How should a 24 year old invest $400k?

CALLING out BS wrote:

Hedge funds do no better than standard mutual funds on average BEFORE fees. After fees they are worse.

Finding a WINNING hedge fund? To borrow heavily from Will Rogers:

Don't gamble; take all your savings and put it all in a WINNING hedge fun and ride it all the way up, then sell it. If it don't go up, don't buy it.

Not true. After fees hedge funds still destroy standard mutual funds. Unless you go with terrible hedge fund managers who lack macro knowledge. The proper metric you should have used is the risk adjusted returns are usually the same. But risk adjusted is just something bad managers use to show their fund is comparable to much better performing funds.

br0ski wrote:

I would hire a Financial Advisor. Give them the $400K minus down payment on a starter home. Have him/her invest it for you.

Max out the match on a 401k, Make sure he/she starts a Roth IRA for you. Pay down a mortgage while aggressively paying off student loans for a few years. Any extra money can go to the Financial advisor.

By the time you pay of your student loans, you should have enough equity in your home to upgrade and start a family.

I think that most Financial Advisors are a complete waste of money. A lot of them charge you 1% or more of your assets to come up with an asset allocation you could figure out on your own.

When I was 24, I probably would have invested the money in a combination of index funds tracking indexes such as the S&P 500 index (large cap), the S&P 400 index (mid cap), the Russell 2000 value index (small cap value), the MSCI EAFE index (international large cap developed markets index), and the MSCI emerging markets index.

I would have done ok with an allocation to those index funds.

However, now that I'm older and wiser I can tell you that I would have been much better off if I had simply dumped all of the money into tobacco stocks such as Altrai (MO) or Reynolds (RAI).

There is a spreadsheet of stocks with long histories of raising dividend payouts every year for at least 25 consecutive years in a row on this website:

A company that raises dividends for that many years in a row is usually very well-run

Shove it

Future Wolf wrote:

Image if you'd just graduated college, you now have a BS in some engineering field and a MS in either engineering or computer science, both from reputable schools; and/or possibly a Ph.D in a similar field. You've already established yourself in a few reputable engineering organizations via internships during undergrad. You accepted a job with an engineering company at age 23 with a starting salary of $80k-90k. You've produced multiple independent projects in the past showcasing your aptitude for engineering and programming to develop your portfolio, and you plan to pursue similar projects or freelancing in free time for profit (apps, websites, etc.) Now you've just acquired a lump sum of $400k.

Although I don't believe your premise is true, I will accept it for the sake of this argument.

Investing in sex is what a wolf would do.

How you invest depends upon your level of benevolence. If you're selfish, you invest in live-in prostitute(s). If you're generous, you gather a group of entrepreneurs and investors, using part of your $400k as well, and dump money into researching & creating female sex-bots. These sex-bots would get guys satisfied without all the hassle (both of finding quality women and of bedding said women). This would cause real women to become more desperate to get a man from lack of demand for them, so they'd be more willing to exercise to stay fit, and also to put out more easily.

By the way, if you go the selfish route, remember that for any girl outside of NYC anything greater than $250/hr. is over-priced.

Future Wolf wrote:

yeahyeahyay wrote:

Multiunit apartment bldg.

Elaborate?

Interest rates are as low as they're ever gonna be.

Real estate has not *really* rebounded

Home ownership at generational lows

Rent goes up faster than inflation (generally)

You can live essentially for free, make money for relatively little work

All the while building equity for when you sell.

Once you get the hang of it, you can leverage your first place into many more.

I have a friend who owns ~75 units, some individual, some apartments, and an extended-stay business residence... He outsources EVERYTHING.

He has not made OR LOST a dime in 15 years

BUT

His first tranche of 15-year fixed-income mortgages are about to be paid off.

From here on out, it is all PURE PROFIT (minus his ongoing maintenance, taxes etc. etc.)

His daughter is gonna be a millionaire, PLUS she can have a job (she's 7, so gonna be a while) as a property manager.

Lastly, he does this all while working full time at a "normal" job.

His case is extraordinary, but I know others. I have another friend who parlayed $5000 cash, credit card debt, and a loan from his mother into a 14 unit building in Chicago.

I have another friend who owns a bldg in Monterey Ca. HIS unit has a beeeYOUUUtiful ocean view. He does practically zero maintenance, yet his tenants pay ~1000 per mo. for one bedroom efficiencies. All he does is collect rent and call the plumber when needed.

I should add: both friends started from nothing and put in LOTS of "sweat equity."

In your case, you're starting w/$400k, so you can skip a lot of the early-stage hard work.

How does one begin such a course of action?

1) pay off all debt

2) put aside a 6 month emergency fund

3) fully fund a ROTH (unless this 400k is income). In which case set aside for the taxes.

4) open a brokerage account at a discount brokerage or vanguard

5) if you have the interest, learn to invest. If you don't want to learn, at least buy a book on index investing. You don't need an advisor to invest in index funds. You can learn to do this in 1 month (or less).

6) dollar cost average into a low cost index fund or ETF with NTF. Give yourself 3-4 years to invest the money.

7) start off with a total market fund. If you learn to invest, you can expand from there.

8) forget you have it until you are ready to retire (unless you learned to invest and are buying individual stocks...even then, take a long term approach. Let the business results drive your investing results, not your trading "skills").

Optional:

1) set aside 10-20k to blow on "stuff" if you must

2) set aside a 20% down deposit on a house if you are going to want to live in one. Make sure you can afford the house based on your salary. Not your assets. You don't need a house at 23, but you want the down deposit nice and safe if that is your goal.

Make friends with someone looking to unload an overabundance of properties

OR

use zillow, e.g., and search for "multiunit" or "multifamily" in your area or an area in which you would prefer to live.

My guy w/the 75 started in college: he and his roomies, once the landlord stopped laughing at the absurdity, bought the house they had been renting. He's a super-techie: he runs his empire from his Android phone (and a call center in the Philippines... funny how his liberal politics take a backseat when it's HIS $ :)

My Chicago buddy bought HUD housing in DC... Gov't subsidized transactions. He rehabbed and flipped, rehabbed and flipped, rehabbed and flipped. He made it up as he went and does NOT recommend following in his footsteps -- although he says it was a good learning experience.

I don't know where the Monterey guy got his money...

Old school = working w/a real estate agent (or a "buyer's agent"). Or foreclosure auctions. Or friends and family.

sbeefyk1 wrote:

CALLING out BS wrote:

Hedge funds do no better than standard mutual funds on average BEFORE fees. After fees they are worse.

Finding a WINNING hedge fund? To borrow heavily from Will Rogers:

Don't gamble; take all your savings and put it all in a WINNING hedge fun and ride it all the way up, then sell it. If it don't go up, don't buy it.

Not true. After fees hedge funds still destroy standard mutual funds. Unless you go with terrible hedge fund managers who lack macro knowledge. The proper metric you should have used is the risk adjusted returns are usually the same. But risk adjusted is just something bad managers use to show their fund is comparable to much better performing funds.

INCORRECT!!!

You my little-brained friend are incredibly naive and/or incredibly ignorant.

Hedge funds disappear after bad performances, leaving folks with low IQs believing that the surviving ones are representative of hedge funds in general. With their reduced reporting responsibilities compared to mutual funds it is easy to put out numbers to deceive the naive (that means you). They also tend to charge outlandish fees which ultimately forces their performance on average to lag that of the market as a whole.

pu$$y and beer

TAA wrote:

2 girls at the same time

'Merica.

How plausible is long term reliable growth of these percentages?

Plausible?

These are assuming the "average" return reoccurs each year. You will have years the market makes 15%, years it declines 15%. Nothing about the stock market is "reliable".

Bringing me to my next point of an "average" annual return. This means if you leave your money in the market long enough in the right funds (ie. index funds, total market funds), you will eventually end up with returns near the average.

Lump sum investing (400k all at once) may be a bit risky. Though the research done on dollar cost averaging is a toss up depending on how you do it, I think that you should probably do it over the course of a few years. Maybe pick a few index funds, buy them every month regardless of the price, until most of that money is invested. If you want to get really advanced, you can spread your money across asset class etfs, such as large cap value, large cap growth, mid cap growth, etc. if you want to concentrate your exposure to only large companies.

Cliffnotes version: invest in index funds every months for 2-3 years

Hookers and Blow.

Flagpole wrote:

Age 65 - $14,927,012.79.

Crazy. At age 50 if you took 4% that would be $163,921 annually.

Which will be worth about $83k allowing for 2.67% annual inflation.

Stocks and real estate are boring, I think you have been given plenty of better options.

TAA

2 girls at the same time

Hookers & Blow:

Blow it all then blame your parents.

Don Don T:

Donate to Donald Trump's campaign.

Doclove

Shove it

tropicalrunner

pu$$y and beer

DO IT

Hookers and Blow.

No.

NO.

NO!!!

It has been PROVEN on these very boards over and over and over again that DOLLAR COST AVERAGING PROVIDES ABSOLUTELY ZERO ADVANTAGES TO THE INVESTOR. It does NOT increase returns. It does NOT reduce risks. It does NOT help the investor avoid bad timing. In fact, what it does is to reduce returns and increase risks because it is a market timing strategy in disguise.

NNNOOOOOOOOOO!!!! Do not make us go through this again......

That money is the property of society.