Newbie - Help Getting Started

I am looking for some help on where to begin investing. I am 30 years old and make have a strong household income. I have been making contributions to my company 401K for about 7 year, not quite maxed out but well above what the company matches.

I currently do not own any investments outside my 401K other then property and a treasury bonds that I contribute to weekly. I have about 2K that I can invest monthly but do not have a lump sum to invest upfront.

Since I am not beginning with a lump sum of money it is more difficult to diversify and therefore do not feel stocks are an option right out the gate. I want to begin building a base that is diversified and stable. From there maybe move over to begin playing is stocks, but not sure I want to devote the time required to properly manage stocks.

So I am looking for where to get started and some good options for me.

Also, I am concerned with starting out in the current market. Seeing the volatility and the current down turn I feel I need to play it more safe then I normally would.

Thanks in advance.

Actually, I see this market as the perfect opportunity. As you say, the market has turned down -- which means its next major move should be UP! That's the goal, after all -- to buy low and sell high.

As to not having a lump sum, that's okay. What you're after is what is known as "dollar cost averaging". Let's do simple math. Let's say you have $10,000 and you put it all in a certain mutual fund. The next month, the market turns bad, and you lose 25%, or $2500. You now have only $7500, and it will probably take all year to regain those losses. At the end of the year, let's say that 25% has returned, plus another 10%, so you now have $11,000.

Now let's say instead, that you use dollar cost averaging (Bear in mind, this is simple math, so compound interest isn't necessarily included in these figures!). The first month, you put in $1000, instead of $10,000. The market takes that hit, and you lose 25%, or $250. The next month, you put in the next grand, and so on, and so forth. Remember, the market has gone up 35% gradually over the course of the year -- the lost 25% plus another 10%. You have made up to 35% on $9,000, plus regained the lost $250 and then some. You have somewhere in the neighborhood of $12,000-14,000, instead of merely $11,000, and all from the same original investment of $10,000 -- it's just your investments were spread out over time. (Remember, this is "easy math" -- how well you did over this fictional year depends on when the market rebounded, and how much you had in the fund at that time.)

I don't see why you need to start out balanced RIGHT AWAY, especially if you're talking about low amounts -- like, for example, what you'd need to start an IRA, which is what I would suggest your next investment step be. The max contribution this year is $5,000 (I think...it might still be $4,000). There's no crime in putting all your $5,000 in a solid earner -- say, a fund that mimics the performance of the S&P 500, like the Vanguard 500. Then, over time, as you build your fund year by year, you can diversify better. This is my strategy -- I started out in one fund with Vanguard, then as I reached the amount of money where I could spread my money into two funds without penalty (you need to have certain minimums in each fund), I did so, and then I added more money and got into a third fund, etc. Eventually, I'll be balanced. Right now, not so balanced, but not tragic, either. I wasn't as hurt during this recent downturn as others were, mainly because I started falling in love with Internationals, which really hedged the damage done by domestics.

Vanguard, of course, isn't the only game in town. T.Rowe and Fidelity are also low-cost mutual fund companies, with a wide variety of funds to choose from. Their websites also offer nice tools to help you balance and rebalance, as you add more and more money.