Author Topic: best places, or books, for finding low-risk, investments around 5-7% return?  (Read 2823 times)

fizzgig

  • 5 O'Clock Shadow
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Hi,

I have 100K in life savings that's losing money everyday in a savings account. Houses and property tax are quite high in north NJ where I live and doesn't really seem like a good option. I'd like to start getting a return on that savings. I'm trying, but understanding financial entities are totally new to me. So far, I keep reading contradictory advice on how to invest, anyway. Any suggestions on where someone like me might start? Mostly looking for the least amount of risk.

GuitarStv

  • Senior Mustachian
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If you're Canadian it might be a good idea to start here:

http://canadiancouchpotato.com/about/


If you're not Canadian, the basic principles still apply . . . indexed funds with low MERs over a long period of time offer reasonable return and relatively low risk.

schimt

  • Bristles
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The lower the risk, the lower the return. lowest risk being cash with a guaranteed loss due to inflation.

Have you read JL Collins stock series? Highly recommend reading through that if you haven't.

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

Also if you prefer listening, check out the dough roller podcast, also free. He isn't all about mustachian status, but a good neutral point of view on investing, in my opinion. He even has an interview with Mr MM himself.

and shout out to a fellow mustachian in Jersey. That sentence is almost an oxymoron. Goodluck

Eric

  • Magnum Stache
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Risk and return are linked.  There is no high return with low risk.  I would advise becoming comfortable with the idea of risk, as everything has risk.  Even that savings account, while you're not losing principle, you're at risk of inflation eating away at it's purchasing power.  (in fact, given today's interest rates, it's almost guaranteed your money is losing value on a daily basis)  People tend to view the stock market as a risky investment where you can lose all your money.  That's not really the case.  If you're invested in a total market index fund, there's very little risk that every single company is going to go bankrupt, and therefore, there's very little risk that you'll lose your entire investment.  Certainly there's risk that you'll lose a percentage, but of course that's only a loss if you sell.

The stock series from Jim Collins that's linked above by schimt is a good one.  I'd also recommend the book The Four Pillars of Investing by William Bernstein, as he talks a lot about how risk and return are intertwined.  Your library should have it.

Trudie

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There is an inverse relationship between reward and risk.  But, a diversified portfolio, held over a long period of time, should net the kinds of returns you're seeking.  What you are looking for is very reasonable.

My first piece of advice is to check out ETF's and funds at Vanguard (and TIAA-CREF, if you have access to it).  Both have very low fees.  Slaying the fee dragon right off the top helps get you over the hump.

Then, I would say, find investments that you're comfortable with and diversify.  Read enough to balance your portfolio, but don't obsess over finding "the next great thing."  Sure, we could probably all obsess and max out returns, but that comes at a price too (stress, time).

Your goal should be to put it on auto-pilot, then tweak as necessary (once a year or so).

If you're really troubled about going it alone find a fee only financial advisor.  But, if they're only recommending funds they represent, tell them to take a hike. 

taekvideo

  • Bristles
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In my opinion... a total stock market index fund is the least risky long-term investment.  It has a built-in inflation hedge, and there's only 2 ways you can lose money long term:
1) You panic and sell after a market crash (e.g. 2008-2009)
2) The whole US economy collapses and doesn't recover.

Case 1 is easily avoided with a little self-discipline, just play the long game and NEVER sell (until you retire of course, and then only the amount you need to live on).
Case 2... few if any investments (even cash) would survive that anyways so not worth thinking about.

johnintaiwan

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  • Location: Tainan, Taiwan
In my opinion... a total stock market index fund is the least risky long-term investment.  It has a built-in inflation hedge, and there's only 2 ways you can lose money long term:
1) You panic and sell after a market crash (e.g. 2008-2009)
2) The whole US economy collapses and doesn't recover.

Case 1 is easily avoided with a little self-discipline, just play the long game and NEVER sell (until you retire of course, and then only the amount you need to live on).
Case 2... few if any investments (even cash) would survive that anyways so not worth thinking about.

My wife always gets scared an asks if there is any chance we will lose all of our money in the index funds we have. i have to remind her that is the entire US market crashes down to zero, we have much bigger problems than money.