Help for a 40 year old....

I recommend you read a book or two to get a quick education:

Then you will know more, and also you will know what you *don't* know, and avoid lots of mistakes, including paying advisors to get you into loaded funds, annuities, and insurance schemes.

Joe Weinstein

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Mutual Funds for Dummies and Financial Planning for Dummies are both helpful.

My general thoughts are:

- work out how much you need for expenses, etc. It is normally prudent to keep at least 6 months of living expenses (including mortgage) in a 'cash' account (MM Funds, CDs etc.)

- make sure you have enough term life insurance and disability insurance to cover you in situations of death or serious illness (including benefits provided by your employer)

Assuming you have a normal retirement profile (ie seeking to retire between 60 and 65, no special health or family issues) and you feel you are making adequate college provisions for children etc. then

- subject to that, maximise your 401k contributions, at least to the point of getting any company matching, investing, if possible, in a low cost index fund. Ideally, a low cost index fund and a low cost international index fund (70-75% in the former, 25-30% in the latter).

You don't want to make investments in a lump sum, you want to make investments steadily over time, on a month by month basis.

If there is a range of index funds on offer, what you want is the fund that 1). matches or tracks the widest index possible (ie if possible more than the Standard and Poors 500 index) and 2). has the lowest possible fees and Total Expense Ratio.

- IRAs are a separate issue, as I am not an American based investor, I leave that to others to consider

Remember paying down your mortgage is also an investment, and one which gives a certain rate of return (the interest rate of your mortgage, adjusted for the tax benefits and the tax you pay on investment income).

I would add, a good long term bet is 8% per annum from such a stock index fund as I suggest in my other post. And that fund will beat at least 2/3rds of the funds out there. It is a pretty safe bet that it will do at least as well as 2/3rds of the funds out there.

If you have very little debt, you are more of a 'money wizard' (to use your term) than half the people living in the United States. ;-)

Just like anything, getting something out of the market requires putting something into it. Specifically, if you are trying to beat the market, you can't expect to do that unless you know something more than an average investor, because everyone else is trying to make as much money as possible as well. For your outcome to be different than everyone else's, you have to be doing something better than them. (Or you have to be lucky, but luck is not a *strategy*.)

Therefore, to be rational about investing, you have to make a decision. Either you put lots of effort into becoming better than the average investor and shoot for above average, or you don't, and you shoot for average.

If you choose the latter, shooting for average, you want a simple approach that is very likely to approximate average returns. Shooting for average definitely means diversification, because diversification pulls you more towards the average, which is the goal. Uncomplicated mutual funds (like index stock funds, but not limited to that) could be a part of the solution.

You should definitely do something about that. :-)

I suppose the two obvious approaches are to either go pay someone to help you choose a strategy, or just choose a simple, reasonable strategy yourself, one that is an improvement over a bank account but would be easy to convert into something a little more optimized later.

- Logan

If you absolutely don't want to risk losing money, then bank CDs, money market accounts, and T-bills are pretty much your only choice. Over the long term, a diversified portfolio of equities and bonds will bring in a higher return -- but in the short term, you may lose money. If you are the type who would panic and try to sell everything if the stock market suddenly dropped 10% or more overnight (think Sep 11, for instance), then maybe you should avoid equities entirely, since panic selling is a sure way to lose money in the long term as well as the short term. Bonds return a little more than cash instruments, and while it *is* possible to lose money in bonds, a loss of over 10% from a diversified bond fund would be pretty much unheard of.

Personally, I've learned pretty much everything I know about investing and financial planning from the morningstar.com web site. They have some excellent tutorial material there.

Do you and/or your spouse have a Roth IRA yet? If not, open one *now* (as in, before April 15) at one of the fund supermarkets like E-Trade, and dump in your maximum contributions for both 2006 and 2007. You don't have to make any immediate decisions about how to invest the cash once it's in your account, but if you're looking for a no-brainer type of investment strategy, you might consider a no-load, low-expense "target retirement" fund like TRRCX (T. Rowe Price Retirement 2030). The value of your account will go up and down with the market, though, and you need to face up and decide whether your nerves can handle that.

-Sandra

For what it's worth, I don't think this is a great time (year) for us novices (I'm not into shorting and so on) to be getting into the market ... or ... that 5% you are making is imo very reasonable for the times. E.g. ... plot the 200 day and the 20 day average of an equity, index, whatever of your choice and in most cases you'll see growth has/is slowing significantly. The odds are, due to current conditions, you will most likely have a repeat your past experience.

What I do that you might consider. I have an online investing account and I've set aside a fixed amount about 5% of my worth for my hobby investing ... I will have a decent pension, the house is paid for, RSP topped up, savings growing at 4%, I drive an 11 year old truck that I wouln't trade for the world :-). I have established a group of equities that I follow. Some I trade on the ups and downs, some are new areas. For example, spent last week looking into canadian banks and think there's still opportunity there and with one in particular (due to conditions elsewhere) so I put some $$s into that with the expectation that when it goes up a few $$s I'll sell and move on to something else. Compared to my buddy at work who is locked into gold and is convinced that some day he'll strike it rich, I'm doing better, learning a heck of a lot, and having a heck of a lot more fun. And yes, those stop orders are my friend :-)

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Thank you for your comment, logan. Appreciate your appreciating my little money wizardry :-)! Fact of the matter is, we are very conservative people. About the only thing that I can claim that we do well (extraordinarily well, that is) is hoard money in a bank. We drive 10 year old Camry's (both of us). I cut my own lawn and do my own fixes (whatever I am capable of- I am a reasonably good handy man) around the house and on the cars. My wife is a vegetarian with very little appetite for the cheese and meat laden food that they dish out at the restaurants and that keeps us eating our own cooked food (which, I suppose, is good for our health and our pocketbooks). We take only one vacation a year and we plan it well to save on the travel and other expenses. In a nutshell, we are good and educated on the part about saving and not being spendthrifts, but not so well versed in the investing side of it. On the part about growing our money well, we are not so well educated. But I am trying to put my best foot forward and trying to make it work. Thanks to you and all the other wonderful people that have taken some of their time to help me out with this. Hopefully, I will put the advise here to some good use.

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