I recently started a Roth IRA, after hearing that it’s “the thing to do.” Ok, so I didn’t open one only because someone told me to; I opened one because I know saving money now is better than saving money later, and hell, if I can afford to buy all the tech gadgets that I do, I can certainly afford to put some money in some kind of savings.
HOWEVER — dot dot dot — I don’t really like the stock market, probably because I don’t really understand the stock market, therefore I am greatly intimidated by it, convinced that any money I put in it will immediately disappear forever, and generally would prefer to just find someone trustworthy and say “here’s my money, make it grow.”
But you have to pay someone for that service, and, being an engineer, I feel like it should be within my capability to understand the damn stock market. I mean, not everything, but at least to the point where I can take the money I would have to pay someone else, plus some, and just invest it myself!
So anyway, I opened this Roth IRA. Put some money in it, just as a start. Now…I can’t figure out how to actually invest the money. And…I don’t know what to invest it in. So…I asked Rich and George and they started telling me all the things that were bad about the broker through whom I opened the account until I couldn’t take anymore and told them to go away.
This is why I haven’t invested before now.
cari says
I use Charles Schwab. My parents have Morgan Stanley. It all depends. I haven’t heard anything stellar or derogatory about either, or anyone else. As far as actual investing, I know something about mutual funds and whatnot, so if you’ll help me out with some website work, I’ll help you figure out how to invest, if you like.
Jen says
In my opinion, the most important thing about choosing a broker is the research they provide. Schwab, in my opinion, provides the best research – however, they provide it only to people who invest $100,000 or more. If your parents have a Schwab account, you might be able to access the research through them.
With this being so, I think Waterhouse is the best option for people investing smaller amounts of money.
As for how to invest, you have two major choices, mutual funds and stocks. I would recommend starting with mutual funds if you’re not experienced. Morningstar (see morningstar.com) is the recognized expert on mutual funds. I look for low-risk, high return funds – and I only invest in funds that Morningstar gives 5 stars. Why settle for less than the best? I also look for funds with low expense ratios (preferably below 1%, but definitely below average for the category) and funds have been run by the same fund manager for at least 5 years. The last 5 years have bee
Rae says
You do what you think is best. If you lose your money, make more. If you gain dividends, give it to charities. I have no advice for you other than to say leave it to the professionals, if they rob you blind, then you can prosecute, but otherwise trust the process of gaining your own experience.
Congratulations on your investment. It is a journey, not a destination.
Karen says
In my opinion you should pay someone to look after your money. Not because you cannot understand everything, but because you do not have the time to keep up with everything. Plus this is not your first retirement account. Right now all of the money you put into your NASA retirement account is probably in the stock market. The person you pay will be incharge of looking at the whole you. It is there job to save you money on your taxes, now and in the future, to know who the good brokers and funds are and more importantly the reputation and abilities of the people who manage them. They are paid to keep their ear to the ground and to keep you informed and your money growing.
becca says
I think that’s good advise if you are a large scale investor, Karen. But on the small, personal scale, you can’t really go wrong with common strategies mix money between liquid savings for large purchases (house, car..) and retirment savings — index funds, a good distribution in your 401K between stocks and bonds, annual purchasing of IRA’s — without mortgage interest(and a lot of times with a house), there’s no point in needing someone to do your taxes for you since you’ll most likely never be able to itemize above the standard deduction, so… Generally brokerages charge significant fees for all their services plus a percentage of each transaction — well worth it if you have a huge portofolio that needs regular attention, but I think too large a cost for small time investors.
Brian says
A good option to get on a path to investment success, from what I’ve heard/read and according to Clark Howard (the master of all things cheap), is to have a certified financial advisor help get things in order. A CFA isn’t a broker and thus doesn’t work on commissions and is a straight fee kind of service so they aren’t motivated by what you buy. That said a good broker is valuable as well.
Brian says
A good resource, especially starting out, is the Motley Fool http://www.fool.com. I don’t have a job and thus no money to invest but I’ve heard index funds are better than mutual funds because they track an entire index such as the S&P. You’re young so you should be willing to be a little risky with your money and thus target higher growth investments. As you get older the general suggestions are to gradually reposition your portfolio into less risky investments.
Suzy says
Hi Sarah! I ran across your blog last week and have enjoyed reading it and seeing your pictures. You lead an inspirationally full life.
Like Brian, I would suggest looking into index funds for low risk. Investing in S&P 500 index funds, for example, instantly diversifies your investment among 500 companies. While your money could still disappear if the stock market in general has a bad run, the fate of your money isn’t tied to any one company. I like Suze Orman’s books on investing — I feel like I have a much better understanding of investing by myself or finding a good advisor after reading her books. Enjoy!