ViperX883
First Time Poster
Cash: $ 0.25
Posts: 1
Joined: 17 Aug 2005
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| 21 and Just Starting |
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Alright, let me start out by saying that I am relatively new to investing beyond my ING account. I am 21 and I have around 7k saved up (college is a killer!), of which I am looking to invest 2.5k-3.5k. This isn't much, but everyone has to start somewhere. I am interested primarily in long-term investments and I plan to continue to add capital to my investments once I begin working.
Anyway, from the research that I have done, I think that mutual funds are probably the best way for me to go given my limited funds. They provide an immediately diversified portfolio with professional management and they do not require a large amount of capital for initial investment. Is this appraisal of the situation accurate?
Second, I am prepared to take some risk with my investment. Accordingly, I was considering investing $3000 in three different funds with $1000 going to each. In order to further diversify, I was thinking that I should invest $1000 in a lower risk, high yield (8-10%) fixed-income fund. It seems that interest rates are back on the rise and will hopefully be going up for some time, so now seems like a good time to get into one of these.
For my second $1000, I was considering investing in a somewhat riskier equity fund, perhaps a large-cap blend fund. They provide a good mix of large-cap value and large-cap growth stocks, so there is a decent chance for a significant return without excessive risk. My real concern with this is that many people say that the stock maret may be getting ready to tank as a result of inflation driven by increases in energy expenses. In that case, the retail industries would be hurt the most, so I would probably choose a fund that didn't have a large percentage of its assets in retail.
For my final $1000, I was considering an even more risky investment with the potential for very good return, maybe a medium-cap growth fund. The risk is higher, but the potential for growth is attractive. Aside form losing my money, a risk that I am prepared to accept, my only concern again is regarding the possibility of a min-recession. Again, I would stay away from retail for the time being.
Does this sound like a good plan? Can anyone offer additional advice or suggestions?
Just for reference, my three picks up to this point are:
Huntington Mortgage Securities Tr (Fixed-Income) or Preferred Fixed-Income (Fixed-Income)
Columbia Acorn Select Z (Mid-Cap Growth)
Neuberger Berman Partners Inv (Large Blend) or FMI Large Cap (Large Blend)
Thanks ahead fo time guys!!!
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Wed Aug 17, 2005 7:51 pm |
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gators52
Contributing Member
Cash: $ 9.05
Posts: 45
Joined: 16 Aug 2005
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I'm in the same boat as you, and looking for the same diversification. You should look at the vanguard website, most of their index funds have very very small fees which is a great plus. However most funds have a 3k minimum, which kinda aucks, however if you invest in EFT funds they have no minimum. Since Vanguard has a 3k min on the funds I want I might opt to find something in the midcap. I'm looking for a decent amount of risk because I will have this money in there for at least 4 years while I finish college.
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Wed Aug 17, 2005 7:58 pm |
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MattL
Senior Member
Cash: $ 46.85
Posts: 234
Joined: 25 Jun 2005
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You are on the right track. I would stick with no load funds. The funds you selected may perform well, but a sales load and higher expenses will reduce your real return.
Debt Elimination
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Fri Aug 19, 2005 1:52 pm |
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efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
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Expense ratio isn't everything. Different classes of funds or better managed funds that pick the cream of the crop can have a better return than an unmanaged index that takes the good with the bad. But not all fund managers are skilled (or lucky), so you need to compare short and long term history.
These are not necessarily representative of these catagories of funds. Just 2 examples from my 401k.
Large Cap Index 0.31% expense ratio
1yr 13.69%/3yr 12.22%/5yr -1.72%/10yr 9.57%
Mid-Cap Blend 0.81% expense ratio
1yr 20.38%/3yr 18.01%/5yr 10.45%/10yr 12.25%
If you only had enough seed money for one of these, which would it be?
One thing I have not been able to find in public mutual funds for my IRA is an international small cap fund that is as broadly worldwide diversefied with the return of the one in my 401k. After its 1.49% expense ratio has been applied its 10 yr average return is 15.49% (although volitile with wild gains or losses in some years).
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Fri Aug 19, 2005 8:49 pm |
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gators52
Contributing Member
Cash: $ 9.05
Posts: 45
Joined: 16 Aug 2005
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I really dont think your examples are correct, most mutual funds and indexes have -% returns in the last 5 years, from the stock market being at an all time high in 1999, there is no way you would be getitng 10% return the last 5 years.
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Sat Aug 20, 2005 2:57 am |
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efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
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"Most" is not "all". Admittedly there are more losers than winners, which I discovered while researching funds for my IRA and Roth IRA. So it takes some work to find ones that regularly perform well (and that is no guaranty of future performance).
Our 401k has limited fund selection. For examples of public Mid-Cap Blend funds that did even better see http://biz.yahoo.com/p/tops/mb.html
There are other segments of mutual funds that have returned a 5 year average over 20% annually and much better within past 3 years. But some of them can be more volitile (even if not in oil/gas), so it depends upon the time frame until the money is required.
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Sat Aug 20, 2005 5:15 pm |
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