posted on Feb, 2 2008 @ 10:20 AM
reply to post by gluetrap
For college you should use a 529 savings plan, as earnings accumulate and can be taken out tax free. Each state has 1n or 2 plans. Check your state
first to see if you get a tax break. If so then do that plan. If not, then I like to put people in the West Virginia Smart 529 Select. They allow much
more exposure to foriegn stocks and small caps than any other plan I've seen. You can choose from about 8 allocations. I prefer the growth and all
equity portfolios. Need to become much more conservative though as child nears college age. The Virginia plan from American Funds is a good, more
conservative plan as well.
As far as investing for yourself. Buy 6 different mutual funds(IRA/401K) or 6 different Index funds (taxable account).
20% Large Cap Value
20% Large Cap Growth
15% Mid Cap Blend
20% Small Cap Blend
15% International/ Foriegn
5% Emerging Markets
You can look search for funds at Yahoo finance in their mutual fund screener. You want funds with long term management of at least 5-10 years, in the
top 1/2 of all funds for all periods(1,3,5, 10 years), and reasonable expense ratios. Reallocate to the original % every year or use your additional
investments to reallocate (add to the worst performers). I tend to stay away from no load funds as the investors in these funds have no guidance and
the bailing out that occurs in market panics tends to cause them to underperform even though they are cheaper.
Slowly build up a cash reserve as well. Under 50 you should have 6 months worth of living expenses in cash. Over 50, add a month of cash every year
until age 65.
U2U me if you want more specific advice. But a portfolio built along these lines will outperform 95% of all investors in your lifetime. Even if you
only pick mediocre funds. Allocation is everything for long term success.