How much of my check to put in a mutual fund? - Tilted Forum Project Discussion Community

macmanmike6100 · 02-23-2004, 10:08 PM

I have recently decided to put some money away in a 4-star no-load mutual fund offered by my employer (Dreyfus Appreciation Fund, Inc...the best one they offered).

I am not inclined to change where I'm investing just yet because it's a safe bet for the short-term and as a start, but suggestions for future investment would be helpful.

My main question is: <b>what percentage of each paycheck should go to this fund?</b>

The paycheck is entirely supplementary (i.e. I can live without it) so am splitting it between a savings account (2-3% annual interest) and the aforementioned fund.

Force 10 · 02-27-2004, 07:39 PM

First you need to figure out what your overall investing goal is and then how this investment plays into that goal. What's the return on this investment and how much money do you want to make off of it? Are you a 'safe' player or do you want to be a millionaire?

Boo · 02-27-2004, 08:30 PM

5% to mutual funds
5% to certificates of deposit
10-20% to savings UNTIL you have 6 months wages saved. Then, up your other minimums.

Always pay yourself first!

macmanmike6100 · 02-28-2004, 01:56 AM

ruprex: safe player for now...I just want to see better than 2% growth; this investment is not really a part of my long-term financial goal, however. i'm just starting out and wanted to start getting a feel for mutual funds.

boo: i have well over 6 months wages saved. how do I go about getting certificates of deposit? more importantly, what are they?

thanks, I definitely appreciate this :-)

Bamrak · 02-29-2004, 07:44 AM

CD's are just glorified savings account with very little return. I would suggest dropping the CD for the mutual fund. The mutual fund appears to be very stable and has been around for quite a while. for the last 10 years your fund has averaged 9%
link: http://cgi.money.cnn.com/mstar/FundL...DGAGX&report=2 .

On a side note, you can start using Viagra and use the excuse that you're helping your investment (Pfizer is your #2 company)
Here's a list of the top 10 and some more info on your fund,
http://cgi.money.cnn.com/mstar/FundL...DGAGX&report=4

CD's are averaging from what I've found about 2.19% APY. if you were going to be seriously investing, I don't think CD's are your best bet. You can find mutual funds with longer track records, more companies(less risk), and better return out there. A good mutual fund should yield about 12 % a year over a 5 year period( mine made 41% last year, but lost 8 the year before). You sound like you are financially stable, why not invest some of your take home pay into a Roth IRA?

But to your original question, If you don't need the paycheck, invest most of it. if nothing else, you aren't spending it on useless stuff.
I hope at least some of that helps!

macmanmike6100 · 03-01-2004, 11:26 PM

wow bamrak that was great; thanks so much! you're not the first person who's told me about roth's so during my spring break (still in school) i'll take the first steps (and start a new thread...)

Cynthetiq · 03-04-2004, 02:35 PM

Quote:

Originally posted by Bamrak
CD's are just glorified savings account with very little return. I would suggest dropping the CD for the mutual fund. The mutual fund appears to be very stable and has been around for quite a while. for the last 10 years your fund has averaged 9%
link: http://cgi.money.cnn.com/mstar/FundL...DGAGX&report=2 .

On a side note, you can start using Viagra and use the excuse that you're helping your investment (Pfizer is your #2 company)
Here's a list of the top 10 and some more info on your fund,
http://cgi.money.cnn.com/mstar/FundL...DGAGX&report=4

CD's are averaging from what I've found about 2.19% APY. if you were going to be seriously investing, I don't think CD's are your best bet. You can find mutual funds with longer track records, more companies(less risk), and better return out there. A good mutual fund should yield about 12 % a year over a 5 year period( mine made 41% last year, but lost 8 the year before). You sound like you are financially stable, why not invest some of your take home pay into a Roth IRA?

But to your original question, If you don't need the paycheck, invest most of it. if nothing else, you aren't spending it on useless stuff.
I hope at least some of that helps!

yes CD's don't outperfom the investments, but then you have taken away the ability to have emergency funds that could be liquid with no capital gains penalty. I'm sure that I could put my CD's into a mutual fund situation but if there's an emergency I cannot count of the exact amount that will be in there, and I'll have to divest the mutual fund as opposed to just withdrawing the CD.

I currently have 3 91 day CD's rolling over ever 30 days so that each month I have a CD that matures and if there's an emergency that money is immediately available.

NoSoup · 03-04-2004, 07:29 PM

Quote:

Originally posted by Bamrak
CD's are just glorified savings account with very little return....

Lol, at this time, this may be true...

A CD is a type of savings vehicle, as I am sure you know. Basically, you are Certifying your deposit. You form a contract with the institution and basically guarentee that you will leave a specificed amount in there for a specified term. The longer the term/the higher the amount, the better the rate.

You can, however, withdraw the fund prematurely, usually suffering a penalty. The most common penalty is 6 months worth of interest, which can cut into the principle balance. For instance, you $1000 into a 3 month certificate, and decide the next day that instead you coulda used that money to do whatever, and withdraw it the very next day. The institution will take their penalty, leaving you with less than $1000 left.

However, CDs are very safe, and usually FDIC or NCUA insured, unlike mutual funds.

There are still CD's out there from a while back that have a 15% return on them, most will be coming due shortly. These are usually long term certificates that were made a long time ago...

With the current rates, it may not be your best short term option, one thing that is a little more risky, has minimum costs, and can potentially give you an excellent return are DRIP accounts. I have discovered an excellent service that allows you to invest in multiple companies for a very low ($5) fee. The site is www.sharebuilder.com - feel free to check it out. If you are unfamiliar with DRIP accounts, they are basically stock purchases with your dividends reinvesting themselves. Get more info at www.fool.com. In my humble opinion, an excellent way to invest long term, with manageable risk and a potential for high returns...

Hope this helped

macmanmike6100 · 03-07-2004, 06:57 AM

thanks everybody! how exciting, the world of investing...that is, until I need the money! ;-)

Warf Rat · 03-08-2004, 10:10 AM

macmanmike, you need to max out your contributions, if you can afford it.The Dryfus fund you mentioned is a good one, however you can't have all your eggs in one basket. Trust me, you can get hurt fast. Speaking of pain, try not to pay much attention to performance in the short term, since you are young, time is on your side, and the market only knows one direction (long term) and that's up. Try to spread out your risk by investing in at least 4 different funds, and make sure they have different objectives, because different sectors move at different times and you always want to have one or two that are really taking off at any given time.
As to your savings, 6 months living expences are about what anyone should need. The rest should be in the market, money makes money, and savings accounts don't pay enough to keep up with inflation. The cost of living goes up by more than the 1 to 2 percent you get from savings, so you are essentially loosing money year over year.
Find a financial advisor you can trust, and stow away all you can now. Chances are your cost of living is the lowest it will ever be, soon comes the hose the kids the car and everthing else.
Best of luck to you!

Cynthetiq · 03-08-2004, 03:16 PM

I just found this at the sec.gov website.

link

Quote:

Certificates of Deposit: Tips for Investors
Investors searching for relatively low-risk investments that can easily be converted into cash often turn to certificates of deposit (CDs). A CD is a special type of deposit account with a bank or thrift institution that typically offers a higher rate of interest than a regular savings account. Unlike other investments, CDs feature federal deposit insurance up to $100,000.

Here’s how CDs work: When you purchase a CD, you invest a fixed sum of money for fixed period of time – six months, one year, five years, or more – and, in exchange, the issuing bank pays you interest, typically at regular intervals. When you cash in or redeem your CD, you receive the money you originally invested plus any accrued interest. But if you redeem your CD before it matures, you may have to pay an "early withdrawal" penalty or forfeit a portion of the interest you earned.

Although most investors have traditionally purchased CDs through local banks, many brokerage firms and independent salespeople now offer CDs. These individuals and entities – known as "deposit brokers" – can sometimes negotiate a higher rate of interest for a CD by promising to bring a certain amount of deposits to the institution. The deposit broker can then offer these "brokered CDs" to their customers.

At one time, most CDs paid a fixed interest rate until they reached maturity. But, like many other products in today’s markets, CDs have become more complicated. Investors may now choose among variable rate CDs, long-term CDs, and CDs with other special features.

Some long-term, high-yield CDs have "call" features, meaning that the issuing bank may choose to terminate – or call – the CD after only one year or some other fixed period of time. Only the issuing bank may call a CD, not the investor. For example, a bank might decide to call its high-yield CDs if interest rates fall. But if you’ve invested in a long-term CD and interest rates subsequently rise, you’ll be locked in at the lower rate.

Before you consider purchasing a CD from your bank or brokerage firm, make sure you fully understand all of its terms. Carefully read the disclosure statements, including any fine print. And don’t be dazzled by high yields. Ask questions – and demand answers – before you invest. These tips can help you assess what features make sense for you:

Find Out When the CD Matures – As simple as this sounds, many investors fail to confirm the maturity dates for their CDs and are later shocked to learn that they’ve tied up their money for five, ten, or even twenty years. Before you purchase a CD, ask to see the maturity date in writing.

Investigate Any Call Features – Callable CDs give the issuing bank the right to terminate-or "call"-the CD after a set period of time. But they do not give you that same right. If interest rates fall, the issuing bank might call the CD. In that case, you should receive the full amount of your original deposit plus any unpaid accrued interest. But you'll have to shop for a new one with a lower rate of return. Unlike the bank, you can never "call" the CD and get your principal back. So if interest rates rise, you'll be stuck in a long-term CD paying below-market rates. In that case, if you want to cash out, you will lose some of your principal. That's because your broker will have to sell your CD at a discount to attract a buyer. Few buyers would be willing to pay full price for a CD with a below-market interest rate.

Understand the Difference Between Call Features and Maturity – Don’t assume that a "federally insured one-year non-callable" CD matures in one year. It doesn't. These words mean the bank cannot redeem the CD during the first year, but they have nothing to do with the CD's maturity date. A "one-year non-callable" CD may still have a maturity date 15 or 20 years in the future. If you have any doubt, ask the sales representative at your bank or brokerage firm to explain the CD’s call features and to confirm when it matures.

For Brokered CDs, Identify the Issuer – Because federal deposit insurance is limited to a total aggregate amount of $100,000 for each depositor in each bank or thrift institution, it is very important that you know which bank or thrift issued your CD. Your broker may plan to put your money in a bank or thrift where you already have other CDs or deposits. You risk not being fully insured if the brokered CD would push your total deposits at the institution over the $100,000 insurance limit. (If you think that might happen, contact the institution to explore potential options for remaining fully insured, or call the FDIC.) For more information about federal deposit insurance, visit the Federal Deposit Insurance Corporation’s web site and read its publication Your Insured Deposit or call the FDIC's Consumer Information Center at 1-877-275-3342. The phone numbers for the hearing impaired are 1-800-925-4618 or (202) 942-3147

Find Out How the CD Is Held – Unlike traditional bank CDs, brokered CDs are sometimes held by a group of unrelated investors. Instead of owning the entire CD, each investor owns a piece. Confirm with your broker how your CD is held, and be sure to ask for a copy of the exact title of the CD. If several investors own the CD, the deposit broker will probably not list each person's name in the title. But you should make sure that the account records reflect that the broker is merely acting as an agent for you and the other owners (for example, "XYZ Brokerage as Custodian for Customers"). This will ensure that your portion of the CD qualifies for up to $100,000 of FDIC coverage.

Research Any Penalties for Early Withdrawal – Deposit brokers often tout the fact that their CDs have no penalty for early withdrawal. While technically true, these claims can be misleading. Be sure to find out how much you'll have to pay if you cash in your CD before maturity and whether you risk losing any portion of your principal. If you are the sole owner of a brokered CD, you may be able to pay an early withdrawal penalty to the bank that issued the CD to get your money back. But if you share the CD with other customers, your broker will have to find a buyer for your portion. If interest rates have fallen since you purchased your CD and the bank hasn't called it, your broker may be able to sell your portion for a profit. But if interest rates have risen, there may be less demand for your lower-yielding CD. That means you would have to sell the CD at a discount and lose some of your original deposit –despite no "penalty" for early withdrawal.

Thoroughly Check Out the Broker – Deposit brokers do not have to go through any licensing or certification procedures, and no state or federal agency licenses, examines, or approves them. Since anyone can claim to be a deposit broker, you should always check whether your broker or the company he or she works for has a history of complaints or fraud. You can do this by calling your state securities regulator or by checking with the National Association of Securities Dealers' "Central Registration Depository" at 1-800-289-9999.

Confirm the Interest Rate You’ll Receive and How You’ll Be Paid – You should receive a disclosure document that tells you the interest rate on your CD and whether the rate is fixed or variable. Be sure to ask how often the bank pays interest – for example, monthly or semi-annually. And confirm how you’ll be paid – for example, by check or by an electronic transfer of funds.

Ask Whether the Interest Rate Ever Changes – If you’re considering investing in a variable-rate CD, make sure you understand when and how the rate can change. Some variable-rate CDs feature a "multi-step" or "bonus rate" structure in which interest rates increase or decrease over time according to a pre-set schedule. Other variable-rate CDs pay interest rates that track the performance of a specified market index, such as the S&P 500 or the Dow Jones Industrial Average.

The bottom-line question you should always ask yourself is: Does this investment make sense for me? A high-yield, long-term CD with a maturity date of 15 to 20 years may make sense for many younger investors who want to diversify their financial holdings. But it might not make sense for elderly investors.

Don't be embarrassed if you invested in a long-term, brokered CD in the mistaken belief that it was a shorter-term instrument-you are not alone. Instead, you should complain promptly to the broker who sold you the CD. By complaining early you may improve your chances of getting your money back. Here are the steps you should take:

Talk to the broker who sold you the CD, and explain the problem fully, especially if you misunderstood any of the CD's terms. Tell your broker how you want the problem resolved.

If your broker can't resolve your problem, then talk to his or her branch manager.

If that doesn't work, then write a letter to the compliance department at the firm's main office. The branch manager should be able to provide with contact information for that department. Explain your problem clearly, and tell the firm how you want it resolved. Ask the compliance office to respond to you in writing within 30 days.

If you're still not satisfied, then send us your complaint using our online complaint form. Be sure to attach copies of any letters you've sent already to the firm. If you don't have access to the Internet, please write to us at the address below:

Office of Investor Education and Assistance
U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0213
We will forward your complaint to the firm's compliance department and ask that they look into the problem and respond to you in writing.

Please note that sometimes a complaint can be successfully resolved. But in many cases, the firm denies wrongdoing, and it comes down to one person's word against another's. In that case, we cannot do anything more to help resolve the complaint. We cannot act as a judge or an arbitrator to establish wrongdoing and force the firm to satisfy your claim. And we cannot act as your lawyer.

You should also contact the banking regulator that oversees the bank that issued the CD:

The Board of Governors of the Federal Reserve System oversees state-chartered banks and trust companies that belong to the Federal Reserve System.

The Federal Deposit Insurance Corporation regulates state-chartered banks that do not belong to the Federal Reserve System.

The Office of the Controller of the Currency regulates banks that have the word "National" in or the letters "N.A." after their names.

The National Credit Union Administration regulates federally charted credit unions.

The Office of Thrift Supervision oversees federal savings and loans and federal savings banks.

02-23-2004, 10:08 PM	#1 (permalink)
macmanmike6100 High Honorary Junkie Location: Tri-state.	How much of my check to put in a mutual fund? I have recently decided to put some money away in a 4-star no-load mutual fund offered by my employer (Dreyfus Appreciation Fund, Inc...the best one they offered). I am not inclined to change where I'm investing just yet because it's a safe bet for the short-term and as a start, but suggestions for future investment would be helpful. My main question is: <b>what percentage of each paycheck should go to this fund?</b> The paycheck is entirely supplementary (i.e. I can live without it) so am splitting it between a savings account (2-3% annual interest) and the aforementioned fund.

02-27-2004, 08:30 PM	#3 (permalink)
Boo Leave me alone! Location: Alaska, USA	5% to mutual funds 5% to certificates of deposit 10-20% to savings UNTIL you have 6 months wages saved. Then, up your other minimums. Always pay yourself first! __________________ Back button again, I must be getting old.

03-08-2004, 10:10 AM	#10 (permalink)
Warf Rat Psycho Location: Philadelphia	macmanmike, you need to max out your contributions, if you can afford it.The Dryfus fund you mentioned is a good one, however you can't have all your eggs in one basket. Trust me, you can get hurt fast. Speaking of pain, try not to pay much attention to performance in the short term, since you are young, time is on your side, and the market only knows one direction (long term) and that's up. Try to spread out your risk by investing in at least 4 different funds, and make sure they have different objectives, because different sectors move at different times and you always want to have one or two that are really taking off at any given time. As to your savings, 6 months living expences are about what anyone should need. The rest should be in the market, money makes money, and savings accounts don't pay enough to keep up with inflation. The cost of living goes up by more than the 1 to 2 percent you get from savings, so you are essentially loosing money year over year. Find a financial advisor you can trust, and stow away all you can now. Chances are your cost of living is the lowest it will ever be, soon comes the hose the kids the car and everthing else. Best of luck to you! __________________ A day late, and a dollar short.

02-27-2004, 07:39 PM	#2 (permalink)
Force 10 Had to leave this awesome space	First you need to figure out what your overall investing goal is and then how this investment plays into that goal. What's the return on this investment and how much money do you want to make off of it? Are you a 'safe' player or do you want to be a millionaire?

02-28-2004, 01:56 AM	#4 (permalink)
macmanmike6100 High Honorary Junkie Location: Tri-state.	ruprex: safe player for now...I just want to see better than 2% growth; this investment is not really a part of my long-term financial goal, however. i'm just starting out and wanted to start getting a feel for mutual funds. boo: i have well over 6 months wages saved. how do I go about getting certificates of deposit? more importantly, what are they? thanks, I definitely appreciate this :-)

02-29-2004, 07:44 AM	#5 (permalink)
Bamrak Enter Title Here Location: Tennessee	CD's are just glorified savings account with very little return. I would suggest dropping the CD for the mutual fund. The mutual fund appears to be very stable and has been around for quite a while. for the last 10 years your fund has averaged 9% link: http://cgi.money.cnn.com/mstar/FundL...DGAGX&report=2 . On a side note, you can start using Viagra and use the excuse that you're helping your investment (Pfizer is your #2 company) Here's a list of the top 10 and some more info on your fund, http://cgi.money.cnn.com/mstar/FundL...DGAGX&report=4 CD's are averaging from what I've found about 2.19% APY. if you were going to be seriously investing, I don't think CD's are your best bet. You can find mutual funds with longer track records, more companies(less risk), and better return out there. A good mutual fund should yield about 12 % a year over a 5 year period( mine made 41% last year, but lost 8 the year before). You sound like you are financially stable, why not invest some of your take home pay into a Roth IRA? But to your original question, If you don't need the paycheck, invest most of it. if nothing else, you aren't spending it on useless stuff. I hope at least some of that helps!

03-01-2004, 11:26 PM	#6 (permalink)
macmanmike6100 High Honorary Junkie Location: Tri-state.	wow bamrak that was great; thanks so much! you're not the first person who's told me about roth's so during my spring break (still in school) i'll take the first steps (and start a new thread...)

03-07-2004, 06:57 AM	#9 (permalink)
macmanmike6100 High Honorary Junkie Location: Tri-state.	thanks everybody! how exciting, the world of investing...that is, until I need the money! ;-)