How should I invest my SEP-IRA?

[disneysteve]

I'm pondering an investment decision and thought I'd throw it out there to get your ideas and suggestions.

I opened my SEP-IRA a few years ago and have basically treated it as "extra" money apart from the rest of my portfolio. Thus far, I've used it to dabble in some individual stock purchases and, fortunately, profited on each trade I've made. I closed my last position recently so the account is now all cash - about $5,500 worth. It is a minor amount of money to me, representing well under 1% of our total portfolio. Right now, I'm not interested in making another individual stock purchase. I'd like to put the money into something more diverse that I won't have to monitor so closely- I'm thinking of a fund or ETF. Obviously, I'm not afraid of taking some risk but I don't want to be stupid either.

So if you had 5K to put into something that you think would do well over the next year or two, what would it be?

If it matters, this account is with Scottrade.

[jIM_Ohio]

I'm pondering an investment decision and thought I'd throw it out there to get your ideas and suggestions.

I opened my SEP-IRA a few years ago and have basically treated it as "extra" money apart from the rest of my portfolio. Thus far, I've used it to dabble in some individual stock purchases and, fortunately, profited on each trade I've made. I closed my last position recently so the account is now all cash - about $5,500 worth. It is a minor amount of money to me, representing well under 1% of our total portfolio. Right now, I'm not interested in making another individual stock purchase. I'd like to put the money into something more diverse that I won't have to monitor so closely- I'm thinking of a fund or ETF. Obviously, I'm not afraid of taking some risk but I don't want to be stupid either.

So if you had 5K to put into something that you think would do well over the next year or two, what would it be?

If it matters, this account is with Scottrade.

What is the allocation of the entire portfolio?
I assume you have a Roth, hopefully that does not have many bonds in it?
Your wife has a tax deferred workplace retirement plan, right?

In Roth, put the small caps and foreign stocks (high growth)
in tax deferred, put dividend payers and bonds
in taxable, put other small cap and large cap growth

Without knowing the other pieces, tough to suggest what other investments to suggest.

[disneysteve]

Without knowing the other pieces, tough to suggest what other investments to suggest.

I realize that but asked the question that way on purpose. Forget the overall allocation. This money isn't enough to move the needle on the allocation. I consider it play money. I've used it to make some risky bets up until now. I'm just trying to decide where to invest it next.

So if you had to make one investment with 5K with no allocation to adhere to, what would it be?

[kork13]

I realize that but asked the question that way on purpose. Forget the overall allocation. This money isn't enough to move the needle on the allocation. I consider it play money. I've used it to make some risky bets up until now. I'm just trying to decide where to invest it next.

So if you had to make one investment with 5K with no allocation to adhere to, what would it be?

Personally, I'd look at a REIT ETF, particularly considering the fact that you've got it in a tax-deferred SEP-IRA (REITs distribute all of their gains each year, most of which are considered short-term capital gains). Alternately, I'd go with any particular bond (or bond fund/ETF) that you've been considering (again, for similar tax reasons with regard to distributions). Otherwise, I actually would consider keeping it as a slush fund for individual stock purchases, if you still have any interest in that.

Bottom line: the tax-deferred status is a huge benefit, so take advantage of it! Use your SEP-IRA for any "trial investment" that isn't very tax-efficient.

[feh]

I don't time the markets, but if I did, I'd be buying emerging markets right now.

[disneysteve]

I don't time the markets, but if I did, I'd be buying emerging markets right now.

I don't time the markets either but see nothing wrong with a little playful speculation with less than 1 percent of my portfolio.

[feh]

I don't time the markets either but see nothing wrong with a little playful speculation with less than 1 percent of my portfolio.

Yup, I understand. I'm not criticizing. If I were in your shoes, I'd throw it at EM. Beaten down recently and PE ratios are low.

[BuckyBadger]

I know you say it wouldn't move the needle, but I'd still allocate it according to my overall portfolio.

If you want to speculate with it, you're on your own ;-)

If you really don't need it, why not cash it out (or rather, use other fungible money so as to avoid taxable events) and go on a European riverboat cruise.

I'd love to go on one of those!

[KTP]

I don't time the markets, but if I did, I'd be buying emerging markets right now.

You mean like the 1000 shares of VWO I just bought at $39.74?

I also think this will be a better year for EM and expect VWO to hit $45 by summer but I will stay in it long term.

[jIM_Ohio]

Steve, are you a sophisticated enough investor to do options? Because this is a tax deferred account, you would be shielded from taxes, and using this money to learn how to do covered calls or straddles might make sense.

If you did cover calls, I might suggest a strategy which focuses on blue chip dividend paying stocks

If you did straddles, I might suggest looking for companies which are neutral short term with good long term growth prospects (like small caps). I can think of one company in particular which is in the news but is not growing as much now...

These techniques are not for rookies, and its possible to lose more than your original investment (covered calls lower this risk which is why they are allowed in tax deferred accounts).

[LivingAlmostLarge]

shorting some commodities that are ridiculous right now.

[srblanco7]

Emerging markets seems to be the most beaten down sector. Europe could also be a play as it's "undervalued" relative to US stocks.

Recognizing that you said no more individual stocks (I don't buy them either), but if you were to consider, I think a 3D printer company could be a real play over the next few years...

[disneysteve]

I think a 3D printer company could be a real play over the next few years...

These things are so cool. When we were touring engineering schools with DD, we saw AMAZING items made on 3D printers (not the "home" versions of course but still mind-boggling).

[disneysteve]

I appreciate the suggestions. I'm liking the emerging market idea. I have a total international index in my portfolio but nothing beyond that. KTP mentioned VWO. I've spent a little time today researching that one. Are there any others you would recommend? Certainly I'm a big Vanguard fan with the bulk of our money invested with them but I'm not opposed to seeking opportunity elsewhere.

Jim, I appreciate the options suggestion. I've tried a few times to educate myself in that area and it just hasn't stuck yet. One of these days.

[srblanco7]

I'll admit that I've never seen a 3D printer in action, but this article blew me away.

http://www.businessweek.com/articles/2013-11-27/general-electric-turns-to-3d-printers-for-plane-parts