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A place for Get Rich Slowly readers to ask questions
and exchange ideas
It is currently Thu Apr 24, 2014 12:35 am




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 Post subject: Investment Questions
PostPosted: Mon Mar 18, 2013 9:01 pm 

Joined: Mon Mar 18, 2013 8:48 pm
Posts: 1
My husband and I recently came into a large sum of money and we're unsure as to how to proceed. We will max out our ROTHs for the year, add to our 5% house down payment to get it to 20%, will set aside 6 months of living expenses, and will still have about $100k.

We're both in our late 20s, have no consumer debt, have $20k in savings, and about $60k currently in our retirement accounts (IRAs and ROTHs). We DO have student loan debt, however, have a separate plan for tackling these (public service loan forgiveness and repayments) that makes paying more than minimums not the smartest plan.

We want to invest this money, but have zero idea of where to go with it. Our plan is to have kids in the next 2-3 years.


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 Post subject: Re: Investment Questions
PostPosted: Wed Jul 17, 2013 7:47 pm 
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Joined: Wed Jul 17, 2013 6:33 pm
Posts: 14
Location: Florida
You have a great problem.

Based on what you have told us here, I would recommend the following:

1. If you have employer 401ks, I would recommend maxing those out and using some of the $100k to live off of if you need to make up the difference. I say this because your paychecks will go down.

2. Consider paying off your house. Living debt free can be very liberating.

3. Open up 529 plans for your future kids. Since you don't have kids, you can name each other as the beneficiary and then switch it to your kids when they are born.

4. Give some of it away to worthy charities.

5. If you have a Financial Advisor, call him/her. If not, get one.

Good luck,

_________________
Jake Posey
http://5minutemoneytips.com/category/invest/


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 Post subject: Re: Investment Questions
PostPosted: Thu Jul 18, 2013 3:22 am 

Joined: Sat Dec 10, 2011 7:25 am
Posts: 523
My approach would be simpler...put the $100k in the Vanguard Equity Income (veipx) and vanguard total return funds (vt) and let time do its magic. why -see below? (Want a little less risk? buy one of there age based blended - funds (with bonds in their portfolio- yuck). Given your age, lack of other debt, emergency fund I would go the equity route. I did and it worked out very well for me. but others like the blended funds.

1) huge diversfied funds, great returns (esp veipx my favorite) with very low admin fees

2) skip the investment adviser! (better yet run away from him/her) A knowledgable and honest one who will put your returns and interest above their commissions is like a unicorn. Have you ever seen a unicorn? Good luck finding one.

3)Take the money you would have spent on the investment advisor and invest it as well. If you want advise come here...many knowledgable people who enjoy helping novice investors.

You can buy your funds directly from Vanguard or open a brokerage account (i.e. Schwab) and buy the mutual funds there...I like the second approach keeps everything in one place...


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 Post subject: Re: Investment Questions
PostPosted: Thu Jul 18, 2013 5:53 am 

Joined: Mon Jul 15, 2013 4:55 am
Posts: 11
I'm going to second and third what Ray said. At your young ages and having all your other ducks lined up (emergency fund, mortgage, debt strategies, etc), I would consider putting the entire amount into low expense index funds, though I would split it 75/25 between domestic and international for diversification.

I also agree with being your own advisor. You guys sound like you're way ahead of the game and probably didn't get there by accident.

Your biggest risk is your own success. You're young, in a good financial shape and find yourself flush with a large amount of excess cash. The temptation to change your habits (eating out more, buying a new car, etc) can be huge, especially for young people. I hope you can stay the course and reap the long term benefits of your current actions.


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 Post subject: Re: Investment Questions
PostPosted: Thu Jul 18, 2013 7:16 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1569
Start here.


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 Post subject: Re: Investment Questions
PostPosted: Thu Jul 18, 2013 7:34 am 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5217
5MinuteMoneyTips wrote:
5. If you have a Financial Advisor, call him/her. If not, get one.


Why?

Sounds to me like the plan suggested in the original post is pretty good. I'd invest the remaining $100k. Start by putting it all in a money market account at Vanguard. Read at least 5 good books on investing, then begin to manage your own money based on what you learn. You might make a few mistakes. But a financial advisor is no guarantee of success either. It is only a guarantee to pay out extra money in fees.

At the very least, if you manage your own money you will always know what it is invested in and that your manager has your best interests in mind.


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 Post subject: Re: Investment Questions
PostPosted: Thu Jul 18, 2013 9:10 pm 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
I would also suggest to spend a little on yourselves. don't get the impression life should be without its luxuries.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Investment Questions
PostPosted: Fri Jul 19, 2013 5:00 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1687
Location: Ottawa, Canada
5MinuteMoneyTips wrote:
5. If you have a Financial Advisor, call him/her. If not, get one.


I disagree with this. Financial Advisors are nothing more than salesmen. They're not there to help you plan a bright and prosperous future - they're there to sell you the most expensive funds/insurance they can convince you to buy, in order to maximize their own commission.

Educate yourself and avoid such snakes.


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 Post subject: 5. Investment advisor
PostPosted: Fri Jul 19, 2013 7:43 pm 
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Joined: Wed Jul 17, 2013 6:33 pm
Posts: 14
Location: Florida
I can understand your hesitation to call a financial advisor. I have met some really slick ones who only want to sell you something. However, I have also met some very good ones who truly do want to help you succeed.

On a forum about Personal Finance, you will find a lot of very bright people who can go at it on their own. That is great. However, if you are unsure, ask for advice. A couple of years ago, I asked my accountant a $100 question and it saved me $1,200 in taxes.

There is no shame in seeking for or paying for advice. A 2011 CNN article noted a study where advise seekers returns were higher.

"The median annual return of those who got professional help was almost three percentage points higher than the return for those who invested on their own, even after taking fees into account." Should I hire a financial adviser or go it alone? Nov 28, 2011.

Can you do it on your own? Yes. Can you do it with help? Yes. My advice is to go to 5 wealthy people you know and ask if they have an advisor. I'll bet you'll get 5/5 who say yes.

___________
Jake Posey
http://www.5MinuteMoneyTips.com


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 Post subject: Re: Investment Questions
PostPosted: Fri Jul 19, 2013 8:52 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1569
I have no bias against financial advisers. But at the OP's particular stage of financial development, I think most posters are saying that a financial adviser is premature and that the money is best used to bolster investments. You don't need a track coach when you're just learning to walk.


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 Post subject: Re: 5. Investment advisor
PostPosted: Sat Jul 20, 2013 3:01 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
5MinuteMoneyTips wrote:

Can you do it on your own? Yes. Can you do it with help? Yes. My advice is to go to 5 wealthy people you know and ask if they have an advisor. I'll bet you'll get 5/5 who say yes.

___________
Jake Posey
http://www.5MinuteMoneyTips.com


Logical fallacies aside, might I suggest you change your acquantinces? Many of the truly wealthy like to fly under the radar.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Investment Questions
PostPosted: Sat Jul 20, 2013 7:42 am 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5217
I also don't necessarily have anything against financial advisors. And I use a CPA for taxes because it has saved us a lot of money over the years. But for most people, the key to success is investing in index funds and avoiding fees.

As BF said, many of us rich folk are good at flying under the radar. Some of us have even perfected cloaking devices...


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 Post subject: Re: Investment Questions
PostPosted: Sun Jul 21, 2013 4:30 am 

Joined: Sat Dec 10, 2011 7:25 am
Posts: 523
Quote:
"The median annual return of those who got professional help was almost three percentage points higher than the return for those who invested on their own, even after taking fees into account." Should I hire a financial adviser or go it alone? Nov 28, 2011."


Yes and the cost of health insurance will go down under Obama Care.
Don't believe it for a moment...

There is an amazing amount of money being charged by financial advisors in both fees and commissions. They can and do fund "study" after study where they like the results. Those 'studies' are generally cited by someone in the financial advisory field. As is the case in our financial advisor proponent here: 5MinuteMoneyTips - (don't you think a little disclosure would have been appropriate?)

Quote:
My name is Jake Posey and I am a busy father, husband and think about money way too much. I am a former financial advisor and have taught personal finance at a local college. I’m currently working in a managment position at a large national bank and teaching business courses at the college level.


There is also research that take the opposite position.
An Audit Study, a working paper by Sendhil Mullainathan (Harvard), Markus Noeth (University of Hamburg), and Antoinette Schoar (MIT), was recently published by the National Bureau of Economic Research (NBER), a private, non-profit, non-partisan research organization.

Seeking financial advice is bad for your wealth. New research by top academics concludes that the advisor industry mostly reinforces bad behavior, rather than fixing it, even when clients start with a well-diversified, low-fee portfolio. High fees and commissions incentivize advisors to promote performance chasing and costly actively-managed products.


see: forbes.com/sites/rickferri/2012/03/30/financial-advisors-encourage-bad-behavior/


The Cost of Bad Financial Advice
Bad Financial Advice Costs Investors Thousands

see: moneyover55.about.com/od/findingqualifiedadvisors/a/costofbadadvice.htm

Creating a simple and effective portfolio is actually quite easy (using Vanguard funds as I have suggested); Finding an honest, knowledgable advisor is not. Why risk it?

I am not saying they are all crooks, or that I doubt the conclusions of a CNN study (gotta laugh). I am saying I still have not seen that unicorn...

---------------
RayinPenn


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 Post subject: Re: Investment Questions
PostPosted: Mon Jul 22, 2013 7:06 pm 
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Joined: Wed Jul 17, 2013 6:33 pm
Posts: 14
Location: Florida
It appears that I have found a great forum to participate in. There are lots of great opinions and passionate people. Thanks for the point-counterpoint.

_____________
Jake Posey
http://www.5minutemoneytips.com


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