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Ok, I'm stupid but..


Aerovette
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On your calculator enter:

1.02 x 2400, hit =, hit M+. Continue pressing = and then M+ 20 times and then hit MRC. The result will be the future value of saving $2400 per year ($200 a month) at an annual 2% APR ($59,479)

Please do not tell me you are saving for a 20 year goal in a saving, money market, cd or any other short term, fixed investment.

Dollar cost averaging $200 per month in a combination of a small cap and large cap fund gives you an "expected" rate of return of 12% and a 20 year projected future value $193,676.

It is none of my business what you are saving for or how you invest. But, fixed investments are totally inappropriate for long term goals.

Good Luck

Cash Flow Coach

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On your calculator enter:

1.02 x 2400, hit =, hit M+. Continue pressing = and then M+ 20 times and then hit MRC. The result will be the future value of saving $2400 per year ($200 a month) at an annual 2% APR ($59,479)

Please do not tell me you are saving for a 20 year goal in a saving, money market, cd or any other short term, fixed investment.

Dollar cost averaging $200 per month in a combination of a small cap and large cap fund gives you an "expected" rate of return of 12% and a 20 year projected future value $193,676.

It is none of my business what you are saving for or how you invest. But, fixed investments are totally inappropriate for long term goals.

Good Luck

Cash Flow Coach

Hey, I told you I was stupid. I know NOTHING, ZIP, NADA, ZILCH, ZERO, about investing. (and my A.D.D won't allow me to focus enough to learn.) I can't really trust anyone with my finances because I would not know if they are robbing me blind.

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Please tell me that you are not depositing $200 each month into a bank account and planning to keep it there for 20 years. Um, you'd be losing money, not making it. That 2% doesn't keep up with inflation. If you don't plan to touch the money, you'd be better off buying $200 worth of gold every month--up 23% in 2006, by the way.

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I never understand why people keep money parked in a bank account. It's great for the banks. They make money and toss a ridiculously low interest rate at you to make you think that your deposits are gaining in value. Bank rates never keep up with inflation. Money sitting in a bank account is a great way to lose money--by lose money i mean that the purchasing power of those dollars is declining over time. 5% ain't so great, especially if you're thinking of it as retirement savings.

The stock market is dicey if you don't know what you are doing. There is a serious learning curve. Newbies can expect to lose money for the first year or two. I have a pal who inherited a bit over 100k and lost it all in six months of day trading. And I stay far away from mutual funds. Index funds can be good if you don't want to actively manage your investments. Do some research on index funds in sectors that have growth potential. Emerging market index funds would be a good place to start.

Gold is always a safe bet. It's volatile day to day, but if your goals are long-term and you don't want to be bouncing money around from investment to investment--it's worth considering, especially now that we are in a gold bull. I expect the next two years to be very good for gold. Keep an eye on it.

I'm just tossing out some ideas. Don't take investment advice from me. Reaserach and make a plan that works for you. BUT please don't leave money sitting in a bank account and expect wealth growth.

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I took the money from sale of my property and put it in a 6-month CD. The interest rate is now better than 4%, which is a whole lot better than a savings account. My bank also pays interest on the checking account.

Had I known about "laddering", I might have gone that way. That's putting funds in CDs in a way that will give you access to part of said funds every month. I believe the process was explained on bankrate.com.

"No-load" mutual funds are a good way to get into stocks, but only if you're in a good company. My grandparents got into mutuals, but the company wasn't too bright because, after Grandma died, they split all thew funds equally between my Mother and her brother. That even split a bond fund so that each got only half a bond, which couldn't be sold. I called the company on the carpet for that and they finally bought back the bond, sold it, then distributed the funds.

Any investment that promises a high yield is one that carries a high risk. Commodity funds are a prime example. Petroleum, grains and the livestock market are examples. Research helps when you're planning 'any investment. Better to err on the safe side than lose everything on a "hot tip."

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I apologize for taking so long to get back to you. I could access the boards with no problem until I signed in. Once signed in, I either got a message the the page I was looking for could not be found, or access was so slow I could not tolerate it. There appears to be something going on, but I have no idea what it is. Anyway, there are 3 issues I want to discuss with you.

Issue #1. Divemedic is right. The method I gave you for calculating a 20 year future value is correct for annual compounding. Most fixed accounts compound monthly and some quarterly. The difference between the 20 year future value of $200/month at 2% APR with monthly and annual compounding is $646. Not an insignifican sum. However, since you did not state the coumpounding period, and the least likely occurence is that you would earn 2% each and every year for 20 years, I didn't think precision was as big an issue as Divemedic apparently believes it is.

To be precise: divide the APR by the compounding period, multiply by 1% and add 1 (this is your interest rate per compounding period. Divide the annual invested amount by the compounding period (this is your principal invested per compounding period) On your calculator, enter the interest rate x the principal invested and hit = then M+ for the total number of compounding periods and then hit MRC for the total future value.

For your specific question, enter 1.0016 x 200, hit = and M+ 240 times and then hit MRC. When I can't find my PV calculator and must resort to this method, I seem to always lose count around 50 or 60. I apologize for my lack of precision, just trying to save you time and aggravation.

Thanks Dive for straightening me out. But, why didn't you give the correct answer? Are you trying to contribute valuable knowledge to this board or just singling me out for petty criticism? I don't think "YOU'RE WRONG" helped answer the question. FYI, I am NOT from Irvine or anywhere remotely nearby. Paranoia will destroya.

Issue #2 types of investment. With thousands of variations there are three basic types of investments: fixed, income, and equity.

A fixed investment guarantees principal and interest, there is no risk of loss. Examples are savings accts, money markets, and CDs. The expected rate of return for any given period is 3.5%.

An income investment guarantees the interest rate, but not the principal. A bond is an income investment. When interest rates go up, the value of bonds decline, and vice-versa. Therefore, there is both the risk of loss of principal and the opportunity for capital gain with a bond. However, if held to maturity the bond will pay face value. The expected rate of return on bonds for any given period is 6%.

Although an equity investment can produce some income neither income nor principal are guaranteed. A house as well as stocks are examples of an equity investment. Values rise and fall based upon market conditions. The expected rate of return on a large cap stock equity investment is 10.5%

(Note, the expected rates of return I've given are approximate, I do not recall precisely what they are.)

Issue #3, time is the determinant of your investment choice. Although stocks provide a much greater return potential they are inappropriate for short term investments (3 years or less) due to the risk of loss. In the short term, bonds also carry a rather substantial risk of loss. Fixed investments are most appropriate.

In the intermediate time period (4-7 years) the risk of loss from in an equity investment is still too great to be considered a prudent investment. Bonds are more appropriate than stocks and better than fixed because the probability that bonds will out yield fixed investments in that time period are very high with low probability of loss of principal.

In the long term (8 years and more) there is an extremely low probability that a fixed or bond investment will perform better than a fixed or income investment. In the 20 year time period, there is virtually no chance that the highest possible return from a fixed investment will be greater than the lowest possible return from an equity investment.

For a very simple and very effective allocation, open an account with Schwab, Fidelity, Vanguard or whomever you want. Allocate 33% of your monthly investment to three index or ETF funds consisting of a small cap growth fund, a large cap value fund, and an international growth fund. Rebalance your portfolio to its original percentages annually. I am pretty sure you will be VERY happy with this strategy. If you do not have a defined benefit pension, get an additional bang for your buck by investing in a pre-tax IRA, 401k, or 403b. If you do have a DB pension, invest in a Roth IRA. DO NOT invest in an annuity of any kind.

I hope this helps. You do not need to trust anything but the historical accuracy and probability of returns. Check it out.

Good luck and best wishes.

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  • 2 weeks later...

Research is out of the question. I don't have the focus or the discipline. All I can count on is avbsolute trust and I don't trust others with my money. I know a savings account is not the best, but it also won't go anywhere unless I take it out. Who do you trust? For a short time I owned 5 shares of Coca Cola stock and it did well. I ended up getting about 5 times my investment in a reasonably short time, BUT "ship" happens and Coke could accidently poison an entire state of cola drinkers and I'll be retiring on aluminum cans. I am open to suggestions, but I lack the knowledge of how these things work and I am too old to learn and too poor to take a big risk and lose. The primary objective was to not get the money in my hands because I WILL spend it. Even if it earned NO interest, it would be more than I would have without a savings account at all.

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