Not rich wrote:
Brief summary. I have $100,000 I can invest. Sold some property and these are proceeds. I have no debt.
Interest rates on savings account is like 1.045%. Just terrible but very safe.
CD rates may be double that, but still not great.
I feel quite uncomfortable investing at the top of the stock market with an election on the horizon. Surely we're due for a recession?
I want to preserve the principal and have low risk. I could live with 3% returns!
What other options do I have?
To give you a complete answer, I would have to know:
1) Your age.
2) The total of any investments.
3) Do you own a home? (you said you have no debt, so I know you don't have a mortgage, but you could own a home outright).
4) Your plans (work until 70, retire at 55, retire wealthy or comfortable or just making it).
Generally speaking, I recommend these things:
1) Get out of debt (you are there).
2) Don't get INTO debt unless you are buying a house.
3) Make sure to be investing 15% minimum of your salary.
4) Have investments in mutual funds made up mostly of stocks. Vanguard and Fidelity are by far the best choices in that order. I have investments with both.
5) Within 5 years of planned retirement, either go more conservative with investments (add bonds and/or go mostly with more conservative dividend-paying stocks) OR start to build up an emergency fund that doesn't involve stocks or bonds at all that will be equal to 3 YEARS of expenses in retirement.
Keep this in mind - the stock market over time goes UP. You can't invest or not invest based on when you THINK the market is either up or down. You MUST do regular unfettered investing with your salary, and then if you can, do EXTRA investing if you want to. People who do not invest because they are waiting for the right time to get into the market typically either never enter the market, or they end up spending that money and it is neither saved nor invested.
What is the "top of the market" anyway? I started investing in 1989 when the Dow was at 2,700. It is now over 28,000. How many "tops of the market" have there been in between?
Even when the market goes down, keep investing. The stocks you buy then are just on sale and will swell up when the market goes north again (and it always does). When the Dow went from 14,100 in 2007 to 6400 by March 2009, I continued to invest the whole time. You can NOT time the market. All of those investments I made during that bad time are now worth a TON more, so much so that I have moved my planned retirement location to a more expensive area, all based on recurring investments I made during that time.
Invest, invest, and invest some more. 15% RIGHT NOW MINIMUM of your SALARY. If you are doing that, then great. If there is still room with any limits on you, add to an IRA or put that $100,000 in a non-retirement mutual fund or set of funds, OR use it to buy a house if you want a house (attaining a mortgage is ok). When you are within 5 years of retirement, you have some decisions to make.