Marlowe,

You will be happy to know that, I invested around 10K in ETF funds, I
also opened a mutual funds account with Vanguard and invested around
15K, I am still looking into subscribing to Bob Brinker's Marketimer
newsletter, I checked the local Libraries and they do not subscribe to
this newsletter anymore, since Bob discontinued subscription to
libraries, I am planning to open a College saving plan for my two
children someone suggested Texas tomorrow fund, I am not sure if the
Texas tomorrow fund is a good choice, therefore I am open for
suggession, anyway things are moving along and I will keep reading this
news group and others to educate myself.

Thanks,

Abid

Abid:

Additional food for thought! If you were me, I would be thinking along
the following lines:

"My emergency fund consists of: 10k cash and 30k in 3 stocks. Much
better to have these 3 stocks in a bank account at 4.75% or CD (1 yr
now pays about 5%) since value can fluctuate sometimes the wrong way
just before an emergency occurs. The 10k cash in your checking account
can be linked to an ING or EmigrantDirect or HSBC on line account
paying 4.5 to 4.8% from dollar one and transferrable back to your
checking account in one day with no penalties. I would also consider
moving up the safety fund amount to from between 50k and 80k (your
choice). In todays business world one never knows!

The remainder I would invest in stocks using the vehicles already
mentioned except I would dollar cost average into the funds chosen over
a period of months up to two years or so depending upon the amount.
Timing of investments is so important, even over several years.

I agree that the 401K is not the place for "stable funds" at my age and
would take the 15-16k and invest it in stock choices within the 401k.

Sounds like I have my financial house in order and wish myself the best
that life can offer!"

Hugh

PS: Your tax consequences of your investment decisions are not too
important at this point since it is apparent (unless you have LARGE
charitable contributions) you do NOT itemize on your 1040 due to your
low interest rate on mortage and (no income tax in Texas to deduct) and
in additions are in the 15% tax bracket on your last dollar earned.
Investing in your 401K does this for you.

Marlowe,

Thanks for such a detail and specific information, I wasn't even
thinking about Exchange Traded Funds, I have decided not to pay off the
mortgage and use this money to build some wealth. I will seriously
consider your recommendations.

Thanks again.

Abid

Since you sold stock to end up with your 50K, you could consider buying into
the stock market a "lateral move." Here you have many choices, I'll give
you three of my favorites strategies:

1)- Open up a discount brokerage account and invest in Exchange Traded Funds
that cover the broad US and foreign markets. I invest in MDY plus many
others.

2)- Open up an account with a no-load, low expense Mutual Fund company like
Vanguard and buy the total stock market index fund, VTSMX for Vanguard.

3)- Subscribe to Bob Brinker's Marketimer newsletter (many libraries have
subscriptions) and follow his portfolio #1 with your investments. His
advice kept me out of the 2000-2002 bear market and then back into the
market in March 2003. This has made me a lot of money, compared to a "buy
and hope" investment strategy. Web site http://bobbrinker.com/

Above all DON'T PAY OFF your 4 1/2% fixed rate mortgage. Repeat don't pay
it off early. Your mortgage company probably prays every night that you
will pay it off early, but don't let them talk you into it. Taking into
account your interest tax deduction plus the inflation rate, it is virtually
free money. You have the added benefit of funding a ROTH IRA for yourself
and your wife plus set up a tax sheltered college funds for your two young
children. This $50k is potentially more valuable as an investment, wealth
building vehicle that paying off your mortgage. This is a no brainier; don't
waste the opportunity.

Hope this helps.


<akhan[at]att.net> wrote in message
news:1144673009.874655.85670[at]i40g2000cwc.googlegroups.com...
- quote -

"bo peep" <cowartmisc1[at]yahoo.com> wrote
El wrote
- quote -

I suppose you're mostly right, John. I just quickly perused
the following:
http://www.nylim.com/gp/0,2058,1000_1018243,00.html . Under
its list of products that are "stable value," it lists,
inter alia, certain annuity and life insurance products. But
further googling indicates that, despite occasionally being
produced by (packaged via) annuity and life insurance
companies (products), SV investments do appear to be more
like a CD of a certain term, as you say.

http://www.smartmoney.com/university...ry=stablevalue
seems helpful, indicating slightly higher risk with stable
value funds compared to money market funds.

I suppose, for now, Abid's 401(k) 20% in stable value should
be counted as a high grade bond or maybe cash allocation.
With his bonds allocation (another 20% in the 401k), and
taking into account the addition of the $50k to his
retirement assets, about 24% of his total of $125k for
retirement is in high grade bonds. That would be a bit
high--a bit conservative--for my taste, were I 42 and still
employed and planning to work another 20 years or so, say.

Now this may be your preference, Abid, but I would keep
asking good questions here, keep studying asset allocation
philosophy, and certainly lurk at this newsgroup for others'
approaches and new ideas. Sometimes responses to questions
here tend to be overwhelmingly the same. Other times,
responses differ, and some sort of average of them all is a
good approach, as I imagine you know. Also, as dapperdobbs
was suggesting, at some point, maybe when you have more time
to manage your own investments and study company
fundamentals, you may want to give up some of your mutual
funds and go to still more stocks. I don't know exactly how
much experience you have with stocks. If you've held those
three large caps you listed earlier (Exxon, Yahoo, Wal-Mart)
for at least a few years, I imagine they've been a very nice
introduction. You saw XOM and WMT (one's value, one's a
cross between value and growth, per morningstar) paid
dividends. You may have noticed Exxon's dividend has
steadily increased at around 7% or more a year. WMT has
similarly had a steadily increasing dividend, rising over
10% a year for some time it seems. That's way above average
for a value stock, IIRC. Rising dividends are a good sign,
at least for my personal preference in stocks, which some
would say is on the cautious side of stock picking. For the
young investor, reinvesting such dividends can compound the
growth of your original investment nicely. But ideally one
really should monitor the companies regularly (like at least
twice a year) and decide whether they are still doing as
well as when they were originally purchased, say. That takes
time.

Yahoo on the other hand doesn't pay a dividend and doesn't
look like it's going to anytime soon, based on a very quick,
amateur check of its cash flow. Nothing wrong with that. It
might be said to be more speculative, with a greater chance
for growth than XOM or WMT. It also might be said to have a
greater chance of losing money, too.

<<I am curious about what others think of the merits of this "stable
value" (effectively a pension or annuity-type vehicle?) allocation>
I don't know where you got that - a stable value fund is more like a
money market fund than anything else. A place to park cash. They
usually pay about the same return as a CD.

John Cowart

That's great info, I will get the ball rolling now, I like your
Disclaimer, this is exactly what I am planning, I guess I can say I
wanna be like Elle, thanks.

Abid

Just to put my two cents in, as usual: I prefer individual stock
selections over mutual funds. The first things I would look for in a
fund: a) are they long-term investors, and b) how consistent are their
returns - in up markets do they participate, and in down markets do
they outperform. I understand that you want to get the funds invested,
and getting up to speed on building your own stock portfolio involves
reading and study (one to two years). Can't help much with specific
fund selection (Dodge & Cox closed a couple of years ago), but once you
pick your funds, chop out $40 bucks for an investment in Graham, Dodd,
& Cottle "Security Analysis" and read it. And read the funds quarterly
and annual reports, looking carefully at which stocks they own, which
positions they added to, which they sold. In looking at funds, as
alluded to above, one thing you want to check is their portfolio
turnover rate - funds that have a 30% turnover (consistently) may be
weak in their stock selection (e.g. "change their minds" a lot?), and
will likely generate short-term gains (taxable ordinary income) that
will overshadow their management fees.

a...[at]att.net wrote:
- quote -

You might want to look at the exchange traded funds (ETF) buying in
diverse categories such as energy, specific global areas, and
technology. Your investment would be liquid and easy to rebalance.

--
Ron

Abid, I think you should first settle upon an asset
allocation you like, then post back. I personally would then
just review what mutual funds Vanguard offers that fit the
bill, and go with Vanguard. Maybe, because I know Fidelity
well, do a double check that Fidelity can't beat what I'd
get with Vanguard, for the funds I sought.

Experiment with your proposed asset allocation on a
spreadsheet, say, dividing it between what's in your 401(k),
your three stock positions in yahoo, XOM, WMT (all large
caps? Two value, one growth?), and, I hope, your future Roth
IRA.

The www.vanguard.com site is very helpful and easy to use to
find funds that meet, say, large cap, international, etc.
goals. If you don't already, you should jot down the expense
ratio of any fund in which you're interested, and see if
other companies can do better. It's rare for other companies
to beat Vanguard's mutual funds, though. One exception might
be Fidelity's international index fund, FSIIX.

The asset allocation you presented certainly looks okay,
excepting maybe the 20% 401(k) "stable value" allocation. I
am curious about what others think of the merits of this
"stable value" (effectively a pension or annuity-type
vehicle?) allocation, especially since you have a ways to go
to retirement yet.

Disclaimer: I am a do-it-yourself stock, bond, and mutual
fund investor of some 20 years, now living off my
investments.

<akhan[at]att.net> wrote
- quote -

Elle wrote:
- quote -

Is yours a fixed rate mortgage? How many years left on it?

Fixed rate, 12 years

How much of your 401(k) contribution does your employer
match?

6%, 50 cents on dollar

Do you have an emergency fund, in the event you lose your
job and have to live from it for a year or so?

Yes, $10K in checking/savings account, 30K in stocks, XOM, WMT, YHOO,
etc

Do you and your wife have life insurance? If not, why not?

I do, wife doesn't work, so we didn't buy, but thinking about getting
one for her too.

Have you started a Roth IRA? If not, why not?

No, doing 10% in 401K I thought that should be OK.

How are your current 401(k) retirement assets allocated,
roughly? For example, what percent bond mutual funds and
what percent stock mutual funds?

20% large cap, 20% midd/small cap, 20% international, 20% bonds, 20%
others.

Do you have any other savings that are for retirement? If
yes, how are they allocated?

None.

I opened a college savings account for kids (Texas tomorrow fund) last
year, I put $50/each per month. Hope this information helps, again
thanks for your time and advice.

Abid

Thanks Elle for all of your advice.

Abid

Thank you, I will follow-up on your suggessions. I would still like to
invest a good portion of 50K in mutual funds, any specific advice for
that.

Abid

<akhan[at]att.net> wrote
- quote -

Vanguard has my vote as being one of several excellent,
possible places to open up a Roth IRA and stuff $16k
immediately. It has excellent mutual fund choices (low
expense ratio, no loads), with the only caveat being to look
out for the fund minimum dollar amounts they often require.

Fidelity's service is excellent, but they don't have nearly
as many index funds as Vanguard. (I speak as a long-time
Fidelity client.)

See www.vanguard.com and www.fidelity.com for info on
opening an account.

<akhan[at]att.net> wrote
- quote -

Fantastic. Fixed rate, 4.5% must be the record!

With such a low interest rate, I would definitely not pay
down the house.

- quote -

What I consider conventional wisdom is to prioritize your
tax advantaged retirement investing as follows:
1. Max out the 401(k) up to the employer matching, to get
the immediate 50% return and 401(k) tax advantage.
2. Max out the Roth IRA, to get the flexibility of
investment choices and withdrawing in an emergency, and to
get the tax advantage
3. Resume contributing to the 401(k), to get the tax
advantage.

See the Roth IRA income limits at
http://en.wikipedia.org/wiki/Roth_IRA . As your income
rises, you may soon be unable to contribute to the Roth IRA,
so it's a good idea to seize the opportunity to do so.

You have a few more days to contribute the 2005 limit for
your Roth IRA. I would consider doing so. It is not
difficult to open a Roth IRA account. Consider calling your
bank or brokerage and see what they can do for you. If they
charge fees, post back first.

For 2005 and 2006, contributions to a Roth IRA for you and
your wife, would consume $16k of your $50k right now. The
earlier you get it into the Roth IRA, the better. Just put
the Roth IRA into a money market and decide in coming months
what mutual funds you want.

In theory, for the rest of this year, you can continue
contributing the extra 4% of your paycheck to your 401(k),
then in 2007, you can consider following the prioritization
I give above.

- quote -

Stocks shouldn't really be thought of as an emergency fund,
but I trust you know the risks here. A lot of folks say
about a year of family living expenses should be kept in a
checking/savings account, but that can vary from one
family's taste to another's.

I don't have any comments on the stock picks themselves,
since you seem to be saying you plan to use mutual funds in
the future. Mutual funds are the better choice for someone
without experience picking stocks.

- quote -

The wife is doing the work of raising the kids, so I would
say definitely think about the life insurance for her as
well.

- quote -

At this point I would identify a target portfolio allocation
using the tools I link at the site I gave before, then
re-allocate as needed to comply with it. Though I'm betting
you already have some ideas on this already, based on the
above. Perhaps start another thread on the "stable value"
portion. Not so sure that's anything to which I would want
to keep contributing at your age.

I think you know this, but just to get it out there again:
Allocation is not an exact science. No one can say which
allocation is precisely best for you. But one can say that,
assuming future category performance mimics the past, xyz
should be done.

- quote -

That is indeed important info.

Two more things:
You should start becoming acquainted with how much you need
to save each year for retirement. For this, try some of the
tools at http://www.fincalc.com/ (click on "Consumer Calcs"
on the left). I suspect, given how much else you have saved,
the prudent thing to do is earmark the whole $50k for
retirement. (Maybe you know this already, as well.)

Also, compute whether you're saving enough for the kids'
college educations.

Is yours a fixed rate mortgage? How many years left on it?

Fixed rate, 12 years left

How much of your 401(k) contribution does your employer
match?

6%, 50 cent on dollar

Do you have an emergency fund, in the event you lose your
job and have to live from it for a year or so?

Yes, 10K in checking/savings account, $30K in stocks, i.e WMT, XOM,
YHOO

Do you and your wife have life insurance? If not, why not?

I do, wife doesn't work so we never bought for her, I am thinking about
getting it though

Have you started a Roth IRA? If not, why not?

No IRA, I am doing 401K upto 10%

How are your current 401(k) retirement assets allocated,
roughly? For example, what percent bond mutual funds and
what percent stock mutual funds?

20% large cap, 20% small/medium cap, 20% international, 20% stable
value, 20% bonds

Do you have any other savings that are for retirement? If
yes, how are they allocated?

None

I also have college savings accounts (Texas tomorrow fund)) for both
kids, I put $50/month, started last year. I hope this information help
you guys to advice me, thanks again for your valueable time.

Abid

My quick $.10-

The retirement fund "is behind". Adding the $50,000 to this puts you
"close". This comment is based on needing 1,000,000 by age 62 or
2,000,000 by age 68. If the need for these amounts is less, maybe you
are closer to being on track.

Mortgage interest rate is low and mortgage amount looks in line with
income.

If the mutual fund will be in a taxable account, I might suggest an
index or growth fund. Look for funds which have low dividend payouts
and low capital gains payouts.

<akhan[at]att.net> wrote
- quote -

Abid, if you can hold off a little longer about the specific
funds and answer a few more questions, I think you'll get
more meaningful input.

Is yours a fixed rate mortgage? How many years left on it?

How much of your 401(k) contribution does your employer
match?

Do you have an emergency fund, in the event you lose your
job and have to live from it for a year or so?

Do you and your wife have life insurance? If not, why not?

Have you started a Roth IRA? If not, why not?

How are your current 401(k) retirement assets allocated,
roughly? For example, what percent bond mutual funds and
what percent stock mutual funds?

Do you have any other savings that are for retirement? If
yes, how are they allocated?

Post these and while you wait for more responses, maybe
experiment a little with the free online asset allocation
tools linked at
http://home.earthlink.net/~elle_navorski/id4.html . They
will give you ideas about what general types of mutual funds
you want to consider.

Well, I am 42, wife 38 and two kids 8 and 2, current income is around
90K, I have about 75K in 401K plan, in which I invest 10% of my income
every year, I can take moderate risk, so I was thinking about a mix of
mutual fund and stocks, my mortgage payment is $850/month, I pay
$1,000.00. Mortgage interest is 4.5% and I owe about 89,000, I guess I
answered most of the question, please advice me on specific mutual
funds so I can start investing and see a reasonable growth as well as
additional income if possible. Thanks for your time.

Abid

Chris Cowles wrote:
- quote -

Further to this point, if the OP's mortgage rate is at 6% and he can
yield a greater return elsewhere, greatest ROI does not go to paying
down one's mortgage.

Regards,

Scott Miller
National Commercial and Residential Lender/Broker
1.877.716.6495
EZMortgageLoanz[at]aol.com or hugh.miller[at]carteretmortgage.com

www.RealEstate-IQ.com
www.EZMortgageLoanz.com