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OnlineYthanA
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Re: Got $7,500 to invest...help? [Re: Techno_Raver] * 1
    #8228766 - 04/02/08 01:49 PM (15 years, 9 months ago)

What makes you think real estate isn't a gamble? As recent events have shown it can be quite volatile. With $7.5K I wouldn't recommend trying to buy actual property, it would barely cover a down payment and the mortgage interest and expenses of home ownership can kill you (see Why rent? To get richer.) You could invest in an REIT, and that's not necessarily a bad idea as there are some good deals to be had at the moment for the long-term investor. But I wouldn't put more than 10% of your portfolio in any specific sector unless you really know what you're doing.

Geo gives good advice. If you're investing for the long-term a Roth IRA is the way to go. If you do decide to buy your first home you can withdraw up to $10,000 penalty-free. And the tax benefits make it the best tool for retirement savings. Understand that an IRA isn't an investment, it's an account which holds your investments. You still pick those yourself and the younger you are the more risk you can accept. Personally I'm 26 and after six months of living expenses in a money market account I basically have all my investments in the stock market. As I get older I plan to buy more bonds and CDs. You can go to an online broker and look at the allocation in target retirement funds to get an idea of what the experts recommend. I'd say go for index funds with low expense ratios unless you really want to take the time to research and actively manage your investments. If it was my money I'd probably put something like $4.5K in VTSMX and $3K in VGTSX but your investing style will vary.


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OnlinegeokillsA
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Re: Got $7,500 to invest...help? [Re: Ythan] * 1
    #8228937 - 04/02/08 02:25 PM (15 years, 9 months ago)

> If you do decide to buy your first home you can withdraw up to $10,000 [from your IRA] penalty-free

And if it's a Roth IRA, you can actually withdraw all of your contributions without penalty, at any time. In addition to that awesome feature of the Roth IRA, you can also withdraw an additional $10K of any profit you may have earned, penalty-free for special one-time purchases such as a home. The Roth IRA is considerably more flexible, so if you're making less than $100K a year (required in order to open this account), it is hands down a much better account to hold than a traditional IRA, in my opinion.


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InvisibleVeritas
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Re: Got $7,500 to invest...help? [Re: geokills] * 1
    #8229010 - 04/02/08 02:42 PM (15 years, 9 months ago)

That really depends upon whether you need the tax write-off now, though. For someone with few deductions, the tax consequences of contributing to a Roth rather than a Traditional IRA could be unfavorable.

I would recommend "pretending" that you made the maximum contribution to a Traditional IRA, and preparing your taxes accordingly. Then prepare them without the write-off, and see what the difference would be. If the difference is minor, then the Roth IRA would be a better choice.


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OnlinegeokillsA
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Re: Got $7,500 to invest...help? [Re: Veritas] * 1
    #8229075 - 04/02/08 02:55 PM (15 years, 9 months ago)

Point taken.


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InvisibleVeritas
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Re: Got $7,500 to invest...help? [Re: geokills] * 1
    #8229087 - 04/02/08 02:58 PM (15 years, 9 months ago)

I'm contributing to a Roth now, and will soon be able to contribute & get a 3% match in a SIMPLE IRA at work.  If my income increases in the future...I mean WHEN my income increases (:grin:)...I will put more into the SIMPLE to reduce my taxable income, and continue my Roth contributions to provide additional tax-free retirement income later.

For now, though, I don't owe any taxes (supporting two kids by yourself will do that), so the "after-tax" income I am putting in my Roth is actually untaxed income, and it will be non-taxable when I take distributions later.  Sweeeeet!  :smile:


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InvisibleTechno_Raver

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Re: Got $7,500 to invest...help? [Re: Ythan] * 1
    #8234760 - 04/03/08 06:28 PM (15 years, 9 months ago)

Quote:

Ythan said:
What makes you think real estate isn't a gamble? As recent events have shown it can be quite volatile. With $7.5K I wouldn't recommend trying to buy actual property, it would barely cover a down payment and the mortgage interest and expenses of home ownership can kill you (see Why rent? To get richer.) You could invest in an REIT, and that's not necessarily a bad idea as there are some good deals to be had at the moment for the long-term investor. But I wouldn't put more than 10% of your portfolio in any specific sector unless you really know what you're doing.

Geo gives good advice. If you're investing for the long-term a Roth IRA is the way to go. If you do decide to buy your first home you can withdraw up to $10,000 penalty-free. And the tax benefits make it the best tool for retirement savings. Understand that an IRA isn't an investment, it's an account which holds your investments. You still pick those yourself and the younger you are the more risk you can accept. Personally I'm 26 and after six months of living expenses in a money market account I basically have all my investments in the stock market. As I get older I plan to buy more bonds and CDs. You can go to an online broker and look at the allocation in target retirement funds to get an idea of what the experts recommend. I'd say go for index funds with low expense ratios unless you really want to take the time to research and actively manage your investments. If it was my money I'd probably put something like $4.5K in VTSMX and $3K in VGTSX but your investing style will vary.




There are several problems with that article, which you gave a link to. First of all, There is no guarantee that a stock price will go up. Second of all, not all stocks make 7% gains per year. Third of all, if you invest in real estate, for the long run, there are many ways to profit. There is a tax break; The prices tend to go up with age, which would also raise the rent prices. So a wise investor would buy a forclosure, and rent it out for profit. Then fix it up a bit, and refinance after the property value goes up. Naturally he would also raise the rents for the tennants. So you could make money from rent, and from the refinancing. If you reinvest the profits in more properties, and follow the same route, you could make a lot more than you would with risky stocks.


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