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BLW500
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IRA Questions  Reply with quote  

So, I just turned 27 and set up an IRA through my employer. They match 5%, combined I'm at about 100$ a week. Now I know very little about the stock market and I will be talking with the company that the IRA is through tomorrow. From what I have heard is I will basically be picking between different risk levels of investment and I would like to know what you guys think would be best for me?
Post Thu May 04, 2017 7:19 pm
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oldguy
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quote:
and I would like to know what you guys think would be best for me?


Most of us are given about 30 years for wealth-building, followed by a transition to wealth-preservation (hopefully for another 30 years or more). You need to take your maximum risks in the first 30 years. So you need to establish your longterm goal for the next 30+ years. Eg, $400/wk invested at 11%/yr for 30 years = $1,150,000 at age 57. Or, if you prefer to build $2.3M at age 57, you'll need to invest $800/wk. And so on.

Know the difference between 'saving' and 'investing'. 'Saving' is a way to safely store money, it is safe, it approx offsets inflation (pays 1% or so). 'Investing' is designed to outpace inflation, eg, if you invest at 11% and inflation eats 1%, your purchasing power still grows by 10%. 'Saving' is risk-free - investing requires that you put your money at risk.

The Law of Investing - "risk and return are directly proportional". And that law is absolute, if someone tries to sell you a product that is "risk-free" and gives a high return, don't believe it - instead, drill down until you understand where the risks are hidden.

I like the 'Little Book of Common Sense Investing' by John Bogel, costs about $15, it does a great job of explaining how to get an 11%/yr longterm return. (11% has been the longterm US Market average for decades). Here's a site, you can pick out a few 30-year blocks and check for 11%.
http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html#.WQuPUcYjWUl
Post Thu May 04, 2017 8:37 pm
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