Investing... need advice from experienced people

[JGood]

I'd like to begin investing. I currently have an American Century Giftrust which was opened for me in 1995 with one deposit from my grandmother and not touched since then. It hasn't done much, an average 5.25% return (low, due to the economey a few years ago I assume). It will be available in about 3 years (when I'm 25), and I plan on keeping it open and depositing more. The past 1 year has shown an average of ~17% return. But in the meantime I'd like to consider other options as well.

I do not know anything about investing or stocks. Anyone have any good information or can anyone point me in the right direction? I understand the higher the risk the higher the potential return. I'm willing to go slightly risky since I am young, but am in no position to loose everything I put in.

I am considering depositing approximatly $100-$200 per month. I am paying school loans and would like to get those payed off before I start investing alot.

I don't even know where to start. I'd like to learn what options are available, and the pro's and con's of them.

Any info is appreciated!

TIA

[JGood]

some more things..

I mentioned I am paying off college loans. They start in February actually. My APR on my consolidation is 8%. I think mathematically I would have to earn a higher after-tax interest rate from investing then I would from my loan after-tax rate to make investing a smart thing right now. Anyone have an suggestions or comments on that thought?

What is the deal with school loan interest and tax deduction? Is there some way to claim interest from school loans on taxes?

My parents never taught me anything about finances and I know I'm starting from scratch basically, but if someone could take some time to point me in the right direction I'd really appreciate it. I also know there is no right or wrong answer, but it seems there is a lot of myths out there, and everyone wants paid for "good" information.

Thanks!

[FredK]

What is the deal with school loan interest and tax deduction? Is there some way to claim interest from school loans on taxes?

You should receive a 1098-E form in the mail from whomever administers your school loan. This form will show how much interest you paid on your loans for that particular tax year.

So, come next January, you should receive a 1098-E. You just plug in this amount into your 1040, which will reduce the amount of income the government can tax.

[JGood]

You should receive a 1098-E form in the mail from whomever administers your school loan. This form will show how much interest you paid on your loans for that particular tax year.

So, come next January, you should receive a 1098-E. You just plug in this amount into your 1040, which will reduce the amount of income the government can tax.

Cool, I did some reading on that and it looks like they will basically waive up to $2500 of your income if you pay $600 per year or more of interest on school loans. That's pretty neat

[browntown]

talk to a financial planner, talking is free. See if they have some suggestions. Most I've talked to aren't too shady, but it's in their interest to broker your accounts, so don't sign anything. I say go talk to them, and then go home and read up on their suggestions.

[onaquest]

my 2 cents:

- since you're young, start with aggressive growth types

- forex is booming. Average gains are quite high compared to other types of investments. Check it out.

[JGood]

Thanks for the advice guys. What would you suggest, just opening a phone book and looking for a financial planner? I've never dealt with anything like this at all, I'm a major financial n00b. I didn't know there was such a thing as a financial planner. Or do you just mean a stock broker? Or are they the same thing?

[hugh jass]

Try to get a recommendation from someone you know. Be wary of just picking one, since many financial planners are comissioned based and will try to push certain types of insurance or mutual funds.
Setting up an IRA retirement account with an diversified assortment of aggressive mutual funds is probably a pretty good way or starting out, but a professional could better guide you on your options. Like I said, try to get a recommendation from someone you trust.

[FredK]

If you are setting up an independent retirement account (IRA). You can either have a tax benefit NOW by setting up a traditional IRA, OR, you can set up a Roth IRA, in which you take your post-tax income and invest into it.

The difference is, when you take a distribution on the IRA when you become eligible, the income you derive from taking a distribution will be taxed on a traditional IRA, but not on a Roth IRA.

Maxing out the contribution while you're young is really difficult, when you have to buy such "necessities" like S50 engines and euroweaves, it might be hard for some to put in 4K. However, investing when you're young is super important. That way you maximize the benefits of compound interest.

[JGood]

Cool, thanks. A close friend of mine has a neighbor who invests money as a second job basically, and he knows alot. I'll try to get in contact with him. I was hoping someone on here would know alot so I don't have to go begging for info from someone I don't know.

Thanks.

[JGood]

If you are setting up an independent retirement account (IRA). You can either have a tax benefit NOW by setting up a traditional IRA, OR, you can set up a Roth IRA, in which you take your post-tax income and invest into it.

The difference is, when you take a distribution on the IRA when you become eligible, the income you derive from taking a distribution will be taxed on a traditional IRA, but not on a Roth IRA.

Maxing out the contribution while you're young is really difficult, when you have to buy such "necessities" like S50 engines and euroweaves, it might be hard for some to put in 4K. However, investing when you're young is super important. That way you maximize the benefits of compound interest.

So why doesn't everyone use Roth IRA? What do you mean by having a tax benefit now?

Yeah I'm done spending crazy money on my car. I got it where I want it. Pretty well built for show, go, and reliability. That's all I wanted from the start - nothing spectacular, but true to BMW form: Pretty damn good at everything. Anything else I do will be done with extra cash I have, not paycheck to paycheck living money.

So on to paying off loans, investing, and finding a small house with a big garage so I can continue parting out cars for a hobby / income and maybe make a living off of it

[FredK]

Traditional IRA contributions allow you to get a tax break, depending on your income for that year. If you earn $50,000 or less, you are allowed to deduct the full amount of your IRA contribution from your income.

So, if you made $30,000 and contributed $4,000, your income tax would be based on $26,000 (well, that is an oversimplification because you still have subtract a standard deduction, but you get the idea).

[machined]

Maxing out the contribution while you're young is really difficult, when you have to buy such "necessities" like S50 engines and euroweaves, it might be hard for some to put in 4K.

Is it 4 this year? Every year it increases just a little.

[FredK]

Yes. It's still $4000 for tax year 2006 and 2007. The catch-up payment for older people has increased to $5000.

It goes to $5000/$6000 for tax year 2008.

[ldsbeaker]

Dave Ramsey's Baby Steps is a place to start.