Where to Invest?

**kork13** · 10-02-2016, 10:04 AM

Start by shifting your savings over to Ally. They're paying 1% interest, which is about the best you'll find right now (+/- .1%) outside of local or special offers. I do keep my normal operating funds in my regular bank, but I push all of our savings over to Ally to earn the better interest.

Minor note, the max Roth IRA contribution is currently $5500/year, if you're interested in truly maxing those out.

Beyond that, it depends on your goals & risk tolerance.

Goals:
- Funds available within the next year: Cash savings
- Funds available within the next 1-10 years: CDs, I-Bonds, moderate mix of taxable stock/bond index mutual funds
- Long term growth (for use 10+ years from now): more aggressive mix of stock/bond index mutual funds.

Risk tolerance:
- Low to Zero: I-Bonds, CDs or cash savings
- Medium to high: mix of stock/bond index mutual funds invested in a taxable account. The mix that you use--your asset allocation--would be dependent (again) upon your risk tolerance. The folks around here can all help you in deciding upon a good mix for you, if you're not comfortable making that choice on your own right now.

Personally, I'm one to say "moderation in all things". As an example...

We're in a similar situation as you -- maxing 401k's/Roth IRA's, funding a 529, no debt besides mortgages on two homes. What am I personally doing? A mix of everything. We're saving heavily in cash savings to replenish our savings after purchasing our second home. We're slowly building our I-Bond holdings (goal is to buy another $10k next year). We're adding a small amount (~$100/mo) as extra mortgage principle on each home. With the rest of our available funds, we're investing in taxable stock index funds (VTSAX & VTIAX)... no bond index funds to minimize tax impacts, and also because we're already saving heavily in cash & I-Bonds.

**MakeAStash** · 10-02-2016, 10:43 AM

The usual step at your point is to open an ordinary i.e. non-retirement investment account. Many people do so at Vanguard. Picking individual stocks takes study so a reasonable first step is to instead buy into one of Vanguard's index funds. Something like symbol VTI gets you a basket of stocks, which is much less risky than putting all your money into one stock. If you envision your investment to stay put for a decade or more, consider choosing what is known as a "small cap value index fund". During the long term such funds have outperformed most others. VBR is the symbol of one such fund.

**sv2007** · 10-02-2016, 11:53 AM

The most important question is why /what do you want to invest/what do you want to do with that money? Does it have any purpose that you want it for?

The next important question is what type of investor are you?

This will determine how you should invest and what return you can realistically expect.

Keeping money in the bank's checking account isn't a bad idea just based on itself. That money will never decrease and is very liquid. The rest is up to your situation.

**97guns** · 10-02-2016, 03:59 PM

you can easily find a 4% dividend paying company thats a pretty safe play, double or more if your tolerance for risk is greater

**ashown** · 10-02-2016, 04:24 PM

Thanks for your replies. Shedding more light on our thought process.
Currently, in our checking account we have amount equivalent to 6 months worth expenses. Additionally, we have 10k in the same account, while ~$1000-1200/month are saved on top of that. So, by Dec we will have ~ 15k additional liquid assets, on which we are barely earning any interest. Hence, this effort to investigate an alternative. Also, this is on top of additional $300/month towards our mortgage principal.

So, in a nut shell, we don't mind investing 15k toward long term (10 years) hoping to earn atleast 4-5% returns. I think, response about Vanguard made more sense. We will start doing our homework about that. Does anybody know better thread about how taxation work on the returns one earn on their own? I believe the taxation rules are different for interest earning than the regular wages/ earning. Once again, any help would be appreciated.

**Goldy** · 10-02-2016, 05:25 PM

What about investing in your Roth outside of work (vanguard) and bumping your 401k up to the full max? Roth contributions can be taken out at any time and by doing one for you and your spouse you can take care of that budget surplus plus upping your 401k reduces your tax bill.

**MakeAStash** · 10-02-2016, 07:14 PM

Originally posted by ashown View Post

Does anybody know better thread about how taxation work on the returns one earn on their own? I believe the taxation rules are different for interest earning than the regular wages/ earning. Once again, any help would be appreciated.

You list interest, dividends, and capital gains on various Form 1040 Schedules (such as B and D). At the beginning of a calendar year the brokerage will send you a statement listing your amounts in each of those categories (earned during the prior year). Interest and dividends are taxed at the same rate as wages, what is called "ordinary income". Capital gains, which you incur only if you sell a holding at a profit, are currently taxed at a lower-than-ordinary rate, in fact the rate can be as low as 0% if your total income is below about $72,000 per year for a married couple filing jointly.

**snafu** · 10-02-2016, 10:13 PM

If you don't mind a quick read, I found 'Smart Couples Finish Rich,' [Bach] helpful in developing our plan. Vanguard and supporting Boglehead's site are recommended because of their policy of good results and low fees. Exchange Traded Funds [ETFs] are likewise cost efficient if you are an investor with a plan.

From my point of view, it's important to know your holdings and [often hidden] costs on your separate investment 'streams' [employer] 401K, ROTH IRA and non retirement, Investor Account we're discussing. They all need to 'mesh.' Typically, in a limited choice Employer's plan, an Index Fund has the lowest cost. Some offerings have high Management costs {MER} which seriously impede your results over the long term.

There are different market segments helpful in various circumstances. As others explain, it's important to understand your risk/reward ratio. You must be able to sleep without worrying about savings. You've acknowledged the low rates for savings accounts. I presume you understand that Bonds likewise offer low rates. If the government carries out it's plan/threat to increase interest rates in December, the value of bond holdings will decrease.

If you believe real estate offers opportunities, you might research REITS, which seem to be offering an acceptable rate of return for higher risk. I like the DCA feature, making automatic monthly 'payments' in my Investment Account at a discount brokerage. I feel buying a set dollar sum gets me more or less units and spreads [not necessarily lowers] the risk.

**Tabs** · 10-03-2016, 04:02 AM

Hello ashown. You are in a very good financial position. You are getting a lot of comments and options in here to follow, but I am in a similar situation now so let me tell you what I actually do and why.

Well, first of all, please keep in mind that you are not literally maxing out your 401(k) (which is currently at $18k) nor your IRA (which is currently at $5500). You may or may not want to consider re-adjusting that.

If you still have leftovers, you can either choose the conservative path and increase your payments to your mortgage, which will help you quite a bit in the reducing your overall interest payments....

or you can set that money aside and invest that as the aggressive portion of your portfolio. You see, that money you set aside is most likely going to be in a taxable account (since you are already using up your tax advantaged buckets). And taxable accounts are not the best for conservative investments that generate passive interest or dividends since you will have to pay capital gains on it.

So, instead of having your aggressive investments like small caps or perhaps even individual stocks investing in tax advantaged accounts which honestly doesn't really need too much tax sheltering, I rebalanced mine out of them and put much of them into my taxable accounts. After all, so long as you are holding to your investings for more than a year, paper gains are not a capital gains situation until you sell it.

So, generally speaking, I have my most conservative investments in my IRA, my middle-cap styled investments in my 401(k), and my most aggressive investments in my taxable account.

**clatoden99** · 10-04-2016, 01:34 AM

$10k is an extremely small start for entering the equities market. You might do better holding onto shares which give dividends until your nest egg grows. Remember, assuming the stock market is frozen in time, your portfolio is still impacted by transaction costs.

My strategy involves tracking reliable undulation in stock price for large-cap companies which tend to stay out of the spotlight. If a price has been rising and falling $0.12-$0.18 every week for the last few months, I'll figure out the volume of stocks needed to break even on a $0.10 rise given $10-20 round trip transaction costs. You'll quickly find low-price, large-cap stocks are the best for it, as your dollars buy more shares and the price is more stable.

Run some numbers, you'll see quickly that $10k will allow you to take profitable, low-risk positions on maybe 5 companies. If one tanks, you're out 20%. On the other hand, if things go swimmingly - I make 20% in 2 weeks.

DO NOT TOUCH PENNY STOCKS.

You'll want to put 5-10% in each position across 5-10 industries, but 20 companies may spread your attention too thin if this is just a hobby.

Good luck.

**rennigade** · 10-04-2016, 04:47 AM

Vanguard 3 fund portfolio.

**feh** · 10-04-2016, 05:04 AM

Originally posted by ashown View Post

Thanks for your replies. Shedding more light on our thought process.
Currently, in our checking account we have amount equivalent to 6 months worth expenses. Additionally, we have 10k in the same account, while ~$1000-1200/month are saved on top of that. So, by Dec we will have ~ 15k additional liquid assets, on which we are barely earning any interest. Hence, this effort to investigate an alternative. Also, this is on top of additional $300/month towards our mortgage principal.

So, in a nut shell, we don't mind investing 15k toward long term (10 years) hoping to earn atleast 4-5% returns. I think, response about Vanguard made more sense. We will start doing our homework about that. Does anybody know better thread about how taxation work on the returns one earn on their own? I believe the taxation rules are different for interest earning than the regular wages/ earning. Once again, any help would be appreciated.

I also suggest a taxable account. You'll need to determine your time horizon for this money.

Learn more here: https://www.bogleheads.org/wiki/Bogl...g_start-up_kit

**Captain Save** · 11-11-2016, 02:11 PM

If you're satisfied with your retirement plan ...why not just save it .. you need some sort of liquidity

**clatoden99** · 12-07-2016, 01:01 AM

Investing is a good idea but making investment in real estate or any other option is not only a smart way but it is one of the best way to become a wealthy with time .

Now First you have to defined a specific area in which you want to make an investment and till when,why.

There are many types of investment such as

GOLD,MUTUAL FUND,STOCK MARKET,EQUITIES,REAL ESTATE etc

now its depend upon you for long term investment and High Return or short time investment.

Where to Invest?

Where to Invest?

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