5 ms·

I wish it told exactly how to get 7% a year on an IRA.

Shamiq 18y ago
This is why asset management types bring in their big bucks. Ask around to see if anyone has a trusted financial guy (gal) they use to manage the 401(k). The general advice: well-diversified; held for long-term; mix of stocks, treasury bills, bonds, preferred shares, etc. Caveat -- Crises like the current one can wipe out even the best of portfolios.
- orp 18y ago
  There's no such thing as 7% yearly interest without risk. It just doesn't exists. If you look at government bonds (a.k.a. TBills), they'll tell you exactly how much interest a truly risk free investment is worth (in yearly interest). Anything higher then that is risky, by definition. On top of that, you have to factor in inflation. In other words, it's good to save money, but managing saved money is hard. Be ready for that.
  - wmorein 18y ago
    "If you look at government bonds (a.k.a. TBills), they'll tell you exactly how much interest a truly risk free investment is worth" That used to be true, but it isn't strictly true any more. The Credit Default Swaps for US Treasuries are priced to imply that you need to subtract around 1/10 of a percent (100 basis points) from the yield to get the real risk free rate. See http://www.fxstreet.com/fundamental/analysis-reports/sunrise-market-commentary/2009-02-26.html http://www.fxstreet.com/fundamental/analysis-reports/sunrise...
    - nandemo 18y ago
      A CDS for US Treasuries seems crazy. I wonder how many counterparties would be alive in case of a default...
      - Shamiq 18y ago
        I think that's why they are basically risk free. When something that major goes down, chances are your greenbacks won't be worth a damn.
patio11 18y ago
Buy a total market index fund. That is literally everything you need to know about asset selection if you start an IRA in your twenties.
- falsestprophet 18y ago
  Standard and Poor 500: http://www.google.com/finance?q=SPY http://www.google.com/finance?q=SPY http://en.wikipedia.org/wiki/S&P_500 http://en.wikipedia.org/wiki/S&P_500 Russell 3000 Index: http://www.google.com/finance?q=IWV http://www.google.com/finance?q=IWV http://en.wikipedia.org/wiki/Russell_Indexes http://en.wikipedia.org/wiki/Russell_Indexes These are highly correlated over the short run, but technically different investments. So, you can get cute with the taxman by writing off a loss on one and buying into the other every down year.
teej 18y ago
Vanguard's index fund has averaged 9.7% a year for the past 32 years. https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT https://personal.vanguard.com/us/funds/snapshot?FundId=0040&...
- sam_in_nyc 18y ago
  It didn't seem that impressive to me. Looks like it made all of its gains 10+ years ago, and their still getting factored into the 32-year average. If you want go that route, invest in MSFT, which has averaged something like 50% over the past 22 years.
jerf 18y ago
Good news! It doesn't matter because that 7% interest has been wiped out anyhow! In the past ten years I've been able to sock away nearly nothing in retirement due to the amount of time I've spent unemployed, and I'm currently 30. While I'm as affected by the market issues as anybody else, one side effect of stock prices dropping back to 1997 levels is that all the interest I thought I was missing out on, it turns out I wasn't after all. Man, I wish I were twenty and had a good job now, buying my IRAs at the bottom of the market like this.
- dasil003 18y ago
  Same here! I put $2000 in a Roth IRA in '98 and never made another contribution. Now it's worth $1800. Of course it would be nice to have $18,000 at 30 instead of $1800, but there is some redemption. Now, about the $5000 in credit card debt...

This is why asset management types bring in their big bucks. Ask around to see if anyone has a trusted financial guy (gal) they use to manage the 401(k). The general advice: well-diversified; held for long-term; mix of stocks, treasury bills, bonds, preferred shares, etc. Caveat -- Crises like the current one can wipe out even the best of portfolios.

orp 18y ago
There's no such thing as 7% yearly interest without risk. It just doesn't exists. If you look at government bonds (a.k.a. TBills), they'll tell you exactly how much interest a truly risk free investment is worth (in yearly interest). Anything higher then that is risky, by definition. On top of that, you have to factor in inflation. In other words, it's good to save money, but managing saved money is hard. Be ready for that.
- wmorein 18y ago
  "If you look at government bonds (a.k.a. TBills), they'll tell you exactly how much interest a truly risk free investment is worth" That used to be true, but it isn't strictly true any more. The Credit Default Swaps for US Treasuries are priced to imply that you need to subtract around 1/10 of a percent (100 basis points) from the yield to get the real risk free rate. See http://www.fxstreet.com/fundamental/analysis-reports/sunrise-market-commentary/2009-02-26.html http://www.fxstreet.com/fundamental/analysis-reports/sunrise...
  - nandemo 18y ago
    A CDS for US Treasuries seems crazy. I wonder how many counterparties would be alive in case of a default...
    - Shamiq 18y ago
      I think that's why they are basically risk free. When something that major goes down, chances are your greenbacks won't be worth a damn.

patio11 18y ago

Buy a total market index fund. That is literally everything you need to know about asset selection if you start an IRA in your twenties.

falsestprophet 18y ago
Standard and Poor 500: http://www.google.com/finance?q=SPY http://www.google.com/finance?q=SPY http://en.wikipedia.org/wiki/S&P_500 http://en.wikipedia.org/wiki/S&P_500 Russell 3000 Index: http://www.google.com/finance?q=IWV http://www.google.com/finance?q=IWV http://en.wikipedia.org/wiki/Russell_Indexes http://en.wikipedia.org/wiki/Russell_Indexes These are highly correlated over the short run, but technically different investments. So, you can get cute with the taxman by writing off a loss on one and buying into the other every down year.

teej 18y ago

Vanguard's index fund has averaged 9.7% a year for the past 32 years. https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT https://personal.vanguard.com/us/funds/snapshot?FundId=0040&...

sam_in_nyc 18y ago
It didn't seem that impressive to me. Looks like it made all of its gains 10+ years ago, and their still getting factored into the 32-year average. If you want go that route, invest in MSFT, which has averaged something like 50% over the past 22 years.

jerf 18y ago

Good news! It doesn't matter because that 7% interest has been wiped out anyhow! In the past ten years I've been able to sock away nearly nothing in retirement due to the amount of time I've spent unemployed, and I'm currently 30. While I'm as affected by the market issues as anybody else, one side effect of stock prices dropping back to 1997 levels is that all the interest I thought I was missing out on, it turns out I wasn't after all. Man, I wish I were twenty and had a good job now, buying my IRAs at the bottom of the market like this.

dasil003 18y ago
Same here! I put $2000 in a Roth IRA in '98 and never made another contribution. Now it's worth $1800. Of course it would be nice to have $18,000 at 30 instead of $1800, but there is some redemption. Now, about the $5000 in credit card debt...