Author Topic: 20k waiting to be invested - what would you do?  (Read 4165 times)

DaKini

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20k waiting to be invested - what would you do?
« on: January 16, 2014, 06:04:48 AM »
Hi there again,
im not confident in a decision waiting for me and seek your advice.

Currently i have 20k on a "call money account" (sorry, i dont know if this is the correct term; it is like a checking account and daily available) yielding 3% (i made a good deal :), but yild is capped at 3%) until September. The yield then drops to 1.05%.

  • 3k are designated to the emergency fund and should remain there.
  • 5k should go to some asset that is at least semi-liquid so i can buy a car should ours die. I guess it will survive at least 5 years from now. It is a Skoda Fabia with 47k miles and is about 5 years old, so it is a really new car)
  • The other 12k are waiting for a bigger market dip to be invested in stocks.

So here are my questions:
1. For the 5k i am thinking at buying corporate bonds yielding about 4%, so at the lower end of the investment grade. However, i fear the price losses that will ocur once the tapering begins. Do you think that investing the sum into a corporate bonds index fonds makes sense? Would it be better if i search a corporate bond that lasts 5 years and let it expire in case the car is fine until then as i see the chances that the car survives 5 years to be bigger than needing a car pre 5 years?

2. For the 12k, i know it is market timing (again) but i think the stock market will present a buying opportunity once the tapering begins. With a 3% yield i think i can wait comfortably, what do you think?

aaronfix

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Re: 20k waiting to be invested - what would you do?
« Reply #1 on: January 16, 2014, 09:04:38 AM »
What's your age, family situation, time horizon, income, and expenses? It's impossible to give any suggestions without knowing those things. That said I"m going to do it anyways... I'd just immediately put it all in VTSMX (Vanguard all stock market index) and forget about it for at least 5 years, unless the market crashes in which case you should double down.

mpbaker22

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Re: 20k waiting to be invested - what would you do?
« Reply #2 on: January 16, 2014, 09:05:03 AM »
Hi there again,
im not confident in a decision waiting for me and seek your advice.

Currently i have 20k on a "call money account" (sorry, i dont know if this is the correct term; it is like a checking account and daily available) yielding 3% (i made a good deal :), but yild is capped at 3%) until September. The yield then drops to 1.05%.

  • 3k are designated to the emergency fund and should remain there.
  • 5k should go to some asset that is at least semi-liquid so i can buy a car should ours die. I guess it will survive at least 5 years from now. It is a Skoda Fabia with 47k miles and is about 5 years old, so it is a really new car)
  • The other 12k are waiting for a bigger market dip to be invested in stocks.
[/b]
[/list]

So here are my questions:
1. For the 5k i am thinking at buying corporate bonds yielding about 4%, so at the lower end of the investment grade. However, i fear the price losses that will ocur once the tapering begins. Do you think that investing the sum into a corporate bonds index fonds makes sense? Would it be better if i search a corporate bond that lasts 5 years and let it expire in case the car is fine until then as i see the chances that the car survives 5 years to be bigger than needing a car pre 5 years?

2. For the 12k, i know it is market timing (again) but i think the stock market will present a buying opportunity once the tapering begins. With a 3% yield i think i can wait comfortably, what do you think?

1)  Man, I don't know your situation, and I don't really do anything like this.  I am 100% stocks baby!  In my situation, I figure I could buy a car with 2-3 months savings, so I don't worry about the car breaking down.  Regardless, I don't see any reason why the car would break down in the next 10 years, let alone the next 5.

2) No No No No No.  Put that in an index fund today.  That's the only real advice I can offer in this post.

Thegoblinchief

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Re: 20k waiting to be invested - what would you do?
« Reply #3 on: January 16, 2014, 09:57:47 AM »
Market "timing" rarely works. Unless this money is going to be needed in less than 5 years, stick it in the market.

Not sure how applicable it is to Germany/EU, but jlcollinsh's stock series is a great read.

http://jlcollinsnh.com/stock-series/

arebelspy

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Re: 20k waiting to be invested - what would you do?
« Reply #4 on: January 16, 2014, 10:35:24 AM »
20k waiting to be invested - what would you do?

Invest it.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

DaKini

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Re: 20k waiting to be invested - what would you do?
« Reply #5 on: January 16, 2014, 01:08:29 PM »
Yeah but where? I currently think selling stock for a car could be a bad idea, at least its what i read on the net.
Am i wrong with that?
Wouldnt bonds be better in this case?

The 20k equals about a year of expenses and is about 25% of our NW. Im 30, secure government job, married (stay home mum for 2-3 remaining years, then part time), 2 kids, debt free, savings rate about 20%.

Edit: forgot to mention, those numbers are EUR, not USD.
« Last Edit: January 16, 2014, 01:51:37 PM by DaKini »

apoclater

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Re: 20k waiting to be invested - what would you do?
« Reply #6 on: January 16, 2014, 08:43:47 PM »
Yeah but where? I currently think selling stock for a car could be a bad idea, at least its what i read on the net.
Am i wrong with that?
Wouldnt bonds be better in this case?

The 20k equals about a year of expenses and is about 25% of our NW. Im 30, secure government job, married (stay home mum for 2-3 remaining years, then part time), 2 kids, debt free, savings rate about 20%.

Edit: forgot to mention, those numbers are EUR, not USD.

I think you need to do a little more research on investing and figure out what's right for you.

My recommendation is if you don't need this money for another 5 years, put it into an index fund.  If you really need the money, you can sell and have your cash in a week or two. 

DaKini

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Re: 20k waiting to be invested - what would you do?
« Reply #7 on: January 16, 2014, 10:44:38 PM »
Im fine with index funds, however its just so that i have read about a 10-year limit in the past, so i received advice "dont put money in the stock market you need in less than 10 years".
Your are proposing such a 5 year limit. If i think about the statistical data i have seen, that would mean that even if the market drops, chances are i wont sell with a loss; however i may not receive a good return.

Thank you all for your patience and answers. I am confident putting it all into the index funds now. Even if the market does take a significant ditch, i maybe can wait a month or so and use my savings rate to compensate.


Thanks for your advice, this forum is very helpful wth a nice community.