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Best and safest way to invest 20k

Discussion in 'Fine Living, Home, Design & Auto' started by Naturally Baked, Apr 12, 2010.

  1. Concordia

    Concordia Well-Known Member

    Messages:
    5,773
    Joined:
    Oct 6, 2004
    I have a real estate fund that guarantees 8% annually and looks like that number is going to jump to 11% with an IRR of 15%

    Does the SEC know about that?
     
  2. dv3

    dv3 Well-Known Member

    Messages:
    2,074
    Joined:
    Feb 16, 2009
    ^ha

    Avoid penny stocks, friend

    Ford is not as safe as you may think these days

    Research mutual funds, there are almost limitless choices

    Be reasonable about returns for mutual funds and pretty much anything else. 8-10% a year long term isn't very reasonable, research shows.

    Safest is still US Treasuries

    Two books to consider as an new investor: Benjamin Graham's Intelligent Investor and A Random Walk down Wall Street, or it's abridged version (by the same author) A Random Walk Guide to Investing
     
  3. ANIKETOS

    ANIKETOS Well-Known Member

    Messages:
    396
    Joined:
    Dec 14, 2009
    Location:
    Somewhere
    Does the SEC know about that?

    Its not registered in the US [​IMG]
     
  4. oman

    oman Well-Known Member

    Messages:
    1,629
    Joined:
    Mar 12, 2006
    i suggest sticking a good portion of it in emerging markets

    to misquote some institutional investor, "asia's breakneck growth makes the very notion of risk aversion seem antiquated"

    wisdomtree ETFs will allow you to do this with minimal micromanagement
     
  5. otc

    otc Well-Known Member

    Messages:
    14,201
    Joined:
    Aug 15, 2008
    Thats a good idea...im obviously gonna spend a bit of it on some nice things for myself (can't let ALL the hard work I did go into a long-term fund [​IMG] ) I really wanted to get something that would eventually pay off grad school for me or allow me to purchase or put a down payment on a house atleast by the time I get my doctorate degree.
    If grad school won't load you up too bad with loans, it might still be worth tossing it into a rothIRA and carrying the loans. With pretty low rates right now, student loans are pretty cheap money and will be beat out by market returns (especially since you are avoiding capital gains tax in the roth). Having a leg up on retirement might make it easier to make other decisions. A reminder (which I didn't make clear originally)--Roths have contribution limits. No matter what you plan to do with the rest of the money, you should be hitting your 5K limit this year (technically if you can open it in the next 2 days, you can still make a $5k 2009 contribution bringing you up to $10k). That leaves you 15k ..definately take some for yourself now...make a big toy purchase that you can get a few years out of like a new computer or a PS3 or a nice bicycle. You don't want to blow too much of it (and don't do it until you have a plan for the rest of it) but you should get something before you lock it away. After that, aim to hit your roth ira limit again next year (if you want to force yourself to do that...you could get a 9-month CD to lock up the contribution limit until 2011). now we are down to what...8k? This could be your future down payment or the repayment of principal on any higher interest loans...until then you are probably looking at some sort of brokerage account and some funds (similar to what would be in your Roth). I would recommend Thinkorswim for both Roth IRAs and regular trading...you probably won't use most of their advanced features (I certainly don't) but they are good people. EDIT: it is of note that (while against conventional wisdom), Principal withdrawals from a Roth IRA are tax and penalty free for any funds that were deposited >5 years ago. Raiding your retirement account isn't good advice, but if you specifically plan for it, it can make sense (e.g. you would like to use a sum of money in several years as a down payment but you would also like to start an IRA...you can start it with the sum of money, withdraw it 5 years later, and keep the IRA going off of the interest and later contributions)
     
  6. Mr.Pinchy

    Mr.Pinchy Well-Known Member

    Messages:
    565
    Joined:
    Sep 26, 2008
    Location:
    Hot dog
    Spend it on something that will make you happy and try to pay attention in grad school. That way, $20k won't mean anything to you when you're making the big bucks.
     
  7. unjung

    unjung Well-Known Member

    Messages:
    6,544
    Joined:
    Sep 30, 2008
    Location:
    The beach
    Its not registered in the US [​IMG]

    What provides the guarantee?

    And where is the issuer located?
     
  8. rjmaiorano

    rjmaiorano Well-Known Member

    Messages:
    2,209
    Joined:
    May 1, 2007
    Location:
    SD
    Go ahead and shore up a small portion in savings if you don't have any savings already. You are 22, I assume you don't have a family or anyone that is immediately dependent on you. Take some risk. I'm going to guess that a lot of the people here giving you suggestions are older than you, likely have families and look at this from a safer standpoint. Index funds and ETFs are all well and good but they have ceilings. I'm not saying be foolish with you're money (no fool joke) but do your due diligence and take some calculated risk, you won't make substantial money if you don't.

    Most funds are too diversified IMO, but they are like that for a reason; the average investor is not prepared to stomach high betas or even analyze a balance sheet so they opt for 'safe' funds that offer decent returns. The market has kicked the hell out of most equities out there and a lot of valuable companies took a hard hit whether they deserved it or not. There is a ton of value in this market IMO and at your age you should be able to stomach some risk. Just get some solid advice under your belt, make as informed as decision as you can and go after some good ol fashioned risk.

    Random thoughts. I'd second the Graham book as a solid beginners guide, I'm a huge fan of Fords these days, opening a Roth with say 5k is a good idea, and dividends are you're friend.
     
  9. Don Carlos

    Don Carlos Well-Known Member

    Messages:
    7,527
    Joined:
    May 15, 2009
    Plan A:

    a) Realize how likely you are to burn through it or lose it if you decide to actively manage it.
    b) Realize again.
    c) Realize again.
    d) Stick it in a few ETFs or index funds.

    Plan B:

    a) Realize how likely you are to burn through it or lose it if you decide to actively manage it.
    b) Say "fuck it," and spend the money on strippers and blow.

    Plan C:

    a) Realize how likely you are to burn through it or lose it if you decide to actively manage it.
    b) Roulette!
     
  10. ANIKETOS

    ANIKETOS Well-Known Member

    Messages:
    396
    Joined:
    Dec 14, 2009
    Location:
    Somewhere
    What provides the guarantee?

    And where is the issuer located?


    Saudi Arabia.
     
  11. bmf895

    bmf895 Well-Known Member

    Messages:
    259
    Joined:
    Jan 31, 2009
    If grad school won't load you up too bad with loans, it might still be worth tossing it into a rothIRA and carrying the loans. With pretty low rates right now, student loans are pretty cheap money and will be beat out by market returns (especially since you are avoiding capital gains tax in the roth). Having a leg up on retirement might make it easier to make other decisions.

    A reminder (which I didn't make clear originally)--Roths have contribution limits. No matter what you plan to do with the rest of the money, you should be hitting your 5K limit this year (technically if you can open it in the next 2 days, you can still make a $5k 2009 contribution bringing you up to $10k).

    That leaves you 15k ..definately take some for yourself now...make a big toy purchase that you can get a few years out of like a new computer or a PS3 or a nice bicycle. You don't want to blow too much of it (and don't do it until you have a plan for the rest of it) but you should get something before you lock it away. After that, aim to hit your roth ira limit again next year (if you want to force yourself to do that...you could get a 9-month CD to lock up the contribution limit until 2011).

    now we are down to what...8k? This could be your future down payment or the repayment of principal on any higher interest loans...until then you are probably looking at some sort of brokerage account and some funds (similar to what would be in your Roth). I would recommend Thinkorswim for both Roth IRAs and regular trading...you probably won't use most of their advanced features (I certainly don't) but they are good people.

    EDIT: it is of note that (while against conventional wisdom), Principal withdrawals from a Roth IRA are tax and penalty free for any funds that were deposited >5 years ago. Raiding your retirement account isn't good advice, but if you specifically plan for it, it can make sense (e.g. you would like to use a sum of money in several years as a down payment but you would also like to start an IRA...you can start it with the sum of money, withdraw it 5 years later, and keep the IRA going off of the interest and later contributions)


    With Federal Stafford Loans charging 6.8% interest, that is not exactly cheap money in this economy. Many people would be THRILLED to get a 6.8% annual return these days. You should seriously consider whether going to graduate school makes financial sense. Tuition is NOT cheap like it was up until the 1980s. The additional earning power of a graduate degree is marginal when you factor in the exorbitant price of a graduate education that you could be paying off for 30 years.
     
  12. Naturally Baked

    Naturally Baked Well-Known Member

    Messages:
    158
    Joined:
    Mar 11, 2010
    With Federal Stafford Loans charging 6.8% interest, that is not exactly cheap money in this economy. Many people would be THRILLED to get a 6.8% annual return these days. You should seriously consider whether going to graduate school makes financial sense. Tuition is NOT cheap like it was up until the 1980s. The additional earning power of a graduate degree is marginal when you factor in the exorbitant price of a graduate education that you could be paying off for 30 years.
    The field I want to go into requires a doctoral degree. So it is a 4 year program. I have a business background, but am not in a business undergraduate program. The money I just got is actually from selling the first business I started. What I am planning on doing is making my resume, applying to jobs all over the country as well as applying to graduate schools. If I get a job offer, out of luck, that I really like for decent money (75-80k) then I will take it, if not then I will head off to graduate school. Right now I am really open to whatever the universe has to offer me.
     
  13. Mr.Pinchy

    Mr.Pinchy Well-Known Member

    Messages:
    565
    Joined:
    Sep 26, 2008
    Location:
    Hot dog
    Plan A:

    a) Realize how likely you are to burn through it or lose it if you decide to actively manage it.
    b) Realize again.
    c) Realize again.
    d) Stick it in a few ETFs or index funds.

    Plan B:

    a) Realize how likely you are to burn through it or lose it if you decide to actively manage it.
    b) Say "fuck it," and spend the money on strippers and blow.

    Plan C:

    a) Realize how likely you are to burn through it or lose it if you decide to actively manage it.
    b) Roulette!


    Plan B
     
  14. Cavalier

    Cavalier Well-Known Member

    Messages:
    989
    Joined:
    Aug 20, 2007
    I'd throw it in some quality munis, jpmorgan has a real nice ohio (since I live here) munibond fund which pays like 4-5% and is free from any tax consequence

    also, if you're just opening up a 529, you could put it all in there (up to like 50g's I think) .. assuming you face a tax bill on the money (i.e. it's not from life insurance or something like that)
     
  15. Master-Classter

    Master-Classter Well-Known Member

    Messages:
    8,463
    Joined:
    Jul 18, 2007
    Location:
    Toronto, Canada
    not having read all the responses... here's my $0.02 let me make this clear, there is no such thing as a "SAFE investment". Personally, I'm risk averse and never want to risk my capital. Why would I just hand my money over to someone else and hope tehy'll use it well, for what? me being greedy and hoping to get more money back then I gave them for doing nothing? I'd say just put it somewhere safe like a bond or something and that way you're gaurenteed to still have it. If you really want, take 25% as F U money and play around in teh market, but keep some aside with zero risk. seriously, WTF do you know about investing? that's not your expertise, and everyone else out there does this 24/7. that's there job, all day every day. buying and selling to get a better deal then you. All you control is A) How much to put in or take out and B) When you do it. Stick to what you know how to do best. Otherwise it's basically out of your control. Why would I ever put my money somewhere out there where I have no control over how well it does.
     
  16. bananananana

    bananananana Well-Known Member

    Messages:
    664
    Joined:
    Jan 27, 2010
    Buy some risky, high potential stocks. Not penny stocks, but look at small caps and beaten down companies. You're 22, you'll have plenty of chances to make more money. As long as you don't need the cash in the next couple years, the relative risk is low based on your age and future earning potential.

    The other alternative is to start your own business but that's a whole other discussion.
     
  17. Phantom9309

    Phantom9309 Well-Known Member

    Messages:
    100
    Joined:
    Jul 4, 2009
    Location:
    Minneapolis
    I only skimmed through most of what other people said. I did notice you saying that the money was from sale of a business. So, make sure your taxes are in order before moving that money around.

    You should really look at your 1, 3, 5, and retirement plans to assess where you are with risk (Think liquidity needs). After that, consider a Roth IRA if it's not already in the picture.

    Financial advisors aren't a bad route to consider because the cost benefit analysis of your time might favor it. Though, I believe you should still have a good base knowledge of your finances with or without an advisor.

    I'd start with knowing the concept of Time value of Money. It's pretty basic for anyone taking finance but I've had classmates who didn't understand it after a year of courses.

    Good luck and you're still young so taking risk isn't necessarily a bad thing.
     
  18. Naturally Baked

    Naturally Baked Well-Known Member

    Messages:
    158
    Joined:
    Mar 11, 2010

    The other alternative is to start your own business but that's a whole other discussion.


    working on this....I have been an entrepreneur since I was 14. Started my first event coverage website and networked with some top name magazine companies. By 16 I had a commercial spot on the radio advertising a car show affiliated with my company, then I sold that and started the one I just sold....I really want to start another business, but not sure what yet.
     
  19. phreak

    phreak Well-Known Member

    Messages:
    1,533
    Joined:
    Apr 17, 2008
    Plan A:

    a) Realize how likely you are to burn through it or lose it if you decide to actively manage it.
    b) Realize again.
    c) Realize again.
    d) Stick it in a few ETFs or index funds.

    Plan B:

    a) Realize how likely you are to burn through it or lose it if you decide to actively manage it.
    b) Say "fuck it," and spend the money on strippers and blow.

    Plan C:

    a) Realize how likely you are to burn through it or lose it if you decide to actively manage it.
    b) Roulette!


    No, just no. You do realize that people do actively manage money daily as their job right? Its as though you took some shitty investment book advice and now consider it fact. There are other options. I would advise any smart, semi market educated person to actively manage their money.
     
  20. otc

    otc Well-Known Member

    Messages:
    14,201
    Joined:
    Aug 15, 2008
    No, just no. You do realize that people do actively manage money daily as their job right? Its as though you took some shitty investment book advice and now consider it fact. There are other options. I would advise any smart, semi market educated person to actively manage their money.

    Just so long as everyone in this thread knows that there is a big differance between actively managing your money and day trading
     

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