Using several mutual funds a wise way to invest
I’m 50, single and feel it’s time to start making some wise investments for my future. I’m debt free, and lately I’ve been doing some research on index funds. Can you explain them, and do you have any advice?
‘ Theresa
Dear Theresa,
An index fund invests in securities to mirror a market index, such as the S&P 500. They buy and sell securities in a way that mirrors the composition of the selected index. So, you invest in an S&P 500 index fund your returns will probably follow the rise and fall of the S&P 500.
I own a few index funds, and they’re a conservative way to invest. But you’re only 50 and have plenty of time, so I’d suggest maxing out a Roth IRA as part of your long-term plan. Put a fourth of your contribution into four different kinds of mutual funds: growth, growth and income, aggressive growth, and international.
Make sure these mutual funds have a solid track record of at least five years, and the rest is easy. You can even have the contribution automatically deducted from your checking account each month!
‘ Dave
Dear Dave,
Our yearly income is $45,000, we have an $75,000 mortgage with no other debt and an eight-month old baby. We’ve been given a chance to move in with friends and rent the upstairs portion of the house. We’d share the kitchen, and it would help us save about $1,000 a month. Do you think it’s better to stay and build up equity in our house or move and save money?
‘ Jennifer
Dear Jennifer,
One thousand dollars a month is $12,000 a year. That means your place would have to appreciate 10 percent a year, and most homes don’t do that.
I understand wanting to save money, but there’s more at stake here. You need to consider that you’ll be giving up a lot in lifestyle. Essentially, you’d be moving from your own home into someone else’s bedroom. You’ll be contending with other people’s likes and dislikes on an hourly basis, and think about this: do you really want your child going through toddlerhood in someone else’s home? Talk about stress!
You guys make enough to pay down the house and keep it in good shape. And chances are your home is going up in value. The only question is how much.
When you take this into account ‘ plus the quality of life issues for you and your family ‘ I’d rather see you get serious about a budget, find as many places as possible to cut your spending and stay in your own home.
‘ Dave
Dear Dave,
About five years ago I started my own furniture building and restoration business. Things are going pretty good now, and I was wondering how to go about setting up health insurance for myself and the family.
‘ Pete
Dear Pete,
In your situation I’d suggest a Medical Savings Account or MSA.
With an MSA you have a standard medical policy with a huge deductible ‘ maybe as much as $5,000 ‘ and a very low premium. It enables you to fund a savings account that grows tax-deferred, and the money can be used for medical care with no penalties, no taxes and you can keep what’s left if you don’t use it all. Plus, it saves you a ton on premiums.
Get with a good insurance broker who sells for several companies to help you set this up today!
‘ Dave