New to the game

[cprice72]

Hello....long time reader - first time post. I am a 34yo that has just begun to invest for retirement after seeing my mother and in-laws struggle on Social Security. I am not really sure how to invest my money. As of now the only investment I have going is my TSP, and the more I read about diversification the more overwhelming it has become.

I am 10 years from a military retirment and I have mapped out some goals for my family:

1) Save for college for my two children - ages 4 years and 16 months
2) Save for a house 5 years after my military retirment (15 years away). I would like to pay at least 75% of cost off the top.
3) Save for my retirement at age 60whatever.

I am looking into adding an Roth IRA (for my retirement) and some mutual funds for my home and childrens college when I begin my 3rd deployment coming up after the beginning of the year. My biggest stump is the mutual funds (no-load, low-load, growth, income, small cap, large cap, etc. etc. etc.). Anyone have any advice in that area? Are mutual funds a good place to store money away for those two areas? Would 7% of my monthly income be too much of too little to throw into those funds? Are my priorities out of whack in my goals? Or am I just way out in leftfield?

Thanks in advance!

 

[rokid]

My recommendation: Before you decide on a strategy, i.e market timing or buy-and-hold, read John Bogle's Common Sense on Mutual Funds. His strategy is KISS, total stock market (78% C Fund, 22% S Fund) and enough G Fund/F Fund to lower risk to your risk tolerance.

All of your goals are 15 years or more away. Therefore, a sizable stock allocation is appropriate.

 

[tsptalk]

Welcome cprice72! No-load is the only way to go on mutual funds, and you probably want to stick with growth funds for > 5 years. The amount you invest is obviously what you are comfortable with and may depend on when you need the money so you can decide how you want to approach the tax situation.

 

[cprice72]

So I can make the assumption that mutual funds are good investing tools for (not necessarily short-term) but 'mid'-term purchases or use such as a home or college savings?

Thanks

 

[tsptalk]

Absolutely.

 

[cprice72]

Thanks for the advice - I am sure I will have plenty of more questions!

 

[Birchtree]

Frankly at your age I wouldn't even bother with mutual funds since you have TSP. You might consider individual stocks that pay a reasonable dividend with the idea all the income is reinvested 4 times a year. It's a great way to dollar cost average. Look into Sharebuilder.com for a cheaper way to enter this arena. They offer both Roth and regular accounts and only charge a $4.00 commission. If you are being deployed again you can put in way over $15,000 if you so choose - up to $44,000 into your TSP.

 

[robo]

My recommendation: Before you decide on a strategy, i.e market timing or buy-and-hold, read John Bogle's Common Sense on Mutual Funds. His strategy is KISS, total stock market (78% C Fund, 22% S Fund) and enough G Fund/F Fund to lower risk to your risk tolerance.

All of your goals are 15 years or more away. Therefore, a sizable stock allocation is appropriate.

I agree with rokid on a most excellent book. Bob Brinker always recommends John Bogel's book on his show Money Talk.

Many others you also might want to consider, but read John Bogles's first.

Check Bob's site out. I get his newsletter and Money talk on Demand. http://www.bobbrinker.com/books.asp

http://www.bobbrinker.com/


His stategy is like rokid recommended, but Bob adds 10% I Fund. His active /passive portfolio is 90% total stock market and 10% I Fund. Dollar cost average every payday and pay yourself FIRST!
https://flagship.vanguard.com/VGApp/hnw/FundsSnapshot?FundId=0085&FundIntExt=INT

https://flagship.vanguard.com/VGApp/hnw/FundsSnapshot?FundId=0113&FundIntExt=INT



Bob Brinker is a Market Timer. His last buy signal was March 11, 2003. ( S&P 500 Index close 800.73) His buy signal remains intact.

However, he does not recommend buying this Market with new money at current prices unless you are dollar cost averging. I don't expect he will be giving a sell signal any time soon. Timer Digest has the top 10 newsletter folks 9 bullish 1 netural. That doesn't mean we can't get a correction. Corrections to these guys are buying op's...

Good Luck. Save as much as you can, as often as you can. I like 10% min if you can, not always easy, and will require sacrifices! I'm currently saving the max in my accounts and my wife's. Current rules a sweet 50K for both, and going up I hope every year.

I'm a retired MSG, stay the course my friend. Always ask yourself when your saving, "do I really need that"? When you retire you can say, "I think I'll buy that"!

Bunch of stuff on Bob's site about college, check it out. I saved for my son's college putting money in my IRA's. My plan was to draw it out when I needed it. Turned out I didn't need it. Most local colleges are still a pretty good deal. Out of state and you will pay! So I'm trading his college money in my Brokerage account. Having a blast with it. ( NOT RECOMMENED!!!! ) I know you have seen the bumper stickers I'm spending my kids inheritance. Well, I'm spending his college money.

Take some time to check out Bob's site! Oh yeah, I love the Roth IRA's.

http://www.bankrate.com/brink/rate/college_home.asp
http://www.bankrate.com/brink/rate/college_home.asp

 

[cprice72]

Thanks for the post Robo. I will head out Friday and pick up the book. Once question though, is the Vanguard fund one that you hold and recommend?

 

[sugarandspice]

Here's the whackjob perspective.

The fact that you have identified that your Mom and inlaws can't cut on SS is key. They were not given the power or tools to do anything about it. You have them. I personally don't believe that you can sit in the G fund your whole TSP career and be set. You must take an active interest. And you are doing that. This place has plenty of good people with good info and insight but you will be the one to manage your future. By taking an active interest you are assuming responsibility and who can you think of would be more concerned about your future than you. You are in the driver's seat! Good luck!