How would you invest $30,000...realistically?

Question

I got a $30,000 total settlement for a recent car accident. I make around $38,000 per year which is low for San francisco. I have no credit card debt and I am 26 by the way. I cant think of how to really spend this money. I live in San Francisco where the average tiny home is at least $300,000 so buying is not an option since my mortgage would be unmanageable(i.e I would not have enough to have a comfortable buffer, not to mention association fees for all condos are at least $300/month here)...The money is in savings at a nice 4% rate for now but I wonder if I can safely increase the money for real. Its not enough money to be a millionaire overnight but does anyone have creative ideas besides perhaps stock market? (I am kind of researching that now anyway). I also plan to keep $5000 untouched at least as an emergency fund by the way.

Answer 1

You can put $4,000 annually into a Roth IRA account. Start doing that. The money earned by the account is tax free forever. That will increase your earnings. But if you do put it in, you will not be able to pull it out until age 59 1/2 without a penalty, so you may not want to put too much into the account, but it is a great way to save.

Several mutual funds will give you the best chance for long term increase in your money if you pick good funds. After deducting your $5000 for emergencies you are left with $25,000. Break it into 4 or 5 bundles. Put one bundle into a large cap fund, one into a small cap fund, one into a Chinese stock fund, one into a European stock fund, and one into a value stock fund. Pick funds that have expense ratios below the average--1.5% and do not turn their holdings at more than 25% annually and have a moringstar rating of 4 or better. Fidelity has a large selection of funds and most have very low expense ratios. You can also choose index funds. They have extremely low expense ratios and have almost zero turnover of their holdings. There are index funds in each of the categories I suggested. You will need to open a brokerage account to buy index funds as they trade like stocks.

However, before doing any of this you really need to educate yourself in investing. Go to your library and check out a couple of basic books. Investing for dummies, mutual funds for dummies, etc.

Answer 2

Do look at the fast growing developing markets of Brazil, Russia, India, and China (BRIC), and the other less covered developing economies

Split ur investment into a 1/3 high growth, 1/3 domestic blue chips, 1/3 safe govt bonds.

The blue chip and govt bond portfolio will allow you to take a loan against your securities should the need arise, so in addition to your 5,000 cash in deposits, you have the potential to raise more.

Assuming a growth rate of
- 10% for high growth
- 6% for domestic blue chip
- 4.5% for govt bonds.

You're looking at an average return of 6.8% / annum. While there are risks in the high growth markets due to the murky nature of such economies, talk to your local banker, if you are still afraid, find a fund that specialises in tracking the index for this markets. Even if the exchange mere trackes the GDP growth in these fast growing markets this is what you are looking at...

2004 - 2005 Growth:
Brazil: 30%
China: 15%
India: 15%
Russia: 30%

Consider other markets that specialise in the Eastern European, Middle Eastern, and central Asia (CIS states)
Kazakhstan: 30%
Kuwait: 29%
Ukraine: 26%
Qatar: 26%
Saudi Arabia: 20%
Oman: 20%

This when compared to N.America / Western European
USA: 5%
UK: 3%
Canada: 13%
France: 3%
Germany: 2%

Answer 3

Move your money immediately to Charles Schwab & Co. (stock broker). They are paying 5.3% on 3 month CDs (government guarenteed), so you have a 1.3% advantage just by moving your money (comes to $390/year).

At this point you can consider what other things make financial sense. Make sure you have no credit card debt for one. Make sure you are making the correct tradeoff with your IRA and 401K transfers/deductions (TurboTax Premier will show you the tradeoffs and appropriate amounts when you do your taxes).

If you are absolutely certain that home ownership is out of the question, consider allocating at least 50% of the money in stocks (leaving the rest in short-term CDs). The money in stocks should be in mutual funds, heavily weighted in overseas investments (personal opinion -- I'm getting a bit afield for this supposedly short answer). I'm not going take this answer much further, except to say that if you really agree and want to follow through, you can get inexpensive help from Schwab financial planners.

Answer 4

If you haven't noticed Stock prices for gas have dropped drastically. A GREAT MOVE would be to invest in some gasoline stocks. Preferrably someone who isn't hated by teh general public. Preferrably a company that doesn't pay it's main man forty million dollar retirement funding. You should just put some money into the gasoline stock and turn the rest into bonds.

Answer 5

Sounds like you are headed in the right direction. A portfolio of mutual funds with different investment objectives would give you the diversity you want to minimize risk.

While you are investigating the stock market pick up a copy of Money magazine to get some sound basic investing ideas and strategies.

Answer 6

Too small to even bother talking to an expert (and there are NO experts at a bank). Researching the stock market won't help you. Investing in it now will. Need to get an Ira going with something like EWA (Ishares Australia ETF) & build some income with a close-end REIT fund like IGR. "Experts" have plenty of high cost advice & heavy load fund to sell you. 4% is not even higher than inflation when you take taxes into account so it is not a "nice' yield - it is a blow to your future hopes.

Answer 7

Go to your local bank and speak with a financial advisor. I'd definitely recommend putting a large portion away in a long term mutual fund. You can get a large return, but it may take some patience. If you are not making much now, it's better to start saving early for the future while you have this extra money.

Answer 8

It sounds like you are off to a good start.
1)You can start and IRA with a few grand and add to it as you want to later.
2)Owning a home will really help you..too bad you can't find a cheap duplex. Then you can start getting rental income. You have to have claimed rental income for 2 years before being able to use the extra income to include it for purchasing more real estate. That would be a good start on increasing your wealth and preparing for owning more real estate.
3) If you qualify people carefully, you can also loan your money out short term at a good rate of return. I am trying to find a professional way to advertise and loan my money out to good credit risks. Title companies will service and accept payments for you so you don't have to hassle with it the payments every month.

Answer 9

Go to your local bank for advice. You want to buy shares that are temporarily low. Buy the shares for keeps, so be patient. Pick up[ the dividend. To cut your costs you might sell long term call options on those shares (somewhat below the current strike rate). Option traders are interested in options rather than shares. But remember annalists very often are wrong as well because they can't look into the future. (My son in law is one and he tells me so)
Mutual bonds is a good thing as well.
Keep 20% in your savings account.

Answer 10

you said you are making 4% with inflation thats just not eneough .Ive been a trader now for 15 years ive traded stocks,commodities and by far currency is the best investment if you know which way it will go.Through lots of trial and error ive developed a day trading currency that is rarely wrong to learn more there is a person on your questions page that asked how to invest $8,000 my answer is the longest i signed off with my email [e-mail] if you want to improve your finances the quickest and easiest way, check out my answer i gave him