Best and safest way to invest 20k

[bmf895]

Originally Posted by otc

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.

 

[Naturally Baked]

Originally Posted by bmf895

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.

 

[Mr.Pinchy]

Originally Posted by Arrogant Bastard

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 "*******," 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

 

[Cavalier]

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)

 

[Master-Classter]

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.

 

[bananananana]

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.

 

[Phantom9309]

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.

 

[Naturally Baked]

Originally Posted by bananananana

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.

 

[phreak]

Originally Posted by Arrogant Bastard

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 "*******," 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 ****** 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.

 

[otc]

Originally Posted by phreak

No, just no. You do realize that people do actively manage money daily as their job right? Its as though you took some ****** 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

 

[Don Carlos]

Originally Posted by phreak

No, just no. You do realize that people do actively manage money daily as their job right? Its as though you took some ****** 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.
First: I manage money professionally, jackass, so I'd appreciate if you dropped the attitude. And, at any rate, I know that there is basically a small handful of people on the entire planet who actually have a consistent track record of being able to pick stocks intelligently (i.e., find legitimate inefficiencies in market pricing of stocks) over the long run. 99.99% of everyone else, professional or amateur, gets lucky and thinks they know what they're doing. I challenge you to show me a highly paid hedge fund manager, let alone Joe Public with a Schwab account and an active portfolio, who can beat the S&P year over year over year. Second: do you even realize what I mean by "active?" That's a technical term, meaning an attempt to make specific trades with the goal of beating the market averages. What this most often amounts to, in amateur practice, is frantic day trading. I don't care what some folks on day trading sites may tell you over the internet: you're going to piss the money away sooner or later by day trading. Even if you trade less frequently, a genuine ability to find market inefficiencies -- especially as a non-institutional investor who just decided to get into the equities markets -- is highly unlikely. So, by all means, ignore my "****** investment advice" and get rich quick by actively trading or stock picking. Be my guest. I mean, ****, no less than Warren Buffet advises lay people against active portfolio management, but what does he know?

Originally Posted by otc

Just so long as everyone in this thread knows that there is a big differance between actively managing your money and day trading
In theory, yes. In practice, most people end up getting addicted to stock picking, and/or frustrated with a day's worth of bad returns, and start day trading. Even if they don't, they still find a way to screw it up by making bad picks or trying to time market changes. IMO, anyone advising the OP to actively manage his $20,000 -- keeping in mind that he's a freaking 22 year old with no prior knowledge base about stock picking -- is basically asking him to gamble away his money. I think that's not only bad, but borderline unethical advice. Finally, the dude asked for the "safest" way to invest the money he's come into. To me, that indicates that this is not money he wants to lose. If that's the case, he should be trying to minimize his risk. It's not the sexiest advice anyone wants to hear, and it certainly gets beaten into people's heads by the likes of Graham, Buffet, Lynch, and other value investment how-to books. But it's pretty damned good advice for someone who isn't looking to gamble. Just because that advice is common, and just because it's been around for awhile, does not mean it's bad advice.

 

[rjmaiorano]

^^^ All that being said he did ask us for the 'most effective' way to invest his money - which is absolutely not day trading. But 'most effective' is vague, so it invited the wide variety of responses in this thread. He also (with a wink and a smile) expected to be a multimillionaire in a decade or so.

I still don't see any problem with him taking a small portion of the funds and taking some risk. If he is not market saavy then of course professional guidance should be sought. But this market, specifically certain sectors and equities, presents excellent long term value that he should consider.

But seeing now that the OP has already had success building businesses he has invaluable small business experience that is going to be his greatest asset going forward. Investing the majority of these funds in another business would be a strong play should the right opportunity come along.

 

[phreak]

First: I manage money professionally, jackass

this explains a lot. Anyway, actively manage was meant to be slightly ambiguous. I would assume that you consider getting in and out of a specific stock after ~one month fairly active. A lot can change in that time.

I challenge you to show me a highly paid hedge fund manager, let alone Joe Public with a Schwab account and an active portfolio, who can beat the S&P year over year over year.

I think you would be very surprised. Idk why I am defending myself here. I guess I am either in the top 99.9% (lol) or have just gotten lucky, my guess is lucky. We agree that it's probably best to just find a few etf's and take that route.

 

[Pezzaturra]

Originally Posted by Arrogant Bastard

First: I manage money professionally, jackass, so I'd appreciate if you dropped the attitude. .

Lol

 

[Mark it 8]

I highly recommend FOREX and dont forget to put a big chunk into Gold