I'd stick with index funds. Personally, I'm a big fan of Vanguard funds -- they're really low expense ratio.
I'd do 90% stocks, 10% bonds, assuming you don't need the money until retirement. You could go down to 80% or up to 100% (I actually do 100%, but I also do individual stocks plus index funds).
S&P 500, a broader-market fund (3000-5000 companies in the US market, to get smaller businesses too not covered in the S&P), and some kind of global fund. Depending on how your 401k is held, you want to take that into account when allocating the rest of your money, and be careful because a lot of 401k plans have horrible funds (high expense ratios).
You might want to look at Roth IRAs too --it's a post-tax contribution, but never taxed on the gain or withdrawal. There are income limits to contribute, but there's a backdoor by contributing to an IRA (not income limited) and then converting it to a Roth.
Good advice. How do you recommend contributing? That's one thing that confuses me. Let's say every month I have excess income, how do I decide when and at what interval to put that money into a given index fund? Do I just set an automatic transfer or do I try to time my investments?
EDIT: And as for as I know, IRA's have a income ceiling of $110k/yr correct?
Generally the advice is to not try to time the market; set it up to be automatic and forget about it. You're investing for (presumably) 40-60 years, so a 5% move now shouldn't be that big a deal. The bigger thing is to just keep contributing even in down markets (when you might otherwise be reluctant), because by putting in the same amount every month, you buy a larger number of shares when prices are depressed.
However, I always wait until the end of the tax year to contribute (due to laziness) or do it at the beginning of the year (because I have extra cash then).
Roth IRAs are about $105k/yr limit. (it fades out up to $125k)
You can do a 401k rollover to Roth without any income limit.
You can do a Traditional IRA without income limit, although deductibility DOES have an income limit (56k since you have a 401k). I'm not exactly sure how a non-deductible IRA rolls over into a Roth; I've only ever done 401k to Rollover IRA to Roth. I don't think you get taxed twice on the money.
Comments
I'd stick with index funds. Personally, I'm a big fan of Vanguard funds -- they're really low expense ratio.
I'd do 90% stocks, 10% bonds, assuming you don't need the money until retirement. You could go down to 80% or up to 100% (I actually do 100%, but I also do individual stocks plus index funds).
S&P 500, a broader-market fund (3000-5000 companies in the US market, to get smaller businesses too not covered in the S&P), and some kind of global fund. Depending on how your 401k is held, you want to take that into account when allocating the rest of your money, and be careful because a lot of 401k plans have horrible funds (high expense ratios).
You might want to look at Roth IRAs too --it's a post-tax contribution, but never taxed on the gain or withdrawal. There are income limits to contribute, but there's a backdoor by contributing to an IRA (not income limited) and then converting it to a Roth.
Good advice. How do you recommend contributing? That's one thing that confuses me. Let's say every month I have excess income, how do I decide when and at what interval to put that money into a given index fund? Do I just set an automatic transfer or do I try to time my investments?
EDIT: And as for as I know, IRA's have a income ceiling of $110k/yr correct?
Generally the advice is to not try to time the market; set it up to be automatic and forget about it. You're investing for (presumably) 40-60 years, so a 5% move now shouldn't be that big a deal. The bigger thing is to just keep contributing even in down markets (when you might otherwise be reluctant), because by putting in the same amount every month, you buy a larger number of shares when prices are depressed.
However, I always wait until the end of the tax year to contribute (due to laziness) or do it at the beginning of the year (because I have extra cash then).
Roth IRAs are about $105k/yr limit. (it fades out up to $125k)
You can do a 401k rollover to Roth without any income limit.
You can do a Traditional IRA without income limit, although deductibility DOES have an income limit (56k since you have a 401k). I'm not exactly sure how a non-deductible IRA rolls over into a Roth; I've only ever done 401k to Rollover IRA to Roth. I don't think you get taxed twice on the money.
> You might want to look at Roth IRAs too --it's a post-tax contribution, but never taxed on the gain or withdrawal.
Assuming Congress doesn't change the rules, that is.