Monday, December 21, 2009

Asset Allocation: Part 1

Asset allocation is one of the most important investment topics to understand.  At the top level, asset allocation is how you split your money between cash, bonds and stocks, each of which is a separate asset class.  There are other asset classes, like real estate and gold, but when you're getting started, you mainly need to focus on cash, bonds and stocks.  There are also further subdivisions of stocks and bonds into additional asset classes, but I'll save that for Part 2.

(Note that by "stocks and bonds" I really mean low cost stock index mutual funds and bond mutual funds, but I'll continue to simply refer to them as stocks and bonds.)

Sunday, December 20, 2009

The Ideal 401(k) Plan

This is just a quick post to share what I personally would look for in a 401(k) plan.  Since it's unlilkely you'll be able to influence your 401(k) plan once you're hired, the main point of this post is to help you evaluate potential employers' 401(k) plans as part of your job selection process.

Wednesday, December 16, 2009

IRAs: Traditional vs. Roth

There are lots of detailed regulations for Individual Retirement Arrangements (IRAs), so to really dig into it, you should read the relevant sections of IRS Publication 590 (html version -- see the PDF Version if you prefer the format used for the printed publication) which covers IRAs in depth.  On the second page of the html version or page 5 of the PDF version, there's a table that summarizes differences between Traditional and Roth IRAs.  I'll summarize some of the differences and similarities here.

Friday, December 11, 2009

College Graduate, First Job -- How to get started saving and investing?

You've graduated, started working, and understand the importance of saving and investing for your future.  What are the very first steps to take?

Wednesday, December 9, 2009

Your Cash Stash

Before even thinking about investing, you should have some cash stashed safely away for unexpected expenses and expenses planned for the next 1-2 years.  Common advice is to have 3-6 months of living expenses in cash for emergency reserves, but the actual amount depends on many variables; e.g., job/income stability, other sources of funds, likelihood of various unexpected events occuring, planned expenses, etc.  Once you've given it some thought, and decided on how much you want to allocate to your cash reserves, you have to decide where to keep the cash.