Mutual Funds/Investing Advice


Hi Warren-
I hope you can offer some advice.  I'm 51, taking classes online for a job that first paycheck should be end Jan.2013- making only $8.00/hr to start. I have $113K in savings, and 16K in ROTH IRA's. One maturing now I'm transferring to savings, one doing 10% avg. for 2 years (index fund), and one only about 1% maturing later next year. I would like to save for retirement and have my money work harder for me. I like the idea of index funds like VFINX. I've heard dividends are the way to go too. My expenses currently do not exceed $1k/mo. total. I feel I should be able to invest at least $50K.  Any advice will be greatly appreciated. Thank you for your kind time and help.  Have a wonderful day!

Hello Susan--

First, you need insurance. Health insurance, life insurance if anyone is dependent on your income, house or apartment insurance, car insurance.
Insurance is to protect you against financial catastrophes.

Next, you need an emergency fund. In case you're unemployed for a while, or you have huge medical bills, and so forth. The emergency fund should be easily reachable--like cash or short-term CDs. How much? It might depend on how easily you could find another job, considering that unemployment is such a common emergency. Three months income?

Now you can invest, and your first decision is: How much into stocks, how much into bonds and cash?

Check what your asset allocation is now. Stocks vs. bonds vs. cash. (Cash includes short-term bonds, savings accounts, and such,)

A crude rule is: Subtract your age from 100 and put the balance into stocks. Gradually. So, at 51, you might aim to be 49% in stocks.
By gradually, I mean over a period of six months or longer -- so, if the market crashes, you won't lose all that much.

I recommend you put your investment money into mutual funds rather than individual stocks and bonds. And my favorite mutual fund family is Vanguard. Low costs, many index funds, a sense of conscience.

An excellent fund to start out with is: Vanguard Wellesley Income, which is roughly 40% in stocks. Excellent record, pretty conservative stocks and bonds.

Let know if I can help you further. Do you need Vanguard's phone number?

Best, Warren  

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Warren Boroson


Author of "Keys to Investing in Mutual Funds" (Barrons), "Ultimate Mutual Fund Guide" (Probus), "How to Pick Stocks Like Warren Buffett" (JKLasser), and "The Reverse Mortgage Advantage" (McGraw-Hill). Former financial columnist for Gannett News Service.


Author of 20 books; winner of 1996 Personal Finance award from Investment Company Institute and Washington University. Formerly on staffs of Money and Sylvia Porter's Magazine. Had a radio program (on WEVD) about mutual funds and a newsletter, FundDigest.

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