jaded57 saidUm when it comes to finance im very ignorant. Im not afraid to admit that. I do have a few questions thou and was thinking this could be the thread to ask them.
1. I recently opened a money market account, its thru capitol one and has a 3.55 interest rate. I only put $5,000.00 initially. Should I leave it there? Or I dunno take it out and bury it in a jar outback next to my magnolia tree.
2. What is a money market account? I was told by a friend it was the way to go. So I opened it online. However Im having second thoughts. I mean free money is to good to be true. And I work hard for my money so I dont want to lose it.
3. I was going to open a 401k thru my job that pays 4% of what I pay into it each month. I figure I could put 300'-500 a month into it with smart budgeting. Should I hold off on that?
4. I was recently invited to join a investment club that a group of friends is starting up. Nothing major just $100.00 initiation fee and $50.00 a month. I can afford this and all. But I wanna know is now a good time to do something like this? Its mostly a social thing, but should we wait to see what the markets do before we start investing?
Dunno if anyone has the answers, but any feedback is appreciated. I keep trying to get thru to Suzy Orman but that hasnt happened yet.
A money market is a more liquid version of a CD. Generally, higher rates are paid because a client puts in higher balances. It sounds like you got a pretty good rate, and even if something were to happen with Capital One (which there's no sign of on the immeadiate time horizon), it's FDIC insured.
Rayne mentioned inflation. But also consider that interest income is reportable on your tax returns. Therefore, if your tax rate (federal, state, and local) is 33%, youre actually only making 2.35% or so on your money. If inflation this year is 2% (and if you include food and energy prices, it's likely to be more), then you've made virtually nothing. As with most savings accounts and CDs, the idea is more so to preserve capital value.
Investing in the stock market is about navigating a business cycle for a paticular industry. The time to buy a certain stock depends on when the business cycle for that industry reaches its low. For example, if you think the financial sector is only going to get better form this point on out, now is the time to buy financials. If you think oil is going to keep getting lower, maybe buy stock in an airline. If you think we're all heading to the bread lines soon (kidding), I suggest Kraft and Philip Morris. People are still going to be addicted to cigarettes, right?
Whatever stocks you invest in, you should research them thoroughly. Check their P/E ratio, their balance sheets (make sure they don't have large amounts of debt), and analyst opinions. Many sites may even place price targets on stocks. Yahoo! Finance is really good, or if you join an online brokerage like Scottrade, they would probably have that information.
Contributing to a 401k up to the point your employer matches your contributions is always worthwhile. It's important to remember that many 401ks can use funds that are heavily weighted in the financial sector. You should always get a prospectus for funds before you invest and make sure the fund is well-diversified.