Any ideas to invest around $4000 annually?

[adios]

...

[James Boston]

Warren Buffet discounts the value of all future cash flows back to their present value to determine INTRINCIC, not book, value.

[RocketManJames]

Book value is a fairly "old" metric. Old in the sense that many older companies actually have a lot of assets such as equipment that might comprise a lot of the company's value. Newer companies tend to have less book value, since newer companies tend to have a larger service-component (since the world is slowly migrating more towards a service-based economy). A service-based company would have very little book value, for example. But, this alone should not be enough to preclude it from being a worthwhile investment.

Also, while book value is a hard number, the true value of the book value figure is quite subjective. True liquidation value is never at full book, and depending on the type of assets, the actual liquidation value can vary by quite a bit.

And, the whole thing about hedge funds and $4k made no sense.

-RMJ

[michiganfan9]

But if the book value was greater than trading wouldn't it still most likely be undervalued?

[James Boston]

[ QUOTE ]
But if the book value was greater than trading wouldn't it still most likely be undervalued?

[/ QUOTE ]

In some cases, maybe. Like RocketMan said, many companies today are more service oriented. They have fewer liquid assests, and mainly the quality of the service is what matters. If they are trading below the book value of a company that already has a small amount of assests, the market basically thinks their service sucks and they aren't making money.

To go further, would you buy a company if you thought, at best, it was only worth what you could sell the assests for? I wouldn't. Given two options. You can pick 2 companies that have an equal amount of book value. One is trading at half of the book value and has x in cash flow. Two is trading at above book value, but has 15x cash flow. Which one do you think will be worth more in the long haul?

[michiganfan9]

I'm sry about that. i dont' really know much about hedge funds and don't know why i posted that. I apologize.

[scottgiese]

While it's true that $4k per year contributed and a growth rate of 10% per year gets you to $2M in 40 years, bear in mind that $2 million in 40 years is only gonna buy what $500k buys today (assuming inflation of 3.5%, which is about average).

That's good, but it ain't exactly easy street, just so you know.

You obviously aren't really experienced in investing, so I'd definitely recommend sticking to index funds for a few years at least. The S&P 500 is a popular index you can buy easily enough under the ETF (exchange-traded fund) with ticker "SPY". You buy and sell it just like a stock, but it tracks the S&P index. Mutual funds by and large underperform this index, mostly because they charge fees.

You can take out any amount up to the amount you've contributed from a Roth IRA for any reason, tax-free and without penalty. Profits, you can only withdraw without penalty after 59 1/2.

<<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>>

Whoever said that, don't take investing advice from them. Expected by whom, exactly? Not by the holders of the S&P index and its components -- not many people invest to actively *try* to lose money.

Which is not to say that the S&P 500 won't drop over the next 10 years. It might, but the market doesn't expect that. It's pretty rare to get a negative return on this index over that long a period.

[Delphin]

The most typical advice for investing your IRA money assuming a 40 year horizon would be to go 90-100% stocks.

A decent split would be 50% large cap, 20% small cap, 25% international, 5% cash or equivalent.

For large caps, an S&P500 index is the easiest way to go (which invests in the 500 largest US companies), but you can also pick from the many other mutual funds available that invest in large cap stocks. You can get similar indexes for small cap and international stocks, or pick and choose from the hundreds of mutual funds available in these areas.

Many funds offer $500 minimums or less for IRA accounts, so you can spread it out over a few funds to lower your risk. Investing 333.33 a month might be better than putting all $4k into the market on any one particular day during the year. Do some research on "dollar cost averaging" to find out some of the benefits.

[wickedgoodtrader]

Put it in Jones Soda (JSDA)... I'm thinking it could be a 10-20 bagger over the next 10 years.

[gvibes]

[ QUOTE ]
The most typical advice for investing your IRA money assuming a 40 year horizon would be to go 90-100% stocks.

[/ QUOTE ]

I think one would need an extremely high tolerance for risk to be 100% invested in stocks. I go 75/25 myself at age 26, and I feel I have a high risk tolerance.