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I'm looking into long-term investments. So far, I've looked at stocks, mutual funds, IRAs, and 401Ks. I'm 22 and recently begun my first full time job. I know the basics of these investments, though am also interested in learning specifics and about (U.S. federal) taxation.

Basically, are there any typical investment methods that people use for long-term security? I'm not looking for penny stocks or quick turnaround, I just want to weight my options at beating inflation and having my money grow decently.

Edit: To be clear, of course I am already taking the match on my work 401(k) and have been looking into a Roth IRA and stocks and know the basics of these (though I'm not entirely sure of what tax forms I'd need).

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    Bonds (gilt's T bonds etc) and Commercial Property are two big classes of investments that you haven't mentioned – Neuromancer Jan 1 '14 at 17:23
  • @Neuromancer Thanks. From the books I've gone through, I've seen more residential real estate than commercial. – BLaZuRE Jan 1 '14 at 21:16
  • The Government does not publish real inflation, because it would be self incrimination, the hidden TAX. Gold in your hand may not show real gain, but it beats inflation. Consider the purchasing power of a $20 currency and $20 Gold coin from long ago, the $20 currency will not fill your gas tank, the $20 Gold coil can buy a used car. Not Gold stock or ETF's, but real Gold in your hand. – Optionparty Jan 4 '14 at 0:04
  • @Optionparty - In 1980, gold hit $800. Inflated to 2012, this is nearly $2200. Gold lags inflation over time. I hope you loaded up when gold hit $1800 on its way to $10K. Last time I tried to buy a car with a gold coin, they laughed, and asked me to return with a dollar denominated cashier's check. – JTP - Apologise to Monica Jan 4 '14 at 13:25
  • @BLaZuRE true but most people who own their own home have already enough (leveraged exposure) residential property as opposed to commercial (office's shops etc) – Neuromancer Jan 9 '14 at 14:12
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401Ks and IRAs are types of retirement accounts. They have rules regarding maximum amount of investments per year; who can invest; destructibility; and the tax treatment of the growth.

Stock, bonds, mutual funds, ETFs are all types of investments that can exist either inside or outside of the retirement account. Some 401Ks restrict the type of investments you can have, others allow you to own almost anything.

Any investment is a risk, and there is no guarantee that it will grow.

Look around the site for beginning investment advice. You should start with the 401K offered by your company especially if they have matching funds. That is free money. Many suggest you invest enough to get the match, then invest with an IRA. Look into IRAs because under US tax law you can still make a 2013 investment up until tax day 2014. Take the time before tax day to decide on Roth or Regular IRA.

The more exotic investments take more time to understand and should not be a concern until you have laid out your basic retirement accounts.

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To expand on mhoran's answer - Once you mention the 401(k), we're compelled to ask (a) what is the match, if any, and (b) what are the expenses within the funds offered.

Depositing to get the full match is going to get you the biggest return on your money. It's common to get a dollar for dollar match on the first 5 or 6% of your income. If the fees are high, you stop at the match, and move to an IRA for the next money you wish to save.

At 22, I'd probably focus on the Roth. If you have access to a Roth 401(k), that's great, the match will be pre tax dollars and you'll get started with a decent tax status mix.

These accounts can form the core of your investing. Most people have little left over once their retirement accounts are fully funded. And yes, reading to understand stocks is great, but also to understand why stock indexing is the best choice for most investors.

  • "At 22, I'd probably focus on the Roth." Age is not relevant. It's the tax rate now vs. tax rate later that is relevant. – user102008 Jan 2 '14 at 1:56
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    Odds are pretty high that a newly working 22 year old is making the lowest salary of his life, nowhere to go but up. That was the intent of the age reference. Save at current bracket with Roth, and move to pretax as he passes next bracket or 2. – JTP - Apologise to Monica Jan 2 '14 at 2:08

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