Hey all! New Fool here, with absolutely zero investing experience. Doing taxes this year, I ended up having to buy a couple of IRA’s, one for me and one for my wife. I opened an account with a broker, and I am ready to allocate some assets!
For background information, I have two retirement streams that I am currently drawing, that gross around 90k/yr. I have funds in TSP (gov’t 401(k)) that I am not drawing on at the moment. I am not drawing Social Security yet. I own a small photography business that grosses between 15-20k/yr. My wife and I are 61 and 60 respectively. She does not work and does not have a retirement. All that to say, whatever I decide to invest these IRA’s into, they are not critical to our fiscal security, i.e. I don’t want to just stick it into a govt bond mutual fund to earn me 2% or less. I love to learn, so willing to do some homework!
So my question is, given the above, if you had a couple of new IRA’s to invest ($7k, and $4.9k) where would you put it?
Thank you for any input!
How much time do you want to spend on research and investing?
What is your return target?
Who is your broker? #3 is an indicator of the breadth of investing options. Plus, some sense of costs. I am still in risk-taking mode, so my preference is individual stocks. Since your TSP options already include broad based index equivalents, then maybe a Vanguard Value Index Fund ETF (VTV) or its equivalent might be a consideration.
@physician - he didn’t want bond type returns. VTV has done better than that in 5-yr and 10-yr periods. Would you suggest QYLD for him? There are definitely a lot of options out there e.g. the DGI (Dividend Growth Investing) world, if his broker allows free dividend re-investments. There’s the preferred stocks realm.
I am thinking of learning how to evaluate stocks, so I realize the intial time investiture will be more, and once I kinda get the hang of it I am willing to spend 4-5 hours a week (off the top of my head!) on my investments. I’m thinking that once I get a solid base going, I won’t need to spend as much time.
I am wanting to outperform the S&P 500.
My broker is TD Ameritrade.
My TSP is now in the L Income Fund, which is the “safest” TSP Fund, for those already retired, or about to. I believe 70% is in bonds. And I am good leaving it there! But with these two IRA’s, I want to entertain more risk. I think I might enjoy learning how to evaluate stocks, at least to the point that I feel safe buying and selling a few stocks. Having read some of your guys’ posts, and others, I don’t think I will achieve the knowledge base that you have. I don’t even understand what you guys are saying half the time! But I am willing to learn!
And having said that, I am NOT opposed to placing money into an ETF that can average say a 12% return after costs and taxes. I am open to suggestions!
@DaddyO406 - Regarding brokerage, TD Ameritrade is also one of my brokerages. I have generally been pleased with the investment options available via the brokerage - stocks, partnerships, ETFs and even OTCs (Over-the-counter/Pink Sheets (via a broker))
As a target, beating the S&P is a worthy but very challenging goal. Not impossible, but it will be a challenge. There used to be more than a handful of useful boards on the Motley Fool in years past. Useful in the sense that there was a lot more board participation when a subject or stock idea was mentioned. Also, lots more ideas shared. I don’t get the same vibe on the boards currently. Maybe sometimes on the “Falling Knives” board. But again, not quite like it used to be.
One of my favorite sectors is Shipping ideas. Shipping is a very cyclical sector. Different segments of shipping have been great investments at different periods of time during the last two-three years. Will it continue? Maybe, maybe not. Willing to discuss a variety of shipping ideas here– Latest Industry Discussions/Shipping News topics - Motley Fool Community
Searching and reading all the dividend investing forums here and others not here is a great idea. I have accounts at both Schwab and TDameritrade. Both are excellent.
Hohum, I think for someone going into the investing world the shipping stocks are very high risk especially in a recession type environ. You are the man when it comes to making money on shipping however, but a new investor might now fare as well IMHO. There are a lot of funds that are pretty safe especially in this sideways trading market. I personally hold QYLD and am increasing my position all the time due to the excellent dividends. I am watching the price of crude oil and if it breaks out again, i will buy OILK which had phenomenal returns in 2021 of 40% range and 2022 over 20% but risky if you don’t watch the price of crude. It looks like takeovers might happen in the energy sector so bigger midlevels might be in play. I’m watching Apache and Diamondback stock over there for any crazy activity. Energy funds might be a place to read about. JMHO…doc
edit: FXN also has a good dividend and is an energy sector eTF
If you want to learn how to evaluate stocks and funds, Zacks has good information. Morningstar has good evaluations. SimplyWallSt has good information. Tipranks is another site to read. Financials, market opinion, trends are all good things to have a handle on. Beware of those who fall in love with a stock or sector and thats all they do/read/recommend. Barchart is another good source of news…doc
Thank you Physician, Hohum and Rainphakir for your responses!
Yes, I had heard that TDA was bought by Schwab. I was a little skeptical about going with TDA after hearing that, but decided to anyway, as Schwab seems to have a good reputation. I understand that diversification is important in any portfolio, so investing in different sectors such as energy, shipping or technology is important.
When looking at a few funds and ETF’s Prospectus I notice that a lot of them have in their top 10 holdings companies such as Apple, Microsoft, Amazon, etc…
I am thinking that to start with I should just purchase stocks of major companies like that in several sectors. Then, as I do some research and learning, start getting more focused with my holdings. But I have to get going! I’ve been debating what to do for over a week now. Time to either fish or cut bait.
Does that make sense?
@physician - was not suggesting the OP jump into shipping stocks. I was just offering him a forum to discuss shipping ideas. Note: I didn’t mention any individual names, shipping or otherwise. I think some of that discovery needs to happen on their own.
I’m very late to this thread but wanted to pipe up. I’ve been investing in the market since 1965. I’ve had tremendous success… but I’ve found very effective ways to lose money as well. I’d like to share both sides:
I’ve had accounts with many brokers over the years and with only one exception, I don’t think it makes a lot of difference as long as you’re with one of the companies that have been around a while. With that said, Robinhood is new and there have been well publicized issues… no point going to someone with known issues, past or present, IMO. I’m currently with Schwab (through a couple former Ameritrade accounts), Merrill and Fidelity. My suggestion… even though I have a couple small accounts there… is to avoid Fidelity. I’ve never forgiven them for the time I went into their office with a large check… and they deposited it into someone else’s account. Didn’t discover it for a few days. But that’s NOT what really riled me (mistakes happen). They moved the money into my account… but they were firm in not letting me use the money until an additional clearing period passed. No common sense… and in this case, the extra wait made a difference.
I’ve done very well with options trading and I’ve done catastrophically bad with options (I’m recovering from some overly aggressive options action now). Options are very powerful and can do amazing things for your portfolio, but there is a reason they are also known as “weapons of mass destruction” for portfolios. Personally, I was able to go from zero net worth to being able to retire early after 17 years without options. I would NEVER say it’s a good thing for a new investor to try them… just in case you eventually come across the idea. I would recommend having at least one or two or three decades of successful investing under your belt before tinkering with them… even then you could blow yourself up (like me!). Just file this paragraph and keep it in mind.
In years past, I would recommend new investors to subscribe to Stock Advisors. Now… sadly… I’m reluctant to do so. It appears that many of the advisors are pretty new to investing and the recommendations that come out are often absurd. Nevertheless, I *will re-subscribe when it runs out… so I can maintain access to the board discussions of the minority of Fool recs I consider worthwhile. It’s cheap.
What Should You Buy?
There are many investing styles. Some provide higher returns with higher volatility, some provide lower returns with less volatility… and some are pretty risky… and they might lose a lot of money for you. And there are a host of other combinations out there. As you journey along, you’ll figure out what appeals to you (slow and steady, fast and volatile or something in between). It may not be a good idea to invest in companies that worry you and keep you up at night. With that being said, it’s very important to learn to follow your head and not be swayed by your emotions. Even the slow but steady stocks move up and down a lot and it’s a sad thing to be scared out of a great performing company just because the stock market goes nuts for a while and you see your great performing company drop by 30% or more. Yeah that happens. Regularly. It’s a “feature”, not a bug, of the market. LOL.
So, being consistent with the preceding paragraph, I suggest establishing a focus on “great performing companies”. Those sources physician suggested will help you discern what that means… and you will eventually see that there are many different views on what “great performance” means.
For me (and I’m not saying this is “best”, it just works very well for me), I like companies that are growing quickly (I’ll say >30% per year here, but in reality I’m looking for faster) and are profitable (you’ll come to find that “profitable” is a squishy term that not everyone agrees on…lol), with a big market advantage. Overall, those companies have an attractive PEG generally (keep reading). Sound like a dream? They are rare. Sometimes they stick out like a sore thumb when you come across them. Sometimes… and this is pretty important… you’ll discover a great company by reading the Fool discussion boards… or those sources physician mentioned. By the way, I’d recommend reading “One Up On Wall Street” by Peter Lynch. He was a mutual fund manager with amazing returns over many years… he came up with the PEG concept.
How Did I Retire Early?
Investing in a small number of great companies and holding on regardless of market performance… generally. Across Fooldom, some folks own less than a dozen companies, some own a couple hundred. Do what you like. But my view is if you rank your companies by performance and opportunity, your top 10 or top 20 are likely going to be a better place for money than something you rank at 50 or 100.
Caveat 1: Small number for me was usually less than 30. But my huge returns were from a very small fraction of those 30.
Caveat 2: Sometimes it seems like disaster is coming and it may be smart to sell rather than hold on even though your companies are doing well and it’s the market that is nuts. Example is the 2007/2008 collapse. I was holding on doggedly, but eventually threw in the towel because I was concerned that the financial system might collapse. At that point, my wife’s IRA (I remember her numbers better) was down around 80%. Seems hopeless? Nope. From 2009-2021 (12 years), her portfolio grew by FIFTY TIMES. Not a typo. How/why? A big chunk of gain was getting back into the market at the bottom… which I will probably never duplicate again. The rest was… great companies.
Some folks have bought great companies and held on for decades and become quite wealthy. Some folks buy great companies in their high growth stages and sell as that growth tapers down to something more normal, only to re-invest in some other high growth company. Both approaches can work, but you need to make more great “guesses” over time if you jump from one to the other. But it has worked for me. At the moment, I’m having a much harder time than usual finding companies that fit my criteria, but they’re out there and this has been a tremendous year for me. You will find… over time… great companies too. Don’t rush it.
And no, I’m not inclined to share what I own. Some of them are what I consider to be “no brainers”, but I also own some more volatile and some riskier stocks that I wouldn’t be comfortable to recommend to someone starting out.
Anyway… I usually don’t like to read long posts so I hope this wasn’t too boring or confusing. But… there are plenty of folks around here who can provide insight.
He is no fool who gives what he cannot keep to gain what he cannot lose.
You are trying to make two major changes at once. I suggest you split them up.
You want to quickly increase your market exposure. The easiest and fastest way to do this is to buy an SP500 or total market index fund. You could stop here, accept being average, and spend your time on other things.
You want to beat the SP500. If it were easy to beat the market everyone would do it. Half of active investors are below average. Many many many people who tell you that you can beat the market are selling something. Buyer beware. Some people think beating the SP500 is random and impossible to do consistently. Others, including many posters here, are convinced they can beat the market. Maybe they can, who am I to judge? Some who try to beat the SP500 end up with catastrophic losses. Think Enron, Texaco, Pier 1 Imports, Lehman Brothers, etc. Many with deep market knowledge paid large tuition costs in the form of years of underperformance.
I suggest put the funds you want to invest into an SP500 index, today. Then, if you want to spend the time and take the risk, take some of those funds and invest in individual stocks. The best way to learn is to have skin in the game. Track your performance and see how you do. Let us know.
Holy mackerel! Thank you so much for taking the time to pass along so much information and advice! Seriously, that is very nice of you to do that. I will re-visit this comment multiple times in the future, I assure you! Not boring or confusing at all!
Thank you for the reply, and the advice, Spinning! I actually did just as you suggested about an hour ago. For both mine and my wifes IRA’s I purchased several mutual funds. Two of them, JENSX and FXAIX track the SP500, but in somewhat different sectors, and one, PGTAX, which tracks 80% tech.
After thinking about it, it just seemed to make sense to put the IRA’s into either mutual funds of ETF’s initially while I do some learnin’ about evaluating companies and investing in individual stocks later, either by realocating funds within those two IRA’s, or by starting a whole new account.
Seems like great advice to me, sir. Thank you!
We (me and you) if you bought QYLD per the two (2) simple rules, we are now up over $2,000.00 and climbing until the next sell signal per the rules. If you didn’t, well you have to do 20 pushups. :o))
Since the “V” (3/19/20) we had 35 out of 35 successful trades with Zero losses other than a minor speed bump.
re: VOO had since the “V” had 29 out of 29 successful trades with Zero losses as Swing Trader. HODLers (hang on for dear life) will never make it. It will be losing battle.
re: GDX 28 out of 28 successful trades with Zero losses. GOLD stocks/etfs are hot at this time.
We (you and me) if you bought QYLD per the two (2) simple rules, we are now up over $2000.00 and climbing until the next sell signal per the rules. .
Tell Daddy-0 to come over to our house to be Healthy, Wealthy and Wise and never regret it. It will blow his sox off. When he gets there, the man is gonna get a headache maxing out on his reading skills.
Foist thing is we are going to teach he and his wife how to use the Tetter Totter Principle and should not lose a dyme unless he does not follow the rules and have a constant positive CASH FLOW. The recession is coming to a neighborhood near us as you are well aware of.
the mutuals will be taking a pounding and people will be losing there Tommy Johns.
my best wishes to you.
Quill - a poor church mouse scratching for a living as a Swing Trader for over 48 years and an Investor for over 65+years.