Investing advice for $200k

**scottbiddick** · 04-15-2016, 06:29 AM

In business, nothing happens until a sale is made. From the jump, you'll need to find a good way to get leads, convert leads into sales, and make sure you keep getting repeat sales from your customers.

**Nutria** · 04-15-2016, 07:41 PM

I agree with the mortgage payment (guaranteed 4% return on investment, and speeds up your payoff by much more than just the number of months that is $50K worth of payments) plus $50K emergency fund.

As for investing, I put mine in Vanguard mutual funds (though other low-cost firms like Fidelity would do just as well). VFIAX (S&P 500) and VDIGX (Dividend Growth Fund) plus some VBIRX (Short-Term Bond Index Fund).

**sv2007** · 04-23-2016, 11:58 PM

Originally posted by Chris T View Post

I'm a 40 year old freelancer in the film business. My gross annual income averages $150,000 (though since I'm self-employed, work can be sometimes volatile and inconsistent). My wife and I own a house (purchased for $800,000, 5 years ago. Now estimated worth over $1.3M). We have $590,000 left on the mortgage = 30yr fixed at 4.0%

I have $220,000 in cash savings and $34,000 in 401k. My wife has $19,000 in her 401k. She works for me (i.e. also self-employed).

Currently my cash is in an online savings account(!!), and is gaining a terrible 0.6% interest or thereabouts. Obviously I need to invest it more aggressively.

I was advised by my accountant that if I'm going to invest on the stock market, that I should consider paying off a chunk (say $50k) of our mortgage at the same time (as a way of 'diversifying' our investing by reducing our mortgage burden).

If I were to do that, and also keep about $50,000 in savings (rainy day), that leaves me with $120,000 to invest in the stock market.

I'm considering Robo-investors (Wealthfront, Betterment etc) vs a human financial manager. Can you advise on the pros/cons of robo-investors vs humans, and also the mortgage payoff etc. Thanks!

Firstly, I think if you are putting money into stocks, your rainy day fund may not need to be so large (compared to you total assets) because that's not making any meaninful returns for you. You can always sell stocks and get cash in 3 days (or at most 4 days).

I like the idea of putting $50k into your hosue; that's going to be VERY helpful in the future by giving you freedom that you may not now realize that you want. It is also good diversification.

If you are interested in stock investiments, then if you have an Android phone or tablet, you can go to Google play store and download "whatif s&p500 calculator" and see if you would have liked the stock market retrun (since everything is in the past). If you just want to invest in S&P 500, you can buy one of the many S&P500 ETFs; check expense ratios of course.

As for investing, how much to those robo/humans charge? I've never heard of them (but I will google soon); I'm assuming that they aren't fund managers. Why not just go to a nearby branch of a discount broker and open an account? Whichever way you go, check the fees and their track records.

Good luck.

**Sabine** · 05-06-2016, 02:15 AM

Originally posted by Charlie_15

If you put money in the stock market, be prepared to do it long term (20 years or more) because you never know what's going to happen in the stock market in the next 1-10 years. Annual return will be about 10% in the long run if you are doing overall market.
P2P lending is another great investment option with less volatility and slightly lower annual return of around 7%. This can be a short-term investment because you can trade the notes but I'd prepare for a 3 to 5 year investment(when notes mature).
I agree with putting some of the money in real estate but I suggest not putting it into your house. Instead, I'd rather buy a rental property or two and get some good cash flow with tenants paying the mortage(s). That way you'll get a higher cash on cash return.
So if I were you I'd divide the money into three portions and invest in the above three options.

Word!

**Chris T** · 06-01-2016, 04:42 PM

Hi all

I'm finally setup with my Vanguard account and have decided to do the following:

1. Paying an additional $700 towards the mortgage each month, which means we're set to pay it off by 2036 (in 20 ys-when I'm aged 60). I decided not to pay-off more for now since that liquidity is important due to my volatile earning (i.e. the possible need for more cash, which if I pay off house would just be invested in the house).

2. Invest $50,000 with Vanguard (probably using their advisor service...for a year at least so I can learn).

3. Invest $50,000 with a Robo-advisor (probably Wealthfront)..for a year at least. After that year or more I'll see which is performing better. Since I have exactly the same amount invested they should be pretty easy to compare. Also, after that year (or more) I may opt to not do the 'Advisor' services at Vanguard and just self-invest in various Index Funds / ETFS (or just the Vanguard S&P like you suggested).

4. Keep $50,000+ in Emergency Fund. While it might be foolish to keep this much in a Savings account, since i'm a freelancer and my income is highly volatile, I do need the liquidity on occasion (so as not to have to dip into the investment accounts). That said, can anyone recommend a more lucrative way of keeping 'SAFE' money. E,g, half in savings, and half say in Treasury bonds? (with a 1-yr maturity or something). That way the whole $50k is not going to waste...

5. $70,000 is now in my 401k. Due to tax deadline issues I had to rollover my single- 401k to a new Financial Advisor. He happens to be with Merrill Lynch (and I believe is charging 1.1--1.3% in fees/commissions. I thought about moving this soon to a 401k at Vanguard, but I discovered that Vanguard cannot offer account management / rebalancing services for 401k's (which ML does), so I'm undecided about what to do with this money.

Any advice on any of the above points would be most appreciated!

**97guns** · 06-01-2016, 07:18 PM

why not keep it in real estate where you have more than tripled your investment in 5 short years

**sv2007** · 06-01-2016, 09:28 PM

Originally posted by Chris T View Post

2. Invest $50,000 with Vanguard (probably using their advisor service...for a year at least so I can learn).

3. Invest $50,000 with a Robo-advisor (probably Wealthfront)..for a year at least. After that year or more I'll see which is performing better.

Any advice on any of the above points would be most appreciated!

1 year isn't nearly enough time to decide which is better. More like 10-20 years.

Also, you'll probably not be able to learn about stock investments from your plan above.

However, you can best learn by pretending to invest -- and it won't even cost you money. Get paper and pencil, write $50k cash, that's your account value in cash, pretend to buy whatever shares you want and keep track once every 6 months. (I read a book that recommends novice investors look less often at their portfolio -- and I completely agree.) There you go, you'll probably learn it in a few years. Get a book.

**feh** · 06-02-2016, 05:57 AM

Originally posted by Chris T View Post

Hi all

I'm finally setup with my Vanguard account and have decided to do the following:

1. Paying an additional $700 towards the mortgage each month, which means we're set to pay it off by 2036 (in 20 ys-when I'm aged 60). I decided not to pay-off more for now since that liquidity is important due to my volatile earning (i.e. the possible need for more cash, which if I pay off house would just be invested in the house).

2. Invest $50,000 with Vanguard (probably using their advisor service...for a year at least so I can learn).

3. Invest $50,000 with a Robo-advisor (probably Wealthfront)..for a year at least. After that year or more I'll see which is performing better. Since I have exactly the same amount invested they should be pretty easy to compare. Also, after that year (or more) I may opt to not do the 'Advisor' services at Vanguard and just self-invest in various Index Funds / ETFS (or just the Vanguard S&P like you suggested).

4. Keep $50,000+ in Emergency Fund. While it might be foolish to keep this much in a Savings account, since i'm a freelancer and my income is highly volatile, I do need the liquidity on occasion (so as not to have to dip into the investment accounts). That said, can anyone recommend a more lucrative way of keeping 'SAFE' money. E,g, half in savings, and half say in Treasury bonds? (with a 1-yr maturity or something). That way the whole $50k is not going to waste...

5. $70,000 is now in my 401k. Due to tax deadline issues I had to rollover my single- 401k to a new Financial Advisor. He happens to be with Merrill Lynch (and I believe is charging 1.1--1.3% in fees/commissions. I thought about moving this soon to a 401k at Vanguard, but I discovered that Vanguard cannot offer account management / rebalancing services for 401k's (which ML does), so I'm undecided about what to do with this money.

Any advice on any of the above points would be most appreciated!

Regarding 3) - comparing returns after 12 months is not an appropriate way to choose where to keep your money.

Regarding 5) - ML is screwing you with those fees. You should jump ship immediately.

Please read this page. You can handle your investments by yourself:

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https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit

**Nutria** · 06-02-2016, 06:18 AM

Originally posted by Chris T View Post

4. Keep $50,000+ in Emergency Fund. While it might be foolish to keep this much in a Savings account, since i'm a freelancer and my income is highly volatile, I do need the liquidity on occasion (so as not to have to dip into the investment accounts).

No, it's not foolish. You're exactly right on this.

That said, can anyone recommend a more lucrative way of keeping 'SAFE' money. E,g, half in savings, and half say in Treasury bonds? (with a 1-yr maturity or something). That way the whole $50k is not going to waste...

At what APY to you consider the money wasted? (I've got a set of 12 month CDs at Synchrony Bank paying 1.25% and expiring every two months, plus a CapitalOne 360 savings account paying 0.75%. They aren't great, but are better than the 1 year T-bill rate are much higher than most other banks.

but I discovered that Vanguard cannot offer account management / rebalancing services for 401k's

It's not hard to do manually: they have nice pie charts showing your target allocation and your current allocation. With their advice, pick one or two equity funds and a bond fund, to put your money in. Then twice a year log onto the web site and click on the buttons to exchange some equities for bonds, or vice versa, to get the actually allocation in line with your target alloc.

**sv2007** · 06-03-2016, 08:46 AM

Originally posted by Sam22

The most important question is...do you have experience in investing or know anyone who anyone does? It's risky but I know a friend who made bank this way, but he spent hours reading about investment and had someone advising him.

Just make sure that wall street adviser isn't conflicted too much.
Main street advisers better be people you love.

Investing advice for $200k