I have to choose what to invest in. My company matches up to 8% or 50 cents to every dollar up to 8%. Their are so many to choose from. Has anyone else had exp with this and what did they do? For starters, I would max out your contribution with your employer up to the point they max...as this is obviously free money and you need to exploit that.
Then, I would look at put $100/months into a RothIRA.
The plan your employer offers will likely be through a discount online broker, which means you will have an account with them and therefore you will have access to their products as well (all of them have Roth IRAs).
Without know what is available for you to make contributions in, I will break it down to categories. Without knowing you personally, I really can't guage your risk tolerance either, so I will just break it down to an aggressive distribution and you can adjust it to something more along your risk tolerance.
45% International Growth Funds
30% Large Cap Blended Fund
15% Domestic Value Fund
10% Bond Fund
A growth fund focus on equity securities that generally do not pay dividends, so they are all about growth!!! The Large Cap blended fund is a fund that is comprised of Large Capitialization stocks and it being a blended fund means that the stocks selected by the fund manager focus on growth, but are not as selective about the dividends being received. The Domestic Value fund means that these are domestic stocks exclusively that are usually mega cap stocks, like microsoft, who shell out a decent, consistent dividend. Then there is the bond fund, which is what it sounds like. A fund comprised of various funds. What you do is, every year, you look at your portfolio...usually around October/November, and you see which fund has grown from its original placement...and you readjust it. The bond fund will naturally be the lagging fund, since it will be growing the slowest. So, for example, you international growth fund is currently at 45%, but at years end it is not 50% of your portfolio....take that extra 5% off and put it in your bond fund. This is capturing the gains you made and storing them in a safe fund that will act like a svings account (just with a higher interest). And thats it. When selecting the funds, you can see if the fund is a growth fund, blended fund or a value fund by checking out the details...usually there will be a MorningStar guide to the fund that will tell you this.
With you RothIRA...a similar make...BUT, use ETFs (exchange traded funds) and actual bonds! If you are living in a state that you plan on living for the rest of your life, than make sure you put your money in Municipal bonds that your state offers. The interest payments from these bonds will definitely be exempt from federal taxes, and are generally exempt from state taxes!!! Score!!! Tax free growth! Just because its a RothIRA you will still owe capital gains taxes and income taxes on dividends and interest received through the year...thats why i mentioned the municipal.
For the ETFs, same thing. Focus on those same areas: International, Large Cap companies. BUT, when you pull money from one fund into another, you are actually selling off a portion of your shares...so in that transition process you will incure a capital gains tax. If you held the ETF for longer than 365 days you will only have to pay 15% tax on the gains...so, keep it slight.
With your VIP, i would also keep them all within the same family of funds, (Like if it they are the are some Fidelity's or Vanguard, keep them all within the Fidelity, etc.) as you don't generally incur charges when you switch between funds as you are Adjusting your portfolio. Also, don't follow the herd when it comes to Index funds...Indices are merely a market or sector thermometer and were never meant to beat the market. In fact, historically, they have always lost out to the market. So avoid them if you can.
Hope this helps. If not, post a question on my comments portion on my 360 page. I'm guessing this is a 401(k) plan? I'm not familiar with the term "Voluntary Investment Plan" - perhaps that what your company has chosen to call it.
What's best to invest in depends a lot on your own personal circumstances. If I were under 40, I personally would choose something that invests in a diversified group of stocks - e.g. some kind of stock market index fund. Historically, stocks have provided a better return over long periods of time than any other investment class, so for any long-term money, my first choice is stocks. You have to be able to stand the ups and downs along the way though because if you panic and pull the money out when the market dives, you'll miss out on the rise that (so far at least) always comes after the dive.
I like to have about 15-20% of my investments in non-US stocks also since they don't always do exactly the same thing the US market does, so I'd put some in some type of international fund.
If I was close to retirement, I'd go with a mixture of stocks and less volatile things like bonds or money market funds. That protects some against the risk of the market crashing right when you need the money, but still provides a better return than just bonds or money market funds alone. depends on your risk tolerance, age, etc; but as the previous person stated-diversification is extremely important and taking advantage of the full company match is mandatory (free money!!!!); do not invest 100% in company (employer) stock. Also if your mutual fund choices are from Fidelity T Rowe Price etc, go to their websites and check performance. Morningstar rates most mutual funds. I think you should invest your money in GSI since the place has gone to hell since you left...LOL |
