Ing Investments
January 22nd, 2010
Question: What’s a good first investment to make as a young adult?
I am a teacher and have college loans and other various bills, but I want to start saving money for my future. I have a 403b and a retirement savings with ING as well. I don’t have a savings account. There are so many different ways to save or invest, and I was wondering if there is something good to start with. Stock? CDs? What is something that I could realistically begin doing now to help myself later?
Answer: The world of saving and investing is confusing. The more products and changes only seem to make it harder to make an intelligent choice. As a teacher and former student you probably know that very little is usually taught about finances and investing in school. So first I suggest educating yourself since saving and investing knowledge can make a huge difference throughout life and will help you avoid being taken advantage of by Brokers, Bankers, Investment Advisers and Insurance Agents. Trust me Firms and their agents are burning the midnight oil trying to find ways to get your money.
Please read the book The Boglehead’s Guide to Investing. It is written layman’s terms and gives a practical understanding of many of the issues you raise. I lent it to my son-in-law and he read it twice and still hasn’t returned it.
I will try to give you some suggestions but please read the above book.
1. Most will advise you to have an emergency fund of 4-6 months that you can access in case of emergency. You should probably have this or at least half of it before you Start Investing. Saving is safe, that is, there no risk to losing your money. That is where your emergency fund should be. A money market fund, a CD or a bank savings bank. Ally, ING and Discover Financial are very good on line banks. They usually offer better rates than your local bank and are FDIC insured. You can open an account on line and have money automatically drawn out of you checking account once or on an ongoing basis. If you automate your savings it will be much more effective..You might want to find out if you are eligible for a credit union – sometimes their rates are very good. Ally offers a no penalty CD – the rate is fixed for 9 months and you can cash it in any time for no charge. All other CDs have a penalty for cashing in before the CD matures. So you can get a better rate on a 2 year CD but if you need the money before 2 years you will pay a penalty (usually 3 months interest).
2. It really annoys me that our education system is so costly that to get a degree you have to go into major debt. Education is a benefit to the country and yet we make it so hard to get one. You should try to pay more than the minimum to get out of debt. Not easy I know.
3. 403b’s usually have mediocre investing Options but hopefully your school system will match some percentage of your investment. If that is true it might be worth investing enough to get their maximum match. (It is like getting a 100% return). Look for investment choices that have low expense ratio and invest in a wide portion of the market. e.g. Total Stock Market Fund rather than Small Stock growth. Sounds as if money is tight but if you can Start Investing 1% now it would be good then every year try to increase your investment. If the school system doesn’t match your investment then skip the 403b and invest in a Roth IRA at Vanguard.
4. Not sure what the ING retirement savings is. An IRA? a Roth IRA? If so, I would roll it over to Vanguard since Vanguard has better investment choices. Read the book before deciding to pick the Vanguard Fuind (If you want to do it anyway you can’t go wrong with their Star fund).
I have included a link to the boglehead’s site. The site is run by followers of John Bogle who founded and ran Vanguard. It is free, no ads, and you don’t even have to register to read the questions and various answers. Many questions are like yours and the members of the site are very kind to new investors. If you register you can ask them about the investment choices in you 403b, what Vanguard fund or funds they would recommend. You will get some of the best free advice anywhere.
Hope some of this has been helpful and best of luck.
7 April 2010 ING Investment Management Americas Visits the NYSE
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