Some money to invest

[frugalone]

I was just reading over Tybee's $10K to invest thread, and I have decided to start one of my own.

Next month an EE bond my mother gave me will mature. I'm not quite sure what to do with the money. I have money kind of scattered around, mostly in savings accounts. I am contributing the max amount to my 403(b) that my employer will match (though of course, I realize I can increase my contribution even if they are not increasing theirs!). I have a Roth IRA and a regular IRA with Vanguard (mostly because I got a similar bond last year and this was a way to avoid taxes). I have $10K in savings so I can replace my 20 year old car (I may not spend that much on the car, but it's nice to know the money is there). I have an emergency fund. I also have what Mary Hunt calls a Freedom Account--money I put away each month to cover irregular expenses such as car insurance, renter's insurance, birthday presents, etc.

Possibilities...I know nothing about financial planning and find it quite boring to read about investments. Also, I do not like taking risks with what little money I have. So...
My sister has recommended a financial advisor to me, but I've never gotten the guts to go see the man. He's associated with a local bank and I do trust her judgment.
Someone on another board recommended I just park at least $10K in a VTSAX and forget about it for the next decade. I admit that I had never heard of a VTSAX or an ETF and there seems like a LOT of learning to do about this stuff. (My 403(b) and Vanguard are both in moderate risk social choice investments).
My mother is quite fond of CDs, though I really don't know why. She told me the other day that Morgan Stanley has a 2% return on a $10K investment, but I discovered this expired last month.

I just don't know what to do. I would like some liquidity, in case I need the money for something big (like a down payment on a house--that is a possibility). Someone on said other board told me not to go near my sister's financial advisor (though I'm not sure why).

Can anyone give me a bit of practical advice? I know you're not supposed to park large amounts of money in savings accounts, but I've done so all my life, mostly because, like Scarlett O'Hara, "I'll think about that tomorrow."

Thanks!

[razz]

A financial adviser who operates on fee-for-service would go over all your financial priorities and offer options to consider.

Usually a bank financial adviser is pressured by the bank to sell their products so that may be the reason behind the concern re your sister's adviser.

Without knowing your variables, it would be inappropriate to offer much advice. I am seeing concern expressed about the high volume of passive investing (ETF's) since such a limited number of stocks are fetching such high prices on market leading the possibility of a market crash.

[Rogar]

If I thought I was going to need the money in the next 3 to 5 years, I'd look into a CD ladder. I am a buy and hold investor in stocks and believe people should be using the stock market for longer term investments. Beyond that I'd estimate one of the first things an investment adviser will do is add up your investments in stocks or other equities and then add up your investments in liquid accounts like CDs, bonds, and savings accounts. They will compare one to the other and determine if the proportions are appropriate for your age and adversity to risk, among your other financial plans. That's the traditional way of looking at things.

[Tybee]

If I thought I was going to need the money in the next 3 to 5 years, I'd look into a CD ladder. I am a buy and hold investor in stocks and believe people should be using the stock market for longer term investments. Beyond that I'd estimate one of the first things an investment adviser will do is add up your investments in stocks or other equities and then add up your investments in liquid accounts like CDs, bonds, and savings accounts. They will compare one to the other and determine if the proportions are appropriate for your age and adversity to risk, among your other financial plans. That's the traditional way of looking at things.

I think this is a good place to start, with an analysis of how old you are, what your goals are, and what your investment personality is. If you know you have a goal to buy a house or go back to school in the next 5 years, then you probably don't want to put the money in the stock market, but that depends on how much money it is, and how much you are going to need. So it's hard to give any advice without knowing the bigger picture, but it's great that you already have things like a 401 k, IRA, and an emergency fund! I guess I'd think through the house issue next. . .

As Razz said, a fee-based financial planner might be a good place to start.

[SteveinMN]

+2 on the fee-based financial planner. One of the nice things about seeing one is that you'll have to get your financial records in order (if they are not already). That may make apparent a value in consolidating some investments (or at least consolidating who is handling those investments for you).

The other note I will make is that stocks and bonds can be an uncertain place to keep money -- but a greater risk for those with a longer investing horizon is losing purchasing power to high administrative fees and to fear. That 2% CD OP mentioned ties up $10,000 possibly for longer than it takes inflation to go up 2%. The "sure thing" there is that your $10,200 in X years may not buy you as much as it does now. That's a loss many people don't see coming.

[frugalone]

Should have mentioned I am 53 years old. As far as my investment personality, I am terrified of loss of any kind. That's why my IRAs & 403(b)s have moderate risk profiles. I probably won't be going back to school, Tybee, as I made a stab at grad school 2x and dropped out.

Thanks for the input!

[Tybee]

Should have mentioned I am 53 years old. As far as my investment personality, I am terrified of loss of any kind. That's why my IRAs & 403(b)s have moderate risk profiles. I probably won't be going back to school, Tybee, as I made a stab at grad school 2x and dropped out.

Thanks for the input!

It sounds like you already have relationship with Vanguard. Take their investment test here:

https://personal.vanguard.com/us/FundsInvQuestionnaire

If you are truly terrified of loss of any kind, I don't think you fit the moderate risk profile, I would think you would fit the conservative risk profile. You might be a lot happier to put the whole thing in something like Vanguard Wellesley fund and let someone else manage it for a very reasonable (Vanguard Wellesley is very reasonable) fee.

But I would first figure out what you want to do with the money--invest it or use it for a house, perhaps?

[frugalone]

Tybee, thanks for the link! I didn't know about the investment test.

I'm also going to go find some books about retirement/investing/etc. that are written for people who are scared of numbers. :)

[frugal-one]

Tybee, thanks for the link! I didn't know about the investment test.

I'm also going to go find some books about retirement/investing/etc. that are written for people who are scared of numbers. :)

Books by Samuel Case are very good. They are easy to read too.

[iris lilies]

OP, dont forget that you are already doing a fair amount correctly, investing through your workplace vehicle.p and having other pots of money and emergency fund. Good for you!

[Gardenarian]

I've always been intimidated by the whole financial/investment world, so I really admire you for considering seeing a planner.

In my case, I'd use it to cover any health stuff not covered by insurance, like dental work, vision, hearing, and so on, and probably see a personal trainer as well. I've been taking care of a lot of stuff like that this year, so it's on my mind.

[Gardnr]

Stick with Vanguard and start another investing account to compliment what you have with them but not tied up in retirement rules thus allowing you to withdraw when needed. Put that cash in a moderate fund. And if you're as risk averse as you say (although I don't think you are), set up 2 accounts for your liquid cash: 1 moderate and 1 low risk.

The fewer fund sources you have, the easier to manage. We have 5 accounts with Ameriprise but I log on to our account and see all 5 on my summary page and can deep dive each one from there.

[Rogar]

I think one of the better investments for people who don't want to deal with any sort of routine management are the retirement funds that Vanguard and Fidelity offer. Basically they have a proportion of equities compared to fixed income investments that is appropriate for a person's age, and then is adjusted to more fixed income as a person gets older.

I have made mistakes in trying to self manage my savings, but have also learned from the mistakes. I am a fan of I-Bonds. I've not bought any in a while and I think the annual limit is now just $5,000. Still, if you buy some each year it can add up. It's very low risk and a way to guarantee at least keeping up with inflation, plus maybe a little more. They are a little complicated but can easily be figured out with a little reading. Like Steve mentioned, if you are getting one or two percent in a CD or money market and inflation is 2% or 3%, you are basically loosing money.

[Tybee]

I think one of the better investments for people who don't want to deal with any sort of routine management are the retirement funds that Vanguard and Fidelity offer. Basically they have a proportion of equities compared to fixed income investments that is appropriate for a person's age, and then is adjusted to more fixed income as a person gets older.
.

I have a small amount in both the Vanguard and the Fidelity retirement funds. The Vanguard 2015 fund has done well this year but the 10 year return rate is only 4.77. The Fidelity 2015 retirement fund averaged 4.41 over past ten years--I just checked them both right now. The Fidelity 2020--these are both choice in my 401k--has a 10 year average return of 4.23.

Expense ratio on Fidelity 2015 is .5. I think that just dropped--I remember it being something insane like 1.46 not long ago. I remember because that is why I bought the Vanguard outside of 401k when I decided to try some of the retirement funds in my own portfolio. The expense ration on the Vanguard 2015 is .14. That right there is reason enough to go with Vanguard.
Expense on Fidelity 2020 is .54, btw, even higher.

But you would not select these because you are only 53-- so let's look at the Vanguard retirement fund for 2035, based on your age-- VTTHX:

year to date return: 18.86
10 year average return: 7.6
expenses: .15--that's good

The return is higher because you have more stocks in it--proportion of bonds goes up as the retirement fund gets closer to your chosen retirement date.

Anyhow, I like Rogar's suggestion a little better with a longer time frame.

[frugalone]

I met with the rep from TIAA-CREF at work today. He said my Vanguard IRAs (one Roth, one traditional, both money market) could be earning more money. So I need to look into that. I fooled around on the Vanguard web site and can't figure out for the life of me how or even if it is possible to change the allocation on my accounts, so I sent them an email.

I also increased what I'm putting into my 403(b) by a small amount. So I guess I should pat myself on the back. :cool:

The rep did represent one of the funds like the VTTHX. Those set-it-and-forget-it accounts.

I took a Samuel Case book out of the library, as well as a couple of others. However, they all pre-date the recession. Can anyone recommend a book that is easy for a math-challenged person like me? In simple English...and up-to-date?

[rosarugosa]

Frugalone: This guy's investing advice is highly regarded and easy to understand. I haven't read his book, just most of this online stock series info:

http://jlcollinsnh.com/stock-series/

[frugalone]

Thank you! Looks like an interesting series. Will read through it.


Frugalone: This guy's investing advice is highly regarded and easy to understand. I haven't read his book, just most of this online stock series info:

http://jlcollinsnh.com/stock-series/