What to invest in? Silver, 401k? stack cash?

**Hypersion** · 10-14-2012, 11:16 PM

Almost all investment advice says that you need to have a diversified portfolio ( asset allocation). A diversified portfolio not only reduces risk it also increase returns since it allows you to buy low and sell high. Right now you are $230k in RE, $60K cash and another $45K in your 401K that you didn't mention how you have invested. You are missing stocks and other equity assets in your asset allocation.

Their are a lot of calculators that would help you set up an asset allocation based upon your age and risk. i personally like index fund adviser questioner and bankrates.

Asset Allocation Calculator

Index Funds - DFA Advisors - DFA Funds - Dimensional Fund Advisors Approved

**bjl584** · 10-15-2012, 05:45 AM

Your current investments in your 401K are way to conservative for your age. Why are you holding so much of it in cash? I'd get it invested in some mutual funds.

How much cash do you have outside of your 401K? I wouldn't use a HELOC as an emergency fund. I'd build up 3 to 6 months worth of expenses in cash if you haven't already.

College should be the last thing that you prepare for so far as finances go. Take care of your own finances and retirement before you begin funding college funds.

**jpg7n16** · 10-15-2012, 07:59 AM

Originally posted by silvor View Post

I actually work in the financial services industry, but I don't like how advisors are paid. Such as, they make no money telling you to pay off debt, so obviously they won't tell you to pay off debt. ;-)

As a financial advisor, I can strongly say that's not the case.

I tell people to pay off debt all the time, when it makes financial sense to do so.

I feel like I should be saving more. I think I should be putting more like 10% away. So really that's just an extra $250 a month.

And how did you come up with 10%? What did you base that on?

AARP Retirement Calculator - How to Retire, Plan for Retirement

Keep in mind this calculator assumes a 6% rate of return before retirement, and with 60% of your account in cash, there's no way you're earning close to that.

So I figure I have 4 options:

1) physical metals - but How much? I am thinking silver as I can buy a little at a time close to spot. That said, perhaps buying and ETF like SLV is a better bet with all the cash I have? Maybe just take the extra $250 a month and buy silver? But it's after tax money. The other "idea" is, since I have no silver right now, buy a large chunk $3-5k with a 401k loan (since I have a lot of cash doing nothing and I'm paying myself back). Or use the line of credit at 4%?? I found a real good deal on silver at spot so thought I should jump at it.

Precious metals are part of an overall portfolio. Standard advice is no more than 5-10% of overall portfolio in precious metals.

2) Or should I just invest in stocks or bond ETF's in my 401k? I like the dividend payers as you at least get something back, and I get the tax deferral.

What sort of strategy do you have for how much to put in stocks vs bonds?

If you don't know, see hypersion's link on asset allocation above to help sort that out.

What rate of return are you expecting based on your current investment allocation?

3) Save for the kids college?

I think that's a great goal, after you've ensured you're on track for retirement.

4) build up cash as we don't really have much on hand as we've paid off the house. But we do have the line of credit if needed.

Build up cash for ___________?

5) spend it.
a) On the practical: We do need new carpeting for the house. Not want, we really need it.
b) On the frivolous: I don't own anything. Between paying for expenses and paying off the house, we've never spent money. Heck, I used to have a pretty cool guitar and firearm collection I sold off the past few years which helped pay down the mortgage, but I now kind of regret it. :-(

Any help is appreciated!

It is perfectly fine to spend money on things you want, after you've first ensured that you are on pace for your goals.

What are your top financial goals? How would you rank them?

**silvor** · 10-16-2012, 07:05 AM

Thanks for all the replies. I've made additional clarifying comments in BOLD below:

Originally posted by jpg7n16 View Post

As a financial advisor, I can strongly say that's not the case.

I tell people to pay off debt all the time, when it makes financial sense to do so.

And how did you come up with 10%? What did you base that on? The bible? Isn't 10$ the standard advice?

Keep in mind this calculator assumes a 6% rate of return before retirement, and with 60% of your account in cash, there's no way you're earning close to that. The cash account earns 2.7%. The ETF's earn around 8%, so I am getting 6% in dividends.
Precious metals are part of an overall portfolio. Standard advice is no more than 5-10% of overall portfolio in precious metals.

What sort of strategy do you have for how much to put in stocks vs bonds?

If you don't know, see hypersion's link on asset allocation above to help sort that out.

What rate of return are you expecting based on your current investment allocation? 6% in this market
I think that's a great goal, after you've ensured you're on track for retirement.

Build up cash for ___________? roof blows off the house, car repair, job loss etc.

It is perfectly fine to spend money on things you want, after you've first ensured that you are on pace for your goals.

What are your top financial goals? How would you rank them?

The first 3 are the most important.
Build cash reserve 15-30k
update house 10-15k
Increase retirement savings $250 extra per month
Spend money on me $300 month
College savings

**Nika** · 10-16-2012, 12:21 PM

1) physical metals - but How much? I am thinking silver as I can buy a little at a time close to spot. That said, perhaps buying and ETF like SLV is a better bet with all the cash I have? Maybe just take the extra $250 a month and buy silver? But it's after tax money. The other "idea" is, since I have no silver right now, buy a large chunk $3-5k with a 401k loan (since I have a lot of cash doing nothing and I'm paying myself back). Or use the line of credit at 4%?? I found a real good deal on silver at spot so thought I should jump at it.

Seriously? nobody jumped on that?
Precious metals is a speculation, not investment. I have nothing against speculation, but doing so with borrowed money is crazy.

**jpg7n16** · 10-16-2012, 05:48 PM

Originally posted by silvor View Post

Thanks for all the replies. I've made additional clarifying comments in BOLD below:

The bible? Isn't 10$ the standard advice?

Hah

Thou shalt save 10% isn't one of the commandments. And 10% figure is for tithing, not retirement savings.

Each person is different in a figure that puts them on a path towards their goal. 10% may be perfectly fine, or it may be woefully short. You should probably figure out which one of those categories you fall into before sticking to the 10%.

Keep in mind this calculator assumes a 6% rate of return before retirement, and with 60% of your account in cash, there's no way you're earning close to that. The cash account earns 2.7%. The ETF's earn around 8%, so I am getting 6% in dividends.

No you're not. Not even with the numbers you just quoted. Not sure where you pulled the 6% number from, but if 60% of your portfolio is getting 2.7, that leaves 40% getting 8...

(60% * 2.7%) + (40% * 8%) = 4.82%

Now the gap from 4.8-6 may not seem like a lot, but over time it makes a difference.

You could really improve your picture by making some strategic shifts in your investment strategy.

(25% * 2.7%) + (75% * 8%) = 6.675%

What rate of return are you expecting based on your current investment allocation? 6% in this market

I think, given your investment allocation, you are being a bit optimistic here. Based on how you're invested, I'd expect more like 3.5-4.5%.

Build up cash for ___________? roof blows off the house, car repair, job loss etc.

You should have property insurance for a roof blowing off the house. And a proper emergency fund for the others. Which I saw was one of your goals, so that's good

The first 3 are the most important.
Build cash reserve 15-30k
update house 10-15k
Increase retirement savings $250 extra per month
Spend money on me $300 month
College savings

If I can recommend, here's what I'd reorder them as:

Build emergency cash reserve: 6 months worth of expenses
Increase retirement savings: to the point where you're on track
Restructure retirement portfolio: to be better positioned long term
Update house: 10-15k
College Savings
Spend money on you.

**siggy_freud** · 10-18-2012, 02:30 PM

Just don't neglect the investment of pleasure. No sense in saving every penny if it makes you miserable in the long run.

I know cars and motorcycles and video games are terrible investments, and rarely provide any positive return. But I also know I'd probably off myself if I didn't have these things that made my life fun. You may have different things that make life enjoyable, but my point is, don't neglect them.

I know this is an investment forum, but at some point you do have to consider the cost of not having fun, which CAN have measurable impacts on life. If buying that guitar relieves enough stress and relaxes you enough that you live 2 months longer (and thus can generate income two months longer), it will have paid for itself in the long run.

My best friend's grandpa died a few months ago. The guy never bought anything for himself, and was in general, kind of a miserable fellow. He died with a few million in his bank. While it's great to have stuff to leave for the kids, there is a balance you can strike.

Don't gloss over that when determining your goals. If you're saving money for the sake of saving money, you're doing it wrong

.

**snafu** · 10-18-2012, 07:02 PM

I suggest you talk to a knowledgeable realtor in your area before replacing carpet. If you think you'll downsize and sell the house as part of your retirement plan, you need to replace flooring with hardwood, engineered flooring or laminate depending on your specific location. If you have 'popcorn' blown ceilings, I suggest you have that removed before replacing floors as they are such a turn-off for buyers.

Have you talked to a Certified Financial Planner to work out your retirement plan? If you are uncomfortable with those who work on commission, you might want to see a fee for service CFP. The most recent figures tell us retirees are living longer and the need for careful retirement planning is more important than ever. People who have worked 35 years are retirees for 35 years, yikes. When SS started no one expected to collect more than a couple of years.

**jIM_Ohio** · 10-21-2012, 06:52 PM

As an advisor myself, it is not my job to tell clients to pay down or not pay down debt. It is my job to listen and ask what they are comfortable with, then design a plan within their comfort zone.

I would focus on goal setting before deciding what to do with money.

**AustinClarke** · 08-26-2013, 02:18 AM

Price of gold and silver has dropped down this year and hence, it is good time to invest in it. It will again rise up in this year end.

**MatthewC** · 09-26-2013, 10:12 AM

Hi Silvor,

Firstly, I would like to say congrats on owning your house. Secondly, you're not putting enough away for retirement.

1. Get an emergency fund going. Save up 3-6 months worth of expenses.
2. Max out your employer-matching contributions
3. Max out your contributions to your ROTH
4. Save some more if you can to invest. This money call always be used later for the kids to help them pay for college. Saving a dollar now and investing it can be worth 2-3 dollars then.

Get that carpet done if you have to. If you have to, you have to. But shop around to find a good price.

The 100k line of credit is probably more expensive, in APR, than getting a mortgage. So if you want to get more money to invest for retirement and you can afford to pay on a 100k mortgage, a 15-year mortgage would be my recommendation over that line of credit. This is a very aggressive move though, and should not be done unless you are comfortable doing it.

You really need to put more towards investments.

**SmartSpender** · 09-26-2013, 01:12 PM

401k

You should be saving more - max out your 401K if you can - you're young enough to throw all of that cash in the market - go with some mutual funds and call it a day - speculative stuff overall is not better than diversified funds.
Smart Spender

What to invest in? Silver, 401k? stack cash?