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200k cash, how would you invest it?

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Blacryan
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200k cash, how would you invest it?  Reply with quote  

If you had 200k cash in your hand, didnt own a home. How would you invest it?

Real estate? Rentals? Seller financing? stocks? What would you do?
Post Thu Feb 03, 2011 5:39 pm
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oldguy
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quote:
200k cash in your hand, didnt own a home. How would you invest it?


First - what NOT to do. Many recipients of "found" money lose it, the average is about 7 yrs. They win the lottery, win a court settlement, an inheritanace, etc - and they immediately pay off all debt, buy a house, buy a house for their mother, buiy a new car, a new motorhome, yada - and then invest $10,000 for their future. The 'takeaway' is to keep the lump sum intact, don't scatter it to the wind.

Second - invest in yourself (as you are doing as a student). Life is much more interesting when you have an understanding of things. It is nice to understand big words, understand the politics & economics of the world, ie, the US and the other 191 nations. To know the physics of satellites in space, to know celestial motion - Ptolomy described the geocentric universe where the planets had 88 epicycles, Copericus discovered that the solar system is heliocentric (no epicycles). Kepler applied calculus and defined the ellipitical orbits. It's interesting to know math - calculus, differential equations, amortization, the Naperian log base, Bernouli principles, thermodynamics, the Fibonnci Ratio, kinematics, Pareto Analysis, yada. So, whatever it takes, do this for yourself - this will be your best use of money.

Expectations: A $200,000 lump, invested in the generic equity market at nearly any point in US history, will grow to ~$4,600,000 in 30 yrs. So, if you are a student in Oregon with your whole life ahead, your big decision will be how much to leave invested in an index fund. Eg, if you spend $150k and invest only $50k, you will have only $1,150,000.

Here is a good site where you can check out the historical results of past 30-year (or whatever) blocks of time -
http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html
Post Thu Feb 03, 2011 9:11 pm
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MrPolarZero
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I probably won't immediately go with big investments immediately. I think it would be be better if I do small scale investments in order for the fund to be more stable
Post Fri Feb 04, 2011 5:14 am
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f5mtadas
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Re: 200k cash, how would you invest it?  Reply with quote  

quote:
Originally posted by Blacryan
If you had 200k cash in your hand, didnt own a home. How would you invest it?

Real estate? Rentals? Seller financing? stocks? What would you do?


I know one service where people invest to commodity treasure even 10 millions of bucks - and they money works hard for them.
Post Fri Feb 04, 2011 4:41 pm
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SweatyGirl
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I would start online store, I am pretty confident with that
Post Fri Feb 04, 2011 5:56 pm
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yulianisakov
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Put it in the market. It's a way to build wealth for yourself for the future and a way to build financial security. Through the market you can buy real estate, you can buy shares in companies in the U.S. and abroad, you can buy wheat, and grain, and iron ore, and invest in forests, and so many other things. The markets are more versatile than any fixed expenditure you can possible dish out for things like opening a store or buying a home (unless you need a place to live). Believe it or not, it is less risky to put your money into the market than buying a home.
Post Fri Feb 04, 2011 7:54 pm
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yourdesignerwear
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yes not with big investment  Reply with quote  

we must not do start with big investment. it would be the risk..
Post Sat Feb 05, 2011 5:39 am
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LiveTradingZone
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Re: 200k cash, how would you invest it?  Reply with quote  

quote:
Originally posted by Blacryan
If you had 200k cash in your hand, didnt own a home. How would you invest it?

Real estate? Rentals? Seller financing? stocks? What would you do?


I wouldn't dump it on a financial advisor. They will be all over that money like a hungry pack of wolves lol. Take your time in finding the right stocks/commodities/futures, whatever you like and manage your trading on your own. The big thing is do not risk much if you trade on your own. People think they have $200k and can go "all in". That mistake costs people a lot of money. If you have $200k do not risk more than 1.6% on your trade. Trust me it will pay off and you can double your account in a year if you follow a good set of rules.

I would not put it in real estate either....that market will never be the same again.
Post Mon Feb 07, 2011 2:28 pm
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RichS
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Tell us a little more about who you are and what your "investing" knowledge is at this point ie: what have you invested in in the past?,how old are you?, what's your risk level?, do you have other sources of income? and so forth. Without information like this "no one" can give you good advice.
Post Mon Feb 07, 2011 3:55 pm
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Blacryan
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quote:
Originally posted by RichS
Tell us a little more about who you are and what your "investing" knowledge is at this point ie: what have you invested in in the past?,how old are you?, what's your risk level?, do you have other sources of income? and so forth. Without information like this "no one" can give you good advice.


I am a 22 year old student from Oregon. I work for the state in the Department of Revenue. My actual hands on investing knowledge really isn't all that much. I have some stocks from what my parents had bought from way back in the day. Some in Microsoft and Disney and few other randoms. I myself haven't actually invested much next to my 401k from work where I deposit whatever they will match me. I believe its 4 or 5%. I have though been researching for a couple months now all the different options, the benefits, downsides -etc- of so many different options.

I want my risk level to stay relatively low, aggressive stocks aren't for me at this moment in time. I do have a job and make a pretty decent income especially for my age.

The big thing I like about real estate is that it keeps my principal amount in the equity of the properties. I really want immediate cash flow if possible so I can afford to take time off from work and focus more on school and do a little bit of traveling. I would still work and do plan on still working, but being able to afford taking a few days off here and there would be nice. This is why I am leaning towards rental properties/condos.

I have absolutely 0 debt, my car is paid off.
Post Tue Feb 08, 2011 3:07 am
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RichS
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Investing in real estate is not a low risk level. Ask the millions of people whose houses have been foreclosed on, the shopping mall owners that have gone bankrupt, the strip mall owners who went bankrupt, the residential real estate rental property owners that can't evict their tenants who aren't paying their rent and so on. You get the idea.

There is no such thing as a safe investment. The principal on your real estate will fluctuate continously and not always in a favorable direction. There is no liquidlity in real estate until you can find a buyer and that is not always easy to do.

You say you are learning towards rental properties/condos. Who is going to do the maintainence on these properties? Are you going to hire someone or are you going to do it yourself? Do your know plumbing, electrical work, carpentry...especially at 3 am and you have to go to your regular job at 7 am.

I am not saying not to do this. You need to sit down and do more homework and lay it all out on how you are going to handle this.
Real estate investing can be a wonderful thing but being a landlord can be a nightmare.
Post Tue Feb 08, 2011 4:57 pm
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Blacryan
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quote:
Originally posted by RichS
Investing in real estate is not a low risk level. Ask the millions of people whose houses have been foreclosed on, the shopping mall owners that have gone bankrupt, the strip mall owners who went bankrupt, the residential real estate rental property owners that can't evict their tenants who aren't paying their rent and so on. You get the idea.

There is no such thing as a safe investment. The principal on your real estate will fluctuate continously and not always in a favorable direction. There is no liquidlity in real estate until you can find a buyer and that is not always easy to do.

You say you are learning towards rental properties/condos. Who is going to do the maintainence on these properties? Are you going to hire someone or are you going to do it yourself? Do your know plumbing, electrical work, carpentry...especially at 3 am and you have to go to your regular job at 7 am.

I am not saying not to do this. You need to sit down and do more homework and lay it all out on how you are going to handle this.
Real estate investing can be a wonderful thing but being a landlord can be a nightmare.


Didnt plan on being a landlord, planned on having a property management company take care of anything. If I was doing anything more then a couple single houses or duplexs I would probably go with a property management company.

Best part about my current job is I can basically come and go as I please.

I do get what you are saying and residential is really the only place I am looking at at the moment.
Post Tue Feb 08, 2011 5:36 pm
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oldguy
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quote:
I want my risk level to stay relatively low, aggressive stocks aren't for me at this moment in time. I do have a job and make a pretty decent income especially for my age.

The big thing I like about real estate is that it keeps my principal amount in the equity of the properties. I really want immediate cash flow if possible so I can afford to take time off


Blacryan - you are definitely mis-understanding risk & risk evaluation. (Don't worry, it's a common mistake).

The Law of investing - risk and return are directly proportional
This applies to all investing, no free lunch. If you want your principal to be 'safe', protected, you must give up return - the safe investments are a savings account or a CD. You will get safe storage of money and about enough return to offset inflation. Conversely, if you want to build wealth, you will need a risk/return level of 10% to 12% so that you can outpace inflation and build wealth.

Many people have the feeling that real estate is 'safe' because thay can see it, it is physical. But no, leverged real estate can be high risk and high return, 20% or 25%. (I'm a long time land lord, the houses have been very good to me over the past 35 yrs). You can add as much risk as you want by adjusting your leverage. But it is certainly riskier than a 12% stock index fund.
Post Tue Feb 08, 2011 7:38 pm
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Blacryan
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quote:
Originally posted by oldguy
quote:
I want my risk level to stay relatively low, aggressive stocks aren't for me at this moment in time. I do have a job and make a pretty decent income especially for my age.

The big thing I like about real estate is that it keeps my principal amount in the equity of the properties. I really want immediate cash flow if possible so I can afford to take time off


Blacryan - you are definitely mis-understanding risk & risk evaluation. (Don't worry, it's a common mistake).

The Law of investing - risk and return are directly proportional
This applies to all investing, no free lunch. If you want your principal to be 'safe', protected, you must give up return - the safe investments are a savings account or a CD. You will get safe storage of money and about enough return to offset inflation. Conversely, if you want to build wealth, you will need a risk/return level of 10% to 12% so that you can outpace inflation and build wealth.

Many people have the feeling that real estate is 'safe' because thay can see it, it is physical. But no, leverged real estate can be high risk and high return, 20% or 25%. (I'm a long time land lord, the houses have been very good to me over the past 35 yrs). You can add as much risk as you want by adjusting your leverage. But it is certainly riskier than a 12% stock index fund.


Hmmm it makes more sense now. I already have enough away to finish school as it is. I am considering law school at the moment, but with the way the job market is, and the % of people not getting jobs out of law school is staggering. I have taken all different kinds of classes in school, enough for about 3 or 4 different majors. I really didn't know what I wanted to do, and I still don't truly know what I want. One thing that was told to me when I first started college was that in life everything you own can be taken from you in some fashion, or you can lose it. The one thing that cant is your education and knowledge, I have really taken that to heart and try to learn as much as I can all the time.

Real estate interest me in so many ways and I feel would give me something to do besides a 9-5 which really interest me.

So tell me if you were in my position, what would you do? What would you suggest now having all of the experience and knowledge that you do?
Post Tue Feb 08, 2011 7:55 pm
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oldguy
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You are exactly right about knowledge and education - no one can take it away.

You have 3 distinct things that put you far ahead of most people - (1) an income stream, (2)$200,000 lump, and (3)youth. Most people miss on one or more - eg, if you didn't have the income, you might need to cut away at the $200k at $30k or $40k/yr for school - that would spell failure. Or, if your had 1 & 3, but had a $150k student loan instead of #2, the road would be harder.

As the site that I put in the last post shows, $200k left undisturbed grows to $4,600,000 in 30 yrs - and $4.6M at age 52 is a financial success by anyone's measure. Mechanically, you would do this by using a no-load fund company, such as Vanguard or Fidelity, and putting the $200k in a SP500 Index Fund - or in a Target2050 Fund. The money would grow tax deferred, the fee is small, about 1/10 of a %, and the funds are diversified.

By using an index instead of individual stocks, you eliminate the risk of a company failure, a risk that you now carry with Disney and MSFT - that is uncompensated risk.

When you want to buy some real estate, make a small downpayment on a house(s) (as small as possible and still get the prime rate). Use only 30-yr fixed rate loans, no ARMs, no balloon payments, no designer loans - ie, confine your risk to your investment, not to your source of capital. After the house(s) grows equity (where you own maybe 40% to 50%), refi and remove the equity. Use that money as seed money for either more houses or more stocks.
A house might have negative cash flow right after a refi - so I usually refi them at different times so that the composite cash flow is positive. Altho I don't want much taxable rental income (I have a good income) - I want the appreciation from theh houses - that grows tax deferred and you only pay when you sell a house.

As for lawyers not finding jobs - yes, lots of new JDs under-employed right now. But these things cycle quickly - 3 yrs from now the opposite may be true. So build on what you are good at, if you have a knack for Law, you will be marketable. If you are good at math/physics, you can be a marketable engineer. And so on.

Don't let Obama spook you - he is antibusiness but that doesn't mean that he can cause US Business to fail. He is pro-regulation so more Attys will be needed in business, medicine, gov't. He is almost sure to make healthcare more costly & more litiguous as over-regulated docs are driven out of the field and a doc shortage developes. All these cause shifts in the economic and employment landscape. Oddly, when you look back on it after 20 yrs, the changes seem trivial. The more things change the more they stay the same?

The common determinant is human behavior - even with our knowledge & civility, we still act like we did 100,000 yrs ago. We sqaubble with our mates, we start wars with the neighboring tribe (nation), we fight for survival, we pull together in natural disasters, we invent, explore, forever grow. Eg, the economy and the GDP grow annually forever. So stocks (companies) must continually grow to build more goods - so the market trends ever upward (but sporaticaly).
Post Tue Feb 08, 2011 9:50 pm
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