The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: michaelbsf on September 23, 2013, 04:45:32 PM
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Hi there!
I have about $10.000 (a kind of emergency reserve for my family) that I keep on money market account and that gives me about 1.2% a year. Now I am thinking of investing it into mutual funds and see if I can get more there... So I decided to go with VANGUARD and one or several STOCK INDEX funds.
Could you help me with my newbie questions...
1) Is it better to invest into one or several funds? If several - how many 2, 3, 10?
2) how quick will I be able get my money back if needed?
3) any recommendations how to select mutual funds? I know, I need to looks at ones with small ratio and high return for this year?
4) should I select growth/balanced/large/mid/big companies, etc? or Index funds have nothing to do with these categories?
Thank you
M
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If the $10k is really an emergency fund, keep it in cash. 1.2% isn't bad. Maybe look towards putting part of it in a CD for longer term if you can get more than 1.2%.
Don't invest your emergency fund in stock based mutual funds!!! Every few years, stocks drop by 10% or more, and you'll loose a mustache-load of cashola quickly. You never know when it will happen. Could start tomorrow.
If $10k is all you need for emergency fund, then start collecting cash for a mutual fund investment.
You can get in at Vanguard for as little as $1000 on some funds. A decent fund, if you only have $1k and don't want to learn about investing, is the Vanguard Target Retirement 2060 fund. They do the asset allocation for you (the small/mid/large/growth/balanced thing you mentioned).
If you have more money, you can buy a couple mutual funds. Total Stock Market Index plus Total International Index might be a good pair if you want 2 funds. $3000 minimum to get either of those, and $10000 if you want lower expense ratios for the Admiral class shares.
Stock based mutual funds are awesome if you definitely don't need the money for 5-10 years. Otherwise, you might lose money over shorter periods.
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Thank you for the advice!
Ok. I would better call it an additional reserve, because I have additional 10K that I keep on checking account. I am 38 , 3 yr old child and my wife doesn't work.
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Hi, let me answer your questions one by one
1) Is it better to invest into one or several funds? If several - how many 2, 3, 10?
A: It depends on you how much you want to spend; based on the budget you choose the policy only after lot of consideration.
2) how quick will I be able get my money back if needed?
A: This will depend on the policy being taken. Some policies allow and some wont
3) any recommendations how to select mutual funds? I know, I need to looks at ones with small ratio and high return for this year?
A: Yes, you need to have a knowledge about the funds you are about to invest it. Also you should consider consulting mutual fund adviser with good past history; something like Birla Sun Life mutual fund - http://mutualfund.birlasunlife.com/Pages/Individual/Home.aspx
4) should I select growth/balanced/large/mid/big companies, etc? or Index funds have nothing to do with these categories?
A: Since I am no expert here, I would suggest speaking to an unbiased financial adviser.
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