5 years out of college, I am now starting to think about investing. I
have never invested in the past. I have $5000 to start investing with,
and will be keeping aside $5000, every 6 months ($10K/yr, change to
investement plan not more than twice a year). the asset distribution
tools on vanguards, wellsfargo and other sites I used suggested I
invest 80% in stock and 20% in bonds (i.e. aggressive strategy).
Initially, I wish to start with investment in stock funds and bond
funds. I am looking for using money from the investments once in 5
years. I want to know:

* What are some good stock and bond funds in the market that that I
should consider investing in (low costs and high returns)?
* Are Exchange Traded Funds better for my investement strategy than
mutual funds? If so, would you please suggest some ETFs to consider
investing in?
* Which brokerage firm has the least transaction/maintenance/misc.
costs for the kind of investment I'm looking for (mutual funds/ETFs)?

I don't know yet how to understand morningstar (or any other) ratings.
So please include more details than just the rating stars in the
answer. Thank You.

I've been using the following web sites: 
http://www.mfea.com/
http://www.wellsfargoadvantagefunds.com
http://flagship3.vanguard.com/web/corpcontent/CorporatePortal.html
http://finance.yahoo.com

An actual Google Researcher will have to contribute an official
answer, but I'll just mention:

(1) Consumer Reports magazine does an issue every year covering the
best in mutual funds. It might be worth visiting your library to see
if you can track down its most recent issue and/or keep an eye out for
the next time Consumer Reports covers that topic.

(2) Before you start investing in stocks and bonds and mutual funds,
it's generally suggested that you make sure you're reasonably
debt-free (particularly credit card debt) and that you keep some
portion of money (an emergency fund--three or six or twelve months'
expenses) in fairly liquid and accessible accounts.

you can join Consumer reports On Line for only $5 per month, and you
can cancel at any time. Everytime I want to buy a
computer/printer/camera I joing Consumer Reports, do my research, and
then cancel. Theri advice has always been worth more than the $5 I
spend. I have done this at least 4 times. They are really really good
about cancelling you. However I could never figure out how to cancel
on the internet so I end up calling them. But they do cancel it the
same day you call. Good luck to you with your investing.

One tip- when my husband and I started investing we bought into a
mutal fund for Bonds, but then I insted on an extra step becasue I
didn't want to losse any money, I made sure that we selcted one that
was insured. We could never loose our principal with the insurance
option we purchased. Until we got comfortable investing we bought
mutual funds, then we got more comfortable and bought stocks outright.
Made a lot of gains on everything, well we did have some loosers,
(stay away from anything that is investing in real estate
partnerships, buying home loan packages etc. this is not for novices).
Again good luck to you.

Just my HO:

I'd put all of the stock money in an S&P 500 Index fund.  Vanguard has
a good one.  Or if you like ETFs, just buy Spiders (SPDR).

I've been investing for 11 years, and, being a reasonably bright guy
(master's from a top tier university), thought that I could beat the
market.  Well, you can't.  The problem is that NOONE knows what's
going to do well in the future.  Today's superstar funds are tomorrow
laggards.  I have the actual experience to prove it.  :-)

I currently have > 50% of my assets in index funds.  (The rest is in
real estate -- I own 2 homes -- and some individual stocks.)  Index
funds are "no care" investments.  You put the money in and don't worry
about it.  You will match the performance of the market, which, over
time, has been 10% per year.

You're young enough that the amount of time you have gives you a very
large advantage.  Consider this: A person who puts $2000 a year into
an IRA from 20 yrs old to 27 yrs old, then doesn't contribute anything
else to it, will have more money in the investment than the person who
starts at 27 yrs old putting $2000 in every year until he or she is
65.

In summary: Keep it Simple, Pay Yourself First, and Live Below Your
Means: this is the formula for financial success.

J.

Wow.  I'm shocked that there are stil people that think the media
knows about investments.  Consumer Reports?  hahahaahah.  The BEst
Mutual Funds?  hhahaaha thats a sales and marketing gimic to lure
people who want EASY MONEY.  There is no easy money.  Ask yourself
this question--how many of the "Best Mutual Funds to Invest in 2006"
were on the same list in 2005?   Fact is the list always changes so
what does it help?   And i did not even metion what a joke funds are. 
I used to work on Wall Street and advised huge funds and 99% of the
guys are CLUELESS.

As far as teh S&P 500--forget it--that's in the past along with teh Ciscos etc.  

I will give you some advice that is PRICELESS.   Do NOT buy funds. 
Ove rthe next several years, as the market trades sideways, annual
fund fees will eat up your money.

Buy individual stocks---make a list of teh best---avoid financials,
dont get in the gold rush (although gold is headed to $1000) and its
too late for the oil companies (although oil is headed above $1000 by
2012)--they are tapped out in price for the most part. There are some
smaller ones that have potential but I would not recommend an amateur
to deal with them.

Keep a lst of companies like: GE, DELL, MSFT, AMGN, INTC, etc....buy
when they get hammered (DELL, INTC, and AMGN are already good values
but will most likely slip further).  Buy low and SELL HIGH...in other
words, convince yourlsef of teh fact that there is trememndous risk in
the economy and markets for teh next several years and when teh market
rallies sell---when it corrects buy. At all times tries to keep at
least 60% cash to use for opportunities.  If you do this with
reasonable diligence yu will beat all major indices and funds with
much less risk.