Have some cash around 25K, what options

[kn96373]

The savings rate is an abysmal 2% and i need to chase various banks as soon as their rates go down..

What do u suggest the best options for me to invest and have better returns...

I can afford medium risk but i dont know much about stocks etc...

any advice fellow members?

[bjl584]

First we need to know a few things. What is your timeline for the money. Do you need access to it immediately, or can you afford to have it tied up for an extended period of time? What are you planning on using the money for? What does the rest of your financial picture look like? Do you have any debt?

[kn96373]

I don't need access to this money. This is purely kept aside for long term investment and i also have 6 month reserve in a CD ( in case of job loss).

Have a car loan, but i dont want to close it just to keep me disciplined..

[jIM_Ohio]

The savings rate is an abysmal 2% and i need to chase various banks as soon as their rates go down..

What do u suggest the best options for me to invest and have better returns...

I can afford medium risk but i dont know much about stocks etc...

any advice fellow members?

What returns are you looking for?
How much of a given risk can you take?

Look at this thread here

http://www.savingadvice.com/forums/investing-banking/50734-investment-risk-questionaire.html

Look at this portion of that thread

There are many types of risks. Do you know what the following risks are?
a) market risk
b) principal risk
c) interest rate risk
d) currency risk
e) investment risk
f) geo political risks
g) information risk
h) sector risk
i) liquidity risk
j) inflation risk

What is this money used for?
What risks do you need to avoid?
Which risks are you willing to accept?

If you know what risks you are willing to take, it is easy to put a return on the money, as well as know which investment(s) are best suited for those risks.

[kn96373]

Thanks for the info..i will look into the details and also read some books to better understand the risks

[jIM_Ohio]

Thanks for the info..i will look into the details and also read some books to better understand the risks

If you want more than 2% return, you are suggesting you are going to take a risk doing one thing or another...

my suggestion is start small- look for a moderate allocation of maybe 20% stocks and 80% bonds, which should be around 5% return... ahead of inflation slightly, significant risk to principal, mild volatiltity.

Then once you stick with an allocation like that for 2-4 years, you might feel more like a 40-60 or 60-40 balanced fund... but I would not start that aggressive if you are moving a cash position into something with a higher expected return.

[kn96373]

Thanks, I am looking at various mutual funds that have such a mix of 20-80.

[daviddane]

Try to invest in mutual funds for safe, secure and guaranteed investment. Mutual funds normally give returns around 30-40%. I had been investing a lot in mutual funds on regular basis.

[jIM_Ohio]

Try to invest in mutual funds for safe, secure and guaranteed investment. Mutual funds normally give returns around 30-40%. I had been investing a lot in mutual funds on regular basis.

30-40% is normal? exactly what do you invest in?

[Beppington]

Try to invest in mutual funds for safe, secure and guaranteed investment. Mutual funds normally give returns around 30-40%. I had been investing a lot in mutual funds on regular basis.

Boy do I have the wrong mutual funds!!!

[disneysteve]

Try to invest in mutual funds for safe, secure and guaranteed investment. Mutual funds normally give returns around 30-40%. I had been investing a lot in mutual funds on regular basis.

Nothing in this post is true. Mutual funds are neither secure nor guaranteed and though returns can be high, they certainly aren't "normally" in the 30-40% range. I'm sure a lot of funds hit that mark in 2009 since it was a great year for stocks, but it is definitely not typical.

[kn96373]

A friend of mine suggested me to look at Index funds..how does one evaluate index funds?

Also could the team here suggest some good books about investing in markets

[watsoninc]

If you want to get into index fund investing, check out Index Investor. Of course you want to look at their track record (it would be risky to go with one that is brand new) and also their purpose (i.e. are you trying to get some income, growth, growth and income, aggressive growth, etc)

[Beppington]

My portfolio of only index mutual funds comes from this guy's book: Retire Early Sleep Well A Practical Guide to Modern Portfolio Theory Retirement

[jIM_Ohio]

A friend of mine suggested me to look at Index funds..how does one evaluate index funds?

Also could the team here suggest some good books about investing in markets

Most people choose index funds because of their low expenses, so best way to evaluate an index fund is to find the index you want to invest in, then find the mutual fund which tracks it with the lowest expenses.

In general, domestic funds have lower expenses than foreign funds, stock funds have lower expenses than bond funds, and large cap funds have lower expenses than small cap funds.

So if you compare a foreign small cap index fund to a domestic large cap index fund, that is not "apples to apples" as far as expenses go, because of the inherent extra expenses it takes for trading small cap and foreign companies.

If you compare two indexes which track large cap stocks (like S&P 500 and Russell 1000), then comparing expenses of the index funds makes sense.