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Long-term Investing
I think the most rationale aspect of finance is long-term investing; it allows for you to generate above fixed-income returns for the long-term. On the other hand, you need to be prepared in the case that you lost your job tomorrow; that's just a reality.
Most likely, you should pick 2 T-Bills in your Fidelity account and keep it in a RothIRA so you can take it out if you need it. You also could leave it in a Fidelity money market paying 5%. The banks will pay you 5.25% but since the money is outside of a Roth, you will pay federal, state, and local taxes. As long as you earn money, you can use a Roth. The only downside is that you must keep your earnings in your account. So after 5 years, you would need to leave $552.57 in the account and you could withdraw the $2,000. You could transfer this $552.57 to a Scottrade account (so you don't pay a $12 fee per year) and use the $2,000 for anything you like. If you violate these rules, you will pay a 10% penalty on the $552.57 that you earned.
A better option may be to use FASIX which has a .58% expense ratio; it averages a rate of return of 6.73% minus expenses of .58% equals 6.21%. The main thing at risk is interest. I would use a SimpleStartIRA to fund the account with $200 per month or put $200 in the first month and $1,800 shortly thereafter to put $2K in FASIX (to avoid the $12 fee). It also helps you avoid the $2,500 minimum. This will provide a return of 1% above the risk-free rate.
With $2,000, I would put $1,000 in VLEOX if aggressive or $1,000 in VALIX if conservative, $250 in PAXWX, $125 in WFIVX, and $125 in DTSVX. The average expense ratio is 1.25%. This leaves you with $500 shall the market drop so you can add to the market. You will pay approximately $18.75 per year if you choose this option.
Another option, much cheaper would be to put $1,325 in VTI/VBK. The expense ratio is only 0.1% (that means you will only pay $1.33 per year plus your $7 commission to buy and sell). You will have $675 to invest shall the market drop.
Another option is to pick 4 stocks. You should add more stocks to the portfolio as you get at least $500 in each stock. UTX, CAT, JNJ, PNRA/JCP, and 1 share of GOOG. These are real solid companies. Other stocks, such as MCD/COST, NOC, DE, GSK, and WM.
Best individual stocks (limit or market order):
GOOG - 1 share at $480
UTX - 8 shares at a limit order of $67.75 per share (GTC) or Market Order
COST - 9 shares at a limit order of $54.25
NOC - 6 shares at a limit order of $74.50
Commissions = $28 plus $14 per transfer ($7 to buy & $7 to sell)
Total Initial Cost, estimated costs
GOOG = $480.00
UTX = $542.00
COST = $488.25
NOC = $447
Commissions = $28 = 1.41%
Total Cost = $1,985.25
Cash = $14.75
Last edited by aquaswim47; 04-25-07 at 11:59 AM.
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