Soo, I recently came into a bit of money, not a ton, but more than I've ever had in my life, and I don't quite understand what to do with it.
I've tried to read some online info, but I just feel more overwhelmed than before I started, and there is absolutely no consensus whatsoever in the slightest, and everyone seems very confident that they are right.
I contacted a couple of financial advisors, but those interactions have left me feeling a bit off-put, I feel pretty protective of what I do have and I'm kind of a control freak, so I want to understand the reasoning behind the suggestions they made. However, it all seemed very opaque and information I read either goes over my head just slightly or seems misleading. I'm used to reading scientific publications and if anyone tried to published some of the graphs I keep seeing from financial services groups, they would be laughed out of the room.
In the end, I'd like to understand exactly why I would put my money somewhere, and then feel fine about just leaving it alone. Anything that requires even the slightest management on my part is going to make me too obsessive, I'd like to trust someone who knows what to do to inform me, but no one seems to in the business of instilling confidence.
I'm for sure not asking anyone to make a plan for me, I just need to know if there resources that I am missing that would help me understand this process better? I'm thinking about just throwing it in an index fund and walking away, but how do I figure out which is the best one for me? I get how they work, but the details beyond that are kind of lost on me and I'm tired of talking to people who are motivated by their slice of my pie to inform me.
I know this is a very privileged problem but I was not raised around financially competent people (my dad just tells me to buy gold because the end of the world is coming), and I'm feeling really stressed out by this whole affair.
I see several of our Really Smart People have already responded with specifics, so I want to focus on something else: What question are you asking? You say you want to just put your money in something and leave it there. But then you say you want to find the "best thing for me". I posit that "you" are a moving target, and what is "best" for "you" is going to change over time. In addition, at some times some financial vehicles will make you more money, and some will make you less, and you could even lose money in others. So I suggest you think deeply about the question you actually want answered. Reading your post, I would think it goes something like this: "I got a gift of money. I do not want this gift to lose value. I want to find a way to safely, and passively, invest the money so it becomes more money." You want to keep the gift safe. You know money can make more money, if invested. So you want to invest it in something that has a reasonable return. Something guaranteed. Anything guaranteed is going to lock your money away and make it inaccessible for a period of time. The longer you can be without it, the more you will make on it. So think about those factors, and what your particular "settings" are for those variables. That will help the Smart People of Hubski guide you in a direction that meets your needs.
Much appreciated. Everyone has been giving me the answer I needed to the question that was between the lines, which is pretty much "chill out, leave it alone until you feel confident about a decision." I know my post is a little hot mess, I def wasn't expecting a concrete like "here's what you should do," but you're right that I wasn't even concise about what my end game is supposed to be. I appreciate you letting me know, I need to ask better questions.
Just to be clear, I am not calling you out for "asking a bad question." My intent was to drive some self-reflection into your request, and inspire you to dig a little deeper into your thinking about what you really want to have happen with this money. I saw "just don't want to mess with it" and "best for me" to be somewhat contradictory requirements. The money markets are constantly changing, so "best for me" is going to change over time. Possibly several times within a single year. So by getting more solid about your goals with the money, you can also make the best use of the smarski's feedback and ideas... :-) I appreciate you letting me know, I need to ask better questions...
I totally understand, by better questions I mean I need to figure out like, "what can I do?" and also communicate my goals better (though clearly you can already tell I'm a bit lacking that department :) ). I'm glad the conversation here has gone in multiple directions cause what I want to do is def influenced by what I can do and people are bringing up a few things that I hadn't considered. I see what you're saying about those seeming contradictory, I simply meant even if I choose to let it sit somewhere so I don't have to actively do anything, what is the best way for me to do that? Is an index fund the right way? What is a money market? Please don't worry about answering those, I'm just trying to wrap my head around the gaps in my understanding. Once I feel like I have a more solid footing, I will definitely be coming back to query the hive :) Also, thanks for the response, I really do appreciate it!
Another "don't overthink it" observation: Women typically outperform men when it comes to investing because they simply don't fuck with it so much. Most investment professionals will tell you to rebalance your portfolio yearly. Fucking with it every six months can do damage even if you know what you're doing. I mean, sure - have some money to play with (I play with fake money, real money is too dear) but leave that shit alone for the most part.
Several of us do. Lots of us are smart. The clever among us won't tell you what to do, they'll tell you how to do what you want. This should also be what financial advisors do but they've had a powerful disincentive from doing so until very recently. Trump's white house actually allowed the fiduciary rule to roll forward but even still, we're kind of at "they're not allowed to actively fuck you over anymore" and a long way from "they have to help you out." I had to read a number of books before I felt comfortable doing what I wanted to do rather than what "the authorities" want you to do. If you're used to reading scientific journals, keep in mind that most financial advisors are business majors that aren't particularly comfortable with algebra, let alone higher math... and that derivatives and leveraged ETFs have higher math in them. Here's a good thread to take a peak at: But before you do any deep diving in there, take this to heart: YOU ARE NOT SUFFERING BY WAITING. I've been in cash since November and I'm not at all upset about that. Just speaking in this moment, there aren't a lot of people talking about upsides and there are lots of people talking about downsides. Whatever you've come into, you're losing absolutely nothing from leaving it exactly where it is, doing absolutely zero, until you've got a hang of all this.
As always, much appreciated. I needed someone to tell me to just chill out and take my time.
Set a timer. I'll do it often. The classic argument is that if you missed the 5 best days since 1993 you'd have passed up on most of your gains. The argument made less often is if you missed the 5 worst days since 1993 you'd be fuckin' killin' it. https://www.ifa.com/12steps/step4/missing_the_best_and_worst_days/ Miss the 5 best days: $10k to $38k instead of $58k. Miss the 5 worst days: $10k to $90k instead of $58k. And then they usually say "so you should be invested all the time because we're business majors and can't do fucking math."
So everyone is thinking investments. They're skipping over basic step one stuff which I don't know if you've done or not. Step 0: Pay off unsecured debt. You said you're not really savvy with this stuff so I'm going to define unsecured debt as debt that you couldn't pay off by selling the thing the debt is for. A mortgage isn't unsecured. A car loan isn't (as long as you're not upside down because you bought a new car, or your house lost value). If you have credit card debt, student loans, any of that stuff, pay it off. Some people will disagree with this because they think that if you're paying 8 percent interest on a credit card, but going to see a 15 percent return on an investment, that you should take the higher return investment. To me, this ignores cash flow, which is more important than a small difference in return on investment. First, that credit cad interest rate is guaranteed to be that rate or worse, and your investment is not guaranteed to do a damn thing. So to argue that an ROI is higher and so that should be the only consideration is naive. Second, if you pay off a debt, you no longer have a minimum payment on that debt. This allows you a great amount of flexibility in how you spend your money otherwise. I find this to be valuable in an intangible way. Step 1: Save cash in an emergency fund. It should be as much as you're comfortable with. Generally that's said to be about six months of salary or living expenses. So take all your outflows for the month, multiply times six, add 10% for what you're forgetting, then put that amount of cash away. If you can do this, and you have no debt already because of step 0, you are infinitely richer than almost everyone you know or see every day. This is money you can quit your job with and take your time to look. This is a security blanket. This is freedom money. Honestly, if you've done this already, and you have any money left over, you've left the realm of 'not a lot of money' for most people. Step 2: Pretty much anything else you want to do with your money after paying off debt and saving is based on risk aversion. You retiring tomorrow, or forty years from now? If tomorrow, save it. You won't see a return on it. If forty years from now, you can tolerate risk. Sequence of returns has lot to do with your final payout, you should read about that. That's basically the thing that the stock brokers aren't going to tell you. Sequence of returns doesn't affect their bottom line, but it does yours. If you can tolerate the loss and eventual rebound, an index is less risky than you can probably tolerate and you could look at smaller investments that a broker can walk you through. But they're guessing just like anybody else. You very well could lose everything you give them. Just accept that if you're going uber risky. Think of the money as gone and everything else is a happy surprise. But if you index it, you're looking at the standard 11% overall return.
This is good advice. Psychologically the argument could be made that paying off lower-interest debts, so long as they can be paid off fully, has more mental benefit than partially clobbering a big debt.
Honestly most of my financial technique is based on how debt and savings make me feel with the caveat that I feel as if I have a strong core of common sense. I know that mathematically it's not the strongest return to pay off my mortgage as fast as I do, but in a few years, I won't have a mortgage to pay off. And that's going to make me feel infinitely richer.
Mathematically it probably is. Every cent you pay over minimum should go to principal, not interest, meaning that less interest can be charged. We pay a smidge over minimum pretty much every month. But then, we also got to abuse TARP funds and turn our 2-year-old 30-year into a 15-year with the same payment back in 2009 so there's that.
Hey yellow, thanks for the advice. For context, I am most certainly at the risk aversion step, I should have been a bit more descriptive. The easiest part of reading about personal finance was the first two steps you outlined, which I was able to fulfill. I got inundated when it just went a little bit beyond that, but your comments in that regard are still very helpful. I am not a gambling man, this is terrifying to me.You very well could lose everything you give them. Just accept that if you're going uber risky. Think of the money as gone and everything else is a happy surprise.
...so... allow me to temper this a little bit. You've probably heard the phrase "blue chip stock." This is a known, trusted, predictable large company ("large cap") whose finances are stable. The company has been profitable for a long time and there's every expectation that it will continue to be. These companies, by virtue of being profitable, pay out dividends - every quarter, you get some amount of money per share you own. Let's say you piled eleven thousand dollars into Ford on May 17. Why May 17? Because shares were $10.92 on May 17 which means now you own 1000 (ish) shares of Ford which is convenient for the sake of math. Right now, Ford is at $10.94. You've experienced a capital appreciation of 4 cents per share - if you were to sell all your Ford stock, you would have made forty whopping dollars. Congrats! But also keep in mind that three weeks ago, Ford declared a quarterly dividend of fifteen cents per share... which means you made $150 on your Ford stock without having to do a thing. This is one of the reason people participate in the market. So long as Ford continues to make money, and so long as you continue to own Ford stock, you will continue to make money. You can sell that Ford stock at any time and you can do whatever you want with that money (within the tax regime it's invested in - if it's in a retirement fund, you'll pay heavy tax penalties if you pull it out before you retire). Ford (for example) is not much of a gamble. Some crazy penny stock biotech firm? That's a gamble. You don't buy it because it's going to pay you fifteen cents a share. You buy it because there's an off-chance GlaxoSmithKline will buy it and double your money. Of course, if GSK doesn't buy it, you're shit out of luck because that stock will go to zero appallingly fast. This is the sort of stuff it's worth reading about. Fundamentally, there are alpha gains and beta gains within the market. Beta gains are the rising tide that raises all ships - people wouldn't participate in the market if it were a zero sum game; everyone benefits just by investing in companies that will probably be profitable. Alpha gains are money you make above and beyond whatever the market is making. Alpha gains are zero sum - for every dollar you make above the beta, someone else makes a dollar below. Alpha gains are speculative. Beta gains are straight boring investing. Be boring. Be cautious, be careful, be slow, be steady, and be boring. Over the long run you will make money so long as you don't fuck around like a jackass chasing wall street. You will lose. Here's twelve High Frequency Trading houses tossing Merck orders at each other for ten milliseconds.
All this being said, a mutual fund based on an index like the S&P 500 is more diversified, and therefore less risky than any single equity. If you are afraid of "gambling" in the stock market, just park your money in a low cost passive index fund, and let it grow.
Yes and no. A NASDAQ ETF right now is mostly exposed to Facebook, Amazon, Apple, Netflix, Microsoft and Google. All of those stocks have insane P/E ratios. They're actually more prone to shock than something boring like 3M. But A diversified index fund covering lots of boring stocks is largely bombproof. A 3X inverse ETF is based on an index and is about as stable as plutonium. Either way, an ETF based on a long portfolio of dividend - paying stocks will pay a dividend. In many cases, particularly where the market is at, the dividend performance outstrips the appreciation performance.
Boy. I don't know that I can even say anything useful. I don't know that anybody can. My personal strategy is to find a lazy portfolio, backtest it, make sure I understand the way it moves and make sure I think it'll fare okay from what I understand of the geopolitical climate for the amount of time I expect to hold it. Which basically says I'm macro AF, and that I disregard everything but fundamentals. It's probably about as conservative as you can go and I've definitely given up some gains that way. But it's what I understand, and what makes me feel like I have a reasonable sense of cause and effect. I think the stock market is deeply overvalued and headed for a correction. From a macro sense, from a fundamental sense, a Russell 3000 ETF does not strike me as a good value at the moment. But that's my take, my tea leaves, my entrails, not yours.
I think that your steps zero and one are probably the most realistic recommendations for receiving a "bit of money, not a ton." If this is unlikely to be a life-changing amount of money, then it's probably unnecessary to worry about thinking any further than those steps. If this is actually a potentially life-changing amount of money (six-figures or more), then I recommend the advice on this Bogleheads managing a windfall article.
It's a bigger amount than "a bit" and I don't have any debt. I work with some very wealthy people so my context has gotten a bit skewed in the last few years. I'm definitely glad you point to the article you did, I have already read it, but there were gaps in my understanding. So every time I read something built upon that one, I still feel like I'm playing catch-up and I don't like missing details. Which makes me thorough, but also a bit obsessive until I feel like I grasp it well.
I can only say what I did, but when I came into money I put most of it into a house. I know I'm going to stay here for quite some time so I bought a nice house on a half acre and paid a good chunk of it off. Now my mortgage is lower than my former rent so I get to keep a larger chunk of my paycheck every month. The stock market and investing always seemed like gambling to me, but I'll always need a roof over my head and the sooner I can secure that, the better.
I feel you, but I also live in the SF bay area. I still can't really afford to put a comfortable percentage down on a house, and even if I could, housing around here seems very unnatural, so it freaks me out. Houses that were less than 100k 6 years ago are easily half a million now and that's spooky to me.
yeah. I have a very small amount of money that I manage for stocks - I wanted to invest in video game companies and it worked out rather well. Otherwise I put my 10% in a 401k and the rest to the house. My wife, on the other hand, is a fastidious saver and could probably buy a house outright with what she has saved.
I feel like real estate that one lives in will always be a good use of money. Maybe not always a good investment in the sense of a return on investment, but if it's one's literal home, is a gain or loss relevant? I owned during the real estate crash in 2007. It felt like it sucked, but in retrospect, I didn't sell and didn't need to sell, so now ten years later, it didn't matter. Do you feel like a half acre gives you a good deal of privacy, or is it more like homes stacked together, just with kind of big yard space? I'm looking at buying land to eventually build a private home on and am trying to get a scale for minimum lot size.
I like the half acre, we wanted more but it's a good compromise of land and location. We looked at a lot of places that had about the same size lot and it really came down to the landscaping and neighborhood. Ours feels pretty secluded because there's a lot of trees and shrubs that the neighborhood is invested in keeping. The few places that aren't covered are places we're going to put in screen plants to help promote that secluded feeling. We also have enough room for a garden, a clothes line, and a large shed. So that's nice.
if you don't have a 6 mo emergency fund now you do, put it in a high interest savings account and leave it there (ally) otherwise drop it in a Roth or EFTs that's what i'd do honestly the personalfinance subreddit is pretty good for advice like this, click hyah
Hey Ref, thanks for the re-direct. I definitely have an emergency fund now :) I've perused around that subreddit article, the situations they cite don't quite fit for me, but the linked info and boggleheads article was helpful for sure, and the biggest takeaway is that I still need to take my time and do some reading. Like, at this point I don't totally understand what an EFT is so I need to do my own research, but that seems to be one of the avenues that keeps being brought up, so your recommendation is helping my push in that direction.
I also am a big fan of the MMM (Mr Money Mustache) blog when it comes to handling personal finance. ETFs (sorry, typo in my original post) - my understanding is their main benefit is that they can be very passively managed, "stick your money in and forget it" sort of funds. I don't pretend to be an expert on this sort of stuff myself. It interests me and I'd like to learn more about it - but having never received a windfall, that hasn't exactly been a realm of personal finance I've researched extensively.
Me neither, I've never had a use and now it's all suddenly very relevant. I've head good things about MMM, forgot to make sure and check him out again, thanks!
I'll offer what I would do. As has been said below most people will have some sort of similar list. Granted we are all different and being 20 is a lot different than being 50 But, here we go. 1. Pay off unsecured debt, ie credit cards. DO NOT CLOSE THE ACCOUNTS. Your credit score is in part based on how long you have the cards. This interest hole is a giant money suck. If you have a lot of credit card debt, get into the habit of not racing up those bills and paying that sweet, sweet 30% interest into my bank stocks. 2. If you do not already have one, find a financial company that will let you open a ROTH IRA. This is money you save for retirement that you put away pre-taxes. The money you pull out after you retire is in most cases not taxable. Most of these companies will have.... 3. Index funds like these for example. These are very boring, low fees (less than .5% a year or better) that match the stock market. You won't make 30% a year, and you will also not lose your shirt when we have another crash like in '08. Always look at the fee load. This will be somewhere in the small print. My fund's fees are .15% a year. This means that if you earn .15% on the money (AKA the economy tanks), you have broken even and made enough to pay the fund managers. (I'm earning 11% this year so I more than broke even) 4. Final thing to think about. Have 6 months take-home in a cash account. This is your "OH SHIT" fund. This money is never touched. NO trips, no shopping, no impulse buying. This is the money you use if you lose a job. This is the money you use to buy out of a lease and pay to move if you get offered a dream job across the country and have to move in 30 days. This is the money to fix the transmission or engine in the car if it goes south. This is the money to pay for travel to a job interview. This is the money to pay for 1st and last month rent and security deposit to get out of the barrio. This money gives you options. Options help lower stress and make the quality of your life better. This six month buffer should be item #2 after paying off the credit cards. If money comes out of this account, then you better darn well put money right back in before anything else. Pay yourself first, then go have fun. If you have a 401(k) at work, start contributing to it and learn to spend less than you earn. The money in a savings account is insured up to 250K. Assuming for example that you just got 100K, I'd mad your Roth this year and next, max your 401(K) which gives you a tax savings, pay off the unsecured debt and put 5K into a lottle fund and do something fun with it. Fun but not outrageous. The best gift you can give yourself with the money is learn spending discipline and delayed gratification. Then when you are 50 you can see the numbers growing and know that you have a retirement and have a LOT of stress off you. Spending discipline is the best gift you can give yourself, you cannot buy it, but this skill pays more than just about any other advice you will get. Otherwise I agree with just about everything in the thread.
I don't know what your best options would be outside Australia, but I still came to chime in with exactly what Klein said: Stick it in something high interest and take six months to think. Seriously, the returns you would make in that time are nothing compared to what you'll achieve by taking some time to sort things through.
An alternative way to invest is by betting on sports. If you check out TopMarketSports.com , you'll find 100% free picks....here's a sample from this weekend:: J.P. Evans is a grizzled Wall Street veteran who applies stock market strategies to picking sports winners. He's recommending a play on UCF +4.5 this afternoon. Central Florida hits the road to visit Maryland in a game that will be broadcast on Fox Sports 1. Just a short time ago, both of these programs were in the dumps. UCF is not long removed from their infamous 0-12 campaign in 2015. And until recently, Maryland was considered the laughing stock of the Big Ten. But fortunes have changed for the two schools, which are both led by brilliant second year head coaches. So what's the difference? Who's got the edge? Terp fans are extremely excited about the early play of true freshman Kasim Hill at quarterback. He was electric against Towson, but this will be his first start against an FBS team. J.P. is betting that the youngster gets a rude awakening to big time college football today. He says, "The key to the game and the number is the Hill kid...he's being drastically overvalued here."
Whatever yo choose but dont invest in Intraday... An Intraday trade is the one in which a trader buys and sells the stock in the same trading session. Usually, intraday trades are carried out on the margin or leverage (service provided by brokerage firms) which enables the traders to buy stocks in a large quantity. Hence, the aim of the trader is to capitalise on the small movements of the stocks which can bring in huge profits. This is just one side of the story. But as the market moves either side, if the bought stock moves in the opposite direction, intraday is capable of bringing in losses of high volume. source : Niveza
Resources... First the fine print. I don't have a lot of money, nor a lot of knowledge or understanding about finance or business. I have been reading more to increase my knowledge. ___ Real estate. (I read the comments thus far and agree with you; I would not invest in the Bay area.) From the professionals, I hear "look at 100 deals, buy one." So, in your situation, I might look for housing in nearby states. There is a lot of investment in the Seattle area, which means that the surrounding suburbs will also get a bump. I would look for similar situations in nearby areas, and start making a habit of attending open houses to get an idea of the deals to be had. It's experience of evaluating deals which is going to increase your confidence. I would not make it a huge thing. I think after you've seen 10-20 houses, you'll get an idea of which houses/deals you should get more details about. ___ Investing in the Market. Trickier. "You Can Be A Stock Market Genius" by Joel Greenblatt. Written in mostly English (meaning so laypeople can understand). Talks about how to take advantage of certain stock market events. I think following the tips in the book will increase your confidence. "One Up One Wall Street" by Peter Lynch. Again, written for laypeople. Recommend reading; unsure I recommend buying it. Reading this increased my knowledge and confidence, but it's not the kind of book that I keep going back to. https://armstrongeconomics.com. Martin Armstrong is someone consulted by governments and corporations to help them manage their financial concerns. He has a lot of information on his site about money, finance and economics (which I'm beginning to understand are very different things). His site is not so much for laypeople. Still, if you want a better sense of how the pieces fit into the whole, I recommend deep delving into the content on his site. https://capitalistexploits.at/. This guy has a blog and podcast and sells an insider service. It's not cheap (for me), but it may be for you. From what I've read of his blog and heard on his podcasts, I get the feeling that you might find his services useful. What I notice about him is that he seems to be looking very long-term, world-wide, doing his research and thinking through things in a way I don't hear from many touting financial services. This guy's style is a teacher. You might not be hands-off, but have enough hand-holding such that you aren't adding too much complexity to life. ___ Investing in Businesses. Know very little about this, and this might be too complex for your goals. If you do, I would follow the real estate rule of looking at 100 business for each one you invest in. ___ Talking to Finance people. I get the feeling you are talking to people about buying their services. Suggest learning more differently. For those people you find who have a passion for it, invite them for coffee or lunch and let them talk. I think you'll learn more from them than you ever will from a sales pitch. ___ Mindset David Bowie said that when he first started, he wanted nothing to do with the money side of music because he felt like it would be too distracting. Then, I guess after a few mishaps, he took control and started to learn about it and realized that it was a lot less distracting and incredibly beneficial to understand the financial side. ___ Cashflow 101. It's a game created by Robert Kiyosaki. There are definitely people in your area who meet up regularly (check meetup.com) to play the game. You will find some people there passionate about finance (or at least interested). You'll learn quite a bit. One thing I learned while playing the game with others was to not only look at the numbers for the deal, but to read the card and understand what the details of the deal were telling me. These are the same details you'll encounter in real life.
I've seen tons of apps which help to manage your finance daily. try one of them
1. Take stock of your current financial standing. List your assets against your liabilities to figure out where you are financially right now. Are you financially in the red or black? 2. Set financial goals based on your current situation. 3. Make financial decisions based on those goals. The salesperson scored himself five or so years of excellent commissions until we really recognized that this "investment" matched his goals way more than ours. We then ended our relationship with this salesperson and have followed this process with more success than failure since. You can now filter the firehose of information on investments based on where you are (assets and liabilities) and where you want to go (financial goals). This is not always easy to do, but it is simple and effective. My wife and I learned this valuable lesson the hard way almost 20 years ago when we were convinced by a savvy salesperson that we should invest in a variable universal life insurance policy.
investing is the best method. saving at the bank so you get interest annually, or investing funds or stock market!