It's been on my account for at least 3 years. Nothing ever seemed worthy of investing it. How does one find the confidence to invest large sums? Do you start small? How to get rid of the pressure knowing that money is just collecting dust?
The world of investing is filled with a lot of bs, conflicts of interest, snake oil, fraud, and plain old incompetence.
Therefore, you need to pretty much learn enough that you could do it all yourself. At that point, you might not do it all yourself, but you'll have a decent chance of judging whether or not someone (advisor, robo-advisor, investment fund, index fund provider etc.) you delegate to knows what they are doing.
And by the way, I'm starting up a hedge fund right now. I can guarantee you an annual 20% return.
Well, it depends on your situation, but in general you could consider:
- Do you have high interest debts? Paying off debt is a guaranteed return.
- Can the money be invested, or is it earmarked for e.g. downpayment for a house, new car, education, or other short to mid-term purchases ? Consider your investment horizon. If it's less than 3-5 years, consider leaving it where it is.
- Can you spend it on yourself, e.g. improve your earning potential or start a business ?
- If you want to invest it in the stock market, I would not try and pick stocks, but spread it across a number of well diversified funds. I also would not spend all the money at once but e.g. aim to invest a chunk of it every month over 6-8 months
Think within the context of broader personal finance considerations, there's already a few good links in the answers.
First off: Well done saving up! If you are paralysed about (getting started with) investing, I can recommend the books "A random walk down Wall Street" and the (very thick but well worth it) "The intelligent investor".
Especially the last one opened my eyes a lot about how to approach investing. I have the revised edition from 2006, though the original publication was in 1949. The 2006 edition has a section after each chapter discussing how the original chapter fared in the decades after publication. Without exception, the lessons discussed in the book from the 1929 recession and earlier turned out to have been very applicable in the dotcom crash of 2000, the "black monday" crash of 1987, etc. It really shows how most things are nothing new and gives a lot of perspective on the markets.
Reading up and understanding how the stock markets work can take away some of the pressure. Finally, there is no rule about having to start big or small. If it makes you feel better, start with $500 and see how it goes. The sister comment by "ForHackernews" about starting with a diversified index fund is good advice (and probably what you'd conclude anyway after reading the books).
I take it you are a young person... First max out your company 401K with as much contribution to the ROTH option as you can afford... invest it in the lowest fee broad market matching index fund (Hint: S&P500) you can find. OK... now hopefully you are down with this and you still aren't eating into that 80K... If you don't need this money for a house, Well... over the long haul investment in the broader stock market "historically" doubles investments every 7 years. So, I'd suggest you open a cheap online brokerage account and first invest as much as you can into a ROTH and drop both ROTH and excess into an (again S&P500?) index mutual fund with the lowest expense ratio that you can find... and... try not to look at it again for the next 30 years except to convert as much each year into ROTH as possible. After 30 years you will hopefully look back into your account and have about $1.5M in that account with... being able to pull some significant amount of that investment out _tax free_. If you do need some of it for a house try to avoid 30 year loans and elect for 10-20 year loans.
Right now is a very risky time to invest. It could be that it turns out to be a good time, because stocks are about 20% below the all-time high. But there could also be a second crash, when investors realize the real impact of the economic crisis caused by Covid-19. In addition to that, there's the risk of inflation caused by government bailouts.
What I'm doing right now is keeping about 1/3rd in gold ETF as inflation protection, about 1/3rd in stocks ETFs and the rest in cash. Once the whole thing is over, I will probably move back to stock ETFs.
Short answer: Dump it all in VFIAX and ignore it for about 30 years.
Alternately, wait for the housing market freefall that is scheduled to hit about 180 days from now, and buy a foreclosure or two.
EDIT: Cosigning the above recommendation about maxing out a Roth IRA each and every year as well, and of course maxxing out any company-matched 401(k) options.
The problem (for me) with index funds is that you end up participating in stocks for companies you may not want. For example, I don't want a penny of my money to go to Facebook, Amazon, Google, etc. Here's the VFAIX top ten holdings:
Microsoft Corp
Apple Inc
Amazon.com Inc
Facebook Inc A
Berkshire Hathaway Inc B
Alphabet Inc Class C
Alphabet Inc A
Johnson & Johnson
Visa Inc Class A
Procter & Gamble Co
It has always blown my mind that the answer for "retirement" now is to put your money in the online casino.
As a father of two young kids, the last thing I want to do is contribute to the erosion of any sense of privacy my kids may have in the future. Using Facebook as a tool for retirement is just as dumb to me as using Facebook for anything else.
Your short answer suggests you cannot time the market but over the long run, stocks generally go up so they're a good long term investment. Also this answer touts the benefits of passive liquid investments with transaction costs associate with it.
Your second answer goes completely the other direction. The answer suggests to time an investment in real estate, the least liquid investment with the highest transaction costs a typical investor could buy.
No one knows what housing market will be like 180 days from now, no matter how many times they're interviewed on CNBC.
overall awfully misguided advice. when you buy foreclosure you are buying all responsibilities for the home - past debts, mortgages, liens, future taxes, repairs etc - in addition you are betting that future appreciation will all pay off - not guaranteed at all. Homes are illiquid and a lot of trouble.
no one should just buy a foreclosed home without thorough preparation
Even if there were to be a massive freefall in housing it would take the banking system months, and probably years, to get round to processing all the mortgages which were in arrears.
Foreclosure is a slow, slow, slow process even at the best of times. People can avoid paying their mortgages and still be living in a property for many years. If you're imagining something that covers a significant amount of property that will take even longer.
Pick one or two ETF and set up a monthly amount to invest into them. You don’t need to invest everything at once and the monthly commitment averages out short term effects. If you want to be more active with a part of your money, you can also commit to buy a couple of stocks monthly. If you get rid of poorly performing stocks regularly and rebalance the portfolio you can declare them as capital losses that will count towards any future capital gains.
After paying down any high interest debts and earmarking at least 3 months worth of living expenses into a savings account or other cash equivalent as an emergency fund.
There’s a great decision making flowchart floating around somewhere or other.
I would actually keep holding it in cash -- that is maybe 2 years of emergency funds if you are married/have a family?
Keep it in cash, pretend you don't have it (create a separate account that is just this sitting there), continue earning and saving. Anything extra you earn after this 80k base you can invest (simple things like index funds, dollar cost average in slowly).
I used to be a stock broker. But right now I am not your stock broker. This is not advice.
Great fundamental wisdom is that you can't (consistently) time the market but you should try to Buy Low, Sell High. That said, we experience a massive COVID crash. It's a great time to buy, but we don't know how long it will last or whether it will be long recession afterwards.
Index investing through ETFs is a great way to get diversity in a single financial instrument such as the S&P (large companies), NASDAQ (tech), or the Russell (small companies.) The NASDAQ has largely recovered but the Russell still has a long way to go back to February prices.
I have an old friend whose parents sold their home recently and gave him a sum. He's putting in 10% per month for the next 10 months, all in the S&P.
Depending on time frame is the key to deciding where to put it.
How to put it, the best advise, and I am doing this myself, is to put it in a little at a time. For my needs, I have selected 8 places to put the money. Based on 3 different times to need the money. I then looked at each to determine where I thought they were going. i.e. money in emerging markets I will not put into until a year from now. Real estate and banking I am waiting to the start of summer. Others started a month ago. When I expected to be fully invested. For each I assigned now much in total I plan to put in. This gives me an amount over time to invest.
Using your 80K, assume you wanted 3 pots. Pot A is 35K, pot B is 25K and Pot C is 20K. Assume you want to put pot A 35K in over the next 6 months - assumption being you expect the bottom of that market within that time frame. 6 months is approximately 180 days - or $194 per day - $1361 per week. So I would either once a week put in $1361 or every other week $2722. In your case, I would probably do it every week.
I highly recommend vanguard.
Plan two, follow Warren Buffets advice - he said when he dies to put in 10 amount in short term government bond fund for his wife to spend every year, and the rest in a S&P 500.
Thanks for mentioning this. Bogleheads Wiki [1] is a goldmine of index investing and asset allocation insights for every stage of an individual investor's lifecycle. Highly recommended.
I dunno man I'd go for precious metals and gemstones so you can at least look at it while it collects dust. Personally I think old gold pesos are pretty cool.
You could look into investing it into crypto money. It obviously is risky, there is no doubt about that, but can yield you very good returns, even in the current crisis. There are a large variety of options depending on the risk-level you are willing to take.
If you don't want to go that deep, I can recommend the crypto.com app/platform, one of the most approachable options right now imo with more or less "safe" earning options for which you do not need to know anything about trading (my referral code: aenfe3qkjz):
https://crypto.com/
What about: nothing, just accumulate more, stach it and one day a need or opportunity will arise.
Might not be a popular opinion since we all are expected to optimize everything but 50 years in and this non strategy has made my financial live rather dull, which I like.
What do you want? How old are you/how much career do you have left to fix a screwup? How much of a catastrophe is losing everything? Are you responsible for other people's well-being? Where are you located? How do you feel about risk? What is your housing situation?
I used a similar amount to buy a very small house in cash, but this would be considered a poor move in many ways (mortgages are pretty cheap debt). It works for me, though.
You decide whether to trust it. Considering your circumstances, the advice can be condensed to buying and continually investing into ETF and holding the assets for a couple of decades, as a few fellow HNers already said.
[+] [-] parenthesis|5 years ago|reply
Therefore, you need to pretty much learn enough that you could do it all yourself. At that point, you might not do it all yourself, but you'll have a decent chance of judging whether or not someone (advisor, robo-advisor, investment fund, index fund provider etc.) you delegate to knows what they are doing.
And by the way, I'm starting up a hedge fund right now. I can guarantee you an annual 20% return.
[+] [-] mrbonner|5 years ago|reply
[+] [-] alltakendamned|5 years ago|reply
- Do you have high interest debts? Paying off debt is a guaranteed return.
- Can the money be invested, or is it earmarked for e.g. downpayment for a house, new car, education, or other short to mid-term purchases ? Consider your investment horizon. If it's less than 3-5 years, consider leaving it where it is.
- Can you spend it on yourself, e.g. improve your earning potential or start a business ?
- If you want to invest it in the stock market, I would not try and pick stocks, but spread it across a number of well diversified funds. I also would not spend all the money at once but e.g. aim to invest a chunk of it every month over 6-8 months
Think within the context of broader personal finance considerations, there's already a few good links in the answers.
[+] [-] WJW|5 years ago|reply
Especially the last one opened my eyes a lot about how to approach investing. I have the revised edition from 2006, though the original publication was in 1949. The 2006 edition has a section after each chapter discussing how the original chapter fared in the decades after publication. Without exception, the lessons discussed in the book from the 1929 recession and earlier turned out to have been very applicable in the dotcom crash of 2000, the "black monday" crash of 1987, etc. It really shows how most things are nothing new and gives a lot of perspective on the markets.
Reading up and understanding how the stock markets work can take away some of the pressure. Finally, there is no rule about having to start big or small. If it makes you feel better, start with $500 and see how it goes. The sister comment by "ForHackernews" about starting with a diversified index fund is good advice (and probably what you'd conclude anyway after reading the books).
[+] [-] slantaclaus|5 years ago|reply
[+] [-] mback00|5 years ago|reply
[+] [-] tjansen|5 years ago|reply
[+] [-] basch|5 years ago|reply
20% Total Stock Market
20% Small Cap Value
20% Long Term Bonds
20% Short Term Bonds
20% Gold
You could replace short term bonds with Cash, TIPS, CDs, Bitcoin.
[+] [-] jpn|5 years ago|reply
2. Choose a target volatility level you're comfortable with (I like 20%).
3. Buy shares of BRKB. Buy enough such that volatility of your portfolio reaches your target volatility.
4. Every month, update your share amount to maintain the same target volatility.
https://alphaarchitect.com/2019/05/22/volatility-targeting-i...
[+] [-] t0mas88|5 years ago|reply
[+] [-] sneak|5 years ago|reply
Alternately, wait for the housing market freefall that is scheduled to hit about 180 days from now, and buy a foreclosure or two.
EDIT: Cosigning the above recommendation about maxing out a Roth IRA each and every year as well, and of course maxxing out any company-matched 401(k) options.
[+] [-] cityzen|5 years ago|reply
Microsoft Corp Apple Inc Amazon.com Inc Facebook Inc A Berkshire Hathaway Inc B Alphabet Inc Class C Alphabet Inc A Johnson & Johnson Visa Inc Class A Procter & Gamble Co
It has always blown my mind that the answer for "retirement" now is to put your money in the online casino.
As a father of two young kids, the last thing I want to do is contribute to the erosion of any sense of privacy my kids may have in the future. Using Facebook as a tool for retirement is just as dumb to me as using Facebook for anything else.
[+] [-] bko|5 years ago|reply
Your second answer goes completely the other direction. The answer suggests to time an investment in real estate, the least liquid investment with the highest transaction costs a typical investor could buy.
No one knows what housing market will be like 180 days from now, no matter how many times they're interviewed on CNBC.
I like your first answer better.
[+] [-] glofish|5 years ago|reply
no one should just buy a foreclosed home without thorough preparation
[+] [-] stevekemp|5 years ago|reply
Foreclosure is a slow, slow, slow process even at the best of times. People can avoid paying their mortgages and still be living in a property for many years. If you're imagining something that covers a significant amount of property that will take even longer.
[+] [-] silicon2401|5 years ago|reply
[+] [-] neilgodwin|5 years ago|reply
[+] [-] orbifold|5 years ago|reply
[+] [-] gshdg|5 years ago|reply
After paying down any high interest debts and earmarking at least 3 months worth of living expenses into a savings account or other cash equivalent as an emergency fund.
There’s a great decision making flowchart floating around somewhere or other.
[+] [-] BrandonSmith|5 years ago|reply
Here is a complex one... https://i.imgur.com/c0p24cU.png
[+] [-] forgingahead|5 years ago|reply
Keep it in cash, pretend you don't have it (create a separate account that is just this sitting there), continue earning and saving. Anything extra you earn after this 80k base you can invest (simple things like index funds, dollar cost average in slowly).
[+] [-] basch|5 years ago|reply
[+] [-] andrewmatte|5 years ago|reply
Great fundamental wisdom is that you can't (consistently) time the market but you should try to Buy Low, Sell High. That said, we experience a massive COVID crash. It's a great time to buy, but we don't know how long it will last or whether it will be long recession afterwards.
Index investing through ETFs is a great way to get diversity in a single financial instrument such as the S&P (large companies), NASDAQ (tech), or the Russell (small companies.) The NASDAQ has largely recovered but the Russell still has a long way to go back to February prices.
I have an old friend whose parents sold their home recently and gave him a sum. He's putting in 10% per month for the next 10 months, all in the S&P.
[+] [-] Leherenn|5 years ago|reply
I would assume to be more flexible and be able to change strategy if something goes wrong?
[+] [-] sloaken|5 years ago|reply
Depending on time frame is the key to deciding where to put it.
How to put it, the best advise, and I am doing this myself, is to put it in a little at a time. For my needs, I have selected 8 places to put the money. Based on 3 different times to need the money. I then looked at each to determine where I thought they were going. i.e. money in emerging markets I will not put into until a year from now. Real estate and banking I am waiting to the start of summer. Others started a month ago. When I expected to be fully invested. For each I assigned now much in total I plan to put in. This gives me an amount over time to invest.
Using your 80K, assume you wanted 3 pots. Pot A is 35K, pot B is 25K and Pot C is 20K. Assume you want to put pot A 35K in over the next 6 months - assumption being you expect the bottom of that market within that time frame. 6 months is approximately 180 days - or $194 per day - $1361 per week. So I would either once a week put in $1361 or every other week $2722. In your case, I would probably do it every week.
I highly recommend vanguard.
Plan two, follow Warren Buffets advice - he said when he dies to put in 10 amount in short term government bond fund for his wife to spend every year, and the rest in a S&P 500.
https://www.investors.com/news/warren-buffett-sticks-with-tw...
[+] [-] uhnuhnuhn|5 years ago|reply
[+] [-] neilgodwin|5 years ago|reply
[+] [-] ForHackernews|5 years ago|reply
Just invest in a broadly diversified index fund.
Start here if you're a total beginner: https://www.bogleheads.org/wiki/Getting_started
[+] [-] imakwana|5 years ago|reply
[1] https://www.bogleheads.org/wiki/Main_Page
[+] [-] neilgodwin|5 years ago|reply
[+] [-] jazzyjackson|5 years ago|reply
https://www.apmex.com/product/1044/mexico-gold-20-pesos-rand...
[+] [-] sayun|5 years ago|reply
If you are interested in trading, I can warmly recommend starting here: https://hackernoon.com/all-my-trusty-crypto-trading-wisdom-i...
If you don't want to go that deep, I can recommend the crypto.com app/platform, one of the most approachable options right now imo with more or less "safe" earning options for which you do not need to know anything about trading (my referral code: aenfe3qkjz): https://crypto.com/
[+] [-] PappaPatat|5 years ago|reply
Might not be a popular opinion since we all are expected to optimize everything but 50 years in and this non strategy has made my financial live rather dull, which I like.
[+] [-] CalRobert|5 years ago|reply
I used a similar amount to buy a very small house in cash, but this would be considered a poor move in many ways (mortgages are pretty cheap debt). It works for me, though.
[+] [-] bmn__|5 years ago|reply
You decide whether to trust it. Considering your circumstances, the advice can be condensed to buying and continually investing into ETF and holding the assets for a couple of decades, as a few fellow HNers already said.
[+] [-] unknown|5 years ago|reply
[deleted]