Ninja answers.

Got an email from a lost soul yesterday and I thought we could help put her on the path to eternal riches. Check it…

Hi!

I’m a long-time reader of your blog. I want to start a retirement account for myself. I’m a 23 year-old, soon-to-be-married female with a full-time job. My employer does not provide any type of retirement savings of any sort, and I haven’t been making any contributions to my retirement in my lifetime so far. I’m ready to change that.

I’m not sure where to being and am not really that “seasoned” in stocks/bonds/etc. If you have any tips, words of wisdom, or a direction I could head in, I would appreciate it.

Thanks!
Rachel

Well, first of all I would personally like to thank Rachel McAdams for reading my blog. Loved you in Mean Girls…

Anywhoozle, on to your question. How do you get started with investing when you know nothing about it? Easy. Get out your checkbook. Write a check to [email protected] Send on over about $10,000. And I’ll mail you back $5,000 in two weeks. BOOM! You just got $5k. Pretty sweet right?

Okay, now it’s time to get serious. Investing, especially for something like retirement, can seem both daunting and unimportant. Stocks, bonds, REITS, Options, blah, blah, blah. Not only is the subject matter rather boring, but retirement is like eleventy bajallion years away, why the heck should we give it any thought? Answer: Because Ninja said so.

Unfortunately Rachel, I know almost nothing about you except that you are 23, employed, and your name is, well… Rachel. Since I don’t know you, I can’t really recommend an investment strategy for you. That said, I can tell you what I do and if you think it sounds sexy, feel free to copy me.

I invest 5% of my gross income to a 401K plan each month because my employer matches that dollar for dollar. Next I take $5,000 of my take home pay each year and invest in a Roth IRA. Roth’s have some pretty epic long term tax advantages for us younger peeps. Since you don’t get an employer match in a 401k plan, I would focus on starting a Roth. I can’t tell you who to open up this account with. Just make sure pick a company (like Vanguard) that won’t fee you to death.

Since I am relatively young (25), I am fairly aggressive in my retirement investing. That is to say, I only invest in the stock market. No bonds for this Ninja. I go the way of Dave Ramsey and invest in a few different mutual funds. 50% of my cash goes to VTSMX (Big US Companies), 25% goes to NAESX (Small-Mid sized US companies), and 25% goes to VGTSX (Foreign Companies). This investment strategy helps diversify my investments across the entire market. If one company collapses (I’m talking about you Radio Shack), it doesn’t really effect me. It’s also important to invest at least a little in international markets. If the US goes to hell in a hand-basket, it will be nice having something that’s still of value.

I don’t like to get super technical when it comes to investing. My mom messes around with individual stocks, options, etc. She’s crazy to me, but it seems to work out just fine for her. A good place to get familiar with solid mutual funds, stocks, etc is MorningStar. They’ll tell ya just about everything you could ever want to know about a specific stock or fund.

Oh man. I’m pooped this was way more “finance” than I am use to in a one blog post. Moral of the story…