Advice for small investment
 

My cousin, just turned 60, he's self employed no retirement plan in place at all, he wants to put $200 a month into something to have a little nest egg down the road.

Any ideas for this better late than never idea?

Many options would be good. I would suggest a Roth IRA in an index fund with Vanguard.

Even IRA's require a minimum investment, usually $3000, with Vanguard.

He says he not concerned about deferring taxes, as in IRA's.

He has big NOL to write off any taxes for many years.

Don't know specifically about Vanguard, but most companies will accept qualified money on a monthly basis that is less than their lump sum investment minimums. A Roth is not currently tax deductible, so that might fit his needs, it is tax free when it is withdrawn. As long as he qualifies for a Roth, there is no downside since he would not be exceeding the contribution limit. Vanguard is a very large no load mutual fund manager that has an excellent track record, there are many other good options.

I think he can put a lump sum of a few thousand in.

What if you know, could he expect as far as a return on his investment?

Vanguard
 

Wellington Fund @ Vanguard. :read:

Vanguard is good, low administration fee's, my wife 401K is in targeted life cycle funds there. I think Fidelity's fees are just a little higher. If your brother is a military Vet he can use USAA. I'm in banking and funds there, really easy to use. The fees are higher, but I'm a "not all in one basket" kinda guy.

How about this
 

How about investing in a startup solar panel company?

The minimum investment in most of Vanguard's funds is much lower for IRAs.

Per Vanguard's web site:

https://personal.vanguard.com/us/wha...r/ira/whichira

"Vanguard Target Retirement Funds and Vanguard STAR® Fund require a minimum initial investment of $1,000; for most other Vanguard funds, an initial investment of at least $3,000 is required in each fund you choose for an IRA. Certain funds require higher minimum investments."

(The double-asterisk notation at the bottom of the page)

Bill :)

:boom: That's good!

Ummmm....no, it's not.

Hard to do on $200 a month :thumbup:

Unless he's doing it for fun what would be the point?

You are correct. It has changed.

If he can save or has the $1000 for a Vanguard target retirement fund, that is the best option. Very low expenses, all index funds, and automatic balancing.

A long time ago when I first opened a Vanguard account, I transferred $1000 into a target retirement account. At that time I think I used 2010 and sometime a few years later moved it to 2020. I have maintained that account with the original $1000 and used it as a benchmark to measure to how well I do with my other accounts. Because the target retirement accounts are made up of total bond and total stock market index funds with automatic asset allocation balancing, I have found it very challenging to beat the benchmark. If I had to chose only a single fund for all investments, a target retirement fund would be my choice.

Have him get the $1000, keep adding the $200 a month, pick a target year that is about 5 years past his anticipated retirement date and he will do very well.

What might you expect his return to be in 5 years?

Any idea, he's concerned he's only going to a few points. that looks like 2%

He can start with $3000 he said.

I've done much better for myself over mutual funds buying top dividend paying stocks such as AT&T, Verizon, Abbott Labs., utilities, and many others. The ones I chose pay a dividend averaging around 4% and have been consistant for many years. I don't worry if the market goes up and down as I always get my dividend and re-invest it in more stock. My cost per share keeps going down and my capital gains has been going up for many years. I have at this time about 19 stocks and get dividends every month like clockwork, all re-invested.

Kinda surprised no one brought that up yet.

But how would he buy them with just $200 at time,

Don't do it. He has a very small amount to invest and should follow a low risk approach. His best option is index funds. His best choice there is a target retirement fund. His best fund company to chose is Vanguard. He would lose way to much with trading cost with that small amount. Lowest cost trade he could find with only a few thousand to invest is $7.95 a trade. He would have way to little diversity. Sorry but that is a very bad suggestion for that small investment. When he gets to 100K or more, he could consider dividend stocks. Not now.

If he does not have an emergency fund of probably 6 months to a year of expenses he should be in a saving account. Problem is they actually lose money since we are printing so much money now to keep interest rates low. If he wants to go to equity I would go to Vanguard (low fees) and a world wide fund that can invest in bonds or equity. Remember this is long term and he is not going to be taking the money out for at least 5 or more years. Even though he does not have a tax problem I would go to the ROTH. Other than the first 5 year rule on withdrawals of earnings he has nothing to lose and a possible gain by using the ROTH. I am also assuming he will stick with the investment and not sell when the market drops 10 or 20%.

When I initially bought them I picked a stock I wanted, then looked at the last 12 months and then picked a price somewhere in the middle of highs and lows and then waited for a very bad day in the market and bought it when it got to that price. Sometimes it got much lower than my target and I watched it every minute until I thought it was as low as it was going to go.
I signed on with Charles Schwab and use their website to watch stocks and buy at the minute I decide. You can't do that with mutual funds.
I'm by no means an expert and am only learning. I've got to say it's become a hobby with me and with about 19 stocks only have one that is down since I've bought it but hate to sell it because it's paying almost 5% dividend.
I'm not sure if there is a min. to buy stock form Schwab or others, you'll have to ask. You don't wan't want to buy every month as sometimes the market is up, so hold on to the money and wait for a bad day, which is really a good day for us. I recommend http://www.dividend.com/premium/ This site is excellent and from it I would make up a watch list of stocks you want to buy when the price is right.

This might be a decent plan for someone with an extra 100K to invest. NOT for someone with 3k going to 10K over the next 5 years. Trade cost will eat up 5% of his investment return. Go with a target retirement fund where expense ratios are under .3%.

He spoke to Vanguard, since he doesn't need tax deferred or exempt they said mutual funds or stocks/bonds.

They can setup an automatic withdrawal, of say his $200 a month in fact they said it can $50 a week.

The better returns are about 12% per year.

But he said it sounded like he was on his own as to which funds to select.

They are prohibited from making recommendations on what funds to select. They can make broad recommendations, but not specific, because if they made specific recommendations and they turned out poorly, they would be liable. Let's be honest here, your cousin will not become wealthy by starting his nestegg at age 60 with $200 a month. However, it is better than doing nothing and by dollar cost averaging he should see a nice return. 12% is an agressive assumption, and certainly not an expected return. Something is better than nothing so he is thinking correctly, just don't expect unrealistic results.

Well in his situation, I talked him out of paying monthly for whole life policy,
so I think this is a step in right direction. :shrug:

I agree, don't expect 12%. At one time, a few years ago, I pulled out of the stock market and used only CD's and money mkt acct's until the interest got to next to nothing. When I decided to get back into it I figured anything I can make over the less than 1% that they were paying was to my advantage. After spending time with a very successful friend of mine tutoring me on investing I got my feet wet and am forever grateful to him.

One person might average 12%, another might average 20%, while others average 0% and less. The truth is that none of these people have the answer, some were lucky and others were not. I remember conducting a mandatory meeting for registered reps (I am a Certified Financial Consulatant) in the late 90s. I asked the reps what they would counsel theirclients to expect for a return in the next few years. Several said that the 10 year rolling average for the S and P 500 was around 10%, so they said that is what they expected. I pointed out that at that time, the markets had enjoyed an average of 20%+ return over the last 5 years or so, therefore if you really beleived a 10% ten year return was the norm, you would have to assume the market would be down the next few years in order to return to the norm. They thought that was unrealistic, but, in fact, that is exactly what happened. People that think they have the markets figured out are people who have made some very lucky bets, just like people who think they have the craps table figured out. I have many years of following financial markets very closely, and I can tell you that a conservative, diversified approach is likely to serve you well, and dollar cost averaging into low cost index funds is a pretty good way to go.