| New and don't know what to do....? |
|
|
|
|
|
RandRmoney
Contributing Member
Cash: $ 7.65
Posts: 33
Joined: 03 Mar 2011
|
| New and don't know what to do....? |
 |
|
Father passed away. No will. I was the beneficiary on his life insurance. After the funeral expenses I have about 140k.
I own two properties and I am looking to invest in more real estate. Flips and rentals.
I want to do other types of investing but don't know too much about it. I know I want to earn more interest than a CD but I do not want to lose money.
Let's start with that.....I will answer any questions and appreciate all suggestions! 
|
Thu Mar 03, 2011 2:36 pm |
|
|
oldguy
Senior Member
Cash: $ 309.30
Posts: 1481
Joined: 21 May 2006
Location: arizona
|
|
|
|
quote:
I know I want to earn more interest than a CD but I do not want to lose money.
You can't have both, you have to decide on a risk level that meets your goals. The Law of Investing - risk and return are directly proportional.
CDs and savings accounts are designed to provide safety, no risk - the interest tracks inflation, so your purchasing power stays fixed. You cannot grow wealth, but your money is safely stored for you.
Stocks have about a 10% to 12% risk/return level and they typically outpace inflation by 7% to 10%, they are the wealth builders. Bonds are about halfway between - about a 5% to 6% risk/return level.
Your choice depends on your age - young people with a 30 yr horizon should use stocks to build wealth. An older person, 55 to 65, should transition to wealth preservation and use bonds and CDs. And a person in between should use a mix - maybe 50/50 stocks/bonds.
One fact - lump sums (lottery winnings, inheritances, judgements) are often lost within about 7 yrs. The 'winner' pays off his mortgage, pays off credit cards, pays off a car, buys a new car, pays off his mother's house, yada - and then 'saves' $10,000 to invest for his future. So try to avoid those pitfalls - keep the $140,000 intact, invest it, let it double to $280k in 7 yrs, maybe $560k in 14 yrs, and so on - it can be a life-changing opportunity.
|
|
Thu Mar 03, 2011 4:08 pm |
|
|
RandRmoney
Contributing Member
Cash: $ 7.65
Posts: 33
Joined: 03 Mar 2011
|
Great advice!
I am 40 and I am willing to take a risk some of the money. I have plans to take a portion of the money to reinvest in real estate.
I will then use the money from the flip/refinance/rental to pay off debt and buy stuff yada yada....You were right on with that statement about how people will likely spend that type of money. LOL!
With the portion set aside for investment, I plan to split it between mutual funds and a high yielding savings account. How does that sound?
As far as investments, I have been talking to a few local/national banks (Citizen's, Wachovia/Wells Fargo) What do you think of them? Who would you suggest?
|
|
Thu Mar 03, 2011 4:43 pm |
|
|
coaster
Senior Advisor
Cash: $ 1357.80
Posts: 6686
Joined: 11 Oct 2005
Location: Wisconsin
|
|
|
|
My general rules are:
1) emergency fund with six months' living expenses in money not-at-risk.
2) on top of that, any additional money that will be needed within the next five years in money not-at-risk
3) any money left after #1 and #2 are satisfied should be in at-risk investments suitable to the time horizon and risk tolerance of the investor. The longer the time horizon, the greater the risk tolerance should be.
- and the biggest rule of all -
never, ever, NEVER give money to be managed by managers who make their profit by SELLING YOU INVESTMENT PRODUCTS
This eliminates any and all banks without exception as your investment managers.
If you have the time, knowledge, ability, and desire, you should be your own investment manager, and put your money in accounts where they make no profit other than their mark-up on transaction expenses and their spread on cash yield and capital reserves. i.e. NO COMMISSIONS. This eliminates insurance companies and full-service brokers.
So, you can guess my answer to your question of who to suggest:
for a portfolio of individual securities: an online broker such as Scottrade or TD Ameritrade
for mutual funds: a no-load investment company such as Vanguard or T Rowe Price
for your not-at-risk allocation: (this is the only time where you should darken the door of a bank): CDs, money-market funds, savings accounts, and the like.
Happy investing!! 
|
|
Thu Mar 03, 2011 5:49 pm |
|
|
RandRmoney
Contributing Member
Cash: $ 7.65
Posts: 33
Joined: 03 Mar 2011
|
| Thanks! |
|
|
Now keeping in mind I am a true rookie to investing, the trade off to going to a bank is that I can get more face to face time and that may give me more "hands on" experience. Then after some time when I know more, I can go somewhere else. But if you say never....I can go with that.
As far as the no risk allocation, money market vs. high yield savings.
I know little about money market accounts. And the best high yielding savings I have seen is a Capital One account whose APY is 1.20 with a 10% bonus on interest earned paid out quarterly. What you think?
So glad I found this forum.
|
|
Thu Mar 03, 2011 6:30 pm |
|
|
oldguy
Senior Member
Cash: $ 309.30
Posts: 1481
Joined: 21 May 2006
Location: arizona
|
|
|
|
quote:
With the portion set aside for investment, I plan to split it between mutual funds and a high yielding savings account. How does that sound?
As far as investments, I have been talking to a few local/national banks (Citizen's, Wachovia/Wells Fargo) What do you think of them? Who would you suggest?
LOL - did you even read my post?
First, there is no such thing as a high yield savings account, they just use that name to pull you in.
And never use a bank for investing, they are good at banking (checking & savings), but not good at investing. Use Vanguard or Fidelity or TR Price.
Caution - avoid the common traps - variable annuities, whole life insurance, and time shares.
At age 40 you have about 20 years to build wealth before you transistion to wealth preservation. If you place your $140,000 in an 11%/yr Index Fund for 20 yrs it will be $1,130,000. If you want a lower risk and choose 7%/yr it will be $540,000. As you can see, the investment selection is an important decision for you. And your outcome is proportional to the amount that you invest - eg, if you invest only $70,000 at 11%/yr you will have half of the $1,130,000.
|
|
Thu Mar 03, 2011 7:46 pm |
|
|
coaster
Senior Advisor
Cash: $ 1357.80
Posts: 6686
Joined: 11 Oct 2005
Location: Wisconsin
|
Rand - if you have an account with one of the investment companies or online brokers, they have EXCELLENT service advisors who can give you all the hand-holding you want ---- for nothing, but your good opinion.
Pick up a copy of the "Investing for Dummies" book. It's actually a pretty decent investing primer.
|
|
Fri Mar 04, 2011 7:47 am |
|
|
RandRmoney
Contributing Member
Cash: $ 7.65
Posts: 33
Joined: 03 Mar 2011
|
No, No, no, Oldguy I am listening. I just wanted to make sure I can get that same personal attention. Your guidance is much appreciated. And when I said HIGH yielding savings I just meant a little higher than the usual.
Good math you gave and easy for me to understand. I plan to start "preserving" with a little bit of it and add to it with the profits from my real estate investments. For example, after a flip I would put it all in an long term "preservation" account. How's that?
Also, of the three names you gave me which one do you like the most?
Thank you too, Coaster. I am going to get that book today or tomorrow.
By the way whats the fee breakdown of the banks vs. broker firms?
Thanks guys!!
|
|
Fri Mar 04, 2011 4:32 pm |
|
|
oldguy
Senior Member
Cash: $ 309.30
Posts: 1481
Joined: 21 May 2006
Location: arizona
|
quote:
I plan to start "preserving" with a little bit of it and add to it with the profits from my real estate investments. For example, after a flip I would put it all in an long term "preservation" account. How's that?
No - at age 40 I would use only wealth building accounts. If selling a house results in $100k, you could easily grow that to $800,000 in 20 yrs, I would avoid letting it sit in CDs or savings. When you are age 55 or 60 you can start transitioning into wealth preservation. (I'm age 72, I am over 50% in bonds - was nearly 100% in stocks for most of my working life)
quote:
By the way whats the fee breakdown of the banks vs. broker firms?
No-load companies such as Vanguard charge about 1/5 of one percent. I like their SP500 Index Fund and their GNMA Bond fund. Discount brokers vary widely, but about 2%. And bankers and full-service retail brokers charge about 5% or 6% for the purchase plus an annual fee.
|
|
Fri Mar 04, 2011 6:21 pm |
|
|
RandRmoney
Contributing Member
Cash: $ 7.65
Posts: 33
Joined: 03 Mar 2011
|
Thanks Oldguy! I guess me being a rookie AND young I want to see results sooner than later.
I just know the kind I am. I can hold on to a dollar. But with this amount of money I figure I could reinvest in real estate, something I know. And at the same time have an amount that I would usually just hold but know I have the guidance and knowledge to make it grow.
|
|
Fri Mar 04, 2011 7:59 pm |
|
|
kronar30
New Poster
Cash: $ 0.45
Posts: 2
Joined: 06 Mar 2011
Location: Omaha NE
|
| safe investing |
|
|
Just to muddy the water some more. Remember that investing in any government garentied product such as treasury notes, gov bonds, even federally insured CDs - is only as safe as the current government. While the USA has been arround for 240 some years; it has also only been arround for some 240 years. Of course if USA should fail; then most anything we now take stock in (like real estate, money in banks, etc) will usually become worthless. About the only things exempt from this form of loss would be commodities, ie food, metals and precios metals.
This having been said. I have most of my money in stocks, real estate and some collectables. Probably the best advice would be to split your gain into about 5 piles. Spend one pile on currebnt debt paydown and things that you will enjoy. Invest in stocks with one portion, bonds with another portion, this will force you to have to learn how to do each as safely as possible. Invest anouther portion in real estate, since you already have experience here, make this portion larger than the others and roll profits into stocks and bonds as you get them (by this time you will have gained more experience in stocks and bonds). Keep the last portion in safer and more easily accessed bank and CDs. Keeping in mind that even the best CDs will end up lossing money due to inflation.
By keeping your eggs in different baskets this gives you the safty you need.
buy when unpopular, sell when popular
|
|
Sun Mar 06, 2011 9:35 pm |
|
|
RandRmoney
Contributing Member
Cash: $ 7.65
Posts: 33
Joined: 03 Mar 2011
|
| Here we go! |
|
|
I put 50k in a mutual fund. It is split, 30k in stocks and 20k in bonds. I am having my dividends cashing out monthly at an expected 3 to 5%.
I know, I know I should let it stack and stack. But because I am a rookie I want to SEE proof that my money is working. After about 6 months I will start to let it grow and not cash in my earnings every month.
|
|
Tue Mar 15, 2011 2:06 pm |
|
|
coaster
Senior Advisor
Cash: $ 1357.80
Posts: 6686
Joined: 11 Oct 2005
Location: Wisconsin
|
Now I do have some advice to give you. 
You really want to SEE your money grow??? Then DON'T take the income out of it. COMPOUND growth is the real secret of growth. It's when you re-invest the dividends in more shares that you'll really see growth. Because more shares means more dividends buying more shares, more shares paying more dividends, more dividends buying more shares, more shares paying more dividends, and on and on. That's when you really see the growth you want to see proof of. When you take the income out, it's gone forever, and the only growth you see is price appreciation.
That being said, my other advice is that at your age you have too much in bonds.
Best wishes and happy investing!!
|
|
Tue Mar 15, 2011 3:58 pm |
|
|
RandRmoney
Contributing Member
Cash: $ 7.65
Posts: 33
Joined: 03 Mar 2011
|
| I got you... |
|
|
But you know I have to keep up the trend of hard headed rookies.
I know about the concept of keeping the money in and letting it compound. I only want to see and FEEL the results. I have other funds in the stash.
So when I see results I can put more in the fund. Would that yield the same results as leaving it in?
For example, if I get six months worth of dividend checks and then put back that amount or more into the fund, hows that?
|
|
Tue Mar 15, 2011 5:15 pm |
|
|
RichS
Full Member
Cash: $ 18.90
Posts: 94
Joined: 02 Feb 2011
Location: Seattle
|
RandRmoney,
You are getting some good advice from old guy and coaster. I totally agree that banks have their place and it is not in the investment world. Second Albert Einstein said that the greatest invention to become wealthy is the magic of compound interest...reinvest all of your mutual fund dividends. Be patient and you will see results soon enough.
Rich CFP(r)
Writer/Publisher/Speaker
Author "Your In Simple Language Guide to Basic Investments"
www.insimplelanguage.com
|
|
Tue Mar 15, 2011 8:17 pm |
|
|
|
