View Full Version : if you had 10,000 to invest
If you had 10,000 to invest and a brokerage account, and you were 30, and could leave the money alone, how would you invest it?
Any ideas for someone new to investing, who is fairly risk averse and doesn't want to lose money, and doesn't know anything about investing?
In general, with $10,000 and no experience/interest in investing - I'd recommend a very very low cost index fund.
If you have a strong requirement for "doesn't lose money", your options are much more limited though.
I was thinking a Vanguard low cost index ETF like VTI, although the don't lose money thing is a problem. I am thinking of recommending half in the index fund and maybe half in cd's while he learns?
A problem I have with "safe" investing is that it isn't really "safe".
It's very hard to keep ahead of inflation while being "safe", which means you are losing purchasing power over time, which seems contrary to the goal of "not losing money".
Yeah. Maybe that is a lesson he needs to learn, that markets go up and down, but over time, he's probably best off in a low cost index fund?
Maybe a retirement date fund that is heavily balanced towards equities because of his age?
The "over time" part is crucial. At the age of 30, I'd be all-in in equities.
Right. Okay. I feel okay suggesting that to him. I would too, if I had it to do over again.
iris lilies
9-19-17, 4:20pm
Will he be adding regularly to this investment?
I hope so, I think so, he's a saver by nature.
iris lilies
9-19-17, 4:28pm
I would do 2/3 stock index fund and 1/3 bond index fund, all U.S.
At a point down the road, I will open up a stock index fund that is all or mostly foreign, throwing 1/4 of my money there, 1/2 at the U?s. Sock index fund, 1/4 at the U.s. Bond index fund.
when stocks go down, bonds go up.
Kind of like the lazy three fund portfolio?
iris lilies
9-19-17, 5:30pm
Kind of like the lazy three fund portfolio?
I dont know what that is, but maybe.
I have a Vanguard REIT index fund that's really going pretty well these days.
ApatheticNoMore
9-20-17, 1:49am
that's all assuming he'll keep it in stock, however if he is really scared of losing money, come the next recession, he won't. So in that case maybe consider a different strategy, really no point in buying stocks if your just going to try to time that market, that's just a waste, most anything works better than that (or something like bonds probably would at any rate).
Vanguard Wellington. Two thirds stocks, one third bonds and low management fees. Well diversified. Been around since 1929.
Is it closed to new investors though, Rogar, who do not have an account at Vanguard? His is with Schwab. I have Wellesley and thought of Wellington for him for the reasons you state.
Okay, just answered that question. Tried to buy VWELX from Schwab and it will not let me--closed to new investors.
Any Schwab equivalent that anyone can think to recommend?
I am following this earnestly. I have about $20K in laddered CD's that are getting okay interest, and it took years to get to that okay interest. Before that I had a fund that lost a lot of money for awhile. Now that the economy may be a little more stable I would like to get a better investment, (these are IRA funds also). I am not even sure where to start, and I am 50 and in excellent health, so planning on keeping money in for 20 years.
dado potato
9-20-17, 11:25am
Coincidentally $10,000 is the limit (per social security number) a U S person can buy per year of Treasury I Bonds. Treasury I Bonds are bought and cashed through Treasury Direct, so no broker is involved. They cannot be cashed within 1 year.
They pay compound interest equal to CPI-U (a measure of US inflation) plus a "fixed rate" which currently is zero for bonds bought during the current 6-month period. The fixed rate will be reset by the US Treasury every 6 months for bonds purchased at that time. If cashed in years 2 through 5 the compounded interest would be reduced by a 3-month interest penalty. After year 5 they continue to compound for 25 more years.
The I Bond pushes money into the future with some inflation protection. The return is relatively small (unless inflation is unexpectedly rapid). But there is no risk of loss in case of deflation (as with TIPs), a stock market crash (as with an equity index fund), or rising interest rates (as with a bond fund). There is no default risk. (The Treasury promise to pay is backed by the full faith and credit of the United States.) Taxes are deferred until the I Bond is cashed.
I personally buy $10,000 I Bonds per year, generally near the end of May. To be able to do so, I set $833 aside each month in an online savings account. I intend to accumulate a ladder of I Bonds, buying $10K annually until 2020, and cash them in 2035.
In my view, securities markets are "priced for perfection", and buyers of bond and equity funds at the prices prevailing in September 2017 are likely to experience 12-year returns that will be zero or less. (For the reasoning behind the expectations of negative returns, look up John Hussman, Weekly Commentary.)
Nothing herein is to be construed as investment advice. I am stating personal opinion only.
Coincidentally $10,000 is the limit (per social security number) a U S person can buy per year of Treasury I Bonds. Treasury I Bonds are bought and cashed through Treasury Direct, so no broker is involved. They cannot be cashed within 1 year.
They pay compound interest equal to CPI-U (a measure of US inflation) plus a "fixed rate" which currently is zero for bonds bought during the current 6-month period. The fixed rate will be reset by the US Treasury every 6 months for bonds purchased at that time. If cashed in years 2 through 5 the compounded interest would be reduced by a 3-month interest penalty. After year 5 they continue to compound for 25 more years.
The I Bond pushes money into the future with some inflation protection. The return is relatively small (unless inflation is unexpectedly rapid). But there is no risk of loss in case of deflation (as with TIPs), a stock market crash (as with an equity index fund), or rising interest rates (as with a bond fund). There is no default risk. (The Treasury promise to pay is backed by the full faith and credit of the United States.) Taxes are deferred until the I Bond is cashed.
I personally buy $10,000 I Bonds per year, generally near the end of May. To be able to do so, I set $833 aside each month in an online savings account. I intend to accumulate a ladder of I Bonds, buying $10K annually until 2020, and cash them in 2035.
In my view, securities markets are "priced for perfection", and buyers of bond and equity funds at the prices prevailing in September 2017 are likely to experience 12-year returns that will be zero or less. (For the reasoning behind the expectations of negative returns, look up John Hussman, Weekly Commentary.)
Nothing herein is to be construed as investment advice. I am stating personal opinion only.
Thanks for a really interesting point of view and something to think about...
dado potato
9-20-17, 11:30am
Hey Zoe,
I just made a comment about Treasury I Bonds, but they cannot be held in an IRA, to my knowledge.
You are 50 and you have a 20-year assumed tenure of ownership. Are you planning to withdraw income at all from your investments during the 20 years?
I am not planning on withdrawing anything during the 20 years, just living on what I make during that time.
Vanguard S&P 500 index fund. Dirt cheap.
Agree with bae; at age 30, buy equities. There's no such thing as risk-free investing, but time is your friend.
I hear you about the age thing. What would you do if you were Zoe's age, at 50, with 20 years?
I'd probably still go all in with equities if I knew I could work 20 more years.
I hear you about the age thing. What would you do if you were Zoe's age, at 50, with 20 years?
I'd probably still go all in with equities if I knew I could work 20 more years.
I'm 54 now, and am running at 50% equities, 30% real estate, 20% bonds. The bonds are local-issue bonds for things I wanted to see happen and support. Otherwise I'd be 60% equities, 40% real estate I suspect. "Real estate" for this purpose includes mortgages I privately fund, and shared-equity purchase deals I participate in to help with affordable housing.
I'm 54 now, and am running at 50% equities, 30% real estate, 20% bonds. The bonds are local-issue bonds for things I wanted to see happen and support. Otherwise I'd be 60% equities, 40% real estate I suspect. "Real estate" for this purpose includes mortgages I privately fund, and shared-equity purchase deals I participate in to help with affordable housing.
Would you classify REITs as real estate? I don't, but some people seem to. So how would you classify Catherine's Vanguard REIT fund?
Would you classify REITs as real estate? I don't, but some people seem to. So how would you classify Catherine's Vanguard REIT fund?
For my purposes, I'd lump it under "real estate". But that's just for planning for my specific scheme.
I think the stock market guys last year created a new sector, "Real Estate Sector", and reclassified REITs from the "Financial Sector" class into the new Real Estate class.
dado potato
9-20-17, 2:40pm
When I was 50, I was somewhat less averse to risk than I am now. It was 1999.
I do not quite understand Tybee's comment <paraphrased> "I'd probably still go all in with equities, if I were 50, and IF I knew I could work 20 more years." To each his own tolerance for risk. I would appreciate clarification from Tybee about his assumptions about risk of loss (maximum drawdown) in a 100% equity portfolio. John Hussman's stated estimate is -50% to -62%, and I can understand his method in arriving at that range.
After a decline in the SP500 of 50-62%, I would probably regard equities as lower risk than they are now.
When I was 50, I was somewhat less averse to risk than I am now. It was 1999.
I do not quite understand Tybee's comment <paraphrased> "I'd probably still go all in with equities, if I were 50, and IF I knew I could work 20 more years." To each his own tolerance for risk. I would appreciate clarification from Tybee about his assumptions about risk of loss (maximum drawdown) in a 100% equity portfolio. John Hussman's stated estimate is -50% to -62%, and I can understand his method in arriving at that range.
After a decline in the SP500 of 50-62%, I would probably regard equities as lower risk than they are now.
My assumption had more to do with the 20 year time frame, and the idea that she could leave it in there and weather market ups and downs. But that would depend on how much money I brought in and how much money I had to put into the 401k. If someone is going to work 20 years and not touch the money, then I am not sure that it's that much difference between 30 and retiring at 50 and 50 and retiring at 70.
My own portfolio is allocated differently, split about 50/50 between equities and fixed income, but I cannot work full time anymore, I have a disability, I am 61, etc. etc.
If I had a lot more money, I'd probably have 60% fixed income at my age.
I'd call REITs a sector fund specializing in real estate. It's probably just terminology.
Thanks, everyone, we decided to go with 6k in VOO and we will invest the rest over time--it's a joint account. Thanks again,everyone, for the help!
ljevtich
10-27-17, 12:32pm
May I suggest a different approach?
If there is any debt, Pay that off first. Get rid of it.
Then, I would invest in Municipal Bonds. Find one that is good, and you get interest payments coming for as long as you own the bond. I just bought (on the secondary market) a Muni bond for $5,500 and 5.5% interest rate for 4.5 years. Even paying the fees for it, I will get a good amount of money back each half of a year. That money can go back into a low fee Index fund or a payout.
You do not pay Federal taxes on Munis and I domicile in a state where there is no state taxes.
May I suggest a different approach?
If there is any debt, Pay that off first. Get rid of it.
Then, I would invest in Municipal Bonds. Find one that is good, and you get interest payments coming for as long as you own the bond. I just bought (on the secondary market) a Muni bond for $5,500 and 5.5% interest rate for 4.5 years. Even paying the fees for it, I will get a good amount of money back each half of a year. That money can go back into a low fee Index fund or a payout.
You do not pay Federal taxes on Munis and I domicile in a state where there is no state taxes.
That is an interesting idea, Laura. He has no debt.
I went to schwab and looked up Munis and could find nothing with a YTM or YTW (yield to worst) like 5.5. Highest yield was almost that for a Puerto Rico electric bond. I thought that munis were a bit risky now. What is the YTM on the bond you bought?
They are also saying 5k minimum on the munis, and I would not want to put him into two munis for his portfolio. Maybe you have a much bigger portfolio?
That is an interesting idea, Laura. He has no debt.
I went to schwab and looked up Munis and could find nothing with a YTM or YTW (yield to worst) like 5.5. Highest yield was almost that for a Puerto Rico electric bond. I thought that munis were a bit risky now. What is the YTM on the bond you bought?
I was thinking the same thing. Five year Ba/BB (which is below "investment grade") general obligation issues are only yielding around 4.1% right now. You would probably need to get into industrial development or revenue bonds, which are backed by the projects they finance rather than the taxing power of the issuer to get a risky 5.5%.
Bitcoin wil outperform any and all asset classes, all claims of bubble notwithstanding. I said it on this forum years ago when it was worth less than $200. 10,000 invested then would now be well over 100,000.
iris lilies
11-26-17, 10:32am
I’ll dump all of my money in bitcoin when Ldahl does the same.
Xmac, you must have quite a large sum now, congrats!
Bitcoin violates one rule of investment for me, to never invest in something you don't understand.
It's his money, so if he wants to invest it in Bitcoin, then he would need to do the learning and thinking to see if it would be a good investment.
I have “friends” who are happily telling me about cool BitCoin investing consortiums they belong to. Apparently you deposit your capital in the account, you get Bitcoins, you participate in Bitcoin’s amazing profit making power, *and* the consortium pays you a 1% bonus *a day* on your capital. Plus you get bonuses for signing people up.
Sounds like a great opportunity...
I have “friends” who are happily telling me about cool BitCoin investing consortiums they belong to. Apparently you deposit your capital in the account, you get Bitcoins, you participate in Bitcoin’s amazing profit making power, *and* the consortium pays you a 1% bonus *a day* on your capital. Plus you get bonuses for signing people up.
Sounds like a great opportunity...
That's what I meant, I don't understand. How do people buy bitcoins? That sounds like a Ponzi scheme--who pays 1% a day on capital?
I guess I don't understand what they are, as all I know is don't people use them to pay for things that are illegal? So how is this market regulated?
I am confused by bitcoins.
I’ll dump all of my money in bitcoin when Ldahl does the same.
All my capital is tied up in tulip bulbs right now.
Bitcoin wil outperform any and all asset classes, all claims of bubble notwithstanding. I said it on this forum years ago when it was worth less than $200. 10,000 invested then would now be well over 100,000.
I see Bitcoin is now at 3,330. I recently read the cost of “mining” BTC is around 5,000. Are we approaching the twilight of crypto?
I still don't understand bitcoin so I don't know, are we?
I bought a Vanguard index fund for my son and he bought a share of Amazon. His Amazon is up 44% and the index fund is up 4.18%. Early in the year, he was up about 20% since we bought for him, a little over a year ago. Now the account is up 9%, since the first buy in October 2017, since the Vanguard has gone down so much in the last couple of months.
I discussed it with him and told him what various people had said to do. He decided that Bae was the one he wanted to listen to since he probably had the most money of anyone weighing in. I thought that showed good instincts, to model one's behavior on the goal one wanted to reach, in lieu of any other definitive information. As in, if you want to get somewhere, follow a role model who is already there.
I thought that was smart of him. I picked the Vanguard index since I understood better how to do that.
The Amazon was his own addition, using logic. He still has some cash since he is so loss-averse; he wanted to leave some in cash.
iris lilies
12-11-18, 12:47pm
All my capital is tied up in tulip bulbs right now.
Still hilarious a year later.
I am making an educational display for the next flower show about the Dutch tulip speculation phoenomena. It will be pretty! The theme of the show is “Lifestyles of the Rich and Famous.”
Martha Stewart built a fortune on that kind of beauty, so really, were the Dutch that far off? Prettier than bitcoin, which reminds me of the Matrix.
Still hilarious a year later.
I am making an educational display for the next flower show about the Dutch tulip speculation phoenomena. It will be pretty! The theme of the show is “Lifestyles of the Rich and Famous.”
Lifestyles of the Rich and Bulbiferous?
dado potato
12-11-18, 3:45pm
As Will Rogers said,
Buy stocks that are going to go up. If they don't go up, don't buy.
iris lilies
12-11-18, 5:00pm
Lifestyles of the Rich and Bulbiferous?
Ok, I’m not sure that worked.
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