Best and safest way to invest 20k

Originally Posted by Mark from Plano

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Not one of the investments you listed would be considered "safe" in any reasonable context. Maybe as opposed to dropping it on black at the casino, but that's about it. You can lose up to 100% of your investment in any of the investments you mentioned. Penny stocks are the worst. Investing 100% of your money in a distressed company in a distressed industry (Ford) is not much better. Mutual funds are the safest of the ones you mentioned (that's not saying much) but any mutual fund with a history of returning 15-20% will be in a higher risk, more volatile sector that as likely as not will lose that much (or more) in any given year.

You need professional help. Find a fee based financial planner (fee based is key) to help you decide on a plan. If you don't have a 3-6 month cash reserve, then this money should go into a CD ladder for a rainy day. After that you can start thinking about investing in equities or bonds.

A good financial planner can help you assess your risk tolerance. Think about this: If you got your brokerage statement and this money had gone from $20,000 to $10,000, how would you feel? If you said anything but "calm" then the investments you listed are probably wrong for you. If you said that you'd want to vomit, then you need a much safer investment. Scared money makes bad decisions. Don't do anything until you have a well-thought out plan.
JMHO.

I really dont think he needs professional help. Investing isnt that complicated. It seems that the OP knows a few of the options that are available to him, enough to make an informed decision on his own at least. Especially with a relatively small amount like 20k, he could really get a great return while having loads of fun and learning a ton too.

If you want to be more passive, I would suggest you open a Scottrade account and just buy a few etf's that sum up to 20k; they do a decent job of diversifying with little to no effort minus the fees. If you want to be more active (some people really enjoy this part when they just start investing) read up on strategies and pick a few stocks that you think make sense. Dont just invest all 20k in one sit-down, watch the market closely for a few weeks/months.

Originally Posted by Naturally Baked

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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

) 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.

Imo, OTC and Mark of Plano have good ideas. Although if you can learn this stuff on your own and avoid an advisor, you'll save some dough.

For "safe" (conservative) long-term investments, I'd go with an all market index fund with as low fees you can find. ETFs are good too. If your goal is to pay off grad school or put a down payment on a house, that seems more of an intermediate timeline (5-10 years?) and so you'll probably want the principal to remain somewhat stable and you'll need access to it without penalty. You might need to go with a mix of stocks and (tax-friendly) bonds in a taxable account. (Though I recommend starting the retirement account as soon as you can).

And of course some of it on some killer gear from B&S. Cuz fancy threads are an investment in your future, young man!

Best advice is to use it as cash reserve. Put it a CD, high yield account, etc. I consider 20K to be the bare minimum for a cash reserve. I can lose all income for at least 6 months and be OK.

Otherwise put it into a low expense no load index fund. VFINX, steady 7-8% return.

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%

I agree with the Roth idea

Originally Posted by ANIKETOS

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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?

^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

Originally Posted by Concordia

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Does the SEC know about that?

Its not registered in the US

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

Originally Posted by Naturally Baked

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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

) 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)

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.

Originally Posted by ANIKETOS

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Its not registered in the US

What provides the guarantee?

And where is the issuer located?

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.

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!

Originally Posted by unjung

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What provides the guarantee?

And where is the issuer located?

Saudi Arabia.