What should I do with my first 50k in savings?
Somewhat ironic that I work in IB but don’t know much about personal finance. I am a Canadian kid working in the US so stuff like Roth IRA, etc, doesn’t really apply because I likely won’t be living in the US long-term (max, maybe next 5-7 years).
Not sure how to park my money. Currently have about 15k USD and after I get paid my bonus, should have 60k USD total. With the exchange rate (if I choose to convert all) that is effectively ~80k CAD.
Will have some student loans to take care of but should have a net $50k CAD after all is said and done. How should I invest this? I’ve been reading some resources and plan to have a rainy day 6 month fund in case (~10k) but am not planning any large spending allocations, and live generally frugally.
Don’t want to do Bitcoin or any of that shit. Not sure how reliable stuff like Vanguard ETFs are. Do I just park in a 2% high yield savings account? Am fairly risk averse. Thanks!
interested
Have some savings (10k) so similar situation I guess, just on a smaller scale.
What I've done is 30% into bond ETFs and 70% into equity ETFs - you can choose what type suits you best, but I've mainly focused on income (so high yield investment grade bonds and income producing equities). I think the main thing you need to figure out is what do you want the savings for? Ideally you wont touch the ETFs so that they can compound over a long period, so if you are expecting it to pay for things in the short term like a home downpayment, vacations or a car, it might be best to put like 10k into a high yield savings account that you can access whenever and leave the other 40k in ETFs.
Really interested in hearing others take on this.
Cool that’s interesting thanks. Can I ask a few questions? Sorry in advance if any seem ignorant
TY SBed btw.
interested
Unless you have specific spending goals (like a down payment or business school) you have an extremely long savings horizon and thus are able to take much higher levels of risk than a 55 year old. Buy a diversified basket of stock ETFs (domestic/developed/emerging; small/mid/large) and then don’t look at it ever.
I have $10k in cash, $10k in a high yield savings account (essentially cash, yields 1%), $25k in a brokerage account with Fidelity (only holds ETFs), and $6k in a Roth IRA. I recommend keeping around 6 months of living expenses in cash.
In my brokerage account, I use a long term, dollar cost averaging investment strategy. So I deposit the same amount in the account every month, with the intention of never selling. My investments are roughly 30% domestic stock, 30% foreign stock, 20% bonds, 10% REITs, and 10% commodities.
I’m certainly not an expert on investing, but I believe ETFs are an easy and low cost way to dip your toes in the water and start putting your money to work.
It's recommended that you put six months of expenses in a high-yield savings account for emergencies. The rest can be invested in a diversified portfolio of your choice, ideally through a handful of low-cost ETFs. The websites below were really helpful for me when I was getting started as they showcase several popular portfolio recommendations and back-test them. I personally settled on a simple allocation of 70% VTI and 30% VEA/VWO since I'm 30+ years away from retirement and wanted some international exposure. I invest a little bit in those funds every two weeks and plan to never sell until I need to.
I should add, always consider your personal circumstances and risk tolerance when deciding on an allocation. For instance, I'm highly exposed to the real estate sector through my career, so I opted for no direct real estate exposure in my brokerage accounts. At the same time, I felt like I could handle risk, so I don't own any bond ETFs, although this may change as I grow older and start a family.
Fucking awesome answer. Thanks. May I ask what (ballpark) your APR has been? Trying to just get a quick comp vs the 2-2.5% of a HY savings account.
And also - my understanding is that you don’t invest in RE since your job is tied to RE and the logic is that if the RE market went down - your actual job / bonuses would go down, in addition to any potential RE holdings, making it a double whammy?
Just a heads up, if you're thinking that you can get 2-2.5% in a HYSA, you'll be extremely disappointed when you check rates right now.
Interest rates have come down a lot. I've had an Ally account for a long time, which earns 1.0% today. I personally don't know of any high-yield savings account with an interest rate as high as 2.0-2.5%. Here's a website I usually reference when comparing high-yield savings accounts: https://www.bankrate.com/banking/savings/rates/. Definitely let me know if you find something better!
Regarding the second question, you're correct. In addition to my salary, I have co-investments and carried interest points in real estate funds, all of which are tied to the performance of the real estate sector.
HY savings rates have plummeted in the last year. Keep your emergency savings there but the days of getting 2.0%+ are done for the foreseeable future.
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