What do I do with $50,000?

When do you anticipate needing this money you invest?

Do you need it semi-liquid or are you using it as a nice jumpstart to start saving for retirement?

We're in a bull market that's getting a bit long in the teeth. If that's the sum of everything you own, I wouldn't suggest you sink it all in the Market. On the other hand, as you suggested, the housing market is looking pretty attractive at this time. You'll never really see this money again, though, until you retire and downsize in about 50 years. You'll see the improvement in the quality of your life everyday as a homeowner, but you have to be okay with it being the longest term investment you'll ever make.

agree with Mantis Toboggan

If you are planning to buy a house anyway within a few years, now is a great time. Interest rates are still low, house prices are low, though still artificially inflated by govt stimulus, banks withholding foreclosures, etc. In other words, the market can still go down and probably will as interest rates rise and more foreclosures come on the market. However, you will have leveraged your money into a physical asset that has inherent value (unlike stocks). You will have a place to live or rent that will benefit your quality of life. You also will not be paying 5% interest on that same amount of borrowed money. With tax deduction, that amounts to about 3.5% benefit to you.

Sound better than any CD? Yup. Long term (5+ years) you can expect a house to at least keep up with inflation. Also a better investment than a CD or savings account since right now they are paying 1.5% and inflation is closer to 2.5% (you are losing that 1.0% difference).

In the short term, the house may go down in value so don't get in over your head or get in a situation where you MUST sell. With a fixed rate mortgage, you also lock your house payment for the next 15-30 years while your salary will likely go up, making it more and more affordable allowing you to save more in the future. So the benefit compounds over time.

If you can't live with all conservative, take $10k and put it in a stock account and trade to your hearts content while putting the other $40k in a house. See where each one is in 10 years and compare the two approaches then.

Good luck.

Surprise! wrote:

When do you anticipate needing this money you invest?

Do you need it semi-liquid

no, fully vaporized

Sub-penny stocks and 10-baggers

If you want to stay conservative, this is a chart of the Pimco Total Return Fund for the last 10 years:

http://quote.morningstar.com/fund/f.aspx?t=PTTRX

Easily beats the Vanguard Index 500 and most stock funds (outside natural resources, small cap, and international, all of which can be VERY risky).

Surprise! wrote:

When do you anticipate needing this money you invest?

Do you need it semi-liquid or are you using it as a nice jumpstart to start saving for retirement?

Truth be told, I have zero dollars put aside for retirement. Scary, I know. I've never enrolled in my company's 401K, but I plan to do that this year.

I would not rule out putting all of the $50K into retirement, but on the other hand I'm a bit anxious by nature and should an emergency arise down the road maybe I'll need the money to be more accessible. I don't know. I suppose I'll have to reconcile that myself.

To Toboggan and RealityCheck...thanks for the advice. Good stuff. I'm not an expert in property management, but it seems like now's as good a time as ever to buy a house.

financial novice. wrote:

I've recently received about $50,000, and I'd like advice on how best to invest it. I want to stay pretty conservative, but the CDs I've looked at seem to offer next to nothing. Should I get started on buying a house? Put it all in mutual funds? IRA? What are your suggestions?

Context: Mid 20s, no dependents, very little financial acumen.

Lump sums are nice, but there's an order in which you do things.

1) $1,000 Starter Emergency Fund. This has to be LIQUID like a savings account or MMA or something like that.

2) Become debt free EXCEPT for a house. You got a 0% loan on a car then I'm ok with you keeping that, but there's great freedom in being debt free.

3) Bump emergency fund to 3-6 months of expenses. As you're single with no dependents, 3 months is enough.

4) NOW invest. 15% of your income needs to go into RETIREMENT ACCOUNTS. Do that in this order - 401k up to the match, then Roth IRA and then back to 401k if there's any left over. This should all be done out of your INCOME, NOT out of this lump sum.

What to do with the rest of your loot? Well, once you pay your debts off (if you have any) and establish the 3-month emergency fund and you set yourself up to put 15% of your income into retirement accounts as detailed in #4 above, then you simply put this money into a non-retirement mutual fund or funds. Vanguard or Fidelity are the two best, with Vanguard being the best. Spread the money out a bit -- perhaps buy 4 different funds from Vanguard or maybe even 2 from Vanguard and 2 from Fidelity. As these are NON-retirement funds, you can cash them out without penalty at any time, so if down the road you want to buy a house, you can cash out and use the proceeds to do that.

I don't think everyone and their brother needs to go buying houses. Houses should be either for investors (if you WANT to be a landlord) or for people who plan to stay put for 15+ years. Very seldom would I recommend to a single person to buy a house. You meet the woman of your dreams the day after you buy a house and then marry her 2 years later (and she also has a house), then you need to sell one or both of them to move on with your lives. Pain in the ass.

Agree mostly with FlagPole. I assumed debt free, but you MUST get there. Emergency fund is very good. Contribute to 401k but don't put this money there.

I somewhat disagree about the mutual funds vs house. The market is subject to the whims of banks, hedge funds, stupid politicians, foreign instability. Houses have inherent value as a place to live and ultimately you want to own yours outright so you don't have to make $$$$ per month the rest of your life. And I was not talking about being a landlord, I meant a place to live. Though if you had to move later and rent it, it can work if costs are controlled up front. Just as investing in a 401k, long term strategy is to have wealth at retirement. A "free" place to live is beyond value in retirement and locking today's price and interest rate makes that more achievable. If you can do it and only use 50-75% of this money and keep the rest in emergency fund, even better. However, if you can't meet the guidelines above (5yr+, monthly mortgage close to rent), mutual funds are a good strategy, but a long term hold is still needed as your principle may still go down short term. Be sure to Diversify.

Emergency fund is in a savings account or similar - zero risk of principle loss, 100% accessible.

I'm all for buying a house, and for the reasons you mentioned, but it has to be done when the person is ready to buy a house, NOT when the market makes him believe that NOW is the time. This is why he should put this money in a mutual fund(s) NOW and use it LATER to buy a house when he's ready. If he gets married in a couple years, where do they want to live? In Florida? In Europe? Near her parents? AWAY from her parents? Etc.Prices of homes aren't likely to skyrocket in the near future, so he doesn't need to go out and buy a house with this money.

I'd pay down any car loans and credit cards. Then put 1/2 of it in a very safe ETF and the other 1/2 in China ETFs.

Flagpole knows what he is talking about. I bought a condo in Atlanta a few years ago, then decided to move to Boulder. Why? Because everyone said now is a great time to buy. Then a two years later, I had the ability with work to move to Boulder and jumped on it. PS: I am single 28yo male. Now I am stuck renting out a condo in Atlanta that I hate and pains me every day. Dont buy a home unless your are 100% sure. And then if you do, I have a condo in Atlanta for sale.

That PTTRX fund is crap. Low returns and you have to have 1mil to invest initially according to the link.

After you get debt free, some mutual funds that I own are

TWMIX (American Century Emerging Markets Fund)

FIREX (Fidelity International Real Estate Fund)

FHKCX (Fidelity China Region Fund)

Vanguard also has some really good options. Asia and Eastern Europe has been doing well since the 2008/09 crash.

Also, for your emergency fund or liquid fund, look at an online high yield savings account. Capital one has the best return right now at 1.24% with HSBC right behind. Back in 2006 HSBC was paying out over 5%. All these based on the fed rate.

Two chicks at the same time.

Bet the entire amount that Scott Brown is lying about being sexually abused

Yeah...I'm sorry that my being right means that you have a pain-in-the-ass condo that you don't want. Hopefully you can get it sold soon.Gotta be ready to buy a house, NOT the house being ready to be bought by you. This is why I say if you're getting married to WAIT at least a year before you buy...so you know where you want to live. Also, PLAN to be in the house for 15 years. This makes sense on a lot of levels...allows you to build decent equity (or even pay it off if you do a 15-year loan) and makes you REALLY choosy and makes you KNOW that you are ready if you know you'll be in it for 15+ years. Sometimes plans change and you have to sell sooner than 15 years, but you PLAN to be in it for 15 years.Rent is NOT throwing money away. You can save a LOT of money by renting...not paying to fix it up or paying to make repairs to sinks, air conditioners, etc., NOT paying to fill it with useless crap that you wouldn't buy if renting. Save that money while renting and use it to help pay the downpayment on a house when it's time.

If you decide to invest on mutual funds, make sure to choose index funds. CFP's , bankers and other so called professionals hate them because you make the money and they lose the commissions and more impOrtantly the yearly maintenance fee of over 1% of your principle. Fidelity spartan funds maintenance fee is .07% per year, vanguard is in the .20% and the others go up from there. When I left my company of over 20 years I took my 401k and rolled it into an Ira. Split into 5 fidelity spartan funds. EFT's may be a tad cheaper but for the investor that wants a simple secure investment you can't beat index funds ( spartan). Don't ever think the advisor your talking to knows more than you, he probably doesn't. He is trained to sell high commission products and indexs are not part of it. Watch how he will try to talk you out of it. I also have 9 properties. One is my house, 6 rental homes and 2 empty lots on water. I got great deals ( at the time, 4 in 2000, 1 in 2004 and 1 in 2005 ) on the homes, at least 25% under value. I always put 20% down and never had problems financing. Fast forward to today and I'm barely breaking even. Don't even get me started talking about October 1987 or march of 2000. My point is either way you will have some rough patches with your investments. If you panic and sell you will never be wealthy. If you let advisors tell you what you need instead of telling them what your going to do you will probably make them wealthy. If you buy real estate, you have to believe that your stealing it. If you can close the deal and still believe your getting an unbelievable deal then do it. I wish I would of flipped a couple of the houses I have now. Oh well hindsights 20/20. Good luck

- right now is a good time to buy a house if you can afford it.

- you are only in your 20's. you can afford to put all of it into stocks. Here's a tip for you. Put half of it into SIRI and wait for one year.

Goldman Sachs Public Service Dept.

Investor wrote:

If you decide to invest on mutual funds, make sure to choose index funds. CFP's , bankers and other so called professionals hate them because you make the money and they lose the commissions and more impOrtantly the yearly maintenance fee of over 1% of your principle. Fidelity spartan funds maintenance fee is .07% per year, vanguard is in the .20% and the others go up from there. When I left my company of over 20 years I took my 401k and rolled it into an Ira. Split into 5 fidelity spartan funds. EFT's may be a tad cheaper but for the investor that wants a simple secure investment you can't beat index funds ( spartan). Don't ever think the advisor your talking to knows more than you, he probably doesn't. He is trained to sell high commission products and indexs are not part of it.

This is actually the best advice for investing. If you try to beat the market, you are essentially gambling. Investing in index funds is the most economically sound, however, it is fund to try to pick a few stock.

You need to determine your time frame and risk tolerance. Anyone giving you advice without you knowing that info isn't going to give you an informed opinion.

Personally, I would use some (maybe $10,000) of it for an investment in myself and travel if you are in your mid-20s and have no dependents. See some of the world. You will gain some perspective. And once you get married and a mortgage and have a job, you may not get the chance and life goes quickly once you are out of school.