5 Valuable Lesson
If you can develop some financial competence, you will save yourself a lifetime of heartache and a heap of money. Suppose that, over the course of your adult life, you have an average portfolio of $250,000.
If you use a broker or financial planner, you might pay the adviser 1% of that sum each year, or $2,500. That is $2,500 you would save if you learn to manage your own money.
Maybe more important, by learning to build your own portfolio and pick your own mutual funds, you will have that comforting sense of control that comes with fully understanding your finances.
Agree with Jonathan completely.
Also, at your age it will never be easier. Sign up for your companies 401k, invest in index funds roughly 60% S&P 500 Index, 20% International Index and 20% Small Cap Index.
Stay away from the Merrill Lynchs of the world. They charge a lot of fees and like to sell you the hottest new thing for which the broker will get a huge commission. Actually, you don't have to worry about them at this stage--you don't have enough money to interest them.
For your after-tax accounts, save up an emergency fund of $3,000 in a money market, Vanguard or Fidelity. After that save up for a specific purpose like a new car or house keeping the money safe in a money market fund as well. If you don't have a specific goal for the short term, invest the money in the same 60, 20, 20 formula above.
For more details, read Category 12--Investments-All You Need To Know.
What Jonathan doesn't mention here is the largest impediment to making money--intertia. Or, I'll get to it tomorrow. Not tomorrow, today. Set it up and forget it. Money that is not saved for tomorrow is usually spent today.
So get going. Call Vanguard or Fidelity or TRowe Price and talk to them. Or go to their websites and get comfortable. Find somebody at work that seems to know what they are doing and talk to them. Or write me. Just do it.
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