Please give your advice on how you would invest $35,000 that you can add $400 monthly to this investment with trying to make an average return of 5% or more for the total 10 year period. Then in 10 years you would need to cash in this investment and use the money.
If you started this investment before the end of 2012 then in 2013 onward you would have about $1,600 of tax free space left empty in a Roth IRA. You have a 7 month emergency fund, 0 debt, Taxes-married filing jointly, 15% Federal Tax, no state tax. I could also handle about a 15% risk.

Thanks for your help!

Sorry I am new at all of this and what our goal would be if it is even possible is to try to take the 35,000 plus 400/month*10years=$83,000 and with the possibility of losing 15% of that then trying to get the $83,000 into around $113,000 to $120,000 range or more.

You're question is clear, the other details aren't.

If you're asking where I would invest a $35k windfall for 10 or so years, there's this thing called the stock market. Have you looked at that? You can access just about any goofy idea anyone who has walked the face of this planet can dream up. There are "safe" investments and there are investments where your $35k would be better off on red in Vegas. Certainly, you could find something to appease you in the stock market....

There is common agreement that one should only invest 2x dollars in the stock market, where 'x' is the amount of money they are willing to lose. This is because stocks lost about half their value during the crashes of 1929, 2000, and 2008. If being able to "handle" a "15% risk" means you are willing to see a potential 15% loss, then I'd put $10,500 into VTSAX and keep the remaining $24,500 somewhere "safe" (maybe VBTLX or certificates of deposit).

Tim

For a average 5% return, the stock market is the only way to go now. I would have it in mostly stocks now and as you get closer to your 10 year goal, reduce your stock exposure.

For me, I would go with:
25% dividend paying stocks and ETF's ex: VZ, JNK, etc.
25% large cap US. ex: VTI, etc.
25% foreign, emerging markets ex: EEM, VT, etc
25% financials, real estate ex: XLF, RWO, etc.
And keep some cash on hand is case the market tanks so you can get in on some discounted prices.

The key is to diversify ,re-balance, dollar cost average.

It's not that hard to get 5% return at much lower risk right now with corporate bonds. An investment in corporate bonds held to maturity would have no market risk either. There would be default risk but that can be kept very low with a diversified portfolio.

Stocks are clearly not "the only way to go" although I do think stocks are one category that should be considered for this investment.



JNK is NOT a stock. It is a junk bond mutual fund. VZ is a risky stock. I don't think it is consistent with the stated risk tolerance.


VTI is a "total stock market" fund. It is about 75% large cap and about 25% small cap. Not a bad suggestion but please don't mischaracterize it as a large cap fund.


Emerging markets are not consistent with the stated risk tolerance.


I would not touch financials at this point, with very few exceptions. They are facing significant headwinds worldwide. I have no opinion about real estate.



I could be wrong but I took the question to be soliciting suggestions for a "handsoff" portfolio. If the OP wants to actively trade then there is nothing wrong with your suggestion but for a buy-and-forget investments that advice is anathema.



The OP also specified that the investment will be a lump sum $35000 now with a $400 monthly deposit. While that $35000 could be dollar-cost-averaged in, that would leave the additional question of determining over which period. That is a timing decision. If you want to make a timing decision you can just decide to time when to put the entire $35000 into the market.

I agree that diversification is important. In my opinion one should never have more that 4% (1/25) in any individual stock. In this case that is $1400. I think that is too small of a position to invest efficiently in an individual stock so I would stick with ETFs or mutual funds.

OP, you also did not describe the use of this money. That is key since it could impact what I would suggest. For example, if this will be used for a child's education, and if you are a US investor, then high quality zero coupon bonds might be perfect. Those could be a terrible choice if you have a different use in mind.

Can you provide more information?
- What will you use the money for?
- Do you intend to actively trade or do you want to buy something now and forget about it for 10 years?
- What do you mean by 15% risk tolerance? Do you mean you don't mind losing 15% in one day? One investment? Would losing 15% of your money over the 10 years be acceptable?
- What is your tax situation? If this investment produces income, what rate will it be taxed at?

My question is, how does everyone know what is best without more details?

Why the ten years? What will it be used for?
Do they have an emergency fund?
What does 15% risk really mean? fluctuation? % of reduced sleep?
Where else are they invested?

It was a vague question which merits a vague response. Detailed responses above are merely what the posters would do, which may or may not be a "good" suggestion for the OP.

You are absolutely right.

Even my attempt at a helpful response was based on an assumption that I had in the back of my mind that this is for a child's education. If so, I think there are some things that can be done that are separate from anything the OP even thought about. For example, zero coupon bonds can be tax free if used for education (I think) but I think they would be a terrible idea for other uses.

But really, we need more information.

I don't know when utility stocks were ever characterized as risky as far as stocks are concerned.
All stocks are inherently risky. This is why most of my examples were ETF's.
And sure some of the ETF's I've mentioned are risky, but the mix of them all takes a bit of the risk off.
And not getting into financials, I believe one would be missing out on a lot of potential especially within 10 years. That's just my opinion though.

And another opinion of mine is to stay away from gold. lol But I could be very wrong.

And besides, it is what I would do. I have no idea of the level of experience of the OP. Only that the OP is looking for ideas and smart enough to ask around a bit instead of throwing it all into AAPL or under the mattress or something.

Everyone is going to have a different opinion as far as investments and personal finance are concerned. And I knew this posting my ideas here.

Utilities used to operate as government monopolies in most places and many still do operate as de facto monopolies. This is not likely to change any time soon. Regardless of any radical free-market, uber-capitalist politics, it is just plain impractical to have multiple sets of power line and gas pipes serving an area. And the capital equipment required to produce and distribute is so expensive that no company is willing to take the risk without some kind of guaranteed return in the form of regulated rates. We tried deregulating the industry. It was a disaster for everyone involved - consumers, the companies themselves, and even investors. That means we are unlikely to try it again for at least a generation when people forget about it.

So, yes, I agree, utilities generally are not as risky as other investments. But Verizon does not operate in the regulated arena. Its investments are not protected by government regulation. There is free competition in the rates of cell operators and that competition is choking them. They are under enormous pressure from customers to spend a great deal on new network infrastructure. And that stuff is expensive. Why do you think the release of the new iphone caused the stock of AT&T to get hammered? Because AT&T and Verizon each lose a little with each phone. Their future profitability rests on consumers being willing to pay more and more for service. And frankly, I don't know many people that want to fork over more that $200 a month that they pay now. I just don't see any growth potential for VZ or T and I would hardly put them in the utility category in the traditional sense. The economics of their business is entirely different.

With financials the problem is that they are facing retaliatory government regulation worldwide. Everyone hates these companies. Governments want to restrict them, people don't want to pay their fees, and interest rates are so low they can't make any money. Even Chase, which is widely considered to have the best management around, allowed one person to lose over $2 billion of investors money. So why would anyone want to bet on that industry? Sure, it's a vital industry, and it is beaten down now. But it's a gamble thinking that it will do well in the face of the headwinds. That industry did well over the last 20 years because of deregulation. We are now seeing a reregulation trend.

But I do agree about gold. I wouldn't touch the stuff for anything but a nice pair of earrings for a lucky girl.

Do you have the same opinion about international financials? I pretty much agree with every point you've made. Financials are crap right now....there are exceptions of course. Their exposure to GIIPS is still pretty high considering they have been trying to shed that exposure as fast as they can. If one was willing to take a chance, this might be a good contrarian play.


I don't like it either. Gold has no intrinsic value but yet the average joe empties his mutual funds of equities once they have tanked so he can buy gold at it's all time peak. And wonders why he loses money.

In general I do have the same opinion about international financials. It was European banks that bought much of the high-risk crap that was sold by US banks and led to the 2008 crisis as well as the greek and spain debt that is being bailed out. There were innumerable banking crises immediately before that including in Ireland and Iceland. In Asia there could be great financials companies but growth seems to be slowing so their profits will as well.

If I saw significant improvement occuring somewhere in the world I might be interested in financial companies in the region depending on a lot of factors. But I don't really see any major positives right now. There likely are some good financial companies in the world. But I'm not able to weed them out and the financials ETFs hold the bad as well.

For risk capital they could e worth a shot but the OP was interested in low-moderate risk.

As you say,

I believe the financials won't perform the way they used to for a long time because of things you mentioned. But as economies improve, the financials can't help to move with it. More so, ahead of it because the market is more of a forward looking indicator. And with an improving economy, at some point rates will rise pushing financials even further. I believe the market as a whole will struggle to make new highs without them.
I would not try an pick an individual name because who knows when the next shoe will drop...like you said: JPM And then dragged through the Senate banking committee.
I do personally own the XLF and have for a while and feel comfortable there.
And the world moves fast now and we have an election around the corner. Who knows? Not me. But I feel the financials are worth the risk to an extent. In the next year or two? No. But 5 to 10? Absolutely.

This is almost like watching Jim Cramer.

You should see the video.

Oh golly gee, not enough characters again

US equities are currently in a fantastic position for buying.

Since the 2008 crash, companies have been paying down their debt, which are now at their lowest levels ever. This has massively improved their P/E ratios. In addition to companies (i'm referring to the S&P500) doing this, they are also beating expectations for profit.

I would be going long on S&P500 Equities that are fundamentally strong, profitable, have low debt and and at historically low stock prices compared to their mid-to-long term movements.

Finviz is a good website you can use to filter out which companies are worth looking further in to.

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