxreturn forinterest paid, insurance, etc... all of which will bepaid by my tenant. This is the reason I don't have any other mutual funds or stocks outside of myROTH and TSP. I'd rather go with a real winner (which is me since I am in control of my investment). My suggestion is for you to invest some time learning real estate. Start off small at first and then expand as you get better at it. Or you can fork over your money to someone you really don't know and hope that they manage it well for you. Just my 2 cents.

Pyriel

Azanon, I went with a USAA brokerage account, they don't charge any fees and you can move in and out of funds 6x a year (though I don't plan on doing this - unless something unforseen happens). The only fees you are charged is what the fund charges. This year I will use my 4k contribution to buy a large & small cap domesticfunds and wieght them a bit heavier than my current holdings. I realize that 2 of the funds I have should be small portions of my portfolio but I wanted to go with an international/nat resource fund right now; (the smallest initial investments I could make were 1k each).

Pyriel, I am looking into buying a duplex and renting out one side of it. Eventually, I would rent out both sides when I moved into a new place. Thanks for the tip!

There is such a thing as real estate funds that you can invest in. You don't have to own real estate to make money. If you think real estate is a good investment you can buy into the funds and not worry about tenents or repairs and other goody's. You just invest in the paper. Of course the funds fluctuate just like any other stock so you may lose money.

Pyriel,

Managing real estate vs buying stock mutual funds is an excellent apples/oranges comparison. The former is a job, the latter is not. I would hope you get better return in any job than some investment where i write a check in 5 minutes and mail it to a fund company.

I get paid well in my job too. A lot of jobs pay well. Glad to hear real estate management pays great too. My uncle says the same thing. That's what he does for a living.

I work 40 hrs a week in the job I have now. Not going to speak for the original poster, but I have no interest in a second job.

Azanon

Azanon, I went with a USAA brokerage account, they don't charge any fees and you can move in and out of funds 6x a year (though I don't plan on doing this - unless something unforseen happens). The only fees you are charged is what the fund charges.

Hmm, i'll check into that again then. Coulda swore there was a fee for something, be it signing up, buying/selling, something.... I'm a USAA member too, so if its completely free, i'm certainly interested. The only investment fee I tolerate is a reasonable management fee in my mutual funds.