If your company has a 401(k) that has a company match of a certain percentage of what the employee puts into it, the easy road is to contribute enough to get the company match, then stop. See this article in MarketWatch by Richard Mason to see why this road can be a mistake in the long term: www.marketwatch.com/story/how-to-stretch-the-401k-match-2015-06-24 An important item for retirement is to save at least 10% of your income in some retirement vehicle. A good rule of thumb is to put enough into the 401(k) to get the company match, then contribute to a Roth IRA if you qualify because of income, and then contribute the rest of the 10% into the 401(k). Also I would not include the match as part of the 10% (the 10% should be money you contribute, the match I would treat as earnings.) With compounding, you will be amazed at how much money you will have at retirement. For financial, accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net Phone: 818-317-6035 Website: www.briantstonercpa.com Android and the IPhone: Has been Featured On https://twitter.com/bstonercpa
Financial Musings of a Burbank CPA: Letting your investment winners run and protecting your downside Part 5 of 5
This article concludes my five part newsletter series I published about a year ago on investments – Letting Your Winners Run and Protecting Your Downside. Part 5 0f 5 – How It All Works Together: Okay, now how does this all work together? First, select the investments you want, making sure you diversify between assets and across industries. Now pick somewhere between 20 and 25 investments and put equal amounts in all of them (keeping position sizes between 4 and 5 percent of assets.) Keep track of your stop losses – about 15% to 25% of the investment. The worst case situation – an investment drops below your stop loss. If you follow your stop and sell at the open the next day, with the position size of 4-5% your worst loss will be around 1 to 1 1/2% percent of your assets. A few of these will probably hurt a little, but you have small losses to deal with rather than big ones. If a couple of investments take off, you can let your winners run, using the stops to stay in the investment and then tighten your stop loss and when you sell you will protect most of your profits. [...]
Musings of a Burbank CPA: Letting your investment winners run and protecting your downside Part 4 of 5
This article continues my five part newsletter series I published about a year ago on investments – Letting Your Winners Run and Protecting Your Downside (this stuff never gets old!) Part 4 0f 5 – The Trailing Stop Loss: Ok, you are in your investments; now when should get out of them? The answer is the trailing stop loss. When you buy an investment, set a stop loss of 15 – 25% of the investment value; if the asset drops that amound, you sell on the market opening the next day (this will prevent a sudden drop in price and rebound, called a whipsaw, taking you out of an investment by hitting your stop loss then rebounding back above – wait until the close and see if you are still below your stop. Also it is not a good idea to log your stop losses in with your broker as they will be automatically exercised instead of waiting for the close; keep them in your head or on a spreadsheet.) The 15 – 25% stop loss will keep you in the trade long enough to give the investment time to become profitable without stopping out too soon. The reason to [...]