Six Figure Mentors

How do I make my money work harder for me???

I am a 33 year old working professional. I make a low six-figure income that enables my wife to be a stay at home mom to our twin baby girls! Up until now I have been able to afford $100-$200 a month into my 401k regularly for the last 3 years. I have been pretty conservative with low risk plans and options, with a goal of slowly growing my balance. But I’ve realized that it’s time to take things up a notch if I want to retire by age 50 or 60, provide for my girls’ college, and maintain our standard of living. What’s the best way to familiarize myself with investments & stocks? Where should I start? It’s time to start making money work for ME instead of working for money! I don’t expect to become a millionnaire overnight, but it would be nice to build a pretty solid retirement / savings account over the next 20 years! All positive suggestions welcomed!

You should invest in stocks, bonds, and money market funds. You want to buy a diversified portfolio of stocks, as individual stocks are too risky. For most folks this means buying mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low cost funds. If you are like most people you will invest part of your money aggressively in stock funds, and part conservatively in money market funds and bond funds. Vanguard.com has an on-line questionnaire which will give you an idea how aggressive you want to be.

AS your company offers a 401K plan at work, try to invest the most they allow. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea. You can read about college savings plans at savingforcollege.com.

I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion

Buying a house instead of renting will save you a lot of money in the long run. You don’t have to pay rent and you build equity in your house instead. Buying rental property can also be a good investment. However, being a landlord can be hard work, and many people are not good at it. If you don’t know how to handle deadbeat renters, you can have trouble.

If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above. You should also have 3-6 months of salary saved up as an emergency fund in a bank or money market fund before trying more risky investments.

Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.

Sources:

http://www.vanguard.com/VGApp/hnw/planningeducation

http://www.dallasnews.com/sharedcontent/dws/bus/scottburns/columns/2007/vitindex.html

http://www.fool.com/school.htm

http://sec.gov/investor/pubs/assetallocation.htm

https://flagship.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//flagship.vanguard.com/VGApp/hnw/planningeducation/education

http://www.savingforcollege.com/

THIS IS HOW YOU CREATE A Six Figure Income