Inherited 30k, advice needed.
As the title states, I was left 30k my Great Aunt Millie, and I'd like some advice on what to do with it investment-wise.
Some information:
No student loans
No car
No debts at all
I just started my first job, and make 80k/year. I live in a high COL city, and so anticipate being able to save about 20k/year as well.
Edit: Thanks everyone for your responses, I bought into two funds I appreciate the help.
Vanguard -> S&P500 Mutual Fund (VFIAX) -> Profit
I was thinking of something like that, but I'm weary of 100% exposure to equities.
Well you don't need to allocate the whole 30k to one fund.
Equity is where it's at. All the bond money is flowing into equities and plus, equities have outperformed the bond market. Should be a good time to invest in equities as long as the economic data continues to be strong.
True, but I'm guessing you're young and you said you had 0 debt. Plus, this is "play money" meaning you can take extreme risks for a high reward, and if things go south, it won't hurt you financially because you just inherited it; you're not sending your kids to school on it, you're not buying food or depending on it for rent etc.
Equities (primarily US) are the place to be right now. Bernanke's got a floor under us and he's not going to change his policy until unemployment slips below 6.5%. Japan is screwed up, Europe is still fucked and emerging markets are eating dog shit right now. Foreign investors are flying to the US for equity investments. Only 40% of the country's households are invested in equities as well. Still plenty of room to go.
Idk, i'd just be wary of the markets right now. Have spoken to a couple of hedgies and they are short-biased on the equity-market. It just seems so inflated, and it doesn't make logicial sense, other then the FED influencing everything
Maybe just because I'm interested in it, I always thought it'd be interesting to invest with a distressed fund.
Like waymon said up there, Fed is willing to continue it. So why not ride the wave and then exit when there are signs for a dip again.
Great Aunti Millie, God bless her soul. People underestimate the importance of setting aside a fairly liquid emergency fund should something unexpected come up. Otherwise, your best bet is to split the $30k into 3 separate low cost vanguard funds. I would probably do a domestic growth, a domestic value, and an emerging markets fund. This is based on the assumption that you will leave the money there for awhile and have no need for it in the near term. Alternatively, you could invest $20k in two funds and speculate with $10k on a name that you think is significantly undervalued with solid upside potential. Found money is great but don't blow it on something stupid and don't try to time the market.
How young are you? Bonds are not the way to go right now son. Equities are more volatile, but always outperform in the long-run.
Firstly, congrats on being in a solid financial situation. Obviously you have done well to avoid the many pitfalls of, well, life. I'm also impressed that in a high cost of living city and making 80k you anticipate saving 25% of your gross pay. Impressive.
As to the money, I think that you should stick some of it in low cost equity funds as others have said but I would be more than reluctant to stick it all in one. Regardless of whether you need the money or not soon, I've found it best to always be liquid no matter what. Shit happens. If you like trading I'd take a portion of it and trade it... probably like $5 grand of it. But that's just me, I enjoy the trading game and think it particularly important to understanding how the market works etc.
Other than that, I truly would avoid sticking it all in one place. There is an argument to be made that you should buy a long bond fund now after the recent comments by Bernanke and eschew equities as they punch through to all time highs. Not saying it is what I would do, but I think sticking all your money into an all equity fund is alluring but not necessarily the most ideal play. Note: I am not saying long term buy bonds and hold them but since I'm a trader by nature most of my recommendations will never be geared towards index to equities over the long term. haha.
+1 on the vangard funds. A trip to vegas wouldn't hurt either (fun only, no gambling)
keep it in a safe.
Thanks for all the replies everyone!
As some have noted, I'm afraid of buying a few funds like VFIAX or ETFs like PFF, and then have the fed announce they will taper and I will just get hammered. Obviously bonds are a joke right now. So I'm a little unsure, which is why I'm asking. Thanks everyone.
Listen to this. You only lose money once you sell. When you look at your account and see the numbers declining, that means nothing. Equities go up and down. The market runs in cycles. Equities will always come back and head higher.
Look at 2008. So many people made the mistake of selling and taking a loss at 7000. Now we're at 15 and they don't have any more money to invest because they let emotions get the best of them. The rest of us are up double, even triple digits because we held on.
If you are "afraid" of investing money that you got for free, then you shouldn't be in this industry. Sorry to act so harsh, but to make money, you need to take risks. Right now and for the foreseeable future, the risk is in your favor. Take advantage of it.
Go all-in Frontline 2012 (OTC: FRNT), cash in in 2-3 years. Honestly, the best bet on a recovery in vessel valuation and shipping markets. Will be a tier-one player in commodities shipping, mark my words.
$30k isn't that much money.
donate to charity - I'll start one for you right now give me a sec
The general rule of thumb is to have six month's worth of expenses saved in liquid form. If you're saving $20k a year on $80k salary, that means your $30k is precisely six month's worth of expenses. Keep $10k in an interest-bearing savings account, and the remaining $20k in 3-month T-bills that mature one month after each other.
Of course, this might be a bit conservative. I would make sure you max out your Roth IRA, and keep saving so when you're ready to buy your own house/apartment you can keep your debt-free streak going. Like STIBOR said, $30k isn't really a ton of money from an investing perspective. Keep most of your extra savings in mutual funds right now. You can go for small caps and foreign investments to bump your return a little, but unless you're doing it for the practice, I don't think it makes as much sense to be investing in individual stocks quite yet.
Do most people here really believe buying equities now, at an all-time high, is a good investment? I intend this as a genuine question, not sarcasm, as I don't know jack shit about investing.
I think it genuinely depends. Much of the argument is that equities have, over the long run, always gone up and thus will continue to go up. They have the most volatility but also have the highest returns over the long term and therefore are the best investment to passively index. You also combine that with the opinion that you can't beat the market (to be fair, most people cannot) and the conclusion is that the best place to park your money for the next 30 years is certainly equities. Not only do you get the advantage of time and compounding returns, but you also have vast amounts of history on your side. And frankly, there is something to be said for dollar cost averaging into the market over the long run. It has historically worked. That is also the caveat. We are assuming that the future will look something like our past. I'm not trying to get into it too far here but I'm not certain that it will. Now, the other way to look at it is that even over the short term equities should outperform because of the Federal Reserve. Bernanke is doing everything he possibly can to push people out of ever other asset class and into stocks. Quantatative easing combined with ZIRP should eventually lead, and has been leading, people to move out the risk curve to reach for yield. That means stocks will continue to go up buoyed by the amazing amount of money in the system. Add to that all the people who have been woefully under invested in the markets for any number of reasons and you get another wave of buyers coming in which should ideally push the rally even further.
Logically, equities should benefit most from these policies as there will be no other place to park your money where you can get a decent return given inflation that will undoubtedly hit at some point in the future. If you choose to buy bonds, you are taking a huge risk that you get nailed with one of the largest sell-offs in history and get annihilated. Obviously, you want to keep your duration super short if you are buying bonds and I personally think you should allocate something to short-duration securities, 1 year maximum, and then re-invest as they roll off. But regardless, you are stuck between a rock and a hard place here because the Fed can with one sentence crush either position you have. I am not buying equities up here at all time highs almost nor would I advise anyone to put new money to work here. I don't believe in chasing and buying up here after the past week or so would be chasing. That's my opinion. If for some reason we blast through the all time highs with authority my attitude might change.
Anyway, I'll shut up now.
I mean he kind of has a point. It's not a life changing sum of money. It's not the type of money where you say fuck and buy a new car in cash. It's an amount that you save with.
Wasn't disagreeing... just threw in a lurking GIF to judge the reaction...
He said 30K -so your options in distressed are extremely limited. There are a few mutual funds that kind of cater to this space though-Check out TFCVX.
Just buy 8-10 stocks you like. It's a good learning experience.
Hookers and blow.
The majority of the responses on this thread make me quiver, but this is very well put. Emphasis on don't try and time the market.
I wish I had a "GREAT AUNT MILLIE"
Throw it in a savings account and forget about it. You never know when/why you'll need it.
Are you fucking retarded? You inherited 30k and "need advice?" Here's some advice - learn the difference between your dick and your asshole.
You know $30k isn't even as big as the average life insurance policy, right? Wal-Mart gets paid more than your "inheritance" when one of their cashiers dies.
$30k is like, half the size of a mediocre first year I-banking bonus. It's an irrelevant amount of money, just put it in your piggy bank.
Either put the money into a savings account, that way, if things go awry, you have half a year of expenses saved up or put it in a good value fund or an index fund
First $5k into a Roth and invest in something a little higher beta.
Another $5k into Ally.com interest checking.
Put the other $20k into CDs with easy withdrawal terms.
Buy a house
Thanks for the response. What I've decided to do is keep 10k in savings for a rainy day, 10k in a vanguard value, and 10k in a vanguard growth. Fees are low and I won't need the money hopefully for at least 5 years.
Thank you guys.
Definitely way too conservative
Do you own or rent? Unless your in NYC I would suggest using that 30K as a down payment on a house. You can start building equity on your house for less than the rent you pay each month.
Disagree. $25K buys you about six months of expenses in Manhattan, and that flies by faster than you'd think.
Trust me, I lived through the panic of '08, and it could happen again. The first thing you really need is an eight month emergency fund. I'll settle for six here, though, as long as you can put the last two months in over the next year.
1% interest sucks, but being able to sleep at night knowing that if you get laid off, you're ok, is worth thousands of dollars a year.
More importantly, I expect interest rates to increase over the next year or two. That's why we're getting you into a CD with easy withdrawal terms. (For instance, Ally.com has a 60 day early withdrawal penalty on 5 year CDSs).
Throw some into ETFs (as stated above) and save the rest.
FRNT is way too hard to trade if you don't have a local broker. Comm. fee and liquidity squeeze will eat up any gains trading in the Nordic OTC market.
That's a valid point. You need an account with a securities dealer that is member of NOTC.
Either way, I wasn't talking about trading anything. Long the stock, put it in your drawer, throw away the key and blow the dust off of it in a couple years. Stock should be tradable on the NYSE by then. In any case, you can buy into it during a planned New York IPO in a matter of 6-12 months (you are gonna be paying more, tho).
Is there a difference between the the Frontline you mention here and NYSE: FRO?
I think you might need to cut back a little on whatever you're smoking.
Must not be the same Aunt Millie from the Goldman Elevator account...
Easy there tiger.
Have you considered buying the vanguard index funds within a Roth IRA?
Roth IRAs, at least for middle income people who expect to become rich, are one of the greatest gifts in the tax code for savers.
1 $30k isn't that much money in the grand scheme of things for a typical banker. But if you can save that money at 22 and keep it in the market for 43 years at 6%, that's $15k/year at retirement. So it's nothing to make a big deal of but it's nothing to sneeze at, especially for a 22 year old.
2 It's always fun to talk about what to do with a marginal dollar in different situations.
3 Most people working in finance are smart enough to figure out the big stuff- investing in mutual funds, risk preferences, liquidity, etc. They're not always quite as sophisticated about taxes or IALM strategies. Based on my research, there's at least an extra 1% in returns in optimizing your portfolio for taxes and risk.
your young bro what i would do is 80% equities, no EM. put 18% in FI (tax free munis?) and hold 2% cash. everyone has their own prefs though
Create a diversified portfolio of ETFs, allocate based on some method that doesn't read 'risk-parity' and re-balance quarterly.
IALM? And could you elaborate on #3? I would appreciate the advice
Rem ea perferendis et autem vitae corporis. Natus nemo dolorum sint nisi sapiente nulla. Sint accusamus non sequi. Illo in eum alias iusto qui enim. Et qui laudantium libero et. Quibusdam sunt aliquam ipsa ad exercitationem quia.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Eaque voluptates dolore sed in quia. Dolores reprehenderit libero alias enim fugiat facilis. Ducimus cupiditate sit velit odit modi consequuntur tempore.
Eaque minima rem dolorem ad. Et officia quo ut qui repellat est. Excepturi id voluptas illo at beatae magni impedit. Sed voluptas possimus libero in cumque incidunt ea. Odit provident vel hic quae expedita incidunt et. Aut aut quas debitis quis eveniet dolor.
Soluta hic minus et autem et nam aliquam. Dolorem libero ut eos praesentium.
Modi officiis molestiae aliquam laudantium deleniti est. Velit dolore dolor perspiciatis voluptates. Accusantium esse soluta quis nihil saepe et ut. Libero sed nulla at hic vel est vitae. Autem velit ut consequuntur. Excepturi laudantium harum explicabo atque. Necessitatibus ab voluptatem sint est et inventore repudiandae.
Placeat ea sint soluta illo eum. Dolore voluptas quidem quidem. Fugiat qui nulla dolores deserunt sequi culpa quo doloribus. Tempore voluptatibus fuga quas sint ut ea.
Suscipit reprehenderit ut qui vel debitis ratione maxime. Soluta aut et accusamus aut unde. Iste harum molestiae rem et consequatur libero delectus rem. Saepe itaque cum doloremque qui nesciunt quod quia.