Fidelity offers Age-Based 529 investments. Just pick a year.

The best time to save for your children’s college tuition is when your child is born. A small investment now will help them cover their college costs in the future. Say you invest $10,000 when they’re born. Assuming a 12% annualized return, it will grow to about $80,000 by the time the kid’s 18 years old and ready for college. $10,000 investment to pay for $80,000 in school costs? Not a bad price to pay for college at all.

Watch out though: You don’t want a bear market to challenge your kid’s future. You’ll want to secure that fund as cash as the child gets older. Use an age-based 529 investment to save for college.

Age-Based 529 Plans automatically adjust from aggressive (mostly stock investments) to conservative (mostly bonds and cash) as the child comes closer to their project college years. All you have to do is pick a projected year and the fund will handle the rest. The downside is that you pay a bit more in management fees since it’s an actively managed funds. The upside is that you get to spend more of your time playing with your kid instead of balancing their investments.

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The sooner you and your spouse can agree on where the family money goes, the better. The best time to figure out finances is before you’re married when both of your money is separate.

I’m getting married in November. The shared finances discussion has begun. It will continue for the next few months until we’ve covered all of the ground rules. These premarital financial discussions should minimize the fights while we’re married.

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The Digerati Life is fielding a money question this week.

What Does Your Investment Portfolio Look Like?

Here’s what I had to say about that:

I frequently contribute to a target retirement fund made up of a bunch of index funds. I do have a grand in the Bruce Fund but I mostly stick to low-cost index funds. I’m saving up for a house so that’s why I have a larger than usual cash position.

My assets should be mostly stocks since I’m fairly young and my risk tolerance is higher. My ideal portfolio would be 90% stocks (small cap, mid cap, large cap, and international index funds) and the rest short-term cash reserves.

Yup. Not much investment detail there. Here’s a shotgun summary of what I hold: Vanguard Target Retirement 2045 Fund (VTIVX), The Bruce Fund (BRUFX), Aggressive Asset Allocation Fund (Some fund available through my 401(k)), and my company’s stock fund. I haven’t been tracking performance too closely since I don’t have a significant amount of money invested.

I was pleasantly surprised to see how much my investments have grown. Horray for automatic investments. Visit The Digerati Life and leave a comment on what your portfolio looks like.

Money Question: What Does Your Investment Portfolio Look Like? [via The Digerati Life]

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A good practice when investing money in certificate of deposits (CDs) is to “ladder” your investment. You start out by purchasing several CDs with varying maturity dates, i.e., a one year CD, a two-year CD, and a three-year CD. As each CD matures, you would then reinvest the money into another 3-year CD. So every year for the next 6 years, one of your CDs will reach maturity. This practice will not only protect you against interest rate fluctuations, it will also give you the security of knowing that at least a portion of your investment will be available to you within a relatively short period of time.

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With some items, there’s a clear-cut answer in the rent vs. own debate. For example, unless you’re in the moving business, it just doesn’t make sense to buy your own moving truck. A moving truck is definitely something you’d be better off renting. With other items, you’re better off just out-right buying them. Underwear, for example, comes to mind. But what about your residence. Financially speaking, are you better off buying a house or renting an apartment?

Owning a home is part of the American Dream. It’s just something that people are expected to do once they have the financial means (if not sooner). As far as renting an apartment goes, I’ve always heard it referred to as “throwing money away.” You pay money every month, but in the end, you have nothing to show for it. Owning a home is definitely the way to go, right?

Not so fast, says Jack Hough of SmartMoney. He argues that over the long term, the value of houses won’t appreciate more than the level of inflation, so you’re better off renting and investing your money in stocks, which average a 7% return per year over the long term. Hough also goes into a great deal of detail about real estate trends, home ownership costs, tax considerations, etc. It’s a good read, and definitely something to think about before you think about purchasing a home.

Article [via MSN Money]

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Jeremy is the author of Generation X Finance. I had the opportunity to have a nice little Q and A with him about investing.

What’s the first thing you look for when analyzing a stock before you buy it?

Jeremy: That depends on what the purpose of buying the stock is. Stocks I’m looking to purchase for short-term trading it is almost entirely in the technicals while a stock for a long-term investment I look almost entirely at fundamental factors.

Why are the investing experts hit or miss? Aren’t experts suppose to be right most of the time?

J: I think it depends on the time period of their predictions in regards to how right or wrong they are. Obviously the shorter amount of time for the prediction the more likely they will be wrong whereas you have a better chance at generally predicting the market.

When it comes to individual stocks and setting price targets or how far up or down they will go there is just too much going on to be accurate on a consistent basis. There are press releases, overall economic conditions, world events, investor buying or selling pressure, human emotion, etc. all at play.

What’s the worst investment move you’ve ever made?

J: Funny you should ask, I was in the process of writing up a post on my site about that very thing. I’ve many poor investment decisions but one in particular was pretty bad. It was a tiny little company traded on the pink sheets and I ended up buying a few million shares (They were priced at something absurd like $0.0001 per share) but there was a lot of buzz with the company and I thought for entertainment value who knows, maybe I’ll get lucky.

Needless to say I missed a huge run up in the stock and could have made about a 900% profit sometime during the first year but I held on. Three years later and all I have to show for it is a stock certificate that isn’t worth more than the piece of paper it is printed on.

Gimme a random piece of investing advice.

J: Don’t get emotionally involved with any investment. Whether it is an index fund in your retirement account or 100 shares of a stock you are looking to flip the next day for a profit, once you become emotionally attached you will make poor decisions. Always stay completely objective, which I know is easier said than done.

What’s one site that you like that people might not know about?

J: While this site may be known by many people I think it is very under appreciated: Morningstar.

Even the free content on their stocks and mutual funds is put together in an outstanding easy to read way. For those who choose to become premium members, some of the tools are simply outstanding.

If you want to chat, my AOL IM name is “henrybrohans” or you can email me at henry@binarydollar.com

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Al Gore says that our planet is heating up, and I guess a lot of people agree with him. I’ve yet to be convinced of this “global warming” theory, but then again, I’ve only recently started subscribing to the whole “world is round” theory (lucky guess, Columbus). Anyway, regardless of where you stand on the issue, you have to acknowledge that there’s going to be a lot of money spent by companies trying to increase energy efficiency, and a lot of money made by companies who provide cleaner energy sources.

Alternative energy providers will obviously be some of the biggest benefactors of the effort to reduce greenhouse gas emissions, but here are some other industries that stand to make some money as well (from Kiplinger):

• Suppliers to alternative energy providers. (Example: Zoltek, which makes composite materials used in turbine blades.)
• Companies that make products that improve energy efficiency. (Examples: lster Electricity, Itron, Sensirion, eMeter and SmartSynch. They sell meters that track real-time fluctuations in power prices, allowing manufacturers and others to better monitor the cost of their energy use.)
• Companies that help make fossil fuels cleaner. (Examples: Foster-Miller and NeuCo, which make systems that remove airborne pollutants from coal plant emissions.)
• Automotive suppliers who increase fuel-efficiency (Example: Magna International, who is developing ultralight, yet sturdy, steels for auto bodies, as well as steel-aluminum and plastic composites for mechanical systems, all designed to cut vehicular weight.)

Hmm, might be time to research some stocks…and by “research some stocks” I mean “put all of these company names in a hat and pick one to buy shares of.”

Article [via Kiplinger]

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Take all you can get from your employer if they offer matching contributions on your 401(k). Contribute to your 401(k) up to the full company match. It’s not often someone gives you free money. Don’t turn it down.

Matching contributions work like this: You put a dollar into your 401(k) retirement account. Your company puts a dollar into your 401(k) account. That’s it. Keep in mind that there is usually an upper limit to the company match.

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What’s the difference between $10,000 sitting in a regular old bank account and $10,000 sitting in an online savings account? Give up? The money sitting in the online savings account earns a couple hundred dollars extra a year.

Online savings accounts like such as the ones offered by ING Direct or Emigrant Direct offer high-yielding interest rates on your money. If you put $10,000 in an online savings account that yields 5%, they you’re scoring yourself 500 bucks a year without doing any work. It’s infinitely better than the average bank account which gives you a paltry less-than-half of a percent.

If your money’s going to sit there anyways, it might as well earn you some cash. Plus, when you bank online you don’t have to drive to the bank. Score.

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In case you didn’t hear the news, Warren Buffett recently upped his stake in Burlington Northern Santa Fe to 11% and now has $3.4 billion dollars invested in the railroad company. Buffett is placing a lot of confidence in the shipping ability of the railroad system, and based on his $46 billion net worth, that gives me confidence in the railroad industry as well. That’s why today I’ve decided to make a $200 railroad investment of my own. If all goes according to plan, I’ll see you on the Forbes Richest Man list next year, Warren.

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