How do I go about saving for retirement? Should I invest in individual stocks or mutual funds?

What % of my income should be allocated towards investments? I have about 25 years until retirement. Should I find a good mutual fund with a decent return and accumulate more and more of it and buy and hold? I am worried about tax implications if I buy investments and then sell them.

Run, don't walk, to the library or bookstore and read:

"Saving for Retirement without Living Like a Pauper or Winning the Lottery" by Gail Marksjarvis of the Chicago Tribune.

if you go with mutual funds chances are ur just going to average the market, 10% annual. if u go with stocks u have a greater chance of better gains. when you buy stocks, if you hold them for a year or more the tax implications are less. do a fake portfolio for a while and teach yourself as much about the market as possible. Its kind of hard to tell you what percentage of your income you should sock away, because I dont know your income. but typically your company will match what you put away to a certain point. so if you were to put away 5% of your income your company will put 5% of your income towards your retirement accounts also. if you are willing to be aggressive you could get 15% of your income away. it depends on what you're comfortable with and how much you can live without.

I take it you are about 40. First, you will need to know how much you will need at retirement age to allow you to live comfortably. At retirement age you will be living off the interest and dividends as you will want to protect the principle since you don't know how long you will live.

Now that you know the amount you will need, you probably (if you are like most people) will need to put large sums of money into your retirement fund. Maximize contributions each year. If eligible, have your employer match. But beware, don't have all your retirement funds in one company. Companies have been known to fold. You only have 25 yrs to accumulate wealth. Don't squander the money or the time. Once lost, you will find it difficult to replace it. With that said, put the bulk of your money in investment that will allow you to sleep at night and grow by appreciating and by compound interest/dividend.s I suggest an equity-income mutual fund that has a good long-term track record through different managers and investment climate. I would think 50 percent of yor retirement investments in this type of fund. Say, another 30 percent in a quality growth mutual fund, and 20 percent in an overseas fund. If you can, put the money in a Roth IRA where it will grow tax free.

If you have the time, the skill, the ability to ferret out good growth companies, and enjoy doing your financing homework in evaluating companies and not just chasing the hot investments, and the funds to diversify, then individual stocks can be a winner. If none of the above apply, then mutual funds are for you.

Invest as much as you can each month for dollar cost averaging. As far as tax implications, max out your contributions to your retirement accounts, then fund other investment vehicles. Stick with it.

Open an Individual Retirement Arrangement (IRA) and invest in a combination of stock and bond mutual funds.

Your risk tolerance has a lot to do with this. If you are just starting now and want to maintain a lifestyle close to what you have now you will need to tolerate a lot of risk. If you can be happy with a lower life style in retirement or have some savings already, low risk may work for you.

The best returns are on individual stocks, buying at least 10 strong big cap stocks can spread your risk enough to justify >1/2 of your investment in stocks. Mutual funds have lower risk but lower gains. Most of your focus should be on saving as much as you can afford. don't sell anything except losers until you retire. You can minimize taxes by pairing sales of losers with winners. if you think you will be in a higher tax bracket in retirement then a Roth IRA may be a good idea, otherwise regular IRA and 401ks work.

Here is a free book on retirement investing that will teach you everything you need to know:
http://www.invest-for-retirement.com

The percentage of your income you need to contribute depends on your goal nest-egg amount and how far away you are from retirement. A general rule of thumb is 10 - 15%. Because future market returns are predicted to be more modest (as I explain in my book), you will need to contribute more than past generations have, and you will really need to keep a lid on costs.

A buy-and-hold strategy works very well for goals that are far away, such as your situation. You will want to use a few good mutual funds, giving yourself the appropriate stock to bond ratio. When picking funds, there are several things to consider. However, I will point out that costs are a lot more important than past performance for picking your funds. Past performance is a poor indication of future performance. Low costs, however, enhance your risk-adjusted return by allowing you to keep more of the return.

If you hold mutual funds within a tax-advantaged plan, like a company-sponsored retirement plan (401(k)) or an IRA, you do not need to worry about taxes while in your working years. You will not pay taxes now and will not have to report this on your tax return. You will eventually pay taxes on money withdrawn while in retirement, but it will simply be taxed as income. In other words, you will not have to calculate any capital gains or tax basis.

For IRAs, I highly recommend www.vanguard.com and www.fidelity.com to find good, low-cost mutual funds. They also offer target-date retirement funds which invest in other underlying funds for you. This way you get full diversity within one fund and the manager will rebalance for you. Also, these funds become more conservative as you move closer towards your retirement date.

Put as much as you can into a 401K (if that is available to you). The nice thing about investing stocks with your 401K is that you don't have to worry about taxes, long-term vs short term trading concerns, etc.

I just max out my 401K contribution, and assume that will be good enough as long as I invest it wisely. If you only have 25 years until retirement, though, you may have to step it up a bit. You're starting about twenty years late.

I invested in mutual funds for many years, because I really had no interest in investment and I assumed that mutual funds were the best way to go. Then I started taking an interest in investment about a year ago, and immersed myself in an intense analysis of various investing formulas, advisory services and anything I could get my hands on. Since I started doing my own investing in September I have made about 30% returns, while the mutual funds which I used to invest in have done considerably less well.