Author Topic: How to go about investing?  (Read 4220 times)

nottoolatetostart

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How to go about investing?
« on: November 29, 2013, 06:02:55 AM »
We are new to MMM and are lucky to earn good incomes. After the government share and our expenses, we have about $105K per year to invest. We are looking to secure FI within 5-7 years (hubby may keep working though due to his personal preference).

Now that we have SL debt gone and most of our mortgage debt behind us (we recently refi'd to 2.625% on $40K remaining balance for pmt of $161 per month).

My question is on how to invest? We are new to this and previously had everything on automatic investment plan 2x per month because we had a fixed amount each month while we were paying down the mortgage. It was easy and I didn't think about. Now the amount we will invest varies greatly and I am having a hard time wrapping my mind around how we should think about the investment buying process.

We have our mutual funds picked out and have anywhere from ~$5K-$10K each month to invest in taxable investment account (note this does not include our non-deductible IRA/backdoor Roth/401k's). Right now, we are sitting on about $15K in our investment account (note: this is not our emergency fund which is in a FDIC insured account) and it is killing me that it is not invested. With December savings right around the corner, it is like a water faucet that we cannot turn off (yes, good problem to have). I guess I was used to sending off $3 payments to our mortgage principle or SL debt previously....I like the instant results. I hate that investments don't work the same way.

Do most people invest lump sum each month? Do you just buy all your investments once per month? Do you break up your monthly investment amount by 4 and invest a portion of it each week into each mutual fund? Do you do automatic investing? What about when you get an unexpected refund or save money - how do you invest that money since mutual funds have minimum investments?

We use YNAB too, if that helps.

I know I am putting way too much thought into it - but I am hoping to get insight into how others buy their taxable investments each month.  Hopefully my question is clear.

wtjbatman

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Re: How to go about investing?
« Reply #1 on: November 29, 2013, 09:26:33 PM »
Do most people invest lump sum each month? Do you just buy all your investments once per month? Do you break up your monthly investment amount by 4 and invest a portion of it each week into each mutual fund? Do you do automatic investing? What about when you get an unexpected refund or save money - how do you invest that money since mutual funds have minimum investments?


Once a month I deposit money into my Roth IRA and Taxable Accounts. When I get a balance larger than $1,000 (which generally takes a month) I then invest it according to my investment plan (ie which stocks/mutual funds/ETFs I've already picked out to put money in). I do this a maximum of once a month. Obviously you're talking about a lot more money than I am, but I don't see why the same idea wouldn't work for you. Accumulate money in your account(s), and once a month or so actually purchase whatever it is you're looking to invest in. I wouldn't want to sit there and manage my investments weekly, especially if you're paying transaction costs, but as you accumulate money you don't want it just sitting there not invested either.

Nothing changes whether I'm talking about money from my paychecks, bonuses, tax returns, or any lump sum.

ASquared

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Re: How to go about investing?
« Reply #2 on: November 30, 2013, 05:10:17 AM »
Congrats on your excellent situation.  Sounds like Vanguard would be a good option for your excess funds after you do 401k and IRA max's.  With 6000 or 10000 you can buy ETF's for free.

Honest Abe

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Re: How to go about investing?
« Reply #3 on: November 30, 2013, 07:13:59 AM »
I just started a nearly identical thread and then saw this one so I deleted it. It read:

I had a good discussion with DW about how much cash is good to have on hand. She and I agreed on a number that is good for our emergency fund, the rest will go into a taxable account (or Roth.)

Now that we're getting serious about after-tax savings I was planning to deduct our CC balance (paid off each month) from our cash accounts at the end of each month. Anything we have in excess of our emergency fund will get skimmed into investments.

How/how often do you harvest excess cash into investments?


Michread

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Re: How to go about investing?
« Reply #4 on: November 30, 2013, 01:41:59 PM »
We auto wireless bank invest 2x/month in Vanguard 4 funds;15th of the month into IRAs; 30th of the month into taxable accts.  Easy, painless, not much thinking - watch money grow!  We leave just enough in the checking acct each month to pay the bills and everything else goes into Vanguard. Lumps sums work the same way.  Wireless transfer directly into the Vanguard fund OR put it into Prime Money Market and then move it around into the different funds through your online acct.
« Last Edit: November 30, 2013, 01:44:54 PM by Michread »

the fixer

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Re: How to go about investing?
« Reply #5 on: November 30, 2013, 03:32:39 PM »
I started out setting up direct deposit into Vanguard, which automatically bought shares. This works well only if your portfolio and investing plan is simple, i.e. you always want to buy the same funds in the same percentages. It's hard to do this approach exclusively since you will probably have some money left over each month that will need to be invested manually.

Later I would invest manually once per month. Near the end of the month I would look at what cash was left over and put it wherever my plan said it needed to go. That could be a Roth or HSA contribution in the beginning of the year, then buys in the taxable account later after all the tax-advantaged accounts have been maxed out. The advantage of this method is you have more flexibility to fix your portfolio with contributions, such as by rebalancing constantly with your buys.

wtjbatman

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Re: How to go about investing?
« Reply #6 on: November 30, 2013, 07:47:49 PM »
Later I would invest manually once per month. Near the end of the month I would look at what cash was left over and put it wherever my plan said it needed to go. That could be a Roth or HSA contribution in the beginning of the year, then buys in the taxable account later after all the tax-advantaged accounts have been maxed out. The advantage of this method is you have more flexibility to fix your portfolio with contributions, such as by rebalancing constantly with your buys.

This. I like the flexibility. Automatic deposits are great as a way to get saving, but actually picking my investments each month is important to me.

nottoolatetostart

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Re: How to go about investing?
« Reply #7 on: December 01, 2013, 03:50:21 AM »
Thanks everyone. I think we'll set a base minimum that we know we can invest each month probably 2x per month and as we find more savings/refunds/rebates/flex spend reimbursements/etc, we will just manually invest at end of month as mentioned above. It's a good way to keep us motivated.