Author Topic: How to invest $50,000?  (Read 5423 times)

livefree

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How to invest $50,000?
« on: August 04, 2014, 04:37:24 PM »
I would love your advice.

I am 27 years old making about $33,000 annually.  I have no car and have a decent credit card debt of around $5000 (~12.9%.)  The only other expenses I have are my phone bills and apartment ($1550/month that I split with my gf).  I don't have a roth or a 401 k as I just got the job about 3 weeks ago so that didn't kick in yet.  We just got the apartment and we don't know exactly how much more the utilities will be so we also have to plan for that.  We've been living with family for a while and now making the next step to getting our own place.  I only have a savings of only couple hundreds of dollars and have about $1200 in betterment so far.  We are very frugal as we don't spend unnecessarily.  We spend most on groceries and occasionally eating out once or twice (~$10-15/person).  Hopefully within the year I'll be able to hit my goals at work and get couple raises which would help as well that would hopefully push my income to ~$40000/year +   

I will be inheriting around $54000 from family and I would love to know your advice on how to best invest it.  From reading the blog, I was thinking about splitting it among a high interest online savings, vanguard stock market index fund and vanguard reit for sheer diversification purposes.  What do you recommend?  I would love to invest/save most of it and want it to grow in the best way possible.  I was also interested with the conversations between betterment and vanguard in terms of fees and expenses and wanted to know if it would be better to withdraw all from betterment and put into vanguard.  As for the credit card, I was thinking about paying it down with my salary instead of using the inheritance for that.  I really just want to invest most if not all of it.

I would love to retire as fast as possible and grow my investment hopefully to six figures in the future by being smart with my money.  I use Schwab for my online checking and i'm in the process of opening up an online savings.  My traditional brick and morter bank is hsbc.  We will be probably be living in the apartment or another around the same monthly for the next several years as the priority right now is all about saving and investing.

Beric01

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Re: How to invest $50,000?
« Reply #1 on: August 04, 2014, 04:42:35 PM »
I would just do a simple Three-fund portfolio. Read the Bogleheads wiki a little to get a feeling for investing, and then decide on your asset allocation and invest.

You sound like you're going for a 4-fund portfolio, with REIT's as the 4th. Decide on your asset allocation and stick with it.

I'm not a fan of putting a lot of money in savings accounts of any type (I'd put money in bonds instead), but to each his own. I have my credit union account with around 1 month's expenses, and that's it.

EDIT: and if you do have access to a 401K, definitely put your bonds in it - those are taxed heavier. Read the Principles of tax-efficiency for more on this.
« Last Edit: August 04, 2014, 04:44:31 PM by Beric01 »

Eric

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Re: How to invest $50,000?
« Reply #2 on: August 04, 2014, 05:15:11 PM »
I have no car and have a decent ridiculous credit card debt of around $5000 (~12.9%.)  ...
As for the credit card, I was thinking about paying it down with my salary instead of using the inheritance for that.  I really just want to invest most if not all of it.

I would love to retire as fast as possible and grow my investment hopefully to six figures in the future by being smart with my money.

If you want to be smart with the money, you'll pay off that credit card at 12.9% APR as soon as you can.  That should be the absolute first thing the money goes towards.  The stock market is great, but even the long term average is 10% (or closer to 7% after inflation), so by delaying that debt payment to invest, you're making a sub-optimal decision.

Otherwise, open up a Roth IRA and max that out ($5500), fund your emergency fund so that you'll never have to carry credit card debt again, and invest the rest as you see fit.  (Total Stock Market Index and a REIT Index would be fine)

Prepube

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Re: How to invest $50,000?
« Reply #3 on: August 04, 2014, 05:28:31 PM »
Eric is right.  Get rid of the credit card debt.  But even before that, I am wondering how the debt on that card came about if you are as frugal as you say you are.  Some habit changes might be in order in addition to the credit debt elimination.  I'd fund a Roth for 2014 and set aside enough for your 2015 contribution now and then split the rest between s&p 500 index and reit index. 

usmarine1975

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Re: How to invest $50,000?
« Reply #4 on: August 04, 2014, 08:42:16 PM »
First figure it what you can do efficiently regarding taxes. If its structured in an IRA you can utilize an inherited IRA and pull RMDs over time.  If you use an accountant talk to him or research and figure out the tax implications first. Then look at options above.  I agree pay the credit card off if you can but again first determine your tax situation.
« Last Edit: August 04, 2014, 08:44:13 PM by usmarine1975 »

blackomen

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Re: How to invest $50,000?
« Reply #5 on: August 05, 2014, 11:52:27 AM »
1) Pay off credit card debt.

2) Research on popular asset allocations (i.e. 3 fund, 60/40, permanent portfolio, etc.), figure out the pros/cons of each, and find one that best suits your financial situation.  Use it as the basis of your asset allocation.

3) Invest passively in the asset allocation you picked in #2.  Rebalance with periodic contributions (use cash the buy the asset class that's most underweight compared to its target.)