or cd's or regular savings
That's a very broad question. I assume you are young–if you are not making a whole lot of money right now, then the odds are you are in a low tax bracket. If this is the case, a Roth IRA is your best choice to start. You can contribute up to $4000 per year of after-tax income, and you will never be taxed on your earnings on investment if you don't make withdrawals before you're 59 1/2. But keep in mind, you will be taxed and penalized if you withdraw before that time. Inside the Roth IRA, stock market investments like mutual funds have historically provided the best returns. If you're not familiar with these, get a good financial advisor who can help you with asset allocation and fund selection. Keep in mind that these funds will be more volatile than bonds or CDs, but if you have a time frame of over 15 years to invest, it's almost certain you will come out better in the long run.
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Here’s a page for finding a good good mutual fund to invest in:
http://www.best-stock-trading-systems.com/mutual_fund_ratings.html
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Millions of baby boomers will reach retirement age this year—many with high hopes for the golden years. But there’s a gap between retirement goals and retirement planning. According to a recent study by Prudential in partnership with the University of Connecticut, the reason may be the Investor’s Retirement Emotion Quotientsm or EQ.
The “Behavioral Risk in the Retirement Red Zone®” research report explores the link between emotions and financial decision-making in investors approaching or in The Retirement Red Zone, what Prudential calls the important investment window five years before and after retirement.
The study identified five dominant emotions that may influence investment decisions. These include fear, regret, inertia, aggressiveness, and susceptibility. Fear and regret are by far the most dominant emotions.
For more on this eye-opening study and other Retirement Red Zone information, go to: www.retirementredzone.com
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I’m about to start a long term monthly contribution plan for a mutual, or index, or exchange traded fund. I have no idea which fund to choose. Every fund seems to lose money in the first 1 to 5 years, which is discouraging. I am conservative, do not want to lose more than 5% (roughly) of my principal over the life of the investment, and do not wish to speculate. I’m trying to put compound interest on my side. Question is – has anyone built a retirement income that satisfied their living needs by a mutual fund? Or index or ETF ? Or have you used it more to supplement your income? Inflation is a killer, and so is taxes.
You should meet with a financial advisor to talk about your goals.
You do have a long time horizon, so taking risk is just fine. However, you have said that you do NOT want to speculate. In this case an indexed annuity or fixed annuity may be right. As you can not possibly lose any of your principle. However, the upside is also not as large.
You should also structure your account for retirement by using either a Roth IRA or Traditional IRA.
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The fudging of expertise is appalling in our business. Believe me, I know. I am 35 years old now, and have been in the financial services business 13 years now. When I was 22, fresh out of the University of Texas with a History degree, my first job was with Fidelity Investments as a mutual fund adviser. I passed the Series 6 exam in a matter of days. After a few weeks of training, most of which was listening to one of the more tenured reps (by “tenured”, I mean someone with six months experience), I was on the phone taking calls from all over the country, advising people on how to take care of their financial future. If you had called an 800 number on a prospectus or an advertisement, you would have been speaking with someone like me. Dozens of reps like me fielded calls, and not one of them had more than three years experience. I, myself, only lasted a year and a half in that job. Call center work has a way of burning you out.
In the 1990’s, Fidelity was undergoing rapid growth, and they could not keep the place staffed. They had planned on staffing to a level where no more than five customers were holding at any given time. Shortly after I arrived, we were constantly on “red alert”, which meant that 30 people or more were holding all the time. So, they relaxed their hiring requirements. They had previously insisted on a college degree for their newly hired reps. Soon, I was sitting next to pimply-faced 18-year-olds who had been in a high school classroom only a few months prior. Looking back on it, who was I to feel so superior? It’s not like I learned how to plan someone’s financial future in my “Western Culture, 1865-present” seminar at UT.
Think about that, though. Customers were entrusting their retirement plans to kids. If you go to Fidelity, Schwab, E*Trade, TD Waterhouse, Ameritrade, T Rowe Price, Ameriprise, or any of the other purveyor of mutual funds, and click on their links to “talk to an adviser”, it is usually accompanied by a smiling, healthy, slightly graying middle-aged man with great teeth and his own corner office. In fact, you are more likely talking to a very young, underqualified, underpaid call center worker who barely has a cubicle and is definitely NOT smiling.
Of course, it is true that it does not take grand expertise to do what they do. Back in my day, we were given a script to inquire of a customer’s marital situation, age, risk tolerance, spending goals, and that is it. With that information, there was (wait for it) a Fidelity fund that met their needs. This is how it works at most firms. You need what they are selling. Financial planning requires more than that.
All investment products should be discussed in the larger context of a person’s life — not just financial life, either. If you take no other advice from me, take this one tidbit. If a “financial adviser” is selling you a product from which he is getting paid a commission, he will not have your best interests at heart. Period.
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We closed this account because the worth had dropped about $600 since first opening it almost 6 years ago. Do we need to claim this on our income tax since it made no money? If we do have to claim it, could anyone help with the form #? Thanks!
Yes. You are allowed to take up to $3000 capital loss deduction, so your $600 will be deductible. Scedule D is for capital gains and losses.
You didn't need to report gains and losses in prior years because you didn't sell and realize any gains/losses.
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