I make roughly $35,000 a year.

I have a few direct questions:

1). How much money should I invest into an index fund? (Please do not give a game of semantics on the word 'should'; I simply mean what is the most feasible investment into an index fund with my salary.)

2). Do I need to pay attention to the stocks whatever, or simply let it sit?

3). What is the return investment, or 'likely', 'plausible' investment, based on the money that you suggest I should be in the market for?

  • 5
    Personal finance is just that - personal. You are the expert on your goals, your expenses, and your risk tolerance, among many other aspects of your financial life. Nobody here can advise you about what is feasible for you unless you state what you are trying/hoping to accomplish in more explicit terms. – Wesley Marshall Nov 17 '16 at 22:24
  • There's not enough information in this question to answer question 1. You should remove it. We'd need to know where you live, what your expenses are, rent/car/whatever, and a lot of other information, to be able to answer how much you should put aside in an investment. And - more importantly, are you asking about an IRA? Or active investments that you're going to use to build up a "buy a house" fund or similar? Or create spending money? – Joe Nov 18 '16 at 0:35
  • What is this investment for: A new house, retirement, education, vacation or something else? Is it just for fun and entertainment purposes? How wild of a ride do you want? These are things where either you assume we should know this or are rather naive to not state at all here. If you want to retire in 5 years from nothing saved this is wildly different than a 20 year old starting out that doesn't plan to retire for 50 years ya know. – JB King Nov 18 '16 at 0:45
  1. Determine an investment strategy and that will likely answer this for you. Different people have different approaches and you need to determine for yourself what buy and sell criteria you want to have.

  2. Again, depending on the strategy there can be a wide range here as some may trade index funds though this can backfire in some cases. In others, there can be a lot of buy and hold if one finds an index fund to hold forever which depending on the strategy is possible.

  3. Returns can vary widely as an index can be everything from buying gold stocks in Russia to investing in short-term Treasuries as there are many different indices as any given market can have an index which could be stocks, bonds, a combination of the two or something else in some cases so please consider asset allocation, types of accounts, risk tolerance and time horizon in making decisions or consider using a financial planner to assist in drawing up a plan with allocations and how frequently you want to rebalance as my suggestion here.

  • I think this answer is technically accurate, but it seems like it doesn't really say anything (because the question is too broad to be answerable). +50% to -50%? Sure, accurate, but how valuable is that to know? Would be better to wait for an answerable question first. – Joe Nov 18 '16 at 0:37
  • @Joe, some of the questions asked could be answered though I would have an intention in answering that the poster could clarify his question some so that after a few revisions on each side there would be a reasonable answer as it may not be clear to the OP what are the pieces to give in asking a good question. – JB King Nov 18 '16 at 0:47
  • Sure, that's fine, but then ask for clarification in comments before answering. – Joe Nov 18 '16 at 0:49

You asked some direct questions, here are some direct answers:

  1. 10% of your salary is a popular rule of thumb. An IRA account is something to consider, you can open one with any of the major discount brokers and select an S&P 500 index fund for your investment.

  2. You can let it sit. That's the beauty of an index fund, it simply matches the market and you don't have to worry about trying to beat the market because you ARE the market!

  3. The average annual return for the S&P 500 Index has been around 10% (since inception). That's no guarantee, and some years are more or less and up or down. Over the long run, it goes up.

  • I can't imagine how a rule of thumb "10% of your salary" without any other information makes sense. Someone making $8 an hour can't do that. Someone making $120k per year probably should do more. His $35k might be middle class, or might be poverty level, depending on if he's head of a large household or single living in rural kentucky. – Joe Nov 18 '16 at 0:36
  • And - I'd like to see a cite on 3. The AAR for S&P500 is not 10% generally. It's certainly not recently. It was for a particular period of time, but that's where you'd need to cite to show what you're using as a referent. – Joe Nov 18 '16 at 0:38

Not the answer you're looking for? Browse other questions tagged or ask your own question.