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THE ANSWER DESK . . . ARCHIVES
Volume 69: To submit a question to MFI's panel of
experts, please write to us.
This week's panel:
 Sidney BlumSidney A. Blum,
CFP, CPA/PFS, ChFC, is president of Successful Financial Solutions, Inc.,
a fee-only financial planning and registered advisory investment firm based in suburban
Chicago. Sid specializes in comprehensive financial planning with an emphasis on income
and estate taxes, retirement planning and investment planning. Sid has appeared on
national and regional television and is frequently quoted in many major publications on
financial planning and investment topics. He has been included the last three years in Worth
magazine's, "The Best Financial Advisors". For more information, visit Sid's website or call (800) 417-1141. |
 Richard ChiozziRichard E. Chiozzi is a founding principal of Successful Financial
Solutions, Inc., a fee-only financial planning and registered advisory investment
firm based in suburban Chicago. Richard is a Certified Financial Planner (CFP), and a
Registered Securities Principal. He has been in the financial service industry since 1981
and has lectured at NAPFA and ICFP national and regional conferences. Richard is a
frequent author on financial planning issues in leading financial publications and also
hosts a one-on-one cable television talk show in suburban Chicago. Richard can be reached
at his website or call (800) 417-1141. |
Questions and Responses
How should I invest to get the best start
after college?
Q: Sir, I am a college student with a good
part-time job at W.W. Grainger. I set up a ten year mutual fund back in 1996, and I invest
$20 a week in Grainger, but I am looking to invest more. I was wondering if you think I
should set up another mutual fund and play it safe or try to invest in the stock market?
What do you feel would be the best for a collge student. I still have about two years of
college and I am looking to have a nice start on life after college.
A: (Richard)
There are a number of questions you must first answer before making any decisions in
regard to investing. Questions such as: How long will it be before you need to liquidate
your investments for financial needs? What type of a risk tolerance do you have? What are
your personal feelings in regard to economic performance over the next three to five
years? I congratulate you for taking the initiative to set up an investment program at an
early age but with any investment that is subject to market fluctuations, you must be
willing to accept the risk that comes with the reward.
A mutual fund will give you the professional management and
diversification that I would recommend for a new investor but also consider that each
mutual fund has its own risk factor. Some are more aggressive than others. Also note that
when you invest in a mutual fund you are indeed investing in the market whether it is in
stocks or in bonds or a combination of both. I recommend that you get the right start by
seeking guidance from a professional investment advisor or reading books on investment
basics and asset allocation. This will help you to determine what type of an asset
allocation you should begin to formulate and what type of mutual funds or individual
securities should be part of your asset allocation. Formulating an effective asset
allocation will take into consideration your risk tolerance, the amount of money you will
be investing over time, how quickly it will be invested, when will you need to draw from
your invested funds and the personal financial goals and objectives you hope to achieve.
If the money is for long term goals, you may want to consider using
either a Roth IRA or tax efficient investments in order to maximize your after-tax return.
Must I include my state retirement monies
when calculating my maximum 403b contribution?
from David
Q: In calculating my maximum exclusion allowance
for my TSA/403b, must I include my state teachers retirement monies? Or may I
contribute the full 10,000 to a TSA?
A: (Sid)
Each state has its own rules, but generally you are allowed to invest up to $10,000
per year into a 403b plan over and above what’s being contributed by your state. But
you should check this out with a representative from your employer as to the specifics of
the plan you are covered by.
Should I turn to a discount broker for
advice?
from RC
Q: I have my main investment through broker at my
bank (ok, live and learn): I want to invest money from my daughters' trust. Also would
like to start monthly investments of my money. Question: Would a discount brokerage offer
advice on mutual funds to invest in? We would not need the money, hopefully, for at least
10 yrs. I'm confused as to growth vs value and can't seem to go forward!
A: (Richard)
Discount brokers do not generally give specific advice on mutual funds that an individual
should invest in. They may have a list of funds based on certain characteristics such as
past earnings and/or current yield.
You should probably sit down with a fee-only advisor in your area to
determine what a proper asset allocation is for you, based on age, goals, risk, time frame
and other factors that are important to you. You will get objective advice on what you
should invest in to reach your goals.
What can I do to ensure that my Roth IRA
grows as large as possible?
from Penny
Q: I have been trying to choose a mutual fund for a Roth Ira.
I have narrowed my search to 2 funds: the Vanguard Star (VGSTX) and the Fidelity
Freedom 2030 (FFFEX). I own 3 Prudential mutual funds, I have a cd, a traditional
IRA (with Prudential) that was opened with 401k rollover money, and 2 life insurance
policies (variable appreciable). I'm considering 9 direct purchase stocks and an
investment with Accessor Growth and I also have a savings account. i'm 29 years old
and I save every penny I can. I'm basically looking for my Roth IRA to grow as big
as possible (with minimum expenses while making the full allowable contribution) so it can
be left to my 2 children.
A: (Sid)
You seem to be doing a great job of saving for future goals. Of the two funds you are
considering, Fidelity Freedom 2030 and Vanguard Star, neither seems to fit the bill of
maximum gains, but they do have low expenses. I would think that Vanguards Index Growth
would be a better long-term choice to get long term growth and minimum expenses. Also, the
Accessor Growth fund you are considering for your taxable portfolio would also make a good
choice to maximize growth in a Roth IRA.
Important Disclaimer
Investing in equities involves a serious
principal risk, and no assurance can be given that the techniques described here will be
successful. Returns vary and you may have a gain or loss when you sell your shares. Past
performance is no guarantee of future results. Index returns shown are historical and
include the change in share price, reinvestment of dividends, and capital gains. Indexes
are unmanaged and do not reflect the impact of transaction costs. Transaction costs would
have reduced the total returns.
International investments, especially those in emerging
markets, entail greater risks (as well as greater potential rewards) than U.S. investing.
These risks include political and economic uncertainties of foreign countries, as well as
the risk of currency fluctuations. These risks are magnified in countries with emerging
markets, since these countries may have relatively unstable governments and
less-established markets and economies.
Lastly, the questions and responses set forth here are for
general informational purposes only and are not intended to substitute for performing your
own independent research or contacting your financial or legal professional before making
any investment decisions. We make no guarantees as to the performance of any investment
strategy you choose and are not responsible for any losses you might incur.
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