What to Invest in?

That's kind of like saying, "I have to eat something, should I eat oatmeal, beef, vegetables, soup, ice cream, or is there anything better?"

To get any useful advice, you need to provide some background info, such as approximate age, how much and what kind of debt and assets you already have, what your income prospects are both now and in the future, and what some of your goals are. Also, it would help for you to determine how much of a gambler you are, so that when you read terms like "risky" or "conservative", you'll have some idea if it's right for you.

Try searching the archives of this group, or lurk here for a while if you want to get a better feel for the kind of help you can get here.

-Mark Bole

In addition to Mark's demographic questions, I'll ask: you wrote '401K', implying of course that you have one available to you. Does your company match? If so, how much? For most people nothing comes above putting in the amount needed to get the company match. In many companies, the first

5% of income deposited is matched dollar for dollar, this is a return that's tough to beat. JOE

Start by reading some good books on investing. A short easy read for the person just starting is "One Up On Wall Street" by Peter Lynch.

You would also benefit from reading the articles posted on the Motley Fool. The Fool even has a revue of the book I just recommended.

That's nowhere near enough information for informed advice.

Until we know more, the very best advice I can give you is to put it into a safe money market account (or decent savings account) and take $20 of it to invest in a copy of one of Eric Tyson's books...

Thank you for the information and for your help and advice. I am 23 years old making 40 thou. a year. I have no debt and I am currently going to a University. I have no house but a car that my company is paying for. Currently they do not have a 401k, but I was asking for future reference. They do have an investment program with real estate. I am getting more information about it but my question is, how stable is it to invest in real estate? I don't know if any one of you has invested in real estate, but i'm not sure if it is good or bad. I will read the books that were suggested and try to learn more to be more educated on the matter.

First, I'm a little puzzled by the "University" -- are you working full time and also a student? (Not sure exactly how that would affect your investment, but maybe you will need some tuition money?)

As I understand the rest of your situation you are in a good position to go for aggressive, long-term investments. I am not familiar with an employer offering an "investment program with real estate". In your place, I would stay away from real estate, other than perhaps bundling it with your housing expense (i.e. buying a primary residence). If and when your company offers a 401k, you should max out your contribution especially if there is a matching amount.

If the $10K of your original post is the only savings you have, leave it in a money market account as your "emergency fund". If you already have one of those, you could easily open a brokerage account and, after funding this year's IRA, start an after-tax investment in some growth-oriented mutual funds with the remainder.

-Mark Bole

I suggest, given these facts, that the IRA be Roth. For 2007, STD deduction + exemption add to 8750. 15% bracket tops off at $31850. If OP actually makes precisely $40K, the deductible IRA would save him 15%, and that's not worth it compared to funding the Roth. If his employer actually had a 401(k), I'd fund to get the match, but think hard about saving too much while still in that bracket. $4K (to Roth) is 10% of his gross, which is a good start for now. JOE

Congratulations on the college degree. You are off to a great start.

Well the truth of the matter is that there are no magic 20% guaranteed returns. There are no 10% guaranteed returns. There are 5% "guaranteed" returns on CD's (FDIC) and Treasuries (nothing is really guaranteed). There may be money market accounts that have no history of ever losing money. Bonds are low risk, but they always run the risk of losing principle in a rising interest rate market (if you sell before maturity). Remember that inflation is eating up (3%) of your cash assets every year and you likely will have to pay taxes just to keep up with it.

So the reason people need to know 101 things about you is that the best you can do is not do anything stupid. If there was a 20% guaranteed return, everyone would just do that.

MINIMIZE YOUR TAXES.

GET THE BEST REWARD WITH THE LOWEST RISK.

It's funny how so many risk/reward combinations end up being about the same thing in the end.

Use up all of your 401K match. This is pretty close to free money.

There is actual earned income that has FICA (social security) and Medicare deducted. This can be taxed at 0% to 36% or so in our wonderful progressive income tax system (USA). Unearned income (e.g. short term capital gains) is pretty much like earned income with no FICA and Medicare deducted. There is IRA money put in pre tax. There is IRA money put in post tax (you have a basis). There is Roth money put in post tax, but never taxed again including gains. There is a

15% dividend tax rate and a 15% long term capital gains rate. Inheritances are taxed at around 45% once you go over the "free" limit (around $2 million today). Collectors items have their own high tax rate. Your collection of pristine "General Lee" Charger models may get hit with a heavy tax when you sell for that big payday. The tax code continually changes. Get a CPA.

I tend to think of investing as retirement planning, but you can have a shorter time horizon if your like.

The methodology is fairly obvious. Earned and Unearned income (day trading short term capital gains) should go in an IRA (left until age

59 1/2) or Roth retirement account (left until retirement with a few exceptions).

Tax free muni bonds may as well be in a taxable account.

There is a huge tax savings if you can hold stocks for a long term capital gains rate (year and a day). Re-investing dividends will help compound your stock returns.

Home ownership is hugely subsidized. Property taxes are deductible. (Purchase money) mortgage interest is deductible (I think there is some very high limit on this). Owner occupied property has a $250,000 single/$500,000 married tax exemption on capital gains if you live in the property 2 of the last 5 years. If you are a landlord, repairs, maintenance, insurance, HOA fees are deductible. There is phantom depreciation now on buildings (and eventual 25% depreciation recapture). A landlord has to try really hard to have any taxable income (you can easily have spendable income). Your appreciation is multiplied by your leverage to figure out your Return On Investment (this actually a bit complicated and the real result is somewhat lower because you don't continually re-invest).

Most people got rich running their own business. All (non-government) investments eventually depend on profits. That sticky, dirty unavoidable taking risks to earn money thing. Many people invest in real estate once they are rich.

Minimize your taxes, maximize your risk and reward parameters and don't do anything stupid.

Arguably, I would amend this to "MAXIMIZE YOUR AFTER-TAX RETURN."

-Will