Investing some money, what should I do?

Question

I just sold my first home, and came out with about 40k. Want to invest it, it's a great time because my employer provides housing.
I'm confused by CD's, Bonds, T Bills...someone even said I should by some land. I dont want another fixer-upper house, I'm not in the position to do that kind of work again. Any advice greatly appreciated!!

Answer 1

You should invest in stocks, bonds, and money market funds. You want to buy a diversified portfolio of stocks, as individual stocks are too risky. For most folks this means buying mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low cost funds. If you are like most people you will invest part of your money conservatively, in money market funds and bond funds, and part aggressively in stock funds. Vanguard.com has an on-line questionnaire which will give you an idea how aggressive you want to be.

If your company offers a 401K plan at work, try to invest the most you can. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea.

I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion

I am not a great proponent of buying land. Real estate has shot up a lot the last few years, but right now it looks like it may be dropping in value in the near future.

If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above. You should also have 3-6 months of salary saved up as an emergency fund in a bank or money market fund before trying more risky investments.

Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.

Sources:

http://www.vanguard.com/VGApp/hnw/planningeducation
http://finance.yahoo.com/funds
http://www.dallasnews.com/sharedcontent/dws/bus/scottburns/columns/2007/vitindex.html
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetallocation.htm
https://flagship.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//flagship.vanguard.com/VGApp/hnw/planningeducation/education

Answer 2

The first thing to consider is how long you were in the home. If you were in it for less than two years, you will be subject to capital gains taxes, unless you use legal means of avoiding them. Some of the more common tax shelters include things such as a 1031 exchange, which allows you to get a similar property, but it seems as though you aren't too interested in that, and a traditional IRA, which will allow you to put money away for retirement tax-deferred. With an IRA, you could also continue to add to it in future years for your retirement. Plus, you can take what is in it and invest it in the stock market and not pay taxes on it until you take it out. If you don't mind taking the hit on taxes, you can put what is left into a Roth IRA, and then you can invest it the same way you can a traditional IRA, only you never have to pay taxes on the earnings. Any bank could help guide you through the process of getting either one of these options started.
A CD is basically where you give the bank your money for a set time frame and they pay you interest on it. A bond works the same way, but with the government paying the interest on money you give them. You just agree that you won't touch your money for the length of the CD or Bond, for example 5 years. These are both safe methods of keeping your money, and will get you some return on it. Typically, the rates will be around five or six percent for that amount of money.
There are other options that will get you a better return, but are more risky, like just investing in the stock market and tax lien certificates. I would say to find a GOOD financial advisor (good being the key word). A good CPA is also a good idea.

Answer 3

A lot depends on what you want this money to do. Are you investing it for retirement and how far away is that? Do you want the money to stay liquid? Meaning you can cash it out fairly quickly if you want to. Are you looking for growth or what?

Since you don't know a lot about investing, at this point, you need to take a conservative approach until you learn more. I'd also seek the advice of an investment counselor. Not one that wants to charge you an arm and a leg though. Some of those guys that pass themselves off as investment advisors are nothing but crooks so be careful. Check with your bank and see if they have an investment advisor.

Look into Mutual Funds too.

Answer 4

Look around (newspaper ads) for a bank CD rate of about 5.40% for up to about a year. Take that time to figure out what to do. Real Estate is always good but if somebody is giving you a place to stay for free, TAKE IT. If you want to invest it long term then start looking at the stock market. Start with yahoo finance and look at top mutual funds. Watch a few things for a while. Only look at things you understand. In 8 months you will have a better idea. You sound young and unmarried so you shouldn't lock it all up in an IRA at this point. Look into an IRA for a portion of it anyway. No load mutual funds would be a good place to start. Maybe even a Index Fund. Look it up.
read read read

Answer 5

The 1st thing for you to deside is your investment horizon. How long do you plant to invest the money for? If over 10 years, equity investments should provide you with a good return of about 10% to 13% annually. If over 5 years equity investments might do as well but may not because of market fluctuations. If under 5 years equities may actually provide you with a negative return. They may not also.

There are many really good mutual funds that can provide you with a probable 10% return over 10 years. There is also the choice of index funds that might very well provide 10%+.

If under 5 years, t-bills are a very good option for a portion of the amount.

With that amount of money to invest, diversity of investments should be a prime consideration. A little invested here and a little invested there so to speak. It reduces specific risk.

check out these mutual funds. Fidelity, Vanguard, T Rowe Price, and Royce Funds. Each of these fund companies have a wide variety of excellent funds, except for Royce Funds. They have excellent funds, but not a wide variety. They specialize in small cap funds.

Answer 6

Invest in the bonds and money markets.
Find a trusted professional proved and tested already..

I suggest Prudential, Fidelity, but go directly to the broker dealer and not to the banking side...avoid speculation (what is your age?) or get into currency exchange trading...

Do not talk to any 5 and dime securities outfit..Go to the big ones. Get into Wall street journal and find out the top rated traders and open an account. You have enough money to start a decent account with any of them...

keep in touch whit your SFA (senior financial advisor) at all times. develop a friendship, and you will get better results..\

good luck

Answer 7

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