Author Topic: How to invest windfall of cash, and how to determine rate of return?  (Read 3940 times)

jeastith

  • 5 O'Clock Shadow
  • *
  • Posts: 40
  • Location: Philadelphia, PA
Just learning about investing, so looking for some advice. 

My husband and I are about to sell the house we lived in for 3 years for a nice little profit.  After realtor fees and transfer tax, we should walk away with a $125K check, which feels awesome.  We are already have some investments in VFINX and a Vanguard 2050 retirement fund, but I'm considering changing these investments because we now plan to retire WAY before 2050 and when we made these investments, we didn't really know what we were doing.  Truth be told, we still don't really have a solid feel for this, but that's why I'm writing this email.  Book and article recommendations welcome! 

We've got two debts right now - $10,000 on a car loan, which we are definitely paying off as soon as we get the check, and our mortgage.  We've agreed we don't want to pay off our mortgage early since it's a 15 year with a 3.125% interest rate.  We think we can do better investing in the market. 

Since we're new-ish to investing, which Vanguard accounts do you recommend?  And also, how do you find out what your annual rate of return is on those investments?

Thanks!  Jeannie 

MDM

  • Senior Mustachian
  • ********
  • Posts: 10403
We are already have some investments in VFINX and a Vanguard 2050 retirement fund, but I'm considering changing these investments because we now plan to retire WAY before 2050 and when we made these investments, we didn't really know what we were doing.

Since we're new-ish to investing, which Vanguard accounts do you recommend?
What is it about the Vanguard 2050 retirement fund that you now don't like?  Too aggressive?  Not aggressive enough?  That fund is actually a reasonable choice for many new-ish investors.

Quote
And also, how do you find out what your annual rate of return is on those investments?
You can see generic values at https://personal.vanguard.com/us/funds/snapshot?FundId=0699&FundIntExt=INT.  To find your rate of return, you look at current value compared with your investment amount(s).  Are you looking for a specific formula?

Frugal_NYC

  • 5 O'Clock Shadow
  • *
  • Posts: 77
2050-2060 Target Date funds are great for people who don't want to be bothered with learning the ins and outs of asset allocation.  However, if you wanted to be more in control of your investments you can use Vanguards index funds to create a simple Total US/Total International/Total Bond portfolio.

This is a good place to start: http://www.bogleheads.org/wiki/Asset_allocation

Regarding returns if you go to any funds page they should have charts with returns by year or average annual.  I was recommended this tool from Morningstar and I like it, you can use the slider to look over time and compare funds: http://quotes.morningstar.com/chart/fund/chart.action?t=XNAS:VEXMX&region=usa&culture=en-US&cur=

flyingsofa27

  • 5 O'Clock Shadow
  • *
  • Posts: 1
You can't keep a mortgage after the property is sold. A mortgage is "attached" to a particular property. When it is sold, the mortgage must be paid off, so you don't get to keep that money and invest elsewhere while you slowly pay off the old mortgage.

Bartstache

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Flyingsofa nailed it.   Mortgage loans are collateralized by the property  and the lien holder will have to be paid off as part of the purchase transaction.   

WhatIsFrugalAfterAll

  • 5 O'Clock Shadow
  • *
  • Posts: 59
You can't keep a mortgage after the property is sold. A mortgage is "attached" to a particular property. When it is sold, the mortgage must be paid off, so you don't get to keep that money and invest elsewhere while you slowly pay off the old mortgage.

I assume the mortgage on their NEW home ;)



TheAnonOne

  • Handlebar Stache
  • *****
  • Posts: 1622
You can't keep a mortgage after the property is sold. A mortgage is "attached" to a particular property. When it is sold, the mortgage must be paid off, so you don't get to keep that money and invest elsewhere while you slowly pay off the old mortgage.

I assume the mortgage on their NEW home ;)

This is what assumed as well.

jeastith

  • 5 O'Clock Shadow
  • *
  • Posts: 40
  • Location: Philadelphia, PA
Correct.  I was referring to the mortgage on the home we are now living in, not the one we just sold. 

1WattLightbulb

  • 5 O'Clock Shadow
  • *
  • Posts: 30
This allocation was suggested by Barry Ritholz. It's a classic 60/40 stock/bond allocation that you can adjust depending on your approach. Personally, 40% in bonds is high for me. All the equities below are available as Vanguard index funds. And REITs may or may not be desired - your home may make you overweighted in the real estate category already.

20 percent total U.S stock market
5 percent U.S. REITs
5 percent U.S. small cap value
15 percent Pacific equities
15 percent European equities
10 percent U.S. TIPs
10 percent U.S. high yield corp bonds
20 percent U.S. total bond market