What Types of Investing Do You Do?

[JohnH]

Thinking about how the poker/casino gravy train might not always be there has got me interested in investing...

Anyone have any advice?

Any good/current books to read on the subject that don't tell me to put my money in a mutual fund for 40 years?

[themike537]

I don't have any books, but I've invested quite a bit over the past two years and I'll give you my experiences. I don't have much advice as far as what to invest in, but this might be useful info for new affiliates:

You can take advantage of some great tax breaks by investing into Roth IRA's, SEP's, and a "Simple Plan". The Roth is up to $5,000 every year I think, and you have to be under $60,000 in income to do the full amount. You invest post-tax income, and when you pull it out down the road, you pay no additional taxes like you would with a standard capital gains investment.

The SEP is basically the opposite. There are no maximums, and you can invest up to 20ish% of your total income. You invest pre-tax money which counts as a business expense, so it knocks down your yearly income and thus, your taxes for that year. You end up paying the taxes on this when you pull it out.

I did the Roth last year, and the SEP for the last two years, and put them into a variety of mutual funds that my Smith Barney rep recommended. Obviously, this is all done through either a partnership or a sole proprietorship, I'm not sure how it works if you're incorporated.

You probably knew about those options, but in case you didn't it'll save you a lot of tax money.

[JohnH]

So you have someone that knows a lot about these things kind of guiding you. I feel like that is what I need.

[resipsa]

The SEP is basically the opposite. There are no maximums, and you can invest up to 20ish% of your total income.

That is not correct, max SEP contribution was 45K last year and I think it is either the same or slightly higher for this year.

[JeremyM]

I currently do the SEP contribution, however as I'm sure you're aware it's money that isn't suppose to come out until retirement age or else you pay a penalty.

I like to keep my money in an online savings account like HSBC. You get good interest rates with just having your money in there (I think it's 3.5% right now) and there are always CD's for higher rates.

With the market so low, it's probably not a bad time to invest a bit in the stock market if you are planning on keep it in there longer term (I'm not an expert on this however).

[kdollar]

In the past I have contributed to my IRA. I haven't done a "Roth IRA" because I thought that it isn't tax deductible like regular IRA...but I could totally be wrong.

[themike537]

That is not correct, max SEP contribution was 45K last year and I think it is either the same or slightly higher for this year.

Ah ok, wasn't aware of that. Thanks for the correction.

[Bryan]

Unless you're going to dig in and really follow the markets daily, IMO the best advice is to follow the Boglehead methodology to investing (read The Boglehead's Guide to Investing, and the forums @ Bogleheads.org).

The Boglehead concept is to choose an asset allocation with a risk-level that you're comfortable with, and that is appropriate given your time until retirement. Invest in no-load, low-expense index funds.

Don't work with a "financial adviser" who charges you $0 to "help" with your investments. If he's charging you $0 up front, he's putting you into funds with a 5-6% sales load to make his coin. In that case, the market has to earn you 6% before you even break-even on the money you're investing. Not to mention, the majority of funds no-fee advisers will recommend also carry high yearly expenses (of 1-2%).

Toss every dime you can into tax-friendly accounts that you're eligible to contribute to (SEP, IRAs, 401k's, etc.). Stop looking at your account balances every day. Rebalance your asset allocation once or twice a year.

As others have mentioned, if you're self-employed (or own a corporation with 0 full-time employees), a SEP is the way to go. With a SEP you can save up to ~45k per year, tax-deferred.

[Jeremy]

I'd rather invest in my own businesses right now than the market. I guess if you haven't lost a ton of money it may be a good entry point, but if you have lost money it sucks to dump more in.

I love how financial advisers will tell me...."Don't worry, you're young it will come back". I'm like, thanks genius, but I'd have rather not lost the money in the first place.

[Tom]

I invest in my own web businesses as well as a 401K.