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I have 35k in ROTH IRA, 17K in 401k. Each year, I put maximum 5 grand to ROTH IRA. I know ROTH IRA, and 401K are money for retirement.
Since I was saving more, I decided to to open a brokerage account as means to earn more money, which is the ONLY reason for opening the brokerage account. recently, I spoke to a financial adviser who said I need to have financial goal when investing . My question is do you have to have a financial goal when investing?
could you invest for the sake of just wanting your money to grow and then take it whenever you want for whatever reason?
I am a newbie to investing myself and I've been a reading a lot lately. There are some basic things even I can tell you now.
You need to have a financial goal which sets your appetite for risk and defines your asset allocation (how much stocks, bonds what kind, etc.) This is necessary so that you know what you are getting into and have the stomach to withstand a drop in the portfolio in a bad market.
You can invest money with the hope to grow but that growth is not guaranteed and all growth is not the same (depending on where you invest). Also taking it whenever and wherever may have tax implications and you be short-changing yourself by not planning it out carefully. Why pay more taxes wen you could avoid them?
Why are you not maxing out your 401K ($17.5K each year)? It is tax deferred money. Are you getting your employer's max contribution, if any?
Too many "advisors" want to sell you some additional services / products. I think a lot of people take training courses intended for car sales people and redo for financial sector -- if you want a "trouble free car" they upsell the "extended warranty" , "worry free gains" and they try annuity... Learn how to manage your own money!
I have 35k in ROTH IRA, 17K in 401k. Each year, I put maximum 5 grand to ROTH IRA. I know ROTH IRA, and 401K are money for retirement. Since I was saving more, I decided to to open a brokerage account as means to earn more money, which is the ONLY reason for opening the brokerage account. recently, I spoke to a financial adviser who said I need to have financial goal when investing . My question is do you have to have a financial goal when investing?could you invest for the sake of just wanting your money to grow and then take it whenever you want for whatever reason?
Surely you can invest as a vocational or avocational pursuit, but you still have the financial needs that are the foundation of financial goals. In other words, even if you "play" at investing, you still are going to need to (for example) buy a family home, save for children's education, save for the travel and other expensive interests you'll have in your life, and save for a comfortable retirement. You still will have those goals and perhaps some more subtle goals, such as financial independence - which is quite different than "wanting your money to grow".
Let's just look at the information you've provided already, putting aside all matters other than retirement for now. When you reach 70 years old, do you think your approach will yield a comfortable retirement? I don't know your age or anything else about you, but I do know that if you just put a small percentage in taxable investments and the max in IRAs each year, you could still end up in dire straights in retirement - actually, given just those savings, you're very likely to find yourself on the ropes, if you're typical. Financial goals, such as those I've outlined, imply specific levels of expenses. Expenses are a critical aspect of prudent financial planning. You may feel emboldened by covering your current-day expenses, and if you truly are doing so without incurring debt, that's great. However, in the absence of outlining your financial goals, your planning is ignoring those things that will perturb your finances later, substantial incidental expenses (such as buying a home or paying for a child's education) and changes in your circumstances that will wrack your current income/expense scenario (such as retirement).
Of course, people in their twenties assume such considerations are things they need to worry about "later". The problem is (a) "later" sneaks up on you, and (b) people in their twenties are actually wrong about their assumption: The typical twenty year old American, today, will very likely encounter an environment where the ability to accomplish the typical goals of a person's lifetime will be substantially more difficult than in past generations, even if they engage in conscientious financial planning their entire working life. The rules of thumb vary, of course, but they seem to center around 13% - that the typical American needs to save 13% of their income every year of their working life to achieve financial independence, and that's only if things don't get structurally worse than they are now. If you save less than that, or make overly ambitious moves with your savings that fail to pan out (and therefore incur catastrophic losses beyond what is typical), then you would have to save substantially more than 13% as you get older. I'm very fiscally conscientious. I saved no less than 6% - specifically for retirement - every year of my working life, and generally have saved closer to 18%, as was the case last year. We're still not on target to reach our financial goals. We're going to have to either encounter especial luck, or lower our expectations, to make it work. If we had been aiming at our goals further in advance, we probably could have taken smaller actions then that would have obviated the gap we are experiencing now.
I am a newbie to investing myself and I've been a reading a lot lately. There are some basic things even I can tell you now.
You need to have a financial goal which sets your appetite for risk and defines your asset allocation (how much stocks, bonds what kind, etc.) This is necessary so that you know what you are getting into and have the stomach to withstand a drop in the portfolio in a bad market.
You can invest money with the hope to grow but that growth is not guaranteed and all growth is not the same (depending on where you invest). Also taking it whenever and wherever may have tax implications and you be short-changing yourself by not planning it out carefully. Why pay more taxes wen you could avoid them?
Why are you not maxing out your 401K ($17.5K each year)? It is tax deferred money. Are you getting your employer's max contribution, if any?
When i started my brokerage account 7 years ago, the idea was that i will treat it as another source for retirement. With that in mind, I didn't have intention to touch it for 30 some year, i picked 70% stocks and 30% bonds. Is it common or okay to use brokerage account as retirement source?
Aren't the very rich investing for the sake of growing and doing anything with it, when they want to? I know i am not 1% but i am just asking.
I am not a big supporter of 401k that's why i didn't max my 401k. i am getting employers contribution which I think is 1% of what i put in. Why do some people favor 401k, other not favor it?
I too don't want to be in the situation to need to touch my brokerage account. Ideally, I'd just let it be there.
401K is a good way to save taxes. However for some people, the inherent inflexibility to forget your money till you're 59.5 is undesirable. In my case, I don't max out my 401K to $17.5K because of the available fund choices. May be I will do that when I need to save taxes to lower my tax bracket. Right now, I simply get my employer's match.
well a goal like "just grow my money" can lead to big problems.
risk is number one, how much risk and volatility swings can you stomach before you bail out at a low and lose money.
do you want your goal to be no greater than market risk like an index fund or do you want to get the same return or better than the index fund with less risk? that has been my goal.
i was always very goal oriented. if one of my goals was to buy a house or to pay off my house than i invested aggressively until i got that money .
then that money was pulled out of the risk pool.
what i didn't do is get greedy like many folks today who leave the money they wanted to pay off their home with still invested and at risk because it earns more.
i do not let my goals stay out there like a carrot on a stick always trying to get more with it until i lose some of it.
through life you will have goals for different things , some long term ,some medium term and some short term.
what you do with that money should match the goals you set for that money.
this is where folks get into trouble all the time. they use long term investments to fund shorter term goals and if things are down they cry.
it is no different than fighting a war. you have all these different fronts going on that require your financial resources. sure, you could pull from one to sure up another and you may win a battle but eventually lose the war.
like a general would do you need an idea of what the big money suckers will be, when are they and invest accordling to match time frames.
this is goal investing as opposed to just let it ride and hopefully the money will be there when i need to use it no matter what the time frame..
needless to say the hope rather than plan are the most popular options used.
we knew we needed money for wedding gifts for 3 kids this decade eventually. that money was pulled out of the aggressive risk pool 7 years ago once we attained the amount.
it was put into bond funds where it sat until the last few years as all 3 will be married now, the last of them in may.
hopefully now you understand what goal investing is.
Last edited by mathjak107; 08-04-2013 at 08:48 AM..
do you want your goal to be no greater than market risk like an index fund or do you want to get the same return or better than the index fund with less risk? that has been my goal.
you goal doesn't seem specific or clear from what you said above. I know my risk without fully having a financial goal.
Quote:
Originally Posted by mathjak107
if one of my goals was to buy a house or to pay off my house than i invested aggressively until i got that money .
so say, you invest like 50k for 10 yrs. then you would take out in full whatever is there regardless if the market did well or not?
Quote:
Originally Posted by mathjak107
i do not let my goals stay out there like a carrot on a stick always trying to get more with it until i lose some of it.
I have 35k in ROTH IRA, 17K in 401k. Each year, I put maximum 5 grand to ROTH IRA. I know ROTH IRA, and 401K are money for retirement.
Since I was saving more, I decided to to open a brokerage account as means to earn more money, which is the ONLY reason for opening the brokerage account. recently, I spoke to a financial adviser who said I need to have financial goal when investing . My question is do you have to have a financial goal when investing?
could you invest for the sake of just wanting your money to grow and then take it whenever you want for whatever reason?
Thanks
In my opinion, a person can invest for whatever reason he wants to invest. Has to have a goal? By whose order? I've been investing for over 30 years and my only goal is to increase my money.
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