Author Topic: 26 year old need advice for better investment allocation  (Read 5020 times)

dragonwalker

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26 year old need advice for better investment allocation
« on: March 26, 2014, 12:52:33 AM »
Alright, I'm looking into some options with what I should do with my money to maximize returns on a timeline of 3-5 years. I'm in the midst of trying to decide if a home purchase is justified but I'm also trying to get some alternatives for my stocks and investments since I haven't been getting the best return and wanted some more feedback. As of today this is the value of my life, for lack of a better term:

Apple stock (AAPL)- 56.6954 shares ($30,898) with a cost basis of $540.34 per share bought about a year ago. The shares are currently at $544.99 so up by 0.86% and yield about 3% dividends. I'm honestly really disappointed in how they have performed the past year as almost the entire time they were below my cost basis and I am seriously considering cashing out to break even ahead by just the dividend payouts. However every time it reaches cost basis there is reason for optimism and a chance I will see that magical 10% gain where I will sell. Need some serious advice about what to do here.

Gold (SPDR Gold Trust ETF)- 28 shares ($3,539) with a cost basis of $173.90. Shares are currently at $126.41 so I've lost a whopping 27.31% or $1,329.59. Held onto these for more than a year and every month it costs about a $1 or so in expenses. Some part of me keeps on wishing gold will make a come back. I just don't know.

Citibank (C)- 129 shares ($6,489) with an average cost basic of $45.23. Shares are currently at $50.30 so I'm ahead 11.20% or $654. Interestingly enough I think I bought $1,000 pre stock split about 5-6 years ago and then some more post stock split about $5000. I'm not sure what to do as financials are on the up swing and there is talk of possible dividends. I figure I'll keep it around until I need it for something else.

Bank of American (BAC)- 36 shares ($620) with a cost basis of $116.23. Mmm you might be questioning this because BAC was never $116 dollars. So this purchase is all that is left from about $4000 I spent in my first stock trade purchasing Countrywide over 6 years ago. I'm currently at a loss of $3,564. I think I may sell it sometime this year for the write off or to offset other capital gains but again there is that optimism about financials and dividends...

Cold hard cash ($)- $33,000 yielding 0.75%, I know I can get more but it's in the same place that my main brokerage accounts are so it's convenient to use if I need to make a purchase.

401K- About $33,000 about half in a cookie cutter diversified plan for target retirement date of 2050 which is the closest to my retirement. About 25% in emerging market bond fund I believe it is an ETF, 15% in housing REITs and 10% in commodities. I have a wide variety of other options so open to suggestions. Company offers 100% match up to 6% of earnings and an additional 1% bonus. About $30,000 of these funds are in a Roth 401K. The match contributions must be in a traditional 401K. 

I need to make this work better than it is. All an all my investments have been very hit or miss and over the past 6 years or so I may have only come out ahead a couple thousand. However keep in mind a good chunk of this money was earned rather recently within past 1-3 years. I'm 26 make about $54,000 gross and currently have 10% allocated every pay check to my Roth 401K. I estimate I save about $25,000-$30,000 of that. 

matchewed

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Re: 26 year old need advice for better investment allocation
« Reply #1 on: March 26, 2014, 05:13:07 AM »
http://jlcollinsnh.com/stock-series/

Start here.

Then go here.

http://www.bogleheads.org/wiki/Investment_policy_statement

Understand what your investments are and lay out a plan. Further education into individual stocks, gold, and other investment instruments can happen while you build a foundation of index funds. Come up with a plan (your investment policy statement) as this will be for you and your risk tolerance, financial knowledge, and time.

DrTesla

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Re: 26 year old need advice for better investment allocation
« Reply #2 on: March 26, 2014, 06:42:51 AM »
Index Funds are at record Highs right now, so keep that in mind.

I don't like buying overvalued anything.

Gold is undervalued right now, especially when India uses it as it's primary currency, and China is buying it non stop for long term investment.


matchewed

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Re: 26 year old need advice for better investment allocation
« Reply #3 on: March 26, 2014, 06:54:32 AM »
Only if your timeline is strictly short, and I'm sure it's not for anyone here. For people who are working through their accumulation phase or are even FIRE their investment timeline is not short. It is 50+ years long. Buying now while the stock market is at record highs is meaningless in that context.

randymarsh

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Re: 26 year old need advice for better investment allocation
« Reply #4 on: March 26, 2014, 07:19:14 AM »
Index Funds are at record Highs right now, so keep that in mind.

The stock market is constantly setting record highs.

TomTX

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Re: 26 year old need advice for better investment allocation
« Reply #5 on: March 26, 2014, 07:27:28 AM »
Stocks seem a poor choice for a 3-5 year timeframe.

matchewed

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Re: 26 year old need advice for better investment allocation
« Reply #6 on: March 26, 2014, 07:33:36 AM »
I'm pretty sure the OP means a 3-5 for FIRE and not for just investing.

TomTX

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Re: 26 year old need advice for better investment allocation
« Reply #7 on: March 26, 2014, 07:48:21 AM »
I'm pretty sure the OP means a 3-5 for FIRE and not for just investing.

Really? His net worth is around $100k, and he will only be saving perhaps another $100k-$150k in the stated timeframe.

matchewed

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Re: 26 year old need advice for better investment allocation
« Reply #8 on: March 26, 2014, 07:52:53 AM »
I'm pretty sure the OP means a 3-5 for FIRE and not for just investing.

Really? His net worth is around $100k, and he will only be saving perhaps another $100k-$150k in the stated timeframe.

Ah, you're right. He's trying to invest money for a home purchase. Reading comprehension FTW.

In that case for a 3-5 year time frame I'd do either CD laddering or savings account. What is needed is liquidity and low risk.

I still stand by my original post within the context of investment asset allocation. But we're no longer talking about investing we're talking about saving money to buy a home.

dragonwalker

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Re: 26 year old need advice for better investment allocation
« Reply #9 on: March 26, 2014, 11:00:03 AM »
I'd like to clarify that I'm aiming for a home because I see the value as an investment however I'm open to the possibility that if the money I would use for a home would yield a high enough return I could delay a home purchase. That's why I'm looking at a timeline of 3-5 years. 

matchewed

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Re: 26 year old need advice for better investment allocation
« Reply #10 on: March 26, 2014, 11:33:16 AM »
But a home is not a great investment. I won't beat a dead horse from your other topic but that link in the other topic on why your house is not a good investment still rings true. That is not to say that getting into real estate is bad. Real estate investment can be very profitable. But your house is a bad investment.

What value do you see in owning a home? Do you need to put down some stability for a family? Or are you just seeing a rather short term appreciation and are trying to chase the wave of some get rich quick path?

As for whether other investing would provide a high enough yield compared to a home... consider that a home probably doesn't return more than inflation (http://michaelbluejay.com/house/appreciation.html love the guy's hair), that US stocks return historically more than inflation, then you'll have to figure out how much more than inflation do you want your investment to return.

Bottom line I think you need to educate yourself on investment and wealth generation. While it is possible to generate a great deal of wealth in 3-5 years that is primarily through savings rate. It is why this site focuses on setting a foundation of low living expenses first and then the left over money is used to generate wealth. But that leftover money better be a high percentage of your take home.

arebelspy

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Re: 26 year old need advice for better investment allocation
« Reply #11 on: March 26, 2014, 11:41:39 AM »
But a home is not a great investment. I won't beat a dead horse from your other topic but that link in the other topic on why your house is not a good investment still rings true. That is not to say that getting into real estate is bad. Real estate investment can be very profitable. But your house is a bad investment.

A blanket statement like this is just flat out wrong.  You need a place to live. You can invest that money into a house and have it "pay off" in cheaper housing (than if you were renting) in certain places.   That has value.  That can be a great investment.

In some areas a house is a bad investment.  But to blanket say it always is is not right at all.  People who say that are missing the bigger picture, that your house is a hedge.

http://thezikomoletter.wordpress.com/2012/12/10/you-are-naturally-short-housing/
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, 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.

matchewed

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Re: 26 year old need advice for better investment allocation
« Reply #12 on: March 26, 2014, 11:46:33 AM »
But a home is not a great investment. I won't beat a dead horse from your other topic but that link in the other topic on why your house is not a good investment still rings true. That is not to say that getting into real estate is bad. Real estate investment can be very profitable. But your house is a bad investment.

A blanket statement like this is just flat out wrong.  You need a place to live. You can invest that money into a house and have it "pay off" in cheaper housing (than if you were renting) in certain places.   That has value.  That can be a great investment.

In some areas a house is a bad investment.  But to blanket say it always is is not right at all.  People who say that are missing the bigger picture, that your house is a hedge.

http://thezikomoletter.wordpress.com/2012/12/10/you-are-naturally-short-housing/

That's a fair take on it. I think I was coming from a place as a house as a way to generate investment return given the OP's comments regarding being open to something that had more yield than a house. Given that statement and the other topic the OP has on wanting to buy a house while renting in his current situation is so obviously cheaper, I'll stand by the idea that a house is a bad investment in this case, but will admit that it is definitely a superior option in other cases when compared to renting.

waltworks

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Re: 26 year old need advice for better investment allocation
« Reply #13 on: March 26, 2014, 11:51:22 AM »
If your timeframe is 3-5 years you are at a TON of risk with where you're at. You should not be in the stock market at all, probably. You definitely should not be owning gold.

Savings account @1% or CDs. The returns suck but if you need the money that soon, anything else is a huge gamble.

-W

arebelspy

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Re: 26 year old need advice for better investment allocation
« Reply #14 on: March 26, 2014, 11:52:56 AM »
That's a fair take on it. I think I was coming from a place as a house as a way to generate investment return given the OP's comments regarding being open to something that had more yield than a house. Given that statement and the other topic the OP has on wanting to buy a house while renting in his current situation is so obviously cheaper, I'll stand by the idea that a house is a bad investment in this case, but will admit that it is definitely a superior option in other cases when compared to renting.

Gotcha. Thanks for the clarification.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, 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.

matchewed

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Re: 26 year old need advice for better investment allocation
« Reply #15 on: March 26, 2014, 12:05:47 PM »
Gotcha. Thanks for the clarification.  :)

NP, thanks for another blog to chew through. :) I should also learn to qualify my statements better. :D

warfreak2

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Re: 26 year old need advice for better investment allocation
« Reply #16 on: March 26, 2014, 02:32:12 PM »
http://thezikomoletter.wordpress.com/2012/12/10/you-are-naturally-short-housing/
Interesting. I am naturally short chocolate, and I established a short position on cider when the market was deregulated on my 18th birthday (21 in the USA). (Of course, the consequences of defaulting on those liabilities are not particularly serious, in comparison...)

arebelspy

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Re: 26 year old need advice for better investment allocation
« Reply #17 on: March 26, 2014, 03:53:23 PM »
http://thezikomoletter.wordpress.com/2012/12/10/you-are-naturally-short-housing/
Interesting. I am naturally short chocolate, and I established a short position on cider when the market was deregulated on my 18th birthday (21 in the USA). (Of course, the consequences of defaulting on those liabilities are not particularly serious, in comparison...)

If you define those as necessary to live, yes, you are short them.

But any item you don't have you aren't automatically "short" it.

(And yes, I understand you were joking.  I did laugh. But also wanted to comment.  :) )
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, 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.