Any ideas to invest around $4000 annually?
 

Starting in Nov ill be able to invest 4 dimes annually.I was looking at roth IRA's, seems safe way to invest and grow my investment. On the internet there were calculations that predicted if i invest 4000/yr for the next 40 yrs (im 20 so 40 yrs will take care of the 59 1/2 rule) with a avg growth rate of 10% the total will be a little over 2 million. Seems too good to be true. Also, will it be a problem if this money is made under the table? And once im in a high tax bracket is it wise to start a regular IRA?

I also think i should set up a savings account for emergencies so i dont pay taxes and penalities for tapping into the IRA's. Any suggestions to what invest the IRA in: stock, mutual funds, bank?

I hear that Bush wants to impliment a Life Savings Account in 06 and is even better than a roth. What ive heard is that max contribution is 5000, you dont need an income, no max income, and no penalities for taking it out (you can use it for school, house, retirement). Any down side to this LSA? Have you heard if it will pass or the chances of it passing?

Real estate is an idea as well but i dont have enough knowledge or bankroll yet, that will come along down the road.

I heard people suggest put money in mutual funds, but ive also heard im better off with an index fund. And then someone commented that it is unwise to invest in the index because for the next decade it is expected that the market will decline? I know i am only 20 and have yet to experience many successes and failures of life and that is why im asking you, who has, to help me step in the right direction.

Re: Any ideas to invest around $4000 annually?
 

You need to figure out what your financial goals are. First, you should probably setup an 'emergency' fund of three to six months of your living expenses before you start investing any significant amounts of money. You can put this money in certificates of deposit, money market accounts/funds, government bonds, or even an interest-paying checking account.

Besides that, a Roth IRA is a great way to go - provided you want this money to go to retirement and keep your hands off it for 40 years. I would recommend putting it all in either stock funds or some kind of retirement index. For example, Vanguard has funds that are "Retirement 2015", "Retirement 2025", and has these going up to 2045. They aren't bad too - just make sure whatever you pick isn't more than 20%-25% in bonds as they will lower your long-term return. They lower your risk too, but if this is retirement money, you have a long time to wait out the market downturns.

By the way, you can only contribute to a Roth IRA if you have earned income (must have $4,000 of earned income to make the $4,000 annual contribution) - so that could be a problem.

Who knows with regards to life savings accounts - for now, assume they wont materialize.

Re: Any ideas to invest around $4000 annually?
 

10% may be a little optimistic, but not horribly so.

TR 2045 would be a good place to park it until you've read some books like A Random Walk Down Wall Street and its type.

Re: Any ideas to invest around $4000 annually?
 

Depends on your age. I'm 15 and invest about 4k annually but mines all in individual stocks. Soon I could dump some cash into a roth IRA so by the time i'm retired i will have over a million dollars. Definitely set up investment goals. You can't invest if you don't have any goals. Look into some bonds or hedge funds if your looking for some slow steady growth or do your homework, run stock screeners and much more, get inside a company and follow warren buffett's strategies if you are picking individual stocks like i am.

Re: Any ideas to invest around $4000 annually?
 

[ QUOTE ]
Look into some bonds or hedge funds if your looking for some slow steady growth

[/ QUOTE ]

What hedge fund will let you in with $4K?

Re: Any ideas to invest around $4000 annually?
 

Then look for individual stocks that have a book value greater than trading value.

Re: Any ideas to invest around $4000 annually?
 

Hedge fund & Individual Stock...2 completely different things.

[ QUOTE ]
Then look for individual stocks that have a book value greater than trading value.

[/ QUOTE ]

What?

Re: Any ideas to invest around $4000 annually?
 

It means that its currently undervalued.

Re: Any ideas to invest around $4000 annually?
 

Book value is the total value of a companies assests. In other words, what the company claims they would be worth if they liquidated everything they had. "Claims" is the key word. Book value can also be inaccurate. As to whether or not a company who's book value exceeds market cap is undervalued, I don't know. It depends on the company. However, if a company is valued at less than its net assests, you can be sure something isn't right. It may still be a good buy in some cases, but it's not as simple as you make it out to be.

Re: Any ideas to invest around $4000 annually?
 

I know what your saying but that is the basis for Warren Buffett. Read his checklist at Forbes.com His main thing is finding undervalued stocks or in essense book values greater than trading value that still have a proven track record.