Where to Invest $115k Right Now?

[mwcermak]

Hey everyone!  So here's the deal - I have $75k in a savings account sitting in my bank, and $40k sitting in a Vanguard Life Strategy Moderate Growth Fund.  I'm 31 years old and live in an apartment in Los Angeles.  I'm maxing out my 401k every year, and saving approximately $10k/year out of my regular salary, while saving 100% of any bonuses that I get. 

With the state of the economy (and the real estate world) being at a peak right now, how would YOU invest that money (referring to the total $115k)?  What would your strategy be?  I want to get into real estate investment properties.  I've heard a lot of people talking doomsday talk about how the economy is going to crash soon given the normal cycle.  I also feel foolish having $75k sitting in the bank essentially losing me money with inflation. 

What are your thoughts?  Looking for some strong advice from some Mustachians out there! 

[terran]

Learn about what would happen if you only invested at market peaks: https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

[matchewed]

Have an Investment Policy Statement and follow it.

[BECABECA]

Looking at your situation, I would immediately dump as much as I could spare of that 75k savings into your Vanguard fund that you’ve already determined to fit with your risk appetite (although at your age, I would personally be a little heavier with stocks and lighter on bonds than the moderate version of this fund). Then I would ignore the ups and downs until you’re retired, because like one of the previous posts showed, even if you invest in the absolute worst times, you’re still way ahead over keeping it in the bank.

I also live in CA, and would not recommend real estate as an investment here, since the profit margins would be so much lower than in a low cost of living state. I also don’t even recommend buying in another state and being a long distance landlord. I did that for quite a few years and I would have made more just putting my money in index funds and would have been spared all the hassle, not to mention that a broad index fund is less risky than an individual house in an individual employment market that periodically needs very costly repairs.

After you get that money into your Vanguard account, set up an automatic monthly contribution straight to your Vanguard fund (skip sending it through your savings account) so that you don’t find yourself sitting on a huge amount of cash again. That will give you better returns and less risk of bad timing, as well as less emotional stress of investing a huge chunk all at once.

So that’s what I would do if I were you. However, if you want to know what I would do for myself, I’d put that money all into Vanguard’s Total Stock Market Admiral fund (VTSAX) because you already have a ton of bond exposure from the moderate risk fund you already own. Also, this fund offers Admiral shares when you invest over $10k, and the expense ratio is .04% vs the .13% of the LifeStrategy fund. This is the fund that I would set auto contributions to (which I do).

If you want to feel more comfortable with investing in the stock market, I suggest reading The Simple Path to Wealth by JL Colins (foreword by MMM). It sums up what I’ve found to work on my own, so I suggest it to my family and friends, and you’re already doing 90% of its recommendations... just get that last 10% and you’ll be golden!