Ava
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Post by Ava on Mar 27, 2015 18:16:15 GMT -5
I just opened my Roth IRA, and sent them a check to fully fund 2014 and 2015 contributions. I also upped my 401K one percentage point above the employer's match.
But I am really trying to improve my finances, and I have questions.
I have money in a savings account. That money ends up there because I'm frugal and because I'm making now more money than ever (it's not a lot but for me it's a fortune). Every few weeks I look at my checking account, and move money I don't need to savings. The savings are for moving expenses, emergency fund, extra expenses (vacation) and it has been consistently growing since I started working at the bank. I was thinking of opening a Mutual Fund with Fidelity. I already have my 401K and now my Roth IRA with them. I think that if I choose a Mutual Fund with modest returns and low cost I will be ahead. Right now the money is stuck in savings, getting eaten by inflation every day. I don't want it there. I know many people are against putting your EF in investments. But I want to do it. I have two credit cards with zero balance. They could float me for a few days in case of emergency, while I get some money out of Fidelity. My plan is to start with the minimum you can invest ($2,500 if I read that correctly) and then take it from there. The problem is that I look and look in their website and I don't know which/ how to choose a Mutual Fund. Can you help? I just want something simple, moderate to low risk, diversified, low cost. I saw a Mutual Fund I liked, but I really don't know how it works. If you pick just one Mutual Fund, do all your eggs go in the proverbial same basket?
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resolution
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Post by resolution on Mar 27, 2015 18:35:06 GMT -5
There is a big difference between different mutual funds. They are a collection of stocks and/or bonds and/or money market accounts, so they can be as diversified or non diversified as the person that put them together. For example my husband owns one that is all real estate, so that is not diversified at all, but we own others that have a really broad mix of stocks. A non diversified mutual fund is very similar to having your eggs in one basket, but a diversified one protects you from some (but not all) of the risk.
I keep around 10k of my emergency savings in my savings account and any excess goes into a mutual fund at Vanguard.
I am using the Vanguard version of the S&P500 fund, which is good because it is diversified and there isn't a lot of turnover to create taxable events. However now that I am committed, I kind of wish I had gone with their total stock market index instead. It isn't a big enough difference for me to take the tax hit by selling it and buying the other fund, so I am just sticking with my S&P500 fund. Fidelity should have their own versions of both funds.
If you don't want to stick with just one fund, you can google the couch potato portfolios to get an idea of how to diversify with just a few funds. However keep in mind that dividends and buying/selling will generate taxes.
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Ava
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Post by Ava on Mar 27, 2015 19:13:25 GMT -5
Yes, I know buying/selling will create taxes. For dividends, I guess I'll take the money out of the account to pay taxes if I have to. I want just one Mutual Fund, very diversified. Fidelity has some sort of Fund that mimics the S&P 500. I'll probably start there.
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NastyWoman
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Post by NastyWoman on Mar 27, 2015 19:27:10 GMT -5
Ava, correct me if I'm wrong but aren't you planning to move to a warmer place as soon as you are done with your MBA this spring? If that is true, I don't think you should do anything with your money right now -> you'll need it too soon to put it in the market and risk losing money by the time you need it. YMO
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justme
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Post by justme on Mar 27, 2015 19:49:04 GMT -5
I second joss. Your planning on moving. If you hire movers that would be at least 4k. And another 2k or so for first and security depending on where you decide to live. Plus several months of living if you didn't find a job before moving. If you just put 11k in the Roth do you really have that much extra to put in investments? Especially once you account for having to pay for your condo if it doesn't rent quick and an ef for that?
I'm not sure the rules on pulling money out of a Roth if the account took a huge loss before you pull the money out. But personally I'd want to be as liquid as possible until you sort out what you're doing.
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Ava
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Post by Ava on Mar 27, 2015 20:04:36 GMT -5
Yes, I'm planning to move but I don't want to do it without a job. To be honest, I haven't been looking. I am concentrating on finishing my last two classes. After I'm done with that in May, then I'm going to start seriously looking for a job in Florida. That's where I really would like to live. I would like Miami, actually, but willing to settle anywhere in Florida to start. If I cannot find a job after looking for a few months, then I'll have to come up with a Plan B. I don't want to be unemployed. It terrifies me, that's the only reason why I won't move in May. Yes, moving will cost money. I don't have that much left after sending money for the Roth IRA, but I'm tired of seeing it languishing in a savings account.
I don't know, maybe I should wait until establishing myself somewhere before investing?
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justme
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Post by justme on Mar 27, 2015 20:15:50 GMT -5
I say yes. Because your plan B is what? Either stay until you find a job or move without one. Either way you're minus an income since you said you won't do the one hour commute up there. The stock market is not the place for money you'll need in the next one to five years unless you have a lot invested.
Jobs are still harder to find out of state unless you have a lot experience in that job. The only out of state interest I in my job search five months ago was when someone I know contacted them. And I got my M.B.A. over five years ago.
ETA I live in Florida btw. As for Miami, depending upon where you live rent can be very expensive and commutes are long. #1 reason why I didn't apply to jobs there unless they were over 100k and the few I did I got no response lol. I definitely saw at least one or two that were really low income for what they wanted, but I really wasn't looking for Miami so I dunno how widespread that is.
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Ava
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Post by Ava on Mar 27, 2015 21:04:41 GMT -5
Yes, I've seen in Indeed that jobs in Miami don't pay much. I saw more than one that asked for an accountant with 3-5 years experience offering 36K. I saw a couple that wanted an Admin. with experience, bilingual, and extensive PC skills for $10.50 an hour. It's a little bit discouraging to see that sort of thing.
I don't know what my plan B is, I haven't created one yet. Plan B can be many things; going back home, looking for a job in a different state, etc.
So I should stay as liquid as possible for now.
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thyme4change
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Post by thyme4change on Mar 27, 2015 21:12:01 GMT -5
If it is truly an emergency fund, I am of the thought that it should be invested. If I have an emergency, I can liquidate. Sure, I won't have control of the stock market at that time, so I might have to sell at a loss or something. But, now that my emergency fun has been invested for 15+ years, and I have dipped into it for some planned spending, and have only had a few things that came at me without much time for preparation, I am so, so very glad that I had it invested all this time. I would be so far behind if it had been sitting in a .00005% savings account (or whatever lame rate I am getting.)
That said - if it is more of a pile of money that is earmarked for a near future expense, I wouldn't go to the trouble of investing it.
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Ava
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Post by Ava on Mar 28, 2015 10:30:45 GMT -5
If it is truly an emergency fund, I am of the thought that it should be invested. If I have an emergency, I can liquidate. Sure, I won't have control of the stock market at that time, so I might have to sell at a loss or something. But, now that my emergency fun has been invested for 15+ years, and I have dipped into it for some planned spending, and have only had a few things that came at me without much time for preparation, I am so, so very glad that I had it invested all this time. I would be so far behind if it had been sitting in a .00005% savings account (or whatever lame rate I am getting.) That said - if it is more of a pile of money that is earmarked for a near future expense, I wouldn't go to the trouble of investing it. You are right. There are two different things; earmarked money and EF. I am thinking about letting the money ride in the savings account until I can figure out when and where and how much for my moving expenses. After that is settled, then I'll invest the EF. Like you, I don't want it sitting in a savings account doing nothing.
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thyme4change
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Post by thyme4change on Mar 28, 2015 10:37:24 GMT -5
If you think the amount you have is likely greater than what you need to move, you can invest just a portion. You will still have access to the money, and you will have an account set up. You can start an automatic deposit every month. Even if you have to take a break to get settled in your new home, it will be easier to restart if you already have everything set up and ready to go.
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