Investing 102

[FatfreeGTO]

Ok phew finally after a few nights of going through this thread I finally finished reading it!

There is definitely a great deal of good info in here but there has also been some missed opportunities for the very basic info. What I am going to say has been mildly addressed by others but no discussions were ever made about it and it really should have been.

The very first and most important thing for anyone looking to take control of their financial future should be to set up their 401k/403b etc that their workplace offers. You simply want to invest the maximum it takes to get the "match" from your employer. Talk to your "HR" person or whomever runs the plan at your work to find out what the limits are. This money comes out of your account using "pre-tax dollars" so you are already getting the tax break at the end of the year because it lowers your "gross taxable income" Additionally and this is the most important part, that employer "match" is an instant 100% gain on the money you invested in the account. Where else can you get a guaranteed 100% gain on your investment... Just make sure you look into what your funding options are in your 401k and do your homework. If you don't elect where the money will be invested it won't do anything for you because it will probably end up in some stable asset fund which is the same as cash so to speak.

The next most important step is setting up a Roth IRA and put the maximum amount in every year. I have had many people ask me where do I buy a Roth IRA?? The general public doesn't understand what one is they believe it is something similar to a mutual fund. It is nothing more then an account you setup through a brokerage firm that you put your take home pay (after tax dollars) into to fund the account. You use this account to buy stocks, mutual funds, bonds, etf's, commodities etc. This money can grow to any amount and when you turn 59 1/2 you are entitled to start taking the money out and not have to pay taxes on any of it! Another bonus is at any time you can take out your money that you put in without touching the profits you have made and it is tax free. Please don't do this though because it is for your retirement.

Key points to consider with a Roth IRA are:
- Under age 50 you can contribute $5000 per year (that is $417 per month)
- Over age 50 you can contribute $6000 per year
- Single person can contribute if they make less then $107k per year, from $107-$122k per year the amount you can contribute goes down with no contributions being allowed if you make over $122k per year.
- Married couples filing jointly can each put in the maximum allowed. This is important because most people think that they are limited to $5k if they are married but really you and your spouse can both have a Roth account and be putting in $5k each or more if you are over 50... Again your combined income has to be less than $169K per year to qualify and no more then $179k before you can't contribute anything.

Anyone on here that has mentioned that they have $10k etc to invest right now absolutely should open up a Roth IRA before tax day if you qualify. You can then put half of your money into the account now and get the full contribution limit for 2011 and after April 15th put the other $5k in and get 2012 fully funded. Then go nuts and buy all the dividend stocks or whatever else it is that excites you that has been discussed in this thread.

Obviously don't do any of this if you have credit card debt. Pay off that debt first. If you do the above steps and you have a chunk of change that you have stashed away for those "emergency moments" consider yourself very lucky because you are farther ahead then the vast majority of people.

Investing is so very important even though it seems like you can't possibly amass any wealth investing only $2,3,4,5K etc per year, I'm here to tell you yes you can! You can absolutely do it! I'm only 30 and have been investing in one form or another ever since I got my first job at Mcd's (gotta love that stock!!) 15 years ago. The amount you invest doesn't matter just so long as you start doing it today, not tomorrow! One day you open up your account and all of a sudden you see your saving starting to pay off because you just gained more in your account from "paper profits" in one day then you normally contribute all year... There are days where you "lose" the same amount but that is all part of the game.

Good luck
BJ